The GM Strike: A Century of Context

Wars end with treaties. In the middle of the 20th century, the “class war” that finished off America’s original plutocracy ended with the “Treaty of Detroit.”

Fortune, the business magazine, came up with that catchy turn of phrase back in 1950 to describe the landmark collective bargaining agreement that the United Auto Workers union had just reached with General Motors. What made the pact so historic? America’s most powerful corporation was essentially agreeing to “share the wealth.”

In exchange for labor peace, notes historian Nelson Lichtenstein, GM guaranteed auto workers what amounted to “a 20 percent increase in their standard of living” over five years, along with a new health care benefit and a standard $125 monthly pension, the equivalent of about $16,000 annually in today’s dollars.

This “Treaty of Detroit” would help energize a huge postwar shift in the distribution of U.S. income and wealth. In the quarter-century after 1945, the real incomes of average Americans would double, in the process manufacturing the first mass middle class the world ever seen.

Now UAW workers are once again making headlines, demanding just as they did decades ago that General Motors share the wealth with the workers who toil to create it. And GM is sitting on plenty of wealth. Since 2015, the company has posted $35 billion in North American profits alone. But GM workers today find themselves struggling in a far different — and more difficult — political and economic environment than their UAW forbears.

In 1950, the U.S. labor movement was beginning a third decade of sustained and significant growth. By the mid 1950s, over one out of every three workers in the nation carried a union card. Last year, by contrast, only 6.4 percent of American private-sector workers belonged to a union.

The executives who run General Motors are operating in a different environment, too. In the 1950s, the U.S. tax code subjected the nation’s rich to consistently steep tax rates. Individual income over $200,000 faced a 91 percent federal income tax throughout the decade. In 1950, GM’s top executive, Charlie Wilson, paid 73 percent of his $586,100 total income in taxes.

Posted In: Allied Approaches