The Corporate “Race to the Bottom” and the Blindspots of Power Elite Liberalism

The Corporate “Race to the Bottom” and the Blindspots of Power Elite Liberalism

Leo Casey: The Corporate ?Race to the Bottom?

In upstate New York, a bitter strike between Mott’s Apple Juice and its production workers has become the latest battle against the “race to the bottom,” the process of undercutting labor market standards that has plagued American labor for the last three decades. As Steve Greenhouse tells the story of the months-long strike in the New York Times, the Dr. Pepper Snapple conglomerate that owns Mott’s Apple Juice is seeking a $1.50 cut in the hourly wage rate (which would slash annual income by approximately $3000), a pension freeze, increased worker contributions for health care insurance, and a host of other concessions. Dr. Pepper Snapple makes no pretense that their bargaining stance is based on economic necessity, on hard times for the company. Corporate sales in 2009 totaled $5.5 billion, with a rather handsome net profit of $555 million. Rather, Dr. Pepper Snapple is demanding concessions simply because it can. The local blue-collar economy is depressed after years of layoffs by its two biggest employers, Kodak and Xerox. Many nonunion local workers earn less, with inferior benefits, than the Mott?s workforce. Dr. Pepper Snapple wants to drive its Mott’s workers down to the lower local standards not because it needs to do so, but because it wants to do so.

“Corporate America is making tons of money—this company is a good example of that,” local union president Mike LeBerth told the Times. “So why do they want to drive down our wages and hurt our community? This whole economy is driven by consumer spending, so how are we supposed to keep the economy going when they take away money from the people who are doing the spending?”

There is, unfortunately, nothing new about the “race to the bottom.” It has been a feature of the American economy since the late 1970s, when corporate-driven globalization first took hold and corporations began to move their operations to countries such as China. There the power of an authoritarian state kept workers from organizing into real unions, keeping their wages artificially low to attract corporate investment. The end product of decades of this ?race to the bottom? has been the evisceration of once powerful industrial unions in basic industries such as steel and auto and the general decline of the American labor movement. This led, in turn, to the decline of the American middle class that arose as a result of trade union expansion in the New Deal era.

In his book The Big Squeeze: Tough Times for American Labor, Steve Greenhouse notes that between 1979 and 2007, the real hourly earnings of private sector workers, who make up 80 percent of the American workforce, rose just 1 percent. Over the same time period, the productivity of those same workers rose a remarkable 60 percent. If the wages of the American worker had kept pace with his increased productivity, the average full-time worker would have been earning an average of $58,000 by 2007. Instead, the average wage was $36,000.

The productivity gains, which never found their way into worker salaries, have been pocketed by the American corporate elite: in 1978, the average CEO salary was thirty-five times greater than the average worker salary; in 2007, the average CEO salary had mushroomed to 344 times greater than the average worker salary. [Executive Excess Reports]. “There’s class warfare, all right,” billionaire investor Warren Buffet said in an unguarded moment, “but it’s my class, the rich class, that’s making the war, and we’re winning.”

While unionized public sector workers once thought that the ?race to the bottom? would not affect them, events in the wake of the 2007 financial crisis have demonstrated that this was a foolish illusion. Having deflated salaries, eliminated defined benefit pensions, and diminished health care for private sector workers, American corporate interests have now set their sights on completing the ?race to the bottom? by targeting public sector salaries, pensions, and health care. Newspapers and televisions are full of accounts of bloated salaries, exorbitant pensions, and costly health care, with the goal of creating resentment among private sector workers who have seen their standard of living decline. The denizens of Wall Street who brought the financial crisis are now leading the charge against public sector unions, and most especially teacher unions–the only American unions which still have their sector of the American economy organized. One of the major players in this effort is none other than the virulently anti-union Wal-Mart Walton Family Foundation, which sees teacher unions as the strongest sectors of a weakened labor movement: destroy teacher unions as an effective political and economic force, and you are well on your way to relegating the American labor movement to a chapter of the past in history books.

What?s remarkable is the response of an ?inside the beltway? wing of liberalism to this one-sided ?class warfare.? A particularly salient example in this regard is Matt Yglesias, a fellow at the Center for American Progress and an increasingly prominent liberal pundit on political talk shows and op-ed pages. Yglesias writes a widely read and influential blog at Think Progress. On the hot issues of the day, from the smearing of Shirley Sherrod to the mosque near the World Trade Center site, Yglesias is a consistent and reasonable voice on behalf of progressive values, opposing irrational prejudice and discrimination and supporting pluralism and toleration.

Yet when it comes to the plight of working people, Yglesias seems to lose the very capacity to empathize and understand. He crowned his recent post on the Mott?s strike with the extraordinary title, Nominal Wage Cuts. Note that 70 percent of Mott?s unionized workers earn an hourly wage of no more than $19, which translates to an annual salary of $36,000, the average for private sector workers cited above. Cut that wage by $1.50 an hour, as Dr. Pepper Snapple wants, and you have cut it by just under 8 percent, or approximately $3000 off the annual salary of $36,000. Does one have to actually live on a modest salary of $36,000, struggling to make ends meet for your family, to understand how the loss of $3000 to a Mott?s worker is anything but ?nominal??

The title of Yglesias? post on the Mott?s strike is matched by its language: it is the cold, detached rhetoric of neo-classical economic analyses, with a dense discussion of the fine points of monetary policy that only the wonkiest of wonks will have the will to deconstruct, assuming they possess a great deal of background in the esoterica of the dismal science. But Yglesias? conclusion is plain enough. The corporate stance must be justified: ?exactly as Dr. Pepper Snapple says, the full employment wage for the area has gone down and thus in some sense wages at the plant ?should? decline.?

Would that the Yglesias post on the Mott?s strike was an aberration. Even in the last few months, there is ample evidence that it is reflective of an underlying world view that always finds a reason to side with corporate power in its pursuit of one-sided class warfare against working people. ?Talk of wage stagnation since 1970,? he writes with reference to the fact that real wages for private sector American workers have increased all of 1 percent over the last three decades, ?obscures some major improvements in quality of life driven by technological progress and new goods.? What might those improvements be? All that Yglesias offers by ways of particulars of these improvements is a quote from another author that cites air-conditioning and access to the internet. Yet they provide the basis for his conclusion that ?one striking thing about the anxious American middle class is that in many respects it?s so comfortable.? In his eyes, the real problem for working people is the cost of public services, especially health care and education.

In a similar vein, Yglesias discusses the literature on the crisis of the American middle class [here and here] without even a passing mention of the role of the declining density and power of the private sector American labor movement. No, it is all about the level of education in the work force, even for those many blue collar jobs which do not demand post-secondary education.

On the corporate ?race to the bottom,? none are so blind as those who have eyes, but refuse to see.


Duggan | University of California Press Gardels