News and Features
When George W. Bush isn't peddling war, he's been goading the Senate to
join the Republican House in passing pension reform.
Thanks to corporate scandals, conservatives are finally on the
he Powers That Be constantly try to keep the progressive majority
divided: workers against environmentalists, enviros against farmers,
farmers against consumers, consumers against workers, and around and
around it goes. As we squawk and squabble with each other, they scoot
off with ever more of our money and power, laughing all the way.
It's when we break this self-defeating circle that we put a little
progress back in "progressive," much to the consternation of those
Powers That Be, as we've seen recently with coalition efforts to pass
everything from living-wage ordinances to public financing of elections.
It's never easy to forge such coalitions--about like trying to load
frogs in a wheelbarrow--but it's essential to the development of a true
progressive movement that can be stronger than our separate parts.
If you were to map out a rational coalition strategy for a movement, you
probably wouldn't start by trying to link farmers and farmworkers, two
groups that have a long history of animosity and conflict. But
organizing a movement sometimes has less to do with rationality than it
does with creativity and opportunity, and, as Guadalupe Gamboa puts it,
"In times of trouble is when people are open to new ideas."
A Different Way
Lupe Gamboa is a regional director of the United Farm Workers of
America (UFW), and from his base in Washington State this grassroots
union leader knows plenty about times of trouble. The number-one crop
there is apples, mostly produced around the central Washington towns of
Wenatchee and Yakima. The apples are picked and packed by some 60,000
farmworkers, of whom 95 percent are Mexicans, averaging only $7,000 a
year in pay, with no benefits. They live in cramped and often squalid
housing, are constantly exposed to pesticides and suffer everything from
ruined backs to early death as they toil in one of America's most
So, time to strike against the apple growers, right?
No, says Gamboa and the UFW, we need a different way, because family
farmers are not really the power in this multibillion-dollar industry.
Indeed, farmers are suffering too, typically getting less money for
their apples than it costs to produce them, which means they're being
squeezed out of business. It's not that they're inefficient producers
but that, ironically, both the apple farmers and workers are literally
at the bottom of a food chain controlled by massive, monopolistic
middlemen dictating prices from far-away corporate headquarters.
In the big-business fresh-apple economy, those who do the most get the
least, which is perverse since, after all, an apple is an apple. From
tree to you, very little has to be done to it. Yet only a pittance of
what you pay in the supermarket trickles back to the actual producers.
Here's how today's apple dollar is sliced: Workers get 4 cents, the
farmer gets 7 cents, wholesalers and transporters take 21 cents and then
comes the hog. The retailers, dominated by Wal-Mart and Safeway, grab 68
cents of every dollar.
These powerhouses have consolidated and nationalized their purchasing
operations, eliminating regional buyers that dealt with individual
growers. This further concentrates the big chains' buying power.
Wal-Mart, now the largest grocery chain in the United States, proudly
proclaims that it offers "Low Prices, Always," but those low prices (and
high profits) are derived from its ability to bully the last dime from
suppliers and extract the last ounce of toil from labor. Someone down
the line always pays for Wal-Mart's cutthroat practices, and in apples
those someones are the hard-hit farmers and the oppressed farmworkers,
neither of whom Wal-Mart's ruling billionaires have to look in the eyes.
"Up to now we've been fighting with the employers," says Lupe Gamboa,
"but it's time to take on the retailers." Taking them on, however,
includes a positive and creative initiative that UFW is proposing: Fair
Trade Apples. Rather than surrender to the top-down restructuring of the
industry, the Fair Trade campaign creates an economic partnership among
the union, willing growers, retailers and consumers.
A Nickel's Worth of Fairness
At the heart of the plan is a Fair Trade price premium that would come
back to the growers and workers. Retailers would pay a bit extra per
pound, either eating this small increase or passing it along to us apple
buyers. Fair Trade Apples would bear stickers with the UFW's black eagle
symbol, certifying to consumers that these fruits allow the farmer to
earn a fairer return and workers to earn a fairer wage. As little as a
nickel-a-pound premium could make the difference, a negligible sum on a
high-volume, highly profitable grocery item.
The Fair Trade process begins in the orchards, where growers would agree
to a union contract assuring better wages, a small pension and safety
and health protections for apple workers. In turn, the farmers get an
able and stable work force, a certified UFW label on their apples that
carries special clout with consumers, and a premium price. Grocers get a
premium product that can generate extra sales and a ton of community
The key is you and me. As retailers have learned from organics, fair
trade coffee and no-sweat garments, there's a growing market of
consumers who care about how products are produced--care to the point
that they'll pay more if necessary. UFW is betting that we'll also be
there for apples, and it's planning a grassroots campaign through
churches, campuses, unions, consumer groups and other networks.
One grower of organic apples is on the verge of signing the first
contract, and some two dozen co-op grocers on the West Coast and in
Minnesota are prepared to be the first retailers to market them. If it
works with apples, it can work with other crops, solidifying the
farmer/farmworker coalition and bringing a measure of progress to fields
long barren of justice. To offer your support, contact the Fair Trade
Apple Campaign at (206) 789-1947 or firstname.lastname@example.org.
American labor still pays lip service to the idea that it seeks "bread
and roses too"--a higher standard of living, plus the chance for workers
to enjoy some of the finer things in life. In reality, the famous
rallying cry of the 1912 textile workers' strike in Lawrence,
Massachusetts, is no more than a faint echo in today's unions. Few offer
what anyone would call a rich cultural experience for their members.
Most of the labor movement is no longer rooted in immigrant communities
or working-class fraternal associations of the sort that once supported
folk music, dance, theater and even literature in foreign-language
newspapers like the Forward, the Yiddish daily. Postwar
assimilation and suburbanization, the decline of indigenous
working-class radicalism and the rise of "mass culture" and
entertainment have left American workers with little claim to a culture
of their own. Beset with many current problems (including threats to
their very survival), unions are not inclined to embrace the additional
challenge of making drama, poetry or music--in new or old forms--part of
their internal life again.
The one AFL-CIO affiliate that has attempted this, on a large scale, is
the union of New York City hospital and healthcare workers, best known
by its number--1199. Now part of the Service Employees International
Union, Local 1199 launched a cultural program called Bread and Roses in
1979, with labor and foundation funding. Since then, B&R has
sponsored an impressive stream of union musicals and documentary films;
exhibits of paintings, poster art, murals and photography dealing with
workplace themes; poetry and writing classes for workers, oral histories
of their struggles--all of which help foster membership solidarity and
connection to the union.
Not for Bread Alone is the story of that effort and a brief
history of the union behind it, as told by 1199's longtime publicist,
campaign strategist and cultural impresario, Moe Foner. The book also
traces Foner's own career as a labor PR man par excellence and contains
much useful advice for today's "union communicators." The author was a
scrappy, streetwise hustler of the press who couldn't type but had on
his desk one of the most formidable Rolodexes in the labor movement. A
product of left-wing politics and CIO unionism in its Big Apple heyday,
Foner was far more effective than the AFL-CIO's current crop of
blow-dried, inside-the-Beltway "media consultants" (whose idea of"party
work" is introducing labor clients to the Democratic candidates served by
their firms, so that union treasuries and political action funds can be
milked simultaneously). Foner displayed a different kind of political
savvy, in countless picket-line battles and major lobbying efforts. As
journalist Jack Newfield says, he "could publicize like P.T. Barnum,
organize like Joe Hill and network like Bill Clinton."
For example, Foner's pioneering work on 1199 campaigns among private,
non-profit hospital workers--who didn't have the right to bargain with
management forty years ago--provides a good model for any union trying
to make organizing rights a higher-profile issue today. Not for Bread
Alone also reminds us about the important role played by the Labor
Leadership Assembly for Peace--the anti-Vietnam War coalition launched
by Foner, 1199 and their union allies in the late 1960s.
The author completed this memoir, with the assistance of former 1199
news editor Dan North, shortly before his death in January at age 86. As
the book recounts, Foner was born into a Jewish working-class family in
Brooklyn that produced not one, but four radical activists. A member of
the Communist Party from the mid-1930s "until the Khrushchev revelations
in 1956 about what went on under Stalin," Moe--along with his twin
brothers, Jack and Phil--was victimized by an early purge of leftists
from higher education. All three were forced out ofteaching or
administrative jobs at City College of New York (CCNY) in 1941. (The
resulting controversy led the highly musical Foners to change the name
of their dance band--already popular on the Catskills small-hotel
circuit--to "Suspended Swing.")
Despite their dismissal, Phil and Jack went on to have distinguished
careers as academic historians. Henry Foner--youngest of the four and
then a student at CCNY--joined the Furriers Union and later became its
president. And the author, for much of his forty-year union career,
became the living embodiment of the cultural politics that developed
during the period of the Popular Front, when American liberals and
radicals united to oppose fascism abroad and support Roosevelt's New
Deal at home. Some of the best material in Foner's book is, thus, like a
collection of old photos in a family album, faded but fascinating
because of what it reveals about the social and political milieu of a
now largely deceased generation of labor activists who managed to
survive both McCarthyism and the self-inflicted wounds of the Communist
In the 1930s and '40s, Foner observes, the left created "a vigorous
cultural life that became part of its mass appeal."
The most famous writers...appeared in the New Masses magazine,
which was close to the Communist Party. The Daily Worker had
great cartoons by people like Robert Minor, William Gropper, and Art
Young, but artists from the New Yorker also appeared there.
This was the era of the experimental Group Theater and...Waiting for
Lefty, the Clifford Odets play about striking taxi drivers.... The
International Ladies Garment Workers Union had already put on its
immensely successful musical revue, Pins and Needles, and on a
smaller scale, the American Student Union put on a musical every year.
One of them, called Pens and Pencils, was a takeoff on the Marx
Brothers.... There was a Theater Arts Committee that had a cabaret to
support the Loyalists in the Spanish Civil War. And the YCL [Young
Communist League] was always putting on skits and shows.
Foner was hired in 1947 as education director for a department store
union. Many Manhattan store clerks of that era--like waiters and
waitresses today--were aspiring actors. So when Foner put out a call for
auditions for the union's first theatrical venture--a seventeen-song
musical review called Thursdays 'Til Nine--400 members showed up.
Through his dance band and party connections, Foner also "had access to
an unusually large number of creative people who were, because of their
political beliefs, more than happy to participate for little or no money
in union cultural events." For music, lyrics or other help, he tapped
show-business talents like Millard Lampell, later a successful Hollywood
screenwriter; playwrights Arthur Miller and Norman Rosten; film
producer/director Martin Ritt (who went on to win an Oscar for Norma Rae); comedians Sam Levinson and Irwin Corey; actors Jack Gilford and Zero
Mostel; and future TV writer Mel Tolkin.
Although professionally written and produced, Thursdays 'Til Nine
drew on the job experiences of store workers themselves and provided
humorous commentary on contemporary labor issues (in numbers like "The
Taft-Hartley Rumba"). Thousands of members applauded its performances,
and Foner's singular career was launched. The show cost only a few
thousand dollars, but in return it "reaped immense rewards in good
publicity, education on labor issues, and membership pride in their
These positive results became a hallmark of Foner productions for his
later union employers as well. The store workers soon merged with
District 65, another "center of left unionism in New York," whose
stewards were deployed in Peekskill in 1949 to protect Paul Robeson when
a right-wing mob attacked one of his concerts. At District 65, Foner ran
educational, social and cultural programs for 20,000 workers in retail,
wholesale and warehouse jobs. One of the first things he did was start a
nightclub on the top floor of the union's lower Manhattan office
Each week, a different group of members would be in charge of selling
400 tickets at fifty cents each. Rank-and-file committees would set up,
check coats, wait on tables, serve drinks, etc.... I'd line up a band.
And every Saturday night, I'd get a guest star to perform for free....
Harry Belafonte was just breaking in then, and he'd come down and sing
in his dark glasses. We were packing them in, the place was always full.
On Saturday mornings, District 65 also had a "kiddy program," which
featured sing-alongs with Pete Seeger and Woody Guthrie, dance programs
conducted by Guthrie's wife, Margie, and magic shows by Doc Horowitz,
who brought along his daughter, a "terrific ventriloquist and puppeteer"
who acted as emcee. Her name? Shari Lewis, later the star of one of the
1950s' most popular children's TV shows.
In 1952 Foner moved to 1199, where he spent three decades--editing the
union newspaper, aiding strikes and organizing campaigns, advising union
founder Leon Davis and eventually creating Bread and Roses. At
midcentury, the union was quite different from what it is today; now it
has more than 200,000 members, most of whom are black, Hispanic and/or
female. When Foner was hired by Davis, a radical immigrant from Russia,
1199 had only 5,000 members and was overwhelmingly composed of Jewish
men working as pharmacists or clerks in New York City drugstores. But,
as Foner notes, 1199 had campaigned since the late 1930s for the hiring
of black pharmacists and was one of the first unions anywhere to
celebrate Negro History Week. When 1199 began organizing primarily
nonwhite hospital workers in the late 1950s--which led to its explosive
growth over the next twenty years--the union already had a strong record
of support for civil rights.
Commitment to that cause was symbolized by 1199's close relationships
with leading black artists and entertainers. Then relatively unknown as
actors, Ruby Dee and Ossie Davis (who contributed a loving foreword to
this book) became lifelong friends and collaborators with the author.
The couple directed or performed in a series of productions at 1199's
annual "Salute to Freedom." Much later they helped Foner create Bread
and Roses' best-known musical review, Take Care, which used
humorous songs and sketches to tell the story of hospital workers' daily
lives, their frustrations on the job and hopes for the future.
In 1199's initial hospital organizing and strikes, the union tried to
fuse civil rights and working-class consciousness. Several vivid
chapters in Not for Bread Alone describe how its "Union Power,
Soul Power" campaigns were built--first in New York, then in Baltimore,
Philadelphia and Charleston, South Carolina, site of an epic 113-day
walkout aided by Coretta Scott King, Ralph Abernathy, Andrew Young and
other leaders of the Southern Christian Leadership Conference. The
photographs accompanying Foner's memoir confirm the breadth of the
union's political alliances--with Malcolm X, Martin Luther King Jr.,
Bayard Rustin, A. Philip Randolph, Roy Wilkins and Adam Clayton Powell.
If the 1960s and early '70s were years of triumph for 1199, they
culminated in a decade of byzantine internal feuding. Leon Davis
suffered a stroke in 1979 and decided, after nearly five decades as
president, to turn over the reins to Doris Turner, an African-American
and former dietary clerk who headed 1199's hospital division. At the
same time, the union's founder tried to realize his longtime dream of
creating "one big union for all healthcare workers" by merging 1199 with
SEIU. Neither the merger nor the internal transfer of power proceeded as
planned. Instead, the union was plunged into a terrible "civil war,"
replete with "bitter elements of racism, sexism, red-baiting, violence,
For a majority of 1199 members, two things eventually became clear:
Turner was an incompetent autocrat and their union had become a "busted
Stradivarius." Turner purged all staff critics, surrounded herself with
goons, moved the union to the right politically, engaged in vote fraud
to win re-election and then, in 1984, led "one of the most inept,
unplanned, and disastrous strikes in New York history." To get the union
back on track, Foner and other 1199 veterans joined forces with Dennis
Rivera, a staff organizer from Puerto Rico recently fired by Turner.
They created a dissident group called "Save Our Union," which ran a
slate headed by Georgianna Johnson in a federally supervised rerun
election for 1199 officers. Johnson narrowly defeated Turner, but her
presidency was only slightly less troubled. She was soon ousted by her
former backer, Rivera, who has led 1199 in New York since 1989 (and
engineered its long-delayed affiliation with SEIU three years ago).
On the subject of 1199's "self-destruction"--what Foner calls "the most
heart-breaking experience" of his life--Not for Bread Alone is
both unreflective and unrevealing. "To some extent, we all played out
events based on our backgrounds, and mistakes were made. But the union
survived," the author writes. Elsewhere, Foner admits that "the whole
affair had disturbing overtones" but claims, unconvincingly, that during
the union's 1989 leadership race he "was removed from the day-to-day
running of 1199, and [has] only a hazy idea of the details."
As a history of 1199, then, Not for Bread Alone is best read
along with Leon Fink and Brian Greenberg's Upheaval in the Quiet
Zone (which Foner, to his credit, helped the authors research,
despite its dissection of various 1199 flaws). Upheaval appeared
thirteen years ago, when the union's bloody and embarrassing leadership
succession fight was still unresolved. Yet it remains the definitive
study of what went wrong then--and its analysis is just as relevant
today, in light of 1199's recent right turn, under Rivera, into the camp
of Republican Governor George Pataki, a questionable ally for any
"progressive" trade union.
Fink and Greenberg criticize Davis not only for his disastrous choice of
Turner as heir apparent but also for functioning as a "charismatic
patriarch" whose "unquestioned authority verged on benevolent
despotism." According to them, even the 1199 bylaw reforms championed by
Save Our Union failed to address the problem of overly centralized
decision-making in a "local" union far larger than most national ones.
"Without provisions for an elected 'chief delegate' at each hospital or
elected area directors, there is still no structural accommodation to
pluralistic power centers within the union and little place for leaders
of the future to spread their wings," they contended. "Communication as
well as decision-making will still be formulated in a room at the top."
The local's history and internal politics aside, the main question
raised by Foner's memoir is whether Bread and Roses offers a viable
model for cultural programming elsewhere in labor. Or is it too much a
product of New York City exceptionalism--a unique expression of 1199's
interracialism and now-fading political traditions, including its
Popular Front alliance with artists and entertainers long in the orbit
of the Old Left?
B&R has, from the beginning, inspired other labor arts initiatives.
Just as 1199 once tried to spread its unique brand of hospital unionism
elsewhere in the country (with varying degrees of success), Foner helped
organize, in 1980, the first in a series of Bread and Roses cultural
festivals in Lawrence, Massachusetts, which have been held there on
Labor Day weekend ever since. For almost as long, the Labor Heritage
Foundation in Washington has hosted an annual Arts Exchange and
Conference on Creative Organizing, which brings together union activists
and entertainers. LHF also sells poster art, videos and CDs of union
music to help publicize the work of labor choruses and individual
singer-songwriters. At the local level, however, few unions have the
kind of membership base and staff support--or access to foundation
funding--that has kept B&R afloat for nearly twenty-five years.
(During his period of forced exile from 1199 during the mid-1980s, even
Foner found it hard to reproduce his past successes while working
part-time for a small Meat Cutters local in Queens.)
According to Esther Cohen, Bread and Roses' current director, the
project continues to achieve its founder's goal of providing
professional-quality programming and opportunities for creative
expression by 1199 members themselves. B&R's permanent art gallery
at union headquarters currently hosts eight exhibits a year, on topics
ranging from Haitian culture and Dominican religion to the lives of
Langston Hughes, Paul Robeson and Pennsylvania coal miners, and the
death-row experiences of Mumia Abu-Jamal. Once a month, Cohen reports,
the gallery becomes "a cozy nightclub" and cafe, with entertainment
provided by 1199 rank-and-filers. More than 150 members recently signed
up for a creative-writing workshop as well; and as part of an amateur
photography program called "Unseen America," Bread and Roses is helping
scores of its members--and other immigrant workers--record and display
scenes of workplace and community life rarely shown in the mass media.
However, in the issue of New Labor Forum that recently published
Cohen's account of B&R activity, the Queens College magazine also
bemoaned the fact that most professionals in the arts are no longer
stirred by "the plight of working people and the intoxicating promise of
their liberation." According to NLF's editors:
For two centuries, until now that is, there was always a cultural
alternative, a point of opposition that said no to the callous
calculations of the marketplace.... While many kinds of people and
institutions have, at one time or another, joined the opposition, the
labor movement was always part of the picture, sometimes at the center
of the canvas. No more.... The labor movement is at a cultural dead end.
It has been defeated in the struggle for the hearts and minds of our
Such funereal observations were not part of Moe Foner's game. He was
ever the optimist, the union survivor and upbeat promoter of new ideas
and causes. If still on the job at B&R, he'd be on the phone right
now buttonholing talent for its next production, badgering reporters to
cover it and rallying members to fill every seat in the house--while
organizing labor opposition to US intervention in Iraq on the side! He'd
also be applauding the role played by hip-hop stars in the mass rally of
New York City teachers (and thousands of their music-loving students)
held in late May during contract talks between Mayor Bloomberg and the
United Federation of Teachers. Better than some activists in his field,
the author knew that if "labor culture" is going to be sustained, it
must be periodically renewed--that Ossie and Ruby must finally give way
to the likes of Sean (Puff Daddy) Combs, Jay-Z, LL Cool J, and Erykah
Badu, all of whom graced the platform of the UFT.
As New York City union historian Joshua Freeman observed, in another
recent exchange about the future of labor-oriented art and
entertainment: "There is no going back in time, and no reason to do so.
The strength of mid-century New York left culture lay in its organic
relationship to the needs and tastes of the city's working class. It
remains for another generation, in its own way, to build a new culture
of labor and the left."
Foreign creditors will eventually pull the plug.
Workers in the country's most dangerous industry are struggling for
I was born into the House of Labor. My father was a Teamster who drove a truck for thirty-five years. He died with his first retirement check in his pocket, uncashed.
How did it all start? What triggered the 1990s political corruption, its
inequality in wealth and its stock market bubble? This is the decade
that Kevin Phillips rails against in his historical epic of how the rich
get richer and the poor get further in debt.
Arguably it all started in Silicon Valley, with a little help from the
Department of Defense (which pioneered the epochal
breakthroughs--transistor and Internet--that sparked the electronics
revolution). Given the government's basic research, such private
companies as Hewlett-Packard, Microsoft, Apple, Intel and Cisco
generated creative, profitable products using new technologies. As the
intellectual property of these well-managed companies began to rise,
their stock prices began to rise, as did those of their suppliers,
buyers, competitors, financial consultants, management analysts, lawyers
and accountants. Even the stock prices of companies unrelated to high
tech began to soar.
The frenzy struck executive salaries. Top-notch high-tech managers made
a lot of money because their pay was tied to stock options. As their
company's stock price skyrocketed, so did their salaries. Soon other
corporate leaders--good, bad and indifferent--tied their own salaries to
the price of their company's stock. The financial markets regarded stock
options as a way to make managers more "efficient" using the litmus test
of stock-price performance. In practice, some managers cooked the books
and inflated stock prices by making risky short-term investments and
acquisitions. Long-term investments in new plant, equipment, research
and intellectual property, necessary for permanent jobs, became an
As Phillips shows, the greed of corporate America was such that in the
1960s, the pay of corporate CEOs was "only" about twenty-five times that
of hourly production workers. In the 1970s, the ratio was around thirty
to one. It rose from ninety-three times in 1988 to 419 times in 1999.
Between 1990 and 1998, the wages of ordinary workers barely kept pace
with inflation or grew at single-digit rates. Meanwhile, top executives
of America's biggest corporations enjoyed compensation increases of 481
percent! (Appalled by the eye-popping numbers on executive pay, Paul
Krugman referred to Wealth and Democracy in one of his columns in
the New York Times.)
With so much money sloshing around, contributions by business to
politicians increased. With more campaign funding, deregulation resumed
where Reagan left off, and upper-bracket tax rates mellowed. Phillips
shows that the effective federal tax rate (income and FICA, or Social
Security and Medicare) for the top 1 percent of families fell from 69
percent in 1970 to about 40 percent in 1993, with plenty of loopholes
remaining. Over the same period, the tax rate for the median family
increased from 16 percent to 25 percent. Between 1950 and 2000,
corporate taxes as a percentage of total tax receipts fell from 27
percent to 10 percent while FICA (mostly paid by the middle class)
jumped from 7 percent to 31 percent.
Regulation was critically lax in the accounting industry's scandals, as
we now know. Phillips's book predates news of this disgrace, but he
anticipates most of what happened. Deal by deal, the Big Five all began
to relax established auditing norms; otherwise they would have lost big
customers to one another. When chairman Arthur Levitt Jr. of the
Securities and Exchange Commission proposed to investigate, the Big Five
went to Washington. The SEC was called off the job; the Clinton
Administration caved in. As for the telecommunications sector, now
bleeding billions from overcapacity, its relations with the government
were similar to those of the railroads in the robber-baron age. In the
late nineteenth century, railroad tycoons were given free access to land
worth millions of dollars; in the 1990s, the telecommunications industry
was given publicly owned electromagnetic spectrum worth billions of
dollars. Phillips shows that, among the top thirty billionaires reported
by Forbes for 2001, eight were in high-tech electronics,
including software, and eight were in media.
So, starting with Silicon Valley, one can tell a story about the 1990s
that may be flat-footed but that at least moves from cause to effect in
a linear fashion. This, however, is not the story that Kevin Phillips
chooses to tell. Or maybe it is, but his writing style is so roving,
rambling and roundabout that it is difficult to find a coherent story
anywhere, although the parts are sure to be found somewhere, and are
often juicy. He aims a shotgun rather than a rifle at the fin de
siècle's cast of cruddy characters.
Phillips doesn't start in Silicon Valley because, at heart, he is an
antitechnologist. For Phillips, technology merely makes mischief. "From
early textile machinery to the Internet," he writes, the early stages of
major innovations have generated rising social and economic inequality
almost as a matter of course." (But how about the millions of jobs
created in textiles and the Internet at a slightly later stage?)
Elsewhere he states: "We can likewise doubt that technology has
outweighed representative government, effective markets, and
English-speaking freedoms in achieving the economic leadership of
Britain and then the United States." Really? Phillips's dismissal of
technology as a major factor in the economic hegemony of first England
and then the United States is strange because he shows contempt for the
alternative explanation--an obsessive love of market forces and
laissez-faire. Technology is bad in Phillips's view simply because it
breeds speculation. There are no heroes.
Notwithstanding Phillips's chaotic style and his neglect of the real
economic forces that govern wealth accumulation and distribution (such
as technology), he does a big service for his readers by providing them
with bytes of information on wealth inequality and democracy's warts.
Phillips, historically a card-carrying Republican, regards his
reformist, liberal politics as nothing strange. It follows in the
footsteps of great past Republican reformers like Lincoln and Theodore
Roosevelt. Phillips considers Franklin D. Roosevelt one of the team
because--his affiliation to the Democratic Party notwithstanding--he was
rich but a reformer of radical scope (responding, one might add, not
necessarily to his conscience but to social unrest). For most
Republicans, Phillips has nothing kind to say. "The Democrats," he
writes, "were the more important incubators of the Internet mania, but
the underpinning economic spirit was the market-deifying,
tax-cutting, and assets-aggrandizing conservatism given its head in the
eighties. This part of the framework was more Republican."
The Republican pedigree lets Phillips get away with murder. He rants and
raves in a way that someone on the left would be skewered for. The
result, however, is welcome. It is satisfying to read an analysis of the
US economy from the standpoint of greed and conservative morality.
The history lessons Phillips administers range from Aristotle to the
Gilded Age of the 1920s, which he contrasts with Gilded Age II of the
1990s. He examines Holland's tulip mania and its economic decline as a
world power, comparing its fall with that of Britain and possibly the
United States. In one table, culled from the Wall Street Journal,
he lists the wealthiest people of the past 1,000 years, starting with
Al-Mansur (938-1002), the Moorish regent of Cordoba, who got rich through plunder,
moving to Kublai Khan, ruler of China (1215-94), who got rich from
inheritance and confiscation, and ending with Bill Gates (1955-), the US
software executive, who got rich on stock ownership in Microsoft.
Other facts and figures are no less interesting, and some of Phillips's
charts are ingenious. To show the "giantizing" of wealth enjoyed by the
richest person in the realm, Phillips compares the largest fortune at
the time to that of the median family or household. In 1790, the ratio
of the richest man's wealth, Elias Derby, to the median was 4,000 to 1.
By 1868, the ratio of Cornelius Vanderbilt's wealth (in railroads) to
the median was 80,000 to 1. For John D. Rockefeller in 1912, the ratio
was 1,250,000 to 1 (in 1940, it fell to 850,000 to 1). In 1962, the
ratio for Jean Paul Getty was 138,000 to 1. For Sam Walton in 1992, it
was 185,000 to 1. For Bill Gates in 1999, it was the blockbuster,
1,416,000 to 1! Presumably, the ratio increased over time as the United
States moved from an agrarian economy to one based on modern
transportation (railroads), natural resource exploitation (copper, oil)
and then manufacturing, where new product innovations could flourish.
Compared with other wealthy countries, inequality in the United States
is extreme. In the 1990s, the income ratio in Japan of the top fifth of
households to the bottom fifth was only 4.3 to 1. (A similar ratio
exists in Korea and Taiwan, which, like Japan, had a land reform after
World War II.) European social democracies tended to have ratios of 6 or
7 to 1 (5.8 in Germany). The US ratio was 11 to 1 or higher, depending
on the source. Presumably this reflected the United States' cowboy
capitalism, its rich raw materials, its pioneering technologies and its
corporations' ability to mass-produce for a vast domestic market.
Wealth (which Phillips never defines) is essentially the difference
between inflows and outflows of income, which is savings in the case of
households and profits in the case of firms. Once wealth is attained,
its holder has to figure out what to do with it. Thus, the financial
services industry usually expands as wealth expands. In the 1990s the
finance, insurance and real estate sector (FIRE) overtook manufacturing
in US national income, "enabled by a dozen federal rescues and
preferences, begun in the eighties and consummated in the nineties." The
thirty richest individuals in 2001 also included eight in finance,
investments and real estate--including Warren Buffett, George Soros and
Ross Perot. As finance grows, Phillips argues, the likelihood of a
technobubble grows exponentially.
What does it all mean, the rising inequality and "financialization" of
Business as usual, insofar as Gilded Age II is merely a catch-up with
Gilded Age I. Between 1922 and 1997, the share of total wealth of the
top 1 percent of households spiked in 1929 at 44.2 percent, tumbled to
33.3 percent in 1933, reached a nadir of 19.9 percent in 1976 (as
profits plunged with the energy crisis) and hit 40.1 percent in 1997
(the estimates are from Edward Wolff). As the stock market boomed in
1997-2000, the wealth of the richest rose further, but atomized with the
crash of 2000, into the present. Wealth inequality appears to be wired
into the American system.
Relative increases in the wealth of the rich, moreover, are often
compatible with increases in real wages and productivity. The average
family's real income increased 30 percent between 1960 and 1968 as the
ranks of millionaires swelled. Then came the era of stagflation.
According to the Council of Economic Advisers, average hourly earnings,
adjusted for consumer prices, fell by 0.5 percent a year from 1978 to
1995. They then rose at a piddling 2 percent a year from 1995 to 2000,
in tandem with rising productivity and the "irrational exuberance" of
the stock market. Thus, wealth inequality does not preclude modest
increases in income for other social classes.
Yet, inequality matters, depending on the use to which wealth is put.
And that in turn depends on the economic and social profile of the
accumulating classes. Kevin Phillips, however, is not keen on "class
analysis." "'Class warfare'...is a false description," he writes, "a
perverse conservative borrowing from Karl Marx," because the United
States has had rich reformers and poor Republicans.
Still, one doesn't have to emulate Karl Marx in the Grundrisse to
emphasize that the new American class of rich is different from the
railroad barons or the oil money of old. For one, it is extremely well
educated. Between 1975 and 1998, the mean annual earnings of US workers
with less than four years of high school fell steadily. Those of high
school graduates stagnated. Those of college graduates rose slightly.
Those of people with advanced degrees soared, particularly after 1990,
when the demand for economists, lawyers, accountants and MBAs heated up
(as noted by Edward Wolff).
Investments of the new superrich, therefore, are likely to gravitate
toward new technologies in manufacturing and services, and fancy
finance. With high educational attainments, the new elite may be
expected to command a lot of money and social legitimacy, which the old
tycoons never quite managed. A mere college education is no longer a
guarantee of upward mobility, as Washington policy-makers still believe.
For most ordinary people without a college degree or fancy MBA, the new
rich have created a tougher world. Horatio Alger now goes to graduate
The second defining characteristic of the new rich is their
internationalism. They hire, produce and market globally, and have
mobilized bipartisan political support for operating overseas.
That all started with strong competition from Japan in the 1980s.
Technologically behind the United States, Japan had more government
interventions to help business grow (as did Korea, Taiwan, China, India,
etc.). The United States regarded this as unfair, and shoved a "level
playing field" down everyone's throat--backward and advanced countries
have to be equal with open markets, free of government's foul play.
The financial services sector, with large-scale economies, benefited
enormously from Washington's dismantling of developing countries'
barriers to foreign banking and regulations of inflows and outflows of
"hot," destabilizing money. Deregulation was soon followed by the Asian
financial crisis of 1997. The Treasury still publishes a book each year
documenting on a country-by-country basis the remaining obstacles abroad
to American financial institutions. The pharmaceuticals industry
benefited from the extension of patent enforcement to developing
countries notwithstanding their need for cheap medicines. The software
industry pressed for protection of intellectual property.
Strangely, Phillips hardly talks about globalization at all. But from
stray sentences we can assume he doesn't like it, especially its effect
on domestic jobs. Yet lobbying in Washington for protection of jobs that
can be provided more efficiently in lower-wage countries is little
different in principle from lobbying for tax breaks and deregulation for
the rich. They are both a form of political corruption.
Phillips ends his 470-page book with a tepid recommendation, given the
preceding fire and brimstone. It is to end the "democratic deficit,"
which puts power in the hands of unelected organizations--the judiciary,
the Federal Reserve and the WTO. But Washington has a large say in the
WTO, controls the World Bank and has a loud voice in the International
Monetary Fund. For American business, that deficit is small.
Is, therefore, American foreign economic policy likely to give the new
class of rich the global stability it desperately requires? No, if Kevin
Phillips is right and inequality does matter. Internationally, economic
inequality among countries has grown like Topsy. As industrialization
spread unevenly, the ratio in per capita income of the richest to the
poorest regions of the world rose from about 3 to 1 in 1820, to 5 to 1
in 1870, to 9 to 1 in 1913, to 15 to 1 in 1950. Then, as East Asia grew,
the ratio fell in 1972 to 13 to 1, but rose steeply to 19 to 1 in 1998,
the age of hardball globalism (data are from Angus Maddison, The
World Economy). Global distribution of income and wealth is becoming
as important to the American rich as domestic distribution, and both are
Phillips doesn't consider any of this, but that's fine. He makes a real
contribution by showing how American politics works, what really goes on
behind the fortunes.
Yech! What a scene!
In 1998 the World Bank notified the Bolivian government that it would
refuse to guarantee a $25 million loan to refinance water services in
the Bolivian city of Cochabamba unless the local government sold its
public water utility to the private sector and passed on the costs to
consumers. Bolivian authorities gave the contract to a holding company
for US construction giant Bechtel, which immediately doubled the price
of water. For most Bolivians, this meant that water would now cost more
than food. Led by Oscar Olivera, a former machinist turned union
activist, a broad-based movement of workers, peasants, farmers and
others created La Coordinadora de Defensa del Agua y de la Vida (the
Coalition in Defense of Water and Life) to deprivatize the local water
In early 2000 thousands of Bolivians marched to Cochabamba in a showdown
with the government, and a general strike and transportation stoppage
brought the city to a standstill. In spite of mass arrests, violence and
several deaths, the people held firm; in the spring of that year, the
company abandoned Bolivia and the government revoked its hated
privatization legislation. With no one to run the local water company,
leaders of the uprising set up a new public company, whose first act was
to deliver water to the poorest communities in the city. Bechtel,
meanwhile, is suing the government of Bolivia for $25 million at the
World Bank's International Centre for the Settlement of Investment
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