Growing Up in a Socialist Paradise

Carl Proper, November, 2013

[i]No one I knew then would have dreamed of calling my home town – Mammoth Hot Springs, Yellowstone Park, Wyoming – a socialist paradise.  We were a small town in Wyoming, virtually all white, often Republican, all “middle class”, and the self-definition “American as apple pie,” might as well have been invented there.

Still, the world where I grew up, though normal to me, in retrospect was an unusual place.   We moved there in 1946, when my father found steady personnel work for the National Park Service.  I was one year old. We lived with elk and mule deer in the front yard, coyotes singing at night, black bears raiding the trash.  No hunting or domesticated animals – no pets – were allowed.  We moved into half of quite a large house on what had been Officer’s Row when the Army ran the Park.  in the early 20th century. We were assigned there, instead of smaller quarters, simply because there were five children in our family, and we might need the space.  The quite logical principle:  to each according to need.

Big family, big house

Big family, big house; to each according to need

Yellowstone in those days was socialism of a kind.  Environmentalism, too, of course – though no one had ever heard that word.  Virtually every parent in the 300-person headquarters town (fewer in the long winter) worked for the government.   Haynes’ Picture Shop and Pryor’s general store were rare for-profit exceptions to public rule.  No one was rich, no one was poor, and no one was unemployed.  No one killed animals inside the Park, either, except for the occasional bear that bothered tourists one time too many.  (Well, we kids occasionally trapped the gophers that ate from our mothers’ gardens, or shot them with a b-b gun.)  For many parents, their work was a calling, not just a job.  When a million outsiders pass through your town every year to appreciate where you live, and how you protect it, insulting jokes about “not bad, for government work,” are rarely heard.

Most people, from the plumber to the Superintendent, attended the same non-denominational Protestant church, and all the kids sang in the same choir (from each according to ability, even for those of us who had no ability.)  At Christmas, we managed to perform the long and complex “Messiah,” by Handel, for ourselves.  My mother played the organ.

The part of the sermons that struck me the most was where Jesus said it would be harder for a rich man to get into heaven than for a camel to pass through the eye of a needle.  The Bible seemed clear on that.  No problem for anyone I knew; my grandfather had been a wealthy magazine publisher years ago, I was told, but lost it all in the Depression.  The bizarre ignorance, cruelty and injustice of what passes for Christianity in some parts of the country has always seemed like sacrilege to me.

But there was little diversity in Mammoth.  The Catholic minority had to travel five miles to Gardner, Montana on Sundays.  Jews, African- or Hispanic-Americans were not present.  There was one wedding, around 1950, of a European-American male and a woman descended partly from the famous Native American guide, Sacajawea – but she was exceptional, recognized as royalty in a region where Lewis and Clark, and early trappers like Joe Meek or Jim Bridger, were up there with Washington and Jefferson as founding fathers.

But, we did learn as kids who had been there before us, as we dug up Indian arrowheads from the ground, or discovered wooden sluice-boxes left by miners looking for gold, in the stream running down Mt. Sepulchre.

Fireside slide shows by well-informed Rangers and Naturalists were part of the regular entertainment.  We loved the stories about heroic public-spirited people who rescued Old Faithful or the buffalo herds from greedy hucksters who would have purchased little parts of our Park for private exploitation.

We also heard, many times, about Nez Perce leader Chief Joseph.  His people, driven out of Oregon by settlers a few months earlier, crossed Yellowstone in August, 1877, en route to what they hoped would be peaceful hunting ground in Canada.  Several skirmishes took place inside the area already set aside for the Park, with troops commanded by Gen. William Tecumseh Sherman, remembered for his fiery march through Georgia in the Civil War.  Chief Joseph, a Christian convert, was revered among us white folks for saying, after his final lost battle, just short of escape into Canada, “I will fight no more, forever,” and withdrawing with his people to the reservation.

The 1877 “Nez Perce war” was the last Indian War inside the Park.Five years after that war, the Senate ratified a treaty with the Crow Indians, eliminating their title to land in the northern and eastern parts of the Park.

The morning after the fireside shows, we could pick up the change fallen from the pockets of tourists seated on rows of logs.

Of course, we had guns, for use outside the Park.  This was Wyoming.   My year-older brother Bill and I had to share one b-b gun.  My eleven-year-older brother, Datus, was a hunter and fisherman who later wrote for Field and Stream magazine.  Once, as the family sat around chatting in the guest bedroom, my brother Bill picked up a pistol to fool around with.  We knew it wasn’t loaded; Datus was fanatical about that.  Still, when Bill pulled the trigger, the gun fired down the hallway, the bullet lodging above the door, missing my parents and me, and barely missing my sister as she stepped into the hall.  Before we knew what had happened, it was all over.  No harm.  Stuff happens.

Our two-room elementary school, for 30 students in six grades, was not too different from schools in other Wyoming towns – good enough to prepare many of us for an interesting life.  When you finished the assignment for your grade, you could work with the grade above.

And… we had the world’s best sledding hill, covered with snow for a majority of the year.

Unfortunately, due to the snow, paradise was closed to the public from Labor Day to Memorial Day.

The tourists, on the rare occasions when we talked to them at all, told us we lived in Paradise, and we guessed we believed it.  We didn’t know any different.

I don’t understand to this day why many people in other places want so many more things, and so many have much less.  There is plenty for all.

Last month, all National Parks were briefly closed again, this time due to the Tea Party-fomented government shutdown.  While some Governors moved to reopen some Parks using State money, conservative Republicans in recent years have often shamefully called for mineral mining or oil drilling inside National Parks.  Grover Norquist, head of Americans for Tax Reform, is one of a number of Republicans who have called for selling the Parks to State governments – who lack the money manage them — or privatizing them.

 

The greedy right brings to my mind the bad guys from the Ranger slide-shows about early days in the Park – bozos jamming a log down Old Faithful, or killing elk inside the Park, to sell as meat.  Struggles between public and private interests, even in nationally protected areas, go back a long ways.  The worst guys lose, but new bozos come along.

The two most influential explorations of the Yellowstone area, both undertaken in 1871 with a view toward possible creation of a public Park, were led by environmentalists who marveled at the convergence of thermal wonders, abundant wildlife and spectacular terrain, and wanted to set the area aside for public appreciation.  But then, as now, profit-seekers challenged the defenders of nature in defining the goals and character of the new creation.  Northern Pacific Railroad entrepreneur Jay Cooke, of Philadelphia, arranged financing for the early expeditions, hoping to build a connector line through Yellowstone, passing near the geysers, and eventually linking with the Central Pacific railroad to the south.

The first exploration was led by Nathaniel Langford, a disappointed candidate for Governor of the Montana Territory and the second by Ferdinand Hayden, head of the “U.S. Geological Survey of the Territories.”  Langford’s funding came directly from Cooke, while Hayden received federal funding pushed through the House by Cooke ally and soon-to-be Speaker James G. Blaine.  Both expedition leaders strongly recommended first-ever National Park status.  Congress concurred, and in 1872 President Ulysses S. Grant signed legislation to “set apart” the 2.2 million acres of wilderness “as a public park or pleasuring ground for the benefit and enjoyment of the people.”  

However, Congress approved no budget for the project.

In absence of government authority, a private group calling itself the “Yellowstone Park Improvement Company” seized the opportunity to harvest and sell meat from Park animals, and to pursue a monopoly on hotel, stagecoach and telegraph service for tourists.  The untrained and nearly unpaid “Assistant Superintendents” who were assigned law enforcement duties in the Park won notoriety for their drunken brawls, and were derided by Park residents as mere “rabbit catchers.”  They sometimes collaborated with lawbreakers they were charged with arresting.

Road-building in the Park proceeded, however, and tourists came in spite of all difficulties.  Ultimately, in 1886, the Interior Department handed control over the Park to the U.S. Army, which acted efficiently to drive away poachers and any businesses that actually profited from the destruction of Park land or wildlife.

The Army also built the excellent house where I spent my childhood.

As for the Northern Pacific’s self-interested efforts to build an iron highway through paradise, that came to naught.  Capitalism served, but did not rule.  No rail line was ever allowed inside the Park’s border – but the railroad, running nearby, has benefited mightily nonetheless, like other surrounding businesses, from the millions of tourists visiting the area each year.

Within the Park, the environmentalists, though making compromises with less committed  people, are winning.

In 1916, an “Organic Act” was approved, creating a new National Park Service to administer a growing number of National Parks, and to “conserve the scenery and the natural and historic objects and the wild life therein.”  Since that time, the National Park Service has provided professional government management, leading to generations of increasing public use.

buffalo - snomobilesUnfortunately, in Yellowstone, snow limited most public use to three months a year.

While no off-road snowmobiling is allowed, up to about 500 more fuel-efficient snowmobiles may continue to travel in the 2,500 square miles of the Park on a given day, under new regulations.

Then, in the mid-1970s, twenty years after my family’s memorable trip east to a new home in Philadelphia, in a beautiful, green Northern Pacific sleeping car with fantastic “vista domes” for observation, the first snowmobiles entered the Park.

Forty years of disputes, trials and errors, featuring seven different sets of provisional “wintertime travel regulations,” followed.   The Park Service was firm that at no time would any off-road use of snowmobiles be allowed.  Still, by the 1990’s, according to Tim Stevens, northern Rockies regional director for the National Parks Conservation Association, “There was a blue haze of exhaust at the entrance stations, while big lines of snowmobiles waited to get into the park… Park rangers were having to wear respirators.”

Quiet-loving animals and more rustic Park visitors were disturbed as well.  In reaction, snowmobile use was sharply cut back, but some pollution continued.

Then, on October 22, 2013, decades of wrangling were apparently resolved as the National Park Service issued final regulations, to take full effect in 2015.  The number of snowmobiles allowed to operate on Park roads was reduced again, and new snowmobile emissions standards were established.  At this point, almost no snowmobiles can meet the new standards, but no one doubts that manufacturers will achieve them in return for the Yellowstone business.

No less important, thanks to the somewhat noisy and polluting snowmobiles, a Park that was once reserved much of the year for just a few hundred residents, is now open year-round to the public.  What we have is socialism, with compromises.

These days, our National Park system appears to be strong and growing stronger.  The National Park idea has spread not only throughout the United States, but around the globe.  Kruger National Park in South Africa, to cite one example, is geographically larger than Yellowstone, and draws almost half as many visitors.

The U.S. public loves their Parks, just like they love their Social Security and Medicare.

Now, when would-be oil and mining profiteers push for privatization, or other foes of the public interest shut down the government, National Parks are an expenditure almost everyone agrees should NOT be cut, and not privatized.

In Yellowstone, indigenous people were the one native species NOT on the list for protection.  But down is not always out.  Indigenous Americans, the majority now arriving from south of our border, may one day be the majority here again.  The buffalos and the otters, of course, do not vote, but their interests have many people’s attention.  The Park is noisy in some places, except when politics takes over and shuts it down.  Xanterra may be pursuing a monopoly on lodging, and who knows what else, but they depend on public protection also.

There is no railroad, and no Disneyland in Yellowstone, and some really expert and dedicated government employees protect our Park and educate the rest of us about it.

On my most recent visit to Yellowstone, with my wife, we stopped by the house where I grew up.  The lady of the house came out to chat, and the Minister of the Park church ambled by.  Turned out, he had been asked to marry a couple from England later that day, and needed witnesses!  We volunteered, and took the wedding photos as well.  The church where my mother had played the organ looked much the same as when I lived there.  My name was still embossed, along with those of my childhood friends, on a Sunday School list.

I don’t believe any more that there’s a guy in the sky, making things happen.  We the people make the world what it is.  But Yellowstone, and National Parks around the world are understood to be sacred spaces.  A good start toward socialism.

c:\users\owner\documents\home\writing\national parks\growing up in a socialist paradise.doc


[i] Sources:

Aubrey L. Haines, The Yellowstone Story: A History of our First National Park (Revised Edition), Volume I, Yellowstone Association for Natural Science, History and Education, Inc., 1996

http://sierraclub.typepad.com/layoftheland/2013/10/just-who-do-these-extremists-want-to-sell-our-parks-to.html

10/07/2013, Lay of the Land: Celebrating the Great Outdoors, 10/07/2013, “Just Who Do These Extremists Want to Sell Our Parks To?”

http://serc.carleton.edu/research_education/yellowstone/snowmobiles.html,  “Snowmobiles in Yellowstone National Park:  An American right, or wrong?”, Created by Jen Millner, Geoscience Education Web Development Team, Montana State University

http://www.npr.org/2013/10/22/239705610/new-rules-mean-more-and-cleaner-snow-mobiles-in-yellowstone

“15 Years Of Wrangling Over Yellowstone Snowmobiles Ends,” by Elizabeth Shogren, [NPR, All things considered], October 22, 2013 4:38 PM

http://www.nps.gov/yell/parknews/13092.htm,  “National Park Service Releases New Rule for Winter Use in Yellowstone”, National Park Service, U.S. Department of the Interior, Yellowstone National Park. October 22, 2013

http://en.wikipedia.org/wiki/Nez_Perce_in_Yellowstone_Park

 “Tea Partiers Exploited the National Park Service as a Prop While Attempting to Abolish It” , Bob Cesca, Huffington Post Politics, Posted: 10/17/2013 3:50 pm

http://www.usatoday.com/story/news/politics/2013/10/15/republicans-national-park-service-shutdown/2990847/;

GOP asks: Why were national parks shut down, anyway?”, Aamer Madhani, USA TODAY 9:49 a.m. EDT October 16, 2013

http://www.dailykos.com/story/2013/10/10/1246005/-GOP-wants-to-SELL-our-National-Parks-not-open-them?detail=email, JL Finch, GOP wants to SELL our National Parks, not open them

http://www.cr.nps.gov/history/online_books/albright3/chap6a.htm, “Look! Real Indians!”

http://www2.gsu.edu/~eslmlm/chiefjoseph.html, I Will Fight No More Forever

Return to Panama Viejo

PEACE CORPS: AN URBAN EXPERIENCE

(siguiente, vea “De Vuelto a Panama Viejo)

Carl Proper

PCV, community of Panama Viejo, Panama City, Panama, 1968-1971

July 16, 2013

Leocadia was now 83 years old.  She had lost weight, and moved to a new neighborhood.  But she stood straight and remembered everything.  “Ay, que bueno verte, Carlos, después de tantos años!”  She showed me the picture on the wall of the small concrete block and plaster house in Arraijan:  one five-foot-four black woman standing between six tall, handsome and well-dressed “rabi-blancos”, with the then-President of the Republic to her left, a government Minister on her right.  She was representing the union of lottery-ticket sellers, on some occasion.

LeocadiaTorres - Pres. Republic - Lottery agreementForty-five years earlier, Leocadia was a sparkplug in the Comité Pro Mejoras de Panamá la Vieja.  Her neighborhood was organized before I arrived.  Panama Viejo (usually, the shorter version of the name prevailed) was a squatter community on the outskirts of the City, on the way to Tocumen airport.  Many residents had moved in from the countryside in an organized way, putting up their board and tin houses, helping to form a “barriada bruja” seemingly overnight – foundations, cinder block, plaster and second stories to come later.  Others had moved out from their apartments in Chorrillo or other crowded city neighborhoods, determined to own their homes, and eventually the land the house stood on as well.  Most lived on the inland side of the road to Tocumen, but others put up their shacks among the ruins of buildings burned by the pirate Henry Morgan centuries before, and defied authorities to move them out.

Their “felt need,” as the Peace Corps then described it, was for paved streets to replace the dirt roads where Obras Públicas would occasionally spread new layers, as long as the $50 bribe was paid to the truck driver; and for running water and sewage pipes to carry away the waste.

I was the second Volunteer assigned to the neighborhood.  The first, a woman whose name I have never learned, had left a year or two before I arrived.  But the Pro-Mejoras committee, I was told, had preceded her as well.

Because the election year of 1968 was one, as John Freivalds described , with five Presidents, I learned quickly to distinguish community leaders’ political leanings.  Community founder Marcial Barsallo, a Spanish speaker with an African-American look, was hoping to land a “botella” with candidate Samudio.  Lalo Gomez, who supported himself and a family including children from earlier relationships in different parts of the country, by taking in sewing and odd jobs from neighbors, was gung-ho for “el Doctor.”  (Arnulfo Arias, a surgeon and millionaire coffee plantation owner, who had been twice elected and twice deposed over a 28-year period, was the front-runner again.)  Carlos Zorita, “Camacho,” a dynamic, literate and foul-mouthed Marxist, was Treasurer of the bus drivers’ union of Panama Viejo, which was also a worker-owned company.  He was a member of the Partido del Pueblo, the communist party; “REALIDAD OBJETIVA” was written in large letters on the massive front bumper of his bus, warning pedestrians to stand clear.  Antonio Saldaña, a student activist (now a lawyer and employee of the National Assembly), was anti-gringo in principal, but ambitious.  Julio Moreno was an intelligent young worker with a family, and no politics.

Working through the Dirección General del Desarollo Comunal, and with U.S. A.I.D., our committee, and the organized neighborhood, pushed the government for action on community demands, but without a lot of hope.  Then, for about two weeks after the Torrijos military government predictably put Arias on the plane to Miami, Lalo and Camacho were both detained, and then released. Soon after, it became apparent that the “Revolutionary Government” would actually make changes.  Step 1 was an end to bribes for throwing more dirt on the roads.  Step 2 was better.  El General himself came out to meet with the neighborhood — a meeting from which I was rightly excluded as not Panamanian.  He was accompanied by a significant Guardia contingent. Only Camacho had the courage to stand next to the General, and describe what the people needed.  Torrijos listened, and the following week, Sr. Ricardo de la Espriella, head of the National Bank, and later a President himself, took a walk through the neighborhood with the Comité Pro Mejoras.

Deals take time, but shortly before the Peace Corps was ushered out of the country, the agreement for streets and sewers was tentatively set.  I never knew if the work was actually completed.

That was the good news, when I finally tracked Leocadia down, on my third trip to the neighborhood, taking a free cab ride with her son-in-law from Country Inn in the former Zone, to Arraijan.  The streets of Panama Viejo HAD been paved, and even named, as I had seen on my first visit, but the sewage lines and running water were installed as well, within about three years of my departure.   Still better, the community never stopped pushing.  Torrijos returned to the neighborhood for a second visit to begin distribution of land titles to all residents (except those unfortunates living among the historic ruins), at fifty cents a square meter — a steal.

Today, though new and half-empty apartment towers for the well-off loom virtually across the street, the people of Panama Viejo, squatters no more, have rights to protect.

Many ex-PCV’s have observed that the people we worked with gave far more to us than we could ever give to them.  To me, they gave a calling that became a forty-year labor movement career.  Even today, the memory from a different time and place stays with me, that justice does not always fail, that the rich are always with us, but the poor can also persist and rise.

…….

……..

DE VUELTO A PANAMÁ VIEJO

Carl Proper

Bethesda, Maryland, 2014

Leocadia ya tenía 83 años.  Había perdido peso y se había trasladado a un barrio nuevo.  Pero se paró recta, y se recordaba de todo.  “Ay, que bueno verte, Carlos, después de tantos años!”  Me hizo ver el cuadro en la pared de la casa de bloques y yeso en Arraiján:  una mujer morena de uno cinco pies con cuatro pulgados, parada entre seis hombres altos, guapos y bien vestidos, con el Presidente de la República en su lado izquierdo, un Ministro del Gobiernos a la derecha.  Ella representaba el sindicato de vendedores de lotería, en algúna ceremonia.

Hace cuarenta y cinco años, Leocadia era una fuente de energía en el Comité Pro Mejoras de Panamá la Vieja.  El barrio se había organizado antes de yo llegar.  Panamá Viejo es una comunidad fundado por “invasores” de terreno en las afueras de la ciudad de Panamá, en la ruta hacía el aeropuerto Tocúmen.   Hace unos diez años, unos residentes se habían trasladados del campo en forma disciplinada, construyendo sus casitas de tablas y zinc, y formando una “barriada bruja” casi de noche al día – dejando los cimientos, bloques y piso de arriba para el futuro.  Otros habían salido de sus apartamentos en Chorrillo u otros barrios urbanos llenados a rebosar, decididos a ser dueños de casa, y quizás dueños del terreno también, algún día.  La mayoría ocupó el lado tierra adentro de la carretera Tocúmen, pero otros se hicieron sus chozas entre las ruinas históricas de edificios quemados por la pirata Henry Morgan hace cientos de años, y desafiaron a las autoridades expulsarlos.

La necesidad principal sentida por los residentes era pavimentar a las calles, reemplazando los senderos de tierra, en dónde los camioneros de Obras Públicas regaron tierra nueva de vez en cuando, en cambio por un “regalo” de $50 – y instalar tuberías para agua sucia.

Yo era el segundo Voluntario en el barrio.  La primera, una mujer desconocida por mí, había vuelto a los Estados Unidos el año anterior.  El Comité Pro-Mejoras fue fundado antes del Cuerpo de Paz.

Ya que el año 1968 fue un año de elecciones, golpes y cinco Presidentes, aprendí pronto distinguir las preferencias políticas de los dirigentes comunales.  El fundador Marcial Barsallo, un hombre de idioma Español y aparencia Afro-Americano, esperaba obtener una “botella” del candidato Samudio.  Lalo Gomez, hombre que mantenía su familia, inclusive unos hijos de relaciones anteriores en varios sitios, por coser y hacer changas por los vecinos, fue entusiasmado por “el Doctor” Arnulfo Arias, un cirujano y dueño millonario de cafetales.  Arias había sido elegido y tumbado dos veces anteriores, y fue candidato favorecido otra vez por la mayoría.   Carlos Zorita – “Camacho” – un Marxista enérgico, instruido y boquisucio, fue Tesorero del Sindicato de Choferes de Autobuses de Panamá Viejo, una sociedad cooperativa.  Fue miembro del Partido del Pueblo, el partido comunista de Panamá.  La “Realidad Objetiva” fue escrita in letras grandes en el parachoques de su bus, advirtiendo a los peatones cuidarse.  Antonio Saldaña, un activista estudiantil (actualmente un empleado de la Asamblea Nacional), fue anti-gringo en principio, pero ambicioso.  Julio Moreno fue un obrero joven e inteligente, con familia y sin política.

Trabajando conjunto con la Dirección General del Desarollo Comunal, y con la U.S.A.I.D., nuestro comité, y el barrio organizado, empujaron al gobierno a actuar de acuerdo con las demandas comunales, pero sin gran esperanza.  Dos semanas después de que el nuevo gobierno militar dirigido por Omar Torrijos mandó al ex-Presidente Arias por avión a Miami, Lalo y Camacho fueron encarcelados, y entonces saltados.

Dentro de poco, sin embargo, se hizo claro de que el “Gobierno Revolucionario” iba realizar unos cambios de verdad.  Como paso primero, se acabaron las “mordidas” para echar tierra nueva en las calles.  El paso segundo fue mejor.  El General mismo llegó a conversar con la comunidad – en una asamblea de la cual yo fui excluido, correctamente, por no ser Panameño.  Él llegó acompañado por un contingente numeroso de la Guardia Nacional.  Solo Camacho se atrevía pararse al lado del General y declarar las necesidades de la comunidad.  Y Torrijos escuchó!  La semana siguiente, el Sr. Ricardo de la Espriella, entonces jefe del Banco Nacional, y más tarde un Presidente de la República, caminó por las calles del barrio con el Comité Pro Mejoras, mandado para comenzar un proceso de mejoras.

Tales acuerdos cogen tiempo, pero poco antes de que el Cuerpo de Paz fue desinvitado del país, se acordó de forma tentativa mejorar las calles y desagües.  Yo nunca supe si se llevó a cabo el trabajo o no.

La contesta a mis dudas fue la buena noticia, cuando llegué a encontrar a Leocadia, después del tercer esfuerzo, por un viaje grátis de taxi manejado por su yerno.  Ella me contó que sí se había pavimentado y nombrado a las calles, y también instalado a líneas para agua potable y agua sucia, dentro de trés años de yo salir.  Aún mejor, la comunidad nunca dejó de empujar —  y el General Torrijos volvió a la comunidad por segunda vez para comenzar la distribución de títulos legales de terreno a todos los residentes (menos los desafortunados que se habían ubicado entre las ruinas históricas) – y a cincuenta centavos por metro cuadrado, una ganga.

Hoy, frente a unos torres nuevos y medio vacíos de apartamentos para la clase privilegiada, unos cien metros del barrio, los moradores de Panamá Viejo, no más invasores, tienen su propiedad a defender.

Muchos ex-Voluntarios han reconocido de que las personas con quiénes trabajamos nos dieron mucho más de lo que podríamos dar.  A mí, me dieron una vocación que llegó a ser una carrera de cuarenta años en el movimiento laboral de mi país.  Hasta al presente, las memorias de un tiempo y una cultura diferente me animan, recordándome de que los ricos quedan siempre con nosotros, pero también los pobres pueden persistir y subir.

Unions, Money and Mergers

Money matters to unions.  Financial resources are hard to obtain, easy to waste, and essential to union survival.  Historically, the effort to accrue or protect a financial foundation has also caused many internal union conflicts, mergers and failures.

Capital’s obvious understanding of the power that derives from fiscal strength explains, among other realities, the persistent – and recently successful — efforts of labor’s corporate enemies to de-fund unions through blocking dues collection.  Union leaders, unfortunately, are often untrained and unskilled in managing this critical resource, and may think it is inappropriate or unnecessary for them to learn. Through mismanagement of money, they may defeat the purpose for which they presumably became leaders in the first place – serving their members, or the working class.

This history recounts a struggle between two great and historically progressive unions over leadership, organizing jurisdiction (itself a form of property rights), and inherited financial resources.  I focus here on financial issues, not because they were the core of the struggle, but because they are seldom discussed, and critical to labor’s history and future.  I will also focus on the roles of labor leaders, who are the financial decision-makers, rather than on the rank and file.  In later chapters, questions of leadership character, membership involvement and exploitation, and jurisdictional issues will get their due.  One conclusion that I would reach, however, is that open discussion of money matters with union members produces better decisions than haste and secrecy.

Over forty years as a member, staff member and consultant for the International Ladies’ Garment Workers’ Union (ILGWU) and its successors, UNITE and UNITE HERE, the author observed and participated in a series of union mergers, disputes and breakups.  All of these were motivated in significant degree by the desire to obtain, redirect or retain financial resources to accomplish personal or union purposes.[i]  Many of those resources, though sadly reduced by inter-union disputes and other poor choices, remain today.

I would urge unionists who believe the next revolution will be built without wealth to learn from our experience. The kinds of investments in real estate or banks initiated by the ILGWU or the Amalgamated Clothing Workers of America (ACWA) decades ago may now be more essential than ever.  They can help unions withstand the loss of dues income in our day, and enable activities of allied community groups with little or no income base.

This history recounts a struggle between two great and progressive service sector unions over leadership, organizing jurisdiction — and over the financial resources inherited from unions in the dying U.S. needle trades manufacturing industries.  The ILGWU (International Ladies’ Garment Workers’ Union) and ACWA (Amalgamated Clothing Workers of America, later ACTWU) each achieved a degree of co-management in the industries where they organized, and derived wealth from them.  The ACWA founded and owned a Bank that loaned money to industry management, among others.  The ILGWU regulated relations between union manufacturers and contractors, using secondary boycott rights retained as exceptions to Taft-Hartley, and invested in real estate that supports organizing today.

I will focus in this paper on financial issues, because they are seldom discussed, and critical to labor’s history and future.  I will also focus on the roles of labor leaders, who are the financial decision-makers, rather than on the rank and file.  One conclusion that I would reach, however, is that open discussion of money matters between leaders and union members produces better decisions than haste and secrecy.

A recent paper by Rich Yeselson, “Fortress Unionism,” may offer a context for understanding the history that follows.[ii]  Included in the concept of “fortress unionism” is the message that powerful workers’ movements start from the bottom, and grow explosively when the revolutionary moment arrives – but that even a scattered base of union power can provide essential seeds from which the revolution can grow.

I would add that the financial resources remaining after the “war” recounted in this paper are of critical importance to that base, as UNITE HERE, SEIU and some other unions pursue new strategies for restoring the power of the working class.

In the following pages, while focusing on financial matters at the level of the International Union, I will also intersperse snapshots of the struggle at ground level, referring mainly to the affiliate with which I am most familiar, after more than 20 years as a member and staff member – the New England Joint Board, now of UNITE HERE.


[i] This is not to suggest that other factors, including the individual character of union leaders, are less important than their financial acumen.  But those would be topics for a different paper.

[ii] Rich Yeselson, “Fortress Unionism,” Democracy: A Journal of Ideas;  Issue #29, Summer 2013

Around the turn of the 20th century, composer Richard Wagner wrote a series of operas in which ancient Germanic gods and heroes fought over the magic wealth of the Rhine Gold.  That story ended with destruction of the dangerous wealth.  The story has been retold in our time as the tale of furry-footed British hobbits.  As in the original, the power of the ring had to be destroyed to save innocent souls.

But innocence is no virtue for labor leaders.  And the destruction or loss of wealth hurts members and limits organizing.

In the story that follows, the “gold” accumulated by earlier generations is the object of sometimes brutal struggle.   Leaders who carelessly waste, lightly give away, or fail to share resources in time of need place their own and their members’ interests at risk.  Those who deploy wealth with courage and wisdom often fare better.

We need to learn from the past, in a time when we cannot afford to repeat its errors.

merger org chart

…..

Andrew Stern, John Wilhelm, Bruce Raynor surround Jesse Jackson at 2004 UNITE HERE Convention

Andrew Stern, John Wilhelm, Bruce Raynor surround Jesse Jackson at 2004 UNITE HERE Convention

In 2004, two private-sector unions with strong organizing reputations merged to form a single organization, UNITE HERE.  UNITE! (the Union of Needletrades, Industrial and Textile Employees) was the product of earlier mergers, which had brought the ILGWU, ACWA, Textile Workers of America (TWUA) and several smaller unions together.  HERE (Hotel Employees / Restaurant Employees International Union), founded in the 1890s, represented workers mainly in the hotel, food service and casino industries.  As its first President, UNITE HERE chose former UNITE President Bruce Raynor, earlier a TWUA and ACWA Education Director and Organizer.

At an intense moment in the secession (2008-2009) from UNITE HERE, led by Raynor, of most former needle trades affiliates, mediator Joe Hansen, President of the United Food and Commercial Workers’ Union, wrote that “both sides went into the (original merger) agreement with their eyes wide open.”[iii]  This paper points to some exceptions to that assertion.  Sadly, shortsightedness has been as common as wisdom and solidarity in the series of mergers and breakups that led to today’s smaller (but growing) UNITE HERE and the still smaller Workers’ United division of SEIU.    As regards the breaking apart of UNITE HERE and the consequent redistribution of that wealth, it is surprising how many union leaders were surprised at the outcome

 

 

Roads to growth and division

Beginning in the 1920s and 1930s, both the ILGWU and ACWA, battling to empower impoverished immigrant communities and workers, separately learned the value of money, managed it carefully, and eventually created reservoirs of wealth that attracted merger suitors in decades to come.

In 1926, nearly bankrupt after a mismanaged strike, ILGWU Treasurer and then President David Dubinsky was forced to borrow from members and from sympathetic Jewish financiers to put the union back on its feet.  From that time forward, the ILGWU developed a reputation for underpaying staff, providing tiny (but fully funded) pensions to members, and growing funds and investments like a successful investment house.[iv]

Initially on firmer financial ground in 1923, visionary ACWA President Sidney Hillman saw the opportunity to strengthen labor by lending to unions, union members and union companies.  In its early years, the fully union-owned Amalgamated Bank was carefully managed and grew steadily, aiding clothing and other workers through financing cooperative housing, managing pension and health funds – and providing bonding or bail money for trade union and other activists. The union was relatively financially strong in other areas as well.

Clothing / Textile Merger

In 1975, the Textile Workers’ Union of America (TWUA), in the midst of a decades-long struggle to organize the giant J.P. Stevens textile empire, approached for a merger the union that had helped found TWUA in the 1930s.  Understanding that Clothing Workers’ financing would be the key to completing the members’ victory, TWUA President Sol Stetin set ego aside, agreeing to take the third leadership spot in a merged union.  ACTWU was born, and the JP Stevens win was just the beginning of its organizing success.

By the 1990s, however, ACTWU’s finances at the national level were stretched thin, and the union’s financially strongest local affiliates declined to bail out their own International.  Looking for speedy gains, the Amalgamated Bank, in parallel with many New York capitalists, moved into risky derivative investments, and eventually paid a high price like other speculators.

It was now ACTWU’s turn to bid for a merger with a financially stronger organization, the ILGWU.

ILGWU – ACTWU merger

As befitted a cautious and wealthy union, ILGWU President Jay Mazur explored the merger possibility in discussions over several years with ACTWU President Jack Sheinkman.  Formal planning, beginning a year ahead of the actual merger in 1995, was inclusive, with a committee of twelve and a second committee of top officers meeting regularly to work through the issues.  Merger leaders sent a draft constitution to all affiliates six months in advance of the merger Convention, and national leaders discussed their proposals in meetings with regional affiliates around the country.

Everyone understood that the ILGWU’s jurisdictional base, mostly employed in tiny factories that made women’s clothing, was disappearing overseas and losing out at home to reinvigorated sweatshop competition.  But the ILGWU International union owned union buildings in New York and Pennsylvania valued at around $250 million.[v]   Its benefit accounts were overfunded, and resources in general were professionally well managed by Secretary-Treasurer Irwin Solomon, Mazur and a financially skilled team. The union also managed several “knippels”[vi] of liquid resources – an Organizing and Strike Fund (estimated at $20 million), an Affiliates Assistance Fund, and several Union Label and Promotion Funds.

President Mazur wanted to see the union’s wealth channeled to organizing and growth.  ACTWU, based in larger and more technically advanced menswear and textile factories, seemed a good match; it was in a related industry, and a relatively known quantity.  The merger was a potential match of money – centralized in the ILGWU national office — with a larger ACTWU membership, both current and potential.  But the ILGWU, its wealth placing it in the driver’s seat, was careful to negotiate protection for its interests.

The final agreement merged UNITE leadership nationally, promoted integration of staff and affiliates, stipulated that the ILGWU President would become the first UNITE President, that merger parties would “use their best efforts” to retain a President from the ILGWU and roughly equal numbers of Vice Presidents from the two unions for the first six years.  Providing a buffer for ILGWU resources, the merger would function as more of a limited partnership than a unified organization.  Alongside the merged leadership, each union would also continue to exist separately, with its own officers, properties and General Executive Board (GEB), for the time necessary for establishing the merger.

Instability at the Amalgamated Bank was a concern.  This led to a mediated decision by just-retired AFL-CIO President Lane Kirkland in the month before the founding Convention, clarifying that neither side was responsible for the debts of the other.  Either side could leave the merger at will, and take its property with it, by a two-thirds vote of its own GEB.

The merger succeeded initially as an organizing vehicle, winning major campaigns in the southern textile industry, and accreting laundry unions at a national level.  After the national union purchased $23 million worth of shares in the troubled Amalgamated Bank, enough to control 51%, the Bank also returned to strength, opening its first non-New York branches in Washington, DC, New Jersey and California.

Near breakup of UNITE merger

But three years into the merger, when a figure who would disrupt the labor movement for years to come, Executive Vice President and then Secretary-Treasurer Bruce Raynor, moved to oust Mazur and take over union leadership, the merged union was on the verge of breaking apart.  As part of Raynor’s attack, New York’s Chinatown-based Local 23-25, formerly Mazur’s Local and now headed by Executive Vice President Edgar Romney, was investigated for Trusteeship, charged with putting its financial interests ahead of the interests of the members’.

Responding to Raynor’s move, the ILGWU GEB exercised the “opt-out” provision of the Constitution, voting by a two-thirds majority to end the merger, taking all ILGWU property with them.  With funds and real estate – vital for organizing and everyday union business – at risk, Raynor and his allies from the former ACTWU, had to surrender.

In its “opt-out” vote, however, the ILGWU Board had also authorized President Mazur to negotiate a settlement with the former ACTWU if he could.  Many on the ILGWU Board believed, at a minimum, that Raynor should be barred from office.  But Mazur had seen Raynor from early days of the merger as his most likely and qualified successor, commenting that, “Bruce Raynor’s a son-of-a-bitch, but he’s not going to give away the union.”[vii]  Still trusting in Raynor’s organizing skills, he offered Raynor and Executive VP Ed Clark a twelve- point settlement, halting disruption for the duration of the six-year period.  Raynor signed and then complied.

Shortly after reaching the settlement, by way of extra protection, the still-functioning ILGWU Board voted to return a number of International-controlled buildings to regional ILGWU affiliates.  These included an eight-story Boston building managed by the New England Joint Board, where I had served on the staff before, and again after moving up to the national office.  Together with another $25 million redistributed from the Affiliates Assistance Fund, these former ILGWU affiliates were made relatively self-sufficient going forward.  The union’s most valuable property, the 28-story, block-long building at 275 Seventh Avenue in Manhattan, which housed the Union Health Center along with paying tenants, was an exception.  With an estimated value of $100 million, “275” remained under ownership of the ILGWU and affiliates, and under day-to-day control of Local 23-25 Manager and Executive VP Edgar Romney.  Following the buildings decision, it was clear that if Raynor eventually gained control of the union, he would not automatically control the property as well.

Mazur was peacefully re-elected as UNITE President at the 1999 Convention, and retired as President on June 30, 2001, with Raynor then moving into the top slot.

The ILGWU had managed its financial inheritance with care, directed it toward growth of a new labor movement, and passed a strong organization on to its 21st century successor.

Alliances, Divisions and Issues in the Raynor UNITE Presidency

Shortly after assuming power in mid-2001, Raynor requested that affiliates transfer ownership of their buildings back to the International Union, under his control.  In a fateful meeting of the still-functioning ILGWU GEB, former ILGWU leaders faced a choice that tested their strength and foresight.  The decisions made by two of those affiliates greatly affected their powers in the ensuing decade.

The big, affable and well-liked number two leader, now-Secretary-Treasurer Edgar Romney, loyally passed his $100 million inheritance[viii] at 275 Seventh Avenue over to the new President’s control.

The New England Joint Board, headed by recently elected Manager Warren Pepicelli, made a different choice.  The Joint Board had acquired an eight-story building in Boston’s Chinatown in 1948 (now worth around $10 million), and occupied it ever since, while renting out other space to tenants.  The building rent – together with stock the union had purchased in the Amalgamated Bank, and a smaller account in the nationally-managed “pooled investment fund” – was an important supplement to members’ dues.  Pepicelli and some other leaders, with their eyes wide open, declined to hand over their buildings to the new President.  In a separate vote, Pepicelli also voted against transferring ownership of “275”.

Romney and Pepicelli then lived with the consequences of their vote. Romney, from that point forward, had the President’s support, while Pepicelli never came off the shitlist.  But Pepicelli retained the property and a degree of independence.  Romney occupied a building owned by the International union, and was in a position, going forward, where it would be very difficult to say “no” to a strong President.

Pepicelli was a fighter, and a careful manager.  In younger days, as shop Steward in an IBEW factory, he had led a challenge to management that led to his dismissal, until the members responded by shutting down production.  He still liked to recall the plant owner calling him back to work and parading him around the floor, so that union members would see him and get back to work.  Now, inheriting the ILGWU legacy in New England, including the Harrison Ave. building, he felt a sense of obligation to protect that inheritance at any cost, and eventually pass a strong and independent organization on to his successor.

In the near term, placing the President’s good will ahead of property was an advantage to Romney, who became Secretary-Treasurer of UNITE.   Later, during the 2008-9 breakup of UNITE HERE, and the formation of Workers United as a division of SEIU, Raynor briefly made Romney the first President of that union.  Pepicelli, by contrast, immediately upon assuming New England leadership, saw all of his International-paid Organizers pulled away.  Later, following the 2004 merger of UNITE with HERE, he faced unrelenting pressure from the International Union to merge his self-sufficient affiliate with the bankrupt Boston Local 26, a former HERE affiliate Raynor was courting with his own re-election in mind.  With encouragement from the International, the former HERE affiliate moved into the 33 Harrison Ave. building and paid no rent for a period of years.

Pepicelli, however, was able to maintain substantial membership without the Organizers, and built a solid membership base as he and his staff negotiated good contracts and prioritized settling members’ grievances. With the advice of his trusted friend and Treasurer Sam Giurleo, he closed unneeded regional buildings, reduced staff, kept dues at an affordable level, and retained the Joint Board’s independence.

Raynor proved a careless, impulsive and divisive President and a poor money manager.

Shortly after gaining control of UNITE,Raynor sold the former headquarters of the ILGWU, a six-story building on Broadway north of Times Square, formerly world headquarters for the Ford Motor Company, for $23 million.  The following year, the new owners sold it for twice the price.  The original Amalgamated Bank building in Union Square was also sold, along with the Pocono workers’ resort, Unity House, started by the ILGWU in the 1920s, and some other properties. 

 

Not long after assuming the Presidency in mid-2001, Raynor alienated a critical constituency, ILGWU staff retirees, by cutting the life insurance they had long counted on (in lieu of higher wages), from accumulated amounts often in excess of $100,000 to $15,000.  After hearing complaints, he cut the maximum again to $5,000.  Besides raising the question whether a union employer should emulate a pernicious corporate pattern, this decision placed at long-term risk an eventual $30 million reversion to the union from the over-endowed Death Benefit Fund.  (For a retiree reaction to these cuts, see quotation at endnote 22).

The Raynor administration invariably characterized the building sales, benefit reductions and other financial raids as needed to raise money for organizing.  In broad terms, however, while the UNITE merger was initially successful in organizing southern textile plants and accreting a significant industrial laundry sector, growth through organizing in manufacturing sectors could barely slow membership losses.  The newly-organized textile mills soon followed the garment industry out of business or out of the USA. Major and expensive campaigns to organize clothing firms Guess? and Peerless, and later the industrial laundry conglomerate Cintas, came to nothing.  As early as 2003, the pattern of selling resources to finance ongoing operations led Edgar Romney to warn UNITE’s executive board that “we cannot continue to deficit spend and reduce our assets.”[ix]

Management waste notwithstanding, UNITE continued to attract outside interest just like the 1995 ILGWU.  UNITE was still a Rhine Gold repository, but with dwindling membership and organizing jurisdictional “rights” mostly in dying industries.  To remain a factor in the labor movement, UNITE needed to merge into a service sector.

UNITE HERE Merger

The Hotel Employees / Restaurant Employees International Union – HERE – founded in the 1890’s, had developed a reputation under President John Wilhelm for never surrendering in an organizing fight, even if that meant picketing for months or years.  The union operated in non-exportable jurisdictions – hotels, casinos and food service – that fit the times; and focused strategically on building dense membership in major cities, largely ignoring other areas.  While steadily adding numbers and raising standards for member earnings and militance, they now stood where ACTWU once had stood – needing to merge for money.  While a few affiliates controlled some wealth, many were dependent on an International office that was itself short on the cash needed to grow.

HERE President, John Wilhelm, had first come to public attention as a young man, as he led the organization of Yale staff while still a student there.  In 2003 HERE had joined with UNITE, and several other organizing-driven unions in forming a New Unity Partnership intended to reform the AFL-CIO.  Both UNITE and HERE represented immigrants primarily, and had jointly led the 2003 Immigrant Workers Freedom Ride.  As a “getting to know you” joint action with HERE, busloads of UNITE members had joined HERE’s successful Yale picket line in New Haven a year before their merger.

A significant difference between the two unions was that, like ACTWU before it and in contrast to the ILGWU and UNITE, HERE operated with decentralized wealth and control.

John Wilhelm, John Sweeney, Bruce Raynor, Edgar Romney at 2003 Yale strike

John Wilhelm, John Sweeney, Bruce Raynor, Edgar Romney at 2003 Yale strike

As 2004 approached, once again a union with great organizing commitment sought merger with a union with strong finances and a dying jurisdiction.  And, as in the ILGWU-ACTWU merger, the union with the money would control the initial process.

Steps leading to the 2004 merger and draft constitution, however, were the opposite of the 1995 ILGWU-led process.  In contrast to the year-long open discussion within both unions of the prospective UNITE merger, the first UNITE HERE Constitution was drawn up in secret discussions between the two Presidents only.  Raynor largely dictated the terms, explaining that “we’re not going to get into a lot of debate and discussion about the merger.  We’re just going to merge.”[x]  In an interview six months before the merger Convention, even UNITE Executive VP Ed Clark acknowledged that “I have no inside knowledge of how the merger between HERE and UNITE came about, or how the merger document that people are going to vote on in July looks.”[xi]  Nearly every delegate, Vice Presidents included, saw the governing document they were to vote on for the first time at the merger Convention.

Despite his near-total control, Raynor failed to negotiate any protections for his team or himself — the kind of “pre-nuptial agreement” the ILGWU had demanded and later used to its advantage.  His intention was to focus on the former HERE jurisdictions, leaders and employers, winning their favor and bringing those of his former allies who could do the same along with him.  Though he would now sit where President Jay Mazur had sat before him, atop a membership majority committed to its own leaders, he expected to win them over as he had earlier won significant ILGWU support from leaders seeing him as the voice of the future.  Though UNITE had been “married” for its money, as the ILGWU had been, Raynor was confident he could earn HERE’s love and respect, and took no precautions on behalf of himself or other former UNITE staff and members.

The Raynor-drafted Constitution, ratified with very little discussion at the merger Convention, granted extraordinary powers to two Presidents – a radical contrast with the former HERE structure based on strong regional leaders.

As in the ILGWU-ACTWU merger, the opening advantage lay with the wealthier team.  In addition to leading health and pension fund Boards, Raynor chaired the UNITE-dominated Board managing 275 Seventh Avenue, and sat as President of the Amalgamated Bank.  Hospitality Division President John Wilhelm and three other former HERE officers served as a minority with 16 former UNITE leaders, including close Raynor ally and former UNITE Organizing Director Mark Fleischman, on the Amalgamated Bank Board.  Raynor loyalist Edgar Romney led the ILGWU Death Benefit Fund.

Observers with a memory of previous merger battles should have understood that control of these assets would shift to the team with the most votes after the second Convention.   Many on the UNITE side, however, expected that Raynor would protect their interests, and were stunned a few years later when much of their legacy did change hands.

As in earlier combinations, money from the UNITE HERE merger quickly led to organizing success in key jurisdictions, including victory in a long-fought Atlantic City strike, and wins in hotels across the country.  Organizing-focused industry “Conferences” were formed for Gaming and for Hotels, but there was no Conference for the former UNITE jurisdictions of manufacturing, distribution and laundries until near the end of Raynor’s administration.[xii]

In some regions of the country, the merger proceeded smoothly.  Former UNITE Vice Presidents, including David Melman in Pennsylvania and Noel Beasley in Chicago, successfully formed and led Joint Boards that included both former UNITE and former HERE Locals. The same was true in some HERE-led areas.  In other areas, however, cultural differences between the two merger partners were never resolved.  President Raynor, in particular, proved unable to win the allegiance of key Vice Presidents from the former HERE – a reality he did not fully understand until late in his term of office.  His top-down constitutional structure and unwanted interference in union- employer relations left him as isolated as first UNITE President Jay Mazur’s lame-duck status had once left him.

Secession from UNITE HERE

 

In the Fall of 2008, less than a year before the July Convention where general officers would be elected, three key and financially independent Vice Presidents from the former HERE – D. Taylor, head of the iconic “Culinary” Local 226 in Las Vegas (and future President of UNITE HERE), powerful New York Local 1 Manager Peter Ward, and Los Angeles leader Mike Casey — met with Raynor.  They informed him he did not have their support, and in all probability would not be re-elected. His override of HERE traditions, beginning with the top-down constitution, and followed by repeated Presidential interference in local negotiations, had left him without support from the majority faction of the union.

The foolhardy failure to add “opt-out” language to the constitution in the event of irreconcilable differences now left many former UNITE leaders, like Raynor himself, in a desperate position.  Rather than seeking a negotiated solution, Raynor proposed secession from the union without any constitutional basis. Even the original UNITE merger objectives were not abandoned.  The UNITE side would gamble, using union resources, to wrest both the former HERE’s hotel/casino jurisdiction and the financial assets UNITE had brought to the merger from the union to whom they now belonged.  With such a dowry, another union would be glad to welcome Raynor and whomever he brought with him into a new merger.

This meant war.

 

The decision to secede, which risked the resources on which members’ security depended, was made with no discussion with the members.

Seeing no alternative to Raynor’s leadership, most members of the former UNITE General Executive Board went along with his risky plan, though not without some debate.  By January of 2009, however, Pepicelli’s New England Joint Board was the only holdout.  As a GEB member, and Board member on the Health and Pension funds, Pepicelli participated in all early planning meetings, but voiced doubts about the legality of the secession, and made no recommendation as to which way his affiliate should jump.

In late 2008, secession battle plans were summarized by Raynor Special Assistant Keith Mestrich in a one-page “Major Goals” document.  Component 2 was “Retain Control of Key Assets,” identified as:

  • Amalgamated Bank of New York
  • National Retirement Fund  (which owned the Amalgamated Life Insurance Company  – ALICO)
  • Staff Retirement Fund (co-owner of ALICO)
  • National Health Fund
  • 275 Seventh Avenue, the union headquarters building (Pres. Wilhelm also maintained a headquarters in Washington, D.C.)
  • Death Benefit Fund

Not listed as assets, but also involved as weapons in the struggle, were what remained from other ILGWU “knippels[xiii],” including the Strike Fund and Affiliates Assistance Fund, as well as the “Pooled Investment Fund” managed by the International union on behalf of many affiliates.  An investigation by the Public Review Board, originally created to watch out for corruption in the pre-Wilhelm HERE, later found that around this time, Raynor had arranged to move $12 million in cash and more than $3 million in other assets from the union’s main account to locals loyal to him.[xiv]

The stated objective of all these actions was:  “[O]ther side realizes that when they wake up in control of the union on July 3, 2009 (post-Election day at the Convention) that they in fact have won nothing – no assets to control.”

The “other side” was the union formed in the previous Convention – UNITE HERE.[xv]

Merger with the Service Employees International Union (SEIU), headed by Raynor friend and ally Andrew Stern, was not included in the opening discussion, but was probably in Raynor’s mind, and on everyone’s agenda by the end of the first month of the ensuing war.

War strategy depended on surprise, haste, bold misstatement of facts, UNITE-side solidarity, a weak UNITE HERE response, and a quick victory – no assets for UNITE HERE to control.

Raiding the Funds

The former UNITE’s public moves to “retain control of assets” began with stunning unanimous UNITE-side votes at the December 6 meeting of the Amalgamated Bank Board.  These put in place “Amended and Restated” bylaws.  The new rules replaced the annual election of Directors with three levels of staggered terms (“a common tactic for warding off challenges to Boards,” according to the Pensions and Investments website)[xvi]; replaced majority voting with a 75% supermajority requirement for “significant transactions”, or to call a special shareholders meeting; and replaced nomination of Directors by the whole Board with a new, five-person “Nominating Committee” including only UNITE-side Directors.  The nominally neutral and professional bank President, Derrick Cephas, supported the UNITE-side majority[xvii].

The immediate effect of the revised Bylaws was to disempower the UNITE HERE Board minority, and facilitate their eventual replacement.  On January 22, 2009, remaining democratic pretenses were dropped, and co-President John Wilhelm and his assistant Matthew Walker were simply voted off the Board.

In addition to opening to political abuse an institution that, when well-managed, had been of extraordinary value to the labor movement,  the new rules also amounted, in the words of Joann S. Lublin of the Wall Street Journal, to “corporate-governance practices that [the Amalgamated Bank Board] has opposed as an activist investor in other companies.”[xviii]  Rather than protecting investors, the new structure empowered Board members, to the potential detriment of the Bank.

The struggle for control of the “Rhine Gold” was under way.

Despite the Board changes, majority bank ownership still rested with UNITE.  In succeeding months, the UNITE side was able, through various ruses, to shift majority Bank ownership to its side.[xix] These mainly involved arranging purchases of Bank stock by UNITE-side-controlled Funds, including the member and staff Retirement Funds, and the Pooled Investment Fund.  In addition, in 2010 the Bank issued $70 million in new stock, which also tended to dilute the shares held by UNITE HERE affiliates. Fund regulators raised questions as to whether the bank stock purchases were being made in the interest of the Funds – as required by law – or of the Bank and Bank management, but the shift was accomplished.

Following the Bank Board coup, similar votes were taken by UNITE-side majorities for the union’s merged retirement fund, health fund, staff pension fund, and the corporation managing the building at 275 Seventh Avenue.[xx]  Because the members’ retirement fund and the health fund were regulated “Taft-Hartley” entities, with the union and employers each holding half the seats on the governing Boards, there were limits on what changes could be made.  In addition, UNITE HERE Directors retained their seats on the pension boards during the war, and up to the present day, resulting in some cooperation between the two unions on behalf of the membership. President Raynor’s influence over the employer members, however, was sufficient to amend the rules to allow continued Board participation by officers of affiliates seceding from the union.

As for the all-ILGWU/UNITE Death Benefit Fund, to obtain initial UNITE-side control, it was only necessary to amend the Trust Agreement to allow members who had seceded from the union – soon to be the entire governing Board — to serve on the ruling council.  That control was soon effectively challenged, however, by a group of former ILGWU retirees.

This Fund for former ILGWU members and staff, it was estimated, would retain a value of from $30-$50 million after the last beneficiary collected.   While most of the former ILGWU was now affiliated with Workers United/SEIU, the Retired Officers of The ILGWU, an organization chaired by former member and later New Jersey Manager of the union, Manny Leventhal, was a bitter enemy of Bruce Raynor.  As UNITE President, he had cut their long-promised life insurance from over $100,000 in many cases to $5,000 – and refused even to meet with them to discuss it.

On October 20, 2009, a day before returning to their former 275 Seventh Avenue office, the Retired Officers filed a lawsuit[xxi] asking that control of the Death Benefit Fund revert to UNITE HERE.  By way of explanation, they released a passionate eight-page open letter to the labor movement and the media.[xxii]  In it, they detailed Raynor’s mistreatment of retirees, along with other instances of malfeasance as they saw it. The broadside included an interview with a recent widow, whose ILGWU husband had learned virtually on his deathbed that the inheritance he had long promised to his family was now reduced to less than the costs of burial.  In May of 2010, the Staff Retirees organization formally left Workers United and affiliated with UNITE HERE.

UNITE-side / Workers United moves to win control of what was probably the most valuable physical asset of either union, the building at 275 Seventh Avenue, soon became part of a much larger lawsuit involving UNITE HERE and the secessionist group.[xxiii]

As noted earlier, Edgar Romney, as UNITE Executive Vice President, had agreed in 2001 to turn ownership of the former ILGWU building over to UNITE.   It had then become property of the UNITE HERE International union as part of the 2004 merger.  There was no managing Board, just a single “member,” UNITE HERE.

Undaunted, on December 8, 2008, agents for Raynor’s faction filed “Restated” Articles of Organization for the building corporation, creating a managing Board with Raynor and five other UNITE-side allies as “Managers.”  The building office was relocated to West 34th St., from which it would be managed on a daily basis by UNITE-affiliated National Corporate Research, LLC.

UNITE HERE, however, still owned the building at 275 Seventh Ave., and continued collecting rents.

Control of the building then became part of the umbrella lawsuit cited above, merging charges filed by the UNITE side and counter-charges filed by UNITE HERE, in United States District Court for Southern New York, Judge George B. Daniels presiding.

Over the summer of 2009, UNITE-side Vice President Mark Fleischman, a former Organizing Director for UNITE, began visiting private tenants of the building and advising them to put rent payments due to UNITE HERE into escrow until control of the building was settled.  Fleischman then stepped further over the line by using his dual role on the managing Boards of both the Bank and the building to reverse a regular UNITE HERE fund transfer of $9 million from the Amalgamated Bank account where rents were deposited to the General Account of the union, controlled by UNITE HERE.

When this interference with normal management of the building came before the Court, Judge Daniels tipped his hand UNITE HERE’s way:  “You tell Mr. Fleischman,” Daniels directed Workers United’s attorney, “that I said he should have nothing to do with the management of this (building) company…If I am a member of an organization, and … I decide to disassociate myself from that organization, I don’t get to pick and choose what I think is individually my property and take it with me… If that was true, we wouldn’t have fought a civil war.”[xxiv]

He also addressed the Amalgamated Bank’s inappropriate involvement in the union dispute, instructing Workers United’s attorney: “tell the bank not to interfere… I don’t want to be talked to in a way that is disingenuous….They are not a disinterested party here.”[xxv]

The building was still UNITE HERE’s.

As for the “knippels,” toward the end of December, 2008, aiming to limit the size of any former HERE war-chest, pro-Raynor management froze all “Pooled Investment” funds, on which many affiliates – including former UNITE affiliates — depended to run daily operations.  Understanding in advance what was about to take place, the still-uncommitted Warren Pepicelli phoned New England Treasurer Sam Giurleo from the plane on his return from the leadership meeting where the plan was considered.  Giurleo immediately withdrew New England’s investments from the pool.  Unlike most other affiliates, New England then had these liquid assets to run operations through the rest of the war.

Local union funds were also brought into play when, in January, President Raynor assessed seceding affiliates $500,000 apiece to finance the rest of the war, beginning with a virulently anti-union internet campaign, and moving on to decertification and disaffiliation campaigns – “raids” – lawsuits and contests for employers’ favor.  From this point forward, many former UNITE affiliates were financially strapped, and Regional Managers were in potential personal legal jeopardy for misappropriation of union funds.

The position of the New England Joint Board was unique in the overall struggle, and also illustrates the potential and effects of managing the crisis locally in a way that was both more open and more thoughtful than some affiliates that made different choices. Because I am personally familiar with this history, and as an example of regional affiliates that played critical roles in the struggle, I’ll lay out some of the Joint Board’s approach before returning to the overall financial struggle[xxvi].  

New England Vice President and Manager Warren Pepicelli used the month of January to review the situation created by the decision of leaders he referred to as the “white boys” meeting in New York.  This included conversations with staff, rank-and-file leaders, members of the GEB on both sides, and with Presidents Wilhelm and Raynor.

Consistent with ILGWU tradition, Pepicelli deliberated carefully before making a decision.

Warren Pepicelli briefly has Bruce Raynor's ear at  New England Joint Board meeting c. 2002

Warren Pepicelli briefly has Bruce Raynor’s ear at New England Joint Board meeting c. 2002

As the battle opened, the Joint Board was facing a January Trusteeship (takeover) backed by BOTH Presidents, designed to compel Pepicelli to merge his affiliate with hotel Local 26, which had moved into the Joint Board building to resolve its financial difficulties, and was paying no rent.  Raynor had originally proposed the trusteeship as a way of winning support from leaders of the former HERE.  For Wilhelm, support for Local 26 finances was the natural position.  He had never had a conversation with Pepicelli outside of formalities at the VP get-togethers.

Pepicelli’s decision-making process contrasted with the rushed and peremptory approach of many of his peers.  His early reports to staff and rank-and-file leaders bluntly described the member-free initial decision process by Raynor’s group, his disgust at both parties for subsequently lining up member against member to denounce each other (a practice he soon found necessary to take up himself), and his determination to protect the Joint Board and the legacy that had been passed along to the current generation of members, and to him.

Though both Presidents had previously been prepared to take over the Joint Board, both now dropped that proposal and urged Pepicelli to join their side.  Legally, the Joint Board’s decision would be important.  Raynor’s defense for seceding with no constitutional basis was that there was a “schism” between the two sides, with 100 percent rejection of the merger by one partner.   On that basis, the former UNITE side could and did claim that the merger had simply not “taken.”   In effect, no divorce was required; the marriage should be annulled.  By standing pat, the Joint Board might disqualify that argument.

Pepicelli outlined the situation to staff in mid-December, and to New England Joint Board’s rank-and-file Executive Board on January 12, 2008, conveying essentially the same message to both.  He was “embarrassed” to report what was taking place in the union.  If the unions fought each other, employers would take advantage. New England was the only former UNITE affiliate not committed to leave the union.  The Trusteeship threat was now probably moot.  No vote would be legally required to remain IN the union, but there would be votes.  It would be painful if they were eventually separated from former ILGWU and ACTWU brothers and sisters.  But his major concern was protecting the Joint Board and the legacy left to them by earlier generations.  If they left the union without a legal basis, they might lose their building and their ability to function as a Joint Board.

Around the 4th of February, Pepicelli held his first serious conversation, by phone, with President Wilhelm. He had been disgusted from the start by the Raynor faction’s decision to secede prior to any discussion with members, and in violation of the law and the constitution. He had sat through four months of meetings with the UNITE-side faction of UNITE HERE, and heard no adequate and principled reason for breaking apart the merger.  He had had years to form an impression of Wilhelm, and judged that he, in contrast to Raynor, would listen to reason and keep his word.  His strong preference was to remain in UNITE HERE, but he could not responsibly recommend that decision without assurances that, if New England remained in UNITE HERE, they would not be trusteed, not be asked to merge with Local 26[i], and would retain the Harrison Avenue building and other resources.  Wilhelm now gave him those assurances, and Pepicelli told Wilhelm that New England would stay, as long as his rank-and-file leadership concurred.


[i] Still loyal to his Local 26 allies, Wilhelm found support for Local 26 in International funds.

On February 6, he met individually with Raynor, in Raynor’s office, to convey the same message.

On February 12, he met with thirty delegates and Local officers from around the region to explain the situation to them.  He warned the rank-and-file leaders they should expect to receive phone calls from UNITE members or leaders urging their affiliates to leave UNITE HERE.  Some had already been called.

New England Joint Board President Bert Barao and Secretary Evelyn Moniz

New England Joint Board President Bert Barao and Secretary Evelyn Moniz

On Friday, February 20, the New England Joint Board Executive Board considered a Resolution to remain in UNITE HERE.  President Bert Barao, a tailor at Macy’s and formerly with ACTWU, had close friends among both rank-and-file and staff of the former UNITE, as did some other Board members.  He had been contacted directly by Edgar Romney, whom he knew from earlier decades on the Civil Rights committee, and had a sit-down dinner with a former UNITE VP sent by Raynor.  While the rest of the E-Board was prepared to vote with Pepicelli, Barao was undecided.  Pepicelli chose not to call a vote without his backing.  Two days later, Barao phoned him at home to express his support for remaining.  A telephone vote by other E-Board members settled the issue unanimously.

This was the critical vote, since the next meeting of the full Joint Board would not be until after the Convention.

New England’s vote had strategic effect.  There was no schism.

Wilhelm, Pepicelli and Barao came from three different unions.  Their decisions to ally with each other were based on consideration of alternative paths, and on trust in each other’s word. [xxviii]

In early May, now-Chief of Staff Keith Mestrich presented Raynor and Stern with a battle assessment reminiscent in its informed honesty of memos from Hitler’s professional military leaders in the aftermath of the Allied landing at Normandy.  While UNITE had counted on creating a financial crisis for UNITE HERE, it was the secessionist group, even after the March merger with SEIU, that was hurting.  (C)hanges in economic assumptions,” Mestrich noted, “have altered Workers United’s short-term finances.”[xxix]

The principal cause of Workers United’s financial difficulties was evident in the memo’s recurrent reference to “the lack of a settlement with UNITE HERE” — apparently unexpected.  The document lists the following among the union’s challenges:

  •  Amalgamated Bank was paying no dividends, including to “at least three affiliates that depended on their Amalgamated Bank dividends to conduct regular business.”[xxx]
  • Evicted from 275 Seventh Avenue, Workers United needed to find new space, purchase new computers and other equipment and do without rental income from the building.
  • A strong UNITE HERE response to Workers United raids on affiliates was requiring W.U. staff to play “defense,” rather than engage in organizing or other “offensive” actions.
  • A sharp decline in dues payments, including the loss of 9,000 New England members, and escrowing of dues by employers claiming they did not know to which union they should be paid.

Mestrich’s recommendation was to renegotiate the original agreement with SEIU, which had been made just a few weeks before.  Rather than bringing a generous “dowry” to SEIU, Workers United was becoming a burden.  As the Memo notes:  “The financing provisions of the agreement [with SEIU] were not negotiated with…a budget for Workers United.  No estimates of staffing needs or fixed costs were prepared.”

The hasty secession plan and subsequent merger had repeated the careless approach to the original UNITE HERE merger.[xxxi]

Mediation and Settlement

Shortly after the former UNITE side convened to form Workers United, and then merged as a conference of SEIU (March 21-22, 2009), leaders of the three unions met for negotiations.  These were mediated by United Food and Commercial Workers Union (UFCW) President Joe Hansen, a partner in the now-floundering Change to Win coalition.  With UNITE HERE still looking to restore the pre-war status quo and SEIU dreaming of swallowing the rest of UNITE HERE and its assets, there was little headway made. Hansen underestimated the relative strength of the major parties, and the commitment of UNITE HERE to the New England Joint Board’s decision.  His mediation proposal, however, did roughly outline the elements of the agreement reached more than one year later.  Hansen listed the “physical assets” at issue as:  the Amalgamated Bank, the UNITE HERE General Fund, the Strike Fund, the ILGWU Death Benefit Fund, and “Real estate assets in New York.”  His recommendation was that Ownership of the Amalgamated Bank [and] the headquarters building in New York City should remain with the membership of the former UNITE, but a financial settlement with HERE remains necessary for the future viability and health of the union.”[xxxii]

“One of the underlying concerns,” Hansen noted, “is that there has not been a proposal constructed that would leave HERE as a viable standalone union- as the merger dissolved.”  This reflected the dispute ongoing at that time over ownership of 275 Seventh Avenue.

The July, 2009 Convention proved a turning point in the war, with 27 Presidents of International Unions and several heroes of the labor movement endorsing UNITE HERE’s no-raiding/no-divorce agenda.  The New England Joint Board delegation was the first group welcomed to the stage.  The convention debated and approved a radically new constitution that restored power to affiliates, and democracy to decision-making.  Wilhelm was reelected by acclamation.  Pepicelli was elected an Executive Vice President, and given a constitutional guarantee for the Joint Board’s independence.

Probably more important to New England than the Convention, as the battle proceeded for another year, with challenges in virtually every workplace, was the extraordinary “ground war” assistance from other UNITE HERE affiliates.  One critical moment came in Spring, 2009, with a presentation to Joint Board delegates by rank-and-file leaders from a Philadelphia school food-service Local.  The Philadelphia members reported, with great enthusiasm, on their recent victory in a hard-fought National Labor Relations Board election, over a representation challenge from SEIU.  Also at this delegate conference, one member of the New England staff and the leaders of two essential warehouse Locals, whose loyalty to the Joint Board was in doubt, announced their commitment in an emotional “come to Jesus” meeting.

New England was also loaned essential UNITE HERE organizing staff, led by disillusioned former SEIU Organizer Dana Simon, now with UNITE HERE Local 26.   Organizers logged hundreds of hours both outside and inside Joint Board workplaces.  While inside “delegations” focused on member grievances, colorful outdoor demonstrations focused on strong union contracts.  Actions also included one long demonstration line of bussed-in Joint Board members on the coldest night of the winter, outside corporate headquarters of the TJX corporation (owners of TJ Maxx, Marshall’s, A.J. Wright and Home Goods stores) in Natick, Massachusetts.  With membership motivated and organized on fights with management, all seventy New England locals, of various sizes, ultimately came down on the UNITE HERE side.

In November, 2009, mediator Hansen updated his settlement recommendations in a memo to “John, Andy and Bruce.”[xxxiii]  He noted there were “approximately $90 million in liquid assets available for settlement,” but also liabilities including pending “judgments and legal actions that could total $30 million.”  He had changed his earlier recommendation that both the building and the bank should go to Workers United; now he suggested these assets be equally divided, both going to the unions that actually controlled them – the bank to W.U., and the building to UNITE HERE.  He would also “reward” both the Death Benefit Fund and the membership of the New England Joint Board to Workers United.  That was to change before a settlement was actually reached.

But the fight carried on for another year, to the bitter end.

And it must be said:  The almost two-year war between formerly merged unions produced endless stress for leaders, needless distraction and risk for members, disgust and wonderment for many trade unionists and their supporters, huge frustration for political activists and leaders who had expected Labor to focus on passing Labor Law Reform and electing a friendly Administration and Congress, confusion for UNITE HERE, SEIU and Workers United employers , great entertainment and opportunities for mischief for anti-union employers and their allies, millions of dollars in legal fees for attorneys, and millions of wasted dues and other dollars spent on union staff and members’ time.  From oppositional websites that drew from the worst techniques of union-busting employers, to raids that pitted union brothers and sisters against each other in defense of elected officials’ jobs, to union disaffiliation and decertification campaigns that are generally among unionists’ worst nightmares,  to battles for property that the sweat and frugality of earlier generations had earned, and to public shame for a labor movement struggling to remain relevant in a world of advancing capitalist domination; the war dragged on.

As in all wars, there were also examples of courage, strength and commitment to principle.

In late July, 2010, a settlement was finally announced.  The terms were significantly more favorable to UNITE HERE than those envisioned by mediator Hansen and many others in early days of the war.  Notably, while Hansen (with the goal of keeping industries together) would have returned the New England Joint Board to Workers United, despite New England’s votes to the contrary; and would also (with the goal of holding the former ILGWU together) have awarded the Death Benefit Fund to Workers United, John Wilhelm stood by his friends.  Both groups, with their funds and assets, ended up where they chose to be, in UNITE HERE.

A critical prelude to the settlement was the resignation in May, 2010, of SEIU President Andrew Stern.  Stern had lost union and public support because of his simultaneous assault on UNITE HERE and on one of SEIU’s own affiliates, the Union of Healthcare Workers, headed by charismatic leader Sal Roselli.  His resignation was quickly followed by the defeat of his preferred successor, Anna Burger, who had headed the Change to Win Federation, and the election to the Presidency of SEIU Executive Vice President Mary Kay Henry.

Henry recognized the hopelessness of what had initially been foreseen as a quick defeat of UNITE HERE, and moved within a few weeks to put the war behind her.  In his July 26 victory announcement, Wilhelm credited “new SEIU President Mary Kay Henry for personally devoting her energy to making this agreement.  For the sake of workers and the labor movement, I hope that this is the first step in making SEIU the great Union it can be under her leadership.

“UNITE HERE is proud that the agreement preserves its exclusive jurisdiction to organize in the hotel and gaming industries. It also lays out a level playing field for both Unions in the food service industry.

“And it restores to UNITE HERE the bulk of the financial assets that have been tied up in federal court, including the Manhattan real estate.”

UNITE HERE and SEIU agreed to seek approval from federal regulators to transfer ownership of the Amalgamated Bank to SEIU-affiliated Workers United.[xxxiv]

In the final settlement:

The Amalgamated Bank went to Workers United / SEIU.  But individual UNITE HERE affiliates owning Bank stock, including future President D Taylor’s Las Vegas Local, and the New England Joint Board, retained their shares.

The Building – 275 Seventh Avenue – went to UNITE HERE.

The Death Benefit Fund, as the Retired Staff had asked, went to UNITE HERE.

Benefit Funds were divided between the unions, so that members did not lose coverage.

Numerous lawsuits and legal charges were dropped or assigned to arbitration.

Jurisdictions were largely awarded to the union where they had originally resided.  However, the New England Joint Board was given continued jurisdiction in manufacturing, warehouses and industrial laundries in its region.

It is my understanding that various cash funds, escrowed dues, and so on were divided equitably, generally to the union to whom they were owed, had accumulated them or were using them prior to the split.  However, details on this were made confidential under the merger settlement.

As labor reporter Harold Meyerson summed it up for American Prospect, “UNITE HERE plainly won the lion’s share of its demands…President John Wilhelm ‘should be’ extremely pleased.”[xxxv]

Subsequent events have only reinforced that impression.

Postlude

In late 2010, Bruce Raynor once again resigned a union Presidency (of Workers United) before being fired, facing charges for misappropriation of funds, a few months after Henry assumed the SEIU Presidency.  Chicago and Midwest Regional Joint Board Manager Noel Beasley was elected President.

UNITE HERE President John Wilhelm retired honorably, and loved by many of his fellow leaders and members, at the end of 2012.

D. Taylor was elected UNITE HERE President at the 2009 Convention – the first President to enjoy from the start a strong and reliable non-dues source of income to the International Union office, from the building at 275 Seventh Avenue.  This represents some shift in power within the union.

The Bank had been wrongly perceived by many outside the ILGWU or the former UNITE as the most valuable physical asset of the union.  Though now under new and better management, it may still be following the troubled path it has followed except during the Presidencies of Sidney Hillman of ACTWU and Jay Mazur of the ILGWU and UNITE.

On April 11, 2012, Steven Greenhouse reported in the New York Times[xxxvi] that:

Amalgamated Bank, long the nation’s only union-owned bank, announced [Wednesday] that two financiers who offered it a lifeline — Wilbur L. Ross Jr. and Ronald W. Burkle — had closed a deal giving them 41 percent ownership in the bank. Amalgamated had sought the [$100 million] investments from Mr. Ross, a prominent investor in the steel and coal industries, and Mr. Burkle, a supermarket magnate, after the New York State Banking Department ordered the bank to increase its capital ratio…”

It is no longer a completely union-owned bank.  And, it has paid no dividends since 2008.

After the failure to pass Labor Law Reform in 2009, an effort funded by billionaire, right-wing extremists to weaken or destroy public employee unions at the state level succeeded first in Wisconsin.  It has since spread to other states and to a national level, and to attacks on dues collection by private sector unions as well.

But there is also good news in the recent success of labor – and particularly of UNITE HERE, SEIU and UFCW (all now back in the AFL-CIO) — in pursuing new paths to organize working families, dues-free, in communities and outside the workplace.  UNITE HERE and community allies even succeeded in organizing whole communities or cities like New Haven, Connecticut and parts of Los Angeles / Long Beach, California to achieve living wages, environmental safety and other gains.  SEIU is sponsoring and funding organizing in the growing fast food sector, including numerous walkouts at McDonald’s franchises.  UFCW is backing demands by non-union but pro-union Wal-Mart employees for living wages and fair conditions.  The International Labor Rights Federation and allied labor groups in many countries are focused on improving conditions for workers in Bangladesh and other countries, in the former ILGWU sector of apparel manufacturing, with U.S. and European labor support.

The approach of every union for itself, exemplified in the Progressive Union War, may be replaced by a more cooperative paradigm.

To what extent greater labor unity and political activity by UNITE HERE and SEIU from 2008-2010,  years significantly consumed by internal struggles, could have slowed or mitigated a decades-long corporate assault is open to speculation.

What is certain is that efforts to better the conditions and unity of the working class rely in whole or in part on labor union funds and the generous understanding of the needs and potential of all workers.

The good financial management of unions is important to us all.  To achieve this goal, we must guard against the undemocratic and unchecked exercise of power by irresponsible union leaders,   or pay a price that is unacceptable now, more than ever.

Observations

On the evidence noted in this paper, and my own experience, I can make certain observations.  Readers, of course, can make their own.

  • The unions that were financially successful generally had a trusted, conservative Treasurer, and an overall leader committed to maintaining and building the legacy, not raiding the funds for immediate gain.  This was true for ILGWU President David Dubinsky and Treasurer Shelley Appleton; for ILGWU President Jay Mazur and Treasurer Irwin Solomon (and later advisor Lloyd Goldenberg); and for New England Joint Board Manager Warren Pepicelli and Treasurer Sam Giurleo.  Amalgamated Clothing Workers President Sidney Hillman was both a great Organizer and an outstanding financial manager, a rare combination.  He may also have employed a strong financial manager; I don’t know.
  • Union organizing and the management of large organizations require different skills.

Organizers always take risks, and may expect to lose as often as, or more often than they win.  Managers also take risks, but must also consider the medical adage:  first, do no harm.

Presidents and regional Managers must manage resources of all kinds after they are organized or otherwise acquired.  Simply hitting your target over the head and taking the money does not assure long-term success.

In trying to take over UNITE before the agreed-on time, and in breaking with the AFL-CIO and UNITE HERE, Bruce Raynor was a foolish risk-taker and a careless waster of resources.  His fellow ACTWU leaders and members made gains in merging with the ILGWU, and lost them in the merger and the breakup of UNITE HERE.

ILGWU (then UNITE) Presidents after David Dubinsky managed cautiously, organized relatively little, but conserved financial resources that still enable union organizing eighteen years after the ILGWU as an independent union ceased to exist.

Careful financial management, well thought-out and openly explained decisions – and unshakable commitment to member service — allowed Warren Pepicelli to maintain his “fortress” against a union President who twice took away his organizing staff, and through labor and economic turmoil.

The New England Joint Board also received essential support from the President of UNITE HERE, from affiliates in Philadelphia, other parts of New England – and especially from the Organizing staff at Local 26.  No affiliate should stand alone – and no affiliate leader should mindlessly “go along” with higher leaders, or be excused from making critical decisions.

There may now, at last, be real opportunity for organizing and growth.

David Dubinsky, Sidney Hillman, John Wilhelm and D. Taylor appear to have mastered both membership growth and retention.  Organizer Taylor now has resources to defend which prior HERE Presidents did not have – and a more challenging political environment than any predecessor.  How he handles the opportunity will have great impact on the future of the labor movement.

  • Union banks (financial resources) and rentable buildings are long-term resources for workers.  Treating them as cash-on-hand robs workers of their patrimony.  Putting them in the hands of irresponsible leaders is a mistake that will haunt those who do so.  Steady, non-dues income creates opportunities for the long-term survival or growth of pro-worker organizations of all kinds.

The value of ACWA’s Amalgamated Bank and the ILGWU’s building at 275 Seventh Avenue is attested by the mergers and takeovers they attracted.  Within the ILGWU, and among former ILGWU officials, there was little doubt as to which resource was more reliable.  The Bank went through repeated boom-and-bust cycles (though it escaped damage from the Great Depression, under ACWA President Hillman’s careful management), resulting both from instability in the larger economy and from union management with quick growth, short-term delusions.  The building, on the other hand, still housing the historic Union Health Center among its many tenants, has been a steady source of income, as well as space.  Union buildings in other parts of the country, like the one in Boston’s Chinatown, are also reliable sources of strength.

  • In a fight, trust matters.  One should verify wherever possible, but in a crisis, you must judge who will have your back, or not.  John Wilhelm, Warren Pepicelli and Bert Barao found they were right to trust each other.  Bruce Raynor repeatedly pursued his personal goals with insufficient regard for the interests of those who trusted him.  His followers paid a high price.
  • Unions differ in the degree of centralization vs. independent regional leadership.  Who holds the money is a key factor.  Whether one structural model or the other is more beneficial to the labor movement is an open issue.  The answer depends on the readiness of affiliates, financially independent or not, to play as part of a team, rather than simply going it alone.  Several examples follow:

ACTWU had a number of regional affiliates that preferred to play alone.  One Connecticut-based Manager out of the Textile Workers Union, tried with some success to organize anything that moved, including explosives and machine gun factories.  Some of the worksites Richard MacFadyen organized are now the industrial base of the New England Joint Board, after the near disappearance of the garment industry.

Leading up to the UNITE merger, ACTWU’s organizing program was placed at risk when well-off affiliates refused to help out their national union at a critical time.  ILGWU affiliates, normally in debt to a strong International, were part of a team, and active when the International took the lead.  But their loyalty to International leadership was uncertain.

Edgar Romney and Warren Pepicelli made opposite decisions with regard to ceding inherited wealth and power to their International union.  The choice to hold on to the power you are given, in this instance, proved more successful

In the early 2000’s, several independently powerful HERE affiliates protected their own reserves when their International needed financial backing.  But later, those leaders led the defense against Raynor’s raiders when UNITE HERE was threatened.

As regards centralization vs. regional independence, what lesson can we draw from this history?  I would say that finding a balance – the middle path – is best.  In the words of Rabbi Hillel (from a tradition familiar to early garment workers):

“If I am not for myself, who will be?

If I am only for myself, what am I?

If not now, when?”

…….


[i] This is not to suggest that other factors, including the individual character of union leaders, are less important than their financial acumen.  But those would be topics for a different paper.

[ii] Rich Yeselson, “Fortress Unionism,” Democracy: A Journal of Ideas;  Issue #29, Summer 2013

[iii] Letter from Joe Hansen to John Wilhelm and Bruce Raynor, May 19, 2009

[iv] While tending to its financial base, the ILGWU engaged in a series of general strikes, including, in August, 1933, a strike of 70,000 garment workers in New York, New Jersey and Connecticut, which persuaded industry Associations to grant the union the power to regulate outsourcing going forward.  Wealth management was a sideline that made growth possible.

[v] Press release from Retired Officers of the ILGWU, Emanuel Leventhal, Chairman, August 6, 2009

[vi] This Yiddish term for a housewife’s cash for necessities, typically tied in a cloth handkerchief, was used by the ILGWU to describe funds not under government regulation.

[vii] Carl Proper interview of Ed Clark

[viii] Some other former ILGWU affiliates also owned shares in the building

[ix] { }

[x] Conversation with Warren Pepicelli.

[xi] Interview with Carl Proper

[xii] One year after the UNITE HERE merger, Service Employees’ International Union (SEIU) President Andrew Stern led a split of unions reputedly committed to organizing first, with politics a distant second, out of the AFL-CIO, and into a new “Change to Win” coalition.  Raynor brought UNITE HERE into the coalition, where they joined also with the Teamsters, United Food and Commercial Workers, Carpenters and Farmwokers.  This second split, seven years after Raynor’s near-breakup of UNITE, proved an omen of further instability to come.

[xiii] A knippel is a Yiddish term for a housewife’s savings tied in a knot in a handkerchief.  The Jewish-led ILGWU occasionally used the term to include a variety of liquid union funds for different purposes.

[xiv] Memorandum from Public Review Board of UNITE HERE to Lanny Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice, et al, February 10, 2010

[xv] The union formed in the 2004 merger, UNITE HERE, has never changed its name.  Most affiliates of the former UNITE did change their name, in March 2009, to Workers United, which merged with SEIU the day after its founding Convention, and now exists as the Workers United conference of SEIU.  I will sometimes refer to the former UNITE group as the “UNITE-side,” up to the point where they become Workers United.

[xvi] “Activist Credibility Gap,” Pensions and Investments, Crain Communications, Inc., March 9, 2009

[xvii] John Wilhelm letter to Derrick Cephas, 6/10/09.

[xviii] “Union-Held Bank Drops Its Stance?,” Joann S. Lublin, WSJ, December 6, 2008.  Lublin noted that “Mr. Raynor also is a co-chairman of the Council of Institutional Investors, a Washington group that represents more than 140 pension funds. He has urged member funds to push harder against staggered terms and supermajority voting, a Raynor acquaintance recalled.”

[xix] In addition to the International Union’s ownership, some UNITE HERE affiliates also owned – and continue to own today – stock in the Amalgamated Bank, which would presumably have been voted in the interest of UNITE HERE control.

[xx] In testimony for the Federal Court, Southern New York District, on 4/30/09, Pres. Wilhelm summarized Raynor/UNITE’s financial takeover measures as follows:

Mr. Raynor and his allies:  (1) changed the governance structure of Amalgamated Bank, owned by the union, in order to prevent the union from exercising control and perpetuating Raynor and his allies in office as the Bank’s directors and officers;

(2) changed the governance structure of the benefit plans sponsored by UNITE HERE International Union to prevent the International Union from appointing trustees and to perpetuate Raynor and his allies in office as  trustees;  

(3) changed the governance structure of the non-profit corporation that owns the union’s headquarters building at 275 Seventh Avenue, in New York City in order to take control of the building away from the union and place it in the hands of Raynor and his allies.”

 

[xxi] Case filed for The Retired Officers of the ILGWU, U.S. District Court in Manhattan.  The plaintiffs include Jean Dubinsky Appleton, widow of former ILGWU Secretary Treasurer Shelley Appleton and daughter of its former president, David Dubinsky.  Press release from Retired Officers E-Board member Aaron Adler:  “I.L.G.W.U. Retirees File Suit Against Amalgamated Bank And Workers United For Breach Of Fiduciary Duty,” New York, NY – October 20, 2009 –

[xxii] The ILGWU staff retirees noted, “Having lost our retirement income security as a result of the selfish and unprincipled conduct of Bruce Raynor, we feel compelled to bring to public attention the anti-worker, anti-retiree policies of this self-described labor ‘leader.’ We are particularly disgusted by the crocodile tears being shed by Raynor over the alleged attempted ‘takeover’ by UNITE HERE of valuable assets and real estate which the ILGWU – not Raynor’s ACTWU – had brought to the ill-fated 1995 merger between ACTWU and ILGWU which formed UNITE….

“As longtime trade unionists, we have closely followed the internecine war which has broken out between the UNITE HERE factions.  We are intimately familiar with the progressive values and traditions of the International Ladies’ Garment Workers’ Union.  Our focus, historically, has always been to benefit the working class, without regard to craft or industry.  A hotel worker is as much a member of the working class as a garment worker in our day.  We are more concerned with the principles which guide the workers’ union rather than with the craft or industry involved…we have learned over decades with the ILGWU, that the raiding by one union of another union’s members is totally unacceptable, inimical to the working class, and destructive of the values we stand for…”

[xxiii] John Gillis, et al, Plaintiffs, v. John Wilhelm et al, Defendants, NY, NY 09 Civil. 09-1116 (GBD); and Bruce Raynor et al v. Wilhelm et al, Civil 09-1374 (GBD))

[xxiv] Ibid

[xxv] Ibid

[xxvi] The author would encourage other affiliates to write their histories as well.

[xxvii] Still loyal to his Local 26 allies, Wilhelm found support for Local 26 in International funds.

[xxviii] Asked why he had decided to vote with Pepicelli, and against Raynor and former ACTWU friends, Barao noted that, “He (Pepicelli) told the truth.”  He also commented on the “respect” Pepicelli had shown by postponing the vote.

[xxix] Keith Mestrich “Confidential Memorandum, Draft #3, (5-11-2009) to Edgar Romney, President, Workers United; cover memo to Bruce Raynor, Noel Beasley; “Workers United Finances and Need to Consider Renegotiating Short-Term Financial Provisions of SEIU Affiliation Agreement”

[xxx] Many banks were in financial difficulty in 2008.  Failure to pay dividends at this time was not surprising, but that this has continued into 2013 is an indicator of special difficulties for ABNY.

[xxxi] Around this time, Bruce Raynor, now an Executive Vice President of SEIU as well as President of Workers United, faced another opt-out vote – this time from the Workers United General Executive Board, angry that he had made unapproved payments to SEIU out of the Pooled Investment Fund.  He headed off the move by issuing Bank stock to affiliates represented on the General Executive Board.  The more things change…

[xxxii] Letter from Joe Hansen to Bruce Raynor and John Wilhelm, May 19, 2009

[xxxiii] Letter of Joe Hansen to John Wilhelm, Andrew Stern and Bruce Raynor, November 30, 2009.

[xxxiv] “A Labor War Ended; SEIU and UNITE HERE come to terms”, Harold Meyerson, American Prospect, July 27, 2010, web only

[xxxv] Harold Meyerson, Ibid

[xxxvi] Steven Greenhouse, “For Union-Owned Bank, Lifeline Offers Chance for Growth”, New York Times, Financial Services April 11, 2012

Capital Strike, Part Deux: Can Obama Negotiate?

 

Capital Strike, Part Deux:  Can Obama Negotiate?

Carl Proper

carlproper.com

 Apple Operations International, in the Hollyhill Industrial Estate,

one of the Irish subsidiaries employing  4 percent of Apple’s global

work force and purportedly earning 65 percent of its worldwide income

AppleIrelandBuilding

Michael MacSweeney/Reuters

As I reported in this blog December 9 (“U.S. multinationals pursue victory in Capital strike against taxes”), nominally U.S. multinationals are refusing to bring back to the United States nearly $2 trillion in self-defined “overseas earnings,” as long as they must pay the 35 percent tax on the earnings.  Faced with a similar situation in 2004, President George W. Bush arranged “repatriation” of nearly $400 billion at a tax rate of only five percent, based on a kiss and a promise to use the money to create American jobs.  New York Times investigative reporter David Kocieniewski later found the action had led to no discernible increase in American investment or hiring. On the contrary, some of the companies that brought back the most money laid off thousands of workers.  A study by the National Bureau of Economic Research later concluded that 92 cents on every dollar was used for dividends, stock buybacks or executive bonuses.”[i]

In a standoff, there has been no repatriation since that time.

But on May 22, one of the still-ongoing tax strike leaders, Apple CEO Tim Cook testified before the Senate Permanent Committee on Negotiations, headed by liberal Democrat Carl Levin of Michigan.  Word was that Cook would propose a “dramatic simplification” of corporate tax laws.  In a promise reminiscent of 2004, he would “present specific proposals aimed at encouraging companies to bring back foreign earnings to the United States and invest that money in job creation, as well as research and development.”[ii]

Cook had been roasted in advance of the hearing for Apple’s use of a web of offshore entities — some with no employees or physical offices — that allow it to pay little or no taxes on tens of billions of dollars, according to a Senate investigation.  Most of Apple’s profits actually derive from research at its Cupertino, California headquarters, rather than from low-wage manufacturing operations.  In 1980, however, it signed over to Irish subsidiaries the right to declare profit from that research.  Between 2009 and 2012 alone, Apple shielded at least $74 billion in profits from U.S. tax laws by setting up subsidiaries in Ireland.[iii]  Press and Senate critics have singled out to two Irish shell companies, one of which brought Apple $30 billion between 2009 and 2012, but paid no taxes to any government.  The other paid a tax rate of 0.05 percent in 2011 on $22 billion in earnings.[iv]

“Apple sought the Holy Grail of tax avoidance,” said Sen. Carl Levin (D-Mich.), chairman of the committee, before the hearing opened. “It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”  Even John McCain of Arizona, the senior Republican on the committee, noted that Apple is “among America’s largest tax avoiders. (The arrangement) “gives significant advantage compared to smaller companies.”

“What impresses me is the effortlessness of Apple’s international planning,” added Edward Kleinbard, a tax law professor at the University of Southern California and a former chief of staff of the Congressional Joint Tax Committee.  “It’s as if Apple checked a box to elect out of worldwide taxation on a vast swath of their international income.” [v]

During the hearing, however, Cook’s low-key demeanor, his mere willingness to testify, while other CEO’s demurred – and the great popularity in the U.S. of Apple’s products – totally disarmed the committee.  Cook won a hands-down victory over Congressional “investigators.”

Apple, he testified, pays “all the taxes we owe — every single dollar.”  Apple is simply “a victim of an outdated tax system. Unfortunately, the tax code has not kept up with the digital age.”

Missouri Democratic Senator Claire McCaskill was convinced:  “I love Apple” she testified. “I harassed my husband until he converted to a MacBook. It’s a huge part of my life.”  Not to be outdone, pre-hearing attack dog Levin added that, “We love the iPhone and the iPad… I know it’s not easy to come in front of a spotlight but it’s important for us.”

During the hearing, Senator John McCain also thanked Cook for his testimony:  “You have to be a pretty smart guy and a pretty tough guy, too, and I say that in a complimentary way,” he beamed.

Sen. Rand Paul (R-Ky.), who had not wavered, got right to the Libertarian point, saying the committee owed Apple an apology for “dragging” Cook and other Apple executives to Washington when they had not done anything illegal. He proposed lowering the corporate tax rate from thirty-five to five percent to encourage companies to bring operations back to the United States – exactly what President Bush had achieved nine years earlier.

Even Cook himself was a bit more generous:  “To incent a huge number of companies” to bring back money, he testified, the new rate “would have to be a single-digit number.”

With Congressional leaders seemingly fleeing the fight, and with President Obama’s last election behind him, the game may now be on.  Given the duration and solidarity of the capital strike, it’s clear that the final tax rate – unlike yours or mine – will be negotiated.  George Bush and Rand Paul’s five percent plan is the floor, and the ceiling is probably in the 20s.

It will be up to Obama, initially, to negotiate a deal that could repatriate enough wealth, in the pockets of ordinary taxpayers , to provide a significant boost in employment and a second stimulus to the economy.  During his election campaign, he lambasted his opponent for dodging taxes through use of overseas tax shelters.

Many in labor, the left, or just ordinary taxpayers might wish Rich Trumka would handle this negotiation.  But we are stuck with Obama. Apple computer, at least, with $10s of billions parked overseas, was recently forced to borrow $30 billion to pay dividends to stockholders.  But we will need to mount one more campaign to raise the money that now sits in overseas banks, when the taxes payable could hire back tens of thousands of teachers and long-unemployed working people.

c:\users\owner\documents\home\writing\for blog\capital tax strike, part deux.doc


[i] ‘For U.S. Companies, Money ‘Offshore’ Means Manhattan,’ David Kocieniewski, NY Times, May 21, 2013

[ii] “Apple CEO Tim Cook to propose tax overhaul,” Cecilia Kang, Washington Post: May 16

[iii] “Apple’s Web of Tax Shelters Saved It Billions, Panel Finds”, Nelson D. Schwartz And Charles Duhigg, NY Times, May 20, 2013

[iv] “Apple avoids taxes with ‘complex web’ of offshore entities, Senate inquiry finds, Cecilia Kang, Washington Post,  May 20

[v] Floyd Norris, One Response to Apple Tax Strategy May Be to Copy It, NY Times, May 21, 2013, Floyd Norris “One Response to Apple Tax Strategy May Be to Copy It”

U.S. Multinationals in Capital Strike Against Taxes

U.S. multinationals in Capital strike against taxes

Carl Proper

Jan. 12, 2013

Global, nominally U.S. corporations have been on a tax strike since the last “repatriation holiday” in 2005.  Corporations like Apple computer and General Electric are refusing to bring an estimated $1.7 trillion in “overseas earnings” back to the U.S. as long as the United States demands a 35% tax payment on those earnings. Apple, for example, has more than $12 Billion parked offshore.  Google has $17 billion and Microsoft, $29 billion.  “To the companies,” Washington Post reporters Jia Lynn Yang and Suzy Khimm note, “no other tax issue matters more.”

Faced with the same situation seven years ago, President George W. Bush let capitalist allies off with a five percent tax payment, and nearly $400 billion was eventually brought back to the U.S.  But, while the tax holiday was “sold” to the public with the promise of job-creating domestic investment, ninety-two percent of that money was instead returned to shareholders in the form of dividends and stock buybacks..  Times reporter David Kocieniewski describes two differing versions of how one of the big winners, pharmaceutical giant Merck Corp., used the tax giveaway.  According to:

“Merck spokesman, Steven Campanini…. the company used the [repatriated] money for “U.S.-based research and development spending, capital investments in U.S. plants, and salaries and wages for the U.S.” 

But..

 According to regulatory filings, the company cut its work force and capital spending in this country in the three years that followed. …

Merck brought back $15.9 billion in October 2005. The next month, it unveiled a restructuring plan to cut 7,000 jobs. Over the next three years, about half those cuts were made in the United States, where the company’s employment fell to 28,800 jobs, from 31,500….

… Much the same happened elsewhere, according to a review of taxpayer data by the National Bureau of Economic Research. “For every dollar that was brought back, there were zero cents used for additional capital expenditures, research and development, or hiring and employees’ wages,” said Kristin J. Forbes, a professor of economics at the Massachusetts Institute of Technology’s Sloan School of Management.  Forbes was a member of President Bush’s Council of Economic Advisers and led the study.

The pitch today is to eliminate U.S. taxes on foreign profits altogether, and switch to a “territorial system” – in which a company only pays taxes where it claims the money was made.  But global companies have many ways of attributing earnings to tax havens like the Cayman Islands to avoid local taxation – or avoiding taxes altogether in “free trade zones” around the world.  (U.S.-based Intel Corporation, for example, negotiated “foreign trade zone” status to avoid taxes in 2011 on its new facility in Chandler, Arizona.)

Unsurprisingly, wealthy global corporations find widespread political support for their strike, including from Co-Chairs Alan Simpson and Erskine Bowles of the National Commission on Fiscal Responsibility and Reform.  “At least,” says Bowles in justifying the giveaway, “(the money) will be here and not circulating in other countries.” The territorial system of taxation was also endorsed by President Obama’s Jobs Council, headed by General Electric CEO Jeffrey Immelt.  Thankfully, this Council has not met since early 2012.  A call for this colossal break was also part of GOP Presidential nominee Mitt Romney’s economic platform, and House Republicans have passed a budget that includes a transition to a territorial tax system.

The effects of caving in to this “bring it home free” demand would include long-term damage to future U.S. budgets.  “The territorial tax system they envision would gut the entire U.S. Corporate tax code,” according to Edward D. Kleinbard, a Professor of Tax Policy at the University of Southern California.  Kimberly Clausing, an Economics professor at Reed College calculates that as many as 800,000 jobs could be added to low-tax countries instead of the United States.

Among factors making a complete Obama Administration cave-in on this demand unlikely is opposition from domestic firms, which already pay higher taxes than the country’s biggest multinationals.  But some negotiated compromise seems likely, though not necessarily as part of “Fiscal Cliff” negotiations.  A 20-25, percent taxation agreement, followed by significant financial repatriation, could be a significant Democrat victory, and a boost to the domestic economy.

Another arguably positive resolution might be following the Japanese example.  Japan switched to a territorial system in 2009.  But they also tax a company’s foreign income if taxes paid in another country are less than 20 percent.  While 20 percent is still a low number, a global 20 percent standard would represent a remarkable move toward tax discipline in a global world.

It seems likely, however, that U.S. corporations would respond to this idea by continuing their strike.

Materials cited in this article:

In ‘Fiscal Cliff’ Debate Companies Quietly Push For Tax Break On Foreign Profits,” Jia Lynn Yang And Suzy Khimm, Washington Post, November 29, 2012

Companies Push for Tax Break on Foreign Cash,” David Kocieniewski,  New York Times, June 20, 2011

Globalization and Union Power

 

Carl Proper

April, 2013

Capital is global today, and not only wealthy, but politically powerful.  Organized labor, like most democratic organizations, is local or national, and at a disadvantage.  While corporate globalization hits manufacturing workers first, the resulting shift in wealth and power eventually affects service and government workers, and their unions, as well.

Capital, despite many heroic efforts by workers and their unions, appears to be winning the class war.  Unions need to change.

I believe that organized labor, like political democracy, will need to coordinate much better globally to contribute at a significant level, and the sooner, the better.  To be taken seriously, we must challenge the heart of corporate power – unchecked control over who works, who doesn’t, and on what terms.  Globalization is much harder for organizations like labor unions that rely on communication from the bottom up, than for top-down corporate command structures, but workers of the world, unite! is still the path to justice.

One reason global capital is winning is that our former political allies – liberals, the educated middle class – are also global in their travels, education and world view.  Where once liberals leaned politically toward labor as a force for justice, and for a better future, now they are on the sidelines as we fight and too often lose.  They see unions as well-meaning, but as resisting global progress and not representing the poorest.  (Of course, the pocket-book interests of upper middle class consumers also affect their world-view.  They are well served by low-cost imported goods and undocumented services.)

More fundamentally, the great economic and political power capital has gained through global operations means that general political opinion in particular countries – liberal, conservative, labor — is not terribly important.  This is because democracies speak mostly for particular populations, but everyone wants the jobs that global corporations control.

In the early stages of globalization, many manufacturing workers in developing countries were made redundant.  As their incomes fell, retail bottom-feeders like Walmart rose, and resentment rose as well, not only against the rich, but against more fortunate workers. Tax revenues declined, harming public employees.

Meanwhile, the vast corporate wealth derived from buying labor from the lowest-wage countries, and selling products to the most advanced, buys political influence wherever it goes.

In a 1981 article on bargaining, authors Samuel Bachrach and Edward Lawler[i]  defined power in a way that is useful for understanding our current situation.  Power in ongoing relationships, they argue, is a function of need.  Party A’s power depends entirely on Party B’s need for A or something A controls.  If B needs nothing from A, A has no power over B, regardless of any intrinsic strength.  If B needs A – or something A controls — more than A needs B, A dominates.  In general, the side that needs the other side less in a relationship has more power (whether for good or ill).

Let’s consider how this has played out in reality for one global corporation.

IntelChinaIn 2010, Paul Otellini, CEO of the nominally American microchip manufacturer, Intel, described to New York Times Op-Ed Columnist Thomas Friedman why he was locating his newest factory, and hundreds of jobs, in China, instead of the U.S. [ii] :

“The things that are not conducive to investments [in the U.S.] are [corporate] taxes and capital equipment credits,” he said. “A new semiconductor factory at world scale built from scratch is about $4.5 billion — in the United States. If I build that factory in almost any other country in the world… I could save $1 billion, because of all the tax breaks these governments throw in.”

 Otellini complains as well about lack of U.S. investment in technical higher education.

“Intel can thrive today — not just survive, but thrive,” Friedman notes, “and never hire another American.”

Asked if his company was being held back by weak science and math education in America’s K-12 schools, Otellini explained:

“As a citizen, I hate it. As a global employer, I have the luxury of hiring the best engineers anywhere on earth. If I can’t get them out of M.I.T., I’ll get them out of Tsing Hua” — Beijing’s M.I.T.

 

The irony of pleading for lower U.S. taxes while calling for increased investment in education escapes Otellini, and Friedman.  Yet increasing corporate tax immunity is a primary factor in layoffs and wage reductions for state employees and deficit spending at the Federal level.

In the months following opening of the plant in China, Intel spokespersons, through the media — and no doubt in conversations with public officials — consistently made the pitch for lower taxes.

And in fact, after the China plant went online, Intel in 2011 announced its next new plant, a $5 billion investment at an existing Intel “campus” in Chandler, Arizona.  The announcement followed a tour of the facilities by President Obama.[iii]  What were the terms for the new investment?

“To be honest, when we changed the sales-tax factor . . . that’s when Intel was making the decision to either divest from Arizona or stay in Arizona,” said Barry Broome, president/CEO of the Greater Phoenix Economic Council…This $5 billion, Intel is not going to pay taxes on that investment,” he said. “It is in a foreign-trade zone. The taxes are abated.”

Evidently, Arizona’s need for jobs was greater than Intel’s need for Arizona’s workers.  That is, Intel had more power (but still some need).  Arizona felt it had to be extra creative, if not extra-legal, in providing tax-free “foreign trade zone” status to a U.S. company in America.

It is important to understand that workers in all states and countries face the same dilemma.  I recall, for example, a conversation I had in the 1980s with a trade unionist from the Philippines.  An “American” company (really global) had just closed one of its two large unionized plants in his country, relocating them to China.  “Those were OUR jobs,” my friend said.  “How could they just take them away?”

Net results of the ability of corporations to locate, move or terminate jobs virtually at will around the globe include lower taxes and greater power for corporations, vis-à-vis workers, governments and citizens.  The shift of power from public to private interests over the past fifty or so years has led to growing class inequality in the U.S. and globally, and to the shrinking ability of many governments to provide public services.

How did this radical power shift come about?  One entertaining history of the early days of global outsourcing – and corporate empowering – is the 2009 HBO film “Schmatta:  Rags to Riches to Rags.”[iv]  This film depicts the New York heyday of the garment industry, where, as one garment executive notes, “everybody was union.”  Then follows the stunning discovery by employers, in the latter 1900s, that they were now free to lay off their American employees at will and contract assembly work to nations where wages were so low as to disappear as cost factors – and neither the union nor the government could stand in their way or follow.  As Russ Togs executive Irving Rousso puts it, describing an early pants subcontracting venture, with materials purchased in Italy and assembled in Johannesburg, South Africa:  “the work came in nice, and…forget it, at a price that you cannot believe!”

American readers of a certain age may recall being told by government and media spokespersons in the ‘60s, ‘70s and ‘80s that, of course, only “low-skill” jobs like garment assembly would be allowed to leave the country.  “Higher” skilled jobs like auto assembly – and certainly computers — would remain in America.  You may also remember Walmart metastasizing continuously in the same years, owing in part to its “Made in USA” image (soon jettisoned for all-third-world production); or patriotic Intel CEO Andy Grove, an immigrant, committed in his day to domestic employment.

Times changed.  Power shifted.  What was unthinkable in 1955 was unquestionable 50 years later.  U.S. workers needed jobs, but U.S. owners needed U.S. workers less and less.

Failure to follow

The response of my union, the International Ladies’ Garment Workers’ Union, then UNITE (later UNITE HERE) to this crisis was similar to that of most other unions:  we represented particular workers, and tried to defend their interests.  We demanded regulation and limitation of imports.  Our theme song, “Look for the Union Label” was a hit.  But the import tide was undeterred.

Though we had been fairly successful at following corporate runaways a5780PB40F19CP400G.union Labelnd contractors domestically – we were even able, domestically, to hold manufacturers financially responsible for their U.S. contractors’ employees[v] — we never found the way to follow when they contracted across national borders.[vi]  National cultures and national laws were different.  Nationalism and “us vs. them” were and are deeply embedded.

Other unions and industries followed the same pattern.  The shared power, the checks and balances formerly applied by non-corporate domestic stakeholders disappeared into history.  As GM spokesman Greg Martin told a Congressional committee in 2007, “We’re a global car company that happens to be based in the United States.”[vii]  In other words, the services of US industrial workers were helpful, but no longer needed.

Capital had found the magic key that freed them of responsibility to labor and to their country’s laws.  As for the consequent shift in wealth and power, still proceeding in our day: “forget it! You cannot believe!”

By the time Koch-funded Republican Scott Walker made his move against collective bargaining rights of public employees in 2011, the demolition by global outsourcing of manufacturing jobs and unions had been under way for five decades.  Corporate wealth and power had multiplied, while the solidarity – and disposable income — of a 93% non-union private sector was diminished.

“What happens if America loses its unions?”[viii] Washington Post columnist Harold Meyerson asked, and the question cannot be dismissed.

What can be done?  Contributors to this blog have made excellent proposals. To inspire great struggles, all agree, we need great dreams.

We need a revival of strikes that actually shut down production.  But shutting down production today may mean coordinating with the new global centers of production.

Racism and anti-communism, were used to divide the working class and block organizing in the South and Southwest in the 1930s and 1940s, and were key to reversing labor progress in the mid-20th century.  But authoritarian socialism, as applied by Stalin, Mao – and Castro – failed to deliver workers a better world, and should not now divide us again.

A national campaign to demand “just cause” for firings in ALL workplaces would help build a class movement, not just an interest group.

But one big dream that is already ON the agenda of workers and activists in many parts of the world is global democracy and global democratic unionism.

If not globally, how else can labor seriously address issues with Apple, Wal-Mart, Intel, Hyatt, Exxon, the World Trade Organization – or world health, world peace, the rights of women, the needs of the environment?  The challenges that stopped the unions from following capital as it took over the globe in the late 20th century still apply, to be sure, but at a less crippling level.  Nationalism, tribalism, vastly different political and labor structures and traditions will no doubt be with us in some form when the 22nd century arrives.  But as capital moves to consolidate its global monopoly, and as workers cross every border to find employment – worker organizing cannot freeze in a 20th century national template.

The Steelworkers, U.E., CWA and other unions, in fact, ARE already seriously building global capability. US LEAP has been incredibly courageous in taking on the assassins of Latin American trade unionists.  International Labor Rights Forum has served us all by identifying sweatshop violations and working toward global contracts for humane sourcing.

Many other farsighted workers, activists and organizations, operating both inside and outside organized labor, are taking the challenge on.  The late Tim Costello, the Teamster intellectual and modest revolutionary and Shanghai law Professor Liu Cheng who worked together to rewrite China’s labor legislation, are examples.  Many other Americans have coordinated with activists in China and elsewhere.

A global fight for democracy and unionism could broaden labor’s base – and also put working people and their organizations back in alliance with the liberal critics and victims of unrestrained capitalism in all countries — those who should be our allies, and can create majorities.  The fight against Coca-Cola capitalism and Exxon excess is our fight, but not ONLY our fight.

The brief collaboration a few months ago between east coast dockworkers, Bangladeshi labor activists and Walmart’s retail employees demonstrated the potential for change.  When a factory burned in Bangladesh last December, killing more than 100 garment workers, dock workers on the U.S. east coast briefly refused to unload the ship carrying goods from that factory to Walmart.[ix]  The Bangladeshi tragedy occurred at the same time as nationwide actions by Walmart’s retail employees here. This blog ran the photo on this page last December, showing Bangladeshi trade unionists holding a banner expressing solidarity with exploited U.S. Walmart employees

Global coordination of this kind needs to be a straw in the wind of global change. Workers’ communication networks are global, and actions can be.

Labor needs today to take many different steps to demonstrate to capital that we can organize on so large a scale that THEY NEED US once again.  They need to know they can run, but they can’t hide.


[i] Samuel B. Bacharach and Edward J. Lawler, in  “Bargaining:  Power, Tactics and Outcomes,” printed in “Bargaining,” Jossey-Bass Publishers, San Francisco, 1981.  My summary is a simplification of their theory.

[ii] “A Word From the Wise”, New York Times, March 3, 2010, Thomas L. Friedman

[iii] “New $5 billion Intel facility planned for Chandler,” The Arizona Republic, Feb. 19, 2011, Ryan Randazzo, Edythe Jensen and Mary Jo Pitzl

[iv] HBO Documentary Films, ©Home Box Office, Inc.

[v] Thanks in part to an exemption from Taft-Hartley and Landrum-Griffin bans on secondary boycott.

[vi] Jefferson Cowie tells a similar story about another industry in “Capital Moves:  RCA’s 70-Year Quest for Cheap Labor,” Cornell University Press, Ithaca, NY, 1999

[vii] Of course, two years later, GM sang a different song, as U.S. and Canadian taxpayers bailed them out.  The game is not over.

[viii] “What happens if America loses its unions”, Harold Meyerson, June 12, 2012, Washington post, and this blog

[ix] While it not generally known, the U.S. garment industry exemption from the Taft-Hartley ban on secondary boycotts (allowing the union to strike a garment contractor to organize the manufacturer, or vice versa) is still in effect and probably valid globally — if there was a strong union to use it, according to lawyers who have dealt with the issue.  If a fatal factory is not a striking issue, what is?

Same Employer, Same Fight

Same Employer, Same Fight U.S., Bangladeshi Workers Suffer and Stand Up to Walmart

Posted on December 1, 2012 by dsalaborblogmoderator

by Carl Proper

“What do you do [to] make a really big difference for these women, and save lives?” CNN commentator Erin Burnett asked her viewers. “Unions. Yes, unions.”

Remarkably, this mainstream newsperson called on air for unionizing an industry – in this case, the Bangladeshi garment industry, where one hundred mostly female workers perished in last weekend’s fire at a factory producing apparel for Walmart and other U.S. retailers and manufacturers.

To buttress her case, Burnett referred to the similar tragedy 101 years ago at the Triangle Shirtwaist company in New York City , in which 146 garment workers perished in a factory fire lacking every available fire safety protection. She noted that:

“The New York City fire helped spur the growth of the International Ladies’ Garment Workers’ Union, which fought for better working conditions for sweatshop workers. And we have every hope that the very sad events of this weekend can do the same for Bangladesh… What do you do? Unions. Yes, unions…They could make a really big difference for these women, and save lives.”

Of course, Burnett was right. If workers do not organize to defend their own interests, and if better-placed people of good will – like Burnett — do not support workers’ causes at a political level, there is no answer. The early members of the ILGWU, and many other unions, fought that fight long ago, and won against employers who no doubt looked as powerful as any today.

How did they do it? What were the common elements between the industry of that day, and in our day; and in the struggle of “wealth creators” of all generations — who too often die of powerlessness — to gain a degree of control over their lives?

A fundamental commonality in the garment industry is the division into a relatively few and powerful corporations who design and sell the products, and set the working conditions; and the thousands of small, relatively powerless production contractors who directly employ the workers making the clothes.

As early as 1900, labor historian and economist John R. Commons described for the U.S. Industrial Commission the circumstances that plague millions of workers in 2012, in the U.S. and abroad, just as they affected employees in a variety of industries at the turn of the 20th century:

“When work comes to the contractor from the manufacturer and is offered to his employees for a smaller price than has been previously paid, the help will remonstrate and ask to be paid the full price. Then the contractor tells them, “I have nothing to do with the price. The price is made for me by the manufacturer.” That is, he cuts himself completely loose from any responsibility to his employees as to how much they should get for their labor . . . . The help do not know the manufacturer . . . . However much the price for labor goes down there is no one responsible.”i

Substitute for “the manufacturer” in this quotation the words “Walmart”, “Tommy Hilfiger”, or the like, and the story is the same – but with one key difference. In the U.S. garment industry in the early 20th century, both the controlling businesses – the manufacturers — and the contractors were concentrated in New York and a few other Eastern cities. Today, the two sides of the business, and the employees of each, are separated by borders and oceans.

In the early decades of the twentieth century, the ILGWU won massive strikes and key support from liberal allies like future Supreme Court Justice Louis Brandeis, future Labor Secretary Frances Perkins, and New York Governor, then President Franklin Roosevelt. In the 1930s, they ended the practice of union manufacturers denying responsibility for the contractor employees who made their clothes. They negotiated collective bargaining agreements with BOTH sides of the business. They required union manufacturers to use only union contractors, and union contractors to work only for union jobbers – and organized the majority of workers on both sides. The success of this mutual responsibility system in pushing sweatshops to the outer margins of the industry was so obvious that even conservative Republicans — including Senators from Robert Taft to Barry Goldwater, and then-junior Supreme Court Justice Antonin Scalia — eventually endorsed and enforced the union’s exceptional “secondary boycott” protection. It worked, as nothing else could.

Could it also work today, and in other industries as well? Could U.S. workers pressure Walmart, for example, to guarantee fair wages and conditions for workers at its overseas contractors? Could Walmart’s indirect employees in Bangladesh or elsewhere coordinate with U.S. unions, and political allies in both countries, to assure enforcement of fair labor standards? What role could Walmart’s direct employees in China’s many Walmart stores, play? Certainly, these are conversations that should take place (and perhaps they are).

Over the same long weekend as the Bangladesh fire, and the nationwide demonstrations there, U.S. workers in hundreds of locations, also acted in nationwide concert to challenge the Walmart dictatorship. It was a courageous and key step toward a fairer world. But as these U.S. workers well understand, they need all the solidarity they can get – just as the garment employees around the time of the Triangle fire needed solidarity in their day.

By standing up where they are, Walmart’s militant indirect employees in Bangladesh, and other countries around the world, also strengthen American workers’ hand in dealing with the same employer. U.S. workers’ actions similarly open up paths to cooperation against the common adversary.

Each union, and workers in each country, will have to work out its own path to solidarity and victory, but to stand on equal footing with our employers, unions must cross geographic barriers employers crossed long ago.

And as workers seek new paths today, who better to learn from than garment workers of an earlier day? Those immigrant women and men, speaking numerous different languages, broke through a previously impregnable barrier to hold the real powers in the industry — the manufacturers (since then updated to include retailer-jobbers like Walmart) — responsible, by contract and under law, for the employment conditions they fostered. Through massive strikes and struggle, they established a principle of manufacturer responsibility for decent conditions for ALL employees, direct or indirect. That principle was once widely implemented and accepted, but the ILGWU’s power was lost when we failed to follow the work across national borders. The principle largely disappeared with the union, though unions like UNITE HERE are working to rebuild it today.

The confluence of events over the past weekend must be recognized, and consciously continued as a step toward global worker power.

i Report by the U.S. Industrial Commission,” Volume XV, 1901; as cited in “Out of the Sweatshop,” by Leon Stein, New York Times Book

Carl Proper was a working member, then staff member of the International Ladies’ Garment Workers’ Union, then UNITE, then UNITE HERE from 1972-2011.  He is now retired.

With Power Comes Responsibility

With Power Comes Responsibility

Carl Proper

December, 2012

 

"Goods produced under conditions which do not meet rudimentary standards of decency should be regarded as contraband and ought not to be allowed to pollute the channels of interstate trade.” – President Franklin D. Roosevelt, 1938, calling for passage of Fair Labor Standards Act (FLSA).

“Most people would still be really disturbed if they saw where their iPhone comes from.”  former Apple executive.[1]

..

On June 22, 1987, the conservative Reagan Administration asked the Supreme Court to uphold Roosevelt’s principle, as embodied in the Fair Labor Standards Act, against CitiCorp (now CitiBank).  They acted on behalf of workers who had gone unpaid for the weeks before their employer went broke.  CitiCorp had acquired the clothing manufacturer’s production out of bankruptcy, but the products were now “hot goods,” the Court ruled.  They could not be sold until the workers were paid all wages due them.  Liberal Justice Thurgood Marshall (previously Chief Counsel for the NAACP) wrote the Court’s opinion, with conservative Justice Antonin Scalia (still serving in 2012) concurring.

Today, things are different.

No iPads, or other Apple computer products, to cite a contemporary example, were blocked from sale this Spring following revelations of extensive labor abuses in their factories.  On the contrary.  As the Bloomberg news headline noted on March 16: “Apple Stores Packed, Sales Boom as New iPad Debuts”.  This was despite widespread publicity about abuses leading to deaths by suicide and by explosion at Foxconn or other Apple contractor factories. “We’ve known about labor abuses…for four years,” one Apple executive told a New York Times reporter.  “They’re still going on….Why?  Because the system works for us.  Suppliers would change everything tomorrow if Apple told them they didn’t have another choice.[2]



The directly affected workers, of course, were among Apple’s 700,000 –plus subcontractor employees in China.  Overseas contracting today is a sort of “get out of responsibility free” card for U.S. corporations.  But, given the predominance of globally outsourced production by U.S. manufacturers, it is well past time to consider why there are no global rules – or American rules – that are effective in policing global employers.  Conditions where much U.S. production is done now recall the U.S. sweatshop world of one hundred years ago, before the 1911 Triangle Shirtwaist factory burned in New York’s Washington Square, killing 146 employees and drawing world attention to unjust and inexcusable working conditions.

And, as happened a century ago in the U.S., there are growing protests by Chinese workers against unchecked exploitation.  These include riots by indirect Apple employees in overcrowded “dormitories” on Foxconn property and threats of mass suicides.  More effectively, youthful workers at Honda and Toyota, and some other foreign-owned factories, have staged successful strikes, resulting in pay increases and formation of independent local labor unions, formal or otherwise.

Worker protests, and the threat of more to come, together with the embarrassment of the negative news in the U.S., have wrung promises of reform from Apple and its most favored assembly contractor, in China.  How far these reforms go remains to be seen.

On the U.S. labor scene, on the other hand, news tends toward premature reports of the death of organized labor.  The resurgence of what French economist Thomas Piketty has termed “crazy inequality” in the U.S. is fodder on the nightly news.  Nominally “U.S.” corporations play the role of global sovreigns, playing the U.S. off as just one more country bidding for their investment.  While manufacturing workers here have not yet seen their wages cut to “globally competitive” levels, the thought that earnings trend lines in the U.S. and China may cross in the foreseeable future is no longer a joke.

Americans with some sense of history should be asking how it is that workers and voters in the early and mid- 20th century were able to set real limits on corporate power, but so many now acquiesce to a corporate challenge not only to organized labor, but to electoral democracy as the way our most important decisions are made.

To understand the 20th century victories of the common man and woman, I turn to the union and industry where I worked, first as a production worker at raincoat manufacturer Forecaster of Boston in the 1970s, then for thirty-five years as a union organizer and representative for the International Ladies’ Garment Workers’ Union (ILGWU) and its successor unions, UNITE and UNITE HERE.

The early union members in the U.S. garment industry, around the turn-of-the-20th -century, were mostly immigrant Jewish women and men from Russia and its sphere of influence, or from Italy.  They lived together in tuberculosis-ridden tenements, worked together in rat-infested sweatshops, struck and won together in massive general strikes.  They were beaten back for a time as manufacturers outsourced their work to tiny sweatshop contractors, but developed new ideas in negotiations and in union classes.  Eventually, with a boost from the Roosevelt Administration, they won contracts requiring their REAL employers (the manufacturers) to guarantee fair wages, benefits and working conditions – even in the contractor shops.  The manufacturers agreed because they won also:  the ILGWU signed agreements with industry Associations representing whole sectors of garment production, leveling the competitive playing field, and allowing reasonable profits.  Both workers and employers also won when, through political action, the ILGWU gained and defended the right to picket any employer who did not sign an Association contract.

The workers and leaders who won these historic victories believed they were fighting not just for better pay, but to build a better world.  Many were socialists or communists and they were internationalists in origin, ideology and behavior.  At the founding “Convention” of the ILGWU, in 1900, eleven union activists from New York, New Jersey, Baltimore and Philadelphia, with a treasury of less than one hundred dollars, declared themselves an “International” union.  As refugees largely from an unassimilated minority in an oppressive empire, they saw their poverty as the result of injustice – never as a mark of failure.  They knew they, and their class, were destined to rise and to win in this new world – and they did.  We owe them many of the rights we enjoy today.

In 1909, 30,000 mostly women garment workers struck through the winter in New York, and won an initial victory in the “shirtwaist” industry.  In 1910, 50,000 mostly men in the coat and suit industry walked out, and eventually settled a “Protocol of Peace” with their employers.  Future liberal Supreme Court Justice Louis Brandeis helped negotiate the settlement – but only after the workers struck on a massive scale, and made demands.  When, in 1911, more than 100 young women and men died in a wholly preventable factory fire at the Triangle Shirtwaist Company in New York’s Washington Square, union demonstrators and their supporters turned even that to a good purpose – the beginning of state and eventually national health and safety legislation.

Then, as employers responded to workers’ power by closing their directly owned factories and outsourcing work to tiny, fly-by-night sub-contractors, the union was cut to less than half its former size.  Undaunted, the union developed and promoted to its political allies a model for regulating the industry.  They would hold the REAL employers – the manufacturers who owned the garments — responsible for providing decent conditions for ALL workers producing their goods, contractor employees included.

In 1933, new President Franklin Roosevelt seemed ready to sign a deal with employers to freeze workers’ wages until 70,000 garment workers walked off the job in New York City, and 20,000 more walked out in Camden and New Haven.  Desperate employers signed new contracts including industry-wide manufacturer responsibility, conditional on Roosevelt Administration approval.  Following the owners, Roosevelt responded to the union’s hard-fought victory, and approved the deal.  The union – victorious first on its own terms — followed through by turning away from Socialist candidates and committed going forward to the Democratic Party.  Garment workers, even those employed by sub-contractors, began rising toward a new middle class.

In 1947, there came a dramatic confirmation that the ILGWU / New Deal system still worked for everyone.  The new Congress, the first Republican Congress since the Hoover Administration, rewarded its backers by enacting the harshly anti-union Taft-Hartley Act.  This law forbid (among other changes) workers from picketing one employer to help organize another (a “secondary boycott”).  But an exception was made for the ILGWU.  Speaking on the floor of the Senate, “Mr. Republican,” Senator Robert Taft, acknowledged that the garment manufacturer was the “virtual employer” of his contractors’ workers, and alone had the power to prevent sweatshops.

A similar scenario followed in 1959, this time with an exception to the mostly anti-union Landrum-Griffin Act.  Right-wing Republican Senator Barry Goldwater, in a Senate floor dialog with Democratic Massachusetts Senator John F. Kennedy, noted that “We conferees are in the very peculiar position of every one of us agreeing that we do not intend to upset the status quo of the garment or apparel industries.” [3]

Finally, in the Supreme Court case cited at the top of this article, the Republican Reagan Administration and Justices from the left and right of the Supreme Court again confirmed the principle first won through a generation of massive strikes.  With regard to the sweatshop-prone garment industry, the dominant employer could not duck responsibility to the folks actually producing its goods through the subterfuge of outsourcing the work.

Opposition to U.S. sweatshops, for a time, was not a partisan issue.

Then, globalization – of a certain kind – happened.  A small Massachusetts employer, being squeezed out of business, told me about a bill he had seen to The Limited store chain from a Chinese source, in the early days of global outsourcing.  The bill didn’t even include the price of labor, which, compared to other costs was effectively zero.  Manufacturers at first seemed stunned as they realized that neither the union, nor U.S. government regulators, nor the jobs-hungry governments of Mexico, Indonesia or China, were prepared to demand just conditions for workers – and their new indirect employees, even those with nominal labor rights in their own countries, were in no position to make any demands.  Corporate America had died and gone to heaven.

Other industries quickly followed the garment example, relocating production to so-called “third world” countries, where worker rights laws could be largely ignored. A succession of “Free” Trade agreements – opposed by unions in all countries – moved through Congress.  Many liberals split with labor on this issue, seeing “buy American” appeals as selfish and nationalistic, but not foreseeing the depressing effects on the earnings and power of recently liberated African Americans or other U.S. workers. Over time, even working class consumers dealing with declining incomes succumbed to shopping strictly for the lowest price items.  People stopped asking WHY the goods were so cheap:  they knew the answer as they looked at their own paychecks. For management, the old contentious days of sharing power and wealth with organized employees appeared headed toward the dustbin of history.

As for the common worker – the intuitive conviction that a worker actually “owned” a job, as long as s/he put in a good days’ work every day, won no backing from the new breed of economists.  Workers’ intuitions, and the shock from seeing their interests ignored, were global.  In 1987, as I attended an international conference for garment union activists, a Philippine union representative spoke to me of a Sara Lee[4] garment factory that had located earlier to his country.  The plant had recently closed and moved to China, leaving no hope behind.  “Those were our jobs,” he insisted. How could this U.S. employer simply take them away?

The 1999 “Battle of Seattle”, where union members and environmentalists joined together in the streets, demanding shared power with corporations in overseeing world trade, was a high point of globalized labor resistance to the new “neoliberal” economy.  In the aftermath of the demonstrations, however, elected officials continued moving away from the New Deal alliance with labor and into a global anti-worker alliance with corporate interests.

Thus unchecked, U.S. corporate power in our day now looms as an overpowering threat to the once superior rights and conditions of the 99% at home.  As they have succeeded at taking on and taking down workers in one industry after another, now including the public sector in state after state, few organized workers are left to resist.  In the wider world, however, a challenge looms:  “state capitalist” nations like China, bankrolled by U.S. corporate investment, are confronting American corporations now divorced from their own base.  In the pursuit of profit gained not from the common effort of all Americans, but from increased exploitation in the U.S. and abroad, the greed of corporate America risks sinking the ship that once sheltered them along with the rest of us.

Where will powerful resistance to the Age of Greed come from?  We might start by looking to a surprising group of workers, with something in common with our Jewish immigrant fore-mothers one hundred years ago – to a new generation of internal migrants from the rural areas of China.  Like the twentieth-century American socialists from Russia and Eastern Europe, these young people expect a better life than their parents, and have little tolerance for the rampant corruption of that country’s new elite.  But what, if anything, can we, or they, learn from the history of American workers and industry in the 20th century?  And what can we now learn from activists in China?

Within the ILGWU, the socialists eventually defeated the communists, and then moved on to become New Deal liberals.  They had seen how unchecked competition led again and again to extreme instability in the garment industry.   They developed, fought for and won a new system, in which the real powers, the brand-name manufacturers, were held responsible for the conditions of all workers.  As all prospered, a consensus was built against sweatshops that lasted for fifty years.

The power of those early garment workers was greatly enhanced by their highly concentrated employment in the “garment districts” of New York and other cities, and even by their concentration in tenement housing.  This was equally true for the tens of thousands of workers employed in the textile mills of Lawrence, Massachusetts in the years leading up to the great “Bread and Roses” strike of 1912.  And it will prove true for the millions of manufacturing workers in China in our day.  Already, the workers at dominant employer Apple’s favored sweatshop partner, Foxconn, have won better conditions and significantly higher wages from a succession of protests, with solidarity facilitated by plants where thousands work elbow-to-elbow, then retire to on-site company dormitories.  At Honda and other foreign-owned auto manufacturing plants in China, young workers have won strikes at one plant and then quickly spread word to others with their mobile phones – a sort of “virtual” concentration of potential power.  Rebellions against arbitrary authority have also taken place in many Chinese towns and villages – and often, authorities have had to back down.

A few courageous Americans have played a part as advisors to Chinese organizers, or even, in the case of former Teamster, writer and activist Tim Costello, joining in rewriting Chinese labor law to include the right to form independent labor unions.  In a eulogy to Costello (who died of cancer, two years ago), Professor Liu Cheng, from the Faculty of Law and Politics, Shanghai Normal University commented that:

Mr. Costello’s work is a worldwide contribution.  Working people of the world shall remember him forever. We shall carry on the unfinished lifework of Mr. Costello to struggle hard for the working people so as to reach a harmonious world of the people, by the people, for the people.

But in China today – and now in the U.S. as well – largely unchecked economic power works hand-in-hand with unchecked and corrupt political power, as in the latter years of America’s19th century.  In both countries, popular anger is rising, but in China, there is now more hope and rising expectations.  Already, worker demands are raising living standards in China, making room for rising standards throughout East and Southeast Asia.

We know, from our own history, that while the sympathy of the well-off can be of assistance, employers and political leaders – even friends like Franklin Roosevelt – ultimately respond most to demonstrations of real worker organization and power.  We proved in the early years of the twentieth century that workers can only defeat outsourced sweatshops by holding the dominant manufacturer responsible.  We have experienced in recent decades the futility of demanding an end to imports, and the falling wages at home that result from unchecked exploitation of workers in other parts of the world.

For working people to recover our lost rights and powers, we must respond globally. We have tried nationalism – and it has failed.  “Workers of the world, unite!” is now necessary just to catch up with capital.

The 1909 shirtwaist strike that ignited the ILGWU was called by a 17-year-old immigrant girl.  The first Honda strike in China was called by a 23-year-old migrant man. The rising generation of young Americans and young Chinese will not surrender to the limitless greed of those they have defined as the one percent.  But the history of U.S. garment workers points to the need for cooperation between workers confronting the employer at its home base – typically in the U.S. or Europe — and workers manufacturing the final product – including in China or elsewhere in emerging economies.  For workers anywhere to achieve justice, we must hold employers globally accountable, by union contract and by law, to both direct and virtual employees.


[1] “In China, Human Costs are Built into an iPad,”, Charles Duhigg and David Barboza, New York Times, 1/25/12

[2] ibid

[3] 105 Cong.Rec. 17381 (1959) (remarks by Sen. Goldwater of Arizona)

[4] At the time, Sara Lee owned Hanes and Wrangler brands.