There was once a time in America when the word “union” did not automatically summon the ghost of socialism, communism, or the imagined specter of Karl Marx hiding beneath the conference table. A union was simply a group of working people who had discovered the elementary proposition that an individual employee has rather less bargaining power than an employer with a thousand employees.
This was apparently considered an intolerable insight.
The history of American labor over the last ninety years offers a rather elegant demonstration of what might be called Capitalism at Its Best—the Republican Way: praise the virtues of the free market while systematically arranging the market so that one side becomes considerably freer than the other.
The numbers tell the story rather more eloquently than the speeches.
In the 1930s, union membership exploded from roughly 12 percent of the workforce to nearly 28 percent. The reason was not that millions of Americans suddenly became Bolsheviks. It was that Franklin Roosevelt’s New Deal, particularly the National Labor Relations Act of 1935, finally gave workers meaningful federal protection for organizing and collective bargaining.
And something extraordinary happened.
Workers became harder to exploit.
Factories became more productive. Wages rose. The emerging American middle class acquired homes, automobiles, pensions, health insurance and something increasingly rare in modern economic life: the expectation that working for a living ought to provide a reasonably decent life.
By the 1950s, union density had reached its historic high—approximately 35 percent of the workforce in 1954.
One American worker in three belonged to a union.
And America did not collapse.
Quite the opposite.
The United States became the dominant industrial power on earth.
This is the portion of history that seems to have escaped the notice of those who now insist that unions are somehow incompatible with capitalism. The great postwar American economic expansion occurred during an era in which organized labor was vastly stronger than it is today.
The automobile industry was unionized. Steel was unionized. Mining was unionized. Construction was unionized. Transportation was unionized. Manufacturing was unionized.
And yet capitalism survived.
Indeed, it prospered rather spectacularly.
The problem, therefore, was apparently not that unions were destroying capitalism.
The problem was that workers were getting too large a share of it.
Then came the great retreat.
Beginning in the 1960s, the private-sector union movement began its long decline. Manufacturing employment diminished relative to services. Automation changed industrial production. International competition intensified. Corporations began restructuring their operations, closing plants, relocating production and discovering the marvelous economic advantages of places where workers were cheaper and considerably less troublesome.
By the 1970s, union density had fallen into the mid-20-percent range.
Then came the 1980s.
And here the story acquires an unmistakably political flavor.
In 1981, President Ronald Reagan fired more than 11,000 striking federal air-traffic controllers belonging to PATCO after they refused to return to work. The episode became an unmistakable signal to corporate America: the federal government was no longer necessarily going to be the sheriff standing between management and labor.
Employers noticed.
Union density fell from roughly 23 percent at the beginning of the decade to approximately 16 percent by its end.
Coincidence?
Perhaps.
But capitalism has always had a remarkable talent for discovering opportunities precisely when political winds begin blowing in its preferred direction.
The decades that followed brought deregulation, globalization, corporate consolidation, offshoring and the steady transformation of America from an industrial economy into one increasingly dominated by services and finance.
NAFTA did not single-handedly destroy American unions, any more than the invention of the automobile single-handedly destroyed the horse.
But the broader economic transformation was unmistakable.
Factories could be moved.
Capital could cross borders.
Supply chains could be internationalized.
And workers?
Workers generally remained attached to the place where they lived.
That asymmetry turned out to be extraordinarily useful.
By the 1990s, union density had fallen to approximately 14 percent.
By the 2000s, it was around 12 percent.
By the 2010s, roughly 10 percent.
And today, American union membership remains near one worker in ten.
From approximately one worker in three in the 1950s to approximately one worker in ten today.
That is not a minor adjustment.
It is a transformation of American economic power.
The private-sector miracle
The really interesting number, however, is not the overall figure.
It is the private sector.
Private-sector unionization has fallen to roughly 6 percent, compared with unionization rates of roughly one-third among public-sector workers.
So the country that once organized its factories, mines, transportation systems and construction trades now finds itself in the extraordinary position of having more organized government employees than organized industrial workers.
This produces a particularly delicious irony for those who spend their political lives denouncing “big government.”
Government employees are among the most likely workers in America to belong to unions.
And who is it, exactly, that has spent decades attempting to weaken those unions?
The same political movement that routinely describes itself as the champion of the American worker.
There is something almost touching about the consistency.
Republican politicians routinely tell working Americans that they are standing up for the little guy.
Then they support policies that weaken collective bargaining.
They oppose increases in the minimum wage.
They support right-to-work laws.
They advocate restrictions on public-sector unions.
They favor corporate tax reductions.
They oppose regulations that increase labor costs.
They celebrate the “freedom” of corporations to relocate production.
And when the worker discovers that his wages have stagnated while the executive compensation package has acquired another zero, he is invited to blame immigrants, China, Democrats, environmentalists, universities, transgender people, or whatever other cultural villain happens to be available that election cycle.
Almost anyone, in other words, except the person signing his paycheck.
The great Republican trick
The genius of the arrangement is that it permits the word “freedom” to be applied selectively.
The corporation must be free to move its factory.
The corporation must be free to fire workers.
The corporation must be free to merge with its competitor.
The corporation must be free to replace employees with machines.
The corporation must be free to outsource production.
The corporation must be free to spend enormous sums lobbying Congress.
But when workers exercise their own freedom by joining together and saying, “We would like a larger share of the value we produce,” suddenly we hear ominous words such as special interests, union bosses, class warfare and, inevitably, socialism.
One begins to wonder whether the free market is actually free or whether it is merely free for those who own it.
“A worker negotiating individually with a multinational corporation possesses about as much bargaining power as a mouse negotiating the cheese contract with the cat.”
– Civil Heresy
A worker negotiating individually with a multinational corporation possesses about as much bargaining power as a mouse negotiating the cheese contract with the cat.
Collective bargaining changes that equation.
It gives workers the ability to say that their labor is not simply another commodity to be purchased at the lowest possible price.
And that, perhaps, is the real offense.
Because capitalism has no inherent objection to unions. Capitalism is perfectly capable of accommodating them.
What capitalism cannot accommodate quite so comfortably is a workforce that understands its collective economic power.
The American middle class was not an accident
There is another inconvenient historical fact.
The period in which American unionization was strongest was also the period in which the American middle class expanded most dramatically.
Workers received rising wages.
Employers provided pensions.
Health insurance became increasingly common.
Homeownership expanded.
College became more accessible.
A single industrial wage could support a family.
And the United States produced an enormous consumer economy in which ordinary workers could actually afford the products they were producing.
There was a certain logic to the arrangement.
Pay workers reasonably well and they become customers.
Give them pensions and they become consumers.
Give them enough economic security to buy houses and automobiles and appliances and they stimulate demand throughout the economy.
It was not socialism.
It was capitalism with a middle class.
And then we began dismantling the institutions that helped create that middle class.
The result was not the disappearance of capitalism.
It was the increasing concentration of capitalism’s rewards.
Follow the money
The decline of unions coincided with a remarkable redistribution of economic power.
As labor’s bargaining power weakened, executive compensation soared.
Corporate profits became increasingly important to the financial economy.
Stock buybacks became a favored mechanism for rewarding shareholders.
Manufacturing employment declined.
Financialization expanded.
And the relationship between productivity and worker compensation became increasingly distorted.
The worker was told that globalization was inevitable.
The worker was told that technology was inevitable.
The worker was told that wage stagnation was inevitable.
The worker was told that unions were obsolete.
The worker was told that tax cuts for corporations would eventually trickle down.
And then, after several decades of this economic catechism, someone finally noticed that the wealth had indeed trickled down.
It had simply stopped at the top.
The Republican conception of labor
There is, of course, nothing inherently wrong with Republicans supporting capitalism.
Capitalism has produced enormous wealth and technological progress. Markets are extraordinarily powerful mechanisms for allocating resources and encouraging innovation.
But there is a profound difference between defending markets and defending every privilege accumulated by those who happen to dominate them.
A genuinely free market requires bargaining freedom on both sides.
If an employer can organize into a corporation, negotiate collectively with suppliers, lobby collectively in Washington, pool capital with investors and coordinate the activities of thousands of employees, then telling an individual worker that he must negotiate his wages alone because collective action is somehow an infringement upon economic freedom is a rather impressive exercise in ideological acrobatics.
It is like giving one side a battleship and the other side a rowboat and then congratulating both parties for participating in free competition.
The historical record is not especially ambiguous.
When American workers were organized, their share of economic power was greater.
When unions declined, employer power increased.
And the political movement that has most aggressively opposed organized labor has spent decades presenting itself as the defender of the American working class.
This requires either extraordinary cynicism or extraordinary historical illiteracy.
Possibly both.
Capitalism at its best
So here we arrive at the peculiar American definition of capitalism.
If a corporation receives a tax break, that is capitalism.
If a corporation receives a government subsidy, that is capitalism.
If a corporation receives a bailout, that is capitalism.
If a corporation moves a factory overseas, that is capitalism.
If an executive receives $30 million while laying off 5,000 workers, that is capitalism.
But if those 5,000 workers organize themselves and demand a larger portion of the wealth they created, suddenly we are apparently standing at the gates of Moscow.
This is not a defense of capitalism.
It is a defense of capitalism’s hierarchy.
And perhaps that is the point.
The Republican version of capitalism has increasingly become less interested in whether the market is genuinely free than in ensuring that the people at the top remain free to determine what everyone else receives.
The irony is that the America of the 1950s—an America with extraordinarily high union density, strong collective bargaining, progressive taxation, robust public investment and a rapidly expanding middle class—was hardly the communist nightmare its modern political descendants would have us believe.
It was, in fact, one of the most prosperous societies in human history.
The difference was that prosperity was not merely measured by the size of the stock market.
It was measured by whether the person working in the factory could afford to buy what the factory produced.
That distinction has largely disappeared.
And perhaps that is why the contemporary Republican Party has become so enthusiastic about telling working Americans how wonderful capitalism is.
Because when the working man stops asking “How much am I getting?” and starts asking only “How is the stock market doing?”, the argument has already been won.
For someone else.
Why It Matters
The history of organized labor is also the history of the American middle class. This essay traces the rise of labor unions, their role in expanding wages, pensions, and homeownership, and their subsequent decline amid globalization, deregulation, and changing political priorities. It argues that the balance of power between labor and capital has shifted dramatically over the past seventy years, with lasting consequences for income distribution and economic security.
Key Takeaways
- The essay argues that the growth of organized labor helped expand the American middle class during the mid-twentieth century.
- It traces the long decline of private-sector union membership from its postwar peak to roughly one worker in ten today.
- The article examines how globalization, automation, deregulation, and changing political priorities altered the balance of power between employers and workers.
- It argues that declining collective bargaining coincided with increasing executive compensation, shareholder returns, and wealth concentration.
- The central message is that capitalism functions differently depending on how economic power is distributed between labor and capital.
Key Questions to Consider
Q1. What is the central argument of the essay?
The essay argues that the decline of organized labor significantly altered the balance of economic power between workers and employers, contributing to broader changes in wages, wealth, and the middle class.
Q2. Why does the essay emphasize the 1950s?
It identifies the postwar decades as a period when high union membership coincided with rapid middle-class growth, rising wages, expanding homeownership, and broad economic prosperity.
Q3. What role does collective bargaining play in the essay?
The essay presents collective bargaining as a mechanism that allows workers to negotiate more effectively with large employers by balancing economic power.
Q4. Does the essay criticize capitalism itself?
The essay distinguishes between market economies and unequal bargaining power, arguing that markets function differently depending upon how power is distributed among participants.
Q5. What broader lesson does the essay offer?
The essay concludes that the strength of an economy should be measured not only by corporate performance or stock prices but also by whether ordinary workers share meaningfully in the prosperity they help create.
If this essay challenged your thinking about labor, capitalism, and the American middle class, subscribe to receive future Civil Heresy essays exploring economics, power, and the institutions that shape everyday life.
