History Taught the Right Way
At the end of the second world war, Detroit was the envy of modern civilization, the model city known as the Arsenal of Democracy. Detroit was the innovator of mass production, the creator of the middle class and the pioneer of racial equality. Today Detroit is synonymous with deterioration and blight.
Detroit’s problems were like a slow moving disease that originated after the post war boom. World War II created the greatest public works projects in American history and lifted citizens out of the Great Depression. The war elevated women and minorities and was the precursor to the civil rights movement.
With Europe and Asia ravaged by war, America was the lone superpower, and U.S. corporations were raking it in. However, American dominance was short lived, as bruised and bloodied Russia began to emerge as an economic and technological alternative to capitalism. By the end of the post-war decade the Soviets had built a hydrogen bomb and the ideology of socialism became a threat to free markets.
Devastated by war, France and Great Britain saw their empires crumble with uprisings in India, Indochina and Greece. When civil war broke out in Greece, President Truman called on Congress to take action and they responded by delivering $400 million in military aid and financial assistance to Greece. The Truman Doctrine was followed by The Marshall Plan, which gave way to the industrial military complex. There was a policy of police actions where our country wrote checks and supplied military assistance to countries many Americans could not find on a map, countries like Malaysia, Laos and Korea, along with our former foes Italy, Germany and Japan.
The post- war period also began our romance with ”black gold” as the United States began to court corrupt dictators from the Middle east. To ensure capitalism’s reign, Britain, France and the United States formed The International Monetary Fund (IMF) and the United Nations to rebuild war torn countries or supply them arms and troops if they feared a communist takeover.
While America was using everything at its disposal to bail out the free world, attitudes towards the working class on the homefront were the opposite. The war had been good for Detroit and its automobile companies. General Motors executive Charles E Wilson’s 1945 salary was $459,014, when the average full time employee earned $2,190. Now that the war was over, Charles Wilson wanted to cut workers’ wages almost 30% .
By 1946 labor relations had deteriorated and 4.6 million workers went on strike from various industries. When the dust settled, 4,985 work stoppages had occurred and the estimated cost of lost work days was $116 million,dollars (est 1.4 billion today.)
Walter Reuther, head of the United Auto Workers (UAW), exemplified the radicalism of the labor movement. Although auto workers fared better than most workers, Reuther demanded more. He wanted labor to run the shops and control production and he demanded that companies open their accounts. Although many companies were losing contracts due to military cutbacks, Reuther demanded higher wages and pensions. The executives despised Ruether and called him a communist. Many businesses colluded in their dealings with labor.
By 1948 many unions gave up or capitulated by agreeing to Cost Of Living Agreement (COLA) clauses in annual contracts. This meant wages would be adjusted to the rate of inflation. Although this meant an upward trajectory for wages, it reduced labor’s leverage when it came to negotiating for higher salaries, stripping unions most of their power.
Increased wages created better living conditions, but there were unintended consequences that challenged the nation in later decades: salary increases for workers and legacy costs that came from labor negotiations were priced into the products that went to market.
When global competition appeared, U.S. companies built plants in business friendly states that had right to work laws, where they didn’t have to pay the high salaries and pensions that industries such as steel and automobiles had agreed to.
An arms race began and the intense labor battles hurt small companies that couldn’t compete with the lucrative financial packages the large employers bestowed. Those who couldn’t organize such as women and minorities were either intimidated or discouraged from demanding higher salaries.
The rising tide did not lift all boats, as union worker rose upward the unprotected and unskilled became more impoverished, which eventually created social and cultural gulfs which widened and eventually erupted in rebellions in cities such as Detroit.
These issues I will address in later editions.