 Hi, Professor Gerald Friedman, Department of Economics, University of Massachusetts, Amherst. And we're here today to talk about the labor accord, such as it was, and the Treaty of Detroit, which was never a treaty but works well enough, and Detroit is a city. Not much of a city anymore, but we'll talk about that. And this goes back to the Great Depression and the New Deal. In the 1930s, the Great Depression started in 1929, Franklin Roosevelt was elected president in 1932, and when he came to office in 1933, he promised a New Deal for the American people. Now, Roosevelt and his people, his advisors, had a very clear sense of what had gone wrong with the economy to cause the Great Depression. They believed that there was a crisis of aggregate demand, although they didn't call it that, but that's what they were talking about, because of rising inequality. The rich in the 1920s had gotten so much of American output, over half of income in the United States went to the top 10% in 1929. Because the rich have a lower marginal propensity to consume, another phrase that Roosevelt's advisors didn't use, but this is what they were talking about, the rich had all this money that they weren't spending, and therefore there wasn't enough demand in the economy. The solution the Roosevelt administration felt was to encourage a shift in income towards the working class, the middle class, the working class, and one of the mechanisms to do this was through promoting unions. So in 1935, the Wagner Act was enacted and signed by President Roosevelt, named after Senator Robert Wagner of New York. This law was also called the National Labor Relations Act, and it had two purposes. The first was to promote purchasing power by raising wages so that we would come out of the depression and not have depressions in the future. The second purpose was to promote labor peace by encouraging collective bargaining between recognized unions and employers. The same year, Senator Wagner also sponsored another law, the Social Security Act, which established system of retirement pensions in the United States. Social Security was added disability pensions and Medicare. Also, these were measures designed to maintain purchasing power, giving more to the working class and middle classes. That was the agenda of the New Deal and the Roosevelt administration, and they continued it through World War II, which was a great war fought against fascism. By the side of the Soviet Union and Communists, so the United States under the New Deal was promoting unions, promoting working class empowerment, promoting income redistribution, all programs associated with the political left. And that's how we came out of World War II. Now, the Treaty of Detroit, as it's called, was a result of a major strike wave in 1946, right after World War II. In particular, this was a strike by the United Auto Workers against General Motors. The strike was fought over the Union's attempt to gain more control over the production process and the decisions about which types of cars would be made and the prices to be charged, et cetera. The Union gave up those demands after a three-month strike, four-month strike. In exchange, they got higher wages and the beginnings of a pension plan. Now, this set the boundaries of that New Deal expansion of worker empowerment and income redistribution. The boundaries would go as far as unions and workers having higher wages, better working conditions, a certain say in the conditions of work, but not as far as actually having power over the decisions made by their enterprises. The capitalists would still control the business, what's called, in most union contracts, management rights, quote-unquote. But workers would have higher wages. And for the next 25, 30 years, going into the 1970s, this worked out more or less. We grew together as a nation. The rate of increase in per capita income for the bottom 20% was actually a little higher than for the top 20%. CEO pay went up, but so did workers' wages. At a pretty steady rate of about 25 to 1, that is, CEOs earned about 25 times as much as the workers in their workplaces. And that rate remained pretty stable, dropped a little bit. For workers, it wasn't a revolution for workers, but it's as close to a social revolution as has been engendered in this planet. For 25, 30 years, if you were in a place like Detroit or Pittsburgh, and you belong to a union, you had a degree of job security, a degree of income security that is unprecedented in American history. Similarly, for workers in Paris, in Frankfurt, throughout the Western world, this period that we call the labor accord worked reasonably well for common people, better than they've gotten before, since, or anyplace else. Unions were protecting their workers, their members' rights to job security, workplace safety, pensions, health benefits, all these things previously unheard of, vacation pay. For a lot of upper class and upper middle class leftists, it's common to have disdain for these private welfare states established at General Motors, Ford, US Steel. It's like, oh, but look at all the workers left out, and it's all true. Look at how inadequate they were. Pensions and social security did not amount to a great retirement, but for these workers in Homestead or Detroit, this is better than they ever had before, and it's a lot better than they have in the next period after the mid-1970s, and that's where we'll pick up next time with the decline of the so-called labor accord.