During the late 19th century and early 20th, a confluence of circumstances transformed the United States into an industrial giant. Among these circumstances were a private-property, profit-oriented economy with a vast, internal free market. Soft coal from West Virginia and iron ore from Minnesota were sent to Pittsburgh to make steel and – with the railroad grid that interconnected the so-called Midwest – automobile assembly plants were opened in Detroit, with suppliers of components dispersed throughout the region.
Just as natural resources were drawn into the region, so too was labor: immigrants from Europe and African-Americans from the South. A new technique of manufacturing enabled these laborers, mostly unskilled or semi-skilled workers, to produce complex products. Joined with others on assembly lines, an individual worker had only to “turn a wrench” to play his or her role in a series of operations that resulted, at the end of the line, in a car or a truck or, for that matter, a refrigerator or a radio.
At the beginning of the transformation of the Midwest into an industrial powerhouse, many of the skilled workers of the day were organized into trade unions, the most prominent of which was the American Federation of Labor. They differentiated themselves from the unskilled and semi-skilled laborers who worked on assembly lines. For these skilled workers, unions represented a level of quality that justified a higher wage. If you hired carpenters, masons, plumbers, electricians, and so forth, through the union, you could be reasonably certain that you would be supplied with well-trained and highly-disciplined workers. For that matter, the skilled workers opposed government-regulation of the labor market, as why would workers need unions if they got the benefits of unions from the government.
All this changed during the Great Depression. The industrial unions, the most prominent of which was the Congress of Industrial Organizations, gained certain monopoly-like advantages through the Wagner Act, and merged with the trade unions to form the AFL-CIO. Wages and benefits for workers in unionized companies rose to an average of something like 20 percent higher than comparable workers in non-unionized companies.
Even with this high cost of labor, the continued abundant supplies of soft coal and iron ore, the amazing productivity of the region, and the destruction of much of the industrial capacity outside the United States during WWII maintained the competitiveness of the region. During the 1950s and ’60s, it seemed that American industrial giants such as U.S. Steel, American Motors and Firestone, couldn’t help but make money. The Harvard University economist John Kenneth Galbraith, in The New Industrial State, said that large corporations controlled the market, instead of being controlled by the market.
Even as The New Industrial State was being published, the first chinks in the armor of this industrial system were being revealed. The American steel industry was losing its international competitiveness, and Japanese and German automobiles were entering the U.S. market. During the 1970′s and ’80s, many industrial plants were closed and some of the largest corporations went bankrupt or were forced into acquisition by other firms. The government made various attempts to help, such as by “rescuing” Chrysler, setting quotas and negotiating voluntary export restraints on automobiles, and periodically jacking up tariffs on steel. But, in the end, the economic forces proved to be relentless; and, the AFL-CIO has turned its attention to organizing government workers.