Tuesday, March 29, 2016

Trump's 45% Tariffs

Think Trump's 45 Percent Tariffs Are Bad? Try Obama's 10,000 Percent Tariffs

Monday, 28 March 2016 00:00By Dean BakerTruthout | Op-Ed
Demonstrators march in a rally in San Francisco, California, against the proposed Trans-Pacific Trade Agreement on January 31, 2014. (Photo: Stop FastTrack)Demonstrators march in a rally in San Francisco, California, against the proposed Trans-Pacific Partnership trade agreement on January 31, 2014. (Photo: Stop FastTrack)
Lately the media have been going wild mocking Donald Trump's plans to put 45 percent tariffs on imports from China. They are partly right. It's not clever to indiscriminately impose large tariffs on major trading partners in violation of existing trade agreements.
On the other hand, the projections of economic collapse are almost certainly way overblown. Furthermore, it would be reasonable negotiate a lower value of the dollar against other currencies in order to reduce our trade deficit, even if the threat of big tariffs might not be the best way of getting there.
But what is even more striking is the selective concern over tariffs. While Trump wants to put large tariffs on imports from some of our major trading partners, President Obama is actively pushing to have far larger tariffs imposed on a wide range of goods in his trade deals, most importantly the Trans-Pacific Partnership (TPP). Measures in the TPP pushed by US negotiators will raise the price of many items by several thousand percent above the free market price.
If you missed this discussion, it's because these trade barriers are referred to as "intellectual property," which takes the form of patent and copyright protection. But markets don't care what term politicians use to describe a government imposed barrier. If a patent monopoly raises the price of a protected drug by 10,000 percent, it leads to the same sort of waste and corruption as if the government imposed a tariff of 10,000 percent, except that in the case of prescription drugs, high prices can also threaten lives.
If a price increase of 10,000 percent sounds high, you haven't been paying attention to what the drug industry charges for its new drugs. For example, the list price for the Hepatitis C drug Sovaldi is $84,000 for a three-month course of treatment. A recent analysis found that Indian manufacturers can profitably produce the drug for just $200 per three-month course of treatment, suggesting a tariff equivalent of more than 40,000 percent.
And we have ample evidence that patent monopolies produce the same sort of distortions that trade theory predicts from extraordinarily high tariffs. First, we have a whole army of lobbyists who descend on government officials constantly pushing for stronger and longer patent protections. The industry employs a fleet of highly paid lawyers who attempt to intimidate generic competitors from entering a market, even if legitimate claims to protection have already expired.
The industry employs a massive number of sales representatives to push their drugs to doctors. And, we are treated to silly television ads that try to get patients to pressure doctors into prescribing drugs even when there is no reason to think they would help them.
And of course there is the enormous waste associated with dealing with high priced drugs. Patent protected prices cause us to have insurance companies that must decide on complex payment systems and the new industry of pharmacy benefit managers that negotiate directly with the drug companies for both insurance companies and hospitals. There would be no place for these intermediaries if drugs were selling at free market prices.
Then we get the bad stuff. Drug companies steer their research toward developing patentable products. Evidence that diet or environmental factors may be important in treating a condition is generally not pursued. Drug companies also routinely pay doctors to push their drugs for unapproved uses. And, they conceal evidence that their drugs may be less effective than claimed or potentially harmful.
It is also important to realize that this is not a minor sector of the economy. We spend more than $400 billion a year on prescription drugs (2.2 percent of GDP). We would likely spend close to one-tenth of this amount if drugs were available in a free market.
We all know the story about how we need patents to finance innovation, but this is nonsense as even some in the pharmaceutical industry are coming to recognize. There are plenty of other mechanisms of paying for research. For example, Andrew Witty, the CEO of GlaxoSmithKline, explicitly called for delinking the price of drugs from research costs. He proposed a system where the government pays for drug company research on a cost plus basis, with the drugs developed then sold as generics. We already support more than $30 billion a year in biomedical research through the National Institutes of Health.
So we do face a very real threat of protectionism, but it is in the form of the Obama administration pushing for stronger and longer patent and related protections in the TPP and other trade deals. Unfortunately most media outlets are perfectly happy with protectionism when the main beneficiaries are drug companies. It is only when someone proposes protectionist measures with the idea that they could help ordinary workers that they get upset.
Copyright, Truthout. May not be reprinted without permission.

DEAN BAKER

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.

Wednesday, March 2, 2016

Break Up Too Big, Too Corrupted Banks

Why the Next President Must Reform Wall Street

Tuesday, 01 March 2016 00:00By Deena Zaidi, Truthout | News Analysis
The New York Stock Exchange on Wall Street, New York City. Many of the reforms suggested by Bernie Sanders address the issues of the 2008 financial crisis, including the issue of banks being too big to fail.The New York Stock Exchange on Wall Street, New York City. Many of the reforms suggested by Bernie Sanders address the issues of the 2008 financial crisis, including the issue of banks being "too big to fail." (Photo: meagankirk / Shutterstock.com)
"The business model of Wall Street is fraud. It's fraud. I believe that corruption is rampant, and the fact that major bank after major bank has reached multibillion-dollar settlements with the United States government when we have a weak regulatory system tells me that not only did we have to bail them out once, if we don't start breaking them up, we're going to have to bail them out again, and I do not want to see that happen..."—Bernie Sanders in a one-on-one debate with Hillary Clinton.
Some of the many reforms suggested by Sen. Bernie Sanders in the 2016 presidential race focus on Wall Street reforms. Along with bridging the wealth inequality gap, he talks about taking some stringent steps to regulate some of the biggest banks by breaking them up.
Here are a few of the reforms proposed by Bernie Sanders that could be a concern to some of the most powerful on Wall Street.
A 21st Century Glass-Steagall Act
Sanders proposes to break up big banks that are "too big to fail" by supporting a "21st Century Glass-Steagall Act." In the February 4 Democratic debate, he said, "If Teddy Roosevelt were alive today, a good Republican by the way, what he would say is: Break them up; they are too powerful economically; they are too powerful politically."
Many economists believed that the integration of commercial banking with investment banking, which was allowed under the repeal of the Glass-Steagall Act, deepened the 2008 crisis. The repeal of the Glass-Steagall Act was called the Gramm-Leach-Bliley Act. The Glass-Steagall Act was passed in 1933 in response to a number of bank failures that happened after the Great Depression. It separated commercial banking activities from risky investment banking activities. But the act was repealed in 1999 under President Bill Clinton after $300 million worth of lobbying efforts. He believed that the act was "no longer appropriate to the economy in which we live. It worked pretty well for the industrial economy ... But the world is very different."

Some of the biggest banks, like JPMorgan Chase, are already 80 percent bigger than they were since they were last bailed out.

After the repeal, the investment banks resorted to risky trading, since such activities remained largely unregulated. These non-bank financial institutions were known as "shadow banks" and were not subjected to traditional banking regulations. They remained in the shadows of the traditional banking system and channeled funds from savers to investors through a range of funding techniques. The shadow banks earned enormous profits from reckless derivatives trading, and their interlinkages with commercial banks and insurance institutions made the risk systemic in nature. Another act that left the multitrillion-dollar derivatives market unregulated was the Commodity Futures Modernization Act, which was signed into a law in 2000. The act allowed inclusion of some of the most complicated derivatives, like mortgage-backed securities and credit-default swaps. In a loosely regulated environment, these risky products brought in lots of uncertainty to the financial system.
Eventually, the banks became so leveraged and huge that in the event of a failure, they posed a huge systemic threat to the entire economy. The estimated value of the derivatives holdings on banks' balance sheets had expanded from $88 trillion in 1999, to a whopping $672 trillion by 2008. During the subprime mortgage crisis, the banks were bailed out with taxpayers' money to prevent financial contagion from spreading to the entire financial system. In 2015, Forbes reported that according to the special inspector general for the Troubled Asset Relief Program (TARP), the total commitment of the US government was $16.8 trillion, out of which $4.6 trillion had already been paid out. TARP was created by the US Treasury to stabilize the economy and prevent any foreclosures in the wake of the 2008 financial crisis.
In 2014, The New York Times reported that US banks still held huge amounts in derivative trading. "American banks have nearly $280 trillion of derivatives on their books, and they earn some of their biggest profits from trading in them," the Times reported. Some of the biggest banks, like JPMorgan Chase, Bank of America and Wells Fargo, are already 80 percent bigger than they were since they were last bailed out.
Reforming the Wall Street Business Model
In a one-on-one debate with Hillary Clinton on February 4, 2016, Sanders highlighted the seriousness of the banking scandals not being treated as criminal offenses. He said, "Kid gets caught with marijuana, that kid has a police record. A Wall Street executive destroys the economy, $5 billion settlement with the government, no criminal record."
The 2008 financial crisis left many scarred due to the greed of the most powerful in the financial system, but post-2008, the banking system witnessed a series of banking crimes. Banking scandals like money laundering, insider trading and foreign exchange rigging involved some of the biggest banks. The concerned CEOs and the involved bank executives either voluntarily stepped down or were sacked in an event of fraud detection. In August 2015, Tom Hayes, a former trader at UBS and Citigroup, was sentenced to 14 years in prison for his alleged role in what was known as the Libor scandal.
Hayes was convicted of attempting to fraudulently manipulate the London interbank offered rate, or Libor, which is the interest rate that banks charge one another for loans in the London market, according to Bloomberg. Galleon Group hedge fund founder Raj Rajaratnam made $63.8 million in illicit profit from 2003 to 2009. He traded in stocks such as eBay Inc., Goldman Sachs Group Inc. and Google Inc., and was sentenced in 2012. The New York attorney has identified 70 additional hedge funds, but the prosecution for them has been very slow.
As of May 2015, global banks have paid more than $9 billion in fines, with many traders and brokers being fired, barred and forced to resign. Many of the banking crimes were related to subprime mortgage lending. In a recent settlement, the world's largest mortgage lender, Wells Fargo, agreed to pay $1.2 billion for engaging in reckless lending under a Federal Housing Administration program.
Reforming the Credit Rating Agencies
Sanders proposes to turn credit rating agencies into nonprofit organizations and make them independent from the shadow of Wall Street. Credit rating agencies (CRAs) give ratings to financial products and sovereigns and these ratings help investors decide which product is safe for investing. Hence, the role of CRAs remains crucial to the economy and investors.
Many of the CRAs were involved in providing inaccurate ratings to products that turned toxic during the 2008 financial collapse. The CRAs knew about the risk of the speculative mortgage-backed derivatives, but still gave them AAA ratings. Currently, the "big three" CRAs - Standard & Poor's (S&P), Fitch Ratings and Moody's Investors Service - control 95 percent of the credit ratings market, with very little competition from any major player in the market.
Sanders aims to make the CRAs independent of Wall Street and to do away with the "issuer-pays model" under which the CRAs operate. The model allows a bond's issuer to pay an agency or agencies for initial ratings and for ongoing ratings. The big three CRAs were criticized for behaving as monopolies during the crisis and providing investors with biased ratings that were inaccurate and lacked transparency. In 2015, a lawsuit alleged that S&P issued inflated ratings that misrepresented securities' true credit risks. Many investors, mostly federally insured financial institutions, lost billions of dollars on collateralized debt obligations (CDOs). Finally, S&P agreed to pay $77 million, in addition to being banned for one year from rating commercial mortgage-backed securities.
Many of the suggested Sanders reforms address the issue of the 2008 financial crisis, including the issue of banks being "too big to fail." A document signed by 170 of the nation's top economists has supported the Wall Street reforms proposed by Sanders. In the document, they write, "The only way to contain Wall Street's excesses is with reforms sufficiently bold and public they can't be watered down. That's why we support Senator Sanders's plans for busting up the biggest banks and resurrecting a modernized version of Glass-Steagall."
The Importance of Community Banks
The 21st Century Glass-Steagall Act and breaking up big banks will surely also encourage the growth of a traditional community banking system that has been adversely affected by the rise of "too-big-to-fail" banks (that have easy access to huge funds). Community banks are roughly defined as small banks that carry an asset size of less than $10 billion. They are vital to local communities as they work on building long-term relationships with their customers. Community banks focus on the needs of local families, businesses and farmers, and provide small loans for local and agricultural businesses. A 2015 Harvard University study found that they provide 77 percent of agricultural loans and 50 percent of small business loans.
But the 2008 crisis and implementation of strict regulations under Dodd-Frank have put this important sector under immense pressure. The cost of sustenance in the current banking environment under expensive regulations has become a challenging factor for many community banks, resulting in mergers or shutdowns. Community banks have seen a decline of 12 percent in their shares of assets since the introduction of Dodd-Frank regulations in 2010. This section of the small banking system had little role to play in the 2008 financial crisis, yet it had to face the repercussions in the form of stringent banking rules. According to the Federal Reserve Bank of Kansas City, "community banks are not major participants in large-dollar wholesale payments systems" and hence "they pose little or no systemic risk to the overall financial system." Sanders' approach toward big banks and breaking them up will help bring back the traditional community banking system and promote healthy and fair competition in the industry.
Breaking up big banks, instating a 21st Century Glass-Steagall Act, restructuring the rating methodology of credit rating agencies and holding bankers accountable for their banking crimes are likely to address some relevant and pending issues on Wall Street.

Sunday, February 28, 2016

Direct Action by Unions is Superior

Getting Beyond the Goods: Direct or Indirect Action in the US Union Movement

Sunday, 28 February 2016 00:00By Dennis GraveyThe Hampton Institute | Op-Ed
Should unionists prioritize direct action, like strikes or slow-downs, over indirect action?Should unionists prioritize direct action, like strikes or slow-downs, over indirect action? (Photo:peoplesworld / Flickr)
It is very possible that in the next few years millions of American workers could win significant wage increases through minimum wage legislation, and do so without militant strikes or building their capacity for shop-floor direct action. For those of us fighting for significant wage increases this is great news, but for those of us fighting for an overthrow of capitalism, this should be very worrisome. Central to this tension is a strategic question, namely, Shall unionists prioritize direct or indirect action? If we aim for revolution, we must choose the former?
Direct action here refers to action on the shop floor using the power of workers in their position as the life-blood of social production. This includes strikes, slow-downs, and various other tactics that directly contest the bosses' power at the site of production. Direct action not only disrupts production, it also questions the legitimacy, and even viability, of the bosses' power. In contrast, indirect action refers to those tactics that exert pressure through the various channels of contestation in broader society, whether that be through legislation, elections, or corporate smear campaigns that fight an institutional tug of war between the companies and the unions. Indirect action stages workers as one interest group among many, vying for influence. Today, within the American union movement, there is a prioritization of indirect action over direct action. When direct action is taken it is only within an overall strategy of indirect action. In this scenario, whether that be strikes included in a corporate campaign or mass worker demonstrations in support of minimum wage legislation, the overall logic of indirect action takes over and explicitly aims to foreclose the more radical possibilities immanent to direct action. The current dominance of indirect action is so entrenched for good reason. That is, because it is the result of decades of careful work developing successful union strategy. However, revolutionaries in the union movement must be committed to a reverse prioritization, not because direct action makes for better union strategy, but because from a revolutionary perspective, direct action is an end in-itself.
To begin, we must establish another distinction, between a purely union framework and a revolutionary one. A purely union framework is aimed exclusively at increasing the bargaining power of workers in their workplace and thus is content in advancing influence with those in power without ever challenging their rule. However, insofar as the union movement is a manifestation of an overall workers movement, it contains more revolutionary possibilities such as those implicit in direct action. The task of revolutionaries working in the union movement is to promote and expand these possibilities. Within this framework a workers movement must not just influence those currently in power to do better by us, but prepare to seize that power and succeed in doing so. Thus, revolutionaries in the union movement must look beyond whether or not something is an effective union tactic, but interrogate how it supports the development of workers' capacity to move from demanding more to taking power. For this, direct action is indispensable. We revolutionaries must be committed to direct action not because it gets the goods, but because it gets beyond them.
What follows has two sections, the first exploring the current dominance of indirect action and establishing why it is so reasonable as a union strategy. The second section argues that direct action is necessary for building a revolutionary workers' movement and that there is an opening in this historical moment for re-establishing direct action within American workers' common experience.
Indirect Action
The essential function of unions is to bargain for better terms in the sale of workers' labor-power. Taken broadly, the terms of the sale of workers' labor-power, the ability for workers to work - whether in the formal or informal sectors and whether directly for a wage or through unwaged reproductive labor necessary to reproduce labor-power - are foundational for working class life, and, consequently bargaining for better terms means bargaining for better lives within the current arrangement of social forces. Within this definition, the various forms of indirect action that are dominating the union movement are neither ineffective, nor inappropriate. Quite the contrary, they're reasonable.
Currently, two forms of indirect action prevail in the union movement: bargaining through the ballot box, and the corporate campaign. When unions bargain through the ballot box, they put resources behind legislative and electoral struggles rather than through direct negotiation with the employer in order to win wage increases, better benefits, and improvement of other terms of work. The most obvious recent example is the heavy union backing for various campaigns to increase the minimum wage, but also includes the various political lobbying and wrangling unions become involved with around laws and policies that make legitimate improvements to workers' lives. Unions decide that attempting to influence the decisions of elected officials, either by lobbying or presenting themselves as valuable pools of election time resources, is a more efficient means to improve the conditions of their members than direct combat with employers. Indeed, it can be easier to win victories through changing legislation and state policy than through bargaining. This is evidenced by recent victories in paid sick day legislation that exceed numerous provisions in union contracts, or in the heralded $15 an hour minimum wage initiatives in SeaTac WA and for hotel workers in Los Angeles, both of which included union exemption clauses meant to incentivize employers to sign union contracts that would presumably include hourly wages below $15.[1] Ultimately, these strategies are predicated on the belief that the official channels of political contestation can be used by workers just like any other interest group, bolstering confidence in the system in its current configuration.
The corporate campaign aims to create an overall strategy pressuring a company, one that includes workplace direct action as one component alongside numerous others. Indeed, the most effective pieces of a campaign often have nothing to do with the shop floor and often do nothing to build shop-floor militancy. These include calling in favors from politicians, counter-branding, low-level boycotts (even some that don't explicitly call for a boycott but aim to amorphously trouble the company's business relationships), or even carefully planned legislative interventions that have nothing to do with workers' lives but pose a threat to the company's business model. A corporate campaign requires a team of campaigners who plan and execute a constellation of attacks on a company that follow subtle legal loopholes, and include skill heavy projects such as building websites and social media campaigns. All this necessitates that the campaign be driven by professional union staff under strict bureaucratic discipline with only occasional engagement of the rank-and-file. As a union organizer once described to me, "the commitment of workers on the shop floor is not so important in the end, because the decisive tactics are always on the corporate level." Corporate campaign strategies are among the most powerful in the contemporary union tool box, and the unions like UNITE HERE and SEIU that have mastered them have been able to make significant gains in contexts where more traditional union strategies have failed. Thus, the corporate campaign epitomizes the contemporary conundrum around direct and indirect action: objectively developing workplace militancy is often only incidental to winning major union victories. Thus, those unionists who aim to advance narrow union victories and are not invested in developing revolutionary directions implicitly see the highly technical and bureaucratically driven corporate campaign as a replacement for a militant and mobilized rank-and-file.
That indirect action is a more reasonable union strategy is rooted in a number of political and economic realities. One reason for this that is often referred to by union militants, such as Joe Burns in his influential 2011 book Reviving the Strike, are the changes to legal environment and the fact that many of the most effective strike tactics, especially those involving solidarity from other workers, have been outlawed or become unprotected. While the effect of this should not be understated, they are not the whole story. For one, the collapse of striking as a common-sense activity for both union leaders and rank-and-file alike appeared most strongly following the 1970s, while the most significant legislative changes came in 1947 through the Taft-Hartley amendment. Beyond this, the unwillingness to violate or bend labor law by union leadership reflects a failure for rank-and-file self-activity to adequately resist the commitment to self-preservation by the union bureaucracy. This quiet, this reticence among workers themselves to take direct action, therefore must itself be accounted for.
One way to account for this reticence is as a reflection of shifts in the political and economic terrain on which American unions struggle since the 1970s. Capital has dramatically shifted its global strategy, most notably by moving industrial manufacturing from the imperial core into the global South, and other areas of low labor standards, thus drastically limited the bargaining power of American workers. Two additional shifts in the American economy have also occurred. First, the role of the service industry has greatly increased, an industry that structurally has less capacity to respond to workers wage demands (see sidebar one for an elaboration of this point). And, second, there has been a corresponding turn toward financialization which simultaneously makes capital more flexible so as to out maneuver workers, and more rigid at the local points where workers have power and thus workers' demands cannot be accommodated. Think, for example, of the franchise arrangement in food service, which simultaneously allows a brand like McDonald's to go global much more easily than a traditional business, but also relies on franchise owners who have little flexibility in their own balance sheet. Responding to these shifts over the past few decades, workers have learned through failed struggles and disappointing victories that direct action is not worth the risk (for more on this, see sidebar two). Today, workers enter quieter workplaces with very little memory or practice of direct action. As opposed to the majority of the 20th century when unions often had to hold workers back, unionist today agonize about how to convince workers to take action and among union organizers it's common sense that talking about strikes will only scare workers away.
One of the most significant economic shifts impacting workers willingness to participate in direct action has been the decrease since the 1970s in the ability for American businesses to grant concessions at the points where workers have the most power. Two historical trends have been contributors to this shift, the turn away from manufacturing in American employment and the overall financialization of capital. First, the decrease in manufacturing's role in the American working class can be see by the fact that in 2012 approximately 80% of the American workforce was employed in the service industry with 7% in manufacturing, as opposed to the 68% in services and 25% employed in manufacturing in 1970, even while the overall output of American manufacturing has continued to increase.[2] Manufacturing is founded on adding high amounts of value to a product at the point of production, usually with expensive machinery. This means that an increase in the cost of labor has a relatively small impact on the overall profitability. In contrast, service sector companies are often less capable of conceding to higher wages because service work necessarily relies less on labor saving devises and mass produced materials than manufacturing, and as a result the cost of labor is a larger portion of the operating costs, and hence wage increases have a larger impact of profitability. Quite simply, granting dramatic wage increases would jeopardize their viability as capitalist enterprises. While some sections of the industry are attempting to get around this by beginning to incorporate labor saving devices, such as the "self check-out" technologies seen in many grocery stores or computer automation of white collar tasks, there is still a structural difficulty for union movement attempting to lead an economy wide shift in wages by increasing workers' bargaining power in the service sector. In large part, the American economy built since the economic crisis of the 1970s wasn't low wage out of avarice on the part of those in power, but out of structural necessity.
Dynamics deriving from the financialization of capital add to the tightening of the potential for worker direct action. Since the 1970s more and more economic activity happens within the abstract money pools of banks and investment firms that allow capital to collect together meager margins to satisfy its insatiable growth imperatives. This process has the para
doxical structure that while investment becomes more flexible and dynamic, firms and outlets making up the links in the chain of production being invested in become more and more fiscally rigid. Today's financial monopolies fracture and convolute the structures of accumulation and risk such that the financial firm is less vulnerable to disruptions in production in any given firm or industry. In order to accomplish this, capital abstracts itself from the specific enterprise so that the pools of money that make up a buffer to risk reside far removed from the individual firm that might face such a disruption. For example, consider what happens when a holding company buys a smaller firm, they squeeze the margin, push operating principles to the point of breaking, and when they do break, the financialized capital is unscathed, while the individual workers and local management are left out to dry. A private equity firm makes a point of diversifying its portfolio enough to withstand disruption of production, whether that be from an earthquake or a strike.
Thus, even while automation seems to create more choke-points in production that are exposed to worker militancy, their position within diversified portfolios means capital has already headed workers off at the pass. What's more, these financial structures create a more elaborate ownership system such that any individual site of possible worker direct action does not have the budgetary or bureaucratic flexibility to meet the kinds of dramatic demands workers look for in a union movement. For example, the franchise arrangement, seen so often in fast food, effectively insulates the brand corporation from the day to day operational risks of a restaurant and shrinks the margin of each employer who thus remains vulnerable to workers disrupting production but unable to provide the standards workers might demand. All this adds up to the fact that where workers have the most power to disrupt production, employers have the least capacity to concede to workers' demands, meaning that direct action unionism is the hard road, and often seemingly the impossible one.
Over the last 30 years the strike has died as a mainstream union tactic not merely because it has lost fashion within official union leadership, but more importantly because workers have themselves become less inclined to disrupt production. This shift has something to do with the development of a reactionary pole within traditional white male base of the union movement, but has more to do with a general understanding by workers of the difficulty of winning through direct action. This is in part due to a series of defeats throughout the 1970s of which the oft cited PATCO strike, broken by Ronald Reagan in 1981, serves as a cap stone. Beyond defeats were the disappointing victories like the Farah garment factory strike beginning in 1972 and ending in 1974, in which meager gains took years of arduous struggle to achieve. Through these experiences, as well as many more too mundane to be documented, workers developed a collective understanding of the objective conditions that made direct action so ineffective. Additionally, changes to the structures of social life on the shop floor made conditions less conducive to the development of cultures of direct action. Workers transitioned from factory floors with collective dining rooms and mass shift changes that brought workers together and facilitated coordination, to the smaller and more fragmented work environments of food service, retail, healthcare, and others that separate workers and hinder self-organizing. As a result of this, American workers decided en masse that fighting hard on the shop floor for the union and even against it just wasn't really worth it. As new generations of workers passed into quieter shops, the memory and common sense of disrupting production faded and, with notable exceptions, today the idea of going on strike for most workers triggers anti-union sentiment and fear.
Over the past forty years leftists in the labor movement have accommodated themselves to this reality, and have, for the most part, rallied behind the various forms of indirect action that have scraped out some victories. This optimism is not entirely misplaced even from a more revolutionary perspective. Indeed, bargaining through the ballot box and the corporate campaign represent a broadening of the perspective of union leadership, and an opening up to creativity and youthful energy, away from protecting their membership in disregard or even opposition of the interests of the broader class. In some cases, legislation even relies on mass solidarity in an electoral coalition. In a corporate campaign, ties are built far beyond the traditional house of labor, and often the tactics of a corporate campaign involve acting, if instrumentally, in solidarity with other movements. Ultimately however, these positive tendencies will merely amount to a more friendly bureaucracy maintaining capitalism unless millions of militant workers develop their direct action skills and prepare to revolutionize production themselves.
Direct Action
Revolutionaries in the union movement should advocate for more direct action, but beyond this, supporting workers taking direct action must be seen as the goal for revolutionaries' involvement in unions. Building the institutional power of unions is derivative of this goal, and should be constrained by it. Too many unionists who want revolution see things in the exact opposite way. For them, building the unions is their primary goal, and they evaluate direct action strategies based soley on that goal. When posed with direct action possibilities that will advance the working class' fighting capacity, but risk damaging the power of a particular union, many chose the path that protects the union. This cannot be the foundation for a revolutionary strategy. This can be seen in two ways. First, by elaborating more fully how direct action plays in indispensable role in a proletarian revolutionary process, and, second, by arguing that the historical forces preventing a mass culture of direct action in the United States may be vulnerable.
The two main justifications of direct action's independent value to a revolutionary process are its ability to "get beyond the goods" and its role in ensuring a democratic and proletarian character to movements. The relationship between union organizing and revolution contains a fundamental incongruity: a union struggle fights for better terms within capitalism, while a revolutionary struggle fights for the overthrow of capitalism. The revolutionary significance of union struggles is therefore not immediately given, but depends on their ability to articulate a path for the activity and consciousness of workers to transform from an economic struggle over terms within existing power relations, to a political struggle for social power itself. The 20 th century arc of union struggles within the United States and Europe demonstrates clearly that this transformation does not occur once sufficient institutional bargaining power is developed, even when those unions have left-wing leadership. On the contrary, once unions are large enough to exert substantial influence over the bosses' business calculations and government policy the goal of the union does not tend to shift toward demanding control over industry, but rather to the defense of their seat at the table.
The revolutionary content of union struggles does not reside in growing the institutional power of unions, rather in direct action. This is because, structurally, direct action offers a fundamental ambiguity between fighting for more and fighting for power. Direct action cuts below the institutional games of social position, and is embedded in the ordinary lived experience of workers. Further, it re-articulates the material realities of production and demonstrates that the bosses' view of the workplace is ultimately absurd and illegitimate. When workers walk off their stations they challenge the primacy of the machines workflow over human labor. When workers take ownership over their uniforms by wearing buttons they dismantle the claim that the boss "has" employees. And, when workers strictly follow work rules in order to slow production they undermine management's claims to wisdom about how work should be done. Direct action is more than just a tool to pressure the bosses, it is also an incubator for a radically different vision of the world, one that is directly antagonistic to capitalism. As a historical example, the Seattle general strike in 1919 pushed many conservative labor leaders to implicitly question the authority of capital over the means of production because they were compelled to organize key social functions themselves as workers, not because of the need to win larger concessions. This shift came from necessities of the general strike tactic itself beyond ideology. When workers decided to stop work for the boss, they asked how necessary social functions would continue such as hospitals, basic transportation, food, electricity, and answered with self-organization. In this example, the unions became more than a vehicle for union struggle but rather a conduit to more revolutionary activity.
A commitment to direct action also tends to resist the bureaucratization and centralization of unions. In contrast to bureaucratic and centralized perspectives on struggle, which determine a course of action based on general trends and static categories, the factors in the workplace that inspire workers to take direct action are always specific to local context and change dynamically through struggle. Thus, workers confident in their capacity to disrupt production through direct action will tend to take action in ways that similarly run contrary to bureaucratic and centralized logics. This was the conundrum of the American union leadership during WWII. There was an official truce of industrial action between the major companies and the unions, not merely out of patriotism but also out of a strategy of building social influence. However, there was also an explosion of rank-and-file militancy that was rarely in response to wages or derived from premeditated strategies but rather was in response to the daily injustices of capitalist production. Workers were compelled, despite good union strategy, to flex their muscles and demonstrate who really controls the shop-floor. For those who sought institutional power at the bargaining table, this posed a serious threat, but for those who want to see a self-mobilized working class teaching itself how to run society, this moment was a historic high point.
From the perspective of a revolutionary process this independence is necessary to maintain the emancipatory character of explicitly political workers movements, classically manifested in the political party but also including councils, communes, and other forms that vie for social power. As much as these raise workers revolutionary aspirations to a higher level, they are just as prone to turn inward, defend meager gains and restrain the autonomous revolutionary process of workers. One need look no further than the Bolsheviks' tragic betrayal at Kronstadt to see the dire consequences of abandoning rank-and-file autonomy. More up to date, the inability for the Occupy moment to include significant workplace disruption manifested an important horizon for the movement. Without the ability to substantively degrade or disrupt the power of society's rulers, it was left as merely a symbolic cry for change and fell victim to authoritarian and toxic small group dynamics within the core of local organizers. Had there been strike waves in response and in solidarity with occupy, the center of the movement would have remained closer to the working masses rather than the handful of leaders who had spent the most time in meetings. That this transition did not occur was clearly inevitable. In my experience at the time working as a union staffer at the time union leadership primarily focused on maintaining institutional power actively blocked any contact between the movement and the union or the rank-and-file. The solution to this blockage will however not come from a more progressive official leadership, but a rank-and-file that is more prone to direct action regardless of its leaders temerity.
Even if one finds these arguments convincing, their relevance to the current American situation is justifiably controversial. Without a generalized foment of strikes and worker direct action like that occurring elsewhere in the world, the most reasonable position of an American unionist, leftist or not, is that we must resign ourselves to a working class that is reluctant or even resistant to direct action. But strange winds have been blowing on the American landscape. We've seen multiple waves of protest, some more formally orchestrated than others, and the underlying economic reality is not so predicable as it once was. Perhaps the first sign of shifts came in 2006, when the immigrant rights movement mobilized millions of workers to participate in May Day demonstrations under the banner of, "A Day Without an Immigrant." Workers called in sick or took off from work that day across the country, causing some businesses to close for the day, effectively conducting a mass strike. Indeed, over the past 25 years Latino immigrant workers have been at the center of some of the brightest spots of the US labor movement, but the challenge has been translating the rebellious spirit these workers brought with them from Latin America to other sections of the working class in this country.
The economic crisis that reached its dramatic apogee in 2008 has shifted the material conditions in just such a way as to make that possible. That crisis was the culmination of the low demand driven in part by the depressed wages of neoliberalism and after this material situation exploded in 2011 workers were able to think that it was possible to act in a big way and take on seemingly immovable assumptions of our society, such as our low wage-economy. Workers' increased willingness to take action was first demonstrated through the SEIU fast food organizing project that has become known as Fight for $15. Though most are familiar with the project, there is important demystification needed to demonstrate its true significance. SEIU spent millions of dollars supporting hundreds of people, some with little to no labor organizing experience, to spend their full time over the course of months or even weeks walking into stores and, under very shallow cover, asking low wage workers if they wanted to fight. Moreover, they did this without especially detailed thought as to whether a workplace was particularly vulnerable to worker collective action or if workers were particularly prone it. In essence SEIU conducted a survey in dozens of cities across the country, asking workers, "do you want to go on strike for higher wages?" What's historically significant is that the answer was not a resounding "No." I'm convinced that this would not have been true ten or even five years ago. Regardless of the subsequent course of SEIU's organizing program, this gives unionists across the country a powerful indication that things might be very different than we're used to.
Another demonstration has been the Black Lives Matter movement and the events in Ferguson, Baltimore, Minneapolis and Chicago. Even if it falls outside the workplace, this emerging movement still represents workers' willingness to take dramatic, militant and even dangerous action to effect change. Many of the most militant sections of this movement have been structurally excluded from formal waged work, and it is an open question whether this fighting spirit will move into the traditional workplace. If the past is any example - particularly the arc from the urban rebellions of the 1960s to the League of Revolutionary Black Workers, made up of black revolutionary workplace organizations beginning in Detroit auto plants - then that seems distinctly possible. Two events in the Twin Cities, Minneapolis and St. Paul MN, that predated the movement surrounding Jamar Clark's death, offer exciting hints of this. First, a Black Lives Matter march in the Mall of America inspired numerous workers to abandon their work stations and participate, including food court workers, still in uniform, who stood with their hands up in the gesture popularized in Ferguson MO. Second, workers in a UPS distribution hub intentionally mishandled packages from a company that produced firing range targets meant to train police officers not to hesitate at shooting innocent looking people who held guns. The workers called their action, "Hands Up, Don't Ship," directly referencing the slogan from Ferguson, "Hands Up, Don't Shoot." While the Twin Cities certainly have an exceptional history of both worker militancy and anti-racist struggle, these examples still do offer hope for a more general trend.[3]
In sum, it seems very likely that workers in the United States are ready to fight for better, and do so through dramatic direct action. This claim is only a hunch, but an educated one, and one that ultimately cannot be confirmed purely through study and reflection, but only with active experimentation.
A Call to Action
All of this leads then to a call for action. The only site to realize the potential of our moment to re-establish militant direct action in workplace is the workplace itself. We must go to the workplaces and take direct action, support the development of histories and cultures of taking direct action, help build infrastructure to spread it, and do this in a way that puts rank-and-file workers in the driver's seat. If workers are indeed ready for this in a historically novel way, then targeted and intentional interventions could be enough to spur more spontaneous activity and move the strike back into the common experience and tool-kit of the American worker.
Of course things are not so simple. There are innumerable questions to be answered: What workplaces to go to? What kind of strategies of direct action to take? And, How to make these actions inspire confidence in workers rather than despair after failed adventures? And, Isn't indirect action, especially corporate campaign tactics, still a necessary and even primary tool for winning concessions? Despite the considerable merit of these questions, in a certain sense they cloud the important point, that the dominance of indirect action over union strategy means that claiming direct action in the workplace as our first priority is a qualitative leap forward in revolutionary strategy. Thus, there will not be a specific program presented here, rather a call for commitment to this core claim and for tremendous imagination in its realization.
That being said, these complications are serious matters. There are real forces that push against initiatives prioritizing direct action. Within the union movement, any serious push for the primacy of direct action will be highly controversial, and likely come into stark conflict with the institutional interests of a given trade union. Pursuing this prioritization may necessitate going wildly "off program" and there by risking one's job as a staffer, or one's influence with leadership as a rank-and-filer. Objectively, it is still true that action outside the workplace, and even of a very indirect variety, are essential to union campaigns. The historical shifts noted above have not made bosses more permissive of organized disobedience, and thus direct action will mean taking substantial risks. Even for those who agree with this, taking the position seriously means we will have to break from the comfort of the established union movement and expose ourselves where we are vulnerable.
To tackle these complications we must gather our forces in order to develop smart and compelling plans, and more importantly, to successfully execute these plans. This task will take organization and working within organizations, but we must be careful about what kind of organization. There are moments when one can take small steps toward direct action's primacy within the framework of the existing trade unions, but those moments are few and we must keep in mind that our goal is not the same as the unions'. Unions can help workers develop valuable skills, spark dramatic action, and increase the capacity of workers to fight, but the revolutionary potential of these pieces will be developed outside of the union framework. Rather than see unions a building blocks from which we can build a revolutionary movement, we must see them as tools, limited in specific ways, but which can be used to advance the workers movement beyond fighting to better terms for the sale of our labor-power and to struggling for the abolition of the wage itself.
Ultimately, we must aim to build organizations committed explicitly to the primacy of direct action. These will need to be independent of the trade unions' horizon and able to nourish workers' more political aspirations. Accomplishing this will include developing existing networks of rank-and-file militants like the IWW solidarity networks, and Labor Notes, as well as charting out new ones. These organizations will ensure that the risks we and other workers take aren't reckless, but build our capacity to support each other and become an infrastructure allowing direct action to become more possible, more effective, less risky, and hopefully by extension, more widespread. When we have ways to have each other and our coworkers' backs, and the ability to put our weight and resources behind these bold actions, then we stand a chance of seeing a new day for the American workers movement. Workers are ready for it, and we must be too!
Notes:
1. For the SeaTac example see Jonathan Martin, "Are Unions Self-Dealing with SeaTac Minimum Wage?" Seattle Times, November 4, 2014, accessed December 19, 2015, http://blogs.seattletimes.com/opinionnw/2013/11/04/are-unions-self-dealing-with-seatac-minimum-wage/. For the L.A. example see Peter Jamison, "Why Union Leaders want L.A. to give them a minimum wage loophole," Los Angeles Times, July 27, 2015, accessed December 19, 2015 http://www.latimes.com/local/cityhall/la-me-union-exemption-20150726-story.html
2. These numbers reference Bureau of Labor Statistics data. For 1970 see http://www.bls.gov/opub/ee/2012/ces/tableb1_201205.pdf for 2012 http://www.bls.gov/emp/ep_table_201.htm.
 3. On the Mall of America action see the article from the Industrial Worker posted at Libcom.org, x378436, "Anti-police brutality protest shakes things up at the Mall Of America," January 18, 2015, accessed December 19, 2015 https://libcom.org/library/anti-police-brutality-protest-shakes-things-mall-america . On the "Hands Up, Don't Ship" action see labor notes article, Flintheart Glomgold and Launchpad McQuack, "'Hands Up, Don't Ship!' Minneapolis UPS Workers Protest Shipments to Missouri Police," Labor Notes, August 26, 2014, accessed December 19, 2015 http://labornotes.org/blogs/2014/08/hands-dont-ship-minneapolis-ups-workers-protest-shipments-missouri-police.
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