The Southern labor system (with low pay and no unions) is wending its way north.
By Harold Meyerson
Santayana had it wrong: Even if we remember the past, we may be
condemned to repeat it. Indeed, the more we learn about the conflict
between the North and South that led to the Civil War, the more it
becomes apparent that we are reliving that conflict today. The South’s
current drive to impose on the rest of the nation its opposition to
worker and minority rights—through the vehicle of a Southernized
Republican Party—resembles nothing so much as the efforts of antebellum
Southern political leaders to blunt the North’s opposition to the slave
labor system.
Correspondingly, in the recent actions of West Coast and
Northeastern cities and states to raise labor standards and protect
minority rights, there are echoes of the pre–Civil War frustrations that
many Northerners felt at the failure of the federal government to
defend and promote a free labor system, frustrations that—ironically—led
them to found the Republican Party.
It’s the resilience of the
Southern order and the similarities between the Old South and the New
that are most surprising—at least, until we disenthrall ourselves from a
sanitized understanding of that Old South. It’s taken nearly 100 years
for the prevailing image of the pre–Civil War South to become less
subject to the racist falsifications that long had shaped it. The malign
fantasies of 1915’s The Birth of a Nation and the Golden Age hooey of
1939’s Gone with the Wind have given way to the grim realism of 12 Years
A Slave. Through all its incarnations, however, the antebellum South
has retained its status as a world apart from the rest of America,
whether (as D.W. Griffith would have it) for its chivalry or (as the
historical record shows) its savagery.
Southern exceptionalism has
also extended to the views of the South’s place in—or more precisely,
its purported absence from—the development of the modern American
economy. The slavery-saddled South was often considered the quasi-feudal
outlier in the early—and presumably Northern—development of
19th-century American capitalism. While finance and factories rose north
of the Mason–Dixon Line and railroads spanned the Northern states, the
South was an island—with just a sprinkling of banks and rails and
virtually no factories at all—largely detached from industrial
capitalism’s rise.
In just the past year, however, a spate of
revisionist histories has made significant additions to the historical
literature that persuasively dispels this image. To be sure, the South
was short on factories, trains, and banks, but its brutally productive
slave economy spurred the development of the first factories of the
industrial age, the textile mills of Massachusetts and Manchester,
England, and the railroads that moved their goods. It was also key to
the creation of modern finance and such pioneering industrial financiers
as the Baring Brothers in Britain and the Brown Brothers in New York.
Empire of Cotton by Harvard University historian Sven Beckert, which won
this year’s Bancroft Prize, and The Half Has Never Been Told by Cornell
University historian Edward Baptist, which won this year’s Hillman
Prize, both document how the industrial and financial capitalism of the
19th century arose as a direct result of the conquests, expulsions (of
Native Americans), and enslavements that turned the Deep South into a
vast slave-labor camp that generated unprecedented profits for
manufacturers and bankers who lived hundreds or thousands of miles from
the Mississippi Delta.
The American South before the Civil War was the low-wage—actually, the no-wage—anchor of the first global production chain.
Today,
as the auto and aerospace manufacturers of Europe and East Asia open
low-wage assembly plants in Tennessee, Alabama, South Carolina, and
Mississippi, the South has assumed a comparable role once more. Indeed,
the South today shares more features with its antebellum ancestor than
it has in a very long time. Now as then, white Southern elites and their
powerful allies among non-Southern business interests seek to expand to
the rest of the nation the South’s subjugation of workers and its
suppression of the voting rights of those who might oppose their
policies. In fact, now more than then, the South’s efforts to spread its
values across America are advancing, as Northern Republicans adopt
their Southern counterparts’ antipathy to unions and support for voter
suppression, and as workers’ earnings in the North fall toward Southern
levels. And now as then, a sectional backlash against Southern norms has
emerged that, when combined with the Southern surge, is again creating
two nations within one.
IN THE SPRING OF 2011,
the Boston Consulting Group made a bold prediction: Manufacturing,
which had been fleeing American shores for years, particularly to China,
was going to come back. “China’s rising manufacturing costs will
significantly erode [the] savings” that U.S. companies had realized by
having their products assembled there, three of the firm’s partners
wrote in a widely publicized study. The advantages of offshoring would
wane, and American manufacturing would rise again.
The numbers
that the authors adduced certainly made their claim seem plausible. As
their wages continued to increase, Chinese factory workers, whose pay,
adjusted for the productivity differences between China and the United
States, came to just 23 percent of their American counterparts’ in 2000,
had already seen that figure grow to 31 percent in 2010, and it would
likely increase to 44 percent in 2015. More revealing still, however,
was the authors’ comparison between factory workers in one particular
region of China and one particular region of the U.S. In 2000, they
showed, factory workers in and around Shanghai already made 36 percent
of the productivity-adjusted pay of workers in Mississippi—a figure that
rose to 48 percent in 2010 and that they projected to grow to 69
percent in 2015.
By contrast to the more rigid European economies,
with their safeguards of workers’ rights, America’s was perfectly
positioned to take advantage of China’s growing labor costs. “America is
so robust and so flexible compared to all economies but China,” said
Harold Sirkin, BCG senior partner and the study’s primary author, when I
interviewed him at the time of his study’s release. “Getting the work
rules right, getting the wage scales right—the [U.S.] economy can flex
in ways that people wouldn’t believe!”
The study’s readers might
be forgiven, though, if their reaction to its revelations was less
effusive than the study’s authors. The basis for their comparison was
Mississippi? The key to an American manufacturing renaissance was, as
the study put it, “an increasingly flexible workforce”? “Flexible” has a
distinct economic meaning: being paid less than what had been the
standard for American manufacturing workers. It had a distinct
geographic meaning, too: Southern.
“We made a mistake by picking
Mississippi,” Sirkin admitted when I suggested that most Americans’ view
of a rosy national future probably didn’t include having wage levels
reduced to those of the country’s poorest state. Indeed, when BCG
produced a fuller version of its study a few months later, all mention
of Mississippi had vanished. But BCG’s focus merely crossed some state
lines. “When all costs are taken into account,” the authors wrote,
“certain U.S. states, such as South Carolina, Alabama, and Tennessee,
will turn out to be among the least expensive production sites in the
industrialized world.”
It’s been four years since BCG made its
predictions, and they’ve proved lamentably accurate. The American
economy has “flexed” just as the study’s authors said it would:
Manufacturing has continued to move to the South, and factory workers’
wages have gone south as well. Between 1980 and 2013, The Wall Street
Journal has reported, the number of auto industry jobs in the Midwest
fell by 33 percent, while those in the South increased by 52 percent.
Alabama saw a rise in manufacturing jobs of 196 percent, South Carolina
of 121 percent, and Tennessee of 103 percent; while Ohio saw a decline
of 36 percent, Wisconsin of 43 percent, and Michigan of 49 percent.
Even
as auto factories were opening all across the South, however,
autoworkers’ earnings were falling. From 2001 to 2013, workers at
auto-parts plants in Alabama—the state with the highest growth rate—saw
their earnings decline by 24 percent, and those in Mississippi by 13.6
percent. The newer the hire, the bleaker the picture, even though by
2013 the industry was recovering, and in the South, booming. New hires’
pay was 24 percent lower than all auto-parts workers in South Carolina
and 17 percent lower in Alabama.
One reason wages continued to
fall throughout the Deep South, despite the influx of jobs, is the
region’s distinctive absence of legislation and institutions that
protect workers’ interests. The five states that have no minimum-wage
laws are Mississippi, Alabama, Louisiana, Tennessee, and South Carolina.
Georgia is one of the two states (the other is Wyoming) that have set
minimum wages below the level of the federal standard. (In all these
states, of course, employers are required to pay the federal minimum
wage.)
Likewise, the rates of unionization of Southern states’
workforces are among the lowest in the land: 4.3 percent in Georgia, 3.7
percent in Mississippi, 2.2 percent in South Carolina, 1.9 percent in
North Carolina. The extensive use of workers employed by temporary
staffing agencies in Southern factories—one former Nissan official has
said such workers constitute more than half the workers in Nissan’s
Southern plants—has lowered workers’ incomes even more, and created one
more obstacle to unionization.
The South’s aversion to both
minimum-wage standards and unions is rooted deep within the DNA of white
Southern elites, whose primary impulse has always been to keep African
Americans down. To those elites, the prospect of biracial unions
threatened not just their profits but the legitimacy of their social
order. To counter the biracial Southern populist movement that emerged
in the 1890's, those elites created Jim Crow laws that legitimated and
promoted white racism, and it was largely by manipulating that racism
that they were able to thwart almost all the Southern organizing
campaigns that unions have waged since the 1930's.
Ironically, most
of the largest factories that have arisen in the South in recent years
belong to European and Asian firms that, in their home countries, pay
high wages and are entirely and harmoniously unionized. In going to the
South, however, they go native, paying wages and providing benefits well
beneath those that such firms as General Motors and Ford offer their
employees, and blocking workers’ attempts to unionize. (The one
exception to this rule is Volkswagen, whose corporate board—controlled
by worker representatives and public officials—has not opposed the
unionization of its Chattanooga plant. In that city, state and local
public officials have led anti-union campaigns.) Nissan has plants in
Tennessee and Mississippi; Mercedes has one in Alabama and will open one
next year in South Carolina; BMW has one in South Carolina, where Volvo
recently decided to build a new plant; Airbus plans to open one in
Alabama. They come to sell to the American market and they come because
the labor is cheap.
“Airbus is a global manufacturer,” Jürgen
Bühl, who heads the treasurer’s office of IG Metall, the German
metal-workers union, and is the primary staffer for the union’s
representative on Airbus’s board of directors, told me in April. “When
we go abroad, we have the high-value work, the research and development,
done in Germany. We [workers in German factories] supply the high-value
parts. The workers who assemble the parts in the Airbus factory in
Tianjin, China, produce 3 to 5 percent of the total value. But given the
6-to-1 productivity advantage that the United States has over China,
it’s cheaper to do the final assembly in the U.S.” And a lot cheaper
than in high-value-added Germany, where the average hourly compensation
for manufacturing workers in 2011 (the last time the Bureau of Labor
Statistics performed an international comparison) was a third higher
than their U.S. counterparts’ ($47.38 there; $35.53 here).
For
global manufacturers, the United States—more precisely, the American
South—has become the low-wage alternative to China. For American
manufacturers, too: In 2012, General Electric re-shored its production
of refrigerators and water heaters from Mexico and China to its
Appliance Park factories in Kentucky, nearly doubling the park’s
workforce in the process. Unlike the vast majority of Southern
factories, Appliance Park was unionized, but in recent years, the union
there was compelled to agree to a two-tier contract, in which the lower
tier of workers (70 percent of them) make far less than the more senior
workers: Their starting hourly pay is just over $13.50, almost $8 less
than what new workers at Appliance Park used to receive.
In the
21st century, the American South has become the low-wage anchor of a
global production process—just as it was before the Civil War.
THE SLAVE ECONOMY OF
the South dominated the antebellum American—and indeed, much of the
European—economy. The Industrial Revolution, which first emerged in the
cotton mills of Manchester, depended almost entirely on the product of
the slave South. Indeed, the two economies—industrial and slave—rose in
tandem. The invention of the cotton gin in this nation and the creation
of water- and then steam-powered mills in the English Midlands provided
the technological wherewithal for the breakthrough, but no less
important were the forced exile of Native Americans from the lands that
were to become Georgia, Alabama, and Mississippi; the sale and forced
migration of more than 800,000 slaves from the Mid-Atlantic states to
the cotton states; and the routine use of physical abuse to compel those
slaves to become steadily more productive in their planting and picking
of cotton.
Even as more land was uprooted to make way for expanding
cotton fields, Baptist shows that the productivity of the pickers—that
is, the number of pounds they individually harvested—more than doubled
between 1830 and 1860. Given the complete absence of any technological
progress in cotton-picking during this time, and the statements of
numerous former slaves testifying to the increased brutality of their
overseers during this period to compel them to work faster, Baptist
concludes that this was a productivity revolution driven by torture.
Between
1790 and 1860, America’s yearly production of cotton grew from 1.5
million pounds to more than 2.2 billion pounds, from less than 1 percent
of the world’s cotton production to two-thirds of all the cotton
produced. The lion’s share of that crop was shipped to Britain. By the
eve of the Civil War, cotton constituted 61 percent of all U.S. exports,
and the U.S. was producing 88 percent of all the cotton that Britain
imported. As cotton production expanded, so did the mills; by 1830, one
out of six British employees worked in cotton factories.
The
non-Southern supporters of the Southern slave economy included not only
industrialists, but also many of the leading bankers in the U.S. and the
U.K. Since harvests are seasonal, farmers invariably need credit, for
which they need to put up collateral. The collateral that Southern
cotton growers put up was most commonly their slaves: 88 percent of the
loans to growers in Louisiana and 82 percent in South Carolina, Beckert
shows, were secured by their enslaved workers.
When growers couldn’t
meet their obligations, as thousands could not after the financial panic
of 1837, banks ended up owning slaves and even entire plantations.
Brown Brothers, on its way to becoming one of Wall Street’s leading
investment banks, owned 13 plantations and many hundreds of slaves after
the 1837 collapse. Major banks, such as Baring Brothers, even
securitized slaves, much as banks in our time securitize home mortgages:
They sold bonds to investors based on bundles of loans that
slaveholders had taken out. Whenever the economy went bad, or the price
of cotton dropped, owners would sell their slaves, irrevocably sundering
thousands of African American families.
The Southern slave
economy was simply too big and profitable for Northern and British banks
to shun. In 1831 and 1832, even the Bank of the United States—the
Philadelphia-based national bank that epitomized Northeastern elites,
and which, largely for that reason, Andrew Jackson later abolished—made
loans so large to a single firm whose sole business was slave trading
that they constituted 5 percent of all the bank’s credit during those
years. The ties between Northern bankers and Southern slavers were so
strong that as the South seceded in 1860 and 1861, New York Mayor
Fernando Wood urged his city—then as now the center of American
finance—to secede as well.
New York’s British counterpart was Liverpool,
the port city to which Southern cotton was shipped en route to
Manchester. Liverpudlian bankers were major investors in the slave
economy, and during the Civil War they not only extended credit to the
Confederacy, but also funded the manufacture of arms bound for the South
and the construction of Confederate warships.
The conflict
between the North and the South in the decades before the Civil War
centered on the question of whose labor system would prevail. The steady
expansion of the United States westward provided a frequent flashpoint,
posing the question of whether new states would be free or slave. The
prospective admission of Missouri, in 1819 and 1820, provoked the first
such sectional battle.
Though the abolitionist movement was in its
infancy, Southern leaders such as South Carolina’s John C. Calhoun were
ever wary that the admission of new non-slave states would bring more
anti-slavery senators and representatives to Congress, eventually
threatening slavery’s continued existence. Until the outbreak of the
Civil War, however, the South retained enough congressional, executive,
and judicial support to eliminate the line dividing future slave states
from free states in the Western territories, and to criminalize
assistance to escaped slaves in the Northern states. While the political
power of the South didn’t significantly affect the earnings of Northern
workers and farmers, the persistent growth of that power and the threat
it ultimately posed to the Northern economy—and to the North’s
increasingly democratic values—led to the formation of a distinctly
Northern Republican Party and, in time, to civil war.
Today, by other means, that conflict continues.
THERE'S NOTHING NEW ABOUT
Northern manufacturers moving south to lower their labor costs. Textile
factories, which had been located chiefly in New England, began to pop
up in the South as early as the 1880's. In 1922, the average hourly wage
in Massachusetts mills was 41 cents while in Alabama, it was 21 cents.
Over the next six years, 40 percent of the Massachusetts factories
shuttered their gates, and by the mid-1960s, the Southern textile
industry was out-producing its Northern counterpart by a 24-to-1 margin.
But
the shift of higher-value manufacturing to the South since the 1960s,
once the South was air-conditioned and its Jim Crow laws nullified, has
had a more profound effect on the American economy. Workers at the
unionized auto, steel, aerospace, and other durable-goods factories in
the Northern and Western states during the three decades following World
War II attained a standard of living and of employment stability all
but unknown to earlier generations of workers. Since the 1970s, however,
that standard—and with it, the American middle class—has been eroded by
the emergence of lower-wage competition from both the Global South and
the domestic South.
Confronted not only with the financial
collapse of 2008 and the ensuing Great Recession, but also with the
double whammy of the two Souths, the median wage of all U.S.
manufacturing workers fell by 4.4 percent between 2003 and 2013. Facing
the possible collapse of the unionized auto industry, the United Auto
Workers was compelled to institute two-tier contracts, bringing their
less-senior members’ pay down to the levels that workers in the
non-union Southern plants make. Newer hires at General Motors, Ford, and
Chrysler are paid roughly half ($14 to $19 an hour) of what more senior
workers make, and can’t make more no matter how long they work there.
(Now that the industry has recovered, removing that ceiling from those
workers’ pay has become, not surprisingly, a UAW priority.)
The
decline of Northern wages to Southern levels hasn’t been confined to
manufacturing. The expansion of Walmart from its Southern base into the
North and West has had a profound effect on the incomes of retail
workers and of workers all along its supply chain. Ferociously
anti-union (when butchers at one Texas Walmart sought to unionize,
company executives responded by eliminating the meat departments from
every store in Texas and six neighboring states), Walmart directs its
managers to keep payroll expenses between 5.5 percent and 8 percent of
sales, though the norm in retail marketing is between 8 percent and 12
percent. Wages in counties where a Walmart has been operating for eight
years, economist David Neumark has found, are 2.5 percent to 4.8 percent
lower than those in comparable counties with no Walmart outlets.
But
Walmart—America’s largest private-sector employer, with 1.4 million
U.S. employees—is in lots of counties. In tandem with Southern
manufacturers and with the spread of Southern economic norms, it has
brought Northern wages closer to Southern levels. In 2008, the wage gap
between states of the industrial Midwest and those of the South—for all
workers, not just those in manufacturing—was nearly $7, according to
Moody’s Analytics. By the end of 2011, it had fallen to $3.34.
THE SPREAD OF SOUTHERN
earning levels northward has been accompanied and abetted by the
concomitant spread of Southern values. Just as Northern bankers and
textile mill owners such as Massachusetts’s Abbott Lawrence profited
from and supported the antebellum South, today’s business and financial
leaders from all parts of the nation profit from the low-wage production
of the global and domestic souths, and support the suppression of
unions in the North as well as the South. What’s new is the spread of
historically white Southern values to Northern Republican
politicians—the latest development in the 50 year Southernization (and
nearly complete racial whitening) of the Republican Party.
In the
last three years, the Republican governors and legislatures of such
onetime union bastions as Michigan, Indiana, and Wisconsin have joined
the South in enacting “right to work” laws intended to reduce union
membership. Since these laws cover only private-sector unions, and thus
have no effect on the labor costs of government employees, the
Republicans’ initial motivation was almost entirely political:
Diminishing unions weakened institutions that generally campaigned for
Democrats. But in recent months, bills to lower wages for construction
workers on public projects have been moving through the legislatures in
those three states, and the Michigan legislature has passed a bill
forbidding cities from setting their own minimum-wage standards—all
measures designed to hit workers’ pocketbooks. Moreover, laws designed
to depress minority, millennial, and Democratic voting by requiring
voters to present particular kinds of photo identification have been
enacted not only by eight of the eleven once-Confederate states, but by
Indiana, Michigan, and Wisconsin as well. Like the pre-1861 slave holding
elites, today’s Republicans appear increasingly dedicated to
Southernizing the North.
White racism is the great hardy perennial
of American life and politics, and it has never been confined to the
South. But never before have Northern-state governments (all of them
Republican) sought so successfully to emulate policies of racial
suppression and anti-working-class economics that the South originated.
Four decades of declining economic prospects, overlapping with a
demographic revolution that has transformed a predominantly white nation
into a profoundly multiracial one, has heightened racist anxieties
among many within both the Northern and Southern white working
classes—anxieties that Republicans, both Northern and Southern, have
skillfully exploited. And as globalization weakened the power of unions
in the once-industrial Midwest, Republicans in those states who long had
wished to make unions as inconsequential as they are in the South had a
golden opportunity—and took it.
With divided government at the
federal level blocking such measures as a minimum-wage hike, and with
Southern congressional resistance to strengthening workers’ rights
blocking labor-law reform even when Democrats have controlled Congress,
the federal government in recent decades has done little to obstruct the
nationalization of the white South’s racist and anti-worker norms.
Since 2013, however, at the very same time that Northern Republicans
have moved right, states and cities where multiracial liberal coalitions
govern have taken it upon themselves to enact their own minimum-wage
increases, paid sick-day legislation, and statutes making it easier to
vote. But there are too few such states to offset the malign influence
of the South on broader wage trends.
Barack Obama came to national
prominence in 2004 hoping to bridge the divisions between blue states
and red. Instead, these gulfs have deepened. Federal remedy is stymied;
the public policies of the red and blue states are racing apart; and the
fundamental divisions that turned one nation into two in 1861 loom
larger today than they have in a very long time.
Harold Meyerson is editor-at-large for The American Prospect and a columnist for the Washington Post
