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Germany's 'Secret' Holds Lesson for Democrats

Former Secretary of Labor Robert Reich has a post up at his blog, "Why the Republican War on Workers' Rights Undermines the American Economy," which does a good job of pinpointing a critical missing element in the economic recovery effort. Lamenting the passing of the era Reich dubs "The Great Prosperity," the three decades after WW II when "wages rose in tandem with productivity" and "Americans could afford to buy what they produced," he holds up the example of Europe's healthiest economy:

...If you want to see the same basic bargain we had then, take a look at Germany now.

Germany is growing much faster than the United States. Its unemployment rate is now only 6.1 percent (we're now at 9.1 percent).

What's Germany's secret? In sharp contrast to the decades of stagnant wages in America, real average hourly pay has risen almost 30 percent there since 1985. Germany has been investing substantially in education and infrastructure.

How did German workers do it? A big part of the story is German labor unions are still powerful enough to insist that German workers get their fair share of the economy's gains.

That's why pay at the top in Germany hasn't risen any faster than pay in the middle. As David Leonhardt reported in the New York Times recently, the top 1 percent of German households earns about 11 percent of all income - a percent that hasn't changed in four decades.

Contrast this with the United States, where the top 1 percent went from getting 9 percent of total income in the late 1970s to more than 20 percent today.

The only way back toward sustained growth and prosperity in the United States is to remake the basic bargain linking pay to productivity. This would give the American middle class the purchasing power they need to keep the economy going.

Reich credits strong labor unions as a leading cause of both Germany's economic health and 'The Great Prosperity' era in the U.S. noting "In 1955, over a third of American workers in the private sector were unionized. Today, fewer than 7 percent are." Reich adds:

With the decline of unions has come the stagnation of American wages. More and more of the total income and wealth of America has gone to the very top. The middle class's purchasing power has depended on mothers going into paid work, everyone working longer hours, and, finally, the middle class going deep into debt, using their homes as collateral. But now all these coping mechanisms are exhausted -- and we're living with the consequence.

...The American economy can't get out of neutral until American workers have more money in their pockets to buy what they produce. And unions are the best way to give them the bargaining power to get better pay.

Reich is well-aware of the enormous difficulties of meeting this challenge, particularly the "Republican War on Workers," which includes eviscerating collective bargaining rights for public workers and "open shop" initiatives to prevent unions from collecting dues, along with attacking the National Labor Relations Board.

Clearly, Reich is not talking about a quick fix in time for next year's elections. Rather, this is a long haul struggle that will require sustained commitment from both unions and progressives. There are critical reforms, like the Employee Free Choice Act (EFCA) which could help strengthen unions. But it these reforms will require restoring strong Democratic majorities in congress.

The outpouring of protests against public worker union busting in Wisconsin, Ohio and Indiana offer the hope that the public is waking up to the dangers of weakening unions further. Organized labor's embrace of new organizing tactics, such as those being used to recruit Wal-mart workers into a union-like organization called "OUR Walmart" may open up new directions for union growth.

The image of unions is in need of a make-over, since anti-labor propaganda has been relentless and it looks like its going to get worse. Senator Rand Paul has apparently been appointed the new poster-boy for union bashing. In response, the labor movement could use a major Ken Burns-style prime-time documentary series showing how much unions have done to help American families have a better quality of life. Unions have also got to do a better job of tooting their own horn, not just in the shops they hope to organize, but throughout American society.

Like every Democrat, I'm hoping economic recovery will soon kick in strong enough to do some good for Dems in '12. But if we want to create a sound foundation for a more enduring recovery benefiting American workers -- call it "The Great Prosperity 2.0," Democrats will have to focus more on supporting unions.