May/June 2011 The Real Enemy of Unions

Why organized labor should join with entrepreneurs to bust the corporate monopolies threatening them both.

By Barry C. Lynn

Even more embarrassing is labor’s failure to make sense of the nature and scope of the threat posed by “big box” trading companies like Walmart and Home Depot. Consider the case of Walmart itself. Even as this firm grew to be well more than five times bigger than any previous retailer ever (relative to the overall size of the U.S. economy), labor leaders tended to view the giant trading company mainly as a vast pool of retail workers in need of organizing. Indeed, until the UFCW’s recent efforts, labor all but ignored the fact that Walmart had grown big enough to essentially dictate terms even to the largest of its suppliers and hence, indirectly, to the individual employees who work for those suppliers, many of whom are unionized.

Most stunning, perhaps, has been labor’s failure to connect the dots when it comes to who’s been funding the attacks on public education, teacher’s unions, and public-sector unions generally. As many in labor know, the Gates Foundation, established by Microsoft cofounder Bill Gates, has been one of the more active institutions in America in advocating policies that weaken the clout of teacher’s unions. And as many in labor also know, one of the main institutions behind the school voucher movement has been the Walton Family Foundation. What labor has all but ignored is that, a generation ago, neither Bill Gates nor the heirs of Walmart founder Sam Walton would have commanded nearly so much personal political power, in no small part because robust enforcement of antitrust laws would have limited their ability to build and exploit monopolies.

As organized labor leans on the ropes, absorbing blow after blow to head and body, it has no idea who hits it or how. Labor believes it can’t see its opponent because of all the blood pouring over its face, from cuts opened in a brutal and one-sided battle. The real reason labor can’t see? It has been covering its own eyes.

Organized labor is one of the few institutions in Washington with any sense of history. Labor leaders are often lifers, who love to swap stories about antique victories and are wont to break into song about battles lost long ago. Yet labor’s version of history, like all versions, is highly selective.

For decades one of labor’s mantras has been that the American middle class of the twentieth century was built on a simple foundation—the freedom to organize the workplace. It is a story that is routinely repeated back to workers whenever Democratic politicians panhandle for support. As Vice President Joe Biden put it in 2009, “Over the last 100 years the middle class was built on the back of organized labor.”

Yet it is a story based on an incomplete reading of the achievements of American citizens in the 1930s.

The Wagner Act of 1935—designed to protect the right of citizens to organize and bargain collectively—was undoubtedly one of the great political milestones in the decades-long effort to restore, after two generations of top-down plutocratic rule, some measure of the economic freedom and dignity that Americans enjoyed for the first hundred years of the nation’s existence, when most citizens were independent farmers, mechanics, craftsmen, and shop keeps. So too the creation of Social Security, also in 1935. What is missing from labor’s standard history of the New Deal era, however, is the fact that 1935 also saw the Roosevelt administration reverse itself 180 degrees on the regulation of competition, as it moved from promoting monopoly and the centralization of power to promoting competition and the distribution of power.

Soon after taking power in 1933, the New Dealers essentially suspended antitrust enforcement, as part of the National Industrial Recovery Act. The authors of NIRA believed the best way to restore the wage and price levels that existed before the Depression was to empower business and labor leaders and government officials to cooperate as closely as possible.They believed these groups would be able to rationally plan economic output, and to set production levels, prices, and wages throughout the industrial portion of the economy. But after the Supreme Court, in a 9-0 decision, declared this grand experiment in corporatism to be unconstitutional, both Congress and the administration took another look at antimonopoly law. (The fact that NIRA also failed economically contributed to this rethink.)

By the late 1930s, the Justice Department had developed an entirely new approach to managing competition in the industrial sphere. This second generation of New Dealers did not seek to impose government directors atop corporate giants, nor did they seek to break giant industry into little pieces. Rather their goal was to ensure at least some competition among a few large “oligopolies” manufacturing more or less the same basic product. Outside the industrial sphere, meanwhile, in sectors such as farming, retail, and services, Congress often took the lead. Here the aim was, often, nothing less than to restore the “Jeffersonian” yeoman to his property, and then to protect the open markets of these citizens from enclosure within the fences of private corporations.

The basic thinking was expressed by Wright Patman, the populist congressman from Texas. In a book he wrote to explain the workings of his 1936 Robinson-Patman Antitrust Act, often called the Anti-Chain Store Act, Patman said the purpose of the bill was “to protect the independent merchant, the public whom he serves, and the manufacturer from whom he buys” from the use of predatory tactics by overcapitalized traders. And in the event, the act, along with a wide-ranging set of other anti-monopoly laws, largely reversed the growth of retail chains and agricultural combines that had emerged as a major force in the economy during the plutocratic era.

By the early 1970s, the American economy had settled into a balance. Roughly half the economy was controlled by 1,000 industrial giants. The other half was divided among some twelve million small enterprises, competing in open market systems.

Which means that the great middle class of twentieth-century America stood atop two foundations. One was freedom to organize the industrial workplace, to erect a “countervailing power” within a necessarily hierarchical governance structure. The other was freedom from organization, the freedom to be one’s own boss, the freedom to build up a business that—thanks to anti-monopoly law—was largely safe from predation. Every American could choose the path that fit best. A citizen who wanted to be her own boss, or run his own family business, could count on robust anti-monopoly law to protect farm, factory, or store from predators wielding massed capital. Citizens who wanted the security of a weekly wage could hire themselves out to an industrial giant or government monopoly, confident that they were protected against economic exploitation and arbitrary rule by open market systems and robust labor law.

And until the rise of the socialistic New Left and the laissez-faire Chicago School crew, this great alliance of workers and proprietors, for all intents, controlled both major parties.

Barry C. Lynn directs the Markets, Enterprise, and Resiliency Initiative at the New America Foundation.


  • Lou Siegel on May 13, 2011 10:23 AM:

    Great ideas Barry, but your piece lacks sensitivity about the enormous pressure unions face every day just to survive.

    Look, for example, at the Communications Workers of America active support for the AT&T / Team-Mobile merger, hoping that the anti-union Team-Mobile can be organized as a result.

    It's not that labor leaders don't understand the consequences of concentrated corporate power, it's just that, in the face of extinction, they're compelled to take expedient action.

    So please don't accuse us of failing to connect the dots.

    Make your case persuasively without condescension and you'll find a tremendously receptive audience at all levels of the labor movement.

  • fig8jam on May 17, 2011 4:05 PM:

    Great article Barry.

    Wondering if it will be pulled however, since Susan Chambers the ExecVP of WalMart sits on the Leadership Council of the New America Foundation.

    I think you did a good job of explaining how the monied interests/oligarchs in the country have successfully aligned and split the common laborer into two different camps so that they are opposing themselves to the benefit of big business.

    Reminds, me of the Southern Strategy.

    If we agree that this is about money and power we also know that the unions have an uphill battle convincing white collar they need to align with blue collar workers and that small businesses need to align with labor to ensure an open and competitive market.

    However, Governor Scott Walker and Governor Daniels have done a lot to take off the blinders in their states and show the teachers, nurses, and others just what side their bread is buttered on. This should make the unions job easier in 2012.

    Obama would be an individual who would sign a new low against these major conglomerates usurping the free market.

    Capitalism can't thrive with monopolies.

    Let's hope that 2012 is the beginning of major legislative acts that redesign and align the America market place in favor of labor and small businesses.

  • Robert Searle on May 18, 2011 11:56 AM:

    I think my project maybe of interest in connection with all this.


  • Norma Rae on June 12, 2011 1:38 PM:

    The ongoing travesty of this country is that too many people are too stupid to vote their own economic interests. What we need is a law to help union organizers encourage people to vote for unions. One good idea would be to give people a union card and ask them to sign it. Anybody who refuses to sign it, we will know immediately is a scab. We can then bring all kinds of encouragement for the scabs to vote for the union, like "gee, it would be a shame if something should fall on your head while you're working". Or we could visit their homes at night and talk to their children about it. Or we could just beat the crap out of them. Whatever. And if any of those filthy Republicans accuse us of intimadation, we can just say "who, us? we would never do that!" This is the kind of stuff our national unions need to favor.

  • John on June 23, 2011 6:04 PM:

    Many economists believe that a strong economy has a large middle class. In the modern society, that is skilled labor and small to medium business. They are the biggest contributor to a strong economy because of the number of them and because of their disposeable income. Without their spending, the economy suffers. An intelligent economy, indirectly managed by big business leaders and government leaders recognizes the economic sustainability of these two groups and control their own greed to maintain the financial balance of power. Of course, big labor must do the same. With capitalism, business can price themselves out of business and labor can price themselve out of a job.

  • Jessica Zembala on June 23, 2011 8:15 PM:

    John on June 23, 2011 6:04 PM:

    "Many economists believe that a strong economy has a large middle class."

    You know, Joe, you are so right. Your point reminds me of a story. During WWII, Americans built airstrips in the jungles of many aboriginal South Sea islands and brought in wealth beyond imagination of many of the South Sea islanders they encountered. When the war ended, these islanders wondered what went wrong when the Americans went home and the flow of wealth stopped. To address the issue of the missing wealth, they built airstrips of their own, and just waited for the planes to land. When they didn't land, they even constructed mockups of airplanes out of bamboo and palm fronds, kind of to attract airplanes. Your economic theories, would be much admired by these South Sea islanders.