Income Redistribution (Voodoo Economics -3)

In spite of the claim by advocates of Reaganomics that “the rising tide raises all ships,” the poor and middle class have seen their incomes fall during the recent economic boom.  Several policies of the “Reagan Revolution” have led to this kind of income redistribution from the poor to the rich.

The War on Unions:  Corporations are organized and the power structure is centralized; and in an economy with any substantial rate of unemployment, they have a tremendous power advantage.  Organizing and representation gave some power back to the workers.  During the 1940s, 1950s, and 1960s union membership was strong enough to create a healthy middle class.  Even non-union workers benefited from the prevailing wage standards negotiated by the unions.

While many city and state governments during this period were rife with corruption, no one called for the abolition of government.  Yet anti-union forces used the fact of corruption in union leadership to discredit the concept of collective bargaining.

One of Ronald Reagan’s first acts as president was to destroy the air traffic controllers union.  Reagan had a legal and public opinion advantage in that the controllers were public employees and their strike was illegal.  Still, it was an impressive victory; people thought it couldn’t be done, because the air traffic controllers were a small corp of highly trained professionals, and the nation’s airline industry depended on their work.

The victory over this professional union emboldened private employers to break unions.  Frank Lorenzo took over Continental airlines and used the bankruptcy courts to cancel that airlines union contracts.  Now after more than thirty year of union-breaking activity, the percentage of employees in unions has fallen to 12 percent, down from 12.5 percent in 2005. Those figures are down from 20 percent in 1983 and from 35 percent in the 1950s.  (NY Times)

One union that remains strong, the teacher’s union (the NEA) is the constant target of attacks from conservatives, including candidate McCain.

Exporting Jobs. Under “free trade” agreements, factories have been closed and jobs have been shipped overseas.  According to Jim Webb of Virginia,

Because of a perverse part of our tax code, moving manufacturing plants overseas is actually a profitable exercise for companies that wish to avoid paying corporate taxes (Roanoke Times).

Much of this “free trade” is hardly free or fair.  Countries such as China are unencumbered by enforceable environmental or child labor laws.  We export jobs to China and they export smoke and smog to California.  Further, many other competing countries have national health care, in effect subsidizing one of the highest costs American manufacturers face.

The result is that the ratio of the pay CEOs receive to that of average workers has skyrocketed in comparison with our own past history and international standards.  In 2007 the compensation for top executives “averaged 344 times the average U.S. worker’s pay. Thirty years ago, the ratio was about 35 to 1″ (Kansas City Star, Thursday, Sep 25, 2008).

“According to The Wall Street Journal, in 2006, the CEO to average worker pay ratio was 11 to 1 in Japan, 15 to 1 in France, 20 to 1 in Canada, 21 to 1 in South Africa, and 22 to 1 in Britain” (Pepperdine).

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