Anti-Pluralism by William A. Galston

Author:William A. Galston
Language: eng
Format: epub
Publisher: Yale University Press
Published: 2018-08-18T16:00:00+00:00

SIX

Liberal Democracy in America

What Is to Be Done?

Vigorous economic growth is necessary for broadly shared prosperity, but it is not sufficient. We thought otherwise during the three decades after World War II because we overlooked the special circumstances that translated growth into an expanding middle class. The war had destroyed the economies of Europe and Japan, leaving the United States in a position without parallel in modern history. Domestic production accounted for nearly all the goods and services Americans consumed, and consumption accounted for nearly all the revenues flowing into corporate coffers. In this quasi-closed economy, labor, capital, and government could combine to shape wages and prices. President John F. Kennedy could compel steel companies to retract what the government regarded as destabilizing price increases, and powerful unions could bargain industry-wide to boost wages and benefits. U.S. consumers had little choice but to accept the prices that flowed from this quasi-corporatist process, but rising real wages made rising prices palatable, and rapid productivity gains helped ward off a wage-price spiral.

The slow collapse of this postwar economic arrangement is an oft-told tale. Suffice it to say that as the economies of America’s Second World War allies and adversaries recovered, U.S. firms encountered increasing foreign competition, first from basic consumer goods that could be produced more cheaply abroad using low-cost labor, then from products higher up the value chain. This challenge changed the game for U.S. producers, who faced new incentives to restrain costs. They responded by locating production facilities in lower-wage jurisdictions, at home and then abroad, and also by replacing human labor with productivity-boosting technology. These moves reduced the size and influence of the private-sector unions. The collapse of the USSR and the emergence of China and India integrated two billion new workers into the global economy, further ratcheting up the pressure on jobs and wages.

As U.S. firms became increasingly global, they derived a higher share of their revenues from consumers outside the United States, and they came to care less about their relations with the U.S. cities and communities in which their headquarters were located. When Charles Wilson, CEO of General Motors and President Eisenhower’s nominee for secretary of defense, appeared before the Senate Armed Services Committee in 1953 for his confirmation hearing, he explained his past conduct with an often-misquoted sentence: “For years I thought what was good for the country was good for General Motors, and vice versa.”1 There is no reason to doubt his sincerity, and much evidence in favor of the linkage he discerned.

Half a century later, the relationship between corporate interests and the national interest is more tenuous. The interplay of globalization and technological change fundamentally shifted the balance between labor and capital, setting in motion the slow erosion of the postwar middle class. As labor economists have shown, what had been an occupational bell curve shifted toward a bifurcated pattern, with high-skilled workers at one end and low-paid workers in retail, food, and personal services at the other. Jobs requiring mid-level skills and offering mid-level compensation became relatively scarce.

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