This week’s episode of Economic Update is a little different from the usual program. Professor Wolff begins by explaining the economics behind the great U.S. anti-leftist purge (“McCarthyism”) after 1945. It then shows the economic impacts of that purge over the last half century.
In the second half, Prof. Wolff explains how that history produced a very different political response to the crash of 2008 compared to FDR’s response in 1929.
Transcript edited for clarity.
RICHARD WOLFF: Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives—jobs, incomes, debts—those of our children, our own, those looming down the road. I’m your host, Richard Wolff. I’ve been a profess of economics all my adult life, and I hope this prepares me well—or did prepare me well—to offer you these insights into the economic conditions of our lives.
I’m going to have a different structure of our program today, different from what we usually do. It won’t be a few updates at the beginning, and then an interview or an extended discussion. Instead, I want to use the whole time I have with you to investigate and explore something central to the last half century of American economic life, and particularly important right now. This has to do with the interaction between politics and economics. It’s well-known that the economic situation shapes our politics. Sometimes, it’s not as a well-understood how, and how deeply, politics has and continues to shape our economic realities. So that’s what I want to focus on. And I want to begin—as good stories of our situation always do—going back, setting the historical context and I want to ask a question. At the end of World War Two, late 1940s into the ‘50s, something remarkable happened politically in the United States. And it was in many ways surprising—let’s review. Suddenly, a group of people in the United States who had been celebrated, pretty much widespread celebrations of them as heroes, became instead—almost overnight—demons. From being leaders, they became traitors. It was really remarkable. Who am I talking about? I’m talking about Communists—members of the American Communist Party; socialists—members of the two socialist parties at that time; and active leaders of the labor movement, the big organizing drives of the CIO in the 1930s and ‘40s had brought millions of Americans, who had never been in unions before, into the unions. They joined the unions, because they thought it would be a safe way to make it through the Great Depression of the 1930s, at least safer than not being in a union. And together the Communists, the socialists and the unionists really struggled to develop a good situation for the mass of the American working people—the lower two-thirds, at least, of our population. And in the depths of the Depression, when those folks were really suffering, a kind of coalition emerged and that’s what I want to talk about, because that’s what was being destroyed in the years after World War Two. The coalition of Communists, socialists and unionists was strong enough to basically pressure the then-president, Franklin Roosevelt, during the 1930s, to institute four basic programs that helped average Americans in a way no previous administration had dared to do.
Here’s what they were. First, the creation of Social Security system to give 65 years or older Americans a check, every month, for the rest of their lives. To help survivors, to help people injured early in life and disabled, to take care of our friends and neighbors, our family members who needed it. In the midst of a depression, when people were suffering, the government stepped in—not only helping, of course, the older folks, 65 and over who got that monthly check, a life-saver—but also helping their children, who therefore didn’t have to help their mother and father the way they otherwise would have had to because the government was lending a hand.
As soon as the Social Security system was set, the government did another thing. It created the unemployment compensation system. We had never had that before, just like we’d never had a Social Security before. You lose your job, through no fault of your own—say, because your employer can’t sell whatever it is you help to make, and so he lays you off, no fault of yours. You can get an unemployment compensation check up to a year, sometimes more, every week. And this was done in the depths of a depression, when there were millions and millions of unemployed people who suddenly got a lifeline.
Third, it passed the first minimum wage act in American history, saying that we owe people who work a decent minimum and it’s unethical and immoral and unnecessary to deny that to them.
And finally, the biggest program, the decision of Franklin Roosevelt’s government to say that they would hire millions of unemployed people. Roosevelt said if the private sector, private capitalists don’t hire people—we will. And the government did. And it used unemployed people to make many of those national parks out west that Americans love, to do some of the first conservation work in American history, to give artists of all kinds a job bringing artistic activity to the mass of the American people in a way that had never been done before and, by the way, has never been done since. Unemployed people got a good job, doing something useful and they got paid properly, so they could make their mortgage payments. The mass of people were helped, because millions had joined unions and had become interested in and listened to socialists and Communists, who said people deserved that, and an economic system that didn’t provide it may be wasn’t justified. Wow.
And where did the money come from, in case your wondering, in the 1930s in the depths of a depression when the government didn’t have money—how could it pay for Social Security, unemployment compensation and hiring 15 million unemployed people and paying them? And the answer was that Roosevelt taxed corporations and the rich. That’s right, he taxed corporations and the rich and that’s how he paid for it and the result—for him, as a politician, Roosevelt—was that he was re-elected three times across the 1930s. He was the most popular president in the history of the United States, because he was the one who went after corporations and the rich to help average people. But he didn’t do it because of him. If you look at his entire political history before he became president, he was no radical. He was no left-winger. He was a conventional, rich kid. Went to school in the right universities, of Harvard and Yale, etc., etc. He was pushed from below, and you know what pushed him? The coalition of Communists, socialists and unionists.
So when World War Two was over, 1945, and when in the same year President Roosevelt died, in his fourth term—well, the business community that was enraged that they had to pay those taxes to help average people, they went to work and they understood the problem wasn’t defeating a Democrat and bringing in a Republican. They knew very well that Roosevelt didn’t do this because he thought it was a good idea. They understood he had been pressured from below, by that coalition—of unionists, socialists and Communists—to do what he did. So they understood that to roll it back, to break it down and to make sure that never happened again they had to destroy that coalition. And the way you do that, the way you destroy any coalition, is you look for and focus first on the weakest link among the groups that making up the coalition and they determined in 1945 that the weak link were the Communists, the Communist Party. So overnight, the Communist Party and its activists—who had been leaders of the unionization movement in many industries, who had been leaders in the struggle against fascism in Germany, in Italy and Japan—became overnight not leaders, not heroes but demons. They were converted into agents of a foreign power, the Soviet Union—kind of remarkable if you remember that in the previous five years, from 1940 to 1945, the United States and the Soviet Union were allies in a war against fascism in Germany, Italy and Japan that soldiers from Russia and America worked together with the same objectives in a coordinated struggle. They were our friends, our allies, our supporters. Suddenly they had been turned into archenemies. And so in the aftermath of World War Two, after the death of Roosevelt, we had in America a political purge—really, of the kind you rarely see in the world and like nothing else in American history. The government, big business and conservatives everywhere went on a tear to arrest Communists—to deport many of them back to countries they had left sometimes forty years earlier—to demonize them as evil agents of a foreign power, not leaders of an effort that had succeeded in giving average Americans the benefit of government programs, the likes of which had never happened before in American history, and footnote—never happened again since then either. The McCarthy period entered American history, named after a senator from Wisconsin who took the lead, holding hearings in Washington, finding a Communist in this bureau, a Communist in that office—and remember, the Communists that were there, some of them, had been heroes years earlier: army veterans, leader of union efforts and so on. It made no difference; they are now evil. And when the Communist Party was destroyed and demonized, they went after the two socialist parties, telling Americans basically that socialism is the same as communism, they just spell it differently. And when they were done, they went after the labor movement and they have done a good job. In 1945, labor unions represented a third of American workers. Today, they represent a tenth of American workers. Communist Party destroyed. Socialist parties destroyed. Labor movement reduced to a pale shadow of what it once was.
This chaotic destruction of the left in America traumatized the American people, or at least hit half or more of it that’s open to critical thinking about capitalism. The kinds of people who face an uncertain job, a job with no benefits, insufficient wages to lead a decent life and who say that has to change and who are willing to support, vote for, work with, demonstrate with people who want and demand change. Those people had gotten that change in the 1930s, but now they watched as all the leaders that they had followed and had been successful with were demonized, jailed, denounced in public, deported, made to appear as though they were the sum total of all evil. A lesson was drummed into the American people: don’t have anything to do with people who are critical of capitalism. Don’t have anything to do with people that are socialist in one way or another, or at least find those ideas worth thinking about or maybe talking about, maybe learning about—not necessarily agreeing with, but as part of the conversation, which is the case in virtually every other country on earth. No, it was bad, it was evil and we stopped teaching it in the schools, and we stopped allowing newspapers and journals to have articles about them; we didn’t publish the books of people who were like that. It was shut down time and it lasted half a century. Politics destroyed a whole part of the American political spectrum and after the break in the middle of this program, we’re going to come back and take a look at the economic consequences of that massive political purge and by the way, it had very little to do with communism or ideology. It had to do with breaking a coalition that had gotten rich people and corporations to pay taxes to help average Americans. We’ll be right back.
Welcome back, friends, to the second half of today’s Economic Update. Before continuing the conversation from the first half, I want to ask you please to remember to subscribe to our YouTube channel, to follow us on Facebook, Twitter and Instagram; and please be sure to check out our website democracyatwork.info. There you can see what we do and how you can interact and work with us—a partnership, if you like—that allows us to get these ideas and these analyses out to the larger community. And as always, I want to make an especial thanks to the Patreon community that supports us, as well as partners with us—you are an invaluable aid to what we do, and we want you to understand how appreciate we are, enabling us to bring these insights to a large audience every week.
OK, we’re going to look now at the consequences, the economic consequences, of the purge of the American left after World War Two. And they were profound. Let’s start with one of the earliest ones, in 1947 a law was passed called the Taft-Hartley Bill, after Senator Taft and Congressperson Hartley. And this was a remarkable piece of legislation. It went after the Communists, it went after the socialists and it went after the labor unions. It basically told labor unions that they couldn’t anymore elect democratically their own leaders. For example, it forbade a Communist from running for office, winning a majority of the votes and serving as the leader of a union, which Communists had been doing for twenty or more years in the United States without an incident—it became illegal. Wow. But it went much further. It had a remarkable clause, which has remained law to this day as I’m speaking, and the clause goes like this: if at a workplace—a factory, an office, a store—there’s a union, and let’s say half the workers in this place have voted for the union and joined the union and have a union there, and let’s say that that union negotiates with the employer and gets a contract—let’s say a wage increase of ten cents an hour. Under the Taft-Hartley law, then and to this moment, that union must give anything it wins with the employer to all the workers there, whether they’re in the union or not—whether the join the union or not, whether they pay union dues or not, whether when the union—if it thought it had to—called a strike and had workers go out and tell the public about their situation to help pressure the employers to meet them halfway and give them a wage increase, the workers who went to strike, and therefore didn’t get paid, had to give to all the other workers who didn’t go on strike, who didn’t lose a day’s pay, the same benefits they won. The Taft-Hartley law, in effect, created an incentive for workers not to join a union, not to pay the union dues because they would get whatever the union won whether they did so or not. That’s fundamentally unfair, and you know it and I know it and the people then knew it. It was a hammer blow against the labor movement. Wow. This was an attempt to destroy the Communists and the unions and the coalition between them, because of course if a Communist couldn’t be elected, that removed them from leadership of unions. And if more and more people decided not pay union dues, not to be part of the union, it weakened whatever unions could do. So it was a crazy, but effective way to abuse the law in the interests of a purge. But it had the effect of weakening the labor movement. It was the opening gun, and there are many more laws that came afterwards, to a direct assault on the labor movement, which has worked very well reducing labor membership from about 35% of all workers at the end of World War Two to about 10% today—a staggering cutback. Anyone in America today, and there are a few, who talks about an economy with big business on the one hand and big labor on the other is either ignorant or lying in your face. Big business has gotten bigger and richer. Big labor, it’s gone. There is no big labor, hasn’t been for years. We are an economy dominated by one side of what used to be a rough balance and boy does it show.
The next effect economically was to get rid of socialists, Communists, left-wingers, liberals of all kinds teaching in American schools—public schools, colleges, universities. They too were demonized. They were dupes, they were agents—all the words that some of you, the older ones among the audience, remember. And this had an interesting effect. It basically removed from the learning process of most Americans critical ideas about the system you live in. Socialists raised questions about American capitalism. Communists raised questions—they offered alternatives. They made people able to see that capitalism has flaws, and capitalism has weaknesses and that there are people who have struggled with those and come up with better solutions to problems. You know, that’s how human progress works—always has. You identify something in the society that needs fixing and then you fix it. You come up with a better way of doing it, a better way of thinking about, a better way of approaching a problem. That’s why we don’t rub sticks together to make a fire—we’ve learned something. And that’s because people early on said there must be a better way to start a fire then spending all this time rubbing these two damn wet sticks together. Well, if you don’t criticize capitalism in school, you’ll prevent people from learning to think critically about their system and that undercuts progress. It makes you stay with the system you got because you’re afraid to think critically. You’re afraid to allow a teacher to raise with students the questions of flaws and faults, things that could be done better—ways of approaching questions and solving problems in a different way. All of that was gotten rid of across the board in the United States—not a hundred percent, you never can do that, but overwhelmingly. And even those professors who were left—who weren’t left-wing but were left in their jobs—were afraid to say anything because they saw what happened to their colleagues, didn’t want it to happen to them.
But the purge went even deeper and further. There was that famous case of the Hollywood Ten, the government got rid of with absolutely the cooperation of the big film studios involved in Hollywood of all kinds of progressive, left-wing, socialist, Communist, liberal filmmakers,. Writers, artists, actors, actresses—destroyed their careers to get the message across that Hollywood was not to make movies that make working people heroes. It was to make movies that said our industrial leaders were captains of industry, kind of funny when you think that at the end of the last century those same people were called robber barons. Wow. You change a culture. And so whether the movies and TV shows that came in or the radio shows or the schools of universities or the colleges or the labor movement—wherever the purge could go, it went. Hounding people for their ideas, hounding people for the questions they asked. Silencing an entire generation. And, of course, the predictable happened and I want to hammer at that. Killing off those leaderships, destroying the education of people in critical ways of thinking, was very convenient, it made it possible for the next decades—the ‘70s, the ‘60s already; ‘50s, ‘60s, ‘70s, ‘80s—to be times of rolling back the New Deal, which we did. We let the minimum wage rot—as prices went higher, the minimum wage wasn’t adjusted, so a real effect was to reduce it. Government employment stopped dead in its tracks. Even in the crisis of 2008, when we had millions and millions of Americans losing their jobs, no leader of the Republican or Democratic Party even brought up the idea of a government jobs program, even though it had worked so well the last time we had this program. That’s how successful the purge went—you don’t bring up those ideas. They had become taboo, they had become unthinkable, unspeakable, out of the norm. It meant that the people that were critical of America’s adventures overseas—when to help big business, we went to war or abused other countries or allowed “allies” to do unspeakable things, you know, like Saudi Arabia did a few weeks ago… Where were the critics? It didn’t happen. They were afraid to speak. When poverty went nuts in America, over the last forty years, where were the critics? When the inequality of income in America exploded, where were the critics? They were afraid. They kept their mouths shut. They were afraid to see what was going on or certainly to speak about it for fear that they would be subject sooner or later to another purge like that horrible one they had lived through or heard from their parents about back in the late ‘40s, ‘50s. The impact was to weaken the labor movement, to weaken social criticism, to convert for example the Congress of the United States, the political scene—not to a debate between the people who appreciate and like capitalism on the one hand, and those who are critical on the other, that’d be a healthy debate. No, no, no, no, no, no, no—none of that! We have people in Republican leadership and Democratic leadership whose job it is to out-do one another in celebrating this system as it is and demonizing critics. They’re still doing that because they haven’t learned the lesson. It’s particular poignant with the Democrats, who don’t understand that by not keeping the other side of the political spectrum in a balance, they were in effect ceding the territory to the other side. It was the part that could call itself “American,” having demonized the other part.
For those of you who weren’t alive then, let me tell you in the 1930s it went the other way. It was the capitalists who had brought us the Great Depression. It was their bad investments, their corruption, their banking irregularities that had plunged us into this morass of eleven, twelve years of depression. They weren’t heroes—they were crooks. They were exploiters. They were the robber barons. But the last forty years has converted them into creative, job-creating, entrepreneurs—nice change of language that reflects the purge of those who were critical. And, of course, the end result of that is precisely the Trump administration, even thought there were many steps up to it.
The costs of economic inequality, the costs of political nightmare—those are some of the prices we’re paying now in economic reality, because of the politics of destroying the New Deal coalition at the end of World War Two. It is a lesson, a testimony to the power of politics to shape our economics. It is also a powerful lesson that when the next crash came in 2008, there was no left left. The Communists gone, the socialists gone, the labor movement a shadow. There was no pressure—Bush, Obama, Trump—bails out the big corporations, all they want, and for the rest of us? Nothing! No Social Security or equivalent. No unemployment. No public jobs. That’s the cost for us of the defeat of the left after World War Two.
Transcript by Christian L.
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