Symposium Papers on Trends in Industrlal Relations from the Atlanta Conventlon--ASE 1989 Chaired by Michael Whitty, Ph.D., University of Detroit

Leading edge scholarship on labor trends is reflected in the four short manuscripts included in this issue of the Forum for Social Economics. These observations span the entire ideological range of current opinion. Fr. J. R. Dempsey, S.J., the MBA Director at the University of Detroit College of Business, argues for a positive assessment of current labor relations trends, particularily as they relate to cooperation and industrial peace. For Fr. Dempsey, S.J., things are generally going in the right direction.

The second contribution is that of a former union leader, Marc Stepp. Stepp is the former Vice President of the United Auto Workers currently heading the Institute for Urban and Community Affairs at the University of Detroit. Stepp argues for labors' full agenda including industrial democracy as the vision for labor. Stepp seeks worker power along with worker cooperation. Dr. Michael Whitty of the College of Business at the University of Detroit argues for a new unionism that can creatively meet the challenges of the brave new workplace of the 21st century. Whitty believes that labor must reinvent itself if it is to take the lead in the 1990s. Perhaps, a new strategy for labor that is post- socialist and post-capitalist.

Finally, the remarks from Professor Michael Thompson of the Economics Department at the University of Michigan document labor's crisis and contrast sharply with the establishment view dominant in the industrial relations scholarship. (The accompanying article by Kim Moody reflects the perspective of Frank Thompson. Moody is editor of labor Notes Newsletter). Thompson argues for new directions in labor strategy geared to struggle against efforts to marginalize workers' power. Readers will view the full spectrum of debate on labor's condition from America's labor capital, Detroit.

THE NEW UNIONISM: A REPORT FROM DETROIT

Marc Stepp, University o f Detroit

It's a pleasure to be with you and to share a few thoughts about America's industrial future and about how labor-management relations figure into that future.

I think it's fair to say that most Americans are used to letting the future take care of itself.

We're a big strong country with ample natural resources that has rarely been directly threatened from the outside.

With the notable exception of the Great Depression that began some sixty years ago, we have generally been able to take growth end prosperity for granted.

Although we have been a major exporting country from time to time in certain sectors, we were never dependent on exports, since we had such a large and prosperous internal market for U.S.-made products.

But as the 21st century approaches, I believe (we seriously need to question) whether prosperity will always be a qiveD in American life.

I believe there is good reason to believe that America could be left behind in a new global economic order that puts Europe and Japan in leading positions, thanks to their greater ability to nurture and promote the industries of the future while continuing to refine existing core industries.

And so, if I have a single theme to share with you today, that theme is summed up in the question: Will America be left behind?

You certainly can't look at the numbers on international trade these days and be very optimistic about the answer to that question.

You may recall that a couple of years ago when the dollar was at its recent low point with respect to the yen and the Deutschmark, there were headlines proclaiming that American exports were booming and that, at this rate, the nation's overall trade imbalance would soon be a thing of the past.

Well, it hasn't exactly worked out that way. Total exports subsequently hit a plateau in relation to overall trade volume. In addition, even during the so-called export boom, this country wasn't exporting a large percentage of

high-value-added products apart from aircraft and certain large computer systems. It was commodities like coal and chemicals and forest products that accounted for most of the export surge.

The numbers in high-value-added goods, especially in advanced consumer products, were and are quite depressing.

They are depressing not only because of the overall dol- lar deficits they create but also because they represent lost opportunities and lost jobs for Americans.

In the automotive sector, which is obviously of some interest to me, U.S. companies and U.S. workers continue to lose ground in the face of a steady onslaught from foreign- based producers.

While the market share enjoyed by built-up imports continues to be about the same, we've seen an explosion in the number of cars and light trucks assembled here in North America by Asian auto companies.

The transplant assemblers, as they are known, already have the capacity to churn out a million vehicles per year, and that capacity will exceed two-and-one-half million units by 1992 -- just three years from now.

If the transplant firms were generating the same number of jobs and income and technology spinoffs as the domestic companies whose market shares they are contesting, you might be able to argue that this development is not all bad from a national economic standpoint.

But this is far from the case. In reality, the rise of the transplant assemblers has ~qqravate~ our automotive trade deficit because of the huge volume of key components that are imported to supply the assembly operations.

As for jobs, Senator Bentsen of Texas recently pointed out that 25-thousand U.S. jobs in auto supplier firms were actually lost in 1988 because of the low domestic sourcing ratio of the Asian transplants.

We in the AUW think the number of jobs lost is considerably higher than that, but even the lower number is ~ar too many and the trend is sharply up.

And of course, when key components come from offshore and when key engineering work is done in the home country, we in the U.S. aren't getting the advanced worker skills and technology spinoffs that we should be getting from our auto- motive sector.

ECONOMIC DEMOCRACY AND CORPORATE ACCOUNTABILITY

The AUW believes strongly in a democratic political system. Democracy provides a framework whereby everyone has the opportunity to exercise their voice in the governance of the country.

By contrast, most working men and women do not have a say in how decisions of their employer are made, despite the fact that often they are the ones affected most by these decisions. The AUW believes that it is time for the prin- ciples of democracy to be extended to the workplace and to our nation's economy. Investment, production, and work organization decisions are too important to be made exclu- sively by a small circle of isolated unaccountable managers. Just as political choices are best made through democratic structures that ensure the widest involvement possible, so could economic decisions be improved by allowing input from working people and consumers.

A true program of economic democracy demands action on two separate fronts: changes within the corporate structure to ensure full participation in workplace and corporate decision-making, and regulation at the federal level to enforce corporate accountability and ensure that business activity is guided in directions which serve the interests of all Americans.

Abraham Lincoln recognized the need for economic democracy over a hundred years ago when he argued, "There has never been but one question in all of civilization -- how to keep a few men from saying to many men: You work and earn bread and we will eat it."

The AUW has made strides in recent years toward work- place democracy and participation. In several companies, joint programs covering a variety of issues have given work- ers more input in workplace and corporate decisions.

Although progress has been uneven, when the programs have been designed and administered properly, these efforts have resulted in improved efficiency and quality, better training programs, safer workplaces, more informed workforces, and more accountable managers. In some cases, successful pro- grams have contributed to saving jobs and have stimulated badly needed reinvestment.

On the public policy front, by contrast, since 1980 the federal government has abdicated its responsibility to regu- late corporate behavior. As a result, working people have witnessed an orgy of mergers, leveraged buyouts, and corpo- rate restructurings, astronomical increases in levels of executive compensation, an upsurge in anti-union and anti- worker activity, and the encouragement of a conscious policy of disinvestment, leading to abandonment of communities and

5

shifting good-paying jobs to low-wage locations, often over- seas.

Other reports have documented the lack of commitment shown by many American corporations to their workers at a time when such commitment is badly needed to help meet the challenge of stiff international competition. Instead, off- shore facilities and affiliates of u.s. corporations often are the "foreign competition," which is intensified by corporate America's often ill-considered and shortsighted outsourcing decisions. American companies have led the way in moving work to maquiladoras or other low-wage locations overseas rather than investing in training or making full use of their highly productive domestic workforces. Unbridled takeover activity has increased the concentration of corporate resources into fewer hands. While workers have been forced to accept moderate wage settlements, or worse, executive Compensation has skyrocketed to the point that American CEOs now routinely make more than i00 times more than a typical production worker.

INDUSTRIAL POLICY

Over 13 million production workers are employed in manufacturing industries in the United States; since 1979, almost 2 million production jobs have been lost in steel and tires, machine tools, consumer electronics, textiles, apparel, agricultural machinery, and motor vehicles. Almost no industry comes to mind that has not experienced job loss. Most of the Jobs have been lost to imports.

During much of the decade of the eighties, U.S. manufacturing operated under an extreme disadvantage because of the overvalued dollar which raised the price of U.S. exports while lowering the price of imports from foreign countries. By the time the value of the dollar began to fall relative to the currencies of our main competitors, many manufacturers had been so weakened by loss of market share and failure to invest in new products and equipment that they were no longer willing or able to produce in the U.S. A number of manufacturers had simply given up manufacturing in the U. S. and moved overseas where they could take advantage of cheap labor and favorable exchange rates. Now as we near the end of a decade of Republican trade and economic policies, we find ourselves with a weakened manufacturing sector which will continue to decline unless badly needed changes in policy give it a new lease on life.

We cannot continue to enjoy a high standard of living without a strong manufacturing sector. Many of the good paying jobs are created in this sector. Many of the good jobs in other sectors such as services, exist only because they serve the manufacturing sector. A trade policy which does not put our industry at some artificially created

6

disadvantage is clearly part of the solution. However, we also need an industrial policy. There is no successful trade policy without a complementary industrial policy; there is also no successful industrial policy without a trade policy.

WHAT IS AN I N D U S T R I A L P O L I C Y ?

The objective of industrial policy should be to create strong, healthy U.S. industries which create good jobs for American workers and foster equity in income distribution. In order to realize these objectives, an industrial policy must be planned and agreed to by all the parties who will contribute and be affected, including labor, industry and government.

WHY HAVE AN INDUSTRIAL POLICY?

One major reason to have an industrial policy is because all our trading partners have one and as a consequence they have created competitive advantages for their industries which have helped them to capture and hold on to a large share of the U. S. and world markets even after the value of the dollar fell.

But regardless of whether our competitors were using them or not, industrial policies can improve the efficiency of the economy; with the same amount of resources we would then be able to produce more goods. A well designed industrial and trade policy could once again allow us to enjoy a rising standard of living.

An industrial policy can increase productivity because it creates institutions which foster greater research and development and greater productive investment than private firms would undertake on their own. The U. S. is far behind several other major industrial nations in civilian research and development. The U. S. spends about 2.5 percent of GNP on R&D, but much of America's spending takes the form of military research and development with limited payoffs in the civilian economy. In recent years America spent 1.5 percent of its GNP on civilian research and development while Germany was spending 2.0 percent and Japan 1.9 percent of its GNP.

Often research is not done outside the areas where government pays for it (defense) or guarantees that whatever is developed will be bought (health). Thus there are critical areas of research which do not take place unless the government helps to organize and support the process. Those include areas that are critical to productivity growth in mature manufacturing industries such as auto or machine tools.

The area of process technology, for example, is virtually ignored in the research and development conducted by private firms because the returns to private development

are low. If a firm expends the resources to develop a new process technology, its competitors can easily use the technology before the firm had made back its investment. In other countries, this type of R&D is often organized and subsidized by government agencies. In the U.S. this rarely happens, partly because the government is afraid that it will appear as a subsidy to a single firm. In Japan or Germany, the government would subsidize a consortium of firms working together to develop a new process technology which all would use. In the U. S. such cooperation between firms in the same industry is forbidden under antitrust laws.

There are also critical types of investment which do not take place unless the government subsidizes the initial expenditure, even if it will be repaid at a later date. Many types of new technology would never come to production with- out guaranteed government contracts to purchase the product. These are technologies on which there is no immediate return.

Two examples from Japanese industry illustrate the role that government-organized R&D and government-subsidized investment can play. In 1983, an agency of the Japanese government, MITI, announced its intent to partially finance a project to develop the automated garment factory. The idea was to connect a robotized computerized factory via telecom- munications with retail stores where individual body measure- ments could be taken to produce made-to-measure clothes for the price of off-the-rack clothes. If successful, the Japa- nese will have an advantage not only in the production of clothes, but in the production of the machines which make the clothes.

In another case, the Japan Development Bank and MITI organized a government-financed leasing company that guaran- teed to robot producers a rapidly growing market by leasing robots on flexible computer-based technologies which are likely to revolutionize factory production. Given comparable industrial policies, the U. S. would be able to do the same.

There is a third reason for adopting an industrial policy: it is a vital adjunct to much needed managed trade policy. Because of the absence of proper industrial policies that would require domestic reinvestment, opponents of managed trade can often argue effectively that protection will simply make an already uncompetitive industry even less competitive. We thus face political defeat after political defeat in trying to stem the flood of imports into the U. S. market. All too often what the opponents say rings true because once an industry buys a little time with protection, instead of investing in upgrading its equipment and developing new products and processes, it moves more capacity overseas or makes unproductive investments. If we had industrial policies to assure domestic reinvestment, the kinds of managed trade policies that we need so badly would be more effective and would enjoy broader support.