Undemocratic America: A Former Secretary of Labor Explains Our Trend Toward a More Imperfect Union, and Offers Some Recipes for Change

By Ray Marshall

Vol. 14, No. 2, 1992, pp. 8-14

TODAY, AS IN THE PAST, America has a tendency to proclaim that we as a nation are doing quite well in achieving the goals of a democratic society. After all, the United States is the world's oldest, continuing democracy. We have the world's largest gross national product. We enjoy one of the largest per capita incomes in the world, and, at least until recently, we had the highest wages in the world (we are now about thirteenth). For many, these signs of status are indisputable evidence of the full blessings of democracy.

These findings cannot be dismissed. However, a more honest, searching examination of the state of democracy in the United States leads, I believe, to a much more discouraging, even alarming conclusion. In fact, as the first modern democracy, the United States now may rank last among the industrialized democracies of the world in achieving, as a whole, the goals of a democratic society. Said another way, simply, the United States may now be the most undemocratic nation among the industrialized democracies of the world.

The United States is a rich country mainly because of our past, not because of our present and probably not of our future. The two things that made us the world's richest economy are no longer important advantages to us. One is we had an abundance of natural resources when natural resources were much more important. Second, we had the mass production system and economies of scale made possible by a large internal market. That is how Henry Ford could reduce the cost of a touring car from $850 to $350 in six years.

Both of those are no longer important advantages. Indeed, in many ways they are both now disadvantages. Abundance of natural resources has caused us to neglect our people. Healthy, educated, motivated people have become the overwhelming source of economic power. That is the reason that countries like Japan and Germany, who have very limited natural resources, are giving us trouble. They have developed their people. We have not.

We still have the resources. We have attained wealth because of mass production and economies of scale and the products of our past.

The Reagan and Bush administrations have done a lot to reverse the progress that we were making in improving the economic conditions of our people. Nobody should doubt that we have made progress. Those who want to see the progress continue have to be alert to the possibilities of backlash. We must be alert in building the foundations for lasting change.

We have made some progress in dealing with discrimination. I applaud the distance we have come but I regret the big distance that we still have to go. Anybody who believes that we have solved that problem is looking at different evidence from the evidence that I see. In fact the thing that worries me the most about our present situation is that we have some very dangerous political movements underway. Particularly the use of racial poli-

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tics. If you go back and look at the history of when you are likely to get serious conflicts and riots and physical conflict between the races they are ordinarily preceded by racial politics. It is unfortunate that we have seen a return to that. We ought to do everything we can to prevent that from happening. We saw it happen in the last Presidential campaign. I think we are going to see it in the next one. I think the White House is planning for it. I know for a fact they are. We must condemn it as vigorously as we can.

A number of other problems cause me to be concerned about democracy in America. I will start by defining democracy in its industrial, social and economic as well as political dimensions and then discuss why have be not used the political system more to try to strengthen democractic systems. Then, I will suggest what should we do.

My orienting hypothesis is that, in terms of all of its dimensions, the United States is the least democratic of any major industrialized country.

One of the best indications of economic democracy is income distribution and earnings. The United States has the most unequal distribution of income of any major industrialized country. It is now more unequal than at any time since we have been keeping the numbers. Seventy-five percent of American workers are worse off in 1992 than they were in 1971. Real wages have declined substantially.

The only thing that keeps real family income from being as low as real wages is that households are selling more labor. More women are working. That has made it possible to maintain family incomes despite declining real wages for men, but that is obviously self-limiting--not many families have another spouse to put into the workforce.

The only people who have improved their position in the last twenty years are college-educated people. We probably have the most elitist school system of any major industrial democracy. It was consciously organized as an elitist system. It was organized so that one part of the school system would supply the managerial, professional, and technical elites and the other part of our school system would mass-produce people to work in the factories and fields. What we called Taylorism was imposed much more rigorously on schools than on any other institution. It was a very authoritarian, undemocratic, and elitist system. That is still the condition that we are in.

The developments during the 1980s have exacerbated the inequalities. In the United States, as Bob Reich

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has emphasized, the wealthy have seceded. This is no way to build a more perfect union. How have they seceded? They go to private schools. They segregate themselves in housing. They oppose the kinds of investments that we need to make in our people in order to be world class and to improve our institutions and our systems.

Inequality as extreme as ours destroys democratic institutions. People can see how it destroys a society. What people often do not see is how inequality tends to destroy the economy. It is very hard to solve a society's economic problems if you have unequal distribution of income. If you correlated economic performance of various countries with income distribution you would find that those countries with the most equal distributions of income have the highest economic performance. That should not be a surprise. The reason is very clear. You get more support--in the sense of the community's will to do things that improve the conditions of everybody--if you have more internal unity. If you get the income disparities and the polarization that we have now in the U.S., it becomes very hard to get the people with the economic power to agree to the kind of investments in people that have to be made in order for a society to function well in the kind of world that we live in today.

I think it is terribly dangerous that the wealthy have seceded. Our public schools are becoming increasingly minority. Is this a threat to democracy? You bet it is.

The public school system is the one institution that should be a unifier, that should help us form a more perfect union. It should give us a common interpretation of our past and a common vision of our future. This cannot occur if you have segregated, fragmented, elitist schools.

There is a big difference between elite schools and elitist schools. Ours are becoming more and more elitist all the time. We have a movement underway called the choice movement that would like to make the elitism permanent. Some people who are a part of the choice movement make it clear that is exactly what they have in mind. They want to destroy the public school system. That would be a huge problem for us.

Poverty Undermines Democracy

The United States has a larger proportion of its people in poverty than any other major industrial country. We have twice as large a proportion of our children in poverty as Japan or any west European country. I do not have to tell you what kind of problem that creates for the future. The family is our most basic learning system. Poor families, with some amazing exceptions, are not very good learning systems. We can do a lot about that, but we tend not to. We do not have a family policy. People know we do not have a national health system, but neither do we have a family policy--even though we keep saying our people are our most important asset. In the way we treat our children, we do not act like they are very important. This bodes ill for our democracy.

In terms of industrial democracy, I believe we are in worse condition than any other industrial country. American workers have less job security and less control. Our workers are probably the least class-conscious of any workers in the world. Our employers are probably the most class-conscious of any employers in the world. Our employers have greater hostility to unions and the right of their workers to organize and bargain collectively.

When I talk to employers in other countries they are always puzzled. They say that in the United States you have the only labor movement in the world that openly embraces capitalism, yet the capitalists have formed a council for a union-free environment.

You cannot have a free and democratic society without a free and democratic labor movement.

We of course have a very strong ideology of individualism. I think one of the main reasons for this situation in industry is that the mass production system, with an authoritarian management and Taylorism, was more deeply entrenched in America than any other country. This was a very authoritarian and undemocratic management philosophy. The basic idea was to reduce workers to appendages of machines; remove all need for workers to think so that they would behave automatically and so they could be easily replaced. In this system, management controls the work through bureaucracy, with a few people at the top to do the thinking.

We imposed that industrial system on our schools. That is one reason the education system started using women for teachers. They were supposed to be easily controlled. The basic idea was that some male professors of education would figure out what you needed to teach. One of Taylor's principles is that there is one best way to do everything. This is sheer nonsense but it is still widely accepted. Management's job was to find out what that was, model it, and cause the bureaucracy to impose it on the teachers and students in the classroom and the workers in the workplace. You could mass-produce students who were literate but did not have to do a lot of thinking. And this is what was done for a while. The trouble is that today all of our people have to think if we are going to make it. An undemocratic industrial and educational system is

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obsolete, but we are having trouble doing away with it. One of the best ways to do away with it is a healthy dose of industrial democracy.

Why has our political system not done much to strengthen our social, economic and industrial democracies? There are a number of reasons. One is that we have had a strong laissez-faire ideology in the United States that resists the use of government to solve problems. The people who set up the federal government wanted it to function only in emergencies or to do routine things like sell stamps. Inmost other things they wanted a balance of power, a separation of powers, so that it would be very difficult for the government to move. Individualism is one of our important strengths, but excessive individualism becomes a weakness. We have individualism run amok, producing a limited sense of community.

I think our political leaders have misread the signs. The current Administration thinks that what is happening to democracies all over the world, with the triumph of the Japanese and western European economies, is a triumph of laissez-faire. Whoever believes that does not understand a lot about what has gone on in Japan, Germany, and Western Europe. A strong partnership between the public and private sectors, not laissez-faire, caused Japan to emerge as a major power. The Japanese will tell you that if they had stuck with laissez-faire, they would still be stuck making toys and dishes. The Japanese had no comparative advantage in automobiles. They created that.

Because of the ideology of laissez-faire in the United States, we did not develop economic strategies to improve the conditions of our people. The consequence of that is that we have backed into what many observers regard as the worst kind of economic strategy we could have thought of.

If you are going to be competitive in a globalized economy you can only do it two ways. One is to cut your wages. The other is to improve productivity and quality. What we have been doing for the last twenty years is cutting our wages. We backed into that. We did not have a strategy, and did not even believe we needed one.

I just co-chaired a commission on the skills of the American workforce. We studied 2,800 companies in the United States and six other countries. We asked: How are you competing in the world? Every other country--Singapore, Japan, Sweden, Denmark, Germany, Ireland--said they were going for the high-wage option. When we asked why, they gave two reasons. First, they would lose a low-wage contest. There is no way the United States is going to compete with Mexico when it comes to low wages, though we are getting ready to do just that through the North American Free Trade Agreement (NAFTA). Second, you really would not want to win a competition for the world's lowest wages.

The European Community and the other industrialized countries that we studied pursue the high wage option: they do not let companies pursue the low-wage strategy. But if a nation has no economic strategy, if you just leave companies alone, that is what they will do. Especially if you have an uncertain economic environment with high real interest rates, the companies' incli-

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nation is to compete by cutting wages. Indeed, only 5 percent of American companies told us they were pursuing the high-wage option. They were honest about it. On the other hand, a majority of the companies in the other countries said they were pursuing the high-wage option.

Why are companies behaving this way in the United States? First, we were told that incentives offered employers in the United States is to pay low wages and shift the work to low-wage places. The U.S. tariff code gives that incentive. The absence of any economic and social policy gives that incentive. The high real interest rate causes employers to take a short view. Secondly, some said, what difference does it make to us? We are maximizing profits and we can do it either way. We can either shift the cost to the workers through cutting wages, or we can try to make all these investments to go for a high-wage strategy. Employers get the profits either way. They can shift the stuff down to the Mexican border or to Sri Lanka and then ship it back into the United States almost duty free. The only duty paid is the value added from low wages. So why should they care which way they do it?

What we must say to businesses is that in the long run there will be no place to hide if they keep running to lower and lower wage locations. That is what happened to us here in the South. We had a low-wage strategy. We recruited a lot of industry that was on its way to the Third World to start with. And we are now left with depressed places.

The whole country has been backed into this situation by not having a strategy. Thus the polarization of the incomes of our people. The only people who are better off during the last decade are the people at the top. This is one of the biggest dangers that we face in our economic democracy.

Opponents of economic strategies say they cannot figure out what to do; that we cannot "pick winners and losers." What I would say to them is that it is not hard to determine the strategic industries of the future, but if you cannot, just start with the German and Japanese lists, which are identical. Companies call that benchmarking.

Let the government do a little benchmarking. Above all, do not do what the administration is planning to do with the North American Free Trade Agreement which is to accelerate this low wage strategy. Why not do what they are doing in the European Community? They are bringing the Spanish and Portuguese wages and labor standards up to the German levels, not reducing the wages and working conditions of the high wage countries.

Laissez-faire Education

We do almost nothing for kids who are not going to college. We spend more on college than any other nation--as you would expect an elitist country to do. Relative to our GNP, we spend less on kindergarten-through-twelve than most other industrialized countries. We do almost nothing for that seventy-five percent of our workforce that does not go to college. In other industrialized countries there are professional technical training systems. We need such a system here.

We have been unwilling to adopt effective social policies because of individualism and laissez-faire. We even perpetuate the ridiculous doctrine that children are responsible for their own problems. We believe more than most countries that learning is mainly due to genetics; the reality is that learning is mainly due to access, hard work,

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and supportive learning systems. We also believe national health systems or family policies create irresponsibility. We perpetuate myths about why people are in the conditions they are in.

We also have very inadequate leadership in our foreign economic policy. We are preoccupied with military aspects of foreign policy and not with economic aspects. We seem not to understand the indivisibility of democratic institutions.

Economic Democracy

What should we do in order to form a more perfect union? First, we should let the guiding principle for our economic policies be the building of a sense of community, in the sense that we are in this together.

Second, we ought to do everything we can to strengthen our democratic institutions. We have the lowest voter turnout of an industrialized country because a lot of people do not see that the democratic system can work to improve social democracy, and industrial democracy, and economic democracy. So why vote?

We have found in Texas, though, if you give the people a real choice they will take it. That is how Ann Richards got elected Governor of Texas. That is how one of my former students, Ernie Codes with the Texas Industrial Areas Foundation (TIAF), has been organizing people at the grassroots to make democracy work for ordinary people. This translates political action into better streets, safer streets, and better schools. A TIAF affiliate took two of the worst schools in Fort Worth and by organizing parents and community caused the school board to provide the resources to make it possible for parents, teachers and local principals to improve those schools. The democratic system can work but we have to make it work. We have to do a lot to reduce the advantage that well-monied special interests have in the democratic process.

We need to strengthen industrial democracy. We need to strengthen unions and the right of workers to organize and bargain collectively. We ought to give this a high priority. We tried to do this in the Carter Administration and failed but I think if we get another chance we ought to go all out. We ought to modernize labor laws. Our present laws do more to protect employers than they do to help workers. Workers in this country do not really have an effective right to organize and bargain collectively. We ought to enact this right. We ought to require some workers councils bylaw. If the Carter Administration had survived, one of the recommendations I wanted to make was that we have labor-management safety and health committees. Other countries find that some organized means for worker involvement in the workplace has greatly strengthened their economies, their ability to improve productivity and quality.

We ought to give workers more control of their pension funds. What we have now is legalized embezzlement with the single-employer funds. Workers are told that they do not know enough to manage their own funds. This must change. Workers can hire people to manage their funds. With almost $2.5 trillion, pension funds are the chief source of equity capital, so their joint control by workers and companies would therefore be a good way to strengthen economic democracy.

We ought to do more to strengthen employee ownership plans. I am on the board of Republic Engineered Steel, which was bought by the steel workers from LTV. Under worker ownership, Republic was made much more competitive than it was under LTV's management. The workers are more likely to have a long-run interest in the success of their company and therefore will be more likely to be motivated to make it succeed.

The only people who have real long-run interests in most large publicly held corporations are the workers. Institutional investors could not care less about the steel business. They could not care less about the auto business or any of the rest of these. Workers do. Therefore wherever you get economic democracy you do not necessarily strengthen the performance but if you get employee ownership amid participation then performance tends to take off.

I believe we also need a national youth service in order to provide a unifying influence for the country. This is to some degree the moral equivalent of war. I had that experience. I grew up in an orphanage where we did useful work. We were self-sufficient. When I was fifteen years old during World War II I joined the Navy.

I came in contact with people I had never come in contact with before. I had never seen a Republican before. I had never seen Catholics or Jews. Being in the Navy with a common purpose unified us. We forgot about some of

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the prejudice we had in our backgrounds. A lot of young people today not only feel unloved, they feel unneeded. There are a lot of useful things we can put young people to work doing. I think that would help form a more perfect union.

I also think we ought to strengthen possibilities for projects like Ernie Cortes's. We ought to encourage grassroots democracy.

We ought to strengthen social democracy. We need a national health insurance system. We need a family policy that would guarantee that children will be taken care of regardless of whether you can find the father or not. Our present system is very inequitable. In fact, it is crazy. It depends on the court you happen to get into and the state you happen to live in.

We must work to strengthen industrial democracy. We ought to adopt a high-wage development strategy for the same reason that every other country has. Because we would not want to win the war for low wages. First, we have got to get macroeconomic policy in order. We need to have a sensible trade policy. Our trade policy has made it difficult for companies that develop technology in the United States to ever benefit from it. Other countries can dump, do what they call capital blockage--deny you the ability to recover your capital. Keep you out of their market as the Japanese do until they can build up economies of scale to penetrate your market and take it over. My Japanese friends say, do you think we are irrational to do that? I say no but I think we are irrational to let you do it to us. The Japanese are not mainly responsible for our problems, we are. We therefore need to have a strategy to see to it that we develop and use leading-edge technology. The trouble is the people who administer our trade laws believe in laissez-faire. They somehow look on it as sin that they are involved in enforcing a trade law. They do not believe that you ought to have trade laws. Therefore they are not very vigorous in their enforcement. They do not have a common objective like seeing to it that we are a full-employment, high-wage society.

We need to greatly strengthen our education and training systems. I invite your support of the High Skills and Competitive Workplace Act of 1991 which was introduced October 1, 1991. This legislation would do a number of things to really help this country. It would require that you have standards for everybody to graduate from high school which we do not have now. It would be a way to drive the system and make schools responsible for seeing to it that all children meet these higher standards. If students have not made satisfactory progress toward those standards by the time they are sixteen years old we recommend they be allowed to leave that school and take their money with them and go to a youth center, modeled after the Jobs Corps, which can be a very efficient learning system. Right now, dropouts subsidize the system because there are no financial incentives for schools to prevent dropouts. Schools get their money on the basis of average daily attendance, ordinarily for some weeks in October--weeks when they put on campaigns for you to show up. Door prizes. If your name is pulled out of the hat, you go to the Bahamas or win a new car. After that they hope some of you never show up again. Guess which ones?--the hard cases that need the schools most. If students could take their money with them, the schools probably would pay a lot more attention to trying to keep those students.

We ought to strengthen the apprenticeship system in this country. We ought to encourage more workforce training. Every company ought to be required to set aside one percent of payroll for the education and training of their frontline workers. Our elitist systems spend a lot on managerial training, but they spend almost nothing for the education and training of frontline workers.

We ought to provide four years of education for everybody who meets the new higher standards for graduation from high school or all adults over eighteen years of age. We need something like the GI bill, made universal. This could do more to strengthen economic democracy than almost anything you can think of. Because it is becoming more and more difficult for low-income people to get education, we are therefore being polarized.

In the international arena we ought to pay a lot more attention to economic aspects of our foreign policy and a lot less to the military. We need to think about building international institutions that will fit existing realities, not those of the 1940s, which undergird our present international institutions. We particularly need to include labor standards in all international economic rules to encourage political, industrial, social and economic democracy in all countries.

The Southern Regional Council and the South have a chance to try to strengthen our democracy. I think we ought to be ashamed of it the way things now stand. Sometimes you can shame people into doing the right things. That's what happened when we studied six other countries instead of just looking at the United States. Some of the employers on our commission would not have believed what they found if they had simply been told about it in advance.

Abraham Lincoln said, "I'll get ready and my time will come." One of the most important things that we can all do is to get ready. Because of what is happening in the world, for those of us who believe in democracy, our time is coming.

Economist Ray Marshall, vice president of the Southern Regional Council and president of the Southern Labor Institute, teaches at the University of Texas. He was U.S. Secretary of Labor during the Jimmy Carter presidency.