Once Upon a Time in America
Why GM and the UAW's postwar economic vision failed.
BY MICHAEL BARONE
Sunday, November 27, 2005 12:01 a.m.
The end, or the beginning of the end, of a familiar and comfortable world: That's how General Motors' announcement last week of massive layoffs and plant closings, following the bankruptcy of Delphi last month, strikes one who grew up in the Detroit area in the two decades immediately after World War II. In that world, it was easy to imagine you were at the center of the economy. Detroit was then the fifth-largest metropolitan area, the home of the Big Three auto companies and the United Auto Workers--national institutions of the greatest importance. The news media followed the negotiations between the UAW and the Big Three company it picked as a target every few years, and it was assumed that the wages and benefits agreed to would set a pattern for the whole economy.
And a very good economy it seemed to be. Left behind were the Depression and the anxious years of World War II. The UAW was able to negotiate big hourly pay increases and generous medical and pension benefits as well. With no effective competition, the Big Three could pass along the cost of UAW contracts to consumers who seemed willing to pay more for dramatically restyled and heavily advertised cars. General Motors' president, Harlow Curtice, was Time's Man of the Year for 1955. This was a recognition not just of an individual (I wonder how able an executive Curtice was) but of a system; Time might have honored UAW's longtime president, Walter Reuther.
The success of the Big Three and the UAW seemed a fit symbol of America's postwar economic dynamism. In fact, this was an economy characterized not by dynamism but by stasis, to use Virginia Postrel's term in "The Future and Its Enemies." New Deal legislation had been designed not for economic growth but for protection from the downward spiral of deflation. Those laws, not least by encouraging unions, strove to prop up wages and prices and to provide security to workers and existing firms. Keynesian economics was employed to flatten out the business cycle as much as possible and to reduce unemployment.
By the mid-1960s, it was generally agreed that this system worked and would continue indefinitely. The Big Three could always make money by rolling out the big cars families needed to go up north each summer. As John Kenneth Galbraith then argued, auto makers could induce consumers to buy as many cars as they wanted to sell by clever advertising. UAW workers could always look forward to ever-increasing wages and benefits. The big demand in the 1970 contract negotiations was retirement for auto workers in their early 50s. The confrontational labor-management politics of the 1940s and 1950s was replaced by consensus, as Henry Ford II joined Reuther in endorsing LBJ in 1964.
Reuther, a man of great energy and ability, wanted to use the UAW as an entering wedge to transform America into a Scandinavian-style welfare state. His contracts would set the pattern for national wages; the union movement would expand into new industries and unionize most of the economy; growth would enable workers to enjoy not only high wages, but job security, medical benefits, generous pensions. They would be protected against competition by large corporations. Reuther employed a Scandinavian architect to build Solidarity House, the union's headquarters on the Detroit River, and Black Lake, its educational center in northern Michigan. Reuther, like Marx, and like so many other social democrats, envisioned workers devoting their increasing leisure hours to pursu
