Screwed the Undeclared War Against the Middle Class (11 page)

On October 19, 2003, the
New York Times
ran an article about Levi Strauss, the maker of all-American denim jeans.
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After January 2004, Levi's jeans stopped being made in America. No more American Levi's. That's like saying America doesn't make apple pie anymore.

Does outsourcing Levi's matter? It matters to Mrs. Flores, who was profiled in the
Times
article. Mrs. Flores worked for Levi's for twenty-four years and was a member of her local union. She was making $18 per hour, got four weeks' paid vacation, and had full family medical and dental benefits for a payment of just $24 per week. Mrs. Flores was in the middle class.

But Mrs. Flores knows she won't be middle class for long if conservatives get their way. "Where am I going to get a job like this?" she asked in the article. After NAFTA and the World Trade Organization (WTO)—the conservative "free" trade policies—took effect in 1994–1995, this country lost 785,000 apparel jobs.

What's happening to people like Mrs. Flores—to the middle class—is not an unforeseen consequence of "free" trade. The policies the cons advocate have historically led nations to become societies in which one is either aristocratic or impoverished. Follow the cons' economics, and very rich people will become so rich and powerful they will create dynastic empires (like the Bushes)
while huge numbers of formerly middle-class people become destitute—and there's little in between.

If we want to keep a healthy middle class and the strong democracy it will maintain, we can't just stand idly by while the cons do their damage. If a nation wants a middle class, it must define it, desire it, and work to both create it and keep it.

A middle class is the creation of government participation in the marketplace, balancing out the anti-democratic power of the economic kingdoms we call corporations.

We create a middle class in three ways:

By creating and regulating the rules of the game of business

By protecting jobs inside the country with rational tariffs and trade policies

By providing—to all—a healthy social safety net and the means for social mobility, such as a free public education—all the way through college

Government of, by, and for the people requires a return to classical economic policies that put We the People in the driver's seat. We know that these policies work because we've tried them before and they created one of the strongest middle classes the world has ever seen. They're in use today in countries from Brazil to Sweden. When the cons tried imposing their utopian free-trade, flat-tax, trickle-down theories on Iraq, it led to a total meltdown. Con economics have never produced democracy or a middle class anywhere. And in America all they've done over the years since Reagan first instituted them is to crush a large sector of the middle class and put our democracy up for sale to the highest bidder.

The United States has had two great periods of what we today call a middle class. The first was from the 1700s to the mid-1800s and
was fueled by the transfer of land from Native Americans to settlers—a great deal for the settlers, who got the land virtually for free, and a raw deal for the Native Americans. With cheap land as their capital, ordinary Americans could become the "citizen farmers" whom Alexis de Tocqueville idealized in his 1834 masterpiece
Democracy in America
—average people, living in relative self-sufficiency, neither rich nor poor but fully literate and well informed about politics and international affairs.

That land-based middle class lasted from roughly the founding of this nation through the Civil War, when "free land" was becoming scarce and the industrial revolution was drawing workers into the cities in search of work. As big business grew in the 1880s after the Civil War, the farm-based middle class collapsed, in large part because the early progenitors of companies like today's Cargill and Archer Daniels Midland Company gained control of the sale and the distribution of farm produce. Middle-class farmers rose up, creating the Grange Movement as part of their own way of competing with the big-agriculture companies. But the country was moving from an agricultural base to an industrial one, which compounded the farmers' loss of power.

As industry grew, the nation entered a period sometimes referred to as the Robber Baron Era or the Gilded Age. Wealthy capitalists obtained monopolies over new technology and the resources it required—railroads, steelworks, oil—and amassed huge amounts of wealth. That wealth did not reach their workers, however.

By the start of the twentieth century, the average income of working Americans was less than $10,000 per year in today's dollars. Americans did not sit still. We fought back through the Progressive and Populist movements, gaining significant economic and political reforms. Their first step was to limit the size of corporations to limit their power—hence the Sherman Antitrust Act of 1881. (It's still law but is unenforced for all practical purposes since Reagan ordered its enforcement scaled back. Jimmy
Carter was the last president to use it meaningfully, to break up the AT&T monopoly.)

Step two was to take Theodore Roosevelt's advice: "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains." Progressives pushed hard, and in 1907 a law was passed (which is still on the books), making it illegal for corporations to give money to politicians. It needs to be expanded.

Other parts of the progressive agenda were political rather than purely economic in nature. They included legislating the direct election of U.S. senators who previously had been appointed by political machines in the states. Progressives at the turn of the century also hoped that if women could get the vote, they would help break up the old boy club of big business. (These goals were achieved in 1913 and 1920.) Even in the face of corporate violence that often escalated to murder, Americans struggled to bring together the budding union movement.

Once an aristocracy is in place, however, it is hard to dislodge. Even though American citizens were very politically active during this time, by and large the vast majority had little say in their own economic destiny. The Gilded Age saw a very Dickensian America—a small group of very wealthy businessmen and landowners and a very large class of desperately poor workers.

The Great Depression was the spark that lit the beginnings of America's second era of a middle class. By 1929, after a series of massive tax cuts for the wealthy by two successive Republican presidents, the chasm between the wealth of the "investor class" and that of the working class in the United States was greater than
it had ever been. (It again reached these dimensions—for only the second time in U.S. history—in the autumn of 2005.) The result was the October 1929 stock market crash and the Great Depression that followed.

Although Herbert Hoover ran his 1932 presidential campaign on the slogan
Prosperity Is Just Around the Corner,
by that time few Americans were buying his idea of more tax cuts for millionaires. They also weren't happy with an extremist Supreme Court that had recently struck down minimum wage and other worker protection laws as unconstitutional. They voted in massive numbers for Franklin D. Roosevelt, who campaigned relentlessly on a platform of government involvement in the marketplace to restore both democracy and the middle class.

It took the leadership of President Roosevelt in the 1930s for the government to again take a hand in creating a middle class, this time via industrialized labor instead of land. FDR implemented the two necessary economic ingredients—a classical economic model and a government-spending stimulus—thereby almost single-handedly creating the modern middle class.

FDR made sure that We the People had money in our pockets through progressive taxation, Social Security, fair labor laws, the regulation of business, and the vigorous enforcement of antitrust laws. In 1935 he pushed through the Fair Labor Standards Act, which set a minimum wage, and the National Labor Relations Act (Wagner Act), which protected workers' right to create a democratic institution—a union that elected its own leadership—in the feudal kingdoms of America's workplaces. People like Mrs. Flores, sewing Levi's, were for the first time able to negotiate a living wage.

During World War II, FDR passed a progressive income tax that barely touched the working class and the middle class but took up to 90 percent of the income
after
a person earned what would be more than $2 million in today's dollars.
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That rate remained high under FDR, Truman, Eisenhower, Kennedy, Nixon, Johnson,
and Carter. America's debt was relatively small, and progressive taxation kept money in the pockets of the people most likely to spend it and stimulate consumer demand.

Some say that World War II was the stimulus out of the Depression, and it was an economic stimulus from which many, like the Bush family businesses, benefited (until Prescott Bush lost one of his companies for doing business with Hitler while we were at war); but spending money on weapons doesn't stimulate an economy the way building roads, bridges, houses, or domestic consumer industries, which "keep on giving," does. The real events of the 1930s and 1940s that set the stage for a second American middle class were primarily the social spending programs that FDR created and integrated with unionization, antitrust laws, and the expansion of citizen participation in our democracy that inevitably occurs when a middle class grows.

In a time of crisis, instead of giving tax cuts to billionaires, FDR went directly to the working class to stimulate the economy. The Civilian Conservation Corps hired young men ages eighteen to twenty-five to plant trees, create animal sanctuaries, fight pollution, and maintain the national forests. The Public Works Administration paid skilled construction workers to build infrastructure, including the Triborough Bridge in New York City. The Works Progress Administration (later the Works Projects Administration, or WPA) put thousands more to work improving our country, paying skilled craftsmen and artists to put on plays, create murals, build buildings, and otherwise improve the commons. Each of these programs paid a living wage, providing a direct stimulus to the economy.

FDR made sure that Americans would be able to enjoy the fruits of their labor by establishing Social Security. A government-run insurance program, Social Security continues to provide money for the disabled while ensuring that all working Americans have some savings for retirement.