‘Labor in the Age of Finance: Pensions, Politics, and Corporations from Deindustrialization to Dodd-Frank’ by Sanford M. Jacoby reviewed by Thomas Klikauer

Reviewed by Thomas Klikauer

About the reviewer

Thomas Klikauer (MAs, Boston and Bremen University and PhD Warwick University, UK) teaches MBAs and …


US labour economist, Sanford M. Jacoby begins his book on Labor in the Age of Finance by saying that ‘the 1970s and 1980s were a disaster for America’s labour movement.’ It did not get much better in the 1990s and even up until today, there is no improvement in sight. Union members continue to decline unabated. An NPR (2015) video map shows as much. Despite declining membership, Jacoby argues that trade unions still have three types of power: organised power, bargaining power, and political power.

In Jacoby’s view, the primary reason for the decline of trade unions in the USA is associated with the narrowing gap between the wages of unionised workers and non-unionised workers. Between 1983 and 1992, unionised workers got a 26% higher wage; between 1993 and 2002, that gap diminished to 24%, and to 21% between 2002 and 2012; then, between 2013 and 2018, it shrank to 20%.

During the 1990s, the hallucination of shareholder capitalism as a means to democratise shared ownership remained a mere ideology designed to support neoliberalism. Among US households in 2016, the top 1% owned 53% of all stocks and mutual funds and for the top 10%, the figure was 93%. Jacoby argues that stock markets are mostly irrelevant for 80% of US households, except to exacerbate wealth inequality. In other words, if shareholder capitalism indeed offers any democratised share ownership, it does only so for a Plato-style plutocratic minority.

Yet, one reason for the anti-unionism of US businesses may lie in the fact that if a firm is unionised, executive pay is reduced. This is a powerful incentive for CEOs to fight trade unions. Clifford’s CEO Pay Machine (2017) outlines, at times in great details, how this works. If one seeks to reverse the ever increasing CEO remunerations, there is one very clear way. This book shows that wherever there are trade unions, CEOs receive a somewhat less stratospheric income. It gets even worse for workers when one considers that the CEOs who have risen through the ranks have greater sympathy for fellow employees – and less for shareholders – than do CEOs hired from the outside. Jacoby explains why corporations prefer to hire MBAs from elite business schools (Klikauer 2013 & Parker 2018).

Jacoby’s first chapter argues that between 1890 and 1929, there have been three waves of capitalism starting with industrialisation. This indicates that the USA is a late developer. By the 1890s, the British’s industrial capitalism, for example, was well-developed. By 1890, Adam Smith’s classic Wealth of Nations was over 100 years old and the fourth edition of Karl Marx’s Das Kapital was published in Hamburg. Jacoby says the second wave was that of the New Deal which took place between 1933 and 1973. Finally, the third wave of neoliberalism was from 1974 to present. Some might argue that neoliberalism started in the 1980s when Margret Thatcher married Ronald Reagan and Hayek visited the electro-torturer Pinochet in Chile (1977 and 1981), to complete the four headless horsemen of the neoliberal apocalypse (Robin 2013).

Contrary to this view, one of the most significant changes in 20th century capitalism occurred after the anti-Semitic and anti-union hard-man Henry Ford introduced the $5 Dollar Day on 5th of January 1914. Ford not only moved mass-manufacturing to new heights, his $5-day also gave workers the means to engage in what we call today as mass-consumerism, which effectively moved liberal capitalism on and gave life to consumer capitalism. From then on, workers no longer wanted to destroy capitalism but fought for higher wages to purchase more cars and more TVs. As trade unions fought for higher wages everywhere during the 1920s, mass consumerism flourished and what Jacoby calls ‘the Roaring Twenties’ (p. 16) emerged. All of this was turbo-charged by the New Deal during the 1930s.

Perhaps Jacoby does not get it quite right when saying ‘the New Deal was the heyday of Managerialism’ (p. 10). The 1930s might have been the heydays of management but certainly not of Managerialism (Klikauer 2013). Only a few years after Fayol and Taylor, management was not yet developed into a full ideology. Today, it is: management became an ideology to create Managerialism. However, during the 1930s, ‘executives and, to a lesser extent, unions were key governance actors’ (p. 10). Mid-20th century management remained staunchly anti-union. From the 1980s onward, management converted a mid-20th century ideology – Hayek’s Road to Serfdom (1944) – into companies and corporations. Simultaneously, the ideology of Managerialism paved the way by creating a hegemony that made neoliberalism acceptable inside and outside of companies and corporations.

Today, the evil twins: neoliberalism and Managerialism, are fully-established and one might indeed call them a ‘Wall Street dictatorship [run by] the Junkers of Wall Street’ (p. 13) behaving like the original Prussian Junkers who were a landed aristocratic group of Eastern reactionaries. How all this works ever since capitalism became financial capitalism has been explained in Rudolf Hilferding’s Das Finanzkapital (1910). Hilferding (p. 14) was not the only one concerned about the rising power of financial capitalism. US Supreme Court Judge, Louis D. Brandeis also shares the same sentiments.  And, Jacoby dedicates several pages to Brandeis (p. 10 to 17). Surprisingly so because he fails to ever mention Brandeis’ famous statement that ‘we must make our choice’ when it comes to having either democracy or concentrated wealth in hands of a few because ‘we cannot have both.’

Berle already made it clear in the 1920s that one-third of the nation’s wealth was produced by two hundred corporations dominated by 1,800 men. In 1933, the Banking Act somewhat limited the power of finance capitalism. In the 1940s and 1950s, the labour movement scored a trifecta when membership, strikes, and political influence flourished as never before. The 1950s were not only the years of rampant anti-communism under McCarthyism, it was also a time of strong trade unionism.

By the mid-1950s, management also began to increasingly re-affirm its power with ‘the concept of management rights’ (p. 23). By the 1960s, ‘the public regarded business as too powerful in politics’ (p. 24). Twenty years on, the very opposite was powerfully installed when neoliberal Ronald Reagan fired over 11,000 government-employed air-traffic controllers signalling the arrival of a full-scale neoliberalism. It was followed by Thatcher’s dirty fight against British miners.

One of the key tools in a CEO’s pay has been the 1990s move towards stock options replacing salaries for CEOs. Yet, ‘the failure to document a consistent and robust relationship between executive pay and equity returns has frustrated scholars and practitioners for over three quarters of a century’ (p. 49). This is not a failure. This is a deliberate policy of Managerialism and compliant business school academics to hide the truth for over seventy-five years.

Meanwhile in corporate finance, Managerialism allowed shareholders to make gains primarily over the losses of stakeholders, i.e., workers (p. 53). At the same time, neoliberalism assured that collective bargaining, ‘the most important source of power in holding corporations accountable,’ (p 77) has been weakened for decades. The fact that ‘unions became active owners [of] mutual funds’ (p. 79) had only a marginal influence on what neoliberalism had set in motion.

Corporations and businesses depend on a functioning state to not only weaken labour law, but also to re-regulate legal matters into pro-business matters. Corporate lobbying seeks to take the state out of the free market. This is a very powerful element. ‘During the 2015-2016 election cycle, businesses outspend labour by a ratio of 16 to 1’ (p. 83).

Jacoby emphasises that ‘all national unions, taken together, spend about $48 million a year for lobbying in Washington, while corporate America spends $3bn’ (p. 83). Corporations outspend labour 62.5 to 1 (Klikauer 2021).

Of course, with the appropriate election success, you can stack up the US Supreme Court with compliant judges and voilá, you get Citizen United. Through unlimited corporate campaign financing, this allows corporations and big businesses to make sure that we have the best politicians money can buy, as evil heretics might say. Given all this, the hallucination that ‘shareholder activism [is] corporate democracy’ (p. 88) sounds almost pathological.

Still, ‘having union members on pension fund boards is associated with better portfolio performance’ (p. 94) – for some. Even the staunchly pro-business and pro-neoliberalism Wall Street Journal reported that the 2.5 million people at the top of the income hierarchy received more money than the 100 million people at the bottom. This is what inequality means.

Unsurprisingly, just 26% of Americans say that big corporations are ‘honest in their dealings with consumers and employees’ (p. 114). To improve this, capitalism likes to put in more pro-business regulations and laws that give the appearance that politicians are doing something while letting capital off the hook big time. Manage this and you can make it into politics. A good example of that was the Sarbanes-Oxley Act (SOX). Jacoby reasons that SOX had ‘more bark than bite’ (p. 116). Worse, in the following ten years just five criminal cases were recorded.

At the same time, US’ unions shrank and lost a significant amount of bargaining power. On parallel, the size of what workers received in wages decline. ‘Today, workers’ earnings no longer track productivity; the gains go to CEOs and to shareholders instead’ (p. 129). In other words, labour’s share of a country’s wealth declines while the rich get richer. This is a key source when creating inequality. Today, Drucker’s proposal to limit the CEO-worker pay ratio between 15:1 and 20:1 (p. 149) is a distant dream.

On the global financial crisis (GFC) of 2008, Jacoby writes, ‘the failure to prosecute, much less punish, those who had committed fraud rankled the public’ (p. 198). What Jacoby describes as a failure was not a failure at all. It was the exact opposite. The capitalism works by offloading its costs onto others, preferably to the taxpayers. The legal system that furnishes capitalism is not set up to prosecute – much less punish – white-collar crimes. The raison d’être of pro-business laws and regulations is to protect capital while, simultaneously, aiding the appearance that the state is after criminals. After all, those bankers who caused the GFC did not steal a can of tomato soup at a corner store, otherwise they would be, as Jacoby affirms, prosecuted and punished.

Capital needs supportive politicians like Obama for its protection – particularly when things go wrong and criminal acts are uncovered. Unsurprisingly, Obama told a group of bankers, ‘my administration is the only thing between you and the pitchforks’ (p. 201). Not long after Obama’s pep-talk to bankers, multi-billionaire Hanauer (2014) explained how this works. Most importantly, Obama told bankers which side he is on – their side (Mirowski 2013). In short, the point of government is to protect capital and not those who lost their houses.

Jacoby emphaisis that the financial crisis was highly destructive for working people and for the US labour movement. Trade unions in the USA lost 1.2 million members in the private sector between 2008 and 2012. In ‘2019, 6% of corporate employees belong to a union, fewer than in 1929’ (p. 217) – the year of the Wall Street crash. Jacoby sums up the lessons from labour’s involvement in corporate finance by stating that ‘unions became wary of devoting diminishing resource to corporate campaigns’ and ‘labour drifted away from shareholder activism’ (p. 218); ‘for unions,’ Jacoby reckons, ‘putting employees on boards was second-best to collective bargaining, labour’s preferred method of changing pre-distribution outcomes’ (p. 222).

Following a series of highly illuminating analyses of labour’s involvement in US corporate finance, Jacoby concludes (p. 224) by saying that American unions took an active role during the age of finance. They sought to transform the money’s power into workers’ power for workers. But for over forty years, the clear winner was capital. At the same time, workers usually lost.

Jacoby rightfully does not blame trade unions for this. Outgunned by the hegemonic ideology of neoliberalism that defined the ideological atmosphere during the last forty years, trade unions also suffered from neoliberalism’s staunchly anti-union fanaticism. Unions also faced hostile corporations and an even more hostile politics – Reagan, Bush I and Bush II, Trump, as well as many Republican governors, senators, etc. Perhaps even worse, labour and unions also faced antagonistic corporate mass media (Klikauer 2021). All in all, trade unions are not to blame for having tried to engage with capital for the welfare of workers. But even trade unions could not make gold out of thin air – just like the alchemists.

Jacoby’s most exquisite book shows – despite underemphasising our common blind-spot (Smythe 1977) – how labour’s involvement into corporate finance and into pension funds works. In the end, labour’s involvement into finance has only very marginally improved the life of the American working class. So, was union engagement with capital worth it? Faced with the overwhelming corporate, legislative, regulative, ideological, and media power of Media Capitalism (Klikauer 2021), the American labour movement fought a fight well worth fighting for. But, with so many cards stacked against labour, it never had a chance in the first place.

24 June 2022


  • Barnard, J. W. 1990 Exxon Collides with the "Valdez Principles" https://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=2112&context=facpubs
  • Clifford, S. 2017 The CEO Pay Machine New York: Blue Rider Press.
  • Hanauer, N. 2014 Beware Fellow Plutocrats, the Pitchforks Are Coming https://www.ted.com
  • Hayek, F. A. 1944 The Road to Serfdom London: G. Routledge & Sons.
  • Hilferding, R. 1910 Das Finanzkapital. Eine Studie zur jüngsten Entwicklung des Kapitalismus Vienna: Wiener Volksbuchhandlung Press.
  • Klikauer, T. 2013 Managerialism – Critique of an Ideology Basingstoke: Palgrave.
  • Klikauer, T. 2021 Media Capitalism London: Palgrave.
  • Mirowski, P. 2013 Never let a serious crisis go to waste: how neoliberalism survived the financial meltdown London: Verso.
  • NPR 2015 50 Years Of Shrinking Union Membership, In One Map https://www.npr.org/sections/money/2015/02/23/385843576/50-years-of-shrinking-union-membership-in-one-map
  • Parker, M. 2018 Shut Down the Business School London: Pluto Press.
  • Robin, C. 2013 The Hayek-Pinochet Connection: A Second Reply to My Critics https://crookedtimber.org/2013/06/25/the-hayek-pinochet-connection-a-second-reply-to-my-critics/
  • Smythe, D. W. 1977 Communications: Blindspot of Western Marxism Canadian Journal of Political and Society Theory, 1(3):1–28

One comment

  1. As long as workers prefer guns to roses there is not much hope for any improvement, not to speak of a revolution.

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