In his New York Times op-ed on Monday, Paul Krugman gives a short-version history of the financialization of the economy. He says: “… the financialization of America wasn’t dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy starting around 1980 was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis. … More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the ‘outrage constraint’ that used to limit executive paychecks, and more.”
There’s a lot more that could be said about it, but it’s important to stress that the policy choices Krugman is talking about were part of an ongoing attack on the gains unions had been able to make in the 1960s and early 1970s. The liberal-labor coalition that lay behind the politics of the New Deal had broken up with the rise of the civil rights movement, leading to a class compromise between business and unions based on an economic boom and unions’ political support for the U.S. war in Vietnam. But in the inflationary economic crisis of the 1970s this gave way to a long-term effort to cripple the labor movement with outsourcing and legislation.
Labor had been able to keep pace with and even achieve raises above the level of inflation. Sociologist William Domhoff explains how, to counter union strength, large corporations headed by US Steel created the Construction Users Anti-Inflation Roundtable. “Its purpose was to help the many small firms in the construction industry resist further wage hikes. It encouraged members to use nonunion firms when possible, worked to coordinate construction firms, and aided unionized firms in starting nonunion subsidiaries. … The corporations began to resist unionization as the 1970s rolled on. They hired antiunion consulting firms to organize campaigns against any attempts at unionization. They fired workers who tried to create unions, even though such an action was illegal …
“The tightening of labor markets coincided with and intensified the movement of American manufacturing facilities overseas. This had two direct effects: a rise in unemployment and a further weakening of industrial unions. … The conservatism of the Reagan years, then, represented what business had been waiting to do for a long time, but couldn’t because of social activism and the Vietnam War. Now all was quiet and labor was on its knees, so business retaliated with a vengeance even though that meant destroying needed infrastructure, creating a homeless underclass, and crushing many small businesses.” (G. William Domhoff, The Power Elite and the State: How Policy is Made in America (Aldine de Gruyter, NY, 1990: 276-282)
So it’s significant that unions, which in the 1970s were hostile to social reform movements, today are not only backing the OWS/99 percent, but recruiting out of their success. Greg Sargent reports in the Washington Post that “Working America, the affiliate of the AFL-CIO that organizes workers from non-union workplaces, has signed up approximately 25,000 new recruits in the last week alone, thanks largely to the high visibility of the protests. Karen Nussbaum, the executive director of Working America, tells me that this actually dwarfs their most successful recruiting during the Wisconsin protests. ‘In so many ways, Wisconsin was a preview of what we’re now seeing,’ Nussbaum says. ‘We thought it was big when we got 20,000 members in a month during the Wisconsin protests. This shows how much bigger this is’.”
And a new poll by Quinnipiac University finds that 67 percent of New Yorkers agree with the views of OWS; 72 percent say they understand the protesters’ views “very well” or “fairly well.” Ordinary people identify with the protesters and the occupation resonates with them despite a lack of formal objectives.
A new pluralist coalition of labor and progressives is rapidly forming, one that channels the working and middle class resistance to the decline of their living standards. The 99 percent will take on the Washington consensus that sees finance as essential to the economy and is beholden to it.