From the Folks Who Brought You the Weekend

by Priscilla Murolo

  George Meany retired in 1979. To take his place he named Lane Kirkland. After a brief wartime stint in the merchant marine, Kirkland had trained for the foreign service, then taken an AFL-CIO staff position researching pensions and social security. Meany had made him Special Assistant in 1960 and Secretary-Treasurer in 1969, and he had spent the next decade cultivating politicians and intellectuals who called for an all-out war against communism. The Executive Committee ratified the nomination unanimously, proving AFL-CIO conservatism had survived the sixties with its hegemony intact and ready to enlist in a new Cold War. But the world had changed, and prudential “business” unionism was not at all secure in the new order.

  CHAPTER

  11

  HARD TIMES

  Screen actor Ronald Reagan, the former Republican governor of California, defeated Democratic incumbent Jimmy Carter in 1980 by nearly eight and a half million votes. Carter had been beset by crises—in 1979, U.S. client regimes collapsed in Iran and Nicaragua, the Soviets sent troops to prop up their own clients in Afghanistan, Iranian radicals seized the U.S. embassy in Tehran, taking fifty Americans hostage, and the economy went into recession. To their usual base of businessmen who still resented New Deal reforms, the Republicans added a new coalition of voters frustrated by the public skepticism about foreign military ventures (the “Vietnam Syndrome”), vexed by the new rights won by racial minorities, homosexuals, and women (especially abortion, decriminalized by the Supreme Court in 1973), and eager for economic relief through reduced taxes. The AFL-CIO endorsed and campaigned for Carter, but this made little difference. More and more people did not vote at all—the proportion of people eligible to vote who actually voted in presidential elections fell from nearly 70 percent in 1964 to less than 60 percent in 1980. Over half of blue-collar voters and 43 percent of voters from union households backed the actor, and the Republicans took the Senate majority.

  The new regime was not friendly to unions. The Professional Air Traffic Controllers Organization had complained for years that staffing and equipment had not kept pace with expanding traffic—stress forced many controllers into early retirement. By mid-1980, the Federal Aviation Administration had set up a Management Strike Contingency Force. When 15,000 controllers walked out August 3, 1981, Reagan put the plan in action. Four hours into the strike he declared on national television that controllers who did not return to work within forty-eight hours “have forfeited their jobs and will be terminated.” Most were.

  The AFL-CIO had already announced a “Solidarity Day” march and rally in Washington, and the affiliated unions turned out almost half a million members and supporters on September 19. They cheered Polish independent trade unionists and PATCO strikers alike. But the Federation planned only to press Democrats to oppose Republican initiatives. As for PATCO, when some unions urged nationwide actions, President Lane Kirkland declared, “I personally do not think that the trade union movement should undertake anything that would represent punishing, injuring or inconveniencing the public at large for the sins or transgressions of the Reagan administration.” Subsequent Solidarity Days became congressional lobbying blitzes, while Reagan’s transgressions injured more and more members of the public at large.

  LEAN AND MEAN

  The Reagan team brought businessmen and their friends to Washington, and they brought business habits. Some simply looted the public treasury. The chair of the Postal Board of Governors (and crony of Attorney General Ed Meese) steered consulting contracts to his friends; the vice chair, a Reagan campaign official, took bribes from contractors. After financiers and bankers stole or gambled away $90–130 billion from federally insured and deregulated savings and loan associations, the government paid out upwards of $400 billion, much of it in interest, as the resolution of the debacle stretched into a second round of ransacking undervalued assets.

  Most of the transfer of public funds to private pockets was legal. The bulk of Reagan’s $8 billion worth of tax cuts went to taxpayers with annual incomes above $50,000. Almost half of all taxpayers saw their overall tax bills rise, mainly through increased payroll taxes, and another 30 percent saw little or no change. Corporations did well. In 1980, they paid over 35 percent of their profits in taxes on the average; by 1983, they paid less than 18 percent. Congress scrambled to pass new tax credits and allowances for needy firms and industries.

  Businessmen wanted less government interference. Industries were deregulated: oil and gas; airlines; banking, savings and loans, other financial services; broadcasting, cable, communications; transportation. For safety, environmental, and consumer protection regulation, the White House cut agency budgets and installed administrators committed to reducing regulatory activity. When the Civil Rights Commission complained about cuts in federal civil rights enforcement staffing in 1983, the White House fired three commissioners. Some laws were just ignored. Federal contractors were required to pay “prevailing wages,” usually union scale, but the military and other departments stopped enforcing the rule, and by the mid-1980s, nonunion contractors got almost all the work.

  The administration left open two seats on the National Labor Relations Board until 1983, letting the case backlog grow. When corporate lawyer Donald Dotson finally became chair, the Board issued a string of decisions against unions. In 1984, the Board ruled that employers need not negotiate with unions over plant closures (Otis Elevator), could send union work to nonunion contractors (Milwaukee Spring), and could fire union members for verbal conduct (Clear Pine Mouldings). The new NLRB upheld union charges in 55 percent of the cases, down from 85 percent a decade earlier, and some unions waited five years for a final decision.

  The Reagan Revolution blended ideology with greed, and a dash of ordinary incompetence, but did not alter the changes sweeping through the national economy. For most people, economic decline began with a sharp rise in oil prices after the 1973 Arab-Israeli War, followed by “stagflation”—rising inflation and unemployment. From an annual average of less than 3 percent from 1945 to 1967, inflation rose to about 5 percent in 1973, over 8 percent in 1975, and reached double digits by 1980. Unemployment remained around 5 percent through 1973, then rose to 8 percent in 1975, and reached 9 percent by 1982. Real wages began to fall in 1973, and plunged after 1975. From 1972 to 1982, average weekly earnings before taxes for nonagricultural workers fell from $196.41 to $167.87 in constant-value dollars, a 12 percent decline. For business, the crisis began earlier: around 1966, the rate of profit began to fall, partly from new competition with the rebuilt economies of Europe and Japan. The after-tax rate of return for nonfinancial corporations fell from 13.7 percent in 1966 to 7.6 percent in 1979, and funding for new capital investment came less from income and more from borrowing.

  Business responded to the crisis in profits in several ways. Companies invested in other companies, buying shares in rivals, diversifying against losses in a single industry, or just shopping for profits. Corporations spent $50 billion buying into or taking over other firms in 1980, more than doubled that the next year, and doubled it again to over $250 billion in 1986. The big corporations became bigger, with more operations dispersed more widely, with heavier debts and interest payments.

  Corporate ownership shifted too. By the mid-1970s, more than half of all stock purchases were made by bank trust departments. Corporate management revised the definition of “profitability.” Interest paid on loans rose from 30 percent of corporate after-tax profits in 1979 to nearly 140 percent in 1986, and was still over 100 percent in 1990. A newly-acquired company had to return its regular profits plus interest on the loan that financed its purchase, a new minimum “hurdle rate.” As inflation pushed up the cost of borrowing, the hurdle could rise to 25–40 percent a year.

  New management restructured merged and acquired companies—closing or spinning off subsidiaries, reducing duplicate administrative, production, or distribution services or systems. Closing even a money-making facility could improve a corporate bottom line. Uniroyal shut down its profit
able Indianapolis tire plant in 1978 to put the cash into making even more profitable chemical products. In 1991, G.E. announced the closure of its most profitable small appliance division, the Ontario, California, metal iron plant. A thousand black and Latino women union members lost their jobs.

  Corporations also invested more abroad—G.E.’s new metal irons were made in Mexico and Brazil. Corporate profits from foreign investments tripled between 1965 and 1980, becoming almost a sixth of total profits. Corporations not only bought out or into foreign companies;they also built new facilities abroad for foreign markets or for reexport to the U.S. Already by 1970 almost half of all U.S. imports and nearly three fourths of exports were exchanges between subsidiaries of transnational corporations.

  Some foreign direct investment improved access to markets or natural resources, but much of it financed the continuing quest for cheap labor. “Right to work” states (no union shops) were attractive, but labor was even cheaper in the developing world. Puerto Rico began its “Operation Bootstrap” economic development program in the 1940s, featuring tax holidays and low-wage labor. It proved to be a bonanza for U.S. investors, returning over $75 million in profits and dividends in 1960, and over $400 million in 1970. From the 1960s multinational corporations moved labor-intensive operations to new facilities in Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand, and the Philippines. Mexico’s proximity was especially attractive. In 1966, the Mexican government opened its first industrial park for processing exports in Ciudad Juárez, across the border from El Paso, Texas. The same year, RCA opened a television assembly plant in right-to-work Memphis, Tennessee. Two years later RCA built a new facility in the Ciudad Juárez “maquiladora” zone; by 1971 RCA-Memphis had closed and RCA-Mexico had expanded. By 1974, some 500 border maquiladoras employed 80,000 workers, and Mexico expanded its “Border Industrialization Program.”

  World Bank and International Monetary Fund policies encouraged governments in developing countries to take the same path, improving utilities, transportation and communications infrastructure, and relaxing restrictions on foreign ownership and profit transfers. Government-backed insurance from the U.S. Overseas Private Investment Corporation provided additional support for some direct investments. U.S.-backed regimes helped enforce labor discipline. Between 1970 and 1980, U.S.-owned assets abroad multiplied five times. By 1980, more than $3.3 billion returned as profits and dividends to nonresident investors from Puerto Rico alone, nearly 70 percent of the value of the island’s manufactures, going mostly to the U.S.

  Business services could relocate as well as manufacturing and assembly. In 1981, Blue Shield broke a fifteen-week strike by Medicare claims processors by transferring 448 jobs out of San Francisco. Offshore data entry had started in Ireland and Barbados by 1982. By 1988, Filipino, Indian, and Scottish contractors also processed credit card slips, supermarket coupons, insurance and hospital records, and book manuscripts for U.S. companies.

  Labor costs were more than just a drag on corporate profits. Thoughtful corporate economists traced the nation’s economic malaise to the distribution of its prosperity. In 1979, Federal Reserve Chairman Paul Volcker declared, “The standard of living of the average American worker has to decline.” Between 1978 and 1982, 6.8 million jobs were lost to plant closures. By 1981, a third of all autoworkers and half of all steelworkers were unemployed. By 1982, about two million Americans were homeless.

  RACE TO THE BOTTOM

  Far from board rooms and stock exchanges, economic change engulfed entire communities. In the copper towns of Greenlee County, Arizona, mine workers belonged to thirteen different unions, the largest of which was United Steel Workers Local 616, with a mostly Mexican American membership. The coordinated regional contracts ran out the last day of June 1983. The unions offered to freeze wages except for a cost-of-living adjustment, and four copper companies accepted. Phelps Dodge Copper Corporation demanded cuts and no COLA, and Phelps Dodge miners walked out a minute after midnight on July 1.

  Strikes for new contracts had happened before, but the company had not tried to stay open during a strike for decades. Now Phelps Dodge got an injunction against union pickets and organized convoys under police protection to bring office employees and supervisors to work the mines. Miners’ wives and supporters took over picket duty. Six weeks into the strike the company began hiring replacements; when the pickets massed to block the convoy, National Guardsmen and state police dispersed them with tear gas. The pickets returned again and again—one trooper declared, “If we could just get rid of these broads, we’d have it made.”

  The women organized an Auxiliary, set up a food bank and clothing exchange, fought evictions, organized relief after a flash flood, and dispatched members to strike-support rallies in New York, Boston, and California. After the Auxiliary held a Cinco de Mayo fiesta, 100 women marched off to picket the shift change at the Morenci pit mine, followed by hundreds of residents and supporters. Again the police dispersed the crowd with gas. When pickets formed up to march after a fiesta on the strike’s first anniversary, a phalanx of 200 state troopers charged them.

  The unions had offered in June to accept the company’s terms if strikers could return by seniority. But copper prices were falling; Phelps Dodge shut down its Ajo mine, laying off 500 replacements, and reduced operations at its New Cornelia mine, laying off another 100. The Morenci pit, which incurred daily fines for polluting the San Francisco River, suspended operations in December. The Auxiliary staged a New Year’s Eve “Good Bye Scabs” rally, but the strike was over. In 1987, the NLRB upheld an October 1984 decertification vote. Strikers, supporters, and unions won several civil rights cases;trial evidence detailed police collaboration with the company—getting lists of people to be arrested and filing false reports. The company’s CEO concluded, “Employees at the operating level must understand how their performance toward key business goals helps the company earn a return on investment that more than covers the cost of capital. It is up to us to teach them.”

  Even strong unions in well-organized industries with industry-wide standards for wages, hours, and working conditions could not resist demands for concessions. Coordinated bargaining ended early in the electrical industry. In 1978, five different UAW locals in the United Technologies subsidiary Essex Wire plants staged unrelated strikes; a union rep commented, “We usually try to negotiate wages on the basis of [each] plant’s ability to pay.” Many wage concessions started as workers’ contributions to keeping their employers open. As UAW rep Jack Horne told Chrysler Local 869 members, “Those of you who don’t want to take a wage cut, go out and find another job.” It was no idle threat: Ford casting plant workers in Sheffield, Alabama, refused to accept a 50 percent cut in wages and benefits, and the plant closed in 1981. But concessions developed their own competitive momentum. General Motors and Ford demanded concessions to match Chrysler, the UAW agreed, and in 1982 the membership ratified contract modifications.

  The logic of concessions went beyond payroll costs. Even before the 1983 general economic recovery, when Business Week magazine surveyed corporate executives in 1982, 57 percent reported that they preferred concessions on work rules to wage cuts, and 19 percent agreed with the statement, “Although we don’t need concessions, we are taking advantage of the bargaining climate to ask for them.” In auto the buzzword was “flexibility”: management redesigned production to achieve new flexibility in function, scheduling, and employment. Companies juggled just-in-time deliveries, adopted more standardized parts and processes, redeployed production to more competitive contractors, and constantly recalibrated their redesign by analyzing benchmark measures of input, output, and throughput. (The best-known benchmark was Toyota’s “57-second minute”—the time assembly workers spent in motion every 60 seconds.) The individual worker did more tasks at a faster pace. The workforce saw fewer jobs with more skills, increasing contingent and part-time employment, and round-the-clock production schedules. Enthusiasts called it “lean production
,” and other industries adopted many “lean” practices.

  Auto companies demanded that UAW locals compete for work with outside contractors—Ford locals in Detroit accepted concessions rather than see work shipped to Toyo Kogyo, a Japanese firm in which Ford had a 25 percent interest. In the 1982 settlement, Ford agreed to give thirty days notice before outsourcing union work, to give locals time to make a counter offer. The companies also insisted on “Quality of Work Life” programs, designed to promote employee commitment to company success by getting workers to team up with supervisors to find ways to cut costs and increase production. The “team concept” meant relaxing work rules. In 1985, the UAW signed an agreement covering G.M.’s new Saturn plant in Spring Hill, Tennessee, featuring team management, job classifications collapsed into a few general titles, and pay rates at 80 percent of the company base, supplemented to 100 percent or more with performance incentives. In 1987, the Wall Street Journal reported that twelve out of twenty-seven G.M. assembly plants had “competitive” agreements in place, most involving work rules.

  The steel industry was in worse shape than auto, hit by dumping—foreign companies selling surplus production at or under cost—and faced with steep modernization costs to control pollution at older open-hearth furnaces. By 1982, the industry was running at 40 percent capacity and another 100,000 steel jobs had gone. The seven largest companies demanded $6 billion in concessions in that year’s Master Steel Agreement negotiations. The union agreed to $2.5 billion in concessions, if the companies put savings into modernization. It was the last industry-wide contract. U.S. Steel bought Marathon Oil and Texas Oil & Gas, and closed a third of its remaining capacity along with several fabricating and finishing mills. Steel companies imported semifinished steel. When Armco asked a Houston local to roll foreign billets, the union refused, and Armco shut the plant. Minimills spread—small electric furnaces producing specialty items, about half nonunion, all without the overhead of pension and unemployment benefits carried by older, larger companies. In 1985, Wheeling-Pittsburgh filed for bankruptcy and moved to cancel its union contract, followed the next year by the LTV conglomerate, which owned Youngstown Sheet & Tube. In 1986, USWA settled separately with each company except USX, formerly known as U.S. Steel, which locked its workers out for six months before accepting a contract about midway in the industry range. Over the next few years LTV merged with Republic Steel and went bankrupt, foreign steelmakers acquired about a quarter of the country’s integrated mills, and the profitable North Carolina–based nonunion minimill company Nucor expanded.