On the Relentlessly Progressive Economics blog, Andrew Jackson, Chief Economist and National Director of Social and Economic Policy for the Canadian Labour Congress, approvingly cited a policy paper, "America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession," written for the New America Foundation by Thomas Palley, former Assistant Director of Public Policy at the AFL-CIO.
At page 11, the Sandwichman threw up his hands in despair:
"The implementation of neo-liberal economic policies destroyed the stable virtuous circle growth model based on full employment and wages tied to productivity growth, replacing it with the current growth model based on rising indebtedness and asset price inflation."Just what "stable virtuous circle" did
Why the 1945-1980 Golden Age, of course. And just how does Dr. Palley envisage restoring that lost paradise?
"...restoration of worker bargaining power in labor markets through strengthened unions, a higher minimum wage, and stronger employee protections; restoration of full employment as a macroeconomic policy objective; restoration of the legitimacy of regulation and increased government provision of public goods; a new international economic accord that addresses the triple hemorrhage problem created by the flawed model of global economic engagement; and reform of financial markets and corporate governance that ensures markets and corporations work to promote national economic well-being."There's just one catch: "While the economics are clear, the politics are difficult..."
Politics are always difficult. The Sandwichman doesn't think that's the problem with Palley's "clear economic" prescription, though. The problem with Palley's paradigm is that its politics are absent. I want to draw attention to the first two planks in the platform to illustrate what I mean: strengthened unions and a higher minimum wage. Both sound appealing to a left perspective. But do they go together?
Samuel Gompers didn't think so. Here's what he had to say about minimum wage legislation in 1914: "I am very suspicious of the activities of governmental agencies. I apprehend that once the state is allowed to fix a minimum rate, the state would also take the right to compel men or women to work at that rate." The rationale for Gompers's opposition to minimum wage legislation -- although not to minimum wages won by collective struggle -- was a philosophy based on collective self-determination and action.
Now I don't want to give the impression I think old Sam Gompers was a saint or always knew what was best for workers. He wasn't and he didn't. But there was a principle and logic larger than Gompers that played itself out in the first four decades of the 20th century that Sandwichman thinks has crucial bearing on the exhausted paradigms of macroeconomics and organized labor.
The Sandwichman drones on endlessly about the eclipse of the shorter working time ethic in the unions and the slander and taboo on the topic in economics. But let's forget about that for a moment and consider Supreme Court decisions and constitutional law. Allison Martens wrote a fascinating paper a few years ago titled, "Parrying with the Courts: Analyzing the Lochner Era through the Eyes of Organized Labor." I don't pretend to know much about US constitutional law myself, nor will I attempt to summarize Martens's argument here. I just want to call attention to a key switch in American Federation of Labor legal strategy that Martens highlighted in the paper and that was discussed earlier in a paper by James Gray Pope, "The Thirteenth Amendment Versus the Commerce Clause: Labor and the Shaping of the Post-New Deal Constitutional Order, 1921-1957."
Forgive me for quoting four paragraphs from the conclusion to Pope's article. The drama and the importance of what Pope is chronicling inhibits me from summarizing or paraphrasing:
"On the eve of the New Deal constitutional revolution, proponents of national labor legislation faced the momentous choice whether to ground their legislation on the Commerce Clause or on the Thirteenth Amendment. Since the early 1900s, the labor movement had claimed the rights to organize and strike under the Thirteenth Amendment. Labor constitutionalists argued that these rights were essential for workers to exercise actual liberty of contract in an industrial economy dominated by large corporations. By the early 1930s, this core theory had won wide acceptance, and legislators routinely echoed labor's claim that restrictions on worker self-organization and protest amounted to slavery and involuntary servitude.I guess one could say that Palley's economic prescription, too, has something of "the smell of the lamp about it." Or, to quote Sam Gompers one last time:
"But labor's constitutionalists encountered stubborn opposition from the movement's own friends within the legal profession. During the campaign for anti-injunction legislation that culminated in the passage of the Norris-LaGuardia Act of 1932, a group of elite, progressive lawyers led by Professor Felix Frankfurter undercut labor's constitutional claims by refusing to acknowledge their existence in public while maneuvering behind the scenes to exclude them from legislative consideration. Their determined opposition to labor's freedom claims reflected not a tactical disagreement among allies, but a fundamental conflict over long-term, constitutional goals. While labor constitutionalists sought power for unions and workers, progressive lawyers sought power for social scientists and other professionals, including themselves. Over a period of six years, this cagey and well-connected opposition wore down labor's constitutional leaders. In the winter of 1931–1932, when presented with what appeared to be a choice between insisting on their constitutional theory of freedom and achieving anti-injunction legislation in the here and now, labor leaders chose the latter. Two years later, when Senator Robert Wagner proposed his labor disputes bill, unionists sought a constitutional foundation sounding in democracy and human rights, but again failed to force the issue.
"The result was to sever the popular demands for industrial freedom from the legal-professional campaign to validate the Wagner Act. Unionists embraced the Wagner Act as labor's latest 'Magna Charta' and declared that if the courts would not enforce it, the workers would. In his 1936 reelection drive, President Roosevelt campaigned against economic royalism and for industrial freedom, apparently endorsing the core of labor's theory. Roosevelt's landslide victory emboldened workers to stage full-blown factory occupations to enforce what they saw as their constitutional rights to organize and strike. The factory occupations, in turn, forced the Supreme Court to uphold the Wagner Act—a victory that workers across the country promptly celebrated as a 'new era' of industrial freedom.
"Meanwhile, however, government lawyers had been urging the courts to uphold the Wagner Act not as a human rights statute, but as an exercise of Congress's power to 'control' and 'punish' strikes under the Commerce Clause. And it was this view, not the popular vision of the statute as a human rights measure, that the Supreme Court embraced in the Wagner Act decisions. The Court did leave open the possibility that collective labor rights might be constitutionally protected, and—for a time during the 1940s—workers and unions won a number of decisions protecting the rights to organize, strike, boycott, and picket. But by the mid 1950s, labor's constitutional victories had been appropriated by others. Under the leadership of Justice Felix Frankfurter, the Supreme Court upheld a battery of restrictive labor laws. By the time the Court was finished, the new civil liberties won by unions and workers had been reshaped into a doctrine that, as Robert McCloskey famously put it, had the 'smell of the lamp about it.' The Constitution, it seemed, protected reasoned discussion about ideas, not appeals to labor solidarity. In class terms, then, the constitutional revolution of the 1930s represented the triumph within constitutional jurisprudence of what might be called the 'knowledge class' over the previously dominant business class. The role of the working class was to provide the foot soldiers for change."
"Be not deceived by any specious sympathy and guileful interest in your welfare, but like men and women work out your own problems and determine your own lives. Benefits, improvements gained by the power of collective action may be slower, but they do not menace future welfare they do not transfer to others control over future activity, policies, or methods. Self-help leads to independence, reliance, and true welfare."
"The problem with Palley's paradigm is that its politics are absent".
Does this mean that you think Palley is unconsciously sliding back into the legalistic morass you go on to describe after that sentence? Or are you saying that Palley has mistaken a legal problem for an economic one? Or both?
I don't think Palley is "sliding back" into a morass. He's immersed in it and like a fish in water I'm sure he has no idea it's even there.
He is mistaking a political problem with economic dimensions for a technical economic problem whose political dimensions can (perhaps?) be addressed later as an afterthought. This is the old "assume we have a can opener" trick and it doesn't open any cans.
Thanks, Sandwichman. But why can't you energise legal/constitutional issues by pointing to a broken economic paradigm? It wouldn't be the first time that changes to the legal status of labour originated in obvious economic problems and obvious social distress. True, Palley doesn't take his argument that far, but I don't see any reason why he (or somebody else) couldn't. That could include re-addressing exactly that issue of US constitutional law which you talk about in the post.
But of course one of the reasons why the politics are difficult is that: "...any suggestion that the United States should reshape
its model of global economic engagement is brushed aside as 'protectionism', which avoids the
real issue and shuts down debate" (Palley p.30).
Lots of people on the Left hate protectionism like the Devil, because of the damage they fear that OECD protectionism does/could do to the developing world. That thinking wouln’t be a major factor in your attack on Palley, would it?
Palley doesn't take the argument that far... But I do. I can't speak for his motives for not doing what he hasn't done -- maybe it just didn't occur to him at the time -- but it seems to me likely that such a radical critique was not in his remit from the New America Foundation.
I wouldn't consider my critique of Palley's paradigm an attack. But whatever it's not motivated by either a hatred or an embrace of trade protectionism.
A magnificent post, S-man... The paradigm presented By Palley is clearly one in which the worker should be worked ever harder, and, in compensation for this excess, be paid in worthless coin that allows the value of his effort to be inflated away.
OK... So I read it and thought about it and came to the conclusion that the author was too fixed on labor unions as the golden fleece to be even handed. I absolutely agree that full employment and wages that keep pace with productivity should be the goals of any economic model worth spit. But to use an outdated mechanism such as trade unions is an exercise in foot shooting. The man seems to be mixing macro and micro and ending up with chicken salad.
"The outlines of such a box are easy to envisage and involve restoration of worker bargaining power in labor markets through strengthened unions, a higher minimum wage, and stronger employee protections; restoration of full employment as a macroeconomic policy objective; restoration of the legitimacy of regulation and increased government provision of public goods; a new international economic accord that addresses the triple hemorrhage problem
created by the flawed model of global economic engagement; and reform of financial markets and corporate governance that ensures markets and corporations work to promote national
The biggest flaw in this is a reliance on labor unions to bolster wages and protect American workers. The problem is that such a microeconomic tool is too specific to manufacturing and is not a macroeconomic mechanism in any case. "stronger employee protections" can be enforced by trade unions better then by government but that is where the honeymoon ends. The "increased government provision of public goods" is (to me) a macroeconomic proposition because it involves fiscal policy on a whole population basis. I don't think that is the current use of "macro" vs "micro" but it is _MY_ use. This is the movement of pensions and health care from the corporate world and union world and into the public domain with the federal government providing these particular goods through the use of "OFF BUDGET" insurance systems.
Then I look at "full employment" and again find some macro both fiscal and monetary. The same is true concerning the flawed international trade model. Here the author blows smoke rings but makes no concrete policy recommendations. This converts the entire piece into nothing more than one long WHIIIIIIINNEE.
1. The funding of the world wide policeman that provides the security in which property rights and trade can occur must be paid by those who relocate manufacturing to lower cost and distant locations. There is no way to do this without import tariffs. The world wide policeman is at present the US military and the military budget must be supported by import tariffs that approximate the need of the enforcement and which also vary with the cost of such support (the more distant the more costly). such a scheme would tax Asia more heavily than America (north, south, and central).
2.Full employment and better wages are assured by import tariffs and social insurance systems such as unemployment benefits, single payer national health insurance, and a better Social Security system. There is no need for micromanagement such as minimum wage laws and labor unions.
It is too soon to tell whether the current health care debate will produce a move toward single payer or be crushed by the joint efforts of the rent seeking private medical insurance sector, the hospital cartel, and the labor unions. There is not much doubt in my alleged mind that any "public option" will eventually crush the current rent seekers. This is why all the big guns are firing at socialization of health care (a public good). Can the real economists and the real democrats educate the public in time to produce real change? It is interesting that the Republicans are stalling because the longer they stall the worse they look and the more educated the public _CAN_ become. An educated public will not turn loose of the public option. So it is too soon to tell whether the current government will begin to turn the ship away from the failed neo-liberal model. It takes time.
"Meanwhile, however, government lawyers had been urging the courts to uphold the Wagner Act not as a human rights statute, but as an exercise of Congress's power to 'control' and 'punish' strikes under the Commerce Clause."
How true! The early '30s saw unions mopping the floor with management, to a large extent using Wobbly-style direct action tactics. The heart of the New Deal coalition was capital intensive industry that could afford higher wages because labor was only a modest part of the total cost package, but absolutely required workplace stability and labor discipline for the sake of its long planning horizons. So Wagner was a way of coopting labor with productivity-based wages and a seniority system, in return for enlisting union bureaucrats to enforce contracts on the rank and file and suppress wildcat strikes. It was the moral equivalent of saying to the farmers at Lexington and Concord, "Here, come out from behind those rocks, put on these bright red uniforms, and march in parade ground formation like the enemy, and in return we'll guarantee you don't lose all the time."
I agree with the Trucker on import tariffs, but I don’t see how you get from “…import tariffs, social insurance systems such as unemployment benefits, single payer national health insurance, and a better Social Security system” to “full employment and better wages” without a union-based bargaining system in between. It’s not automatic. There has to be a bargaining stage.
Gordon. you are assuming a structured manufacturing economy where the employees need solidarity to fight against against the owners of the means of production. If the employees can collect generous unemployment and health care without kissing the employer's ass, and if they can earn sufficient wages on their own without an employer and still have access to reasonably priced health insurance and real Social Security then they do not need to be tied to an employer at all. In such an environment they must be "bribed" with better wages, The producer surplus of workin' for the man, must exceed the producer surplus of self employment. As we remove the employers from the pension and health care systems we free the workers from exploitation.
Post a Comment