How Capital Crushed Labor

Once, it was a Labor Day tradition for Democrats to go to Cadillac Square in Detroit to launch their campaigns in that forge and furnace of American democracy, the greatest industrial center on earth.

Democrats may still honor the tradition. But Detroit is not what she was, not remotely. And neither is America.

Not so long ago, we made all the shoes and clothes we wore, the motorcycles and cars we drove, the radios we listened to, the TV sets we watched, the home and office calculators and computers we used.

No more. Much of what we buy is no longer made by American workers, but by Japanese, Chinese, other Asians, Canadians and Europeans.

“Why don’t we make things here anymore?” is the wail.

Answer: We don’t make things here anymore because it is cheaper to make them abroad and ship them back.

With an economy of $14 trillion, we may still be the best market in the world to sell into. But we are also among the most expensive markets in the world in which to produce.

Why is that? Again, the answer is simple.

U.S. wages are higher than they are almost anywhere else. Our health, safety and environmental laws are among the most stringent. Our affirmative action demands are the most exacting, except possibly for those of Malaysia and South Africa.

Does the cost of production here in America alone explain the decline in manufacturing and stagnation of workers’ wages?

No. For since the Revolution, America has had a standard of living that has been the envy of the world. From the Civil War through the 1920s, as we became the greatest manufacturing power the world had ever seen, our workers enjoyed pay and benefits that were unmatched anywhere.

Yet our exports in those decades were double our imports, and our trade surpluses annually added 4 percent to the gross national product. How did we do it?

We taxed the products of foreign factories and workers and used the revenue to finance the government. We imposed tariffs of up to 40 percent on foreign goods entering our market and used the tariff money to keep taxes low in the United States.

We made foreigners pay a price to get their products into our market and made them pay to help finance our government. We put our own country and people first.

For corporate America, especially industrial America, this was nirvana. They had exclusive free access to our market, and foreign rivals had to pay a stiff fee, a tariff, to get their products in and try to compete with U.S. products in the U.S. market.

What happened to this idea that made America a self-sufficient republic, producing almost all it consumed, a nation that could stay out of the world wars as long as she wished and crush the greatest powers in Europe and Asia in less than four years after she went in?

A new class came to power that looked on tariffs as xenophobic, on economic patriotism as atavistic and on national sovereignty as an antique idea in the new world order it envisioned.

By 1976, editorial writers were talking about a new declaration of interdependence to replace Thomas Jefferson’s Declaration of Independence, which was now outdated.

The new idea was to replicate America on a global scale, to throw open the borders of all nations as the borders of the 50 states were open, to abolish all tariffs and trade barriers, and to welcome the free flow of goods and people across all frontiers, thereby creating the One World that statesmen such as Woodrow Wilson and Wendell Willkie had envisioned.

By three decades ago, this globalist ideology had captured both national parties, a product of universities dominated by New Dealers.

But why did corporate America, with its privileged access to the greatest market on earth, go along with sharing that market with its manufacturing rivals from all over the world?

The answer lies in the trade-off corporate America got.

Already established in the U.S. market, corporate America could risk sharing that market if, in return, it could shift its own production out of the United States to countries where the wages were low and regulations were light.

Corporate America could there produce for a fraction of what it cost to produce here. Then these same corporations could ship their foreign-made products back to the USA and pocket the difference in the cost of production. Corporate stock prices would soar, as would corporate salaries — and dividends, to make shareholders happy and supportive of a corporate policy of moving out of the USA.

Under globalization, America’s investor class could and did get rich by the abandonment of America’s working class.

America is in a terminal industrial decline because the interests of corporate America now clash directly with the interests of working America — and, indeed, with the national interest of the United States.

And both parties are either oblivious to or indifferent of what is happening to their country.