Marxian and Institutional Industrial Relations in the United States Research Paper

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This research paper presents industrial relations (IR)—the study of the capitalist employment relationship, with particular emphasis on employer/worker or “capital-labor” conflict. The field originated a century ago in the United States, maintaining an intellectual tradition and historical experience distinct from IR in other nations. The field was almost a purely American tradition until after World War II, when it was promoted and exported to Europe and developing countries, with U.S. cold war foreign policy an important impetus. The intellectual landscape and character of IR in other nations, with Britain a singular example with its heavy Marxist influence, is completely distinct and beyond the scope of this research paper. Kaufman (2004) provides a useful global history of IR.

Two IR schools of thought are summarized—the original, institutional tradition of industrial relations (or ILE/IR for institutional labor economics/industrial relations) and Marxian-derived modern political economy, which, drawing on the work of historians of U.S. labor and basic Marxian thought about class relations, has a competing interpretation of both the employment relationship and class conflict. Both schools provide an interpretation of U.S. labor relations’ history and a policy agenda for solutions to employment relationship problems.

It is important to note that institutional and Marxian analyses share important conceptual ground. They are both heterodox theories (i.e., they are outside of the post-1950s Anglo-American neoclassical mainstream). Both emphasize the social determination of human beings’ consciousness and norms of economic behavior (i.e., as opposed to seeing people as individual maximizing agents with preferences given and prior to any social influences), with institutions and power fundamentally shaping individual behavior and group economic outcomes. Most important, they share a belief that the default “market” situation in a “free” labor market is one of unequal bargaining power of capital over labor, an inequality that provokes conflict. They differ on understanding the nature and sources of power, especially in their interpretations of class conflict and of appropriate policy. This will all be explored in detail below.

Finally, this research paper presents IR’s historical background. Class conflict is a historical phenomenon, with ebbs and flows and patterns of evolution and devolution. The origins of the field, the late coming of radical economic theory to the stage, and even a grasp of contemporary employment relations questions, in the view of the field, can be understood only historically. So, to situate our comparative analysis of institutional and Marxian schools of IR theory, we begin with the origins of IR in the industrial conflict that grew out of the American Industrial Revolution. Comparisons of the ILE/IR and Marxian views of the employment relationship, IR policy, understanding the decline of labor in the late twentieth century, and the future direction of the field follow this section.

Capitalism and the Labor Question in the United States

It is widely understood by labor experts that industrial revolutions—the rise of a specifically capitalist system based on wage labor—create a brew of social and economic conditions that provoke labor conflict (see Cowie, 1999; Dunlop, Kerr, Harbison, & Myers, 1960; Marx, 1977). The U.S. Industrial Revolution began in textiles in the early nineteenth century and gained full force after the Civil War when a new national railroad system sparked the rapid growth of a national market.

By the 1880s, the strongest force in the lives of the quickly growing U.S. industrial working class was their employer. Workers employed by large and small industrial employers who faced fierce competition in a national market—the world’s largest—experienced harsh conditions, including low wages, long hours, management authoritarianism, and a lack of civil liberties in industrial communities. Early institutional thinkers such as Richard Ely and John R. Commons began to label these collectively as labor problems (Kaufman, 1993). As in all industrializing societies, American workers began rebelling, forming oppositional movements with both militancy (strikes, organized restriction of output, etc.) and radicalism (various ideologies of revolution within the labor movement) that were a threat to both the ability of capitalists to earn a profit and a potential long-run threat to capitalism itself. In turn, extreme hours, workplace exploitation, and chronic unemployment afflicted and provoked workers to organize and rebel.

As early as the 1870s, American workers created unions, joining in large numbers, in order to improve their chances of reducing hours (specifically the 8-hour day), gain fairness in the workplace and in their communities, and increase wages above meager levels. National railroad strikes in 1877 and 1894; nationwide marches and protests by workers on May 1, 1886, for the 8-hour day; and the famed Homestead steel strike in 1892 all seized the nation s attention. All were brutally repressed by state and federal troops. By the 1910s, the United States experienced an unprecedented, violence-filled strike wave that spread beyond “native” workers to include southern and eastern European immigrants, the growth of socialist politics and anarchist unionism, and acts of violence and terrorism that were seen as threatening prosperity and even social stability.

These phenomena, and the desire to bring about a progressive resolution to them, came to be known as the labor question. As President Woodrow Wilson framed it in 1919, the labor question was as follows:

How are the men and women who do the daily labor of the world to obtain progressive improvement in the conditions of their labor, to be made happier, and to be better served by the communities and industries which their labor sustains and advances? (quoted in Lichtenstein, 2002, p. 4)

The labor question was highly political because of the degree of social conflict and strongly opposing ideologies associated with the different sides. The first choice of most employers was to use the government as an instrument of repression, along with spies and private militias. For instance, state militias were brought in to suppress strikes at least 495 times between 1880 and 1900, and by the 1930s, more than 100,000 were employed in union-busting “detective” agencies (Green, 1998; Laurie, 1989). This lasted until a sea change in government involvement and societal attitudes attenuated widespread use of overt repression of labor militancy roughly in 1940.

Political leaders, journalists, labor activists, and some business leaders responded to accelerating labor conflict in the 1910s by searching for labor problem solutions that addressed root causes and did not further inflame labor strife by breaking unions. Among experts, public leaders, and the union movement itself, the term industrial democracy became the term that described these alternatives to business repression and overt class warfare. Three visions of industrial democracy emerged during this era, becoming the contending models for IR policy for much of the twentieth century.

New employment relations experts defined two of these views—a “personnel management” (PM) tradition and the ILE/IR tradition (Jacoby, 1997; Kaufman, 1993; Kochan, Katz, & McKersie, 1986). These were clear and contending professionally driven visions and practices of how to bring about labor peace—an anti-union, PM tradition and the pro-union (though antiradical unionism) ILE/IR tradition. IR experts sought to enlist the state to support moderate “business unionism” (defined below) and create a regulatory role for IR experts themselves, while the PM group saw itself as a component of management. Personnel management was continually in direct competition with the authoritarian approach favored by most employers, while ILE/IR sought national government policies.

Within the labor movement itself, there was a split between proponents of business unionism and radicals. The American Federation of Labor (AFL) was the dominant national union institution. Founded in 1886, it was a federation composed of existing craft-based trade unions. The AFL s predominance was unchallenged until the formation of the Congress of Industrial Organizations (CIO) in the mid-1930s. The AFL advocated business unionism, which sought to have employees collectively bargain directly with employers for improvements (via compromises embodied in contracts) in wages and working conditions. The AFL did not seek a major role for government in industrial relations other than to stop employers and courts from repressing their rights to associate and bargain. The AFL position was consistent with and connected to the IR school s vision of employment relations. A third vision of industrial democracy came from a growing radical wing of the 1910s labor movement that embraced both socialist politics and a more militant unionism favoring strikes and direct action.

While use of the phrase industrial democracy eroded in the coming decades, the basic categories of employment relations policies continued throughout the rest of the century, with some more ascendant in certain periods than others. Radical unionism/socialist politics persisted until its full repression in the 1940s, and the “non”-solution of employer autocracy remained the default practice for a majority of employers.

The U.S. federal government, needing employment stability during World War I, briefly instituted a version of the IR solution during 1917 and 1918. It was quickly dismantled after the war, and labor unions, which had grown rapidly, were just as quickly crushed. During the 1920s, large- and medium-sized U.S. employers hired PM experts widely to enact “corporate welfarism.” Employers with as many as 3 million employees came under the aegis of “welfare” policies that included new disability and pension benefits, improved management practices, and “company” (i.e., employer created and dominated) unions (Brody, 1993; Jacoby, 1997).

The Great Depression brought about the ascendancy of the ILE/IR expert group, as the policies offered via the PM model collapsed in the economic crisis, leaving only employer autocracy, which worsened the depression by reducing wages and buying power. The IR model was embraced and sponsored by key congressional Democrats and the Roosevelt administration. They were its designers, rank-and-file bureaucrats, scholarly analysts, and public relations champions. ILE/IR members were both academics and political reformers devoted to a centrist solution to the problem of class conflict. In the 1930s, Democrats embraced ILE/IR proposals as a major component of liberal economic policy. IR policy came to the fore because of the peculiar and deep crisis of the 1930s (Kaufman, 1993; Lichtenstein, 2002). Crucially, IR policy offered a solution to the depression itself because it would lead to rising industrial wages and thus support greater mass consumption (i.e., effective aggregate demand) that would in turn revive the economy. It thus was a pillar of what came to be Keynesian macroeconomic policy. Also, IR policy offered an alternative to the twin “evils” of socialism and class warfare.

Two signal and roughly coterminous events marked the mid-1930s: the passage of the National Labor Relations Act (NLRA) in 1935 and the rise of the CIO, a federation of unions composed of populist and left-wing industrial unions. Industrial connotes a union composed of all workers in a workplace without regard to occupation or “trade.” The AFL is a federation composed of trade unions—that is, with membership based principally on occupation (e.g., carpenters, machinists, typographers). The AFL bitterly fought industrial unionism from its inception through the 1930s (Dubofsky, 1996). CIO unions organized for the first time the preponderance of workers in twentieth-century mass production industries (steel, auto, rubber, electrical workers, etc.). The NLRA, designed by ILE/IR experts, legalized unions and created a government-sponsored election process to allow workers to elect for union representation, a requirement that capital and labor bargain collectively “in good faith,” and, most important, proscription of traditional employer “unfair labor practices” (e.g., firing and blacklisting prounion employees) that had previously blocked widespread unionization. New organization and the support of the federal government, combined with heavy pressure by government on recalcitrant industrial employers during World War II, sparked a fivefold expansion of union membership from 1933 to 1945. This ushered in the “New Deal IR system.” After thriving for decades, the New Deal system went into an abrupt decline in the 1980s. The New Deal system provided dramatic increases in working-class living standards (however, with many groups left out— southern and some rural workers, African Americans, and women workers). Its end in the period around 1980 reversed this progress.

The Institutional IR School: Peculiarities of the Labor Market, Unequal Bargaining Power, and Capital-Labor Conflict

IR began as a subset of the institutional economics field, focused on the question of capital-labor conflict and compromise solutions to that conflict. Institutional economists developing IR theory also studied the need for social insurance and sought to understand the institutional forces shaping the labor market.

Beginning with Richard Ely and especially with the work of John R. Commons and his students in the Wisconsin school in the late nineteenth and early twentieth centuries, an evolutionary line of descent can be traced through a second generation of scholar/policy makers from the 1930s to the 1990s, led by John Dunlop and Clark Kerr, Richard Lester, and Arthur Ross. This group was somewhat friendlier to orthodox (neoclassical) economics. A third generation is active and influential today (including Kate Bronfenbrenner, Michael Piore, Richard Freeman, Eileen Applebaum, Thomas Kochan, and Bruce Kaufman). Some in this third generation differed from the second in their greater concern for problems of urban poverty, racism, and sexism.

Richard Ely began with a view of labor markets that differed radically from the assumption of “free” labor markets found in neoclassical economics. Ely concluded that capitalist labor markets suffered three “peculiarities” that disadvantage workers vis-à-vis employers: a lack of bargaining power, management’s authoritarian treatment of workers, and economic insecurity—that is, frequent unemployment (Kaufman, 1993, pp. 32-33). If labor in capitalism is “free” (i.e., free to quit a bad employer and find another, creating a competition among employers that should redress such problems), how could employers have such an upper hand? The premise is significant, chronic unemployment. Beatrice Webb (1901) provides a clear statement of the sources of this imbalance that defines why capitalist labor markets were then and now are slanted in employers’ favor:

If the capitalist refuses to accept the workman’s terms, he will, no doubt, suffer some inconvenience as an employer. … But, meanwhile, he goes on eating and drinking, his wife and family go on living, just as before. His physical comfort is not affected: he can afford to wait until the labourer comes back in a humble frame of mind. And this is just what the labourer must presently do. For he, meanwhile, has lost his day. His very subsistence depends on his promptly coming to an agreement. If he stands out, he has no money to meet his weekly rent, or to buy food for his family. If he is obstinate, consumption of his little hoard, or the pawning of his furniture, may put off the catastrophe; but sooner or later slow starvation forces him to come to terms. And since the success in the haggling of the market is largely determined by the relative eagerness of the parties to come to terms—especially if this eagerness cannot be hidden—it is now agreed, even on this ground alone, “that manual labourers as a class are at a disadvantage in bargaining.”

In turn, these resulted in labor problems. In distinction to the “labor question,” labor problems included workers’ low wages, insecure employment/income, and harsh treatment by supervisors. Employers faced the wake of workers’ self-protective reactions, ranging from lost output due to workers’ restriction of output and lost productivity from strikes. Society suffered because of lost production but mostly the disruption of violent strikes and nationwide strike waves (Kaufman, 1993).

Finally, conflict was inevitable in the face of such harsh conditions. The militancy and radicalism of industrial nations’ workers seeking to redress exploitation and insecurity was well established by the late 1800s. As discussed below, this led to a policy vision focused on using the state and harnessing an invigorated, state-supported, conservative trade unionism to bring about labor peace through a government-supported process of compromise.

Marxian IR: Marx and Capitalist Employment Relationship

Marx developed a theory of the inherent presence of class conflict in capitalist employment relations. Radical and Marxian analyses of the U.S. thrived until the early cold war period, when McCarthyist repression of radical intellectuals reduced radicalism to a marginal existence. The changed political environment of the 1960s permitted a revival. Scholars such as Samuel Bowles, James Crotty, Heidi Hartman, and Stephen Resnick and Richard Wolff led a rebirth around 1970. Marxian labor analysis grew out of the influential work of Harry Braverman (1974) and Gordon, Edwards, and Reich (1982).

Marx begins with what he sees as the historic fact of classes. Capitalism’s class system is seen as the product of two related historic processes: “proletarianization” and primitive accumulation (Marx, 1977, pp. 873-930). Proletarians, capitalism’s working class, are formed out of former serfs, independent “yeoman,” or peasant agricultural workers who were forcibly separated from their access to land and dispossessed in European societies. Paupers moved to cities and sought waged employment. These proletarians were newly “free” to sell their labor time (for Marx, a person’s “labor-power”) and were “freed from” access to the land and resources needed to produce their means to survive. They are thus both “free” to participate in labor markets and, at the same time, utterly dependent on them. In turn, European aristocratic classes participated in global plunder and exploitation of slave-produced commodities such as sugar, as well as the slave trade, to produce a merchant class with the money to hire proletarians and begin the process of manufacturing for markets for a profit (Howe, 2002). Capitalists have exclusive control and access to physical capital (which Marx termed the “means of production”) and money that can provide workers with a means of buying goods and services—thus being able to survive. Workers are compelled under these circumstances to work for a wage and accept giving over their time to the control of capitalists. The drive for profit by capital, as well as the control they have over workers’ lives, results in exploitation and, in the absence of worker resistance or government limitations, tremendous excesses such as child labor and extremes of workdays (pushing physical limits of 14 to 18 hours per day) and working conditions that inevitably shortened life spans.

Marx published Volume I of Capital 20 years prior to Ely’s founding of U.S. institutional economics, a history consistently ignored by IR scholars in the United States. Yet, Marx’s analysis identified Ely’s “three peculiarities of the labor market” and went beyond Ely to highlight workers’ exploitation.

For Marx, the wage is set just like any other value, at the cost of the reproduction of the thing being sold. Thus, in Chapter 6 of Capital, Volume 1, Marx presumes that the labor market is fair in the precise sense that the wage is equal to what it costs to clothe, feed, house, and transport the worker and provide for the next generation at a socially and customarily determined standard of living. It is not in the labor market but inside the employment relationship that one must go to understand processes of conflict and cooperation.

What the capitalist wants to buy is labor (i.e., work), but what he or she can buy is labor time. For radical economists, this is Marx’s famous “labor from laborpower” distinction. Capitalists buy from workers a commodity: the human ability to apply muscle and brain power. The cost of this commodity is set by its labor time necessary to produce (Marx used a “labor time” theory of commodities’ value or price). Marx argued that a given capitalist society would have a socially determined  (i.e., by norms established historically and often through class struggle) combination of “wage goods.” The labor time required to produce this “wage bundle” (i.e., what is necessary to socially reproduce the worker and the next generation of workers) would define the wage as the equivalent of “necessary labor time” (i.e., keeping a workforce alive and able to continue economic production). Capitalists earn a profit by getting more labor time from a worker than the wage. Labor, unlike the fixed cost of labor-power, is elastic and can be extended or intensified to increase labor time embodied in newly produced commodities beyond the cost of the wage, and this constitutes “surplus labor time.” Surplus labor time is the source of profit (i.e., surplus value).

The labor from labor-power distinction causes two kinds of conflict. First is conflict over the length of the working day. If capitalists can lengthen the working day without increasing the (daily) wage, more of the output returns to them: that is, surplus labor time and the surplus product (i.e., the labor time and production above “necessary labor time”). Competition drives capitalists to push workers, in the extreme, to work arduous hours—up to and past 80 hours a week, to the point where workers’ health is damaged and lives are shortened. Indeed, the beginning of the modern labor movement can be found in the struggle to limit the working day, first for women and children and then for all workers.

A second area of conflict is reduction in necessary labor time, or what Marx called relative surplus value. Here, the object is to reduce necessary labor time through increased productivity. Individual capitalists have an incentive to pursue this, in order to increase profits at the expense of competitors through cost advantages. Technical changes that increase the pace of production or allow skilled or high-status workers to be replaced by unskilled or low-status workers, production speedup that gets the worker to work harder, and moving production to regions with a lower standard of living all increase the relative part of the product that accrues to the capitalist. At the center of this strategy is intensification of the work place beyond human limits and de-skilling of work that destroys the intrinsic value of skilled work. Both provoke worker resistance and rebellion.

While workers may struggle (sometimes successfully) against these two forms of exploitation, their success is limited by a number of factors, including the problem of coordinating individual action for mutual gain and the existence of the reserve armies of the unemployed who are ready to take employment under lower standards than incumbent workers.

Marx illustrated his ideas in a detailed case study of Britain’s Industrial Revolution, with its struggle over the length of the working day, the rise of mass production, and the intense competition that makes capitalism both technically progressive but also intensely exploitative. British capitalists, seeking an advantage in competition, are shown pushing the working day past all physical and moral limits, including cruelties that dramatically shorten the lives of workers and rob children of a meaningful childhood. Marx (1977) argues that the incentive for every capitalist to use up labor-power without worrying about there being a tragedy of the commons can be limited only by society itself placing absolute constraints on the capitalist:

Apres moi le deluge! is the watchword of every capitalist and of every capitalist nation. Capital therefore takes no account of the health and the length of life of the worker, unless society forces him to do so.

Workers, seeking to preserve their “property” (themselves) and their humanity, demand a working day that does not physically destroy them and leaves time for cultivation of their physical, intellectual, and cultural powers. Similarly, an inherent conflict exists over the intensity of labor, particularly once society establishes some norms on the extent of the working day. Capitalists divide the labor process, create single-task jobs (the “detail worker”), and generally impoverish the work process, increase its speed, and, by using specialized machinery (in what subsequently came to be known as “mass production”), create a super-productive work process that at the same time degrades work and the worker. As the “new” labor history and labor process theory has shown in recent decades, U.S. workers have indeed periodically and frequently rebelled over the length of the working day and over “control” in the labor process (see, e.g., Braverman, 1974; Montgomery, 1980; for a careful review of 30 years of “labor process” work provoked by Braverman’s book, see Thompson & Newsome, 2004).

The institutional and Marxist traditions thus share the common assumption that class conflict under capitalism is to be expected. Where they depart ways is on what is the appropriate resolution of this conflict. For institutionalists, class conflict is seen as a threat to social order, a “primitive democracy” to be channeled and ultimately repressed (S. Webb & Webb, 1897). Marx proposed a different notion.

Marx infamously predicted in the Communist Manifesto (coauthored with F. Engels) a worker-led revolution that never materialized (Tucker, 1978, pp. 473-500). Marx also argued that the working class could, through waging class conflict, improve its position within an existing economic system without overthrowing it. He illustrated this idea by describing the British working class’s victorious struggle to shorten the working day and reduce child labor:

It will be easily understood that after the factory magnates had resigned themselves and submitted to the inevitable, capital’s power of resistance gradually weakened, while at the same time the working class’s power of attack grew with the number of its allies in those social layers not directly interested in the question. Hence the comparatively rapid progress since 1860. (Marx, 1977, pp. 408-409)

Marx (and Engels) stressed that even within the existing structure of capitalism, the state could be pressed by circumstance into opposition to the interests of capitalists. Friedrich Engels, Marx’s collaborator, makes this point in his famous Letter to Bloch, citing the many occasions in which they made this point:

If Barth therefore supposes that we deny any and every reaction of the political, etc., reflexes of the economic movement upon the movement itself, he is simply tilting at windmills. He has only got to look at Marx’s Eighteenth Brumaire, which deals almost exclusively with the particular part played by political struggles and events; of course, within their general dependence upon economic conditions. Or Capital, the section on the working day, for instance, where legislation, which is surely a political act, has such a trenchant effect. (Tucker, 1978, p. 765)

A politically empowered working-class labor movement thus could and has shaped capitalist societies to improve treatment of the working class. Marx’s conclusion about the struggle over the length of the working day is instructive on “reformist” possibilities within capitalism:

For “protection” against the serpent of their agonies, the workers have to put their heads together and, as a class, compel the passing of a law, an all-powerful social barrier by which they can be prevented from selling themselves and their families into slavery and death by voluntary contract with capital. (Marx, 1977, p. 416)

The moments when the state leans against the interests—espoused and practical—of the capitalist class are restricted to those conjunctures when a combination of “pressure from below” and a host of other circumstances— political, economic, and ideological—combine to produce a change in the state that reacts back on the economy. Marx, despite his infamy as a predictor of the necessity and inevitability of the revolutionary demise of capitalism provoked by a combination of impoverishment of all workers and irresolvable economic crisis, had, with Engels, a specific vision of reform within capitalism that could better the fortunes of the working class.

ILE/IR: A Program for Labor Peace and an End to Labor Problems

ILE/IR scholars defined a clear paradox: how to equalize the bargaining power of labor (thus curbing the “peculiarities of the labor market” and especially creating equal bargaining power between employer and worker) and not, as a consequence, provoke an empowered working class into more militancy and creating even more capital-labor conflict. ILE/IR offered a reform vision that, if implemented successfully, would resolve this paradox, bringing stability and steady economic growth. It called for “corporatism,” a system where employer and worker representatives work together through a collective bargaining process to produce capital-labor stability by means of compromise. Just as important, the ILE/IR school promoted the nonrevolutionary business unionism of the AFL as the preferred mode of making corporatism work. The AFL and IR policy together provide an alternative to radicalism, defeating radicalism by making it irrelevant.

Kaufman (1993) summarizes this ethos in describing the ILE/IR corporatist view of “the efficacy of conflict in the employment relationship”:

From the point of view of the institutionalists, a certain amount of conflict is the normal by-product of the employment relationship and, indeed, frequently plays a constructive role to the extent that it vents repressed frustrations, resentments, and grievances. Good industrial relations, therefore, is not synonymous with an absence of conflict, for often this indicates complete domination of the relationship by the employer. Rather, good industrial relations requires equalizing the bargaining power of labor and capital both inside and outside the plant and letting them voluntarily negotiate a mutually satisfactory outcome. The watchword of the institutionalists is compromise.

Such compromise is imagined to be at least partly dependent on the work of state-supported mediation experts. Indeed, it is important to note how far this vision differs from a free-market view of the economy. Institutions—including unions and employers with bureaucratic representatives and working within parameters set, enforced, and often directly supported by the state—structure the process of striking a bargain, rather than “free,” individual agents in a market.

More broadly, about the purpose and result of creating such a state machinery of IR experts, Commons famously said, “In dealing with the momentous conflict of ‘capital and labor’ … I was trying … to save Wisconsin and the nation from politics, socialism, or anarchy” (cited in Ramirez, 1978, p. 188). In other words, IR experts were to provide not just workplace stability but also political stability—making labor revolt and anticapitalist working-class political expressions less likely. In its place, Commons advocated for a system in which “neutral” experts provided technically determined compromises between the conflicting interests of capital and labor.

IR scholars have thus had as their goal the careful management of class struggle, with a fundamental aim of limiting (though not suppressing) conflict and encouraging nonsocialist political expression by workers through nonpartisan, nonmilitant unions. In turn, their role as experts has been to continuously study the underlying “problems” that might cause an unstable landscape—notably through case studies of industrial relations in specific industries— and get directly involved as mediators and experts, to ensure that the problems will not get out of hand and that compromises are struck. IR experts saw, for the New Deal IR period, what Kaufman terms institutionalization in the creation of IR institutes with the creation of graduate programs at the top state universities throughout all regions in the United States except the South and also in federal and state mediation bodies.

It appeared that ILE/IR policy worked in the 1950s and 1960s. The mass strike activity of the 1930s/1940s abated. The U.S. economy experienced a combination of unparalleled income “compression” (i.e., greater equality) that saw industrial workers become middle class and enjoy steady and powerful income growth, as well as improvements, including fewer hours worked and an expanded private sector safety net provided through union contracts. The ILE/IR field itself appraised this as the success of expertise over a technical problem with capitalism and projected that the stability of the New Deal system would persist indefinitely. However, through the exercise of capitalist class power, this system came to an abrupt end in the 1980s.

Marxian Political Economy: Class Strength and Workers’ Improvement Without Revolution

Marxian analysis of U.S. employment relations employs a different analytical framework. It comes to several different conclusions that contrast and even contradict the ILR/IR school:

  • Not only is class conflict inevitable, but it can be a good thing.
  • A stronger labor movement tends to produce better social outcomes, including lower income inequality, less poverty, shorter weekly and annual work hours, and more comprehensive social insurance, without an overthrow of the capitalist system.
  • Historical evidence supports these conclusions.

It has been the political quest of working-class parties in advanced capitalist countries to accomplish that very goal of improving the quality of life for workers and for society, seeking to humanize capitalism by minimizing economic insecurity and discrimination, reducing/eliminating poverty, implementing safety and health and labor standards (e.g., limiting hours worked, eliminating child labor), and providing public goods (e.g., education, child care, public space). The labor movements of various countries have also sought regulatory and union agreements that grant expanded workers’ rights and decreased property rights, such as legal guarantees over right to job, workplace decision-making power, and having a significant stake in corporate governance.

Thus, Marx’s emphasis on relative class strength as a predictor of social outcomes, as well as the possibility of a politically strong working class to enlist social allies (e.g., middle classes) and the state, has resonance with twentieth-century historical experience. Succinctly, the quality of economic and social life for a working class in a particular nation is a reflection of the strength and degree of past and current success of its labor movement. Child care, retirement, health care, social security, length of the working week, and weeks of paid vacations are better for workers in Sweden, Germany, or France than in the United States. Why? Because over the second half of the twentieth century, their labor movements succeeded economically and politically where the U.S. labor movement either failed or won only modest improvements (and, as noted, isolated only to certain regions) that a now far weaker labor movement has been unable to protect. There is of course no reason to believe that these improvements will lead to revolutionary change, but such improvements are, we would argue, good in and of themselves. Added to Marx’s historical example of the 10-hour day, this offers compelling evidence that a politically and economically stronger working class, as well as class conflict emanating from it, produces positive outcomes for the working class. When two valid and opposite claims over the course of the employment relationship meet one another, as Marx put it, in the end, force decides.

To reiterate, a politically strong working class can, with allies and supportive historical circumstances, get the state to “lean against” the interests of the capitalist class. This happened in the United States in 1934-1937.

The Case of 1934-1947

The Great Depression reignited working-class insurgency after more than a decade of dormancy. By 1934, workers, emboldened by Roosevelt’s verbal support for unions, mobilized to form unions and conducted vigorous strikes, including three “general” (community-wide, multiemployer) strikes (Green, 1998; Lichtenstein, 2002; Lynd, 1996). Initially, Roosevelt’s National Recovery Act implemented in 1933 and 1934 large businesses’ proposal for solving the depression. This consisted of government-sponsored cartelization—businesses openly cooperating in setting prices and allocating markets. This approach did not address the underlying problem of inadequate aggregate spending and utterly failed. In combination with the public’s already low esteem for big business—the American public held business responsible for causing the Great Depression in the first place—this failure left a political vacuum seized upon by two allied groups: the broad working-class insurgency played out in streets and factories across the country, and liberal political leaders who sought to impose ILE/IR policies such as the NLRA and a broad program of social security. This magnified the already existing loss of business legitimacy that the Great Depression created, opening the way for a coalition of congressional and executive branch leaders, representing the northern urban, working-class, union-based movement, to seize control of national policy making.

This permitted a onetime imposition of values and policies alien to U.S. capitalists. The loss of capital’s credibility and power was unprecedented and short-lived, but it ushered in dramatic changes—an expanded welfare state and widespread unionization—that lived on for decades (Finegold & Skocpol, 1984; Lichtenstein, 2002). The results: a New Deal state that imposed state-sponsored support for an IR collective bargaining-based system (under the 1935 Wagner/NLRA Act), and a tax-supported national social welfare system, including Social Security and unemployment insurance, along with significant labor market regulation (especially the 1938 Fair Labor Standards Act). During this period, industrial unionism caught fire, gaining special momentum after Roosevelt’s 1936 reelection; the new political environment contributed in part to high profile union victories at General Motors and U.S. Steel in early 1937. While interrupted briefly by the late 1930s recession, the momentum toward rapid unionization resumed during World War II and continued into the 1950s.

In sum, this period illustrates a similar moment of dramatic, pro-working-class reform, supported and implemented to a significant degree by a state willing to act against capital’s economic and political interests. Working-class political strength was unparalleled and briefly even unchallenged by capital. The result was long-lasting improvements for the working class.

This observation comes with an important qualification. Historical scholarship has a consensus view that African Americans, southern workers in general, and women were largely left out of this progress. At the level of policy (e.g., Social Security and unemployment coverage, as well as wages and benefits), this was most certainly true. Many in these groups were trapped in a “secondary” labor market of low wages and benefits with little opportunity for income security or advancement (Gordon et al., 1982). There are also notable exceptions to this partial progress (Minchin, 2001). It is also the case that new activism in the 1960s and 1970s served to expand inclusion of some women and people of color in some of these benefits, but even then incompletely (Kessler-Harris, 2007; Lichtenstein, 2002).

ILE/IR: Stagnating New Deal System Collapses, Dynamic Non-Union Alternatives Rise

Recently, ILE/IR scholars have reinterpreted twentieth-century U.S. IR history, focusing on explaining why the dominant unionized/corporatist New Deal system lasting from the 1930s through the early 1970s went into an abrupt and lethal decline (Jacoby, 1997; Kaufman, 1993; Kochan et al., 1986). They attribute the decline to the vitality of employer-dominated “welfare capitalism” throughout the era of the New Deal, which escaped the attention of earlier IR scholars. The unexpected vulnerability of unionized employers to rapid economic change from the 1970s led to a new dominant IR system based on “progressive” but union-free employers.

How could a strong and durable institutional system be taken apart at all, much less so quickly? First, 1920s welfare capitalism survived (and adapted) in the 1940s-1970s period, becoming more sophisticated, and gained strength and momentum. Non-union employers also led capitalist political activism against the New Deal state and unions. For instance, the 1948 Taft-Hartley Act created vast loopholes in labor law that allowed employers to defeat new union organizing drives. In retrospect, the true apogee of union strength was really in the 1950s. From then on, dynamism in IR policy centered on the ever-expanding tool set of welfare capitalism—the latest version of the “PM tradition” now called human resource management (HRM) that contributed to the vitality of non-union companies. Even unionized companies adopted HRM practices in efforts to weaken union influence (Phillips-Fein, 2009). Besides high wages and generous benefit packages—aimed to meet the standard set by the strongest union contracts—the HRM movement sought to realize the PM vision of a humane management by surveying workers to gain a grasp of their concerns, training frontline supervisors to be more positive, and creating at least an appearance of due process through employee handbooks and “open-door” policies. As we discuss below, the velvet glove of HRM shielded an iron fist that crushed any movements toward independence through union organizing. Union busting, capital flight to non-union states or offshore locals, and “progressive management” were part of one package.

When rapid globalization met the macro crisis of 19791983, unionized business abandoned its cooperative relationship with unions, getting givebacks, deindustrializing much of the Midwest, and, with perhaps the singular exception of auto, shifting more aggressively to non-union operations in Southern and Great Plains rural towns or “offshore” to developing countries with low wages and labor standards. Another factor was simple contraction in the face of loss of markets to foreign competition, where companies ceded markets rather than investing in new technology and capital, instead diverting retained earnings into conglomerate purchases, as was the case in steel. Private sector union density (the unionized percentage of workers) fell by two thirds over the last three decades of the twentieth century, standing now below 8%.

A Marxian View: Changing the Terms of Class Power, American Employer Exceptionalism

To reiterate, the central concept in a Marxian interpretation of industrial relations is relative class power. Here, we explain the crisis and implosion of the New Deal IR system as the result of capital’s regaining an upper hand from the 1970s on. The outlines of this story are well known: increasing globalization, transportation and communications technology that make it virtually costless to move production offshore, and the impetus to do so by the allure and opportunity of vast armies of cheap labor abroad. Missing from this standard story is a clear recognition that the U.S. decline in unionization and speed and extent of industrialization are unique—not found elsewhere in western and northern European nations or Japan. Our own view of American exceptionalism is that the formation and activism (agency, for short) of large industrial U.S. employers has been a pivotal component driving the United States’ unique IR characteristics: the weakness of the labor left, the rapid destruction of unionization and collective bargaining in dominant industries, and the decline of U.S. labor standards and accompanying growth of inequality since the 1970s (Hillard & Mclntyre, 2009a).

We begin with U.S. labor history from the 1880s to the 1920s. U.S. labor was arguably at that time as radical as European labor. But the ruthless use of force by U.S. capitalists and the weakness of the government in refereeing industrial relations (indeed, typically siding with employers by deploying troops) limited the success of the labor movement and cut off radicalism as a viable alternative to business unionism. Individual American employers had even greater relative incentive to repress labor because unionizing one company at a time put them at a competitive disadvantage; European unions had greater success in organizing whole industries (Jacoby, 1991; Wilentz, 1984).

American capitalist class exceptionalism thus traces its roots to the massive defeat of U.S. labor and popular organizations in the pre-New Deal period. Scholars comparing the labor histories of Europe and the United States conclude that U.S. employers went drastically farther and were singularly dedicated in their efforts to crush unions rather than accommodate them (Jacoby, 1991; Thelan, 2001). This exceptional commitment to crush labor was not fundamentally altered when the Great Depression and New Deal forced American capitalists, much against their will, to recognize unions’ legal right to exist. As IR scholars cited above note, the New Deal period was one of vitality of non-union “welfare” employers, who sought to eliminate, not accommodate, the New Deal. Leading nonunion employers, large and medium sized, led national efforts to weaken and repeal labor law and pioneered union-busting tactics (Jacoby, 1997). Modest victories turned into a collective rout when American capitalists succeeded in virtually wiping out private sector unions. The rout began in the early 1980s, when President Reagan fired 11,000 federally employed and unionized air traffic controllers on strike and permanently replaced them. As already unionized manufacturing industries contracted rapidly, depleting the numbers of existing workers with union representation, it became nearly impossible to unionize the growing service industries as employers learned, with the help of a huge industry of union-busting lawyers and consultants, that they could bend or violate labor law with impunity and prevent union campaigns from succeeding in three out of four cases, down from a more than 50% success rate in the 1940s-1960s (Freeman & Medoff, 1984; Logan, 2002). As noted below, private sector union representation in the United States has plummeted from more than 30% to single digits since 2000.

Capitalist class exceptionalism meant that free market or “neoliberal ideas” found fertile ground in the United States in the post-1970s. How exceptional is the United States? Recent work in comparative political economy places the United States in a group of “liberal market economies” that rely mostly on stock markets rather than institutional relationships in finance, give workers little in the way of employment protection, and have had high levels of inequality and relatively higher employment growth. Even within this group—all English-speaking countries— the United States stands out with much lower rates of union density, collective bargaining coverage, social spending, employment protection, family support, and poverty reduction through state redistribution, as well as much more income inequality (Pontusson, 2004). Thus, the loss of working-class economic and political strength has translated into worsened economic and social outcomes for the U.S. working class. As the Economic Policy Institute’s excellent biannual publication, The State of Working America, has demonstrated, beginning in 1973 and accelerating in the 1980s and 1990s, median hourly wages have actually declined, low-wage jobs have proliferated, private employer-based retirement and health insurance has rapidly eroded, and annual hours worked have increased (the United States being the only advanced industrial nation that has not seen a decline of hundreds of hours annually worked), all at the same time that individual worker productivity has increased by approximately 80%. In Marxian terms, this would be an increase in exploitation sparked by the loss of working-class political and economic strength (Mishel, Bernstein, & Allegretto, 2005).

What made this possible is that the U.S. capitalist/ employer class engaged in a process of “class formation” (i.e., becoming more united and stronger politically), and it built a political alliance with white working-class conservatives in rebellion against liberalism to place pro-business politicians and policies into government, symbolized by the “Reagan revolution,” although it started under Democrats in the 1970s. In impressive fashion, when the opportunity for a comeback presented itself in the 1970s, U.S. capitalists built the institutions and attitudes necessary for action in their collective interest. This process of class formation included the growth of the Chamber of Commerce from 60,000 members in 1972 to more than a quarter million a year later; the movement of the National Association of Manufacturers to Washington, D.C., and the formation of the Business Roundtable, both also in 1972; and the establishment of the ultra-right Heritage Foundation the next year, increased corporate backing for both the conservative American Enterprise Institute and the mainstream National Bureau of Economic Research, and the growing importance of right-wing foundations.

In sum, U.S. capital has maintained a long-run historical strength advantage over the U.S. working class. The New Deal era—1930s to 1970s—was a departure from this advantage because U.S. working-class strength was distinctly and unusually strong. Rapid erosion of the conditions that supported that strength (lack of international competition, a stable political coalition, etc.) and new opportunities allowed capital’s ongoing efforts to defeat the New Deal IR system and dismantle it to succeed. This in turn left U.S. workers weak and their societal position ever lower, evidenced by the near destruction of private sector unionization, the consequent growth of lower waged work, and a steady weakening of the employer-based private health insurance and pension system (Klein, 2003), and a decline in U.S. labor standards (e.g., longer hours, low wages, lack of benefits).

The Future of “Employment Relations” Study in the United States

Kaufman’s influential 1993 book brought the “crisis” of the ILE/IR field into focus. It was clear that the world had changed. Specifically, the decline of unionized labor meant that the relevance of the field was called into question. Academic IR institutes were losing students and funding and were shutting down. For Kaufman, the only way out was to merge with the PM/HRM tradition, which many IR institutes did. With the decline of private sector unionization, its once influential role in making and implementing federal and state policy has severely diminished.

Despite this decline, IR scholars have continued to produce good scholarship. Emphasis on case studies, defining new issues—especially organizational/workplace redesign— and a frank recognition of previous mistakes, has produced a viable intellectual tradition. Scholarly practitioners have moved in two directions. One group has joined the broader labor studies scholarly community, which recognizes that society’s progress depends on a strong labor movement. This has produced scholarship examining the use and outcome of power in union organizing. They have identified and scrutinized how employers have used legal and illegal tools to make union organizing nearly impossible, while shedding light on how clever service sector unions have overcome these barriers. Hotel workers, janitors, and low-wage health care workers have successfully organized themselves with union support through a “social movement” model. This model enlists workers’ communities and community institutions in pressuring employers to recognize and bargain with workers (Bronfenbrenner, 2009; Clawson, 2003).

The other group of ILE/IR scholars has de-emphasized union strength (though quick to identify the positive role of unions in workplace productivity and implementing change) and turned to the question of workplace reform to improve the “competitiveness” of U.S. corporations. The chief recommendation here is to improve worker “voice” in management-defined “high-performance work systems” (HPWS; e.g., self-managed teams) (Applebaum, Bailey, Berg, & Kalleberg, 2000; Kochan & Osterman, 1994). In essence, these ILE/IR scholars fully joined the PM/HRM tradition in becoming management consultants, with the important caveats that the ILE scholars stressed the relevance if not superiority of implementing these reforms with the cooperation of unions and an emphasis on workers sharing in productivity gains. Regardless, this vein of work peaked in the 1990s. Continued rapid deindustrialization since 2000, widespread implementation of HPWS without gains sharing in service industries, and failure of signal examples such as Saturn Motors have sidelined the HPWS movement.

What of Marxian political economy and IR? Specifically, what are the opportunities for increased working-class political and economic strength in the twenty-first century? One component comes from a “de-centering of labor” (McIntyre & Hillard, 2007, 2009). That means recognizing that labor is performed not just in industrial and traditional service sector sites but also in the household (“domestic labor”) and community. Some of this labor is paid a wage, but much is “unwaged,” particularly domestic labor. Such labor has gone unrecognized by the IR field. The composition of what is considered work has also broadened; twenty-first-century labor is increasingly “immaterial” (producing services, not products) and comprises emotional, not physical, labor (caring for others; providing attention, support, reassurance). Gender is a related dimension. Domestic labor has been largely female. Women typically do waged work in emotional labor-intensive occupations. The mass entry of women into the waged workforce after 1970 has extended dramatically the problems of doing both a workplace and home shift. The “second shift” creates stress for households generally and especially for the two-shift workers who are predominantly women (Hochschild, 1989). These developments are an opportunity if, following the lead of a handful of progressive unions (e.g., the Harvard Clerical and Technical Workers), a new labor movement brings a decentered, gender-sensitive approach to union organizing, bargaining for more than the “hours, wages, and conditions” that defined the twentieth-century male “family wage.” A gendered solidarity of women and men fighting for a transformation of both the household and the workplace represents the major opportunity of our time.

Finally, this model may currently exist only at the margins of our society but is not, at present, the kind of building and broad movement that labor saw a century ago when the labor question first arose. In addition, U.S. capital retains its commitment to crush any progressive working-class movement. While the 2007-2009 financial and economic crisis, as well as Barack Obama’s election, has notes of the 19341937 period, especially a discredited business class and freemarket model, and while Obama is undoubtedly the most overtly pro-labor president in U.S. history by some measures, there is not a broad movement to carry out such an agenda. But if the crisis has taught us anything, it is that history takes surprising twists. And whatever shape it takes in the coming decades, class power will be a fundamental force in shaping that new history.

See also:


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