Detroit, Labor Day and a Hard Day’s Night

As we approach Labor Day 2013, Detroit still endures its “Hard Day’s Night,” filing for bankruptcy last month.  Yet Liverpool thrives once more, a showroom for urban renaissance. Why did Detroit and Liverpool follow such different paths?  It turns out that workforces thrive best in a challenging world economy when they have a solid, government social safety net, not one woven from the vanishing threads of employer-provided job security and benefits. 

People fled both Detroit and Liverpool after WWII, taking their tax base with them.  America scattered its military industries outside the cities and the people followed the jobs.  Eisenhower’s interstate highways paved a path to the suburbs, at least for many white families.  After the German air force flattened Liverpool, residents found replacement housing outside the city center.   Tough towns, they hung strong, only to find themselves on the wrong side of a newly globalized economy. By the late 1970s, imports outran Detroit’s capacity to innovate, while Liverpool floundered when containerization made its ports obsolete.

Liverpool dock workers faced these structural shifts with far more security than did Detroit auto workers.  England’s strong postwar social safety net guaranteed citizens health care, livable wages and unemployment insurance.   In the U.S., a coalition of unions and civil rights organizations lost their post-war fight for national health care, job security and a federal unemployment system.

{mosads}Instead, the U.S. wove a unique social safety net that relied on employers to provide citizens with economic security, such as health care and pensions. It was a compromise with a built-in dilemma. If the government ceded the role of security provider to business, how was it going to make sure business kept stepping up? For that, the nation’s leaders turned to unions.  In the Inland Steel case of 1948, the federal government first decided that employers must bargain with unions over pensions and health care.   The nation then came to depend on unions to wrangle good benefits and paychecks through collective bargaining.  The U.S. thus built two social safety nets – – a robust one for those workers who could effectively organize a union and enter the collective bargaining system, and a much more meager one for others through public benefits like Social Security and the minimum wage. 

For twenty-five years, this two-tier system worked out pretty well, not only for Detroit auto workers but even for many people who didn’t have a union.  Most big businesses matched the pay and benefits of the unionized industrial giants, in part to keep their employees from forming unions.  Once corporations faced growing international competition and began to pull good jobs out of Detroit, workers found they needed the kind of national safety net that preserved workers in Liverpool, where the spiral into poverty never got as destructive as in Detroit.

Other differences matter.  While both towns received federal aid, Liverpool benefits from the European Commission’s Structural Funds which recognize that regional poverty hurts Europe’s global economic position.  There are no comparable funds for Detroit to smooth out the wreckage left by globally mobile corporations.   Instead, Detroit turned to bankruptcy courts. 

 
As the U.S. struggles to define its role in a globalized economy, it would do well to study the challenges facing Detroit.  A competitive nation needs a strong safety net for its citizens, one that neither depends on fickle global employers nor burdens workers’ democratic institutions with a redistributive role best played by the government.    In addition, the U.S. should take a cue from the European Union and allocate more funds to help hard hit areas transition their economies. 

Working people in other American cities may soon face their own hard day’s night, but it does not have to be this way.  This Labor Day, we can choose the next path our nation will take in the shifting global economy. 

Lane Windham is a PhD candidate in history at the University of Maryland.