The Day After Election Day

Casting a ballot for President Barack Obama on Election Day should not be a dilemma for people on the left.   The problem is what to do on the day after, I am assuming, as seems likely, that the president wins.

What not to do is clear. After the 2008 election, the president urged the social movements to allow the administration to negotiate with Wall Street and the other interests. They complied. Young people returned to school, blacks glowed with pride, and the labor movement tried to trade acquiescence for his support for the Employee Free Choice Act, which never happened.   When movements on the left failed to demand alternative recession policies, the vacant space was taken up by the right, namely the Tea Party. Eventually, in September, 2011, the Occupy Wall Street (OWS) movement inhabited the empty real estate on the left. OWS operated less on politics than society. It was an attempt to create alternatives—democratic forums, alternative financial institutions, and so on. These kinds of endeavors have a long history in the United States, from the creation of utopian communities in the nineteenth century to the formation of communes in the 1960s and 1970s. But their track record as a vehicle for change is poor.  And so it was with OWS.

So, what’s to be done.  Progressive politics are produced by a combination of organization and ideas.  One needs organized people – whether they are striking, demonstrating, petitioning – and good policy alternatives.  The recent Chicago teachers’ strike is a perfect example of this recipe.  The ideas the union promoted have been floating around progressive magazines and blogs for years.  Yet Republican and Democratic politicians ignored them, listened to hedge-fund CEOs and foundations, undermined teachers’ unions, and shifted public resources into private hands.   George Bush’s No Child Left Behind (2001) started the process.  Barack Obama’s Race to the Top (2009) continued it. Obama’s program paid states to use student test scores for teacher evaluations and to lift caps on the number of privately managed charter schools, thus draining resources from public schools. The “reform” agenda, begun in Chicago in 2004, not only failed to improve education, it worsened achievement.  One strike does not produce a revolution.  But the Chicago teachers dealt the “reform agenda” a blow that millions of words never achieved.

The Chicago strike also reveals the barriers to change.  Although the union muted differences with the president and focused squarely on Mayor Rahm Emanuel, an unlovable bully, it was fighting against the president’s agenda as much as the mayor’s.  The strike highlights the conflict within the Democratic party between its constituencies and its funders.  The strike also revealed the new shape of the labor movement.  37 percent of government workers are unionized while compared with 6.9 percent for those in the private sector. What the teachers were able to do may be impossible for other workers.

The first problem is the Democratic party.  Progressives usually support it because the constituencies that matter to them – labor, blacks, etc. – reside there.  The party was never a labor party or a social democratic party but the mixture of interests and ideology have changed over time.  During the economic crises of the 1970s, Democrats lost their economic glue – the mixed economy, full employment, regulation – that had kept the party together.  By the 1990s, it had embraced neoliberalism.  It sought and gained support from the now dominant financial services sector.  The best example of this was the appointment of Goldman Sachs’ Robert Rubin, first as economic adviser and then as Secretary of Treasury in the Clinton administration.  (Rubin had convinced Walter Mondale to embrace deficit reduction in the election of 1984.)  President William Clinton promoted “free trade,” deregulation, market solutions, and welfare reform, which solidified neoliberalism within the party.  The president’s task was made easier by the stunning rise in productivity during the mid-1990s, which had nothing to do with the party’s new ideology or friends.

The Democrats’ current difficulties after the Great Recession stem from the clash between promoting equitable growth and the party’s inheritance from the Clinton years.   It is not surprising that President Obama, who had no experience or interest in economic policy before he took office, listened to men like Clintonites Larry Summers and Timothy Geithner when it came to recession, trade, and banking issues.

So, the party is stuck with a tarnished neoliberalism. That is probably why President Obama’s strategy is to cobble a majority from demographic slices – blacks, Hispanics, women, and youth, recently leavened with a populism generated from Mitt Romney’s elitism. Given the flaws of his opponent and the GOP’s miscalculation that the majority of Americans support Tea Party positions, Obama will most likely win. But such a victory does not provide a road map to fix the nation’s economic problems.

Solutions depend upon the analysis of the problem. Elsewhere, I have argued that the origin of our current crisis was in the 1970s when global gluts of manufactured goods and rising oil prices pressed upon the macroeconomic ways that the U.S. produced prosperity.  While Europe and Japan employed industrial policies – cartelization, government loans, and trade barriers – the U.S. downsized or exited from many tradable industries – steel, auto, machine tools.

The old jobs were replaced by new ones in real estates, retailing, finance, and defense. Virtually all (97.7 percent) new jobs created from 1980 to the Great Recession were in nontradable sectors.  Most of these jobs paid less than the old ones, so inequality rose.  From 1980 to 2005, which included the tech boom of the late 1990s, more than 80 percent of total increase in Americans’ income went to the top 1 percent.

That is where finance entered the picture, as its role was to fill the demand gap.   Nations which accumulated dollars from their trade surplus with the U.S. (especially China, Japan, and Germany) bought U.S. securities, which kept interest rates low.  People could borrow to maintain living standards and felt richer than they were as the prices of their housing assets rose.  In short, consumption was maintained by increased national and household debt and asset inflation, instead of wages.

When the public’s willingness to increase its debt load waned as real estate prices fell, consumption, economic activity and employment fell along with it in 2007 and 2008.  There was financial misallocation and regulatory failures, the most common explanations of the crisis.  But the cause was the model of globalization that produced leakage through the trade deficit and outflows of investment and manufacturing jobs offshore.

Initially, President Barack Obama seemed to understand this.  Obama told CNN in September, 2009.  “We can’t go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling anything to them.”  Obama thus rejected the solution to the crisis of the 1970s, the postindustrialism that caused the current crisis. But the president’s deeds did not match his words. He and his advisers acted as if this was a severe, but ordinary recession.  Its Keynesian stimulus did nothing to alter the imbalances that caused the recession.

The recovery is weak.  In 2012, the economy has five million fewer jobs than it did before the recession.  Employment gains so far have been primarily in low wage occupations – retail sales, office clerks, food preparation workers, and stock clerks – nontradables.  They replicate the pattern that led to the recession. From 1999 to 2007, employment growth was concentrated in the bottom third of the skill distribution. And, the future does not look much different. The Bureau of Labor Standards projects that five of the six occupations with the most job growth from 2010 to 2020 will be low wage jobs that require little or no post-high school education

The obvious source for new jobs is the tradable sector. Thus the main avenue to growth must be through reduction of the $800 billion trade deficit.  Reducing it can come from a combination of importing less and exporting more. The U.S. can produce more of what it consumes and export more of what it produces.  Despite talk of companies returning production to the United States, the chronic U.S. trade deficit in manufactured and high tech goods has been rising. The drivers of this deficit are Germany and China.  Both nation’s responses to the Great Recession were export drives (like Germany and Japan in the 1970s), which succeeded.  As the fortunes of these nations show, trade policy matters.

More active responses to nations that manipulate their currency and other important trade issues require American leaders to privilege economic growth over national security issues like Iran’s nuclear policy or North Korea’s bluster.  Increasing the tradable sector will also entail a better tax system, consumption rooted in higher wages not debt, public support of critical industries, and the requirement that companies that sell in the U.S. to also produce here.  Without  new growth policies, the nation faces incomplete recovery, economic stagnation, and low wage employment, conditions that plant seeds for yet another crisis.

Yet, the question remains how to get the parties to embrace new strategies for economic growth.   I come back to the Chicago teachers’ strike. Historically, the labor movement has best tackled issues of jobs and inequality.  But the labor movement may not be prepared to enhance private sector employment. The structural shift away from tradables produced new fissures and a new power structure within the labor movement.  The rise of Andrew Stern, the head of the fastest growing labor union, the Service Employees International Union (SEIU), which organized non-tradable health care, public services, and property services workers, reflected this change.   Stern, John Sweeney, who preceded Stern as president of SEIU before becoming head of the AFL-CIO in 1995, and Gerry McEntee, the head American Federation of State, County, and Municipal Employees (AFSCME) counseled abandoning manufacturing, which could be offshored, and concentrating on the work that could not.  Tensions deepened in the labor movement as Stern and others who dealt in non-tradables (James Hoffa of the Teamsters, John Wilhelm of the Hotel Employees and Restaurant Employees [HERE], and Joseph Hansen of the United Food and Commercial Workers [UFCW]) tried to exert their influence within, then ultimately left, the AFL-CIO in 2005 to form Change to Win.   The new group’s mission “is to unite the 50 million American workers who work in industries that cannot be outsourced or shipped overseas into strong unions that can win them a place in the American middle class.” Stern has subsequently left the labor movement, but the division within the movement lives on.

The new strategy of organizing the nontradables  did not work. First, it did not halt inequality or create middle class workers. Although SEIU organized many government and service workers, its greatest success was in the arc where the AFL-CIO had succeeded – the North Atlantic and Pacific coasts. That it was not more successful in the South and Southwest than the other unions challenges the view that SEIU possessed superior organizing strategies.  Second, the alleged immunity from outsourcing has become fanciful as the boundary between tradable and nontradable became porous.  Third, Change to Win’s abdication of the producing sector of the economy not only limits the scope of the labor movement, but ignores the important role of policy on the structure of the economy and thus the labor movement. It reinforces the notion that the current model of globalization is inevitable and gives up the weapons of social democratic politics and bargaining that can control and shape globalization.

A smaller and divided labor movement is an imperfect vehicle for change. Yet the idea of reviving American production is popular and capable of producing electoral majorities, which is why both candidates talk so much about it.  And, if politics were easy, the U.S. would be in a better position than it is now.

Judith Stein a professor of history at the City College and Graduate Center of the City University of New York.  Her latest book is Pivotal Decade:  How the United States Traded Factories for Finance in the Seventies.