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Dean Baker

Dean Baker is co-director of the Center for Economic and Policy Research

March 16th, 2011 10:29 AM

The Key to Rebuilding Workers' Power: Unrig the Rules

The battle in Wisconsin over the rights of public-sector workers holds the potential to reawaken workers across the country to demand their fair share of the economic pie. This could be an important turning point. However, if workers are to make real progress, they must move to alter the rules of the game. These rules have been deliberately rigged against them over the last three decades.

The most obvious of these rules are those governing the rights to unionize, such as those that Gov. Scott Walker directly attacked in Wisconsin. However, this is just part of the story. Unionization has become almost impossible in the private sector, since companies routinely fire workers engaged in an organizing drive.

It is illegal to fire workers for trying to organize, but the penalties are trivial, even if a fired worker presses a case before the National Labor Relations Board long enough to win. Companies will gladly pay a few dollars to the organizers they fire in order to avoid having a union.

It would be a very different world if there were real penalties for violating labor law. A woman in Minnesota got fined more than $200,000 for allowing people to download copyrighted music from her computer. Suppose companies paid the same penalty for illegally firing workers trying to organize a union as this woman had to pay for violating copyright laws. That might encourage some respect for the law.

But this is just the beginning. Over the last three decades, the government has signed trade agreements like NAFTA, the major purpose of which is to put US manufacturing workers in direct competition with low-paid workers in countries like Mexico and China. According to economics and common sense, workers in the United States will lose jobs or see their pay cut when they have to compete with workers in other countries earning one-tenth as much.

This situation is made even worse when the dollar is overvalued. If the dollar is overvalued by 20 percent, we are effectively giving a subsidy of 20 percent to foreign producers competing with our workers. It is not easy to overcome a 20 percent subsidy.
Therefore, a lower valued, or more competitive, dollar should be at the top of progressives' lists of demands.

The Treasury and the Federal Reserve Board can bring down the value of the dollar in international currency markets. If the current crew claims not to be smart enough, we can find people who are up to the job. A more competitive dollar would go an enormous way toward eliminating the trade deficit and generating jobs in manufacturing and other sectors that are open to trade.

The practices of the Fed more generally should be front and center in every progressive's agenda. The Fed's actions are enormously important in determining the course of the economy. If Alan Greenspan and Ben Bernanke had done their job, and reined in the housing bubble, we would not be sitting here with 25 million people who are either unemployed, underemployed or have given up looking for work altogether.

We need the Fed to be governed by people who take its commitment to full employment seriously, not by people who see its job as serving the big banks. The Fed should be moving more aggressively now to bring down the unemployment rate.

More generally, it has to be prepared to occasionally take the risk of somewhat higher inflation if that is the cost of bringing down the unemployment rate. The world looked very different for workers back in 2000 when the unemployment rate was 4.0 percent than it does today. The Fed should be pressed to get the unemployment rate back down to a level that we reasonably call "full employment."

There are many other important "rules of the game" issues that should concern progressives. Corporate CEOs walk away with paychecks in the tens or hundreds of millions of dollars in the United States because they largely pick the board that determines their pay. Increased shareholder power should be effective in bringing CEO pay in the United States back in line with pay elsewhere in the world.

We also need to rein in our patent and copyright system, which create enormous distortions in the economy while pulling hundreds of billions of dollars a year out of consumers' pockets and putting it in the hands of the pharmaceutical and entertainment industries. We pay an additional $250 billion a year from prescription drugs alone as a result of government granted patent monopolies, more than five times the cost of the Bush tax cuts to the wealthy.

The list of rules that need changing is long, but this is where a successful effort to rebuild the middle class must focus its efforts. As long as the economy is rigged to redistribute income upward, tax and transfer policies designed to help the middle class and the poor will inevitably fail. The right knows this; if progressives can't learn this basic fact, then we are spinning our wheels no matter how angry and organized we get.

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