Abstract
Given the comprehensive discussion of Dismantling Solidarity offered by my colleagues in this symposium, I feel liberated to focus on what I consider to be Michael McCarthy’s signal contribution to the dynamics of government social policy development, and – most precisely – the modality and impact of external pressure on the formulation and implementation of these policies. For me, then, McCarthy’s focus on the development of pensions in the U.S. system gains originality and generality because he has discarded the intellectual confines of arguments that allocate primacy to a single set of social pressures demanding new policies and seeks to trace the path that this pressure followed to fruition. Instead, McCarthy views the development and evolution of the U.S. pension system as a multi-dynamic process in which the constantly changing policy profile emerged and re-emerged from the complicated interactions of powerful actors seeking partially contradictory outcomes.
I think the larger theoretical perspective that emerges from the complex arguments that McCarthy offers can be best described by the paradoxical term “trialectics.” Without ever asserting it explicitly, McCarthy sees the critical moments in the history of the United States retirement system as the (largely unintended) consequence of three interconnected dialectical relationships: the classic struggle between capital and labor – found in this text in various forms from massive strikes to maneuvering within labor markets; the contentious, evolving relationship between government and labor – finding expression in venues that include electoral campaigns and union regulation; and the fraught interactions between government and corporate management – ranging in this history from lobbying to military intervention into corporate functions.
McCarthy deploys these three sets of dynamics to explain the causal structure of the major moments in the non-linear evolution pension system in the United States. To illustrate this trialectical analysis, I will focus first on the rise of defined benefit pensions (DB) just after World War II. These pension systems guaranteed a certain income (based on remuneration levels while employed) after retirement. Workers sought these benefits as part of union contracts when it became apparent that the Federal government would not increase the still-developing Social Security to assure adequate after-retirement income levels. These DB pensions ultimately became a key part of the contracts that the Truman administration mediated/negotiated/imposed on unions and management during the turbulent post-World War II period of frequently violent class struggle that animated the expansion of industrial unions. By focusing on this moment, I think we can perceive the usefulness – even brilliance – of McCarthy’s multi-dynamic analysis, as well as point to the areas in which more work is needed to fully document the causal story – and theoretical perspective – he is offering.
McCarthy’s analysis of the institutionalization of defined benefit pension funds exhibits all the components of his trialectical logic in a visible and powerful (and very persuasive) way. But it also illustrates a propensity to underestimate the importance of one element in the trialectic – the direct corporate–labor struggle. After documenting relevance of the worker agency in bringing DB pensions into the foreground of political and economic policy, McCarthy posits that union power itself was not enough to coerce management into delivering this benefit to the core sectors of the U.S. economy. His argument rests on the impact of the loosened post-war labor market, caused both by returning soldiers seeking civilian jobs, and by the post-war recession that lowered demand for key industrial products. These factors allowed management to endure strikes by selling-off stockpiles of previously produced – but still unsold – inventory. This was certainly a factor in allowing/encouraging management to endure – even invite – strikes, and to hold out for much longer periods than during the war, when the pressure of war-production was intense. This aspect of McCarthy’s analysis is, I believe, incomplete; a point to which I will return in a moment.
In McCarthy’s interpretation – which I think is spot-on – the massive strike wave after World War II (the peak year, 1946, remains to this day the biggest strike year in U.S. history) interfered with the U.S. fulfilling its political-economic roles as the production center for the rebuilding of European and Japanese economies. This program – symbolized by the iconic Marshall Plan – was not only the centerpiece of the Truman Administration’s ambition to insure that the United States would become the economic engine of the “free world,” and to deliver the benefits of European and Japanese reconstruction to the U.S. capitalist class; but also to assure that the post-war recession would not metastasize into a renewal of the pre-war Depression. With so much at stake, the Truman administration chose to intrude into the roaring class struggle by engaging with both the workers and management – thus activating the other two elements in the McCarthy trialectic.
It is critical to McCarthy’s analysis that the Truman administration was primarily concerned with restoring maximum production, and that there was no a priori agenda involving pension plans, and certainly no commitment to DP (defined benefit) pension plans. In fact, Truman initially sought to end the economic disruption by attempting to suppress strikes through the threat or reality of government intervention, including utilizing direct military intervention to violently break picket lines and/or man production and transportation facilities. Despite many instances of successful application of government power, the massive strike wave continued, and it became clear that government intervention could not alone end the crisis.
Eventually, government strategy evolved in a more mediating role, seeking to negotiate union contracts that would be acceptable to both management and workers, and assure that further disputes would be settled without chronic disruption of production. The package that emerged included very substantial wage increases, DP pensions, and a host of other benefits that would become standard in unionized industries and eventually diffuse outward to much of the economy. In exchange for granting these expensive concessions, the unions ceded to management unfettered control over shop-floor decision-making. Most significantly, they abandoned work stoppages as protection against unremunerated intensification of production and other contract violations, and accepted (and enforced on their members) what would become unworkable slow-moving grievance procedures. Aided by the Taft–Hartley Act, which engineered the suppression of the more militant Communist wing of the labor movement, this initiative reduced the level of disruption to levels consistent with Truman’s ambitions for U.S. economic hegemony in the “Free World.”
I think that McCarthy’s argument hits all the major marks and constitutes a full-spectrum analysis of how pension policy became organized around employer-based DP plans. Though the 1946 strike wave was not animated by workers’ demands for adequate pensions, the Truman Administration mediators eventually discovered that the workers would relax their demand for substantial control over the work process (exercised through work stoppages) if they were offered pension plans (and other benefits) that promised to give them long-term economic security. Thus, on the workers’ side, this was a textbook case of government-mediated union negotiation.
But I think that McCarthy’s argument is incomplete when we look at the management side of the bargain. McCarthy does not explicitly lay out the underlying decision-making on management side, but he offers a sketch of its parameters. The long struggle with workers that created the 1946 strike wave had not altered management’s unwillingness to concede some control over work process, major wage concessions, and/or a generous benefits package that might include DP pension benefits. In McCarthy’s analysis, the use of product stockpiles and the loose labor market made these strikes less coercive than they might have been, and government intervention had worked in management’s favor, by re-activating shuttered plants and stalled transportation. In this circumstance, government intervention against management was needed. Truman therefore developed a package of concessions that would bring labor back into the factories and imposed this bargain on still-recalcitrant management. But McCarthy does not explain why the government had this power of imposition, or – more broadly – what exercise of leverage brought management to the negotiating table?
It is here that I think McCarthy’s analysis is incomplete. To my eye – and I would hope that future research will document this – the Truman Administration did not apply leverage to management, the leverage was actually applied by the workers. Recessions and high unemployment are not a definitive weapon against well-organized workers in tightly coupled industries – the Great Flint strike during the depth of the depression proved this point to workers and armed them for the post-war confrontations. The flexible production systems of the time, combined with the post-war ability of unions to shut down whole industries, gave the workers (and their unions) incredible leverage within the worker–management dialectic.
McCarthy implicitly acknowledges this by describing the various interventions by Truman to forcibly break strikes, including sending troops to replace workers. In some circumstances these interventions may have worked in favor of workers (a point that McCarthy emphasizes), but in many other cases it worked in favor of employers, who refused to grant the concessions that would have brought the workers back, and relied on government intervention to man factories with scabs or soldiers, government force to break picket lines, and the legal system to punish striking workers and drive others back into production. Over and over again, management refused to grant packages of concessions similar to – and often less expensive than – what would later be accepted.
McCarthy views the government–business dialectic as a more-or-less constant confrontation in which Truman was urging corporate management to “give in” to at least some of the workers’ demands. In this context, he demonstrates that Truman – compelled to protect the economy as a whole and the U.S. role as economic hegemon – had good reason to press corporate leadership to grant major concessions to labor. At the same time, his analysis of the government–labor dialectic yields both electoral and economic reasons for Truman to support some concessions to labor.
But if we look at this equation without understanding the power relationship between Truman and the major corporations, one would expect Truman to impose a victory for labor on management, giving workers the wage and work process concessions that were their primary demands, with workers punishing him with electoral defeat and/or disruptive strikes if he failed to extract these concessions.
But this did not occur. I think the reason is simple: however much Truman may have desired to deliver a victory to the workers, the government did not have the power to impose such a drastic solution on business. (Moreover, neither did Truman have the power to impose a corporate victory on the workers, who had already absorbed his maximum repressive effort without modulating the disruption.) In this case – and perhaps many others – the government could not impose in either side and was destined to act as a mediator by finding a package of concessions acceptable to both sides that would therefore produce labor peace.
So why, then, did management finally concede so many expensive concessions, including the defined benefit pensions which would become central factors in waves of corporate failures, bankruptcies, and debt-imposed mergers a few decades later. In my view – and I think amply gestured at in McCarthy’s text – the leverage that brought them to the negotiating table was the same strike wave that had activated the Truman Administration. Only after months (even years in some cases) of repeated crippling work stoppages did corporate management finally decide that intransigence and repression – even conducted by the U.S. army – would not restore “labor peace” soon enough to avoid permanent damage to corporate viability. Continued insistence on total victory would yield continued disruption, and there was the lurking danger of sinking into a renewed Depression.
McCarthy demonstrates that Truman understood this logic, and that it ultimately activated him to intervene. But McCarthy does not point out the importance of management’s eventual acceptance that they had to give “something,” and to decide for themselves what they were willing to “give” and what they were unwilling to concede. Once this negotiating posture had been forced upon management by the workers’ continued disruption, the government could fruitfully perform the essential mediation, while using the government’s resources to modulate the arrangements. The final package thus preserved management’s unfettered control over the production process, while granting labor enough material benefits to end the strike wave.
The logic implicit in McCarthy’s argument – and made more explicit here – deprives the government of determinative power in implementing a negotiated settlement between capital and labor. But it allocates to government the initiative in selecting pensions as a key sweetener that both sides could embrace. A major factor in determining this as the selected sweetener was that a number of major unions had already won such pensions, and that Truman could see ways of making this an acceptable concession.
As McCarthy points out (p. 76f), the existing pension funds had already become a substantial source of investment capital, with worker representatives participating in the decision-making over their disposition. This power was developing a new source of leverage for the unions who could utilize (partial or full) control of the investment of the pension funds to influence the profile of local development, notably by investing the funds in worker housing or other local projects. This enhancement of union power made corporate executives particularly resistant to including DC pensions in the negotiated settlement.
However, this sticking point was ameliorated by a provision in the 1947 Taft–Hartley Act that allocated control over single employer pensions funds to the corporation, with no control or input from the workers or their union. Once this government initiative took hold, DP funds became an attractive concession to management, and thus assured that both sides would be willing to accept them.
This is a symptomatic example of the constrained but important role that government played in mediating the relationship between corporations and their workers. While the government could not (and did not) impose a settlement of the 1946 strike wave, it nevertheless could alter the terrain in which the concessions were negotiated, in this case by altering the profile of pension fund investment to make it more acceptable to management; and thus, preparing the way for corporate leaders to embrace it as a concession that would quiet the labor upsurge.
I think that critical moment after World War II, one of three major moments in pension history that McCarthy scrutinizes, allows us to see both the value and the promise of his trialectic analysis. The outcome of the 1946 labor upsurge was determined by the complex intertwining of three contradictory relationships: the struggle between labor and capital which, at that moment in history, tipped toward the workers; the complicated combination of repression and negotiation between government and unionized workers around ending the strike wave; and the mutually coercive relationship between government and the corporate world over granting concessions to rebellious workers.