Facing the Universal Imperatives

By Ray Marshall

Vol. 1, No. 7, 1979, pp. 16-18

[Introduction]

The world that we live in has changed; is changing, dangerous and uncertain – and I think that if you take a look at the concerns of the Southern Regional Council and some of the universal imperatives that impinge on those concerns, you can see that the main thing that will characterize the work of the Council, as it endures, is not that things will get easier- but they will get different. It’ll be a different environment, but it will be equally treacherous.

There are universal imperatives that, I think, are fairly obvious to people, if you think about them. One of the universal imperatives that we experienced since 1944 has been industrialization and economic development. That’s caused most of the changes.

One of the universal imperatives that we’ll face probably in the future is discrimination. We haven’t solved that problem by a long shot. What’s happened to discrimination is its forms have changed. And different people are now involved.

What the Black civil rights movement started has caught fire, and other groups are now demanding equality – and that will be a continuing process. Women will continue to demand equality. Hispanics will continue to demand equality; the handicapped, the elderly; people who are discriminated against for anything, unrelated to their merit, will be caught up in that movement – and have been caught up in it. And they will see the value, the power of the moral example that the Black civil rights movement launched.

Another concern that the Council will have to grapple with in the future, I think, is a whole range of international concerns. I think these are very important, and they’re usually overlooked. But these international concerns increasingly impinge upon our ability to get civil rights, and our ability to improve the conditions of people in the society who desperately need help.

Just to mention some of these things indicates the significance of them. The whole human rights movement is very important throughout the world, and it’s not divisible; you caimnot talk about human rights in other countries, and ignore them here. Just as Van Woodward put it so well, the institutionalization of racism around the turn of the century had strong international origins. We could not go forth and fight the White man’s burden in the world and not be infested with the same kind of racism here.

I think it also works in reverse. The origins of a lot of the civil rights movement – particularly employment originated with international concerns. A. Phillip Randolph’s first march on Washington was directly as a result of a war that we were in to make the world safe for democracy, at a time when Blacks couldn’t work in the plants, making the guns to fight the war.

The anomaly and inconsistency of that had a compelling force. I think the problem that Southern Regional Council will have to deal with is immigration. The problem of illegal immigration, particularly, will have a significant bearing on the ability to improve the conditions of lowincome people, workers generally, and to get civil rights.

I believe that because we don’t legalize the flow of peo

---

Page 17

ple in our work force, we are building for ourselves another monumental civil rights struggle in the future. The dynamics of that struggle will be very similar to the dynamics of the struggle that we went through in the fifties and sixties, as we will have some of the same causes.

The first generation of immigrants will endure second class status; their children will not – and you can almost count on it. And if we don’t prepare for that, to assimilate people into our society with full legal rights, then we’re going to build a serious problem for ourselves.

One of the areas of greatest concern that I have about the future is our ability to have a just and humane society by providing a decent standard of living for people; a decent job, in a relatively stable economy.

Now I believe that we can do that. I believe that the means of doing that are within our grasp. But I think it’s going to require a lot of dedication, a lot of intelligencc and a lot of hard work.

I believe that we’ve established the framework for that in the passage of the HumphreyHawkins bill, that many of you helped us get, which commits the government to the achievement of full employment by 1983.

We have been trying to do a lot in the last couple of years to move us in that direction, and I think it’s imperative that we continue to move in that direction. We should not let the talk about the budget obscure the fact that the government has for too long done too much for those who need it least, and not enough for those who need it most.

What we are trying to do with our programs is to see that that happens; that we concentrate our resources on people who need it most, in spite of the budget constraints we face.

For example, the amount of job money in the CETA system that we devote to the disadvantaged has increased, both absolutely and relatively. In 1976, we spent $3 billion on the disadvantaged; in the 1980 budget, we’ll spend $9 billion. In 1976, 63 percent of the participants in the system were classified as disadvantaged. In 1980, 94 percent will be classified as disadvantaged.

The point of that, to me, is that even though we do

---

Page 18

have problems with inflation and budget constraints, it does not mean we cannot continue to help those who need help. It seems to me, we need to really concentrate our efforts on seeing that that happens. We need to work to reduce the disparity in unemployment rates, as well as to reduce the overall level of unemployment rates. And we can reduce that disparity by concentrating our resources on the problem of Black youth, for example, and young people generally, and by concentrating our resources on places with the highest rates of unemployment. We must do everything we can to provide job opportunities for the people in urban areas and depressed rural areas.

Another universal imperative we will face that will make it difficult for us to help those who need help most, and to continue the civil rights struggle, is inflation. Inflation is a very serious problem. It is a particularly serious problem for low-income people, and minorities. And the reason for that is very simple – the cost of living for low income people increases much faster than the cost of living for higher income people.

When you get into inflation, you tend to buy down. You quit eating sirloin and start eating hamburger. You quit eating hamburger and start eating beans. And many people quit eating beans and start eating pet food. And that is happening, as inflation inflicts damage on the poor – the very people who can least afford to bear the brunt of inflation.

Inflation is serious because it also threatens our democratic institutions. Nothing threatens antidemocratic forces as much as inflation. It strengthens support for government, and for using government to help people who need help. Inflation frequently tends to bring out the worst in people, and tends to generate a selfish attitude that causes people to turn inward, rather than being concerned about other people.

A curious thing to me about inflation is that the wealthy do the most complaining about it, and the poor do the most suffering from it. I never could quite capture the reason for it, but I read a quote recently from one of my economist friends, John Kenneth Galbraith, who said that in this light against inflation, we have to be sure we distribute the burden of fighting inflation, according to one’s ability to fight it, which means do everything we can to see to it that the people who pay for it are those who have the higher incomes and who are in the best position to deal with the problem.

Somebody asked Galbraith, “But won’t the wealthy object?” “Yes, quite a lot,” he said and gave this quote:

“You must remember that social tranquility at all times and in all countries, is always advanced by the cries of anguish of the affluent. They have a much deeper sense of personal injustice than the poor, and a far greater capacity for indignation. And when the poor hear the primal screams of the well-to-do, they imagine that the fortunate are really suffering, and become more contented with their own lives. Good statesmanship has always required not only the comforting of the afflicted, but the afflicting of the comfortable.”

Well, I think that Galbraith, in his own way, put it very well – that in the fight against inflation, there will be strong forces to try and shift the burden for the fight to the poor; the low-income people. It seems to me that a goal of this organization should be to see that this doesn’t happen.

We’ve been trying to insure that it doesn’t happen in the Administration, by seeing that the inflation fight is equitable. That’s the reason we had a low-wage exemption; the reason we ruled out the alternative of allowing inflation to be controlled by having a recession, or having a depression – and try to maintain a level of unemployment while we deal with problems of inflation.

We tried to do it in our effort to get a real wage insurance provision in the Congress – so that wrong about our ability to control inflation, there will be some insurance, particularly for lowincome people, who will suffer the most from inflation.

Finally, we resisted the cries by people who argue that we ought to deal with inflation by not increasing the minimum wage, about rolling it back, or by doing away with prevailing wage legislation that tends to help those who do not have a power in this society to improve their own conditions.

I think that we have to continue to recognize that efforts will be made to roll back the minimum wage, to have a youth differential on the minimum wage, to eliminate it all together, and if we do that, then we will transfer the fight to the people who can least afford it.

Secretary of Labor Ray Marshall is a former director of the Task Force on Southern Rural Development sponsored by SRC.

American Poverty, World Poverty

By Ray Marshall

Vol. 8, No. 1, 1986, pp. 3-7

For poor people in this country, and in the world, the outlook is not good. And because the lives of the poor are joined together with ours, their problems and poverty are ours-directly and indirectly, in our communities, through international trade, and through immigration.

Rising unemployment is a worldwide phenomenon. Joblessness in the Third World is fifty percent, and climbing. The International Labor Organization estimates that to keep that figure from going up by the end of this century for people already born we’ll need to create 700 million new jobs.

There are not 700 million jobs in the whole industrialized world today. Things are going to get worse.

The Greatest Economic Policy Mistake

The American economy is losing its competitiveness across the board, not just in the smokestack industries but, as a presidential commission reported in 1985, in seven out of ten high-tech industries. Our ability to maintain jobs in this country is being eroded.

The main reason for the loss of competitiveness and for our loss of two million jobs is the over-valued dollar-which comes about directly because of Reaganomics. The 1981 tax cut was the single greatest economic policy mistake in US history. Historians will leave no doubt about that.

To give you some idea of the magnitude of the damage that has come from the tax cut decision, Ford Motor Company estimated in 1983–before things got as bad as they are now–that of the $2,000 differential between American and Japanese automobiles, $1,400 was because of exchange rates. The Caterpillar Company estimated that on a $200,000 piece of equipment, they ought to have a $30,000 advantage over Komatsu. They’ve got a $30,000 disadvantage.

So what do they do? They leave the country. They’re moving the jobs to other countries. Not because of inefficiency in the United States, not because we can’t be more competitive in real terms. They’re moving those jobs from the United States because with differentials in exchange rates of that magnitude they simply cannot compete. They cannot produce in the United States. Ninety-five percent of all the increased capital goods final demand over the past business cycle came from imports. Ninety-five percent.

Our capital goods industries–our machine tools and basic production capability–are in shambles. And although we also have structural problems, the fundamental problem is the over-valued dollar that came about because of high real interest rates, that came about because of the enormous budget deficit, that came about because of the 1981 tax cut.

Corporations Beyond the Rule of Law

There are other problems. What to do about multinational and transnational corporations? (Transnational companies are owned by people from different countries. Multinationals are American companies operating in different countries.)

Transnationals and multinationals are driven by profits. Whatever is second to profits is a long way behind. They will move the jobs wherever they can make the greatest profit. Ordinarily that means to where they can get the lowest wages. So they are able to whipsaw countries. And whipsaw workers.

I’ve seen no effective means to bring multinational and transnational corporations under the rule of law, to make them responsible for their actions. I think it can be done, but I see no organization now to do that.

Many of the jobs in the South are on their way to the Third World. We will not be able to keep them. Many of them came here because of low wages. And this is their last stop in this country. In the Third World, Mexico is a high-wage country and their wages are about one-fifth of ours.

American Poverty

The US poverty figures remain high. The little improvement among some categories last year was very little. We have to be very discouraged about the overall decline in the national poverty rate from 15.2% to 14.4%

Income is being redistributed in the United States. The top ten percent of income recipients have never received a larger proportion of the income at any time since we’ve been keeping numbers than they did in 1984. (see Tables l and 2) The bottom forty percent of income recipients in the country have never received a lower proportion of income than they did in 1984. The lowest ten percent of income recipients in the country have lost about $400 since 1980 while the richest ten percent have added $5,000 to their median income.

Programs to help the poor have been drastically reduced. You know those numbers. Most discouraging, most alarm-

---

Page 4

ing is what is happening to children. Poor children are much worse off now than when the War on Poverty started. There are more of them. Their numbers are increasing while the resources to deal with their problems are diminishing.

Over one-half of poor children live in families headed by women. These children’s futures are inextricably bound up with the conditions of women in poverty. They will never escape from that. If they don’t get proper nutrition as infants and children, they and we are damaged by that forever. These programs have been drastically reduced despite evidence that they save the government three dollars for every dollar spent.

Among our most important anti-poverty programs are our anti-discrimination laws. But, now we’ve got an administration intent upon weakening civil rights enforcement. In their attitudes about discrimination against women and blacks, they would send us back to the 1940s.

Many of the organizations that might help poor and near-poor people are either weakened or are looking the other way.

Unions are weakened and under full-scale attack. The National Association of Manufacturers has formed a Council for a Union-Free Environment. They wouldn’t have dared do that twenty years ago. I don’t think they will pull it off. But in the process they have greatly weakened unions and unions’ ability to represent the interests of workers.

Community-based organizations and civil rights groups have been weakened.

The government–which in a just and humane society should always be concerned about the least fortunate–is looking the other way. They have convinced themselves that there’s no problem or, that it’s the poor’s own fault that they’re poor.

The Democratic Party seems unconcerned about the poor. It has not even demonstrated the concern that would be in its own self-interest: by registering the poor to vote. We could only get six out of over thirty Democratic governors involved in encouraging community service organizations to register voters.

We’ve also got the “neo-liberals” who are disaffected. They believe that the programs that tried to help the poor failed. They believe that if we just let the market work and have the proper macroeconomic policies we don’t need jobs programs and we don’t need most of these programmatic interventions. That strikes me as looking the other way. Denying a problem that clearly exists.

An Intellectual Code of Nonsense

We are seeing a weakening of the intellectual support for human resource development programs. Having such intellectual support during the New Deal was one of the reasons we were able to make progress.

People used to believe that a just and humane society took care of the least of these our brothers and sisters. And, that in so doing, we were helping the country. We did not believe we could prevent depressions and have lasting prosperity unless all major goups shared in that prosperity.

We still say that people are our most important asset. And it’s unquestionably true. But many people who know that, don’t understand it.

So we have cut programs for education that have demonstrated their effectiveness. And we have cut programs like WIC, the women’s, infants and children nutrition program which returns three dollars to the government for each one it spends.

In the past, we believed that these programs were not costs but investments. Public education was an investment in this country. So was the GI Bill. We didn’t only look at the cost of doing things.

Creating a just society once meant something pretty concrete. It meant a bias in favor of the disadvantaged. Nothing was more unjust than the equal treatment of unequals. We felt an obligation to the poor and the disadvantaged.

All this now is being challenged by an intellectual code that contains several parts. The first is Reaganomics, an economic theory of sheer nonsense. I don’t think anybody of sound mind and any training believed that supply-side economics–the doctrine that was used to justify the 1981 tax cut-ever had a chance. You remember what this promised–that by cutting taxes by 750 billion dollars and increasing defense spending to 1.6 trillion, we would so stimulate the economy that we would balance the federal budget by the end of 1983.

The result was the creation of a budget deficit so huge that people now view balancing the budget as the most important thing we can do–even if it means cutting out education and nutrition for children.

As former Reagan budget director David Stockman said in his famous interview, you couldn’t sell trickle-down out loud, so you called it supply-side. That’s all Reaganomics was and is: the myth that if you make the rich richer, we’ll all be better off.

Well, we made the rich richer. And we made the poor poorer–they have been trickled down on. Investment went down. Savings went down. And the result is a budget deficit larger than that produced by all the preceding administrations combined.

Beyond Reaganomics, other doctrines have undercut intellectual and popular support for economic justice. One idea–put forth by Charles Murray in his book Losing Ground–is that government assistance programs are

---

Page 5

counterproductive. Murray’s view, which continues to be surprisingly well-received, holds that social spending makes the receipients dependent and the problems worse. Murray says that as a result of the War on Poverty and the rest of the government’s social spending programs, poverty went up.

A variant of that argument is, “The programs didn’t work.” That’s the easiest one to deal with. Because the evidence is overwhelming that the programs did work. And produced rich dividends for the country.

But let’s look at the ideas of Reaganomics and then at the notions of Murray. First, is the budget deficit our most important problem? Not really. The budget deficit is not likely to cause a recession. It is troubling. Its real effects are on interest rates, the exchange rate, and in creating an obstacle to economic growth. But bringing the deficit down will not necessarily reduce real interest rates.

There are various reasons for that. First, in the deregulated financial environment, competition for deposits keeps the interest rates up. There used to only be competition on one side of the market. Moreover, with very low corporate profits, corporations are no longer as sensitive to interest rates. So there is likely to continue to be high demand for money. Also, there’s simply a lot of speculation, which causes rates to be high and volatile.

By trying first to balance the budget by 1987, we could end up with a deeper recession than that of 1981-82. It’s the wrong time to do it. And the worst possible way to do it would be to make further cuts in domestic spending. We need to reduce the budget deficit as much as possible by raising revenues, cutting military spending, restoring many of the cuts in human resource development programs, raising taxes and reforming the tax system.

Now, let’s look at Charles Murray’s arguments. The evidence is overwhelmingly against the idea that government domestic spending is counterproductive. Bet me just tick off a few reasons.

First, there is the assumption, underlying Murray’s view, that the poor don’t want to work. Nonsense. If you have had any experience with these programs you know that if you make a few lousy jobs available, you get inundated with applicants. Secondly, Murray doesn’t exclude the elderly from his federal expenditure numbers, but he excludes them in terms of how their lives have improved. The elderly have benefitted tremendously from government programs. They have received 86% of social welfare spending. Poverty among the elderly has declined from over 25%, at the beginning of the War on Poverty, twice the overall level, to fourteen percent in 1983.

The neo-conservative argument ignores the fact that a relatively small part of social welfare spending goes to the non-elderly. We are told by Murray that black male teenage crime is a result of government spending. What government program is for black teenage males? None. There’s no social spending on black teenage males. Indeed I know of no human resources development program where conditions got worse because we spent more money.

Even from looking at Murray’s own statistics, the only conclusion you can come to is that social program spending reduces poverty. When we quit spending and reduce

---

Page 6

programs, poverty went up. Problems get worse because of changing conditions or poor program design, not because we spent money. There is overwhelming evidence that programs like the Job Corps that have had time to grow and learn from their mistakes have greatly improved the employability of the young people they were designed to help and are good investments of public resources.

Things have gotten worse for many people because we have discontinued the programs, not because we adopted them. We have serious problems of a secular rise in unemployment; growing inequality, which will greatly weaken an already fractured national unity; and the development of a self-perpetuating social and economic underclass-made up disproportionately of minorities, but including many whites as well.

One manifestation of this self-perpetuation is the teenage pregnancy problem. Unwanted pregnancies among children is a serious national problem with devastating long-run consequences. Its causes are not well understood, but they can be understood with study and attention. I would guess that a good bit of the problem relates to unemployment and social isolation of very poor young people. In the black community, joblessness, racism, the movement of middle- and working-class people out of predominantly black areas (thus removing role models and sources of social stability), and growing unemployment among young black males, all have contributed greatly to a self-perpetuating system of helplessness and despair.

I believe we should make the elimination of this growing underclass a high national priority.

Many object to the costs of programs to change this situation, but we will pay dearly if we do not deal with it.

Most of the work force growth between now and the first two decades of the twenty-first century will be among women and minorities By about 2015, there probably be a combined minority population of 91 million in the US; this will constitute about 34% of the population and well over forty percent of the work force (because white males are older and more likely to retire).

How well prepared these young people are for twenty-first century jobs depends on what is happening to them right now. And the evidence is not encouraging. Most eighteen year old minority males are not sufficiently literate to function in even the emerging low-wage jobs.

Probably less than ten percent of our growing prison population can function at the twelfth grade level. The fact that it costs between $25,000-$30,000 to keep somebody in prison for a year is only part of the cost of inadequate human resource development.

If there is any one fault with what we did in the past, it was that we paid too much attention to income transfers and not enough attention to making people self-sufficient. For the poverty problem is going to be solved by poor and near-poor people themselves. The rest of us (and organizations like the SRC) can help, but programs must be designed to give people greater ability and incentives to help themselves.

So what can we do? It’s very clear that we need a new international economic order. That we’ve got to renegotiate GATT (the General Agreement on Trade and Tariffs). We’ve got to have much better coordination between the economic policies of the major industrial countries.

We’ve got to say to Japan and Germany and other countries, “You’ve got to help. We’ve got to move together. And what you ought to do now is to start stimulating your economy. What we all ought to do now is relax our monetary policies to bring real interest rates down. And we’ll start doing some things to balance our budget.”

Within the US, we need a full employment strategy. We need to create enough jobs at decent wages to provide one for everybody who is willing and able to work. We can and ought to do it. We can’t do it through monetary-fiscal policies alone, but we can create jobs There’s a lot of useful work to be done.

We know that a full-employment policy would be good business. With a jobs program, $15 billion could save the federal government $30 billion. We’ve demonstrated that in the past. The main reason we don’t do it now is the neoconservative mythology that it didn’t work. We ought not let them get IJY with that. The contrary evidence is overpowering.

We need to greatly strengthen our human resource development. Our education, our health care. We must educate people, get them trained.

Worker ownership of industry has already started in

---

Page 7

other countries, and is beginning in the United States. We ought to develop policies to facilitate worker participation in and ownership of industry.

We must strengthen collective bargaining.

We need to strengthen community-based organinzations that assist people in gaining greater control of their own destinies.

We must get ready, for our time will come I think the country will be looking for new answers by 1988 when many of Ronald Reagan’s chickens come home to roost and the consequences of his policies are more obvious.

What should we do? We must keep the faith. We must do what we think is right. We ought not be stampeded into doing things simply because they are popular. We especially should avoid the trap that balancing the budget should take priority over everything else-an idea t hat seems to be very popular with many Democrats. We ought to learn. We ought to act We ought to challenge. We ought to develop strategies and tactics to improve the conditions of the poor. We ought to organize. We ought to register voters. We ought to form coalitions.

We ought to present our analysis and the realities of life under Reaganomics to as wide a popular audience as we can, using the most modern and accessible forms of media. We should make clear what life for the working poor is really like. We should present the examples of young people who have been trained in the civil rights movement or in community-based organizations who are now assuming positions of leadership in the country. We should present the lives of young women who have been able to escape from welfare and poverty because of government programs which support training and childcare. We should present the very real stories of adults who have learned to read and write because of an adult literacy program.

We should not let people make abstractions of human suffering. Above all we should not be afraid to experiment, to try new approaches to dealing with our human problems. We should not be afraid to make mistakes and we should learn from our mistakes.

Rather what we should fear most, as citizens of the richest nation on earth, is the judgment of the world community and of history that we were unwilling to tee good and faithful stewards of our resources, that we deliberately decided not to use our resources to try to improve the human condition.

One of the reason that I am proud to have been associated with the Southern Regional Council is that this organization can stand that test. Whatever else historians may say about the SRC, I am confident that they will say we at least tried to use our resources to make the South a better place for all of our people.

Ray Marshall holds the Audre and Bernard Rapoport Chair in Economics and Public Affairs at the University of Texas at Austin, and is vice-president of the Southern Regional Council.

The Climate for Workers in the U.S.: Summary of a Study by the Southern Labor Institute. A Special Project of the Southern Regional Council

By Ray Marshall

Vol. 8, No. 4, 1986, pp. 1-2

The challenge facing the South is to create jobs with the income and benefits needed to bring the region’s workers above the poverty level – not just new jobs, but jobs that will significantly improve the standard of living for people who work full-time, year-round.

“THE ‘BUSINESS climate’ and ‘ideal places to live’ are regularly assessed, but there have rarely been indexes of good places to work. Indeed, the criteria used by most business climate reports assume that low wages, limited unemployment compensation and worker protection, and weak unions, are good

---

Page 2

for business. This is a strange assumption for people who also profess to believe that people are our most important asset. The Climate for Workers report demonstrates the error in this traditional assumption.

“To attract business by maintaining and encouraging low wages and weak worker protection was always shortsighted, but in an internationalized information world it is ludicrous. American companies cannot compete in the international arena on the basis of low wages. Workers in many developing countries earn less than one-fifth as much as their American counterparts. Competitiveness therefore requires greater attention to productivity, technological innovation, and world class management systems, and these factors are not likely to be highly correlated with low wages and weak worker protections. However, international competitiveness and high and rising standards of living are likely to be highly correlated with a high quality workforce and strong worker development programs. The Climate for Workers is therefore a good indicator of those places that are likely to have long-run development potential. Fortunately, far-sighted leader in these states realize the connection between economic and human resource development and have made strong efforts to improve their education systems. These leaders recognize the futility of the all-too-frequent strategy of attempting to compete by depressing wages. Attention must be focused on other aspects of human resource development, that also are important in improving workers’ welfare and therefore the quality of life in any state.

“This report puts job growth in the Southeast into proper perspective and evaluates the overall benefits of work. The climate for workers in the sunny South is rather chilly. Those who believe that ‘the Southern economy no longer exists’ or that ‘the South has thrown off its history,’ should consider the findings of The Climate for Workers.

“As with any new indexing undertaking, The Climate for Workers has technical weaknesses. However, its thrust is sound and it should initiate discussion to improve technical quality in future reports.”

Dr. Ray Marshall, former U. S. Secretary of Labor, holds the Audre and Bernard Rapoport Chair in Economics and Public Affairs at the LBJ School of Public Affairs, University of Texas at Austin; is Board Chairman of the Southern Labor Institute; and Vice President of the Southern Regional Council.

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.

---

Page 17

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.

---

Page 18

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

---

Page 19

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.

Change Through Education

By Ray Marshall

Vol. 11, No. 1, 1989, pp. 1-6

EDITOR’S NOTE: “Change Through Education” was the theme of the 1988 Annual Meeting of the Southern Regional Council, held in November in Atlanta. The keynote speaker for the event was Dr. Ray Marshall, president of the Southern Labor Institute, vice president of the Southern Regional Council, chairman of the National Action Council for Minority Achievement, professor of economics and public affairs at the LBJ School of Public Affairs at the University of Texas, and former U.S. Secretary of Labor. His edited remarks appear below.

QUALITY EDUCATION FOR ALL OF OUR people is the single most important problem that the country faces. We have great difficulty getting quality education, but if we don’t it is going to cause us a great deal of trouble, not only the trouble in individual lives which we are already having but also a lot of trouble for the country, a continuation of our decline. If I had to bet, I would bet that that is what we are going to do.

Quality education is especially critical today because fundamental shifts have occurred in the economy in which most U.S. workers earn their livings.

We are losing our competitiveness in the international arena. It is in the high techs as well as the smoke stacks. Our real wages were lower in 1988 than they were in 1973. Our income distribution is more unequal than at any time since we have been keeping numbers. That is a very serious matter.

One of the things that we did in this country and in other industrialized countries after the period of industrialization was to change the income distribution. Preindustrial income distribution was like a pyramid-a few people at the top, most people at the bottom. Industriali-

---

Page 2

zation and democracy made income distribution more like a diamond than a pyramid-most people in the middle.

That strengthens democracy.

The economic system that produced this change was able to use the abundant natural resources of this country within a mass production system that was based on one principle economies of scale. We were able to improve our standard of living easily because of economies of scale which made possible by a large internal American market using our abundant resources.

When the system broke down during the 1930s, we coupled it with Keynesian economics to keep it going. The big problem in the 1930s was that we knew how to produce a lot more stuff than we could sell. The basic idea behind the New Deal was to put some money in people’s pockets so that they could buy the output of all that industry, making possible a higher standard of living. Then we coupled that with unionization of the plants where you were getting this economy of scale and the right of people to organize and bargain collectively, causing the non-union industries to treat their people better than they would have otherwise. A lot of working people got middle-class living standards for the first time. Therefore we got this diamond-shaped income distribution.

During the 1970s and 1980s, income distribution is becoming more like an hourglass. We are polarizing, the rich are getting richer and the poor are getting poorer. That is not good for democracy.

Workers particularly are a lot worse off. All you have to do is isolate particular groups of workers to see the extent to which that is the case. I think you can make the case that the democratic system is strained by polarization of income distribution. I guess it was Franklin Roosevelt who said we would not have enduring prosperity in this country unless all of our people shared in it. I think that still is the case. Most people do not share in the benefits of the system. Eighty percent are worse off now than they were in 1973. In a nutshell, part of what has happened is political, the trend to make it hard for workers and low-income people to use the political system to maintain this diamond-shaped income distribution. That is what the conservative trend is about. Lower-income people with limited economic power historically have been able to use their political power to change the situation. In recent years the ability to use the political system to offset economic weaknesses has diminished a great deal, though there is more to it than just politics.

Fundamental changes are underway in the world’s economy that greatly alter the way we have to do business if we really want to change income distribution and we really want people to have relatively good incomes. Instead of economies of scale and the easy improvements in our standard of living which that made possible, we now have to be a lot more concerned about competitiveness and productivity and quality and adaptability and adjusting to change. In other words, the days of easy improvements in our standard of living are over. We have had easy improvements because we had all these natural resources. Natural resources are, now relatively unimportant. Technological changes have broken the connections between natural resources and output.

---

Page 3

Economies of scale depended heavily on a monopoly on the internal market. We had the American market all to ourselves which meant that we could produce lots of cars or whatever and could build up such output that we could improve our standard of living relatively easily. We have lost that. Internationalization means that we no longer even have the American market. Our ideological commitment to free trade means that we are no longer willing even to use that market to cause other people to open their markets. Therefore our competitors, like the Japanese, are able to have the second-largest market all to themselves and get economies of scale and hit our market, which we no longer have to ourselves. They have a strategy, in other words, and we do not. We have a passive policy, they have an active policy.

There is even more to it than that. New technology means that spreading output over large physical units-producing a million units with the same plant and therefore reducing the cost per unit-is no longer economically and technologically viable. We now have technology that makes possible flexible manufacturing and targeted markets. At a Ford plant I went through some months ago, they have different products coming down the line. That would have been impossible twenty years ago. Now they tell a computer to make some red ones and some green ones. They do not have to retool. They reprogram. That is a very different way to produce. That whole production system requires that we do things differently than in the past.

Another reason that previously we were able to get relatively easy improvements in our standard of living was what economists call interindustry shifts. Many of us probably improved our income by moving out of agriculture and into urban manufacturing. Personally, I was born in north Louisiana in an area that had very low productivity; I am one of the few people born in the twentieth century that also lived in the nineteenth, because it was very low income. The movement into manufacturing improved everybody’s standard of living. Now the movement is out of high value- added manufacturing and into services. In other words, the interindustry shifts are now against us.

So what is the way out? The only way we are likely to be able to maintain relatively high incomes is to have a high-quality work force. This production system requires people to be well-educated and well-trained and in very different ways. The essence of our problem is that we are having to adjust from a system that was very different into one where we do not know exactly what to do. We do not know how it works its way out. What we do know is that education will be a very important determinant of our ability to move out of that system.

Essentially the information technology has made mass amounts of information available to us. Unless we know what to do with it, it is not doing us any good. We have to learn to analyze information, to think, to solve problems, to deal with change, to learn, to communicate with great precision. We have to have people who can be innovative and creative in order to be able to deal with this system. That is the essence of our challenge.

THE OLD SYSTEM of education was a dual system. It was a two-track system. It did not cause us too much damage in the mass-production, goods-producing world. You had one system for the elite.

They had the elite schools, elite families, elite jobs, elite learning systems. Those people were taught to think and to be creative. They had good teachers and small classes and did traveling.

Then you had the system for most of us. In fact, the mass production system was imposed on the schools. The assumption was that you did not have to think to put bolt number thirty-five on the left rear wheel. You were taught to do routine things. You were taught by rote, not to deal with change. The basic idea behind the system was to get some low-paid teachers-and that is the reason we started using women-who would be blue-collar workers in the system, and then you would get some men to run the system like you do a factory. They would be the elites. The basic idea was to turn out a standardized product that could go to the fields and go into the factories.

Now, it is a false assumption that that you can continue to have one system for the elites and another system for the rest of us-that is the really important challenge we have to face. The only way to keep a world-class economic system–and to strengthen the democratic system–is to see that all

---

Page 4

of our people have quality education. Not just the elites.

That is the basic case.

WHEN YOU SAY that education is a requirement to be world-class, and that education has been important and improves people’s condition, some will immediately say, “Nonsense, we have always had people who have been well-educated.” When I was responsible for the Job Corps, 20 percent of the high school graduates coming in were still illiterate. Therefore how can you say they’re educated? The first thing you have to recognize is that there is a difference between schooling and education. Education is ideas, skills and knowledge, and not time that you spend in the school.

When we think about education, we must think about all of the learning systems that go with the school. One is the family. One of the reasons that family income is the greatest predictor of educational achievement is because some families can be efficient learning systems and some cannot. Poverty does not cause you to have an efficient learning system. Therefore the presence of poverty hurts learning, which is why interventions like the Women Infants and Children program and Headstart can compensate for the inefficiencies in poor learning systems, poor families.

One of the false distinctions we make is between health and education. Education improves health. People’s ability to think, to make decisions, to read, to appropriate health technology will make it possible to improve their condition. One of the greatest predictors of dropout is the birth weight of babies when they are born. We can assign a probability that it is going to cause higher dropouts. The education of the mother has a lot to do with the education of the children. All the early childhood work suggests that the kind of education and nurturing young children get will determine the ability of those children The main point of that is a lot of kids are behind because they come from poor families when they start to kindergarten. Therefore we have to think of overcoming that with interventions that improve health. Probably the best way to break the inter-generation of poverty is to concentrate on the education and the health care of the mothers, so that they can then do a better job of educating their children. A lot of your basic learning traits, I am told by the experts in this matter, are fixed by the time you are three to five years old. So if you have not had a good learning experience up until then, you’re likely to be in big trouble.

Little kids come into this world as expert learners. They are little scientists. They are busily stating hypotheses and checking them and getting the data and learning is fun. They are very efficient at it. Something happens when we get them into first grade that tends to make it un-fun. It makes it hard and no longer challenging.

Another important learning system is communities-the reinforcing that kids get. Some kids come into the world being told by their families that they are smart, that they can learn, that they are programmed for success. Poor kids come into this world programmed for failure. They will tell you you cannot learn. They will track you when you get into first grade if you are the wrong color. They will call you things like, “educable mentally retarded.” Therefore you communicate to the kid that you cannot learn and therefore

---

Page 5

we will keep you here, we will give you schooling, but we will not give you education. Then you get the reinforcement of that from the community structure, whereas the elites get reinforcing that they can make it, they are smart, they are destined for the elite work.

One of the most important learning systems that tends also to perpetuate the elitist system is the corporate classroom. There are eight million students in American corporations. Corporations spend $220 billion on them. About eighteen companies will now give you a degree. The main people who get those learning chances in those corporations are white males. The least chances go to black males and the middle chances go to women, black, white or brown. Tony Carnivales the director of the American Society of Training and Development says that eighty-five percent of what we need to know in order to improve our incomes during our lives comes from work.

Therefore we need to think of all these learning systems.

IN SPITE OF THE FACT that we have had a two-tier system, education has always been an important cause of improvements in income and standard of living. But it is becoming even more important. In this new kind of world that we are in, it will no longer be possible for a person with relatively little education to make a good living. We will no longer get economies of scale. People will no longer be able to go to work in the big factory or get a highly-unionized job that will pay a middle-class income even if they only have six years of schooling. In this kind of world education becomes much more important than ever before. Why? Part of it is the internationalization of the economy which puts a premium on productivity and quality and ability to adapt to change. Part of it is the competitiveness of the international economy.

What does competitiveness mean? It means to me, unlike most economists, how we operate in such a way that will make it possible for us to maintain and improve our incomes. To most economists maintaining income is not important. It is how do you clear your markets that is important. We have cleared our markets since the early 1970s by cutting our income. We have put everything on sale and have lowered real standards of living as a result of that. We have delayed the cut during the 1980s with heavy debt. Since 1980 the debt per worker in the United States has gone up from about $6,500 to $18,000. In 1985 the average worker was owed $1,000 dollars by foreigners. Today we owe foreigners about $5,000 per worker. And the amount we owe is rising rapidly.

In a different context that means that since 1980 we have improved our consumption per worker in this country by $3,500 to $4,000. We have improved our production per worker just over $1,000. Where did we get the rest? We borrowed it and we used up our capital. We are eating our seed corn. We have delayed the reductions in our standard of living which will come unless you can figure out some way of never having to pay your debts. When we start paying, we are going to take the rest of the cut that we need in order to maintain our standard of living.

There is only one way to avoid it. You either cut your standard of living or you improve your productivity, improve your quality, improve your ability to adapt to change and to innovate.

It comes down to being able to develop and use the leading edge technology. Why? Technology is in two categories. One is standardized. Technology really means ideas, skills and knowledge embodied in equipment. The equipment is unimportant. We destroyed Germany’s equipment but they came back because the thing that was really important was ideas, skills and knowledge. Once we perfected the manufacture of the automobile that standardized technology will seek out low wages. It will not be done in a relatively high-wage country. It becomes a commodity it can be exported. Therefore what we have to do in order to improve our income and maintain it is to constantly be innovating which means to have people who can develop and use the leading edge technology. We also have to have supportive public policies. How are we doing with respect to all of that? Not very well. We have probably the best top half of the work force of any major industrial country and the worst bottom half of the work force of any major country. It is the bottom half that we have to concentrate on that will cause us trouble.

Why do we have the best top half? We have the elite schools. Our colleges and universities are still world-class though we can lose that if we aren’t vigilant. We still have a technological lead and since you learn by using the technology we have been able to benefit from that. We have benefited from the immigration of well-trained, well-educated people into the United States when we were the highest standard of living country in the world. We are now about fifteenth in our real wages. We have a much lower standard of living than Sweden, Switzerland and Germany therefore we cannot expect to enrich our pool by pulling on people from those countries.

The bottom half is the way it is because most of our schools are mass production schools. Racism and elitism perpetuate this system. We have undemocratic public policies and the most challenging of these things besides trying to root out racism and discrimination is that we probably have the poorest school-to-work transition system of any industrialized country. That is where most minorities are located. Since minorities are a rising proportion of our total work force it is a very serious problem for the country. Half of our youth is not college-bound. Twenty million young people. We spend about $5,000 on each one of our college students and almost nothing on the people who are not college-bound.

What we need to do of course is to reform the system. School reform is very important and since that is well understood I will not say a lot about it except that the key to reform is to get good teachers, give them status and pay, give them the freedom to teach, and give them the resources to figure out what needs to be done. Just like we need to reform our factories and management systems in order for them to be more competitive.

THEN WHY DON’T we? A lot of myths keep us from doing it.

An important myth is that we can make it with a two-tier education system, that we do not have to give quality education to all of our people because we never have and we have done all right in the

---

Page 6

past, so why should we do it now.

The bottom line is this. In this economy people will either be assets or liabilities. Uneducated, untrained, unhealthy people will be a liability. Trained, educated, healthy, motivated people will be an unlimited asset. We cannot afford poor education; it is no longer a moral question.

Another reason you cannot make it with two-tier systems is that this technology is unique. The information technology is ubiquitous. It will be everywhere. You will not escape it. The idea that somehow you can go into services and you will not need it does not realize that the information technology will be used in the services as well as in any other place. I think we have a lot of work to do to convince people that we need quality education for all of our people.

The second myth that we have to deal with is equally pervasive in this country and has deep roots. It is that educational achievement is mainly due to innate ability and some kids cannot learn. Therefore, why try? We have had polls where people really believe that. All of the scientific evidence is that anybody can learn. It is mainly hard work that causes educational achievement not innate ability. I think the evidence of that is so overwhelming that we ought not to have to spend a lot of time on it.

The third myth that will cause a lot of trouble is from a lot of my colleagues in higher education who will make the following argument: They will say, “In a highly competitive world we cannot sacrifice excellence for equity. In order to maintain our position of excellence we cannot have quality education for everybody.”

That is a very serious error and very dangerous for a variety of reasons. One, everybody can learn so the whole idea that excellence is incompatible with equity is a false dichotomy. The only way you can argue that is to argue that some people cannot learn. There is no evidence for that. Second, a failure to provide quality education will cost the elites dearly. It will also cost the country dearly. They diminish their own quality of life by failing to deliver quality education for everybody. Educated people themselves will actually not be very well educated if they are elitist. A person who is a racist has a serious literacy problem and is not well educated. Therefore we owe it to those people to help educate them. A multicultural, multiracial society has tremendous advantages. It also has serious problems. The advantages are higher quality of life, greater prosperity, stability, creativity which is one our strong suits. The downside is racial and ethnic conflict, prisons, using up a lot of our resources in order to try and preserve the peace and therefore to greatly diminish the quality I think it is also terribly important for everybody to see that we are in this together in this country. Regardless of whether you accept my moral values you have to accept of making the proposition of making a virtue of necessity. We are a multicultural, multiracial society. We are not going to change that. Therefore we had better do everything we can to maximize the positives and minimize the negatives of that. We are like a team. If some members of our team cannot play then we are going to be in trouble. Therefore I conclude that we will not have educational excellence without educational equity.

The fourth of these arguments is that it costs too much to provide educational equity. Well I can demonstrate to you and anybody that wants to debate is that it costs you too much not to. It costs us like $30,000 to $35,000 to keep somebody in the Texas state prison system. Ninety percent of our inmates are illiterate. We could make them literate for a lot less than $30,000 a head. I figure I could make them literate for less than a thousand. Therefore it is just bad business not to do that.

We have to overcome the mentality that sees the price of everything but the value of nothing. We have to cause people to see that this is an investment, not a cost. Therefore we will make money on the deal. We have made money on the deal investing in our education.

The fifth of these arguments is, “All right you’ve convinced me,” some people will say. “Therefore let’s make some marginal changes in the school system and that will solve the problem.” You will not do it. Marginal changes by definition will be neutralized. We have got to make radical changes in the system, not marginal changes. The system we have got is geared to the plantation and the large mass-producing industry. It’s as obsolete as those are. Therefore we need to change it. Finally, some people will say, and this is one of the hardest to overcome politically these days, they will say, “All right maybe you have convinced me but we do not really have any choices. We have got to live with the system. You cannot change the system. It is too deeply entrenched. Therefore nothing works. You cannot get an intervention that is really going to have any effect on anything.” Then you will have people tell me what I believe to be the truth. We hear all of these exemplary programs. We also hear all about the exemplary schools. I have yet to see an exemplary school system anywhere in the country. Therefore our challenge is how do we translate these exemplary interventions into systemic changes that will really make a difference.

I think we could do that. I also believe that it is not true that none of these interventions work. We can cite all kinds of interventions. I have mentioned the WIC, Headstart, Job Corps, Creative Rapid Learning System, the G.I. Bill of Rights which got me educated. Some people say, “See what happened when we did that.” It was one of the best investments we ever made in this country and our people. We are running into all kinds of exemplary interventions. Things do work. You can change the system. Therefore we ought to go about it.

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-

---

Page 9

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

---

Page 10

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

---

Page 11

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-

---

Page 12

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,

---

Page 13

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

---

Page 14

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.