THE BLOG

Inequality: The Defining Challenge of Our Time

01/16/2014 12:58 pm ET | Updated Mar 18, 2014
Estate of Stephen Laurence Strathdee via Getty Images

The United States economy has two large overlapping problems: It continues to have a damaging level of unemployment accompanied by a massive shift of wealth and income from the middle class to a very small fraction of the population at the very top. These problems reinforce each other. Stagnation of middle class wages and unacceptable levels of unemployment are perpetuated by the lack of demand for products and services, and vice versa.

If the middle class is to get higher wages and its fair share of our economy's wealth, it will have to find a way to do so on its own. But, the utter lack of meaningful bargaining power possessed by middle class workers today has hobbled their ability to do so.

In past years, workers banded together in labor unions and fought collectively for higher wages, helping to create a healthy middle class in our country. Our post-WWII manufacturing economy, employing workers in factory settings performing similar tasks and sharing common interests, was ideally suited for unions to achieve improved working conditions, wages and benefits simultaneously for large numbers of workers. More recently, the off-shoring of manufacturing jobs, the development of technologies that have eliminated many jobs, and our economy's conversion from manufacturing goods to providing services, where workers perform a wide variety of tasks and no longer share common interests, have fundamentally changed this labor-friendly landscape. The ability of unions to achieve benefits for large numbers of workers, despite their relatively meager resources, has been undermined by these changes in the workplace. Today's workers, saddled as most are with mortgage and credit-card debt, are no longer willing to endow unions with the ability to call strikes, the only real leverage they ever possessed to secure higher wages and benefits.

Moreover, a sizable portion of workers in the service sector tend to think of themselves as white collar, rather than blue collar workers and are no longer predisposed to look to the labor movement for help. The incessant drumbeat of anti-labor rhetoric used to promote right-to-work laws and other anti-union legislation has drowned out most sympathy for the labor movement. For many in the dwindling middle class and even among the poor today, words such as "corruption," "bosses" and "extortion" are more associated with unions than their struggle for higher wages. The Great Recession has further undermined organized labor. The layoff of huge numbers of employees, as well as bankruptcies and the wholesale reduction or loss of pension benefits for many in the private sector has enabled anti-union politicians to play them off against unionized public sector employees with relatively rich pension plans funded by their tax dollars.

Nonetheless, it is important to recognize that the stagnation of wages and the inequality gulf that has grown between the top one percent and the rest of our population has paralleled the decline of the labor movement.

Interestingly, the Great Recession witnessed the utter collapse of the fundamentalist free market ideology that precipitated it -- at least among intellectual academics and economists if not among politicians wedded to that ideology and their trickle-down theology. Economists who had credibility in the aftermath of the Great Recession were in agreement that the economy was not going to get out of its downward spiral on its own. A Keynesian solution was required: an aggressive monetary policy and an expansive fiscal policy. And they viewed persistent unemployment as a matter of too little "aggregate demand." In other words, our middle class is not spending enough to keep everyone employed; they are not spending enough because they don't have the money to spend. The inescapable conclusion, reached by almost all economists left standing after 2008, is that a revival of the union movement, or something comparable to it, will be vital to the survival of the middle class and a revival of the economy.

Unfortunately, organized labor and academic economists rarely collaborate. But they need each other if they are going to be able to educate workers, potential members, the unemployed, non-voters, the poor and ultimately politicians who today listen primarily to those with money, i.e., the "one percent." As Harvard law professor Benjamin Sachs noted in the September 1 edition of the New York Times, "A democracy in which government policy responds to the rich and not to the poor or the middle class is a democracy unworthy of the name."

Not only do politicians need to wake up and promote the broader public interest, so do the lions of Wall Street need to recognize that their long-term interests will not be served by short-term greed and aggrandizement of wealth at the expense of our nation's citizenry. So also do our disadvantaged citizens need to learn that the government's tax and spending policies are some of the most important root causes of their malaise and become activist voters demanding their fair share of our nation's wealth and that our government stop subsidizing the rich at their expense.

All of which raises questions: How do we set about the task of addressing the rampant economic (and political) inequality that threatens our nation? How are we to revive our middle class -- along with our economy and our social contract?

President Obama recently declared that "inequality" has become "the defining challenge of our time." Suddenly, both political parties are scrambling for the high ground in defining the issue and proposing solutions for their respective definitions; however, the problem we face today is largely the creation of our government's economic, tax and labor policies over the past 30-odd years. And if recent history is a guide, political ideology, the outsize influence of the wealthy, and the current standoff between our political parties will likely prevent any meaningful progress toward resolving the crisis confronting our nation.

Responsibility for coming up with solutions and selling them via the democratic process will instead fall upon our objectively thoughtful and enlightened citizens and institutions, academics, journalists, labor and civic leaders, and ultimately our middle class and entire citizenry which will need to speak out more loudly at the voting booth. There are encouraging signs that this process is beginning to get underway. But a lot more effort will need to be devoted to it if it is to succeed. It is high time that we all renew our energies and bend to the task.

--

Arthur Fox, a public interest litigator, has devoted his career to working within the union movement to assist democratic-minded union leaders, members, and dissident organizations to reform autocratic unions and to strengthen the collective bargaining process on behalf of workers. He was a founder, in the 1970s, of the Teamster reform movement.