Unions

The Collapse of Wal-Mart’s Social Responsibility Charade

For the past eight years, Wal-Mart has pursued an image campaign apparently inspired by the Marx Brothers line: “Who you gonna believe, me or your own eyes?”

Despite the preponderance of evidence of its unenlightened practices, the company has tried to give the impression that it is really a model corporate citizen. Recent events suggest that the giant retailer’s social responsibility charade is now crumbling.

Through all of its scandals and controversies over the years, Wal-Mart could at least count on the support of its institutional shareholders, which for a long time turned a blind eye to the company’s transgressions and focused on its growth. Now even that is changing. The recently released results of voting at the company’s annual meeting indicate unprecedented discontent with its leadership. Not counting the large bloc of shares controlled by descendants of founder Sam Walton, more than 30 percent of the votes were cast against CEO Mike Duke, board chair Rob Walton and former CEO and board member Lee Scott. In the past, Wal-Mart board members typically had approval rates close to 100 percent.

The high degree of no-confidence this time around is largely attributable to the fallout from an 8,000-word exposé by New York Times alleging that high-level executives at the company quashed an internal investigation of foreign bribery. Before the annual meeting, the California State Teachers’ Retirement System filed a lawsuit against current and former Wal-Mart executives and board members for breach of their fiduciary duties in connection with the bribery scandal.

That scandal also appears to have played a significant role in Wal-Mart’s decision to cave in to calls to suspend its membership in the American Legislative Exchange Council, which is under siege for its role in promoting “stand your ground” laws such as the one in Florida linked to the shooting of Trayvon Martin. In the past, Wal-Mart, long a stalwart member of ALEC, would have ignored pressure of the kind being exerted by the anti-ALEC campaign.

By all rights, the disintegration of Wal-Mart’s responsibility image should have come from its retrograde labor and employment practices, which were the main reason for the public relations effort but which didn’t substantially change during the campaign. The company has never strayed from its uncompromising opposition to unions (except for toothless ones in China). The Organization United for Respect at Walmart is not a conventional union-organizing effort, yet the company recently fired several activists in the group in an apparent act of intimidation.

In its 1.4 million-employee U.S. retail operations, Wal-Mart has maintained a low-road approach of meager wages, inadequate benefits and overuse of part-timers. Workers at its more than 100 distribution centers had enjoyed somewhat better conditions, but it appears that is no longer the case. A new report from the National Employment Law Project finds that the company is increasingly using logistics subcontractors and temp agencies that engage in rampant wage-and-hour abuses and other labor-law violations.

In the latest in a long line of its own fair labor standards cases, Wal-Mart was recently forced by the U.S. Labor Department to pay $5.3 million in back pay, penalties and damages for violating overtime rules. Although the U.S. Supreme Court came to Wal-Mart’s rescue last year by blocking a massive class-action sex discrimination case, several non-class actions have been brought in recent months making the same allegations on behalf of thousands of women.

One area in which Wal-Mart believes it has attained a measure of legitimacy is environmental policy. It has succeeded in winning over some green groups, which cannot resist the temptation of working with such a mammoth company to change industry standards.

Yet the funny thing about Wal-Mart’s green initiatives is that most of them involve changes that the retailer is requiring from its suppliers, who are expected to bear the costs of altering their products and their packaging. This is consistent with Wal-Mart’s longstanding practice of forcing suppliers to cut their wholesale prices to the bone. When Wal-Mart does take steps on its own, such as in reducing energy usage in its facilities, those reforms are ones that reduce its operating costs and thus add to its bottom line.

Even if you believe it is okay for Wal-Mart to boost its profits while pressing suppliers to be more environmentally responsible, it’s important to remember that many of those suppliers are in countries such as China where oversight is difficult. A recent investigative report in Mother Jones found that Wal-Mart’s monitoring of Chinese plants left a lot to be desired and that this is causing frustration among some of the environmentalists who have been working with the company.

A report by Stacy Mitchell of the Institute for Local Self-Reliance finds that Wal-Mart’s domestic green initiatives, such as using more renewable energy sources, are also faltering, while the company ignores the detrimental environmental impacts of its land use practices. All this is compounded, Mitchell notes, by Wal-Mart’s extensive political contributions to candidates who are global warming deniers or otherwise have poor voting records on the environment.

The demise of Wal-Mart’s phony social responsibility initiative poses a fascinating question: Can the company return to its old critics-be-damned stance, or will it finally have to make some genuine reforms in the way it does business?

Employers Stand their Ground

These are heady days for the corporate accountability movement. Threats of consumer boycotts prompted half a dozen major companies to drop out of the American Legislative Exchange Council, which in turn forced ALEC to cease its efforts to get states to enact “stand your ground” laws like the one in Florida at the center of an uproar over the shooting of an unarmed teenager.

At the same time, institutional investors humiliated Citigroup by rejecting a board-approved compensation package for its senior executives. Although the “say on pay” resolution is non-binding, it will in all likelihood result in smaller paydays for top officers of an institution that epitomizes financial sector misconduct. This comes on the heels of an announcement by Goldman Sachs that it would change its board structure in response to pressure from the capital strategies arm of the public employee union AFSCME.

Environmentalists have succeeded in stalling and perhaps killing the disastrous Keystone XL pipeline . The past few months have also seen a surge in protest over working conditions at the Chinese plants that produce the wildly popular Apple iPad tablets. Apple’s manufacturing contractor Foxconn was forced to boost pay for factory workers, while Apple itself faced demonstrations at many of its normally idolized retail stores. The Apple campaign and others are being propelled by new online services such as Sum of Us and Change.org that mobilize online pressure for a variety of anti-corporate initiatives.

Missing from all this positive momentum is a significant victory for the U.S. labor movement. While major corporations have bowed to pressure from consumers and shareholders, they are standing their ground against unions.

Rather than making concessions, large private-sector employers are looking to further roll back labor’s power. Companies such as American Airlines and Hostess Brands (maker of Twinkies and Wonder Bread) have filed for Chapter 11 and are using the bankruptcy courts to decimate their collective bargaining agreements and gut pension plans.

Verizon continues to stonewall in negotiations with members of the Communications Workers of America, who struck the company for two weeks last summer in the face of unprecedented concessionary demands from management but then went back to work without a new contract. CWA is also facing difficult negotiations with AT&T, even though the union went out on a limb to support the company’s ultimately unsuccessful bid to take over T-Mobile.

There have been a few relatively bright spots for labor. For example, after being locked out for three months, Steelworkers union members at Cooper Tire and Rubber managed to negotiate a new contract that excluded the company’s demand for a five-tier wage structure with no guaranteed pay increases.

Yet organized labor has not been able to take the offensive in a significant way, and employers continue to feel emboldened. This comes through loud and clear in the results of the latest Employers Bargaining Objectives survey conducted by Bloomberg BNA (summarized in the April 11 edition of Labor Relations Week).

“Employers are fairly brimming with confidence as they head into 2012 talks,” Bloomberg BNA writes. “Nine out of 10 of the employers surveyed are either fairly confident or highly confident of obtaining the goals they have set for their labor agreements.”

Those goals, of course, do not include hikes in pay and improvements in working conditions. In fact, only 11 percent of respondents said they expected to have to negotiate significant wage increases, while 27 percent said they planned to bargain for no improvements at all in wage rates. Many employers expect to shift more health care costs to workers, and few expect to agree to stronger job security provisions.

Employers are prepared to play hardball in seeking their objectives. For example, one-quarter of manufacturing-sector respondents told Bloomberg BNA they would be likely to resort to a lockout of workers if they did not get their way in negotiations. Corporations have little fear of strikes, which are all but extinct, and if workers do dare to walk out, employers are confident of prevailing—or at least maintaining the kind of impasse that exists at Verizon.

Such arrogance is not surprising at a time when unemployment levels remain high and private-sector unionization rates are abysmally low. The question is what it will take to shatter employer intransigence.

One piece of the solution is greater cooperation between unions and the rest of the broader corporate accountability movement, and that’s exactly what seems to be emerging from the 99% Spring offensive.

Strong private sector unions in the United States are an essential check on the power of large corporations and one of the most effective vehicles for raising living standards. Corporate accountability will mean much more when big business is running away not only from ALEC but also from union-busting.

Neither Social Darwinism Nor Paternalism

President Obama’s critique of the Republican budget plan as “thinly veiled social Darwinism” is a refreshingly blunt statement about the retrograde features of contemporary conservative thinking.

The efforts of House Budget Chair Paul Ryan and his colleagues to accelerate the upward redistribution of income and the unraveling of the social safety net deserve all the scorn that Obama served up.

While invoking a phrase that has a grand history in the critique of laissez-faire ideology, Obama failed to mention how social Darwinism was originally embraced not just by philosophers such as Herbert Spencer but also by leading industrialists such as Andrew Carnegie and John D. Rockefeller (a fact noted by Richard Hofstadter in his seminal work on the subject, Social Darwinism in American Thought).

Rather than pointing out how social Darwinist ideas can still be found in corporate boardrooms (especially those of Koch Industries) as well as in House hearing rooms, the purportedly socialist Obama went out of his way to sing the praises of business: “I believe deeply that the free market is the greatest force for economic progress in human history.”

Obama also used his speech to extol Henry Ford, specifically for the auto magnate’s policy of paying his workers enough so that they could afford to buy the cars they were assembling. Higher wages are a good thing, but it is misleading to cite Ford without putting his practices in some context.

Henry Ford gained fame as the man who instituted the Five Dollar Day for his workers in the 1910s. The facts were somewhat more complicated: not all workers at Ford Motor qualified for that amount, which in any event was not the base pay. A large part of the $5 consisted of a so-called “profit-sharing” bonus that had to be earned — by working at a high level of intensity on the job, and by living in a style that Ford considered appropriate off the job.

To enforce the lifestyle regulations, Ford created a Sociological Department with inspectors who visited the homes of workers and interviewed family members and neighbors. The company wanted to be sure that workers were not spending their share of Ford profits in a frivolous or irresponsible manner.

Ford’s practices were also designed to discourage unionization. When workers nonetheless tried to organize, Ford’s paternalism quickly dissolved. In 1932 a protest march to the company’s River Rouge plant in Dearborn, Michigan was met with tear-gas and machine-gun fire, which killed four persons. Dearborn police officers were supplemented by members of the Service Department, Ford’s own security force. Headed by Harry Bennett, the Service Department became notorious for its surveillance of workers both on and off the job. In a 1937 confrontation known as the Battle of the Overpass (photo), union organizers were attacked by Bennett’s security force and freelance thugs when they attempted to distribute leaflets outside the Rouge plant. Ford was the last of Detroit’s Big Three to give in to unionization.

It is telling that the word “unions” was not uttered a single time during Obama’s speech. Instead, Obama seems to want us to believe that the alternative to deregulation and trickle-down economics is a return to some kind of government and big business paternalism.

The first problem is that big business, despite giving frequent lip service to corporate social responsibility, has almost completely abandoned paternalism in favor of the human resources principles of Wal-Mart. As for government paternalism, Obama himself felt compelled to say in his speech that “I have never been somebody who believes that government can or should try to solve every problem.”

Even if the prospects for paternalism were more promising, it would not be the most effective way of responding to neo-social Darwinism. As the story of Henry Ford illustrates, paternalism is simply another form of social control by the powerful, and when necessary it is quickly abandoned in favor of repression and austerity. Collective action of the type that was put aside after Obama took office and recently revived by the Occupy Movement is the only real way forward.

The Price of a U.S. Manufacturing Revival

A few decades ago, U.S. factory jobs began moving offshore to countries that lured corporations with the prospect of weak or non-existent unions, minimal regulation, lavish tax breaks and other profit-fattening benefits. Workers in those runaway shops enjoyed little in the way of a social safety net, thus making them all the more dependent on whatever dismal employment opportunities foreign firms had to offer. Much of the U.S. manufacturing sector was left for dead.

Now, we are told, U.S. manufacturing is undergoing a resurrection. “Manufacturing is coming back,” President Obama told a group of blue-collar workers at a recent public event. “Companies are bringing jobs back.” Obama earlier used the State of the Union address to tout the recovery of the U.S. auto industry in the wake of the bailout he championed. One of the bailed-out firms, Chrysler, aired a Super Bowl commercial called “It’s Halftime in America” in which Clint Eastwood hailed the country’s industrial recovery.

It’s true that manufacturing employment has been on the rise after many years on the decline. But is this something calling for unqualified celebration?

Boosters of the industrial resurgence would have us believe it is a reflection of improved U.S. productivity, entrepreneurial zeal or, as Obama put it in the State of the Union, “American ingenuity.” In the case of Chrysler, that should be Italian ingenuity, given that the bailout put the company under the control of Fiat.

But it can just as easily be argued that domestic manufacturing is advancing because the United States has taken on more of the characteristics of the countries that hosted those runaway shops. Deunionization, deregulation, corporate tax preferences, excessive business subsidies and a shriveled safety net are more pronounced than ever before in the U.S. economy. If any of the Republican Presidential candidates get in office, those trends will only accelerate.

Even the Obama Administration is on the bandwagon to a certain extent. Its Office of Information and Regulatory Affairs has obstructed a slew of new environmental and workplace safety regulations. Now the President has legitimized years of conservative rhetoric claiming that companies are overtaxed by introducing a corporate tax reform plan that would reduce statutory rates in general and create an even lower rate for manufacturers. The plan has some good intentions—such as ending special giveaways to Big Oil and other loopholes while encouraging corporations to bring jobs back home—but it ignores years of evidence from groups such as Citizens for Tax Justice showing that big business will exploit any softening of the tax code to bring its actual payments down to the absolute lowest levels.

The perils of joining the manufacturing revival chorus can be seen by looking at heavy equipment producer Caterpillar. The company has been getting a lot of attention lately for expanding its domestic employment through moves such as the planned construction of a $200 million plant in Athens, Georgia that is projected to employ about 1,400.

This needs to be put in some context. According to data in Cat’s 10-K filings, the company’s workforce outside the United States soared from around 13,000 in the early 1990s to more than 71,000 last year, growing to some 57 percent of the firm’s total employment. The number of foreign workers in 2011 was greater than the company’s total head count in 2003.

Cat’s love affair with places such as China blossomed as the company was trying to escape its U.S. unions, which it had unsuccessfully tried to destroy. Cat’s hard-line approach to collective bargaining soured relations with its workers, resulting in a series of strikes and other confrontations, including a dispute in the 1990s that lasted for more than six years.

It appears that unions have no role in Cat’s limited back-to-the-USA plan. The company’s new domestic facilities tend to be located in “right to work” states. After recently trying to impose huge pay cuts at a factory in Ontario (photo), Cat first locked out the workers, then shut down the plant and is now reported to be shifting the work to a facility in Muncie, Indiana, the latest state to adopt a “right-to-work” law to hamstring unions.

By locating the Athens plant in a labor-unfriendly state such as Georgia, Cat is expected to be able to pay wages far below those in its unionized plants. It is also worth noting that Cat agreed to build the plant in Georgia only after it received $75 million in tax breaks and other financial assistance, one of the largest subsidy packages the state has ever offered.

The message of all this seems to be that the U.S. can enjoy a renewal of manufacturing if we are only willing to put up with a few minor inconveniences such as union-busting and big tax giveaways to corporations. That’s apparently what is really meant by American ingenuity.

Unions in the Crosshairs

“We’ll make the unions understand full well that they are not needed, not wanted, and not welcome in the State of South Carolina,” Gov. Nikki Haley declared in her recent State of the State address. “I love that we are one of the least unionized states in the country. It is an economic development tool unlike any other.”

While treating unions as pariahs, Haley celebrated corporations. During her speech she asked representatives of a dozen companies that have invested in the state to stand up and take a bow.

Haley’s brazen expression of anti-union animus is a sign of the times. From statehouses and Congressional hearing rooms to corporate boardrooms and bankruptcy courts, organized labor is under attack. Union strength has been waning for many years as a result of structural changes in the economy and dysfunctional labor laws. Foes of unions are now acting aggressively to try to hasten that decline.

Last year, apologists for the effort to eradicate public sector collective bargaining rights in states like Wisconsin insisted that it was not an assault on unions in general. Yet these days private sector union members are in the crosshairs as well. Indiana, in the heart of the industrial Midwest, recently enacted a “right to work” law, the first state to take this deliberate step to weaken unions in more than a decade. Legislators in states such as South Carolina that are already in the “right to work” camp are considering bills that would make it even more difficult for unions to operate.

Meanwhile, in Congress, the House Oversight Committee recently held a hearing meant to give the inaccurate impression that unions are misusing dues money for political activity. Committee Chair Darrell Issa seems intent on hamstringing legitimate union political involvement at a time when corporate influence over politics is growing by leaps and bounds in the wake of the Citizens United ruling.

House Education and the Workforce Committee Chair John Kline, still furious over the Obama Administration’s recess appointments to the National Labor Relations Board, has warned that it may be necessary to “overhaul” the National Labor Relations Act (Labor Relations Week, 2/8/2012), undoubtedly in a way very different from labor’s unsuccessful push for an Employee Free Choice Act.

Overt anti-unionism is not limited to the maneuvers of conservative politicians. Major employers are taking their own steps to undermine collective bargaining. As the New York Times has pointed out, companies are making unprecedented use of lockouts, while strikes have become exceedingly rare. More than 1,300 workers at seven American Crystal Sugar plants in Minnesota, North Dakota and Iowa have been locked out for more than five months, while 1,000 union members at a Cooper Tire & Rubber plant in Findlay, Ohio have been in the same situation since late November. Across the border in Ontario, U.S.-based Caterpillar Inc. locked out 450 workers at a locomotive plant and then shut down the facility.

Other employers are trying to avoid strongholds of organized workers. For example, transnational grain exporter EGT has been trying to sidestep the Longshore union and use scab labor at its Longview port in Washington State.

Unions are also under assault in the bankruptcy courts, where companies are making strategic use of Chapter 11 filings. Hostess Brands, Inc., maker of Twinkies and Wonder Bread, is seeking court approval to rid itself of 296 collective bargaining agreements with 141 Teamster locals and 35 locals of the Bakery, Confectionery, Tobacco Workers and Grain Millers union. At the same time, American Airlines is seeking to use the bankruptcy process to gut its union contracts through massive layoffs, termination of pension plans and decimation of health coverage.

Unions have been far from passive in responding to the onslaught, but high rates of unemployment make it difficult for them to maintain a very militant posture. After charging that Boeing was engaging in anti-union retaliation by expanding its Dreamliner production in South Carolina rather than in Washington State, the Machinists struck a deal in which the company was able to maintain its facility in the right-to-work state while agreeing to use union members in the Seattle area for another new aircraft. The CWA suspended its strike against Verizon last summer without getting a new contract but has kept up a campaign against the company’s demands for severe contract concessions. The UFCW is once again trying to organize workers at Wal-Mart, but the union is putting much of its energy into building an employee association not designed to engage in collective bargaining.

What passes for good news in labor circles is the recent announcement by the Labor Department that the number of U.S. workers represented by a union held steady in 2011 rather than declining. Union membership in the private sector as a whole also remained unchanged at 6.9 percent.

One of the many reasons to hope that the economic recovery builds some real momentum is that it would greatly improve the prospects for a revived labor movement capable of beating back the deunionization agenda and putting a brake on economic polarization.

The Corporate Raid on State Tax Revenue

One of the usual canards of the corporate tax reduction crowd is that high U.S. rates force large companies to invest offshore instead of at home. The Institute on Taxation and Economic Policy and Citizens for Tax Justice have just issued the second installment of their detailed refutation of the myth of oppressive rates.

After putting out a report last month showing that many large corporations end up paying far less than the statutory federal rate (so much less that their rates often become negative), ITEP and CTJ now demonstrate that the story is the same at the state level. Their study, Corporate Tax Dodging in the Fifty States, lists 68 Fortune 500 companies that managed to pay no state income tax at all in at least one year during the period from 2008 through 2010 despite posting a total of nearly $117 billion in pre-tax U.S. profits during those no-tax years.

Sixteen of the companies—including the likes of DuPont, Tenet Healthcare, International Paper, Intel and Peabody Energy—had more than one no-tax year. DuPont, Pepco Holdings and American Electric Power contributed nothing to state coffers in all three years. The report points out that, if the 265 companies in the sample had all paid the average 6.2 percent average corporate tax rate on their combined $1.33 trillion in U.S. profits, their state tax bill would have been about $82 billion. Instead, they paid only $40 billion, meaning that states were left without $42 billion in revenue that could have been used to help pay for education, healthcare, transportation, public safety and other key state government functions.

A system that allows many companies to sidestep millions of dollars in state tax payments can hardly be called onerous and certainly can’t be the reason for investing overseas. It is thus no surprise that the ITEP/CTJ list of firms with negative or minimal tax rates includes corporations that engage in extensive offshoring; among them are Eli Lilly, General Electric, Hewlett Packard and Merck.

At the same time, the key state tax dodgers include some manufacturing companies that have (at least in part) bucked the offshoring trend and made substantial investments in the United States. Chief among them are Intel and Boeing.

Intel, which has been spending billions on semiconductor fabrication plants in state such as Arizona, and Boeing, which focuses its aircraft assembly in Washington State and South Carolina, are major recipients of the kind of company-specific tax breaks that the ITEP/CTJ report cites as one of the reasons for the decline of state corporate income tax collections.

Intel has been playing the subsidy game in earnest since 1993, when it announced plans for what was then an unprecedented $1 billion investment in a new chip plant, to be built in a suburb of Albuquerque called Rio Rancho. The company pressured local officials to provide what would ultimately amount to about $455 million in property tax abatements and sales tax exemptions on the equipment purchased for the facility.

Soon after getting its way in New Mexico, Intel put the squeeze on officials in Arizona, where it proposed to build another plant in Chandler, a suburb of Phoenix. The company received some $82 million in property tax abatements, sales tax exemptions and corporate income tax credits. In 2005 Intel strong-armed the state to change the method by which it calculates corporate taxes to a system known as single sales factor, which allowed Intel and other companies with lots of property and a big payroll but relatively low sales in the state to enjoy enormous tax reductions.

In 1999 Intel announced plans for a large expansion of its semiconductor operations in Oregon but made it clear that the investment was contingent on receiving a property tax abatement that turned out to be worth an estimated $200 million over 15 years. In 2005 Intel got the county to extend the property tax break to 2025, locking in an estimated $579 million in additional savings. Intel also enjoys a substantial reduction in corporate income taxes thanks to Oregon’s decision to join the single sales factor bandwagon.

Boeing has also sought special tax breaks and other subsidies in multiple states. When the company was ready to begin production of its much-anticipated Dreamliner, it forced Washington to compete with around 20 other states for the work and agreed to stay there only after the legislature in 2003 approved a package of research & development tax credits and cuts in Business & Occupation taxes (the state’s substitute for a corporate income tax), sales taxes and property taxes that together were estimated to be worth $3.2 billion over 20 years.

Rather than showing its appreciation to Washington, the company went shopping for a better deal for the second Dreamliner production line. It chose South Carolina, where it was awarded a subsidy package that has been valued at more than $900 million and is able to take advantage of a “right to work” law that discourages unionization. The Machinists union accused the company of retaliating against union activism in Washington, but the complaint has just been withdrawn as part of a deal in which Boeing will build its new 737 in the Seattle area.

While it was once taken for granted that large U.S. corporations would do most of their investing at home, companies such as Boeing and Intel now act as if they are doing the country a favor with their domestic projects and expect to be rewarded handsomely in the form of special state tax breaks on top of those business-friendly provisions available to all firms.

Far from being held back by tax rates, large U.S. corporations invest offshore or onshore as they please while contributing as little as possible to the cost of public services.

Pension Busting at American Airlines

There was once a time when a bankruptcy filing by a company was a mark of shame. That stigma has fallen by the wayside, and firms now employ Chapter 11 not to protect themselves against creditors but for strategic purposes.

One of the most popular ploys is to use the bankruptcy court to undermine the bargaining position of labor unions. The latest firm to do so is American Airlines, which said it took the step to “achieve industry competitiveness.” This is corporate-speak for “we’re going to milk our employees dry.”

Such union-busting bankruptcies are far from new. They were pioneered three decades ago by the likes of ruthless airline executive Frank Lorenzo, who used Chapter 11 to abrogate union contracts after taking over Continental Airlines in 1983. Six years later he tried something similar at Eastern Airlines, but changes in the law forced him to settle for weakening the unions rather than eliminating them altogether. Subsequently, most of the other major carriers (and various smaller ones) also went through the bankruptcy process.

Airline management has made the most of the system. In 2006 a federal bankruptcy court barred unions at regional carrier Mesaba Airlines from engaging in strikes or other job actions, prompting the company’s unions to agree to management’s wage-cutting demands. In 2008 a bankruptcy judge gave Frontier Airlines permission to cancel its collective bargaining agreement with the Teamsters, but that decision was later overruled in federal district court. The union, nonetheless, had to make contract concessions, as have workers at other carriers and in other industries.

It remains to be seen how far AMR will go in using the bankruptcy process against its unions. Yet there is little doubt that it will seek to slash labor costs, especially those relating to pensions. The head of the federal Pension Benefit Guaranty Corporation has already expressed concern that AMR might terminate its plans—the way United Air Lines did during its stint in Chapter 11.

This would put an enormous strain on the PBGC, which has already amassed a deficit of $26 billion and would have difficulty providing significant payments to the tens of thousands of people covered by AMR’s pension plans.

There is good reason for AMR’s unions to be concerned about management’s intentions. AMR’S crusade against labor began three decades ago, when Robert Crandall took control of the company in the early days of airline industry deregulation. Apparently inspired by Reagan’s crushing of the air controllers strike, he was determined to get workers to bear the financial consequences of increased competition.

In the early 1980s AMR was one of the country’s first major employers to adopt the pernicious practice of two-tier wages. Crandall pressured unionized pilots to accept a contract that cut the pay of new hires by a whopping 50 percent; for flight attendants the reduction was more than 30 percent, making many of them eligible for food stamps. The moves transferred $100 million a year from paychecks to company coffers.

AMR also pioneered the practice of high-tech offshore outsourcing in 1983 when it set up a subsidiary in Barbados called Caribbean Data Services. The company began air-shipping tons of used ticket coupons to the facility, where operators (mostly women) paid $1.75 to $3 an hour entered the information on computer terminals and then transmitted it via satellite to the airline’s accounting center in Tulsa, Oklahoma. By 1985 the operation was successful enough in cutting costs that American shut down its data-entry operation in Tulsa.

When unions began to challenge the two-tier system in the late 1980s, AMR sued them for supposed violations of federal labor law, fired activists and threatened to shut down the airline. Eventually, Crandall had to accept a softening of the two-tier arrangement, but he pursued a relentless campaign against labor costs which prompted a 1993 strike by flight attendants that ended only when President Clinton personally intervened. Four years later, Clinton intervened again when American’s pilots walked out to protest the company’s rigid bargaining position.

Crandall’s successor, Donald Carty, continued the company’s confrontational labor relations posture. In 2003 he used the threat of bankruptcy to wring $1.8 billion in annual concessions from AMR’s unions. While those negotiations were taking place, AMR management failed to mention that it was simultaneously offering lucrative retention bonuses and special pension protections to top executives at the company. When the plan came to light, the uproar was so intense that AMR’s board ousted Carty and—for a while—adopted a less aggressive posture toward the unions. With the bankruptcy filing, the company appears to be returning to its savage ways.

When Occupy protesters or others talk about income inequality, conservatives complain that this is class warfare. The real class war is that being waged by corporations against decent wages and benefits, using the bankruptcy courts as one of their most effective weapons.

What makes this all the more galling is that severe restrictions have been placed on the ability of struggling individuals—including young people overwhelmed by student loan debt—to use the bankruptcy system to gain relief. Here, as in so many other areas, corporate “persons” have been given the upper hand over real people.

A Rogues Gallery of the One Percent

For the past 30 years, Forbes magazine has used its annual list of the 400 richest Americans as a platform for celebrating the wealthy. This year, amid the persistent jobs crisis and the growing challenge posed by the Occupy movement, the Forbes list has to be viewed in a different light. Rather than a scorecard of success, it comes across as a rogues gallery of the 1 Percent who have hijacked the U.S. economy.

Start with the overall numbers. Combined, the 400 are worth an estimated $1.5 trillion, up 12 percent from the year before. This at a time when both the net worth and annual income of the typical American household have been sinking. When the first Forbes list was published in 1982 there were only about a dozen billionaires. Today, every single member of the 400 has a ten-figure fortune. Their average net worth is $3.8 billion.

And where did this wealth come from? Forbes tries to justify the skyrocketing assets of the 400 by saying that “an alltime-high 70% are self-made…This is the working elite.” New riches may indeed be better than inherited wealth, but how did this “elite” climb the ladder of success?

The question is all the more pertinent, given the current inclination of conservatives to refer to the wealthy as “job-creators” as a way of rebuffing efforts to get the plutocrats to pay their fair share of taxes.

How much job creation can be attributed to the Forbes 400? In a chart on Sources of Wealth, the magazine notes that the largest single “industry” is investments, accounting for the fortunes of 96 of the 400. By contrast, manufacturing, which is more labor intensive, is listed as the source for only 17 of the tycoons.

Within the investments category, about one-sixth of the people in the top 100 made their fortunes from hedge funds, private equity and leveraged buyouts—activities that are more likely to result in the destruction than the creation of jobs. For example, Sam Zell (net worth: $4.7 billion) was ruthless in laying off workers after his takeover of the Tribune newspaper company.

Forbes no doubt would respond by pointing to the 48 people on the list who got fabulously wealthy from the technology sector. Yet many of these companies create very few jobs: Facebook, which made Mark Zuckerberg worth $17.5 billion, has only about 2,000 employees. Or, like Apple, which gave the late Steve Jobs a $7 billion fortune, they create most of their jobs abroad in low-wage countries such as China rather than manufacturing their gadgets in the United States. The same is now true for Dell—source of Michael Dell’s $15 billion fortune—which has closed most of its U.S. assembly operations.

The few people on the list who are associated with large-scale job creation in the United States got rich from a company known for paying lousy wages and fighting unions. Christy Walton and her immediate family enjoy a net worth of more than $24 billion deriving from the notorious Wal-Mart retail empire (other Waltons are worth billions more). The Koch Brothers ($25 billion) are bankrolling the effort to weaken collective bargaining rights and thereby depress wage levels, while satellite TV pioneer Stanley Hubbard ($1.9 billion) has been an outspoken critic of labor unions and was an aggressive campaigner against the Employee Free Choice Act.

Poor job creation performance and anti-union animus are not the only sins of the 400 and their companies. Some of them have a checkered record when it comes to other aspects of accountability and good corporate behavior.

Start at the top of the list. Bill Gates, whose $59 billion net worth makes him the richest individual in the United States, is known today mainly for his philanthropic activities. Yet it was not long ago that Gates was viewed as a modern-day robber baron and Microsoft was being prosecuted by the European Commission, the U.S. Justice Department and some 20 states for anti-competitive practices. In the 1990s there were widespread calls for the company to be broken up, but Microsoft reached a controversial settlement with the Bush Administration that kept it largely intact.

Today it is Google, whose founders Sergey Brin and Larry Page are estimated by Forbes to be worth $16.7 billion, that is at the center of accusations of monopolistic practices.

Amazon.com, headed by Jeff Bezos ($19.1 billion), has fought against the efforts of a variety of state governments to get the online retailer to collect sales taxes from its customers. By failing to collect taxes on most transactions, Amazon gains an advantage over its brick-and-mortar competitors but deprives states of billions of dollars in badly needed revenue.

Cleaning products giant S.C. Johnson & Son, the source of the combined $11.5 billion fortune of the Johnson family, recently admitted that it has used aggressive tax avoidance practices to the extent that it pays no corporate income taxes at all in its home state of Wisconsin. Forbes ignores this issue, but instead describes in detail the criminal sexual molestation charges that have been filed against one member of the family.

And then there are the environmental offenders, such as Ira Rennert ($5.9 billion.) His Renco Group was for years one of the country’s biggest polluters, and the Peruvian lead smelter of his Doe Run operation is one of the most hazardous sites in the world.

This is only a small sampling of the transgressions of the 400 and their companies. Rather than being hailed as job creators, they should be made to answer for their job destruction, their tax avoidance, their anti-competitive practices, their environmental violations and much more. Rather than celebration, the Forbes 400 and the rest of the 1 Percent are in need of investigation.

Striking Back at Verizon

As the U.S. economy teeters, most politicians and mainstream analysts have nothing to offer but the usual counter-productive agenda of reduced public spending, corporate tax cuts and weakening of government regulation of business.

Some of the only helpful initiatives are coming from an institution that much of the American public has been taught to despise: labor unions, especially aggressive ones like the Communications Workers of America.

The strike recently launched by CWA and the International Brotherhood of Electrical Workers against telecom giant Verizon Communications has significance that goes far beyond the terms of their contract negotiations. It is one of the only arenas in which an effort is being made to shore up rather than erode the living standards of American workers—living standards that are supposed to be the backbone of an economy that we are constantly told is based on consumer spending. Also adding to the importance of the walkout is that it is targeting an employer that is emblematic of much that is wrong with corporate America today.

That starts with the evolution of the company. Verizon started out as Bell Atlantic, one of the regional operating companies, or Baby Bells, that resulted from the 1984 dismantling of the old AT&T monopoly. Taking apart Ma Bell was supposed to beget a new era of competition in the telephone business, but instead, some of the stronger Baby Bells focused on acquiring their rivals. Bell Atlantic took over NYNEX in 1997, and a few years later it bought the large non-Bell local phone company GTE. Seeking to downplay its origins, the combined corporation adopted the portmanteau name Verizon, a combination of “veritas,” the Latin word for truth, and “horizon.”

Verizon is now one of two firms that dominate traditional phone service in the United States. The other is the new AT&T, the name taken by the other voracious former Baby Bell, SBC Communications, in 2005. In the end, the dismantling of Ma Bell simply replaced a monopoly with a duopoly.

This concentration of ownership has carried over into the wireless realm, which in the U.S. is now largely controlled by subsidiaries of Verizon and AT&T (Verizon Wireless is a joint venture with Britain’s Vodafone, which owns 45 percent).

Verizon has compounded the negative effects of its bloated market share by fighting the extension of union rights to its wireless operation. From the end of the Second World War to its break-up, the Bell System was strongly unionized, and phone company jobs were among the most secure and best-paying blue-collar positions in the private sector. Things became more contentious after the creation of the Baby Bells—there were widespread strikes in 1989 over company attempts to curtail healthcare benefits—but workers in the core wireline business retained their union protections.

Workers at Verizon Wireless, on the other hand, have been struggling for the past decade to achieve such protections. The company has employed all the usual dirty tricks of union-busting, including surveillance, misinformation and intimidation of activists. As American Rights at Work noted in a 2007 report, Verizon also shut down call centers where organizing was taking place and moved the operations to states with anti-union “right-to-work” laws. The National Labor Relations Board found the company guilty of violating federal labor law for disciplining a worker for union organizing.

Rather than improving working conditions at Verizon Wireless, Verizon seems intent on lowering those in its wireline business. The current strike was prompted by management demands for a long list of major contract concessions concerning pensions, sick leave, healthcare and job security. Verizon also wants to tie wages more closely to individual job performance, an arrangement that is typical of non-union workplaces. CWA and IBEW are accurately charging the company with trying to undo half a century of advances in worker rights.

Verizon’s position should be seen as an assault not only on its 45,000 unionized employees but on the entire economy. If management gets its way, some people will find themselves transferring from Verizon’s payroll to the unemployment rolls, and those who remain would have less disposable income.

Its labor practices are not the only way Verizon harms the economy. As Citizens for Tax Justice points out, Verizon is among those large companies that find ways to avoid paying their fair share of taxes. For the past two years, its federal tax rate has been negative, meaning that it is getting rebates from the Treasury—totaling more than $1 billion—despite enjoying profits of more than $10 billion in each of those years.

Verizon also plays the tax avoidance game at the state and local level. For example, it has received tens of millions in subsidies in New Jersey, and last year it pressured authorities in New York to award it more than $500 million in property tax abatements and other tax breaks for a data center it was planning to build near Niagara Falls. This was on top of $96 million in electricity subsidies. The company cancelled the plan after a lawsuit was filed by a local resident.

In addition to mistreating workers and taxpayers, Verizon has apparently found time to cheat its customers. Last year, Verizon Wireless had to pay a record $25 million to settle Federal Communications Commission charges that it charged 15 million cell phone customers unauthorized fees. The company also agreed to provide $52 million in refunds.

A sign seen on a picket line reads: VERIZON IS KILLING MIDDLE CLASS AMERICA. If this strike is successful, it will send a strong message to all corporate assassins that U.S. workers will not roll over and die.

The Forgotten Legacy of the Excess Profits Tax

Behind all the ideological posturing going on in Washington over the debt ceiling, there is a surprising amount of consensus on the wrongheaded proposition that corporations need more tax relief.

The bipartisan Gang of Six plan that has recently been at the center of attention provides for the reduction of the statutory corporate tax rate from 35 percent down to as low as 23 percent. It also calls for moving to a “competitive territorial tax system,” which, as Citizens for Tax Justice points out, would make it even easier for companies to exploit offshore tax havens. A reported new plan being discussed by President Obama and Speaker Boehner as this is being written would probably include something similar.

Corporate domination of our political discourse makes it all but impossible for national leaders to suggest that large companies, which have been enjoying abundant profits while much of the country suffers from high unemployment and other forms of economic distress, should be paying more, not less to keep the USA afloat. Behind many of the protestations against special tax breaks for the oil industry and ethanol producers are agendas that call for lowering the statutory corporate rate for all companies.

It wasn’t always this way. The United States has a history, now largely forgotten, of imposing higher taxes on corporations during times of national emergencies. Excess profits taxes were imposed at various times to put a check on profiteering during wartime.

The first excess profits tax was enacted in 1917, less than a decade after the basic corporate income tax came into being. It remained in place through the World War I, and in 1919 President Wilson recommended that it be made part of the permanent tax system. Congress demurred, but the tax was not eliminated until 1921, well after the end of the war.

Interest in an excess profits tax was revived in the 1930s.The National Industrial Recovery Act of 1933 used a form of excess profits tax to prevent evasion of the declared-value capital stock tax. Later in the decade, as war seemed imminent, a broader based excess profits tax began to be discussed. In 1940 President Roosevelt, insisting that government should ensure that “a few do not gain from the sacrifices of many,” sent a message to Congress calling for a “steeply graduated excess-profits tax.”

There was little disagreement on the need for such a tax. The debate centered, instead, on how the levy would be calculated—especially the question of what base would be used to determine the excess. The tax remained in effect through 1945. Only five years later, Congress returned to an excess profits tax to help pay for the Korean War.

Writing in the Journal of Political Economy in 1951, economist George Lent wrote that the tax had “been accepted as an essential part of a broad system for the equitable distribution of the cost of defense.” Unfortunately, that acceptance turned out to be short-lived. The excess profits tax enacted in 1950 was terminated in 1953, and despite an ongoing Cold War and then large-scale intervention in Vietnam, corporations were no longer expected to shoulder a significant portion of U.S. military costs.

During the past decade the situation has grown even worse. Despite the existence of two expensive wars and a trend toward privatization of military functions that makes the conflicts extremely profitable to the private sector, no one talks of higher corporate taxes. On the contrary, the demand for lowering those taxes has been relentless.

The justification for excess profits taxation need not be linked only to military costs and the profits of Pentagon contractors. Today we are seeing excessiveness of another kind in relation to corporate profits. Most large companies are enjoying bloated bottom lines by refusing to return their workforce back to pre-recession levels. They can do this because unemployment is high, unions are weak and those with jobs find it difficult to resist demands for intensified workloads.

Along with the wars in Iraq and Afghanistan, there is a war at home—a war against workers that amounts to a form of profiteering. If the leaders of this country were not in thrall to corporations, we would be talking about an excess profits tax focused on employers that keep their staffing levels artificially low.

It could very well turn out that higher, not lower taxes are what would induce companies to begin hiring again. Those companies which resist would at least be helping reduce the national deficit rather than further enriching the investor class.