Labor's Lost Story

By E. J. Dionne Jr.
Tuesday, November 29, 2005

Decades ago, Walter Reuther, the storied head of the United Auto Workers union, was taken on a tour of an automated factory by a Ford Motor Co. executive.

Somewhat gleefully, the Ford honcho told the legendary union leader: "You know, not one of these machines pays dues to the UAW."

To which Reuther snapped: "And not one of them buys new Ford cars, either."

The historian William L. O'Neill tells this story in "American High," his fine and appropriately titled book about the 1950s, a time when "autoworkers were the best-paid production line operatives in the world." It helps explain why General Motors' layoffs of 30,000 workers, announced last week, have become a new litmus test in American politics.

Almost everybody right of center sees the job losses as inevitable, the result of the American auto industry's failure to meet foreign competition and the "excessively" generous wages, health benefits and, especially, retirement programs negotiated by Reuther's union.

The believers in inevitability inevitably cite the economist Joseph Schumpeter to the effect that capitalism "is by nature a form or method of economic change and not only never is, but never can be, stationary." It is capitalism's gift for "creative destruction," Schumpeter argued, that guaranteed new consumer goods, new methods of production and new forms of organization.

A different story is told left of center, though it will come as no shock that progressives can't quite agree on a single narrative. The left is united in talking about rising health care costs and the fact that most of our foreign competitors have government-run health insurance systems that take the burden of health care off employers. The iconic number: providing health care for workers and retirees accounts for $1,500 in the cost of each American-made car.

Critics of globalization tell an additional story of how free trade is sending many of our best-paying blue-collar jobs offshore. There is also the decline of union membership, a chicken-and-egg tale, since private-sector unions historically were strongest in the older manufacturing industries such as steel and cars. The UAW's numbers tell the story: 1,619,000 members in 1970, 1,446,000 in 1980, 952,000 in 1990, 623,000 in 2004. Where have you gone, Walter Reuther?

The contrast between these two accounts explains why economic conservatives currently hold the upper hand in America's political debate. The conservatives have a single, coherent story and stick to it: Economic change is good for everyone, especially for consumers, who get better stuff at lower prices. The fact that "producer groups" (such as those unions) are losing their "monopolies" and their capacity for "rent seeking" is cheered as progress.

The left's narrative is less compelling not only because there is no single story but also because few on the left attack the current system with the same gusto the right brings to defending it. Gone, for good reason, is the time when significant parts of the left called for "government ownership of the means of production." Much of the left accepts a certain amount of creative destruction because, in Margaret Thatcher's famous phrase, there is no alternative.

But this muddle reflects a default on parts of the left and, especially, within the Democratic Party. Because so many Democrats fear that they might sound like -- God forbid! -- socialists, they are unwilling to challenge the right's core story. Capitalism, all by itself, would never have achieved the rising living standards that were the pride of the United States in O'Neill's 1950s and still are today. The rules enforced by the National Labor Relations Board made it possible for Reuther's union to organize by protecting workers' rights. Cheap 30-year mortgages, which became the norm because of Federal Housing Administration guarantees, created a nation of homeowners.

As medical costs rise, more Americans will need government help. More employers will need to offload the costs of medical insurance to avoid bankruptcy. Yes, that's "socialized medicine," just like Medicare. But don't tell anyone. The phrase plays terribly in focus groups.

For 60 years New Dealers and social democrats, liberals and progressives, turned Schumpeter on his head. They insisted that few would embrace capitalism's innovations if the system's tendency toward creative destruction was not balanced by public innovations to spread the bounty and protect millions from being injured by change. It's a compelling story. Walter Reuther knew it well. Too bad it isn't told very often anymore.

© 2005 The Washington Post Company