Jamie Galbraith: 'The government is not, by any means, a pure representative of the working population.'
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.
| February 23, 2011; 12:00 PM ET
Categories: Interviews, Unions
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