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May 1910 to May 2010–100 Years of…Progress?

May 7th, 2010 · No Comments · Corporations and Industry, Culture, Economics, General, Politics, Populism, Wall Street, wars and militarism

By 1910, the United States had changed from a collection of states along the Atlantic Coast and a group of Southern slavery states to an emerging nation spreading across the entire continent. There were only three major cities: New York, Chicago and Philadelphia with over a million population. There were half a dozen other metropolitan areas of over a half-million population: Boston, Pittsburgh, Detroit, Cleveland, St. Louis and San Francisco. There were no large southern cities and none between Chicago and St. Louis and the West Coast.

By 1910, the country was beginning to shift from agriculture to manufacturing, and from rural to metropolitan. In 1870, 54% of the workforce was involved in agriculture; by 1910, only 34% were still on the farms. By 1910, manufacturing had grown to 22% of the workforce. Manufacturing would continue to increase to a peak of about 29% of GDP by 1953.

By 2010, manufacturing had fallen to 12% of the economy, the same percentage as the federal government. To show how the country has changed, the service sector, which virtually didn’t exist in 1910, accounts for 82% of GDP!

By 1953, manufacturing in America was booming. We had more union jobs, more jobs in general that could sustain a family and more exports than at any time in our history. Almost all our domestic needs from autos, to homes to apparel to appliances to electronics were still manufactured in this country. Wages were good, thanks to unions…that is the truth so it is a good reminder, particularly now…and the middle class was readily able to imagine their children climbing into the next higher income category through education and expanded opportunity.

All this was facilitated by a Democratic Party and trade unions that encouraged and protected civil rights and workers rights and promoted Liberal policies. The Republican Party was a positive force in 1910 and throughout most of the century, acting as both a fiscal conscience, a brake on too much Liberalism and a moderating influence on social legislation. The Republican Party during the first three-quarters of the 20th Century advocated for business in order to balance legislation and represent business-oriented and fiscally oriented policies. In those days they were not the Party of “no” but the Party of solid, intelligent, fiscally-oriented restraint.

While totally different in approach, both Parties had an element of populism in their programs. Their approaches to problems were often different but they truly were working on behalf of the People. Unlike the current Neocon Republican Party, the Republicans of the post-war era up to 1980, did have many populist members in the House and Senate, and did, in fact, really work for the people, and not the corporations. In those days, there were probably occasionally more Democrats allied with industry than Republicans because Democrats were in power.

This all led to a strong manufacturing base. In the late 1970s, the increased cost of energy, plus foreign steel and much stronger foreign products at lower prices, even with import duties, began to take its toll on the U.S. economy. When the Conservatives took power in 1980, the impact on U.S. manufacturing was colossal. Campaigns and legislation against union organizing and favoring union-busting put unions on the defensive.

The Conservatives took the ruin of unions as one of their legislative goals. The Neocons have made it their principal goal to ruin both unions and the middle class. A constant drumbeat of false information, a campaign of lies, has damaged union membership which now stands at less than 8% in private industry.

When manufacturing declined, employment declined and union membership declined. In more recent years, cutthroat tactics, like hiring foreign workers or moving entire manufacturing facilities to foreign countries and hiring foreign workers has increased. The Neoconservative, Right Wing propaganda machine spends much of its time haranguing labor unions, blaming them for the movement of jobs overseas, when, in reality, it is management decision, often pure management greed and their lack of patriotism that sends jobs abroad.

In the Neocon, business-controlled labor market today it was an enormous doomsday-predicting struggle in Congress, to pass a $7 per hour minimum wage. Whereas, in 1945, union membership was 35% setting the stage for thirty years of unequaled prosperity.

The era of Liberal Democratic economic success was not topped until Clinton’s remarkable 8 years in office. During one period, from 1995 to 2001, middle class mean hourly earnings increased by 8.3%. Stock and home ownership by the middle class both increased substantially as well. Contrast this with the Bush years during which average hourly earnings increased by 1.6% and household income fell by 2.1%. Prices increased, especially housing, which rose by 17.9%, and not surprisingly debt and personal bankruptcies jumped to record levels, year after year.

In 2010, there is good news for the Labor movement and the middle class. About 36% of all government employees are members of a union, with good pay and benefits. The service industries are now unionizing and private unions have seen a slight rise in membership in the last several years.A Democratic President and a Democratic Congress are working on new legislation for labor to strengthen the ability for Labor to organize.

In 1910 income inequality was less in the United States than in some other countries of the world. In Great Britain, for example, some of the great fortunes were still intact and the top 1% were estimated to possess 60% of the wealth or more. By the 1970s, this had dropped to 20%. In 1910, in Sweden and the U.S. the top 1% owned about 40%, but that dropped to about 20% by the early 1970s.

The surprising part is that the tax cuts in the United States of the 1980s and the shifts in the way earnings can be held by major industrial owners were the opposite of policies in Sweden. In fact, Sweden’s government is characterized by Americans as the ultimate “welfare state.” But in fact, both Sweden and the United States increased wealth inequality during the late 1980s and 1990s. Great Britain, even though following the Conservative mood here in the United States with its own Conservative government, did not resume greater income inequality.

The point is that taxing the rich may affect annual incomes, and may help government pay the bills but wealth is something that happens over time and is less affected by annual tax rates. What does seem clear is that inherited wealth increases overall household wealth inequality dramatically.

Having said that, income inequality in the United States has been on the rise over the last 30 years. In 2007, the top 1% increase their share of all U.S. wealth to 34.6% from under 20% in the 1970s. If you subtract home ownership, and now there are millions fewer people who own their own homes than did in 2007, then the top 1% owns 42.7% of all wealth. It is further astonishing to find that the bottom 8 out of 10 Americans own only 7% of all financial wealth in the country, once again, if you subtract their homes. If you include home ownership and a much smaller number of households own their own home than in 2007, the bottom 80% still only own 15% of all wealth.

In 1910 there were no regulations. The working week was from 54 to 60 hours and the average weekly wage was $15. There was no SEC, there was no FDIC, no FDA and certainly nothing even remotely imagined like OSHA. There was little enforcement and less supervision. Even the FBI was only two years old.

In the 1930s after the dramatic failure of a regulation-free economy ripped apart the fabric of society, the government stepped in. Even prior to that there were regulations that resulted from serious flaws in the way society worked. In the first half of the 20th Century, wage and hour laws were enacted, meat and produce inspections became regular as well as regulation of railroads, radio and television communications. Regulations improved our food quality, protected our citizens from financial and sexual predators, improved industrial relations, and helped to end devastating diseases. Government worked for the people.

In 2010, after 30 years of de-regulation, we once again have people dying of food poison, beaches defiled by oil slicks, financial scandals in which millions of Americans lose their homes and life savings, corporations cheating workers out of pensions, firing them without cause, and shutting down plants arbitrarily while sending their jobs overseas. We have banks charging citizens amounts of money on credit cards for which, before 1980, pawn brokers were called usurers and loan sharks were eventually accurately called felons and convicts. Financial firms are allowed to take depositors money gamble with it, lose it, go broke and demand that the taxpayers give them money to start all over again without penalty.

In 1910, there were no income taxes. But in 1913, the 16th Amendment introduced the income tax and it was severe. If you earned up to $20,000, you paid 1%. If you earned over $500,000 you paid 7%. By 1986, taxes were so high that President Reagan, who had already cut them once, cut the top rate from 50% down to 28%. The problem is that he didn’t cut spending. The result was deficits that have never stopped except under President Clinton, when there were surpluses.

In 1910, there were segregated schools, the KKK, and a growing sense of nationalism that would eventually draw us into WWI, WWII, the Korean War, the Viet Nam War, the First Iraq War, the Second Iraq War, and the War in Afghanistan. Not to mention bombing the Balkans, removing the President of Panama and beating up on Communists in Grenada.

We had hardly any military in 1910. In 2010, our combined defense and homeland security expenditures will be $728 billion. Our revenues will be $2.1 billion, which–thanks to Wall Street and the Bush Recession–will be the lowest in 50 years.

There were virtually no social safety net programs in 1910. Churches and families and private charities took care of the aged and infirm and destitute. Today, we spend about 9% of our gross national product on these programs, Social Security, Medicare and Medicaid. We take in about 18.4% of GDP in federal taxes. But since these programs continue to grow, we need to do something to bring their costs by, say, 2030 to 2050, in line. In other words we need to begin a change now that will provide funds to pay these things in the future.

The solution is to do several things. First, alter the medical health care delivery system, the first step of which we took this year. The goal must be to put in in line with those other countries that cover everyone yet pay half what we pay for health care. Once we have health care costs down to where they should be, then our costs for Medicare and Medicaid will automatically go down, just as will costs for individuals on private health care, to reasonable levels.

We must raise taxes on everyone, including those at the top marginal rate. If we were to have about a 10% increase across the board, that would generate sufficient revenues to come close to balancing the budget once the recession is over and troops are home from Iraq.

Next, we need to add some tariffs and we need to modify the Bush plan for retirement savings. The idea of a retirement fund, a portable 401K is actually a better one than the current Social Security system. (We need to take disability out and make it a simple government pay out to those who become disabled, as we now do with veterans.)

The Portable 401K system would be like a government pension, which would be better and offer more than the current Social Security system. If we do those things, plus insure that all corporations who make money pay at least a 10% corporate income tax and cut the military budget to no more than 15% of GDP, we will be fine.

We have come a long way from 1910. But we have a splendid country with wonderful places to live, great resources, charitable people, good schools and universities, many fine businesses, churches, and many excellent places of recreation. It is still the land of opportunity. All we need to do is move forward and resist the temptation of those who want to take us back to 1910 rather than moving forward to make this a better land in 2110 than it is in 2010.

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