European Sociological Review VOLUME 25 NUMBER 1 2009 9–23 9 DOI:10.1093/esr/jcn036, available online at www.esr.oxfordjournals.org
Online publication 20 August 2008 Globalization and Inequality:
Explaining American
Exceptionalism
Douglas S. Massey
Globalization creates pressure for greater inequality throughout the world, but these
pressures are expressed more fully in the United States than in other developed nations.
Although the distribution of US income before taxes is no more unequal than other
nations, after taxes it is considerably less egalitarian. This occurs because of specific
institutional arrangements that fail to redistribute income effectively and allow the
pressures of globalization to be fully realized. These arrangements represent a shift
from the past and were deliberately enacted over the past two decades with divergent
consequences for those at the top and bottom of the socioeconomic hierarchy. The
realignment of the US political economy can ultimately be traced to America’s legacy of
racism. Once leaders in the Democratic party sought to include African Americans in the
benefits of Roosevelt’s New Deal, support for economic populism evaporated in the middle
and working classes. The advantage of the wealthy is further enhanced by a political
system in which those with money are better able to have their interests served
legislatively than the poor or working classes. So far, the world has witnessed two great eras of
globalization. The first began around 1800 when the
international circulation of goods, capital, people, and
resources began to grow steadily as industrialization
spread across the face of Europe and hopscotched to
current and former colonies around the world. This
first wave of globalization culminated in the first
decade of the 20th century. Economic interconnections
grew faster than political integration between nations,
however, and the rudimentary multilateral institutions
of 1914 were unable to manage the shifting balances of
power, leading to a catastrophic world war. From 1914
to 1918 the world’s industrial powers engaged in a
wanton destruction of land, labour, and capital that
left most bankrupt. World War I opened a Pandora’s
box of contradictory forces: the intensification of
the struggle between labour and capital, the polarization of political ideology between communism and fascism, and a retreat from liberal democracy
throughout the world.
The 1920s were characterized by the rise of autarkic
economic nationalism. Chauvinistic restrictions were
placed on trade, investment, and immigration to
curtail international movements of goods, capital,
and labour. Although the global economy hobbled
along for a while on the strength of wealth accumulated in the New World, it came crashing down in
1929. Following a decade of economic depression, the
ideological contradictions unleashed in 1914 were
partially resolved on the battlefield between 1939 and
1945, as a coalition of communist and liberal
democratic states came together to defeat fascism in
the Second World War.
The ending of that war did not bring about an
immediate resumption of globalization, however,
because of the armed standoff between liberal capitalist ß The Author 2008. Published by Oxford University Press. All rights reserved.
For permissions, please e-mail: journals.permissions@oxfordjournals.org 10 MASSEY democracies and communist dictatorships, with two
new superpowers at the core of each block: the Soviet
Union and the United States. In the west, the US took
the lead in laying the foundations for a new global
market economy, joining with Western Europe and
Japan to charter a new and more effective set of
international institutions that could guarantee international security, liquidity, convertibility, investment,
and trade. Institutions such as the United Nations,
the World Bank, the International Monetary Fund,
the General Agreement on Tariffs and Trade, and the
World Trade Organization led to a revival of international trade, first among industrialized nations and
then more generally throughout the world.
Until 1990, however, globalization could not reach
its full potential because of the Cold War, which cutoff roughly one-third of all humanity from the global
marketplace (the combined populations of China, The
Soviet Union, and their various satellites) and mired
much of the rest of the world in proxy confrontations
(in the countries of Asia, Latin America, and Africa).
The end of the Cold War finally allowed the global
economy to return to the stage of development it had
reached on the eve of First World War. Since then we
have witnessed an evolution toward liberal democracy
among trading nations, the emergence stable international institutions, an acceleration of free trade, and a
new global security regime guaranteed by the hegemonic power of the United States.
Since the 1980s, markets for land, commodities,
financial capital, human capital, goods, raw materials,
labour, and information have globalized as never
before, and once again the resulting international
flows are accompanied by rising inequality within
nations. In a global economy, the demand for financial
capital, human capital, land, and energy is immense
while supplies are limited, driving up returns for those
who possess these resources. In contrast, the demand
for labour remains limited even in a global economy
but the supply is immense, putting downward pressure
on the returns physical labour.
As markets have globalized over the past two
decades, therefore, the general trend has been toward
rising levels of within-country inequality. According to
Goesling (2001), the average degree of inequality
within nations grew by almost 40 per cent between
1980 and 1995. Despite the universality of the trend
toward greater income stratification, however, inequality has surged more in the United States than elsewhere. When Smeeding (2005) computed the ratio of
the 90th to the 10th percentile of the income
distribution for selected nations, he found that the
US ratio of 5.45 was well above the average level of 4.0 for all nations in the Organization for Economic
Cooperation and Development. The United States thus
stands out among developed nations for the severity of
its inequality.
Rising inequality over the past 30 years has been
attributed to a variety of factors, including, in addition
to globalization itself, technological change and market
segmentation (Massey, 1996; Levy, 1998; Danziger and
Gottschalk, 1995). Nonetheless, all countries compete
in the same global economy and face the same
technological and market conditions, yet the United
States is unique among advanced nations in the degree
to which it allows these large, macro-level forces to
generate inequality. When Smeeding (2005) computed
Gini indices of income inequality before and after
taxes, he found that the redistribution of income was
much lower in the United States than anywhere else.
America’s pre-tax Gini coefficient of 0.45 was only
slightly above that of Sweden (0.44), Germany (0.43),
and The Netherlands (0.42) and well below the values
of 0.50 and 0.49 in Belgium and France. In contrast,
the after-tax Gini coefficient was 0.30 or below these
countries whereas in the United States it stood at 0.37.
This hyper-inequality emerged not through globalization, technological change, or market segmentation,
but because of institutional arrangements specific to
the United States that fail to redistribute income to the
same extent as other industrial nations. Over the past
several decades, the US political economy has been
systematically restructured to give producers, owners,
and managers the upper hand over consumers, workers, and employees. In this article, I describe the new
political economy of the United States and how
American markets have been transformed to produce
divergent outcomes at the top and bottom of the
income distribution. The New Political Economy
of Poverty
During the 1930s, Franklin Roosevelt’s New Deal
created a political economy that worked to the benefit
of the middle and lower classes at the expense of the
wealthy. Markets were regulated in the public interest
to moderate their excesses and failures. A system of
social insurance was created to protect ordinary
citizens from periodic downturns in the economic
cycle, the misfortunes of life, and dependency in old
age. To fund these state responsibilities, a progressive
tax system was erected to redistribute income and
wealth away from the rich toward the middle and
lower classes. Lyndon Johnson’s Great Society took the GLOBALIZATION AND INEQUALITY New Deal a step further by seeking to eliminate racism
from the welfare state that Roosevelt created.
The wealthy had long opposed these redistributive
policies, but until the 1960s they gained little traction
politically. As long as southern states remained solidly
democratic, populist, and allied with northern workers,
north-eastern liberals, and western progressives, conservatives could do little more than chip away at the
edges of the New Deal. More than any other factor, it
was the decision to enfranchise African Americans and
include them under the protections of the welfare state
that broke apart the New Deal coalition and led to a
political realignment that restructured the American
political economy in favour of the rich and powerful
(Edsall and Edsall, 1991; Lemann, 1991; Quadagno,
1994; Massey, 2005).
The passage of the Civil Rights Act of 1964 began
the process of realignment. In one stroke it ended the
south’s traditional support for populist economic
policies and transformed the former confederacy
from a Democratic to a Republican bastion. Blue
collar voters in the north likewise began to abandon
the Democratic coalition in 1968, when passage of the
Fair Housing Act threatened to integrate schools
and neighbourhoods (Massey and Denton, 1993), and
when affirmative action began to force blacks into
white unions (Skrentny, 1996). As northern blue collar
workers and southern Democrats increasingly sided
with economic conservatives (Phillips, 1969) and as the
Republican Party turned rightward after being taken
over by southerners (Lind, 2002), the wealthy finally
began to make serious headway in reversing the
New Deal. Deunionization
Despite the rise of unions under the New Deal, the
labour movement never achieved the same level of
prominence as in other industrial democracies
(Western, 1997). Owing to the decentralized political
economy of the United States, collective bargaining
took place on a firm-by-firm basis rather than across
industries; unemployment programmes were run by 50
states rather than the unions themselves; and labour
was never able to establish its own political party.
These peculiarities of the American system limited the
size and influence of unions in the United States
compared with other industrialized nations. Whereas
levels of unionization in 1985 were above 80 per cent
in Belgium, Finland, and Sweden, in the United States
the level stood at just 18 per cent (Western, 1997).
The decentralized nature of the American political
economy, and the barriers to union organization that 11 follow from it, are in no small way attributable to the
unique role of race in shaping the politics and policies
of the United States. The US Constitution’s granting to
states of all powers not specifically allocated to the
federal government stemmed from the need, unique
among nations that would become industrial powers,
to bind slave holders and freeholders in a common
political union. In writing the US constitution, southerners were determined to create a weak national
government that would not be able to end slavery and
impose a system of free labour on the states. The
resulting fragmentation of power between states and
the federal government limited the legal tools available
to promote unionization compared with other industrial nations.
Even at the height of the New Deal, when southern
Democrats supported progressive, pro-union policies,
they did so only as long as the policies did not threaten
the racial status quo, which meant that sectors of the
labour market with significant black employment had
to be excluded from coverage in major pieces of labour
legislation (Katznelson, 2005). Because of these wholesale exclusions, levels of unionization reached their
natural limit much earlier than in Europe, weakening
the power of workers in collective bargaining.
The heyday of union power and influence was the
period 1935–1946. After the Second World War,
however, northern-based unions began to achieve
unexpected success in organizing black textile and
service workers in the south, and southern congressional representatives came to fear that unionization
would fuel demands for civil rights (Katznelson, 2005).
In response, for the first time since Roosevelt’s
election, populist southern Democrats deserted labour
interests and joined with pro-business Republicans in
the north to roll back the National Labor Relations Act
and attenuate enforcement of the Fair Labor Standards
Act. Although President Harry Truman denounced the
legislation a ‘slave labor bill’, with southern support it
passed over his veto (Katznelson, 2005: 67–68).
The 1947 Taft-Hartley Act represents the first breach
in the walls of the New Deal and was a harbinger of
things to come. It prohibited requiring union membership and dues paying as a condition of employment
and outlawed secondary labour actions—banning
boycotts, strikes, and picketing against firms that
were not engaged in a labour dispute, but did business
with one that was. It also gave federal authorities new
power to issue injunctions against collective labour
actions and to impose an 80-day ‘cooling off period’
whenever a strike was deemed to ‘imperil national
health or safety’. The legislation also curtailed federal
authority to investigate and prosecute unfair labour MASSEY Union Members/Non-farm Workers 35.0
30.0 1.2 National Labor
Relations Act
Frequency Relative to 1946 12 25.0
Air Traffic
Controllers
Strike 20.0
15.0
10.0 LandrumGriffith Act 5.0 1910 1920 0.8
Successful
Election 0.6
0.4 Strikes
0.2
0
1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 Taft-Hartley Act
0.0
1900 1 1930 1940 1950 1960 1970 1980 1990 2000 Year Year Figure 1 Level of unionization in the United States
1900–2004. Source: Historical Statistics of the United
States Millennial Edition practices and authorized employers to file suit against
unions for monetary damages incurred during stoppages that were later determined to be unlawful under
the act (Katznelson, 2005: 53–64).
In 1959 the Landrum-Griffin Act further tightened
prohibitions on secondary labour actions and gave
employers another tool in the fight against unionization by permitting non-union members to vote in
certification and decertification elections. Employers
could hire scab workers to replace those on strike and
then have the scabs vote as employees to decertify the
union that originally called the strike (Azari-Rad et al.,
2005). Together, the Taft-Hartley and Landrum-Griffin
Acts took an increasing toll on the labour movement
beginning in the 1960s, especially as manufacturing
began to decline.
Figure 1 shows the rate of union membership in the
United States expressed as a percentage of all nonagricultural workers between 1900 and 2004. Aside
from a brief surge at the end of the progressive era in
1920–1921, unions achieved little success in penetrating the US workforce until passage of the National
Labor Relations Act in 1935, whereupon union
membership surged, more than tripling from around
10 per cent of workers in 1935 to a third of all workers
just 10 years later.
With the passage of the Taft-Hartley Act in 1949,
however, union membership ceased growing and then
began to decline after 1959 when Landrum-Griffin
strengthened the hand of employers. From a peak rate
of 33 per cent in 1954, unionization fell to 23 per cent
by 1980, at which time Ronald Reagan was elected to
the presidency. His first year in office was pivotal,
for in 1981 the union representing air traffic
controllers went on strike for better working conditions and improved safety. Invoking Taft-Hartley, Figure 2 Relative frequency of strikes and successful
union elections 1936–2000 with 1946¼1.0. Source:
Historical Statistics of the United States Millenniual Edition President Reagan declared the strike illegal and
promised to fire all those who did not return to
work within 2 days (Pels, 1995). He brought in
replacement air traffic controllers from the military,
and although flights were disrupted and air traffic
reduced, the union was broken and 85 per cent of its
members lost their jobs. This action sent an important
message: Republicans were prepared to use all the
tools available from Taft-Hartley and Landrum-Griffin
to prevent public sector unionization, the only real
pathway left for union expansion in the United States.
After 1980, the pace of deunionization accelerated and
by 2004 only 11.8 per cent of all American workers
were union members, the lowest level since 1933.
As union power waned, so did the frequency and
success of labour actions. Figure 2 shows frequencies
work stoppages and successful certification elections
from 1936 to 2000. Each series is expressed as a
fraction of its 1946 value to place trends on the same
scale. In many ways, the year before passage of the
Taft-Hartley Act can be considered the high point of
the labour movement in the United States. Despite
year-to-year volatility, the overall trend in labour
actions has been steadily downward since then, with
the exception of a brief period in the late 1960s and
early 1970s during the Vietnam War. After Reagan’s
breaking of the air traffic controllers union, the
frequency of strikes plummeted to near zero.
Over the same period, the frequency of successful
certification elections steadily dropped. Whereas in the
4 years prior to the air traffic controllers strike of 1981,
an average of 8,600 union certification elections were
held each year, by the late 1990s the number had fallen
to around 3,400; and as the number of union elections
fell, so did the success rate. Until 1946, unions
routinely won 86 per cent of their certification GLOBALIZATION AND INEQUALITY Minimizing the Minimum Wage
Specific policy decisions made by the US congress and
the American president in 1947, 1959, and 1981 to
weaken labour’s bargaining position had their desired
effect. Without the collective power of unions behind
them, workers moved out of the middle of the income
distribution and downward toward its lower reaches.
Benefits also disappeared as wages fell steadily toward
the legal minimum, a benchmark that itself came
under increasing attack from conservatives. As Figure 3
shows, through its actions and inactions congress
progressively reduced the real value of the minimum
wage to a level that is presently the lowest since
the 1940s.
The golden age of the minimum wage was from
1948 to 1968, when in real terms it steadily rose from
around $3.50 an hour to peak at $9.20 during the
height of the President Lyndon Johnson’s Great
Society. As inflation increased during the late 1960s 10
9 Wage per Hour 8
7
6
5
4
3
1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003
Year Figure 3 Real value of the US minimum wage (in 2002
dollars) 1938–2004. Source: U.S. Bureau of Labor Statistics 0.95
Proportion of Poverty Earnings elections. From peak success rates above 80 per cent in
the 1940s, the rate fell to a nadir during the Reagan
administration, when unions won just 40 per cent of
certification votes.
Falling levels of unionization translate directly into
lower wages. Holding constant a variety of job and
worker characteristics, studies indicate that union jobs
pay around 15 per cent more than non-union jobs
(Freeman and Medoff, 1984; Robinson, 1989; Card,
1996) and as rates of unionization have declined, so
has the share of workers enjoying this earnings
premium, pulling down average wages. In addition,
with unionization no longer viewed as a credible threat
by employers, they had little incentive to pay workers
higher wages as an inducement not to form a union.
Studies reveal that in the past the threat of unionization boosted the wages of all workers, even those
who were not union members (Freeman and Medoff,
1984; Leicht, 1989; Neumark and Wachter, 1995;
Corneo and Lucifora, 1997; Rosenfeld, 2006b).
As a result, there is a strong positive relationship
between the frequency of strikes and the wages earned
by workers in the United States (Ashenfelter and
Johnson, 1969; Ashenfelter et al., 1972; Kalleberg et al.,
1984). The breaking of the air traffic controllers union
in 1981 effectively ended the perception of unionization as a threat by employers and led to a ‘complete
decoupling of the wage-strike relationship’ (Rosenfeld,
2006a). By the dawn of the new millennium, unions
were no longer a significant institutional player in
determining the wages and employment conditions for
workers in the Unite States. 13 Republican Republican 0.9 Republican Republican 0.85
0.8
0.75
0.7
0.65
0.6
0.55
0.5
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Year Figure 4 Earnings for a full-time minimum wage job as a
share of poverty earnings for a family of four. Sources: U.S.
Bureau of Labor Statistics and Statistical Abstract of the
United States and early 1970s, however, congress declined to adjust
the minimum wage and in real terms its value fell
sharply, reaching $7.20 during the Nixon administration before stabilizing in the Ford and Carter years.
With the accession of the Ronald Reagan to the
presidency after1980, the minimum wage resumed its
race toward the bottom, reaching a value of just $5.40
in 1989. After fluctuating around $6.00 per hour
during the Clinton years, the wage declined once again
under President George W. Bush to end at $5.30 in
2005, the lowest level since Taft-Hartley passed in1949.
Figure 4 illustrates the effect of these wage reductions on the welfare of families supported by low wage
workers using government data compiled by Smith
(2006).1 Specifically, it computes how much income is
earned by working full time (38.5 h/week) for a full
calendar year (52 weeks) and expressing the result as a
share of the official poverty level for a family of four.
As can be seen, never in the course of the past 50 years
has the U.S. minimum wage been sufficient to lift a 14 MASSEY 0.35
Nixon-Ford Carter Reagan-Bush Roosevelt-Truman Clinton
0.3 12000
10000
8000
6000
4000 2003 Dollars per Person 2003 Dollars per Unemployed Worker 14000 Eisenhower KennedyJohnson NixonFord Car
ter- Reagan-Bush 0.25
0.2
0.15
0.1
0.05 2000
0
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Year Figure 5 Spending on unemployment benefits per unemployed worker. Source: Statistical Abstract of the United
States family with one breadwinner out of poverty, although
during Johnson’s Great Society it came close. In 1968,
a minimum wage worker employed full time would
generate annual earnings equal to around 93 per cent
of the federal poverty limit.
The figure has been labelled to show Republican
versus Democratic administrations. After the 1960s,
Republican administrations are very clearly associated
with falling minimum wages whereas Democratic
administrations are associated with steady, fluctuating,
or rising minimum wages. A more comprehensive and
well-controlled analysis by Bartels (2004) showed that
Republican presidents indeed produce greater income
growth for rich than poor families, and that rising
inequality is reliably associated over time with
Republican administrations. Dismantling Safety Nets
Although declining rates of unionization and a falling
minimum wage may have lowered the wages of
workers after the 1960s, in a sense they were the
lucky ones, for despite their reduced earning capacities
at least they had jobs. After the 1970s, as the earnings
of workers stagnated in response to legislated changes
in the US political economy, the safety nets erected by
the New Deal to catch those falling out of the labour
market were cut back through reductions in funding
and coverage. Figure 5 shows per capita spending on
unemployment insurance from 1970 through 2000.
During the early 1970s unemployment benefits steadily
rose based on momentum carried over from the Great
Society, going from $4,900 per unemployed worker in
1970 to $12,000 per unemployed worker in 1973.
During Nixon’s second term (completed by Gerald
R. Ford) benefits were cut back before stabilizing at
around $8,000 per unemployed worker during the first 0
1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
Year Figure 6 Per capita public spending on social services for
the poor 1930–1995. Source: Historical Statistics of the
United States Millennial Editon) half of the Carter administration. As inflation eroded
the value of...

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