The orthodox liberal theory of economic inequality goes something like this: In the 1950s and 1960s, America was a highly egalitarian and prosperous society, thanks to strong unions, public-spirited CEOs, and progressive taxation. Then, beginning with the Reagan revolution and proceeding through the neoliberal 1990s and Bush tax cuts of the 2000s, conservative policies undid the institutions—particularly labor—that enabled prosperity to be broadly shared. The right path forward, then, is to resurrect them, in an attempt to recreate the more egalitarian economy that existed at midcentury.
This narrative isn’t all wrong. Middle and working class incomes really did grow more quickly in the postwar decades, and a strong alliance between big government, big business, and big labor really did play a large role in making that possible. Where it errs is in assuming that the ensuing policy changes were chiefly a cause rather than an effect of the increasingly unequal economy, and that the institutions of the 1950s can be reconstituted as if nothing has changed.
In the Washington Post, Robert Samuelson (no hyper partisan) concisely explains why a unionist revival—a key part of the blue model agenda—would be unable to counteract the economic transformation of the last half-century:
Many middle-class workers have lost their ability, mostly through unions, to create their own rents — higher wages. In the 1950s and early 1960s, when roughly 30 percent of non-farm workers belonged to unions, this was possible. Companies could pass higher wage increases along to consumers, because many industries were dominated by a few large firms and competition was weak.
Even if today’s unionization rate exceeded 2015’s 11 percent, it would be hard to duplicate this feat. Competition has intensified in too many ways for too many firms: from foreign companies (autos, steel); from the Internet (retailers, movie studios); from deregulation (airlines, trucking and telecom firms). Companies with high labor costs that cannot be recovered in the market are likely to shrink or vanish.
To be sure, private sector unions, unlike their public sector counterparts, are not undermining public accountability and bankrupting entire cities and states. They remain a useful way for workers to prop up their wages on the margins, especially at larger companies in less competitive sectors. But the structure of the 21st century economy means that it is simply impossible for organized labor to act as a guarantor of wage equality on the scale that it was in the blue heyday.
As WRM explained in “The Once and Future Liberalism,” a convergence of globalization, technological change, foreign competition, demographics, and consumer demand have converged to make the blue model unsustainable. That doesn’t mean we can ignore the problem of stagnating wages for people who depended on the old system—indeed, as this election is showing, that is one of the most pressing political problems we face. But overly zealous attempts to double down on an old system—to put the genie back in the bottle—can become a diversion from thinking about where to go next: that is, updating and even re-engineering our institutions for the economy we have now.