Toward Economic Democracy

By Ray Marshall

Vol. 9, No. 3, 1987, pp. 16-19

The goals of economic development and job creation are terribly important but we must be clear that job creation means a job for everybody who is well and able to work and wants to work. We must be concerned not just with the number of jobs but with the quality of those jobs.

In spite of all the talk about the new unemployment, the problem caused by unemployment is the same as it ever was-serious material loss. The loss from unemployment this past year is over $1,000 for every man, woman, and child in America, over $200 billion total. We could have done a lot with that $200 billion.

Furthermore, unemployment's human costs go beyond material loss. Unemployment is still heavily correlated with almost every social pathology-crime, alcohol and drug abuse, family breakups...even infant mortality. Unemployment shortens lives and kills people.

We should have a guaranteed job for people who are willing and able to work at decent wages and under decent working conditions. Since that ought to be our policy objective, we must get voters to accept the goal, and we must establish policies to move toward that goal.

We're in a different world, though, than in 1946 when the Employment Act was passed or in the 1930s when a lot of basic full employment objectives were established. We need to adapt to that new world, to work within new institutional forms to build economic development from the grass roots up.

Democracy has several dimensions. Political democracy, people say they understand. At one time we had a commitment in this country to industrial democracy, too. It was an extension of political democracy and for the same reasons. In fact, if you try to preach democracy in the political process and deny it on the job you create strong social tensions. Added to that in recent years, is the realization that democracy is very efficient. We taught that to the Japanese who developed a very competitive system based on a simple proposition that many of our managers refuse to accept-that the people who know the jobs better than anybody else are the workers on those jobs. If you can harness the energy and ideas of those workers, you can build a terribly competitive system. It will be very efficient and it will improve the conditions for everybody. Now a lot of our managers are selling that idea but they don't understand the other part of it-that worker participation without effective worker power is inefficient and temporary.


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Workplace democracy with a false concept will fail when management starts making unilateral decisions. Workers won't identify with something that is authoritarian, undemocratic and elitist, which is what Taylorism, the basic American management system, is all about. If you want true democracy on the job, you have to give workers an independent source of power to protect and promote their interests. They must have the right to organize and bargain collectively. Society must protect that right; we're not going to have a free and democratic political system without a free and democratic labor system.

Now the concept of democracy is being extended from political democracy to industrial democracy to social democracy, which means that we ought to as a society establish minimum conditions for people within the society. That's social democracy...we are concerned about the development of our people so we are concerned about education, about health insurance, about income maintenance for those who are unable to participate effectively in the economic process. And then the final part which is on the horizon now is the extension from social democracy to economic democracy.

Economic democracy means greater ownership and control by the workers themselves of the places where they work. In an internationalized information world, if you're not where the decisions are made you cannot protect the interests of workers. You've got to be on boards of directors, you've got to have part of the ownership of those enterprises, you've got to pay attention to stock ownership and stockholders and be a part of the financial system. All of these things-financial manipulation through leveraged buyouts, the use of your pension funds against your interests-have a vital effect on American workers, their jobs, their working conditions, and how well off they're likely to be in the future.

To be concerned about workers' interests today is to be an actor in the deals that get cut, to see to it that the workers' interests are protected. By working together we can perfect some of those institutions and therefore do new things to meet the conditions in which we now live. We must develop employee stock ownership plans and labor cooperatives. Why should all these labor exchanges make a lot of money, exploiting workers and denying them benefits, sending them to work under unsafe. unhealthy conditions? We need labor cooperatives with workers who control themselves to supply that labor. It doesn't take a lot of management expertise to run a labor exchange, and you could in the process protect the conditions for workers. We might fail with a lot of such efforts and will, but the way to progress is through failing and starting over and building to what you have got.

Such grassroots initiatives are important, but we also have to recognize the other reality-that policies made a long way from the South have a direct and immediate bearing on our lives. We therefore have to be concerned about international and national economic policy making, and if we don't then what we try to build up can be eliminated overnight.

We have many case studies of that if you look at the effects of U.S. economic policies on workers throughout the South. Take monetarism, which is one-half of Reaganomics. Stripped of its niceties, monetarism means we are going to use unemployment to keep wages down. Therefore, if you don't want that to happen, you've got to be an actor in the economic policy making process.

Supply-side economics is based on the assumption that a huge tax cut in 1981 would so stimulate the economy that in spite of spending $1.6 trillion on defense, we would balance the budget by 1983. That didn't happen, but what did happen is what some really had in mind all along-to so weaken the federal government that it could not do an effective job of providing human services or protecting the rights of workers and ordinary people in the country. That was the main agenda of a lot of people who are involved in this process and they have done it. The other thing they did was to cause misery for people all over the world. Because of the huge budget deficit, it means the federal government has to use most of the net savings in this country just to pay interest on the national debt--$170 billion this year. Lyndon Johnson. during the Vietnam War, put in the first $100 billion budget, and the interest on the national debt now is much larger than Lyndon Johnson's Vietnam-era budget and it is going to get bigger.

Now what effect does that have on you?

First, you and your children and their children are going to pay it. Second, in the process the federal government as the preferred borrower, with the Federal Reserve limiting the money supply, drove up interest rates and put a block on job-creating activities. Who's going to invest to create a job when all you have to do to make ten, twelve or even twenty percent is draw interest? Nobody.


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But more important than that, it also costs us jobs because other countries wanted that high interest so they bought dollars so they could buy U.S. assets and that drove up the price of a dollar. That is like subsidizing imports and putting a use tax on exports. The trade policy of the United States is not only passive, it's perverse. The trade policy of the United States has encouraged companies to ship jobs overseas simply because of tax reasons or because by opening the American market to competition from overseas the companies can then justify that level of wages and costs.

The essence of the trade policy is this-if you have a passive policy and someone else has an active policy, you don't have to have a lot of imagination to see who's going to call the shots. We tend to be reactive and that means that other people will decide which jobs we get to keep in this country. And they do what I would do if I were in their position. They keep the good jobs and give us the rest.

Instead, we ought to have an active policy, but we're not going to get it so long as you are not actively involved in the policy process. Therefore, we need to pay heavy attention to this policy process and to recognize a number of realities.

The main trend occurs with technological change. We need to be technologically advanced to maintain rasher high wages. Why? Because if we lose our technological advantage, we compete according to wages. If we compete according to wages, we'll lose, as wages will tend to go down.

The other thing we must worry about is the revolutionary effect those technological changes will have on our lives. Technology makes it possible for the international corporations to ship jobs around the world like they were pieces on a chess set. Technology would let a one-room company operate all over the United States and all over the world just as if they were in all of these places-we have a company in Dallas that has two hundred workers in Beijing, China. Those workers work every day for that company. They send stuff through satellite. Those Chinese workers make fifty dollars a month and they're pretty well-trained and well-educated computer workers.

Technology can shift jobs. It has also been partly responsible for the fact that most jobs are now being created by relatively small enterprises-fifty or fewer workers. There are obvious implications for organizing and obvious implications for where the jobs are. But the big question is will this technology create more jobs than it displaces? That is one very important issue.

The second important issue related to technology is will those jobs be worse jobs than the ones we've got now? Technology can make better jobs and more jobs or it can make worse jobs and fewer jobs. It all depends on policy, on management and on whether workers participate in making the decisions for the introduction of machines. If we get enough growth to absorb the workers who are displaced by the machines, we can maintain relative employment.

Historically, technological change has always caused unemployment. The only reason most technology is introduced is to displace labor. That is what improved productivity means, that you produce the same output with less labor and new machinery therefore always causes unemployment. In the past we've absorbed a lot of unemployment through shortened hours, longer vacations, starting to work at later ages, etc. However, future unemployment is likely to be involuntary and therefore will increase joblessness.

The second trend we have to watch is the internationalization of the economy, which changes the whole concept of the labor movement. The basic idea behind the labor movement historically is to remove labor from competition, thus improving efficiency and equity and the human condition. You strengthen management because managers now have to manage. You strengthen efficiency because you don't let parasitic employers continue to operate. If you don't subsidize them and you have the proper policies, you improve efficiency because you shift people from the inefficient to the efficient, to those who can uphold good conditions and meet proper standards. Now, of course, we can no longer take labor out of competition by collective bargaining or by national regulations. Our rules don't cover China, Korea, Japan and western Europe. Our contracts don't cover Japanese workers and it's a fundamental principle of collective bargaining that unless your contract coincides with the market, you'll have trouble holding the contract.

The solution is to extend the rules internationally and that is why workers' rights must be included in trade legislation. We can't be any more complacent about Mexican and Korean workers getting cancer than we can workers in the United States. American companies can exploit Korean workers and send their goods back to the United States to compete with us. That doesn't help Korean workers and it doesn't help ours. The basic principle of international labor standards is the same principle of removing labor from competition through national standards.

The third basic trend is demographics, which is vital to the labor movement. As has been pointed out, eighty-five percent of all people who will be working in the year 2000 are already in the work force. And ninety percent of the increase between now and the end of the century will be women and minorities. By 2020, when the post-war babies' generation retires, there will be a minority population of


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ninety-one million in the United States. Minorities will at that point be thirty-four percent of the population and forty percent of the work force. They are now seventeen percent of the population. Therefore, the future of the labor movement as well as the future of the American work force and therefore the future of the economy depends heavily on what happens to women and minorities now.

We know those things because demographics is predictable. See, the birth rate in most white populations is not even at the level required to replace themselves. We don't know all the reasons why, but part of it is that the white population is older, and old folks don't have as many kids as young folks. The median age of whites in the United States is 32 years and rising. The median age of hispanics is 22 and declining. The median age of blacks is 25 and rising.

Now if you don't get women and minorities organized, educated, and trained, then you're not going to be competitive in the international arena. And you're not going to be able to maintain the labor movement unless you have a strategy to deal with women and minorities because that is where the future lies.

Given those trends, what do we do? How do we develop policies to achieve full employment with relatively decent wages and conditions?

First, we need to focus on our main objective, which is to try to achieve full employment and decent wages.

Our problem in dealing with international competition and in achieving this objective is not that we can't do it. Our problem is that we don't want to do it and that we have policy failures relative to other countries. Why do we have such bad policies in this country?

One basic reason is greed. Some people make out all right with a laissez-faire, non-government intervention climate. It's not hard to figure out who those folks are-people who've got it, who have a lot of resources, are going to make it. I grew up in a Mississippi Baptist orphanage and had to go to church a lot and didn't even know people could start a meeting without taking a text from the Bible and singing some hymns and giving a prayer. So, if I was going to put together a text for the Reagan administration policy it would be, "To him that have shall be given, and to him that have not shall be taken away, even that which he thought he had." If we don't recognize that is part of what supports this laissez-faire world, then we don't understand what is happening.

The second reason for our bad policy is ideology. We have sold ourselves the notion that government is bad and the market will solve all problems, and therefore, we ought not to have government intervention in the market. That attitude will cause us to continue to decline.

It was creative pragmatism that caused us to have the longest period of sustained prosperity in our history, from World War II to the early 1970s. We didn't ask ourselves if the G.I. Bill, the national highway program, our whole education system, that we enlarged greatly in those days, we didn't ask if this agenda was socialism-we saw it as the thing to do. We maintained employment reasonably well by active government intervention. We built our agricultural system and our space program (the spin-off of which gives us our technological lead) and people didn't ask themselves if it is right for government to do that. Only recently have we begun to get this ideological belief that whatever the government does is negative.

We've got to get away from that. We can't solve our problems without a strong federal government actively involved as a partner. When we recognize that reality, then it is not hard to look at the components of policy that we need to build the just and humane society we feel is important.

To make the policy, we must recognize that at every level-international, national, in the plant, in state and local policy-making-if you are not there, people who do not necessarily have your interests at heart will determine the policies.

Second, we must recognize the internationalized environment that we are in.

Third, we must assemble a decent set of national policies to deal with our problems. We have to develop our people-a human resource development strategy. We must have an active trade policy that will promote our own interests. We need industrial policies. As a part of that industrial policy, we must pay attention to our financial institutions. We now have the financial tail wagging the economic dog. With this, we need to have an international arena-an international bank that is a lender of last resort, to bring discipline, to prevent disasters like the third world debt. Our financial systems tend to have a short-run orientation. They make it hard for companies to develop the technology that will cause them to be competitive. We need to change that. We need to concentrate on research and development. Finally we need to build democratic institutions. Our political system is too dominated by economic interests. We need campaign finance reform so that people can't buy elections and so the democratic processes can work better. We need to encourage new forms of democratic organizations.

Above all, we need to re-examine our labor laws, particularly with respect to collective bargaining. American labor laws were designed to make it possible for workers to organize and bargain collectively to represent their own choosing. Today those labor laws do more to protect the interests of employers than the interests of workers. They have been perverted. They don't even work as well as they used to and they never worked as well as they should. That is why we fought so hard for labor law reform. We need to speed up the NLRB processes and to strengthen the penalties for violation of those laws. We also need to convince the country it's in the national interest for workers to be able to organize and bargain collectively. In the 1960s the United States and Canada had about the same proportion of the work force organized, about thirty percent. Today Canada has forty percent and we have eighteen percent. The main difference, I think, is public policy with respect to collective bargaining.

Finally, we should not fear the trying of new things and we ought not to fear failure. But what we ought to fear is the judgment of history that we understood what needed to be done and refused to even try to do it.

Ray Marshall, who was Secretary of Labor in the Carter Administration, teaches at the University of Texas-Austin He is the president of the Southern Labor Institute.