Taking the fire forward

May 12, 2014

Socialist Worker contributor Sharon Smith is the author of several books, including Subterranean Fire: A History of Working-Class Radicalism in the United States. She has written a new introduction for a forthcoming Spanish edition, which expands on the history through the last decade. It appears here in English, with the permission of the publisher.

I FINISHED writing the English edition of Subterranean Fire: A History of Working-Class Radicalism in the United States in early 2006. Back then, George W. Bush was still president, and Barack Obama was just a U.S. senator with presidential ambitions. The U.S. economy was booming, thanks to a feeding frenzy engineered by Wall Street bankers gambling with other people's money.

The year 2006 also brought a rise in struggle, as a new immigrants' rights movement drew hundreds of thousands of immigrants and their supporters onto the streets in more than 100 cities on April 10. Those numbers grew into the millions on May Day--marking the first time in six decades that International Workers Day was celebrated on U.S. soil with mass working-class demonstrations.

Movement organizers had called on migrant workers to "boycott" their jobs on May Day, naming the protest "A Day Without Immigrants," thereby tying workers' ability to withhold their labor to this struggle for civil rights. Millions of immigrant workers responded to this call, often shutting down entire workplaces to take part in mass May Day demonstrations in cities, large and small, across the country. In so doing, these workers demonstrated the potential to finally begin to reverse decades of working-class retreat and setback.

Above: Memphis sanitation workers strike in 1968; below: Chicago teachers strike in 2012

But the immigrants' rights movement was stopped in its tracks--first by congressional Democrats who played both sides of the immigration debate and ultimately did nothing. Second, the financial bubble began to burst in 2007, as it was destined to do. By 2008, the U.S. economy was enmeshed in its worst economic crisis since the Great Depression of the 1930s.

In the 1990s, Wall Street investment firms had begun orchestrating get-rich-quick schemes based on a model of betting using the odds of Russian Roulette, in which managers offered investors opportunities to make fast money in new high-risk transactions--through hedge funds, Structured Investment Vehicles (SIVs) and other "innovative" derivative instruments such as Collateralized Debt Obligations (CDOs).

In the 2000s, managers added yet another high-risk formula to this bag of tricks: predatory lending via sub-prime mortgages. Sub-prime mortgages targeted low-income families who did not otherwise qualify, dangling the promise of low "teaser" interest rates that later rose sharply and added more fees. Many working-class families took out second or third mortgages on their homes during this time simply to pay their bills in the face of falling incomes.

Bankers carved up these mortgages and rushed them into investments that changed hands before the ink was dry, bundling the debts and passing them on in a global game of "hot potato." In so doing, they passed on risks to the entire international banking system, while feeding an unsustainable real estate bubble. The sub-prime formula worked only as long as housing prices kept rising. But when the real estate bubble burst in 2007 and housing prices collapsed, an estimated 2.5 million homes, the vast majority of them owner-occupied with mortgages acquired between 2005 and 2008, were lost to foreclosure.[1] By the end of 2008, one in every nine U.S. homeowners was either in arrears on monthly payments or already in some stage of foreclosure.

Wall Street's many investment schemes had operated free of government regulation or oversight, in a shadow banking system operating in virtual secrecy, based on mathematical models investors could not possibly understand and leveraged by borrowed money many times the equity invested--at terms always skewed in favor of short-term gains for fund managers.

The wheels for this financial perfect storm were set in motion many years before the sub-prime mortgage crisis hit. As one of his last acts as president in December 2000, Bill Clinton signed into law the Commodity Futures Modernization Act, which formally deregulated companies sponsoring derivatives schemes. The legislation was sponsored by Texas Republican Phil Gramm, later to become vice chairman of the Swiss investment firm UBS. This legislation repealed the Glass-Steagall Act of 1933--the New Deal legislation requiring the separation of investment and commercial banks--and single-handedly enabled banks to run the unaccountable shadow banking system at the center of the 2008 financial crisis.

As Financial Times columnist Martin Wolf noted, "With the 'right' fee structure, mediocre investment managers may become rich as they ensure that their investors cease to remain so." Wolf added, such vehicles are "bound to attract the unscrupulous and unskilled, just as such people are attracted to dealing in used cars..."[2]

The Great Recession

On March 13, 2008, the Carlyle Capital Corporation hedge fund collapsed with debts amounting to 32 times its capital. The significance of Carlyle's demise was overshadowed by the collapse of Bear Stearns, one of Wall Street's five largest investment banks, on March 19--when its high-flying management team informed its stunned investors that it had lost $17 billion of wealth five days earlier. The Federal Reserve stepped in to rescue Bear by obtaining emergency funding allowing commercial titan JPMorgan to take over Bear, the first time the Fed had engineered such a rescue since the 1930s.

Two of Bear Stearns' hedge funds went under due to disintegrating sub-prime mortgage holdings. But as the subsequent string of Wall Street crises exposed, the shadow banking system increasingly intersected with commercial banks. It was difficult to know where one ended and the other began, since banks were allowed to keep such investment vehicles off their balance sheets--legally.

The Bear Sterns debacle was just the first market convulsion in a succession of bank and corporate failures that brought Wall Street to the brink of collapse in 2008, infecting the entire global financial system. The list of insolvencies included Wall Street giants Lehman Brothers and Merrill Lynch; Wachovia, the largest savings and loan in the U.S.; Washington Mutual, the fourth-largest bank; and AIG, the world's largest insurer.

The federal government responded with lightning speed, arguing that the banks were "too big to fail." The Federal Reserve invoked emergency authority and, along with the Treasury Department, launched a $700 billion corporate bailout swiftly passed by Congress in October 2008--paid for with taxpayer dollars. That figure ballooned into the trillions over the next years as the list of corporations lining up for handouts, including the automakers General Motors, Ford and Chrysler, grew exponentially.

As it turned out, much of the bailout money went toward financially solvent investment firms. The $182 billion bailout of AIG, for example, went not only to AIG but also to its debtors--Goldman Sachs, Morgan Stanley, Bank of America and Merrill Lynch (not to mention AIG's European trading partners) to cover AIG's bad debts.

Goldman, which reported 2.32 billion earnings in 2008, received 100 cents on the dollar for its CDOs. Although AIG had intended to offer only 60 cents on the dollar, reflecting market value, New York Fed president Timothy Geithner (soon to become Treasury Secretary under Barack Obama) overruled AIG's decision for unstated reasons.[3] As Bloomberg reported, "The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG."[4]

Most media commentators at the time praised the federal government for avoiding another Great Depression through its massive bailout, despite its enormous burden to taxpayers. But the financial crisis also provided a rare glimpse at the private club of government and corporate cronies who together run the financial system from behind closed doors. All its members are culpable in the financial meltdown of 2008.

To be sure, the banks conned their clients in a manner befitting a Mafia family. But the government institutions empowered to police them were all too happy to look the other way until the deals went sour--en masse. Even three decades of deregulation legislation had not entirely removed Wall Street oversight. Between them, the Security and Exchange Commission (SEC), the Treasury Department and the Federal Reserve surely could have taken action against the bankers while the good times were still rolling.

The SEC was not simply asleep at the wheel while the financial system careened toward disaster. In 2004, it had designed a special program, known as the "consolidated supervised entities" program, which enabled the reckless borrowing that later caused the banking crisis. The special program was created, according to the New York Times, "after heavy lobbying for the plan from all five big investment banks. At the time, Mr. Paulson was the head of Goldman Sachs. He left two years later to become the Treasury Secretary."[5]

The same five investment banks--Goldman, Morgan Stanley, Bear Stearns, Lehman and Merrill Lynch--immediately "volunteered" to enroll in the new SEC program that was created at their behest. Through this special program, the SEC allowed these Wall Street giants to vastly increase their amount of debt. SEC rules had long required banks to hold roughly $1 of equity for every $15 of debt, or a 15-1 debt-to-net-capital ratio. The new program lifted these limits. As journalist Ben Protess reported, "Merrill Lynch's leverage ratio was possibly as high as 40-to-1 [in 2008], and Lehman Brothers faced a ratio of about 30-to-1, according to Bloomberg."[6]

In return for this cash cow, the banking behemoths agreed to allow the SEC to regulate their holding companies. But this also was at the banks' request. Voluntarily submitting to SEC oversight would allow their overseas operations to avoid European Union regulators. They preferred the SEC for reasons that later became obvious: Their backslapping pals at the SEC provided virtually no regulatory supervision.

By the time the SEC dissolved the program on September 26, 2008, none of the five investment banks remained as such, although their trail of poison was still working its way through the global financial system.

The Goldman Sachs brass had long enjoyed an especially cordial relationship with government regulatory agencies. Goldman executives have transitioned habitually to employment at the U.S. Treasury Department--as did Bill Clinton's Treasury Secretary Robert Rubin, along with George W. Bush's Treasury Secretary Henry Paulson. The line between banks and their overseers has become so blurred because watchdog agencies actively recruit from big banks and vice versa, in a revolving door of golfing partners. And Paulsen's Treasury Department collaborated with Goldman apparently more than any other Wall Street firm during the 2008 financial collapse.

Upon taking office in June 2006, Paulson ruled out any official contact with Goldman to avoid a conflict of interest with his former employer. But just over two years later, he requested and received an "ethics waiver" voiding that pledge. That was on September 17, 2008, just one day after the government agreed to come up with its initial $85 billion for insurance giant AIG to pay off its substantial debts to Goldman and other big banks.

Goldman was the largest recipient of the payoff. According to the New York Times, during the week of the AIG bailout, Paulson spoke to Goldman CEO Lloyd Blankfein "two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives."[7] At the end of that tumultuous week, the Federal Reserve rushed through emergency requests by Goldman and Morgan Stanley to change their status from investment banks to traditional bank holding companies--with the flick of a pen bypassing the legal five-day antitrust waiting period.

That deal was struck over a single weekend, and Goldman and Morgan Stanley emerged on Monday morning as entirely new entities--a signal from the Fed that it would not allow these two firms to fail. Interestingly, their new status switched their holding companies from SEC to Federal Reserve supervision.

In a note of bitter irony, during the 2010 congressional hearings investigating the financial crisis, Bernanke (by then Obama's Treasury Secretary) refuted proposals to cap the proposed payout to failed executives taking advantage of the federal bailout as unnecessarily "punitive."[8] Perhaps more importantly, no politician suggested that Corporate America be barred from policing itself.

Just weeks before Merrill Lynch passed into Bank of America's hands on January 1, 2009, it paid out $3.6 billion in bonuses--its four top executives alone shared $121 million in cash and stocks--while the company posted a loss of $27 billion for 2008. The bonuses were given about a month ahead of Merrill's normal schedule, without explanation.[9]

The federal government's ability to bail out the nation's most corrupt capitalists appeared inexhaustible, yet little was on offer for those who work for a living. Wall Street insiders fed at a bottomless trough that was funded by the millions of workers facing mass unemployment, wage and health insurance cuts, and home foreclosures. Yet no relief was forthcoming from the same government powerbrokers so eager to aid their banking brethren who had caused the financial crisis. Even the Wall Street Journal observed this glaring discrepancy, commenting, "Why a 'bailout' for Wall Street, and none for homeowners?"[10]

The credibility of the entire financial system was in shambles, yet corporate executives remained remarkably insulated from the working-class anger they had provoked. When the clueless CEOs from the "Big Three" auto companies, General Motors, Chrysler and Ford, flew from Detroit to Washington, D.C. in November 2008 to plea for $2.5 billion in bailout money, each traveled in his own luxurious private jet.[11]

Just days after its initial $85 billion bailout, AIG executives treated themselves to a luxury resort, costing $440,000. Two weeks later, the company's top brass jetted off to England for a weekend of fox hunting, with a price tag of $85,000. At year's end, after receiving a total of $182 billion in bailout money (and posting a $40.5 billion loss for 2008), AIG awarded its top 73 executives bonuses totaling $165 million.[12]

President Barack Obama

Barack Obama ran for president as the U.S. economy was spiraling downward, and he reaped the political gains, since most people blamed both Wall Street and Republican George W. Bush's administration for the financial meltdown. Obama was all but assured victory in the 2008 presidential election as he told throngs of cheering supporters across the country that he represented "change you can believe in" and encouraged crowds to chant "Yes, we can!" borrowing directly from the immigrants' rights slogan "¡Si, se puede!" In so doing, Obama raised expectations and energized the U.S. population on a scale not experienced in decades.

Thus, Obama's election brought widespread optimism among millions of people: Not only was the despised Bush finally leaving the White House, but he was also being replaced by the first African-American president in history. At long last, a democratic majority elected an African-American to the U.S. presidency in a country built upon slavery.

Obama's election was partly due to the U.S.'s changing demographics, in which the combined votes of Black Americans along with Latino, Arab, Muslim and other racially oppressed populations helped to shift the electoral terrain. But Obama's victory was only possible, even decisive, because 43 percent of white voters cast a vote for him. A higher percentage of white men voted for Obama than for Bill Clinton in the 1990s.

A 2007 Gallup poll showed 94 percent of respondents saying they would vote for a Black presidential candidate, while 88 percent indicated they would vote for a woman. A 2008 Newsweek poll showed roughly 70 percent of voters agreeing that the country is ready for a Black man to serve as president, up from just 37 percent in the 2000 election.[13]

The weeks following Obama's election in November 2008 witnessed two important struggles--one, a rising LGBT movement and the other, a factory occupation--each providing a glimpse of how widespread anger at the political and class status quo can transform into struggle.

Thousands of LGBT activists took to the streets in California the day after the 2008 election, when voters narrowly passed a ban on same-sex marriage. The ban overruled a California Supreme Court decision that had legalized same-sex marriage just months earlier. Some 18,000 California couples had already been married when the ban was passed, spurring a spontaneous outpouring of anger that this hard-fought victory could be taken away.

In Los Angeles, outraged activists marched through city streets, blocking traffic and sparring with police, inspiring activists across the country to demonstrate their support. That support jelled into a nationwide movement that culminated in a march on Washington, D.C. the following year, drawing hundreds of thousands of equal marriage supporters.

Like the immigrants' rights movement, the struggle for same-sex marriage synthesized a fight for civil rights with a working-class demand. Without the right to legally sanctioned marriage, LGBT couples are denied not only essential financial rights but also basic human rights--including the right to be with their partners at their deathbeds--afforded to heterosexual couples.

The weeks after Obama's election also witnessed an eruption of class struggle at the point of production, when workers at the Republic Windows and Doors factory in Chicago occupied their workplace--a tactic used so successfully in the 1930s. With just three days' notice, the 250 workers learned that they would lose their jobs so that their financially insolvent employer could shut down their union plant to open up a non-union plant in Iowa. The company had violated the few remaining workers' rights in U.S. labor law, yet claimed that it had no choice because Bank of America, its main creditor, refused to make any more loans to the company.

The Republic Windows and Doors workers, members of United Electrical, Radio and Machine Workers of America (UE) refused to leave the plant on its last day of operation, December 5, vowing to stay inside until they were given the $1.5 million in severance and vacation pay owed to them by management. News of the occupation spread quickly, electrifying both labor and immigrants' rights activists who rushed to Republic Windows and Doors to provide support for the largely Black and Latino workforce.

Facing bitter winter weather, the union and thousands of its supporters from Chicago and around the Midwest immediately began organizing deliveries of food and blankets to the workers, who faced frigid conditions inside the plant--while organizing fundraising and labor rallies outside the plant. Carrying signs such as "Bank of America got bailed out, we got sold out!" workers and supporters also rallied outside the bank, demanding that it cough up the money to pay the company's debts to its workers.

On December 10, the bank and other lenders agreed to fund about $2 million in severance and vacation pay as well as health insurance. The workers then voted unanimously to end their six-day occupation, in victory. With 600,000 manufacturing jobs lost in the recession the previous year, support for the Republic Windows and Doors workers was widespread among the broader population. Even President-elect Obama felt compelled to voice support the occupation. When asked about it at a news conference, he replied, "The workers are asking for the benefits and payments that they have earned," adding, "I think they're absolutely right and understand that what's happening to them is reflective of what's happening across this economy."[14]

Promises Made, Promises Broken

Obama made many promises on the campaign trail. He pledged to close down the infamous Guantanamo Bay detention camp. He promised to pass a Freedom of Choice Act, guaranteeing women the right to legal abortion. He said he would pass the Employee Free Choice Act, allowing workers to unionize simply by signing union cards--thereby avoiding employer intimidation during union elections.

Once in office, however, Obama kept none of these promises. He had benefited handsomely from Wall Street donations in his election campaign, and he returned the favor. Obama's approach to the banking crisis was even more generous to the bankers than Bush's, effectively handing Wall Street a blank check. Even when its bailouts gave the government controlling shares in company stocks--at insurer AIG and Citibank, for example--the Obama administration did not take control but left managers in charge.

Five years later, it is clear that the 2008 financial meltdown precipitated a long-term crisis of global capital that continues today. It is equally clear that Obama has done next-to-nothing for workers, despite the accelerating decline of working-class living standards, even in the recession's recovery phase. America's first Black president has also been notably silent about the ever-worsening conditions, including a sharp rise in racism and police brutality, facing the vast majority of the Black population.

Indeed, five years after the Wall Street meltdown, the statistics are grimmer for workers than when it began. Union membership sank to a 97-year low in 2012, with the percentage of workers in unions falling to just 11.3 percent, while private sector unionization fell to 6.6 percent. In Wisconsin and Indiana, where Republican-dominated state legislatures decimated the collective bargaining rights of public sector workers, union membership dropped by 18 percent in Indiana and 13 percent in Wisconsin from a year earlier.[15]

The gap between the rich and poor likewise has reached levels not seen in a century, with the percentage of income going to the top 10 percent of the U.S. population now exceeding that of the bottom 90 percent. As Berkeley economist Emmanuel Saez observed, "[T]he top decile share in 2012 is equal to 50.4 percent, a level higher than any other year since 1917 and even surpasses 1928, the peak of stock market bubble in the 'roaring' 1920s."[16]

Journalist Caroline Fairchild summarized, "Income of the top 5 percent of Americans rose last year, while median household income fell, keeping inequality at a record high, according to Census Bureau data."[17] The top one percent has fared even better. Between the economic recovery between 2009 and 2012 the incomes of the top one percent of the U.S. population soared by more than 31 percent, compared with 0.4 percent for the bottom 99 percent of the population.[18]

The ranks of the poor have expanded beneath the corporate class's surge in wealth, with rates of long-term unemployment, poverty and hunger accelerating since 2008. In 2011, the U.S. Census Bureau measured the official poverty rate at 15 percent of the overall population. The same survey showed that four in ten U.S. adults find themselves living in poverty for at least one year of their lives.

But this official estimate underestimates the scale of deprivation in the U.S. today. A more comprehensive study, which issued its results in 2013, showed that eight in ten U.S. adults face "economic insecurity," for at least parts of their lives by the time they reach age 60. Economic insecurity is defined as "a year or more of periodic joblessness, reliance on government aid such as food stamps or income below 150 percent of the poverty line."[19]

According to the report, to be published by Oxford University Press in 2014, racial disparities in the rate of economic insecurity have closed significantly over the last three decades. The study showed that while the rate of economic insecurity described above afflicts Blacks and other racially oppressed groups at the astronomical rate of 90 percent, the white population is affected at a rate of 76 percent by the time they reach age 60. Roughly half of all children in the U.S. live for some period of time in a household that relies on food stamps to eat.[20] Census data for the last several decades have shown that about two-thirds of those living in poverty describe themselves as white.[21]

As social welfare scholar Mark R. Rank described, "The typical pattern is for an individual to experience poverty for a year or two, get above the poverty line for an extended period of time, and then perhaps encounter another spell at some later point. Events like losing a job, having work hours cut back, experiencing a family split or developing a serious medical problem all have the potential to throw households into poverty."[22]

High rates of unemployment combined with the prevalence of part-time, low-wage jobs and a shredded social safety net have greatly contributed to the economic distress of working-class families in recent years. The rate of joblessness in 2012 stood at more than 21 percent among those earning less than $20,000, roughly the rate experienced during the Great Depression. But this statistic downplays the affect of the jobs crisis since 2008, which four years later left 40 percent of workers in households making less than $20,000 a year either unemployed, underemployed (working part-time while seeking full-time jobs) or among the millions of long-term unemployed who are too discouraged to actively seeking work.[23]

The foreclosure crisis left entire working-class neighborhoods peppered with repossessed homes, standing empty. Yet as the Financial Times observed, "[R]emarkably, bankruptcy laws currently provide that almost every form of property (including business property, vacation homes and those owned for rental) except an individual's principal residence cannot be repossessed if an individual has a suitable court-approved bankruptcy plan."[24]

Racism is a defining feature of U.S. capitalism, and even in the best of economic times Black unemployment is twice the rate of whites. This simple fact guarantees that in any economic crisis, Black communities will suffer by far the most, and the most recent crisis has followed this familiar pattern, leaving fully 48.4 percent of Black workers in households earning less than $20,000 under- or unemployed. It must be understood that, because of housing segregation, entire Black communities face this rate of poverty and unemployment, amounting to economic devastation. The rate for low-income Latinos was 38 percent, and for low-income whites, 36.8 percent.[25]

Between the beginning of 2007 and the end of 2009, lenders foreclosed on about 2.5 million homes. Roughly 8 percent of African American and 8 percent of Latino homeowners--compared with 4.5 percent of whites--lost their homes to foreclosure during this period.[26]

The expansion of financial distress among the broader working-class population thus does not diminish the much deeper and persistent poverty experienced by Blacks, Latinos and other racially oppressed populations. It does, however, show that white workers have reaped no gains from it. On the contrary, white workers have found their own living standards deteriorating along with rising class inequality.[27]

With its stated aim to remain "globally competitive," the U.S. corporate class has deliberately driven down the wages of U.S. workers, including those in the once higher-paid manufacturing sector--even as productivity has risen sharply.

Indeed, there has recently been a trend of "reindustrialization"--the return of manufacturing jobs to U.S. soil. One of the key factors in this new investment is declining labor costs in the U.S., according to a 2013 report from the Euler Hermes Economic Research Department--which notes the "tightening gap between Chinese and American wages," and "lower labor costs, especially in the [U.S.] Southern states."[28]

The report noted in particular the rising level of investment by foreign auto companies into the non-union South:

Foreign automakers have taken advantage of this situation and moved production to the U.S. South where they could avoid elevated union wages and high legacy costs. Their lower costs, in turn, make the total cost of manufacturing cars in the South lower than manufacturing overseas and shipping to the U.S. In addition to the Big Three, the U.S. auto industry now has a second concentration in the seven Southern states of Alabama, Georgia, Kentucky, Mississippi, South Carolina, Tennessee, and Texas.[29]

Thus, union workers from the traditional centers of auto production in the Midwest have been forced to compete with non-union autoworkers in the U.S. South, driving down the wages of autoworkers in the Midwest. The United Auto Workers (UAW) has responded not by fighting but by acquiescing. In 2007, the UAW agreed for the first time to accept a permanent scale of two-tier wages, allowing newly hired non-assembly line workers to be paid just $14-$16 per hour--roughly half the wage paid to longer-standing workers.[30]

The vast majority of jobs created in recent decades have been in the low-wage service sector. But even low-wage job creation since the 2008 recession has not kept pace with the numbers of workers seeking jobs, creating a "domino effect" in which formerly middle-income workers are forced to take low-income jobs, displacing lower-income workers and pressuring median income downward while increasing the rate of long-term unemployment and poverty. Both the age and educational attainment of low-wage workers has risen--with a distinct rise in those who have attended college.

Uprising in Madison

The year 2011 began on a very promising note the world over. A mass uprising in Tunisia had toppled its brutal dictator the previous month, and the struggle quickly spread to Egypt and beyond, launching what soon became known as the Arab Spring. The victorious revolution in Egypt, deposing despised dictator Hosni Mubarak in just a few short weeks, elated activists around the world--stirring hopes among workers as far away as Madison, Wisconsin.

On February 11, 2011, Wisconsin Governor Scott Walker introduced a so-called "budget repair bill," which was a frontal assault on public sector workers. Walker enjoyed the support of the right-wing "Tea Party" movement--with significant backing from Charles and David Koch, two brothers who together own Koch Industries, with estimated annual revenues of one hundred billion dollars.

Besides gutting wages and healthcare benefits, Walker's bill laid waste to public sector unions' collective bargaining rights. Perhaps the most devastating part of the bill was its requirement that public sector unions hold annual elections in order to be "recertified" as the bargaining agents for their members the following year.

As tens of thousands of union members and supporters poured into the streets surrounding the Wisconsin's state capitol in Madison, the inspiration of the Egyptian Revolution was clear in the signs they carried--including "This Is Our Tahrir Square" and "Treat Us Like Egyptians"--while waving placards with photos and Walker and Mubarak side-by-side. Days later, thousands of protesters, including entire working-class families, occupied the three floors on the interior of the capitol building, hanging banners and chanting slogans such as "Tell me what does democracy look like? THIS is what democracy looks like!" and "What's disgusting? Union busting!"

Egyptian revolutionaries soon began expressing solidarity with Wisconsin workers. When a local pizza store announced it would begin only taking orders for delivery to the protesters, pizzas began arriving from Tahrir Square. One Egyptian protester, Muhammad Saladin Nusair, posted a photo of himself on Facebook standing in Tahrir Square holding a sign that read "Egypt Supports Wisconsin Workers--One World, One Pain."[31]

The struggle to "Kill the Bill" in Wisconsin marked a turning point in recent U.S. labor history, when the one-sided class war produced significant resistance from below. Madison teachers, while legally prevented from going on strike, staged a mass "sickout" and joined the protests at the Capitol. So great was the firestorm of struggle that enveloped Madison in those weeks that 14 Wisconsin senate Democrats fled the state on February 17 to prevent the quorum necessary for a vote on the bill, while protesters began occupying the senate chambers.

Days later, the Madison-based South Central Federation of Labor, representing 100 unions, passed resolutions raising the possibility of a general strike if Walker's bill passed, reading in part: "The SCFL endorses a general strike, possibly for the day Walker signs his 'budget repair bill,' and requests the education committee (of the SCFL) immediately begin educating affiliates and members on the organization and function of a general strike."[32]

The raised stakes in the Wisconsin battle quickly led to a showdown that would impact the balance of class forces for the foreseeable future, and Governor Scott Walker and his Republican cronies were determined to win. They passed the bill by using a procedural ploy on March 10, in a resounding defeat for Wisconsin's working class.

Yet no general strike call came from the labor federation. Two days later, the 14 Democrats who had fled the state received a hero's welcome from a crowd of 70,000 gathered at the capitol. But the politicians used their hero status to urge the protesters to accept defeat, telling reporters "They won the battle; we're going to win the war," while promising to soon move to "phase two" of the fight.[33]

Phase two turned out to be an electoral campaign to recall the Republican Walker from office and replace him with a governor from the Democratic Party. Union activists enthusiastically gathered 900,000 signatures to initiate the recall election. But a mood of intense demoralization set in soon thereafter, as public sector workers were forced to absorb the effects of the legislation stripping them of bargaining rights.

More than a year later, on June 5, 2012, Scott Walker was easily re-elected governor of Wisconsin, as Republicans cheered. Significantly, the Democratic Party machine allowed the war on Wisconsin workers to unfold without comment. Even the possibility of replacing Walker with a Democrat did not gain support from federal Democrats.

Apparently, they did not support a Democratic electoral gain if it also scored a victory for the Wisconsin labor movement. Indeed, Obama said and did nothing to support Wisconsin's public sector workers--even as the state legislatures of Ohio, Indiana and Michigan followed Walker's example and pushed through legislation crippling unions in these once densely unionized manufacturing states.

Occupy Wall Street

The rise of Occupy Wall Street that same year was also inspired by the Egyptian revolution. On July 13, 2011, the Canadian anti-consumerist Adbusters Foundation posted the following call on its site, using the hash tag #OCCUPYWALLSTREET: "Are you ready for a Tahrir moment? / On Sept 17th flood into lower Manhattan, set up tents, kitchens, peaceful barricades and occupy Wall Street."[34]

At the time, there wasn't any particular reason to expect Occupy Wall Street to create a transforming moment in U.S. politics. Adbusters had posted numerous calls for protests before in its 20-year history, and none had received a mass response.

Occupy Wall Street started small. On September 17, a group of dedicated activists staked their tents at Zuccotti Park, located in the heart of New York's financial district, and fewer than 1,000 turned out for its first protest on Wall Street. But the protesters' message, "The 99 % vs. the 1%," soon struck a chord with the many millions of people still reeling from the Great Recession and the colossal hypocrisy of the 2008-2009 bank bailouts.

As the mainstream media began covering the story, the protesters spoke about the foreclosure crisis, skyrocketing student debt, graduating from college with no jobs on offer, and low paying jobs that left young people with no future. Soon, thousands of working-class and student New Yorkers were visiting Zuccotti Park on a daily basis while many became involved in its daily "general assemblies," open air meetings to decide next steps, which grew in size to 1,000 or more on any given evening.

Occupy Wall Street reached out to local unions, and gained the support of the Transit Workers and other major New York City unions. This support proved crucial in the weeks that followed. After police arrested 700 peaceful protesters on the Brooklyn Bridge in October, a coalition of union and community groups organized a demonstration of more than 20,000 in downtown Manhattan.

On October 13, New York City Mayor Michael Bloomberg announced plans to evict the Occupiers from Zuccotti Park at 7 o'clock the next morning for "sanitation" reasons. As soon as they were alerted, thousands of activists began mobilizing--gaining 300,000 signatures on a petition against eviction. In the middle of the night, New York City unions called out their members, and students and workers who supported the movement's goals flooded the park to physically defend the encampment from police.

The following morning, Bloomberg announced that the city's eviction had been called off, injecting a strong dose of confidence to the movement. The next day, an estimated 100,000 jubilant Occupy supporters demonstrated in Times Square.

Occupy protests had quickly spread across the country, many with their own encampments and a few, including Occupy Wall Street, Occupy Chicago and Occupy Oakland, with their own newspapers. Occupy Wall Street named its encampment Liberty Plaza, while Oakland named its Oscar Grant Plaza, in tribute to an unarmed young Black man who had been brutally executed by Bay Area Rapid Transit police. Following the New York model, each Occupy protest had its own general assembly where decisions got made, usually by consensus--in a rough-and-tumble experiment with direct democracy.

Altogether, Occupy protests drew many thousands of activists into the struggle across the country, including substantial numbers who had become radicalized through disillusionment with Obama. That radicalization deepened as police repeatedly assaulted peaceful protesters and engaged in mass arrests to quell protests.

The first major attack in New York City came on September 24, less than a week after the occupation began. A video posted online showed police squirting pepper spray at a group of women protesters--after they were already trapped in orange police netting. Incident after incident of police brutality made its appearance online, so activists across the country could offer support and organize solidarity protests with each other.

On October 25, cops from a dozen police forces in the Oakland area moved in before dawn to evict the Occupy Oakland encampment, using tear gas, beanbag rounds and rubber bullets to awaken protesters as they slept. Later that day, as 1,000 Occupiers marched to protest the eviction, police again attacked them using teargas and rubber bullets, leading to numerous injuries. A 34-year-old Iraq War veteran was so badly injured that he suffered a life threatening lacerated spleen. The protesters used the media outrage at police brutality to successfully re-occupy the plaza the following day, without police interference.

Thus, both Occupy Wall Street and Occupy Oakland had managed to thwart police attempts to evict them, humiliating city administrators while fueling confidence among Occupiers across the country. In November, the Obama administration moved in via its Department of Homeland Security (DHS) to coordinate a national campaign to defeat Occupy forcibly.

As progressive journalist Dave Lindorff described, the DHS used its various agencies to organize "a series of multi-city law enforcement calls to coordinate the police response to Occupy, which led immediately to the wave of violent crackdowns. It was at those meetings that police were advised among other things to act at night, to use aggressive tactics and weapons like tasers and pepper spray, and to take steps to remove journalists and cameras from the scene of crackdowns."[35]

The result was the successful eviction of protesters, using the methods of police repression described above, in New York City, Denver, Portland, Oregon, Salt Lake City and Oakland--in the four-days between November 12-15, with the aim of shutting down the movement nationwide.

After the evictions, Occupy Wall Street protesters issued the following statement: "Some politicians may physically remove us from public spaces--our spaces," adding, "You cannot evict an idea whose time has come." The Occupy movement did not recover--but its ideas live on.

Chicago Teachers Point the Way Forward

In September 2012, the 26,000 members of the Chicago Teachers Union (CTU) went on strike for nine days. This was the first strike in 25 years for the CTU, the nation's third largest teachers union--and it was called in the midst of the massive assault that had already stripped bargaining rights from public sector workers in Wisconsin and throughout the Midwest.

The CTU leadership had been elected as a reform slate from the Coalition of Rank and File Educators (CORE), a caucus of progressive teachers, including a small but significant number of socialists, committed to fighting the privatization of public schools and to democratizing the union from below.

This group of reformers had formed fairly recently, in 2008. But two years after winning the union leadership, they led a strike against Chicago mayor Rahm Emanuel--a cold-blooded champion of school privatization who made no secret of his plan to fight the union tooth and nail. Emanuel had left his job as chief of staff in Obama's White House to run for mayor of Chicago in 2011, with the aim of showcasing his ability to run a major urban city in order to further his long-term political ambitions.

Emanuel's program for education "reform" included a plan to first close public schools en masse, on the grounds that they were "failing children." The second part of the plan involved replacing them with for-profit and non-union "charter" schools, along with competitive "magnet" schools that choose their students through lotteries or scholastic requirements.

The schools targeted for closure were almost exclusively located in working-class Black and Latino neighborhoods, while new magnet schools catered primarily to "high achieving" (disproportionately white and middle class) students. New charter schools often took over the public school buildings they replaced.

Wealthy Chicagoans, including Mayor Emanuel, sent their children to expensive private schools.

Upon taking office, Emanuel immediately set his sights on preventing a teachers' strike, successfully convincing state lawmakers to pass a law requiring 75 percent of all union members (not just voting members) to authorize a strike. Emanuel thought the CTU would never be able to meet this preposterous threshold, thereby preempting even the possibility of a teachers' strike in the foreseeable future. Meanwhile, Emanuel floated his intention to impose merit pay on teachers, which would base teachers' wage increases on how well their students perform on standardized tests.

The future looked grim for the CTU in the spring of 2012, when it became clear that Emanuel was preparing to close an unprecedented number of schools. Rumors began circulating that the number of schools destined for closure could be as high as 120 out of the 600 in total.[36]

Although CORE members were inexperienced as union leaders, these activists already had plenty of experience at grassroots organizing in Chicago, forging links between teachers, parents and community organizations while fighting together against the (unelected) Chicago Board of Education's relentless assault on so-called "underperforming" schools. These included not only school closures but also "turnarounds"--firing the entire school staff while blaming teachers for the school's problems. These attacks made teachers threatened with job losses the natural allies of the parents and students whose schools were facing the possibility of closure and turnaround.

As Robert Barlett described in Monthly Review:

People who wanted to fight back against the encroaching privatization began to be attracted to CORE, which started a series of audacious actions against school closings. When a school was targeted for closing or turnaround, CORE members went to the school and met the teachers and parents who wanted to fight the closings and did whatever they could to help build a resistance in that community. This ranged from leafleting at the school to camping out overnight in front of the Board of Education in January or in front of schools with parents...

Most teachers threatened with losing their jobs do not automatically respond by trying to fight back, but a critical layer started going to school board meetings, bringing with them parents and teachers from the affected schools, as well as community organizations that were also opposed to board policies, to testify at board meetings and become a public opposition to privatization.[37]

The CTU continued this method of community activism against school closures while preparing for a possible strike as soon as they took office. The union's Black president Karen Lewis sparred publicly with Emanuel on a regular basis--to the delight of CTU members and the disdain of corporate media outlets (which labeled her "confrontational").[38] When Emanuel blamed teachers for the low quality of education in the city schools, the CTU retorted that the problem was the city's under-funding of public schools due to its under-taxing of corporations. In February 2012, the CTU released a well-researched report, Schools Chicago's Children Deserve,[39] highlighting the racism that led to a system of "educational apartheid" in Chicago.

The CORE union leadership, unlike its predecessors, cut their own pay and put financial resources into its organizing department, whose members spent more time at the schools than in the union's offices. Perhaps most importantly, the CTU leadership recognized that a union is no stronger than the commitment of its rank and file. As Lee Sustar noted in the International Socialist Review, "Training for delegates and other CTU members went well beyond the usual network of activists to create an organizational backbone of 1,000–3,000 teachers and paraprofessionals who led discussion about contract demands and made the argument that a strike would be necessary."[40]

When the strike authorization vote took place in June, it not only met but vastly exceeded Emanuel's required 75 percent authorization threshold--when nearly 90 percent of eligible union members voted to authorize a strike. The CTU spent the summer preparing members through strike training to lead the picketing and organizing at every school.

As Sustar described, when the CTU finally declared a strike on September 10, "tens of thousands of red-shirted members of the Chicago Teachers Union (CTU) and supporters swarmed downtown, shutting down traffic around the Board of Education headquarters and City Hall in what a local radio news reporter aptly called 'an older and more polite version of Occupy Chicago.'"[41]

Every day during the nine-day strike, parent, student and community supporters joined striking teachers at school pickets across the city. Teachers organized marches through their schools' local neighborhoods and repeatedly marched by the thousands through downtown Chicago, circling the School Board and City Hall. The strikers enjoyed widespread popularity among bus drivers, truckers and other passers-by, who honked their horns in solidarity whenever they saw a red CTU shirt on the street. Opinion polls showed 66 percent of parents sided with the union in the strike, a remarkably high number since working parents were largely left to scramble for childcare as long as the walkout continued.

The CTU leadership's commitment to rank-and-file democracy meant that, even after union negotiators reached a tentative contract agreement with the city, they brought the details of the contract for a vote by the union's 800 delegates. At that meeting, the delegates voted to extend the strike by two extra days in order to take the agreement to the picket lines for discussion by the entire membership. For the next two days, members took part in meetings that lasted for hours on sidewalks in front of schools across the city, while they debated the terms of the contract.

On September 18, the CTU House of Delegates voted to end their strike and resume work the next morning.

The new contract defeated merit pay in favor of continuing seniority pay increases, in a major setback for the centerpiece of the mayor's plan. But the contract also contained a number of important teacher concessions--most importantly, it left open the possibility of more school closures.

The strike's success must be measured by its context, however. Taking place in the midst of the staggering assault on public sector unions, Chicago teachers scored a significant advance not only for public sector unions, but for all unions. With all the chips stacked against them, they stood up as a united force and forced Democratic Party powerbroker Rahm Emanuel to face a major strike in Obama's home city. This was a far cry from the mayor's expectations when he took office.

In this context, the CTU scored a rare victory for organized labor, using a strategy of social justice unionism. In so doing, they pointed the way forward for a revival of the entire labor movement.

To be sure, Emanuel struck back in the spring of 2013, closing 54 public schools and laying off thousands of teachers and staff, the largest numbers in Chicago history--while agreeing to finance the construction of a 10,000-seat local basketball stadium for the private DePaul University. Thousands of teachers, parents and students again took to the streets in protest, to no avail.

The Future of Class and Social Struggle

As I am writing this introduction to the Spanish edition of Subterranean Fire at the end of 2013, the precise future for class and social movements is unknown. Neither Occupy Wall Street nor the Chicago teachers strike led to new battles this past year, leaving a sense of suspended animation in the class struggle.

It is, however, possible to draw some conclusions about the struggles that have emerged since the start of the Great Recession. These are significant due to their mass character, but they have also taken place in fits and starts, involving mass outpourings of anger followed by retreat. This makes sense for a working class attempting to rebuild its own organizations after four decades of one-sided class war. Moreover, the overwhelming dominance of the Democrats and Republicans, the two corporate parties that together rule over U.S. society, limit the electoral expression of working-class consciousness.

The four decades of the unrelenting employers' offensive have had dire consequences for the U.S. working class. The thread linking today's generation of workers to their own tradition of struggle has been effectively broken and must be rebuilt anew. This is a daunting but necessary task for rebuilding the labor movement. And the role of radicals in this process is no less important today than a century ago.

The Great Recession was caused by Neoliberal policies, yet these remain firmly in place--and will remain so until they are pushed back through struggle from below. While right-wing Tea Partiers revel in labeling Obama a "socialist", the president left no doubt about his class loyalties in a speech to a meeting of top CEOs in late 2013:

People call me a socialist sometimes, but you've got to meet real socialists, you'll have a real sense of what a socialist is," he said. "I'm talking about lowering the corporate tax rate, my health care reform is based on the private marketplace, the stock market is doing pretty good the last time I checked and it is true that I am concerned about growing inequality in the system, but nobody questions the efficacy of a market economy in terms of producing wealth and innovation and keeping us competitive."[42]

Obama's disappointment hangs heavily on those who placed their hopes and expectations in his presidency, but many have also become radicalized by this disappointment.

The working class has scored an important victory through the LGBT movement, however, which offers a glimpse of the transformative possibilities ahead. This movement was not centered at the workplace but teaches the crucial lessons of the importance of integrating of social and class struggle. In 2008, LGBT activists took to the streets against the ban on same-sex marriage in California, and spawned a new movement that changed the hearts and minds of the U.S. population. By 2013, a majority of the U.S. population approved of same-sex marriage, compared with just 27 percent in 1996--representing a sea change in consciousness.[43]

In 2013, the U.S. Supreme Court finally ruled Prop 8 unconstitutional, and California became one of 16 states that had legalized same-sex marriage. Obama himself reversed his earlier opposition to this basic civil right in 2012, due to pressure from below.

Most of the struggles taking place over the last year have been smaller, but contain the seeds of future mass struggle. Low-wage retail and fast food workers have begun organizing, staging small-scale strikes and protests at corporate giants such as Wal-Mart and Whole Foods. With the backing of the Service Employees International Union (SEIU)--a union with a history of impeding democracy in its own affiliates--these workers have nevertheless organized a social justice movement that addresses the plight of minimum wage workers forced to survive on poverty wages.

Their campaigns, with names such as "Fight for 15"--referring to the $15 per hour that could provide a living wage for workers instead of the federal minimum wage of $7.25 per hour--have gained substantial support in the larger population. One typical opinion poll in the summer of 2013 showed 80 percent of respondents supported raising the minimum wage to $10.10 per hour, with cost-of-living increases to follow.[44]

As labor scholar Kim Moody argued in early 2012:

While there is no automatic mechanism that creates such an upturn in worker self-activity, the worker-led resistance that has commenced on a fairly large scale in Europe, Latin America, and more recently in China, suggests the possibility of a new upsurge. Even such seemingly disconnected events as the plant-occupation at Republic Doors and Windows in December 2008 and the spectacular mass-movement in Wisconsin in early 2011 may be signs of things to come.[45]

Moody added, "Whether America's weakened labour-movement can rise to the occasion, as it did in the early 1930s when it had hit low levels of organisation comparable to those of today, is as much a matter of practice and politics as of economics."[46]

The next major struggle could appear seemingly out of nowhere, like the Wisconsin uprising or Occupy Wall Street, or might involve the steady building of a strike, as did the Chicago Teachers Union. The question is not whether but when the struggle will resume.
December 31, 2013


1. Debbie Gruenstein Bocian, Wei Li, and Keith S. Ernst, "Foreclosures by Race and Ethnicity: The Demographics of a Crisis, Center for Responsible Lending Research Report," Center for Responsible Lending, June 18, 2010.

2. Martin Wolf, "Why today's hedge fund industry may not survive," Financial Times, March 19, 2008.

3. The Goldman Sachs Group, "Goldman Sachs Reports Earnings per Common Share of $4.47 for 2008," press release, December 16, 2008.

4. Richard Teitelbaum and Hugh Son, "New York Fed's Secret Choice to Pay for Swaps Hits Taxpayers," Bloomberg, October 27, 2009.

5. Stephen Labaton, "S.E.C. Concedes Oversight Flaws Fueled Collapse," The New York Times, September 27, 2008.

6. Ben Protess, "'Flawed' SEC Program Failed to Rein in Investment Banks," ProPublica, Oct. 1, 2008.

7. Gretchen Morgenson and Don Van Natta, Jr., "Paulson's Calls to Goldman Tested Ethics," The New York Times, August 9, 2009.

8. Greg Hitt, Sudeep Reddy and Deborah Solomon, "Bernanke, Paulson Face Skeptics On the Hill Despite Dire Warnings," The Wall Street Journal, Sept. 24, 2008.

9. Michael J. de la Merced and Louise Story, "Nearly 700 at Merrill in Million-Dollar Club," The New York Times, February 11, 2009.

10. David Wessel, "After Bear, a New Game: Line Between Banks, Securities Firms Blurs; Homeowner Bailout?" The Wall Street Journal, March 20, 2008.

11. Dana Milbank, "Flying From Detroit on Corporate Jets, Auto Executives Ask Washington for Handouts," The Washington Post, November 20, 2008.

12. Elizabeth McDonald, "American Inconscionable Group," Fox Business News, March 17, 2009.

13. Lance Selfa, The Democrats: A Critical History (Chicago: Haymarket Books, 2008), p. 6.

14. Monica Davey, "In Factory Sit-In, an Anger Spread Wide," The New York Times, December 7, 2008.

15. Steven Greenhouse, "Share of the Work Force in a Union Falls to a 97-Year Low, 11.3%," The New York Times, January 23, 2013.

16. Emmanuel Saez, UC Berkeley, "Striking it Richer: The Evolution of Top Incomes in the United States" (updated with 2012 preliminary estimates), September 3, 2013.

17. Caroline Fairchild, "Top-Tier CEO Pay Grew Nearly 15 Times Faster Than Worker Pay Last Year," Huffington Post, October 22, 2013.

18. Connie Stewart, "Income gap between rich and poor is biggest in a century," The Los Angeles Times, September 11, 2013.

19. "80 percent of U.S. adults face near-poverty, unemployment, survey finds," CBS News, July 28, 2013.

20. Ibid.

21. Mark R. Rank, "The Great Divide: Poverty in America is Mainstream," The Opinion Pages, The New York Times, November 2, 2013.

22. Ibid.

23. Hope Yen, "Rich-Poor Employment Gap Now Widest On Record," Huffington Post, September 16, 2013.

24. Lawrence Summers, "America needs a way to stem foreclosures," The Financial Times, February 24, 2008.

25. Yen, Op Cit.

26. Bocian et al, Op Cit.

27. Yen, Op Cit.

28. Euler Hermes Economic Research Department, "Special Report: The Reindustrialization of the United States," Euler Hermes Economic Outlook, no. 1187, January 25, 2013, p. 5.

29. Ibid.

30. Lee Sustar, "A Historic Surrender," International Socialist Review, Issue 56: November-December 2007.

31. Medea Benjamin, "From Cairo to Madison: Hope and Solidarity Are Alive," Huffington Post, February 21, 2011.

32. Roger Bybee, "Presidential Ambitions Behind Wis. Gov. Walker's Unionbusting Stance?" In These Times, February 22, 2011.

33. Bill Glauber and Tom Held, "Democratic senators return to Madison to tell crowd fight isn't over," Milwaukee Journal Sentinel, March 12, 2011.

34. Thomas Stackpole, "Meet the Ad Men Behind Occupy Wall Street," The New Republic, November 12, 2011.

35. Dave Lindorff, "White House and Dems back banks over protests: Newly discovered Homeland Security files show Fed central to Occupy crackdown," Nation of Change, May 15, 2012.

36. Eric (Rico) Gutstein and Pauline Lipman, "The Rebirth of the Chicago Teachers Union and Possibilities for a Counter-Hegemonic Education Movement,"Monthly Review, Volume 65, Issue 02 (June 2013).

37. Robert Barlett, "Creating a New Model of a Social Union: CORE and the Chicago Teachers Union," Monthly Review, Volume 65, Issue 02 (June 2013).

38. Cynthia Dizikes and John Byrne, "She will not cower: Union President Karen Lewis forged her confrontational style in the classroom," Chicago Tribune, September 11, 2012.

39. Available online at http://www.ctunet.com/blog/text/SCSD_Report-02-16-2012-1.pdf

40. Lee Sustar, "Toward a renewal of the labor movement: US labor after the Chicago teachers' strike," International Socialist Review, Issue 89, May 2013.

41. Lee Sustar, "What the Chicago teachers accomplished," International Socialist Review, Issue 86, November 2012.

42. Rebekah Metzler, "Obama: I Am Not a Socialist: At CEO Council, Obama says Washington must shed rhetoric to work," US News & World Report, November 19, 2013.

43. Huffpost Gay Voices, "Gallup Gay Marriage Poll Finds Majority Of U.S. Citizens Would Support Nationwide Marriage Equality Law," Huffington Post, July 31, 2013. Frank Newport, "For First Time, Majority of Americans Favor Legal Gay Marriage," Gallup Politics, May 20, 2011.

44. David Winograd, "80 Percent Want Minimum Wage Raised To $10.10 Per Hour: Poll," Huffington Post, August 1, 2013.

45. Kim Moody, "Contextualising Organised Labour in Expansion and Crisis: The Case of the US," Historical Materialism (Brill, 20.1 (2012), p. 25.

46. Ibid.

Further Reading

From the archives