With the Labor Day rhetoric behind them, AFL-CIO President Lane Kirkland and other bigwigs are facing their biggest leadership crisis since 1935. That's when their predecessors had to fight for the legal right of workers to organize in unions of their choice.

Collective bargaining is the heart of industrial democracy--and by law, companies must deal with the unions. But the real struggle of this generation of labor leaders has been to convince increasingly affluent workers that unions and collective bargaining are still relevant.

So far in the 1980s, organized unions have suffered a double whammy: a recession that struck the "smokestack" industries in which the union membership was strong, and then the dawn of the automation/computer age, which is wiping out traditional factory jobs as well as white-collar office jobs.

No one is more aware of these grim realities as threats to union power than Kirkland, the ex-sailor who succeeded George Meany as head of the AFL-CIO. In a calculated move to revive labor's political clout and to turn the picture around, Kirkland is placing a big bet on former vice president Walter Mondale. Kirkland is hoping that a solid endorsement at the AFL-CIO convention prior to the political conventions will help Mondale in the primaries.

If labor helps Mondale take over the White House, Kirkland will have tremendous influence in shaping the nation's economic and labor policies.

What does labor expect from a Mondale presidency? It is clear that Kirkland would anticipate not only an aggressive government-jobs program that would soak up some of the current 10 million unemployed Americans, but a longer-term "industrial policy." It's the latest nostrum suggested as a solution to America's economic problems.

Kirkland proposes to set up a multi- billion-dollar version of the old Reconstruction Finance Corporation to "ensure the revitalization of the nation's sick industries and decaying communities." He would also target industrial sections and regions that need particular help.

"Industrial policies" have been a dime a dozen in the wake of the failure of Reaganomics to revive basic industry in the United States and a worsening trade balance that reflects, mostly, superior Japanese marketing and managerial skills. Industrial policy is a fuzzy concept. Some advocates mean a targeted investment policy in which the federal government would try to separate the "winners" and "losers"--in terms of regions of the country as well as among industries and companies--and then help the "winners."

Labor's pitch is protectionism by another name, an effort to prevent further erosion in auto, steel and other labor-intensive industries where union membership once was strong, the anchor of the entire labor movement.

While such a huge bailout might temporarily preserve some jobs, it would be an act of desperation at enormous expense to taxpayers. These sick American industries are never going to regain their competitive edge, especially against Japanese products, unless they meet quality and cost standards that appeal to the average American customer.

A more productive approach was outlined by a number of other labor leaders at a recent meeting in Washington of the World Future Society. Several labor leaders at that meeting looked for ways in which labor and management could break their historical adversarial relationship.

According to a report in the Milwaukee Journal, John Joyce, president of the International Association of Bricklayers and Allied Craftsmen, said that confrontation was an outmoded technique that must be scrapped in order to deal with new technological advances. Joyce is seeking greater worker participation in decision-making at the work site. Moreover, he believes that this can be achieved through broader collective bargaining.

Here, we have an intelligent approach. He would turn collective bargaining into a tool not merely for establishing wage and hour norms, but to define the quality of the working environment as well as the quality of the product.

The critical question for national labor leaders is not whether they can provide the necessary impetus for Mondale, who makes John Connally-like anti-Japanese noises, or whether a protectionist bailout disguised as an "industrial policy" can be launched with taxpayer money.

The critical question for union leadership is whether it can, along with enlightened management, build a whole new relationship that will ease the transition to the computer age. The new contract with the telephone company is a hopeful sign: it provides for joint union-management training programs, improved security for employees, and flexibility for management to benefit from advanced technology.

That kind of industrial policy makes some sense. Otherwise, as former labor secretary Ray Marshall said at a recent seminar on industrial policy, the phrase has no meaning. and hour norms, but to define the quality of the working environment as well as the quality of the product.

The critical question for national labor leaders is not whether they can provide the necessary impetus for Mondale, who makes John Connally-like anti-Japanese noises, or whether a protectionist bailout disguised as an "industrial policy" can be launched with taxpayer money.

The critical question for union leadership is whether it can, along with enlightened management, build a whole new relationship that will ease the transition to the computer age. The new contract with the telephone company is a hopeful sign: it provides for joint union-management training programs, improved security for employees, and flexibility for management to benefit from advanced technology.

That kind of industrial policy makes some sense. Otherwise, as former labor secretary Ray Marshall said at a recent seminar on industrial policy, the phrase has no meaning.