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Posted at 12:00 PM ET, 02/23/2011

Jamie Galbraith: 'The government is not, by any means, a pure representative of the working population.'

By Ezra Klein

The events in Wisconsin are bringing the idea of "countervailing powers" back into the discussion. The concept comes by way of economist John Kenneth Galbraith, who was trying to understand an economy where the competition was not between lots of small companies, as the early neoclassical models had assumed, but a smaller number of large institutions. Organized labor was one of these forces -- they were in competition with producers and retailers and distributors and the government, representing some portion of the American working class. I spoke this morning with Jamie Galbraith, John Kenneth Galbraith's son, and an economist at the University of Texas at Austin. An edited transcript of our conversation follows.

Ezra Klein: Walk me through the idea behind "countervailing powers".

Jamie Galbraith: "The concept of countervailing power" is the subtitle of my father’s first major book, “American Capitalism.” For him, the American economy was made up of large organizations, and to function properly, there had to be a system of checks and balances, of which unions were a critical element. But not the only element. Corporations were acting as countervailing forces on one another. Producers countervailed against retailers and retailers against distributors. There was a whole ecosystem of checks and balances. But the government is not, by any means, a pure representative of the working population. It's a mediator of all the voices that impinge on it. And if the workers have no organized voice in it, well, we get the government we have now.

Your father was detailing these ideas in the 1950s. The economy, thanks to globalization and technological change and policy decisions and a host of other factors, is rather different today than it was then. Is the "countervailing powers" concept still relevant now?

No question the world became much more complicated when the internal system that developed in the United States became exposed to competition and interpenetration with Europe and Japan and more recently, China. But what happened to the unions was first and foremost an enormous attack on them from the American right, which culminated in the 1980s with the Reagan administration. Then, as manufacturing jobs inevitably declined, labor was blocked from effectively organizing in the rest of the private sector, particularly the service sector. But that's not been true in every country. And those countries which have high union coverage manage to stay in the forefront of competitiveness in world industry. If you ask why is it that the Scandinavian countries did so well, it’s not because Sweden discovered oil -- that was Norway. Rather, having to pay decently high wages means businesses have to stay on the front of the technological curve.

And what if labor never gets off the mat, and initiatives like the one in Wisconsin succeed? Are there any other actors in the economy who can play the countervailing role that labor has traditionally played?

There are certainly other organizations in the system. Voluntary associations and churches and so forth. But there’s nothing able to play the role as effectively on economic issues as an organization based on economic roles. Everything else is divided up into particular concerns -- many of which are very important, like civil rights and environmental issues. But what has faded out is an organization with a clear and coherent focus on the economic position on the working population. And not the working population composed of manufacturing workers, but the mass of service sector jobs and others who are not organized.

By Ezra Klein  | February 23, 2011; 12:00 PM ET
Categories:  Interviews, Unions  
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This discussion falls in line with Kevin Drum's recent piece on the deterioration of organized labor and how it caused the Democratic Party to lose it's most important institutional support.


Now both parties have to compete for corporate/business interests while the working class continues to lose its most important "countervailing power" as Galbraith observes.

But how can that institutional power of the working class be realized again? Is it conceivable for unions to make a comeback? Seems unlikely. I fear we're up the creek on this one and must settle for the very short lived periods of barely acceptable progression that takes place during a Democratically controlled White House and Congress...

Posted by: ztdunnam | February 23, 2011 12:31 PM | Report abuse

One point that the current union busters might want to consider. If you take away the collective bargaining rights, the only thing they are left with is the ballot box.

You'll see even higher voter turnout in order to get elected officials sympathetic to their interests.

Posted by: rpixley220 | February 23, 2011 12:32 PM | Report abuse

--*[H]aving to pay decently high wages means businesses have to stay on the front of the technological curve.*--

It sure worked for General Motors and Chrysler.

Posted by: msoja | February 23, 2011 1:15 PM | Report abuse

Back then big corporations dominated the economy: the big three automakers, the big two steelmakers, Ma Bell, etc. all of which were unionized. Add in the oil companies, which were more numerous and, I think, less unionized. Today which corporations dominate the economy? Maybe Google, Facebook, Microsoft, Verizon and ATT, Exxon, BP, and Chevron. The decline of unions tracks the conversion of the economy from bending steel to pushing bytes.

Posted by: bharshaw | February 23, 2011 2:01 PM | Report abuse

I wish we heard more from Galbraith. He's better than Krugman (who's pretty good, in my view).

And, re rpixley220: "You'll see even higher voter turnout in order to get elected officials sympathetic to their interests."
Seems to me if that was going to happen it would already have happened. As Galbraith says, most sectors of the workforce lost their bargaining rights some time ago.

Working people are not voting their economic interests, and/or don't understand their interests. I think it was Yglesias who pointed out the large minority of union households that voted for Walker in Wisconsin last time. It goes way back to the hard-hats for Nixon, and the Republicans shameless pandering to racism and all the noise about "social issues". This has been a very effective smoke-screen for the plutocratic right-wing's underlying and overarching, and highly successful, economic agenda to redistribute wealth upwardly to themselves.

I think it essentially comes down to what the Marxists like to call "false [class] consciousness". Workers have been propagandized to believe that what's good for business owners is necessarily good for them. At the same time that profits have ballooned while wages have drooped.

Saying things like this gets you accused of "class warfare." But... two things. (1) The right has been waging class warfare against workers for 40 years. Workers just haven't noticed (see above). (2) You don't have to believe in class "warfare" to recognize that reality of class competition -- or "countervailing powers" as Galbraith formulates it.

And you don't have to demonize employers (or even capitalists) to understand that their interests are partly overlapping but partly countervailing to those of employees. Higher wages diminish profits -- and vice versa.

Maybe at some point workers will wake up to what's been happening, and frog will jump out of the pot. But it's pretty well cooked already.

Posted by: jtmiller42 | February 23, 2011 2:08 PM | Report abuse

Re bharshaw: Galbraith's point is that this was not inevitable or a necessary consequence of the eonomics or business dynamics. Union busting was a conscious strategy by "predatory capitalism", leveraging both economic control of business and political influence through financing of conservatism. The idea of inevitability is a by-product of their very successful propaganda campaign.

Posted by: jtmiller42 | February 23, 2011 2:17 PM | Report abuse

Public service unions are de facto workers using other people's money to bribe their government management to give them far more than several times the poverty rate, i.e., more than enough to raise a family, and more than they could get in the marketplace, i.e., ripping off the government, harming the recipients of those services (school children), and depriving other qualified unemployed people work. To legitimize them as a countervailing power merely because they are a countervailing power is absurd. The mafia is a countervailing power, too. By the same logic, you would legitimize them.

Their is, of course, a countervailing power to corporations; it's called the people. If corporations are so horrible the people would vote to curtail them. It's only your opinion that they have failed to do so sufficiently. Moreover, you can organize those very same workers to contribute to campaigns without collective bargaining.

You don't have the right side of this and so you are desperate for this corrupt means to have your way in any case.

Posted by: Commenting1 | February 23, 2011 8:24 PM | Report abuse

This is a complex topic, barely scratched here. It's not just a battle between investor classes, financial institutions & corporations on one side & labor unions on the other. One side certainly did win, but the other side also lost, through failed management of their own resources. One of many factors was that there simply wasn't enough competition for professional improvement of leadership within unions. Instead of the likes of Hoffa, if unions had recruited US Marines as leaders, it's doubtful they would have lost the campaign for the heartland of American productivity - and we'd still have an improving instead of a declining "union".

Posted by: roger_erickson | February 24, 2011 9:40 AM | Report abuse

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