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James Crotty: Big business using crisis to continue rolling back wages and safety net

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay. We’re in Amherst, Massachusetts, at the PERI institute, and we’re talking about who benefits from austerity measures. Joining us again is James Crotty. He’s a professor emeritus at the University of Massachusetts here in Amherst and he’s a research fellow at the PERI institute. Thanks for joining us again.


JAY: So in one of our earlier interviews, we talked about what’s going on now. This moment is a historic crossroads in this battle over how much of what’s created is divided between [the] rich and people who work for their money–I guess some rich people work for their money, but they get paid a lot more. They get paid a lot more. And if you go back to the last time we were in such a crisis, in the ’30s, there was a kind of a compromise made that there has to be a certain amount of social safety net. You’ve got to let workers in on some of the American prosperity to avoid a meltdown domestically, and to get them, I guess one could argue, to help support and buy into some of what United States is doing abroad. World War II takes place. Workers come home from Europe, from Asia. I shouldn’t say “were soldiers”, most–many of whom–most of whom would have been workers in their previous lives or about to be workers if they were students. Anyway, they come back and they say, we’ve been fighting for democracy and we want some, and we want some in our economic life, we want some in our political life. And in 1946, more workers are on strike–I think the number’s over 5 million–than in the history of the United States. So talk about what comes next and get us to today.

CROTTY: The strikes were about what kind of arrangements were going to take place after the war and whether the unions that had organized, particularly industrial unions during the 1930s, and who cooperated in the war effort and assisted the government through labor discipline were going to maintain the power that they had. And they had to have a new deal for all the people coming home, and they didn’t want to–who had fought for their country and were not going to accept Depression conditions. So there were lots of things suggesting that the ruling elites thought they had to really provide the kind of things we now think of as normal government functions and social welfare functions–age education and unemployment compensation and so on, and other things as well. Now, the workers’ strike was about doing that. The workers’ strike, of course, just increased the fear on the part of very conservative companies and individuals and politicians that they had to stop the workers movement from being too powerful. So that’s how we get Taft-Hartley, which essentially put enormous restrictions on–.

JAY: Taft-Hartley, a piece of legislation.

CROTTY: The piece of legislation. So that put tremendous restrictions on the labor movement, and you couldn’t be a radical or a leftist or a communist and be in the labor movement. You had to take an oath of allegiance and loyalty oaths. And it had put many, many restrictions which weakened labor.

JAY: Yeah, you couldn’t organize secondary boycotts.

CROTTY: Right.

JAY: If you worked at an enterprise where one section went on strike but your contract wasn’t up, you were forced to cross the picket lines, where before, the fact there was a strike gave you the right not to work, which means you can close the whole place down. Now you can’t. And also right–.

CROTTY: Right-to-work states.

JAY: Right-to-work states.

CROTTY: [inaudible] So what this meant is that on the one hand the working people of the country got a hugely better deal than they had gotten before World War II. We got kind of the modern environment. The unions, being stronger, even though restricted and kind of put on a leash by the Taft-Hartley Act, were still strong enough to generate good wages, to get good contracts. And this victory for workers–the roles of the state in terms of increasing regulation of business and using the tax system to provide Social Security and to provide unemployment compensation and to provide support for many, many things–led to the best period in the United States’ history, economically. It’s sometimes called the “Golden Age”, the quarter-century after that. On the other hand, Taft-Hartley was one of the first serious recognitions that there was resistance in the business community, at least parts of the business community, to this compromise, which led to the modern United States of America.

JAY: And you have the House Un-American Activities Committee, the period known as McCarthyism. When–generally when people talk about this, they focus on what happened in Hollywood. But it was very much about what happened in the unions.

CROTTY: It was more about what happened with labor.

JAY: Which was to get rid of the militants.

CROTTY: Okay. Now, ultimately, if we move forward, then we move forward into the 1980s and Ronald Reagan and the triumph of conservatism. So this is the business folks, the rich folks, the billionaires who thought that they had lost with this regulation and tax system and kind of a social democracy [snip] helped prepare the grounds for Reagan to be elected. And Reagan then represented the rollback of the achievements of the working and middle class after the war. So we had deregulation. The government was supposed to get out of the way of business; it was supposed to leave business alone. Reagan attacked the air controllers when they went on strike. That led off to a much more conservative era economically in the United States, and that era has been very bad for working people. And you know the statistics (many people do), that the average full-time male worker’s real wage is no higher today than it was in 1973. Family incomes haven’t gone up very much, when they had doubled in this Golden Age period. So Reagan was the initiation or the culmination of a lot of efforts to roll back the victories of labor. And that kind of maybe brings us up to the question of what’s happening now.

JAY: ‘Cause my big question was who benefits from austerity.

CROTTY: There’s short-term, long-term, medium-term beneficiaries. But the one that I think is interesting and most people don’t talk about is it looks like it may be another stage in the defeat of the organized working class and the use of the government and the economic system to make sure that it’s a fair game and that working people get a fair share of the pie.

JAY: Fairer anyway.

CROTTY: A fairer share of the pie. And, I mean, the inequality’s been tremendous. But if you think about the Koch brothers, right, these billionaire businessmen who’ve been trying to get right-wing politics empowered in the United States, this is great for them. Right? We’re going to maybe privatize Social Security. They would like to do that. They would like to privatize Medicare. They would essentially like to slash regulations. They would like to reduce programs. They don’t want the government interfering in the economy. They don’t want the government empowering workers. So this is terrific for them. They’re not going to pay any of these taxes.

JAY: You use the crisis. Because of such high unemployment, labor is weak, so use the crisis to continue this fight that took place after World War II.

CROTTY: Right. That’s the longer-term historical perspective within which you can understand some of the forces around austerity. And it’s happening everywhere. It’s not–obviously it’s not just some rich right-wingers. The forces of austerity are working across Europe and–.

JAY: In fact, in Europe the working class and people there had actually gained more, I think, probably, than the Americans had.

CROTTY: They did.

JAY: So there’s more to roll back.

CROTTY: And there’s more to roll back. And so in Britain we’re finding that the conservative government is in fact implementing–attempting to implement cuts in social welfare programs, and they’re fairly substantial. But they’re also eroding some of the strengths. For example, there’s benefits, mothers’ benefits. If you have a child in Britain, you get payments from the state. Now they want to means-test that. So it means that middle-class and upper women don’t get that. Now, that may sound like not a bad thing, except one of the reasons why there’s such political support for the social programs is that they’re not means-tested: it’s not just those people taking our money; it’s all of us are getting this. In Ireland, the public workers have already taken a 15 percent cut in their wages. There’s all of this pressure all over the world to roll back the gains that people (at least in North America and in Europe) fought for and won and led to reasonable lives for us in this country. And the prospects of our lives now, for tens of millions of us, are awful. There’s–you know, wages aren’t going up. Unemployment is, as you know, horrible. Job prospects are bad and they’re going to stay bad for years. Young people coming out of college can’t get jobs. Laid-off people, older people in the United States, they don’t know how to support themselves; they’re losing their homes. So this is a horrible situation, which you would think would call for tremendously energetic moves by the government to contain and sustain and roll this back, but it’s not what we’re doing at the moment.

JAY: Thanks for joining us.

CROTTY: You’re welcome.

JAY: And thank you for joining us on The Real News Network.

End of Transcript

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Professor Emeritus James R. Crotty teaches in the Department of Economics at the University of Massachusetts, Amherst. He is a Research Associate at PERI. He's a macro economist with broad interests whose research in theory and policy attempts to integrate the complementary analytical strengths of the Marxian and Keynesian traditions. His writings have appeared in such diverse journals as the American Economic Review, the Quarterly Journal of Economics, the Cambridge Journal of Economics, the Review of Radical Economics, Monthly Review, the Journal of Post Keynesian Economics, and the Journal of Economic Issues, and in many edited collections.

His research interests include: economic methodology; the implications of radical uncertainty for macro theory and policy; theories of financial markets and their implications for understanding financial booms and crises; Marxian and Keynesian perspectives on investment theory; the structure and performance of the global neoliberal economy; theories of competition and their impact on theories of macro dynamics; the financialization of the non-financial firm; and the political economy of South Korea.