What happens when supporting capitalism hurts capitalists? Do business lobbies ever control the economy to the extent we think they do? The tumultuous history of NAM, the powerful lobby group of America’s manufacturers, offers possible answers.
Editor’s note: The current debate in economics seems to lack a historical perspective. To try to address this deficiency, we decided to launch a Sunday column on ProMarket focusing on the historical dimension of economic ideas. You can read all of the pieces in the series here.
Back in the twentieth century, when manufacturing dominated the US economy, America’s largest employers were represented by a trade association and lobby called the National Association of Manufacturers, or NAM. Early twentieth-century pundits called it a “union for employers,” which it most definitely was. Founded in 1895, NAM identified, organized, and promoted the collective interests of US manufacturers. Its enemies—labor unions, progressives, liberal Democrats—saw it as hyper-effective and all-powerful. In the end, however, it proved unable to evade capitalism’s vicissitudes .
Like the labor unions it fought, NAM attempted to organize and protect its members’ interests from the chaos that was US capitalism in the 1890s. Imagine investing money or producing goods in an economy with no centrally-regulated currency, a patchwork of state economic restrictions, and no standardized system of weights, measures, or industrial specifications. NAM helped members navigate a bewildering array of state laws and successfully lobbied for standardized freight rates, payment schedules, and bankruptcy laws. It encouraged the formation of organizations and agencies that collected data for industrial planning. It offered its members the benefits of information and coordination, promoting “best practices” in safety devices, production, pricing, and distribution. It sewed individual manufacturers into a powerful industrial sector, whereby the innovations and efficiencies of some contributed to the progress of all.
Perhaps the foremost service NAM offered its members in the twentieth century was deterring and containing labor unions. NAM’s reputation as an anti-union bulldog was well-deserved, evolving over time from coercion and injunctions in the 1900s to more professional “scientific” approaches designed to win workers’ loyalty with benevolent policies, promotion ladders, and company-sponsored unions. In 1935, Democrats passed the Wagner Act, which guaranteed workers’ collective bargaining rights and banned company unions. NAM’s hardline conservative leaders went ballistic, damning the law as “one of the most vicious pieces of legislation” ever, and encouraging members to fight union drives in hopes the Supreme Court would declare the law unconstitutional. Instead, SCOTUS upheld the law.
After the Second World War, NAM moderates stepped up and—against the wishes of NAM’s most conservative and powerful members—accepted workers’ right to organize. They even accepted the legitimacy of the National Labor Relations Board. What they required in return were specific limitations on unions’ power as spelled out in what became the Taft-Hartley Act. Labor called it a “slave labor bill.” A Republican congress passed it over President Truman’s veto in 1947.
Reviled by liberals and historians, the Taft-Hartley Act was a clear instance of NAM’s power and effectiveness. It set the stage for mostly predictable, codified labor relations. It also stabilized a political-economic order in which unions checked the power of capital. NAM continued to fight unions, of course; it lobbied for state “right to work” laws and always found ways to discredit labor leaders. But it had persuaded organized manufacturing to accept organized labor, moving the struggle inside the bounds of government bureaucracy. For NAM conservatives, it was capitulation.
Ironically, or perhaps tragically, NAM only really “won” its war with unions when US manufacturers shuttered their enormous multidivisional plants that once employed millions. And that brings us to the part of NAM’s program that ultimately destroyed its membership and political influence: trade expansion.
Expanding foreign trade was the original impetus for NAM’s founding in 1895. At first, it organized international expos to display goods in places like Mexico City and Shanghai, offering members translation and networking services. Soon enough, however, it was lobbying the government for consular reform, reciprocal trade agreements, a merchant marine, and other policies designed to create a trade and finance infrastructure for American producers.
The problem was that the vast majority of NAM members and the Republican Party supported and depended on high tariffs designed to protect the US market from foreign imports. This obviously dampened foreign trade. In the early twentieth century, NAM’s trade expansionists sought something called reciprocity, which lessened tariffs on some imports, typically raw materials, in exchange for access to specific foreign markets. They also sought to transfer control of tariffs from Congress (as assigned by the Constitution) to a more professional Tariff Commission in the executive branch. NAM’s trade expansionists assured members these steps did not threaten protective tariffs, but a significant portion of NAM members thought otherwise. In 1909 disgruntled NAM members formed the Home Market Club, deriding “the National Association of (Free Trade) Manufacturers.” After this debacle, NAM leaders affirmed their unequivocal devotion to “the Principle of PROTECTION” and agreed to limit public statements about tariffs to avoid antagonizing members.
Even so, NAM internationalists worked quietly with Democratic administrations over the course of the twentieth century to lower US tariffs, secure financing for exporters, and build international trade and investment infrastructure. By the 1960s, there was bipartisan support for Cold War trade treaties and NAM could more forthrightly embrace freer trade with US allies. NAM often advocated on behalf of resistant NAM members, securing specific exemptions or rules to lessen the impact of imports. In doing so, they got American manufacturing’s buy-in for the trade agreements and institutions that created today’s globalized trade networks.
As many smaller and mid-sized companies feared, these agreements led to cheap imports and increased international competition, which contributed to deindustrialization and plant closings, beginning in the late 1950s. During the 1980s, tensions about trade roiled NAM all over again, as NAM-member companies in steel, automobiles, textiles, and other industries sought import relief (unsuccessfully) through “escape clause” processes set up in the 1974 Trade Act. Throughout this difficult period, NAM leaders stood by their commitment to freer trade, arguing as they always had that trade deals created foreign consumers for American goods; if the US refused to take the lead on trade agreements, its competitors would, and US producers would be left behind. The best thing American manufacturers could do was adjust to new realities.
Plant closings and mergers decimated NAM’s membership, which went from a high of 21,800 companies in 1957 to just under 12,000 by 1980. With deindustrialization, NAM lost much of its political power in Washington. While Reagan-era tax cuts and deregulation upheld NAM’s “free enterprise” messaging, they ended up hurting manufacturing as a sector. Reagan-era tax cuts eliminated the many loopholes NAM had won when manufacturing was riding high in the 1950s and 1960s. The tax cuts benefitted the tech and finance sectors that replaced manufacturing as drivers of the economy. Venture capitalists were tax reform’s big winners and they weren’t interested in old factories. Deregulation contributed to hostile takeovers that threatened even the most powerful NAM companies.
By the 1980s, NAM had much in common with its historic enemy, organized labor. Both were part of the old “smokestack” economy and both were abandoned by the parties that had once fought their battles. Just as a new breed of “neoliberal” Democrats ignored the demands of a shrinking union constituency, so too were Republicans less than thrilled about saving manufacturing.
But unlike labor unions, manufacturing rebounded in the 21st century. NAM helped surviving manufacturers streamline, automate, and update their plants to compete in the new borderless supply chains. It expanded its membership to include internationally-based corporations and new tech companies. With a current membership of 14,000 companies, it continues to help members and their employees navigate changing regulations and economic turmoil.
Still, its active support for policies that hurt members’ interests and reduced its own influence raises questions about how much lobbying organizations really control. Typically, critics have blamed large multinational corporations with overseas investments for betraying smaller and mid-sized manufacturing firms.
The critics may be right. But not all of NAM’s globalist leaders came from large multinationals. Internationalist Clarence Randall, for instance, was an executive at Inland Steel during the 1950s, an independent Chicago-based factory that would fall victim to the decline of the US steel industry in the 1970s. Contrariwise, the leaders of Monsanto, which was more internationally connected, defended tariffs. The internationalist perspective was often more of an ideological perspective than a material interest. Jerry Jasinowski, NAM president from 1990 to 2004, had been a policy wonk with the Democratic Party before joining NAM and was a true believer in the social and economic benefits of globalization. Nor is it clear that US manufacturers and their workers would have fared any better with more nationalist trade policies. Thus, an explanation for NAM’s seemingly self-destructive policies remains unsettled.
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