The Tale of Two Cities

The Tale of Two Cities

REUTERS/Rebecca Cook
REUTERS/Rebecca Cook

As America celebrates "Victory Day," on August 15, when one looks at a photo of 1945 Hiroshima or modern day Detroit, the similarities are striking.

As Hiroshima lied smoldering, Detroit was the envy of modern civilization; the model city known as the Arsenal of Democracy. Detroit was the innovator of mass production, creator of the middle class, and the pioneer of racial equality. Today, Detroit is emblematic of the failures of the social policies starting in the sixties, and synonymous with deterioration and blight.

However, many have attempted to use social science to explain what caused Detroit's bankruptcy.

Truth is, Detroit's problems were like a slow moving disease that originated after the post-war boom. World War II created the greatest public works projects in American history and lifted citizens out of the dire straits of the Great Depression. The war elevated the status of women and minorities, and was the precursor to the civil rights movement. However, the greatest benefactors were the automobile industry.

Since Europe and Asia were ravaged by war, America was the lone superpower. And with no threat from foreign industries, corporations were raking it in. However, its dominance was short lived; bruised and bloodied USSR began to emerge as an economic and technological alternative to capitalism. By the end of the decade, the USSR built a hydrogen bomb and the ideology of socialism became a threat to the status quo of free market capitalism.

Devastated by war, France and Great Britain saw their empires crumble with uprisings in India, Indochina, and Greece. When civil war broke out in Greece, Great Britain asked if America could supply cash and troops to quell the rebellion. President Truman called on Congress to take action, and they responded by delivering $400 million in military aid and financial assistance to Greece.

The Truman Doctrine was followed by The Marshall Plan, which gave way to the military-industrial complex. During this period, many leaders in Washington feared the spread of communism, and initiated a policy of intervention, by sending financial aid and military assistance to countries all over the world. Countries like Malaysia, Laos, and Korea, along with our former foes Italy, Germany, and Japan.

The post-war period also began our romance with ”black gold,” as the United States began to court corrupt dictators from the Middle east. To ensure capitalism would reign, Britain, France, and the United States formed the International Monetary Fund (IMF) and the United Nations to rebuild war torn countries or supply them arms and troops if they feared a communist takeover.

While America was using everything at its disposal to bail out the "free world," their attitudes towards the working class on the homefront was the opposite. The war machine was the golden goose who made many businesses rich, and the military contemplated cutting their expenditures.

The war was good for Detroit and its automobile companies. General Motors executive Charles E. Wilson’s 1945 salary was $459,014, when the average full time employee earned on average $2,190. Now that the war was over, he was trying to cut wages almost 30%.

By 1946, labor relations had deteriorated and 4.6 million workers went on strike from various industries. When the dust settled, 4,985 work stoppages occurred and the estimated cost of lost work days was $116 million (est. $1.4 billion today).

No one exemplified the radicalism of the labor movement more than Walter Reuther, head of the United Auto Workers (UAW). While auto workers fared better than most workers at the time, he demanded more radical changes. He wanted to control production, have labor run the shops, and demanded that companies open their accounts. Although many companies were losing contracts due to military cutbacks, he was demanding for higher wages and pensions. The executives despised Ruether and called him a communist. Many businesses decided to collude and developed a new tactic to deal with labor.

By 1948, many unions gave up or capitulated by agreeing to Cost Of Living Agreements (COLA) clauses in annual contracts. This meant wages would be adjusted to the rate of inflation. Although this meant an upward scale of higher wages it reduced the bargaining leverage labor had when it came to negotiating for higher salaries, stripping unions of most of their power.

While increased wages created better living conditions, they also created unintended consequences that challenged the nation in later decades. During the war, America spent an estimated $288 billion for military equipment. Because of the lucrative contracts that were awarded to automobile manufacturers, any labor disputes were quickly settled. Because there was no competitive bidding for contracts, any wage hikes were passed on to the consumer.

During the War, the National War Labor Board gave trade unions the discretion for calling strikes in exchange for closed membership. This allowed labor leaders to acquiesce with executives or allow members to call unauthorized strikes—“wildcat strikes”—without the consent of the union.

After the war ended, there was a wave of strikes in 1946. President Truman, who was sympathetic toward unions, became frustrated when 800,000 steel workers went on strike followed later by a coal strike. However, when railroad workers threatened to strike, President Truman became incensed and threatened to draft striking workers into the Armed Forces.

The public turned against unions, with polls showing a public majority favoring a ban on strikes by public service workers and a year's moratorium on labor actions. In the 1946 midterm elections, the Republicans took back the House for the first time since 1930. Despite a veto by President Truman, Congress signed the Taft-Hartley Act into law, which prohibited wildcat strikes, solidarity or political strikes, secondary boycotts, secondary and mass picketing, closed shops, and monetary donations by unions to federal political campaigns. It also forced union officers to sign a pledge that they were not communist.

Soon after Taft-Hartley was passed, Florida along with eight other states signed "right to work" laws which outlawed closed union shops. Furthermore, the executive branch of the federal government could break strikes if they viewed an impending or current strike imperiled the national health or safety.

Soon, factories moved to right to work states and the great industrial centers of the early 20th century started to deteriorate. This was because companies didn't have to negotiate high salaries and pensions that the big automobile and steel industries were paying their employees. This allowed them to reduce their overhead and reduce the cost of the goods. Meanwhile, the automobile companies were strapped paying pensions and salaries which limited their opportunities to create lower priced products.

As the quality of life increased for the modern worker, one may wonder what were the long term consequences. It's hard to argue against higher wages and paid vacations, but in Detroit's case, when foreign cars came common, most of its capital investment was used to pay corporate salaries or a bloated workforce. If both sides showed flexibility, they could have used their profits to fight the challenges of globalization and keep many factories in Detroit.

When the drive for more fuel efficient cars came, Detroit was caught off guard, which cost many UAW workers to lose their jobs, defeating one of the union’s primary objectives.

The rising tide did not lift all boats. As union workers rose upward, gulfs widened socially, politically, and culturally. Eventually it exploded into riots and the city became a place of lawlessness overrun by gangs and violence. A new Detroit went from the model city to the murder capital of America.