How Corporations Crush the Working Class

The most dramatic change in the system over the last half-century has been the emergence of corporate giants like Amazon and the shrinkage of labor unions.

The resulting power imbalance has spawned near-record inequalities of income and wealth, corruption of democracy by big money, and the abandonment of the working class.

Fifty years ago, General Motors was the largest employer in America. The typical GM worker earned $35 an hour in today’s dollars and had a major say over working conditions.

Today’s largest employers are Amazon and Walmart, each paying far less per hour and routinely exploiting their workers, who have little recourse.

The typical GM worker wasn’t “worth” so much more than today’s Amazon or Walmart worker and didn’t have more valuable insights about working conditions.

The difference is those GM workers had a strong union. They were backed by the collective bargaining power of more than a third of the entire American workforce. 

Today, most workers are on their own. Only 6.4% of America’s private-sector workers are unionized, providing little collective pressure on Amazon, Walmart, or other major employers to treat their workers any better.

Fifty years ago, the labor movement had enough political clout to ensure labor laws were enforced and that the government pushed giant firms like GM to sustain the middle class.

Today, organized labor’s political clout is minuscule by comparison. 

The biggest political players are giant corporations like Amazon. They’ve used that political muscle to back “right-to-work” laws, whittle down federal labor protections, and keep the National Labor Relations Board understaffed and overburdened, allowing them to get away with egregious union-busting tactics.

They’ve also impelled government to lower their taxes; extorted states to provide them tax breaks as a condition for locating facilities there; bullied cities where they’re headquartered; and wangled trade treaties allowing them to outsource so many jobs that blue-collar workers in America have little choice but to take low-paying, high-stress warehouse and delivery gigs. 

Oh, and they’ve neutered antitrust laws, which in an earlier era would have had companies like Amazon in their crosshairs.

This decades-long power shift – the ascent of corporate leviathans and the demise of labor unions – has resulted in a massive upward redistribution of income and wealth. The richest 0.1% of Americans now have almost as much wealth as the bottom 90% put together.

The power shift can be reversed – but only with stronger labor laws resulting in more unions, tougher trade deals, and a renewed commitment to antitrust.

The Biden administration and congressional Democrats appear willing. The House has just passed the toughest labor reforms in more than a generation. Biden’s new trade representative, promises trade deals will protect American workers rather than exporters. And Biden is putting trustbusters in critical positions at the Federal Trade Commission and in the White House.

And across the country, labor activism has surged – from the Amazon union effort, to frontline workers walking out and striking to demand better pay, benefits, and safety protections.

I’d like to think America is at a tipping point similar to where it was some 120 years ago, when the ravages and excesses of the Gilded Age precipitated what became known as the Progressive Era. Then, reformers reined in the unfettered greed and inequalities of the day and made the system work for the many rather than the few.

It’s no exaggeration to say that we’re now living in a Second Gilded Age. And today’s progressive activists may be on the verge of ushering us into a Second Progressive Era. They need all the support we can give them.

The parallels are striking. In the last decades of the nineteenth century – the so-called “Gilded Age”— America experienced inequality on a scale it had never before seen, combining wild opulence and searing poverty.

American industry consolidated into a few giant monopolies, or trusts, headed by “robber barons” who wielded enough power to drive out competitors. A few Wall Street titans like J.P. Morgan controlled the nation’s finances.

These men used their huge wealth to rig the system. Their lackeys literally deposited stacks of money on the desks of pliant legislators, prompting the great jurist Louis Brandeis to tell America it a choice: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.“

We face a similar choice today.

Then, America chose democracy. President Theodore Roosevelt, railing against the “malefactors of great wealth,” broke up the trusts. And he pushed Congress to end the most blatant forms of corruption.  

His fifth cousin, FDR, went further – enacting social insurance for the elderly, the unemployed, and the disabled; a minimum wage and forty-hour workweek; the right to unionize; compensation for workers injured on the job; and strict limits on Wall Street.

In other words, between 1870 and 1900, American capitalism got off track. Between 1901 and 1937 (the effective end of the New Deal), America put capitalism back on track.

We’re now in the Second Gilded Age, and American capitalism is again off track. It takes about three generations for Americans to forget how our system, unattended, goes wrong. And then to right it. 

Inequality is now nearly at the same level it was in the late nineteenth century. Half of all families are poorer today than they were a decade-and-a-half ago, the pay of CEOs and Wall Street bankers is in the stratosphere, and child poverty is on the rise.

Meanwhile, American industry is once again consolidating – this time into oligopolies dominated by three or four major players. You can see it in pharmaceuticals, high tech, airlines, food, Internet service, communications, health insurance, and finance.

The biggest Wall Street banks, having brought the nation to the brink of destruction a few years ago, are once again exercising vast economic power. And big money has taken over American politics.  

Will we put capitalism back on track, as we did before?

The vile election of 2016 doesn’t seem to offer much hope. But future historians looking back on the tumult might see the start of another era of fundamental reform.

Today’s uprising against the established order echoes the outrage average Americans felt in the late nineteenth century when they pushed Congress to enact the Sherman Antitrust Act, and when Democratic presidential candidate William Jennings Bryan fulminated against big business and finance.

One hundred twenty years later, Bernie Sanders – the unlikeliest of presidential candidates – won 22 states and 46 percent of the pledged delegates in the Democratic primaries, and pushed Hillary Clinton and the Democratic Party to adopt many of his proposals.

At the same time, Donald Trump – a faux populist – has laid bare the deep discontents of America’s white working class, which both parties have long neglected. Not incidentally, Trump has also jeopardized the social fabric of America and nearly destroyed the Republican Party.

Hopefully some of America’s current elite will conclude, as it did at the turn of the last century, that they’d do better with a smaller share of a growing economy fueled by a flourishing middle class, in a society whose members feel the system is basically fair, than in one riven by social and political strife.

History has proven the early generation of reformers correct. While other nations opted for communism or fascism, Americans chose to make capitalism work for the many rather than the few.  

If Donald Trump is elected next week, all bets are off. 

But if Hillary Clinton assumes the presidency, could she become another Teddy or Franklin D. Roosevelt? 

You may think her too much of an establishment figure, too close to the moneyed interests, too cautious. But no one expected dramatic reform when each of the Roosevelts took the reins. They were wealthy patricians, in many respects establishment figures. Yet each rose to the occasion.

Perhaps she will, too. The timing is right, and the need is surely as great as it was over a century ago.

As Mark Twain is reputed to have quipped, “history doesn’t repeat itself, but it often rhymes.”

Hillary Clinton won’t be the only winner when Donald Trump and his fellow haters are defeated on Election Day (as looks increasingly likely). Another will be Paul Ryan, who will rule the Republican roost.

Democrats may take back the Senate but they won’t take back the House. Gerrymandering has given House Republicans an impregnable fortress of safe seats.

This means that in order for President Hillary Clinton to get anything done, she’ll have to make deals with Speaker Paul Ryan.

While the Clinton-Ryan years won’t be marked by the same kind of petulant gridlock we’ve witnessed over the last eight, the ascendance of Ryan and Clinton will mark a win for big business and Wall Street over the strongest anti-establishment surge America has witnessed since Great Depression.

Clinton might be able to summon Ryan’s support on a “Buffet rule” for the highest-income taxpayers – an effective minimum tax of 30 percent on top incomes. She might also be able to wangle some additional spending on infrastructure and paid family leave.

But the price Ryan can be expected to exact will be lower corporate tax rates, along with a tax amnesty on corporate profits repatriated to the United States. And to offset the added spending and tax cuts, Ryan will probably want Clinton to trim Social Security (perhaps reviving the terrible idea of a “chained” CPI for determining cost of living increases), and slow the growth of Medicare.

None of this will do much to remedy the central economic challenge of our era – reversing the declining incomes and wealth of most Americans.

Although incomes rose in 2015, the typical household is still worse off today than it was in 2000, adjusted for inflation. The assets of the typical family today are worth 14 percent less than the assets of the typical family in 1984. And the typical job is less secure than at any time since the Great Depression.

These trends are not sustainable – neither economically nor politically. They generated the fury that’s undergirded Trump’s ugly campaign, and fueled the anger that propelled Bernie Sanders’s insurgency.

They’ve fed a growing sense that the political-economic system is rigged in favor of those at the top.

And it is. Big money has corrupted our democracy, resulting in laws and rules that systematically favor big corporations, Wall Street, and the very rich over everyone else.

Consider, for example, the growing market power of leading pharmaceutical companies, private health insurers, the biggest Wall Street banks, giant cable providers, four major airlines, and five largest high-tech companies. And the decreasing market power of unions. 

The resulting imbalance is transferring money out of the pockets of average Americans directly into the pockets of major shareholders and top executives.

A similar upward distribution is occurring through bankruptcy laws that allow giant corporations and billionaires to avoid paying what they owe, yet don’t allow average people overburdened with mortgage or student debt to renegotiate those obligations.

Mandatory arbitration clauses in contracts with giant corporations are forcing people to give up rights under a wide variety of consumer and employment laws. Meanwhile, workers classified as “independent contractors” are losing whatever rights they once had under the nation’s labor laws.

In all these respects, the American political economy has become radically imbalanced.

The reforms Hillary Clinton and Paul Ryan are likely to agree to are miniscule compared with the scale of this imbalance.

Hopefully, the leaders of big business and Wall Street – the true winners of the 2016 election – will realize that although they avoided Trump’s authoritarian populism and Sanders’s “political revolution” this time around, they won’t for much longer.

The forces that gave rise to both will grow unless our political economy is rebalanced to work for everyone and not just for those at the top.

There is precedent. In the first decades of the twentieth century, enlightened business leaders joined with progressive reformers to rebalance American capitalism – thereby rescuing it from the savage inequalities and corruption of the Gilded Age.  

If they understand what happened in the 2016 election, enlightened business leaders will do so once again.

We’re in a new gilded age of wealth and power similar to the first gilded age when the nation’s antitrust laws were enacted. Those laws should prevent or bust up concentrations of economic power that not only harm consumers but also undermine our democracy – such as the pending Comcast acquisition of Time-Warner. 

In 1890, when Republican Senator John Sherman of Ohio urged his congressional colleagues to act against the centralized industrial powers that threatened America, he did not distinguish between economic and political power because they were one and the same. The field of economics was then called “political economy,” and inordinate power could undermine both. “If we will not endure a king as a political power,” Sherman thundered, “we should not endure a king over the production, transportation, and sale of any of the necessaries of life.”

Shortly thereafter, the Sherman Antitrust Act was passed by the Senate 52 to 1, and moved quickly through the House without dissent. President Harrison signed it into law July 2, 1890.

In many respects America is back to the same giant concentrations of wealth and economic power that endangered democracy a century ago. The floodgates of big money have been opened even wider in the wake of the Supreme Court’s 2010 decision in “Citizen’s United vs. FEC” and its recent “McCutcheon” decision.

Seen in this light, Comcast’s proposed acquisition of Time-Warner for $45 billion is especially troublesome – and not just because it may be bad for consumers. Comcast is the nation’s biggest provider of cable television and high-speed Internet service; Time Warner is the second biggest.

Last week, Comcast’s executives descended on Washington to persuade regulators and elected officials that the combination will be good for consumers. They say it will allow Comcast to increase its investments in cable and high-speed Internet, and encourage rivals to do so as well. 

Opponents argue the combination will give consumers fewer choices, resulting in higher cable and Internet bills. And any company relying on Comcast’s pipes to get its content to consumers (think Netflix, Amazon, YouTube, or any distributor competing with Comcast’s own television network, NBCUniversal) also will have to pay more – charges that will also be passed on to consumers.

I think the opponents have the better argument. Internet service providers in America are already too concentrated, which is why Americans pay more for Internet access than the citizens of almost any other advanced nation. 

Some argue that the broadband market already has been carved up into a cartel, so blocking the acquisition would do little to bring down prices. One response would be for the Federal Communications Commission to declare broadband service a public utility and regulate prices. 

But Washington should also examine a larger question beyond whether the deal is good or bad for consumers: Is it good for our democracy?

We haven’t needed to ask this question for more than a century because America hasn’t experienced the present concentration of economic wealth and power in more than a century.

But were Senator John Sherman were alive today he’d note that Comcast is already is a huge political player, contributing $1,822,395 so far in the 2013-2014 election cycle, according to data collected by the Center for Responsive Politics – ranking it 18th of all 13,457 corporations and organizations that have donated to campaigns since the cycle began. 

Of that total, $1,346,410 has gone individual candidates, including John Boehner, Mitch McConnell, and Harry Reid; $323,000 to Leadership PACs; $278,235 to party organizations; and $261,250 to super PACs.

Last year, Comcast also spent $18,810,000 on lobbying, the seventh highest amount of any corporation or organization reporting lobbying expenditures, as required by law.

Comcast is also one of the nation’s biggest revolving doors. Of its 107 lobbyists, 86 worked in government before lobbying for Comcast. Its in-house lobbyists include several former chiefs of staff  to Senate and House Democrats and Republicans as well as a former commissioner of the Federal Communications Commission.

Nor is Time-Warner a slouch when it comes to political donations, lobbyists, and revolving doors. It also ranks near the top.

When any large corporation wields this degree of political influence it drowns out the voices of the rest of us, including small businesses. The danger is greater when such power is wielded by media giants because they can potentially control the marketplace of ideas on which a democracy is based.

When two such media giants merge, the threat is extreme. If film-makers, television producers, directors, and news organizations have to rely on Comcast to get their content to the public, Comcast is able to exercise a stranglehold on what Americans see and hear. 

Remember, this is occurring in America’s new gilded age – similar to the first one in which a young Teddy Roosevelt castigated the “malefactors of great wealth, who were “equally careless of the working men, whom they oppress, and of the State, whose existence they imperil.”

It’s that same equal carelessness toward average Americans and toward our democracy that ought to be of primary concern to us now. Big money that engulfs government makes government incapable of protecting the rest of us against the further depredations of big money.

After becoming President in 1901, Roosevelt used the Sherman Act against forty-five giant companies, including the giant Northern Securities Company that threatened to dominate transportation in the Northwest. William Howard Taft continued to use it, busting up the Standard Oil Trust in 1911. 

In this new gilded age, we should remind ourselves of a central guiding purpose of America’s original antitrust law, and use it no less boldly.