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Friday, September 13, 2019

The Government and Private Interests, 1962 and 2019



Last Saturday’s New York Times reported that the Justice Department has warned four leading car companies—Ford, Volkswagen of America, Honda and BMW--that it may pursue an antitrust case against them for sticking to a deal with the of California that would commit them to meeting mileage targets for their cars—and corresponding targets for carbon emissions—that are much stricter than the loose ones that the Trump Administration has just announced.  I immediately remembered another case, more than 57 years ago, in which the Justice Department threatened leading firms in a major American industry with antitrust action and helped change its behavior to meet a policy goal of the Kennedy Administration.  The comparison is a terrifying illustration of what has gone wrong in American life and American government since the early 1960s.

Some background is in order.  The 1940s, 1950s and 1960s saw remarkable economic growth in the United States, dominated by major industries such as automobiles, energy, and steel.  Meanwhile, they also saw a remarkable growth in the reach and power of the American labor movement, which had successfully organized coal miners, autoworkers, steelworkers, and just about every other major industry.  The unions made pretty steady wage gains for their workers, and their employers passed some of those gains on to consumers.  Inflation had become an intermittent problem during the 1950s, reaching about 3% annually in the middle of the decade, but falling in 1958-9 because of a recession.  Another recession struck in 1960-1, and the new Kennedy Administration, which included a number of prominent economists, wanted to encourage recovery without triggering a new round of price increases.  To do so, the administration, led by its Labor Secretary Arthur Goldberg—himself a labor lawyer—tried to intervene in major contract negotiations.

The American steel industry in 1962 was easily the world’s largest, and changes in its wages and prices always had immediate effects throughout the economy.  Its union contract was expiring in the spring of 1962.  In meetings that included both union leaders and Roger Blough of US Steel, Goldberg and the President made clear that they wanted a new contract that would not lead to a steel price increase.  Blough said nothing in response.  Then, when the parties had reached a settlement, Blough immediately announced that US Steel was raising its prices—a signal to the rest of the industry to do the same.   The President reacted immediately, opening a press conference by declaring that the price increase constituted “a wholly unjustifiable and irresponsible defiance of the public interest.” When the nation was asking the military, union members, and all its citizens for sacrifice, he said, “ the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans.” (Readers who follow this link and read Kennedy’s entire statement will find a rather extraordinary contrast with a day or two of our current President’s tweets.)  The President led a government-wide effort to force Blough to back down, including the opening of an FBI investigation into price fixing in violation of the antitrust laws, and a shift of Defense Department steel purchases to companies that did not go along with the increase.  Within a few days, Blough rescinded the increase.  Kennedy had scored a remarkable victory for his Presidency—followed within the next six months by the successful attempt to secure the admission of the first black American to the University of Mississippi, and then, his remarkable resolution of the Cuban missile crisis.  During 1963 he followed those up with the introduction of the great civil rights bill that would end discrimination in public accommodations and the negotiation of the Test Ban Treaty with the Soviet Union.  No subsequent president has shown such a consistent ability to deploy the power of his office for the public good.

The Trump Administration’s decision to threaten the auto manufacturers with anti-trust action if they continue to observe their agreement with the state of California has an opposite purpose.  Kennedy successfully forced the steel companies to subordinate their private interests to the public interest.  Trump and Attorney General Barr want to help private interests—specifically, energy companies—at the expense of the public interest and the very future of human life on our planet.  Because of its vulnerability to pollution, the state of California has the right to set its own emissions standards, and because of the size of the market it represents, the car companies have an interest in observing those standards.  13 other states also follow California’s rules. Reducing the fuel consumption of our automobiles—now the single largest source of carbon pollution in the United States—is of course critical to any attempt to halt climate change.  The Trump Administration, however, remains in denial about climate change, and does not seem to want to lessen reliance on fossil fuels.  Its Justice Department is now accusing the auto manufacturers of conspiring to build more expensive cars, in an attempt to force them to abandon the California standards.  No one but Koch industries and other fossil fuel producers will benefit if the administration succeeds.

From the 1930s through the early 1960s, a sense of the public interest dominated the political life of the United States.  That enabled us to fight the Depression, prepare for and win the Second World War, and rebuild Europe. We expanded the nation’s housing stock and its school systems, undertook the interstate highway system, and mounted the civil rights movement.  Now nearly every politically active element in our society makes its demands on behalf of a particular economic interest or demographic group, not for the good of the nation of the whole.  That may be the biggest single reason for the catastrophic state of our political life.



4 comments:

Bozon said...

Professor
This is quite a long period and topic for one post.
hard topic to pick at piecemeal.

One area I gleaned out is the Kennedy theme.

Kennedy is not my favorite, so what I say is not necessarily the gospel truth, but seldom is truth just the gospel.

"...From the 1930s through the early 1960s, a sense of the public interest dominated the political life of the United States....No subsequent president has shown such a consistent ability to deploy the power of his office for the public good." DK

While this seems true, has been the story told, other agendas since WWI: liberal, market capitalist, anti Western white imperialist, pro demo libertarian, were stronger than domestic public interest agendas.

Blough had cut a deal with USS's union, as a prelude to a steel price increase, and JFK queered it for political grandstanding purposes. He never ever did anything for the public interest.

Pretty soon, anyway, this whole industry then moved abroad, at first mainly to Japan. No President, most importantly JFK, would have stopped them. He would have claimed that moving steel production to Japan was in the public steel consumers' interest. Terms search Trading Places.

Looking at Kennedy's record re organized labor is just one example. His opposition to unions exceeded his opposition to their protectors, the mob, the only force that could stand against the gilded capitalist backed government forces back then. Hoffa spelled it out. Frank Ragano's book.

Ask not what your country can do for you was not directed at steel, or any other, executives, but at unions themselves. Portraying him as pro union or pro public interest is rather a travesty.

I like the account of the Kennedys in Real Lace. That is a go to source of perspective.

All the best

Energyflow said...

If Trump think he is pro-driver, pro Auto company for cheap production then he would be correct. If CO2 is not his worry as he believes the hockey stick graph is a hoax then that fits into this well. Broadening this perspective it seems people choose own reality on politics, sience, etc depending on whom they listen to. On the left gender concept is unscientific(30 genders, give preschoolers a choice for sex change as basic human right), on the right, environmental destruction as a human right. Moderately acheived agreement on a commonly agreed upon path is out the window.

Yeats made the classic poetic commentary on this political situation:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

This was written in 1919 as Europe lay in ashes and Irish fought for independence. I see similar stirrings in USA, in Britain due to Brexit and elsewhere. Intransigence due to totally differing world views. I could compare the insistence and vehemence of the people who say CO2 is unimportant and that we can continue as is with industrial growth, waste disposal, consumerism, resource use with abandon to the vehemence of certain scientists in support of German govt policy of the 30s who branded Einstein as a plagiarist or discredited relativity altogether as 'jewish physics'. Much as today's popular misunderstanding and confusion on climate science(I read competing versions regularly), relativity in its scope, like evolutionary theory, was perceived as threatening at a basic level. If climate change is correct then 'Progress' is over. Period. We cannot continue growth on batteries and intermittent renewables. We would need a redefinition of modern values entirely similar to any civilization in decline. So really you are starting to 'get religion' about the problem whilenTrump doubles down on the trusted path of 19th century expansionism, limitless horizons. Above comment by Bozon seems a clear takedown of kennedy, a liberal demigod. Problem is now global though. Fleeing auto industries cannot set up shop elsewhere. Stricter emission standards, electro-autos will be more advanced abroad, competitive edge is in technology.

Bozon said...

Professor
Unfortunately, my comment, in isolation, might seem more critical of JFK than of other presidents, of either party, regarding the public interest, trade, industrial, financial, and commercial policy.
I did not mean to give that impression, long story short.
Although you singled him out for approbation, my remarks regarding him might be generalized to almost anyone who sat in the White House.
All the best

Anthony Mugan said...


Dear Professor Kaiser.
Whilst I would suggest that not everything was wonderful in Camelot I do agree very much with the broad point you are making about the fundamental difference in the approach of the 'New Dealers' and the neo-liberal approach that followed (and particularly the more libertarian / Social Darwinian end of that).

There are elements of the neo-liberal world view, and particularly in the more libertarian elements, that have a distinctly religious aspect in that they seem to think the market is both omnipotent and can do no wrong. This is clearly delusional but perhaps it is a convenient delusion if you are a selfish, avaricious narcissist interested only in your personal enrichment and aggrandisement. It is no surprise that Social Darwinism provides a warped philosophical justification for these people's blatant aggression against ordinary people, the environment and indeed anything and anyone that might get in the way of enriching and empowering a few billionaires to an ever greater extent.

In many ways the current situation with climate change reminds me of the position the tobacco companies were in some decades ago. The science is clear and the threat is clear. I see no chance of a change of heart by these people - that would mean denying their god of the market and returning to an approach to government more akin to that of FDR, but they (including the US government) are opening themselves up to legal action on a huge scale.

On a more general note it is disturbing just how angry I have become at the current situation (I am writing from the UK and refer to both the situation here and with the USA). This seems a little strange as I have always been very middle of the road politically (by European standards). Our societies seem to have become deeply polarised in recent years with 'the enemy' now being very much an internal enemy within our own country rather than some external threat. I wonder if there are examples from history of societies that got into broadly analogous situations and found a way out of them without too extreme a crisis / suffering? The examples that spring to mind are not all that encouraging - the run up to the English Civil War, the prelude to US Civil War and the 'gilded age' prior to the Great Depression and all that followed. The latter would seem the more relevant but not exactly encouraging. I hope there are some more optimistic examples we can learn from?