Seeking an Equitable International Trading System

PART 2: Deregulation: Global war on labor

By Henry C K Liu

(Click here for PART 1: A structural link)

The long-range consequence of the Carter deregulation policies and practices that had begun during 1978-1982 was magnified during the Reagan period of 1980-88, with greater emphasis on changing the tax regime to favor the rich, industry deregulation to lower prices by lowering quality, and a shift of power from unions to management.

Carter took the first steps towards dismantling the post-World War II social safety net and retirement/pension system, and encouraging job market restructuring in the name of freedom and efficiency. Reagan’s conservatism was merely skin-deep and rhetorical, being the president with the largest federal deficit in history, whose policies were outright antagonistic towards the interests of the poor whose rank was constantly enlarged by the steady decline of the middle class. Reagan’s rhetoric labeled government as the enemy, not the protector of the people. Ironically, his policies made his rhetoric ring true. The Reagan government had been the ruthless enemy of the US middle class.

Bush Sr lost to Clinton: It’s the economy, stupid!

During the presidency of George Bush senior, 1988-1992, the emphasis shifted to policies promoting US corporate investment overseas, trade, and on implementing neo-liberal policies in emerging offshore economies and markets. The Bush policies produced a prosperous corporate state while the nation fell into a domestic recession to which Bush was personally oblivious and which caused him to lose the White House to an unknown challenger from a minor Southern state, despite victory at war in Iraq. The slogan: “It’s the economy, stupid!” entered US political nomenclature and dominated the entire Clinton presidency.

Under Clinton, 1992-2000, the policy focus centered largely on promoting and expanding neo-liberal “free trade” under dollar hegemony. Additionally, the Clinton period was characterized by the introduction of new formulas for enabling health care cost shifting from corporations to workers, by accelerating the diversion of social security payroll taxes to the US general budget to create the false appearance of declining federal budget deficits and by-passing government rules, encouraging the further decline of the traditional private pension system. The Clinton surplus was largely funded from the pockets of US workers. Clinton deregulated world trade and introduced dollar hegemony to put the US middle class in debt in order to feed corporate global profit. The Clinton prosperity was built on debt addiction, otherwise known as “Rubinnomics”, after Clinton treasury secretary Robert Rubin.

The Bush tax cut for the rich

Under George W Bush, once again tax cuts for corporations and the wealthy become the pre-eminent policy focus and are hailed as the indispensable dynamo of prosperity while further expanding “free trade” to advance democracy. Bush tax and trade policies contribute to a new wave of income shift toward income disparity, combining the worst aspects of both the Reagan and Clinton eras, the former being an inequitable tax policy and the latter being a anti-labor trade policy. Not surprisingly, the income inequality gap accelerated at the fastest rate during the Bush period of 2000-2006, but the stage had been set by Carter, Reagan, Bush and Clinton. In addition to tax and trade-driven income inequality, under George W Bush other new income-shifting policy initiatives were launched as well in health care cost shifting, retirement system restructuring, and legislated wage compression by government edict, targeting overtime pay for millions of hourly paid workers.

US workers squeezed by government and employers

While the tax, trade, wage and benefits policies were being implemented top down during the two decade between 1980-2006 under four presidents from both parties, deregulated corporate policies and practices that further contributing to the growing income inequality gap were being simultaneously overhauled from the bottom up, shifting from full-time, permanent jobs to part-time, temporary, and independent contract work. Growing consistently since the 1980s, more than 44 million of the 137 million employed workforce in the US, close to one third, are now part time, temporary, and contract workers earning 60-70% of the pay of full-time workers and typically 20% of the benefits.

Management-promoted de-unionization policies launched in the 1980s resulted in the decline of union membership from 22% of the workforce in 1980 to barely 7% in the private sector in 2006. Two decades of corporate job outsourcing policies sent millions of high-paying, liberal benefit jobs in manufacturing, technology, and business professional services overseas, a loss filled with lower paying domestic service jobs – frequently part-time, temporary, and contract jobs. Corporate fringe benefits policies shifted fundamentally during the same period, resulting in the dismantling of more than 100,000 traditional pension plans and their replacement with cheaper cost 401-K plans; the discontinuance and/or shifting of costs of health insurance plan coverage; widespread unilateral corporate elimination of retiree health benefits; reduction of paid vacation and other paid time off; and other similar company-driven cost reduction measures.

The two approaches – corporate policy changes at the company-industry level and government policy changes – worked in close concert with each other. Government tax, depreciation, and free trade policies provided significant financial incentives to corporations for expanding offshoring jobs and consequently dismantling and transferring abroad much of the manufacturing sector in the US.

Health care and pensions

Government agency rule changes allowed corporations to extract pension fund surpluses for general business use and/or to delay properly funding pension plans. Government bodies like the National Labor Relations Board directly aided corporate efforts to de-unionize while government deregulation and privatization of entire industries further decimated union membership ranks and undermined union bargaining effectiveness.

On the health front, government policy in the form of managed health care under Clinton and consumer-driven health care and health savings accounts under George W Bush encouraged corporations to more rapidly shift health care costs to workers.

Read the rest here.

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