Neoliberalism, introduced to the United Kingdom by Margaret Thatcher and to the United States by Ronald Reagan around 1980, is a set of economic ideas and policies designed to liberate the private sector from the shackles of government. Tax cuts for upper-income groups, combined with the deregulation of industry and finance, were supposed to unleash an investment-driven wave of economic growth so powerful that all boats would rise. But the real wages of working people didn’t rise.
One reason was the crippling of organized labor and collective bargaining—seen as impediments to economic restructuring—that was set in motion by Reagan’s successful assault on the air traffic controllers union in 1981. As Simon Sinek shows in the spirited excerpt below, the unintended consequences of Reagan’s strikebreaking rippled through the economy. It paved the way for raiders to buy up companies, load them with debt, sell off divisions, and force mass layoffs. It shifted the mind-set of corporate leaders from “retain and invest” to “downsize and distribute,” and it altered the fabric of the relationship between employer and employee.
The harm done to the competitiveness of companies and nations is still being tallied. As corporate leaders ponder how to build broader markets, revitalize the consumer economy, and sustain their own innovation, it’s worth reflecting on the value of unions. Could a strong organized labor movement, especially if it existed worldwide, actually be a boon to business?
An excerpt from chapter 11 of Leaders Eat Last:
Why Some Teams Pull Together and Others Don’t
August 5, 1981. That’s the date it became official.
It’s rare that we can point to an exact date when a business theory or idea becomes an accepted practice. But in the case of mass layoffs, we can. August 5, 1981, was the day President Ronald Reagan fired more than 11,000 air traffic controllers.
Demanding more pay and a shorter workweek, PATCO, the air traffic controllers’ union at the time, was embroiled in a vicious labor dispute with the Federal Aviation Administration. When the talks broke down, PATCO threatened to go on strike, ostensibly shutting down airports and causing the cancellation of thousands of flights during one of the busiest travel periods of the year.
Such a strike is illegal, according to the sometimes controversial Taft-Hartley Act of 1947. The act essentially prohibits any labor strike to cause unfair harm to those not involved in the dispute or to do any damage to any commerce that would negatively affect the general welfare. This is the reason police and emergency room nurses are forbidden to strike. The damage such a strike would cause is believed to outweigh any grievances over unfair pay or hours.
Without an acceptable deal and, worse, without the ability to find common ground, on August 3, PATCO’s members refused to go to work. Given the strike’s impact on the country, President Reagan got personally involved, ordering the air traffic controllers back to work. Meanwhile, contingency plans were put into place, with supervisors (who were not members of the union), a small group of controllers who had chosen not to strike and military air traffic controllers enlisted to cover the losses. Though not a perfect solution, these temporary workers were able to keep the majority of flights going. The effect of the strikes was not as severe as expected, and so, on August 5, 1981, President Reagan fired 11,359 air traffic controllers, nearly every controller working for the FAA at the time. And it didn’t stop there.
Reagan banned every one of the strikers from ever working for the FAA again for the rest of their lives, a ban that remained in effect until President Clinton lifted it in 1993. Many of the air traffic controllers who were fired that day were war veterans (which is where they learned the trade) or civil servants who had worked hard to earn their middle-class incomes. Because of the ban and the fact that their skills were hardly transferable to other industries (there’s not a huge demand for air traffic controllers outside of the FAA), many of them found themselves in poverty.