4
“Stewardesses aren’t breadwinners,” Carl Icahn told Victoria Frankovich during a bargaining table standoff in August 1985. “They don’t have dependents like the men do.” The newly elected president of the Independent Federation of Flight Attendants (IFFA) at Trans World Airlines, Frankovich was locked in concessionary negotiations with the Wall Street financier who would soon own her troubled employer. Hoping to build on a series of corporate takeovers that he had recently staged in the technology and steel industries, Icahn had publicly promised to lower TWA’s operating costs and to return subsequent profits to investors who backed the deal. Demanding a 40 percent reduction in compensation from pilots, machinists, and ground crews, Icahn would cut all employees’ pay as he trimmed TWA’s budget. Flight attendants, however, would receive a special benchmark for givebacks. Because 91 percent of flight attendants were women, and because he argued that women do not need a family wage, Icahn insisted that Frankovich accept deeper cuts than those coming from other employee groups. Furthermore, unlike the temporary concessions that Icahn was seeking from the other unions, the flight attendant givebacks would be permanent. If Frankovich signed the deal, flight attendants would forfeit the gains they had made a decade earlier in coalition with the women’s, gay, and lesbian liberation movements. With Icahn’s proposal, it seemed that restoring corporate profitability in the 1980s would require rolling back the social transformation of the 1960s and 1970s.1
The double standard in concessionary bargaining at TWA was a consequence of a broader political economic transformation that scholars have called “financialization.”2 By the mid-1980s, free market reforms had drastically elevated the power of the banking industry relative to other sectors of the economy. Insisting that strict federal financial regulations passed during the Great Depression had exacerbated the economic crisis of the 1970s, pro-business activists helped convince policymakers that eliminating those regulations would be necessary for an economic recovery. They argued that if Wall Street could design new financial products that coupled higher levels of risk with higher interest rates, investors looking for better returns would provide new capital for starved credit markets. As the financial services industry boomed amid successive run-ups in the junk bond, derivative, and mortgage-backed securities markets, Wall Street stockbrokers, hedge fund managers, and investment bankers became the most powerful actors in the economy and short-term stock performance became the most important benchmark for corporations’ success.3
The new focus on stock and bond prices would present an unprecedented challenge for working people. Before 1980, labor, financial, and environmental regulations made companies accountable to a wide array of stakeholders, from employees to suppliers, customers, and neighbors.4 Union activists were able to leverage that accountability to make concrete economic gains for their constituents. That changed after financial markets became more important to the economy in the 1980s. Since Wall Street reacts favorably when companies trim labor costs,5 managers could drive up corporate stock prices by cutting wages and laying off workers. Armed with a new economic incentive and new capital, corporate leaders took aim at the labor movement. As management’s anti-union campaign succeeded, financialization helped bring low-wage labor to heavily organized industries that had once been the bedrock of the middle class.
Given the economic inequality that accompanied Wall Street’s rise to power, new cultural work would be necessary for big business to sell financialization to the public. Taking up that task, businessmen framed financialization as a means to rescue hardworking American families that were struggling in a weak economy. Before 1980, the financiers argued, government regulation had hamstrung corporate leaders. Labor law, equal employment opportunity enforcement, environmental regulation, and safety oversight had limited executives’ control of corporations. With management held in check, environmentalists, community organizers, people of color, and feminists had made advances in the workplace in the 1970s. In the wake of those gains, some single mothers, women of color, and even welfare recipients were able to provide for their families. While marginalized people moved forward, the resurgent conservative movement argued, most hardworking American families had moved backward. To reverse that trend, Wall Street offered a solution: cut government fetters on capital. With new financial resources, managers could jumpstart the economy and provide new opportunities for family breadwinners. As regulation vanished and the economy recovered, businessmen and workingmen could reclaim their natural power over the workplace and over the household.
Wall Street’s sales pitch put flight attendants in the crosshairs of financialization. As the airlines singled out flight attendants, using conventional ideas about domesticity to dismiss their need for a livable wage, activists confronted the contradictory foundations of a financialized economy. On the one hand, the architects of financialization espoused patriarchal ideals, promoting businessmen’s authority at work, workingmen’s authority at home, and the self-reliance of the husband-led nuclear family. But on the other hand, as financialization helped corporate executives cut up union contracts, wages collapsed for all workers. Consequently, as businessmen appealed to traditional family values by asserting that “flight attendants aren’t breadwinners,” financialization would strip both flight attendants and workingmen of a family wage. As trade unionists with a commitment to feminist and gay liberationist activism, flight attendants refused Wall Street’s economic agenda and its cultural justification. Because of their activism, the airline industry took center stage in the debate over Wall Street’s rise to power in the 1980s.
Hostile Takeovers, Junk Bonds, and the Problem with the Three-Martini Lunch
Financialization confronted TWA flight attendants as they were jarred awake with news of a crisis on the morning of Friday, June 14, 1985. Newscasters interrupted regular programming to announce that Rome-bound TWA flight 847 had been hijacked after takeoff from Hellinikon International Airport in Athens and that the jet was under siege in Beirut. Five New York–based flight attendants would spend three harrowing days aboard the aircraft as gunmen ordered the pilots to fly back and forth between Beirut and Algiers and murdered one of the passengers at the front of the Boeing 727’s crowded, fetid passenger cabin.6 As they grappled with disturbing live television feed of the standoff, flight attendants picked up morning papers and found a second piece of news about TWA. Bold headlines announced that Texas financier Frank Lorenzo would buy the airline for $795 million.7 TWA flight attendants were all too familiar with Lorenzo after his intervention at Continental Airlines in 1983, which eliminated two-thirds of the carrier’s employees and cut wages in half for workers who remained. As they pored over details of the Lorenzo transaction, and as the hijacking provided a vivid reminder of the airline industry’s vast instability, flight attendants were perplexed. Why, they asked, would a businessman with an unwavering commitment to corporate profitability want to buy a company that had lost hundreds of millions of dollars since deregulation?
The answer to the flight attendants’ question begins with a core component of financialization: the corporate mergers and acquisitions boom of the 1980s.8 With Lorenzo’s announcement, TWA became one of thousands of companies targeted that decade for a “hostile takeover,” a forced sale also called a leveraged buyout (LBO). Hostile takeovers begin when a wealthy suitor wagers that a company’s stock is undervalued. In TWA’s case, the company owned a cache of valuable assets, from facilities at Washington National, New York–LaGuardia, and other capacity-restricted airports, to treaty-protected access to lucrative global hubs such as London-Heathrow. The airline had floundered since the passage of the Airline Deregulation Act in 1978, however. Recording net losses in four out of the first five years of deregulation, TWA shed twelve thousand employees and cannibalized 30 percent of its operation.9 Initiating an LBO, Lorenzo gambled that TWA’s low stock price reflected the post-deregulation turmoil and not the overall value of the facilities and routes, assets that presumably would be worth far more if managers had been more effective. Given that assumption, Lorenzo prepared to make TWA shareholders an offer too lucrative to resist. Rather than pay the current, depressed market value for the shares, Lorenzo would buy stock at above-market prices, paying a rate that investors would have gotten if the post-deregulation crisis had never happened. Once Lorenzo owned more than 50 percent of the voting shares of stock, he would control enough votes on the board to make executive decisions by fiat. Exercising that unilateral authority, Lorenzo would fire the existing management team, take the reins of the company, and retool operations to maximize efficiency. Except for the sacked former managers, everyone theoretically wins, as the original shareholders liquidate their once-depressed stake at a profit and as competent new executives put assets to better use, which in turn leaves the firm better equipped to meet the challenge of the marketplace.
Reeling from Lorenzo’s hostile takeover of Continental Airlines, union leaders from across the industry insisted that in an LBO, not everyone wins. Because the prices of fuel, airplanes, and facilities are largely fixed, the only way for new managers to achieve promised operational efficiencies is to cut wages. Indeed, after the Lorenzo takeover, Continental flight attendants topped out at $16.47 an hour while their peers at TWA were earning almost three times their wage—$42.64.10 Recognizing that Lorenzo or any other financier could try to replicate Continental-style labor cost cutting at a different airline, and aware of takeover rumors at TWA, Eastern, and Pan Am, a coalition of activists from multiple trades and carriers mobilized against LBOs. Their initial strategy involved leaning on pro-labor Democrats to convene congressional hearings on the consequences of LBOs in the airlines. The coalition hoped to persuade elected officials to regulate hostile takeovers, creating oversight that would drive up the cost of transactions and make them less desirable to financiers.
Although they provided an audience for flight attendant testimony that underscored the inequitable consequences of LBOs, congressional hearings also allowed bankers to make the case for the political and cultural merits of financialization. Most eloquent in that defense was Wall Street financier Carl Icahn. Notorious for his confrontational approach to business, Icahn would soon inspire Michael Douglas’s performance as Gordon Gecko in Oliver Stone’s 1987 film Wall Street. Icahn first testified on June 6, 1985, the same week that the Wall Street Journal reported that he had joined Frank Lorenzo in buying up shares of TWA. Journalists speculated that if he could outbid Lorenzo for control of the airline, Icahn could leverage TWA in a sequence of LBOs he was engineering. He would finance the TWA deal by borrowing against the resources of ACF Technologies, a previous takeover target that Icahn now owned, and then use TWA’s unencumbered assets to launch a follow-up raid on steel giant USX.11 When he took the witness stand, however, Icahn avoided arcane financial analysis and instead engaged the public by insisting that high-stakes financial risk taking was necessary to restore the global economic competitiveness of the United States.
Leading his audience through the economic history of the 1970s to explain his interest in hostile takeovers, Icahn worked to manage a contradiction surrounding Wall Street’s growing political and economic power in the 1980s. As they mobilized against welfare and against government regulation, the pro-business activists of the 1970s continually reiterated that hard work is the bedrock of American culture (see Chapter 3). Restoring the power of the free market would, for the pro-business movement, restore such enduring values as self-denial, deferred gratification, and personal responsibility. For more than a century, however, those same pro-work values had also been the foundation of a populist critique of banking, one that condemned Wall Street for its self-indulgent, irresponsible, immoral excess.12 Indeed, as it drove a financial boom that would soon produce Gordon Gecko’s “greed is good” speech as a cultural leitmotif, Wall Street seemed to undermine the pro-business movement’s goal of reorganizing the economy around traditional family and hard work.
Reframing that debate, Icahn insisted that hostile takeovers would reinforce pro-work values by teaching corporate managers to work hard. By the mid-1970s, Icahn argued, managers had strayed from the work ethic. Tight credit markets, government regulation, union contracts, and a weak economy had restrained corporate leaders, making non-intervention—rather than aggressive leadership—a survival strategy for those at the top of big firms. With corporate executives choosing inaction over action, Japanese competitors had lapped U.S. firms in the 1980s. LBOs, Icahn insisted, would break that cycle. Hostile takeovers would subject upper management to the forces of the free market, making business leaders either take charge or face ejection in a Wall Street–engineered buyout. Selling financialization as a moral mechanism to transform managers into responsible workers, Icahn accomplished two political goals. First, he undermined flight attendants’ effort to claim the moral high ground and in the process moved the labor question to the periphery of the public debate about financialization. Second, he aligned Wall Street with the moral foundations of the family values economy, turning hostile takeovers into means to retool the economy around domesticity and hard work.
The congressional hearings about the TWA buyout seemed to underscore Icahn’s point about flagging corporate leadership. TWA president Ed Meyer took the stand early in the process. “If you don’t mind, I’ll read my presentation,” Meyer began, seeming intimidated by the intensity of the venue and keeping his head down in prewritten text. When Icahn was called, however, he spoke directly to the gallery without notes, offering vivid testimony. “Mister Meyer is flat wrong,” Icahn boomed as he began.13
Rather than offer a narrow rebuttal to Meyer’s nuts-and-bolts presentation about airline economics, Icahn launched a broad critique of dominant management practices at U.S. corporations in the postwar era. Bad management was the negative side effect of an immensely stable banking system in the mid-twentieth century, Icahn and fellow financiers argued, one that channeled funds into General Motors, General Electric, U.S. Steel, and other established, stable firms. That banking system was fundamentally risk-averse. If investors recognized that a management team at a given firm was failing, for example, it was extremely difficult for them to gather the capital necessary to eject managers in a hostile takeover. The big banks and insurance companies of the 1960s would not, in Icahn’s appraisal, want to dirty their books with the risks associated with buying a failing company, and they had no stomach for the negative publicity that would come with the ejection of well-known and well-liked managers.14 Executives at brick-and-mortar companies were, therefore, protected from the market forces that would ordinarily force them to innovate.15
As he problematized mid-twentieth-century capital formation, Icahn also launched a distinct cultural critique of the era’s managers. Because of their insulation from the market, there were few incentives for executives to claim managerial authority or take the risks necessary to build an innovative, adaptive, competitive business. Instead, managing had been relegated to the short blocks of time between three-martini lunches and departure for the golf course. Icahn painted a vivid picture of this culture for the House Subcommittee on Telecommunications, Consumer Protection, and Finance:
[Managers] are sort of like the fraternity brother in college. The fellow that you elected to be president of the fraternity in college was certainly not necessarily the best and the brightest or the guy that you would have run your company or your funds or your money. . . . He was the good guy, the guy you liked to go drinking with. . . . And that is the guy that gets into the corporation today, a likeable guy. He gets football tickets for the guys on the board and he goes drinking with them when they come in for a board meeting. And what happens is, the CEO likes him and the CEO decides to retire or become chairman emeritus, he makes this fellow, who has been there 20 or 30 years, he makes this fellow the CEO, and this is what evolves. What happens as a result, we have, I believe, poor management today.16
Castigating the not-so-smart-frat-brother-turned-CEO, Icahn took control of the debate with TWA’s Ed Meyer. The underlying cause of Meyer’s opposition to the takeover, Icahn argued, was his unwillingness to part with a mid-twentieth-century managerial culture. Meyer was afraid to lose a lavish lifestyle, one that came with unlimited free rides on TWA flights with gourmet cuisine and attractive flight attendants in Valentino dresses. “It is just fear of the unknown,” Icahn taunted, “fear that I am going to oust them.”17 Antagonizing Meyer, Icahn turned the conversation to morality. Because of managerial inaction, Icahn argued, the United States put its productive capacity to a terribly inefficient use. That bloat was the cause of the economic woes of the 1970s, those that had jeopardized the American Dream in a cycle of high unemployment and runaway inflation. Using LBOs to bring back the discipline of the market was, therefore, a way for Icahn to put American families back to work.
What was most challenging about Icahn’s line of argumentation for his opponents at TWA was that, at least in operational terms, Icahn was correct. The management teams of Ed Meyer and his predecessor, Charles Tillinghast, had, after all, failed to read the tea leaves of a historic reorganization in the global economy in the 1970s. The major airlines had entered that decade making money by cherry-picking revenue off the postwar boom in manufacturing. In the spring of 1974, for example, U.S. airlines offered more seats on Chicago-Pittsburgh—a route linking the capital of the world’s steel industry to the financial center of the Midwest—than Chicago-London and Chicago-Paris combined. Columbus, Indianapolis, and Saint Louis were as important to TWA’s route system as Zurich, Milan, and Hong Kong. But after 1973, the U.S. industrial economy withered amid intensifying international competition and relentless inflation. Going forward, it would be much more difficult for the airlines to make money carrying coal, steel, and auto executives between industrial cities.18 Instead, companies would have to build networks that connected what Saskia Sassen calls “global cities,” those with command and control functions over finance, insurance, real estate, communications, and technology. This meant that each major carrier would have to redeploy assets to gain a top position in the East Coast megalopolis, connect traffic through a hub in a large midwestern city with a diverse economy, and then link that traffic to the burgeoning California corridor.19
TWA managers failed to meet that challenge. The airline was unable to capitalize on its once-strong position in the most economically important city in the middle of the continent: Chicago. In the mid-1970s, either TWA or American Airlines could have occupied the number two position at O’Hare International Airport behind giant United. In April 1974, for example, American and TWA’s Chicago stations were the exact same size, with each offering approximately one hundred flights to twenty-five destinations. But as the 1970s progressed, TWA failed to hold the line against American. TWA had almost no ability to borrow by mid-decade, because of both painfully tight lending practices and its own precarious finances. Bad credit made it difficult for TWA to buy new aircraft, leaving the carrier particularly vulnerable to the oil shocks that occurred in 1973 and 1979. American, however, had dedicated more capital to technological advancement and scooped up most of Braniff International’s fuel-efficient 727s when that airline collapsed after deregulation.20 Thus, when American put the squeeze on TWA in Chicago, it did so with far lower energy costs. In 1979, for example, TWA still flew a full third of its Chicago schedule with fuel-thirsty 707s while American cut its use of the older jets to just 15 percent.
Lacking the right aircraft for the market, TWA gave up. On the eve of the Icahn affair in 1985, when American connected Chicago to the world with nonstops to fifty-seven cities, TWA served just eight airports from O’Hare, three of which were in its hometown of New York City.21 Meanwhile, TWA built up operations at Pittsburgh and Saint Louis, escaping American’s challenge in Chicago but placing itself front and center in the crisis of deindustrialization in the Midwest. Therefore, despite the underlying value of TWA’s global route system, TWA’s stock price was in free fall while American’s had stabilized.
TWA’s declining stock price made the carrier particularly attractive to financier suitors like Lorenzo and Icahn. Confirming speculation that he was buying up shares to counter a Lorenzo takeover bid, Icahn went public with an offer to buy TWA for $18 a share on May 22. But with Lorenzo’s higher offer for $23 a share on June 14, Icahn faced an immediate choice. He could let the sale close, selling his 32.7 percent stake in TWA to Lorenzo for a robust $78.6 million profit.22 Or he could stay in the game and counter Lorenzo. All signs pointed to the second option: Icahn had been publicly adamant that TWA’s assets made it a good buy and that it would make him far more money than the $78 million that Lorenzo had put on the table.
Carl Icahn formally met Frank Lorenzo’s challenge on August 6, 1985, when he raised the Texas financier’s bid by $1 and offered $24 a share for TWA.23 To Icahn’s consternation, Lorenzo immediately counteroffered, matching Icahn’s bid. Recognizing Lorenzo’s determination, Icahn invited Lorenzo into a private meeting in his Manhattan office the following week. Icahn offered Lorenzo a one-time cash payment of $50 million to walk away from TWA, apparently hoping that the opportunity for immediate profit would dissuade Lorenzo from continuing his increasingly risky, increasingly arduous hostile takeover attempt. Lorenzo refused the payment, instead demanding $70 million to withdraw his offer. Exploding in frustration, Icahn threw Lorenzo out of his office.24
Abandoning the effort to pay Lorenzo off, Icahn retooled, aiming to secure additional financing and close the sale before Lorenzo raised the price with another counteroffer. As Icahn returned to Wall Street, the most important player in the LBO process emerged: Icahn’s investment bank, Drexel-Burnham-Lambert. A driving force in the corporate mergers and acquisitions boom of the mid-1980s, Drexel was working with both Icahn and Lorenzo, preparing to assist in financing either man’s purchase of TWA. The investment bank was able play both sides of the TWA bidding war because few other financial institutions were willing to bet on deals as risky as the TWA takeover. TWA, after all, was burning cash, losing market share, and posting net losses. Conventional wisdom said that a lender would be foolish to further leverage a firm that was already hemorrhaging.
Drexel-Burnham-Lambert thought otherwise. The investment bank specialized in identifying undervalued stocks and then funding LBOs of those firms. Most of these transactions were financed with high-yield securities commonly known as “junk bonds.” With a rating of BB-plus or lower from Standard & Poor’s, or BA1 or lower from Moody’s, junk bonds are securities that are backed by little or no collateral but that advertise much higher interest rates than those paid for more secure investments.25 The junk bond business was small, just $16 billion out of an $800 billion credit market in 1984.26 But it was red hot and growing, and by 1985 investors were trading as many junk bonds as they were stocks on the Dow Jones.27 Under the direction of its aggressive CEO Michael Milken, Drexel-Burnham-Lambert helped lead the charge toward the riskiest sectors of the bond market. The investment bank had a growing list of private and institutional investors willing to gamble that TWA would survive the leadership change and become a leaner, more agile, and more profitable company, one that could pay interest rates far exceeding those available from most other stocks and bonds.
By the end of 1985, Drexel had shifted the advantage in the struggle for control of TWA toward Carl Icahn. The investment bank helped Icahn put together what had become the most securely financed buyout offer and to acquire the majority of the voting shares in the company. Like more and more transactions in a junk bond market steaming toward boil-over, however, the deal came at a steep price. The financier was about to pay $24 a share for TWA stock that—given the airline’s overall financial performance—was trading at $15 on the eve of the closing. Icahn would in fact have to borrow another $750 million from Drexel just to keep TWA flying once he took over. Nevertheless, short-term economic challenges were no match for Icahn’s broader pro-work cultural vision, and the financier closed the sale on the freezing day of January 6, 1986.28 Using the new financial tools of a deregulated banking industry, Icahn executed a heavily leveraged deal that gave him control of an airline that, for more than a decade, had been home to the industry’s most mobilized flight attendant union.
Concessionary Bargaining Family-Style at Trans World Airlines
Soon after Carl Icahn became TWA’s chief executive, tensions rose in response to the story that he and other Wall Street bankers were telling about financialization. Regulatory reform in the banking sector, Icahn had argued, was about the future. Financialization would allow companies to move out of the stasis of the 1970s and into a new age of global competitiveness, one that would bring new opportunities for workers who had been frozen in place by a weak economy. The problem with financiers’ analysis was that companies like Continental and TWA were dynamic places in the 1970s. Flight attendants had their own vision for a better economic future, one that stood in stark contrast to Wall Street’s narrative and guided their unions as they challenged the status quo of airline labor relations. Activists focused on closing the pay gap between flight attendants and other airline workers and had won wage and work rule improvements that allowed union members to be breadwinners for their families.29
Icahn and other financiers rejected flight attendants’ plan for the future. Echoing religious activists, the pro-business movement that had propelled Wall Street’s rise to power in the 1980s pushed for economic changes that would help self-reliant, independent, responsible families. Traditional notions of domesticity defined the family for these activists, who argued that financialization would provide new resources for breadwinning husbands, caregiving wives, and dependent children.30 A flight attendant movement that delivered big raises to single people, to female-headed households, and to gay, lesbian, and feminist-identified people was thus suspect to Carl Icahn and his colleagues. Insisting that flight attendants are not breadwinners, Icahn designed a targeted package of givebacks that stripped flight attendants of a family wage. Therefore, while all unionized workers faced disheartening setbacks in the 1980s, the renewed cultural commitment to family values provided a cudgel for Wall Street to force flight attendants to take deeper economic concessions than any other airline workers.
The deteriorating situation at TWA in the second half of 1985 demonstrates how family values left airline workers on a divergent path through financialization. That divergence surfaced as all TWA employees scrambled for a response to Carl Icahn and Frank Lorenzo’s simultaneous hostile takeover attempts. The 1983 crisis at Lorenzo’s Continental disturbed TWA employees, who heard the stories of the surprise bankruptcy, the mass firings, and the 50 percent pay cut blowing across the airline. Motivated by fear, pilot, machinist, and flight attendant leaders quickly arrived at a strategic consensus. Union leaders would try to preempt a surprise attack on employees by engaging Icahn in bilateral talks before the sale of TWA. By promising Icahn expansive labor cost savings, activists could protect themselves from the even more extreme cutbacks that Icahn might design without their input. Meanwhile, Icahn could use concessionary pacts with unions to woo investors looking to cash in on labor cost savings. Guaranteed pay cuts would strengthen Icahn’s hand against Lorenzo, thereby reducing the chance that employees would face the notorious Texas financier.
Workers’ initial unity vanished as soon as pilots, flight attendants, and ground employees began negotiating with Icahn. Talks with the mostly-male employee groups moved quickly. On July 5, 1985, just three weeks after his first formal buyout offer, pilots announced an accord with Icahn, and a bitter pill it was for any aviator who had built her or his flying career at TWA. Pilot leaders offered a 20 percent across-the-board cut in hourly wages, givebacks that when coupled with work rule and benefit concessions would reduce TWA’s total pilot costs by 40 percent. The deal came with a humiliating and ominous caveat: as long as Icahn honored the proposal, cockpit crews would cross the picket lines of any other group that opted to strike rather than take concessions after the buyout. With their livelihood on the line, and without skills that were easily transferable to other industries, pilots abandoned the union coalition in exchange for solidarity with Icahn.31
Well aware that ground employees were also close to a deal and recognizing that the pilots’ picket crossover agreement had further weakened their leverage against Icahn, flight attendant activists pushed for a compromise. Los Angeles–based flight attendant Victoria Frankovich led her colleagues through that process. Vowing to take the Independent Federation of Flight Attendants (IFFA) in an activist new direction, Frankovich had recently defeated IFFA co-founder Arthur Teolis in a bid for union president. Frankovich had built a reputation as a determined negotiator and sharp communicator in the 1970s and was adamantly committed to protecting the gains that she and other IFFA leaders had won during the upsurge. Nevertheless, Frankovich conceded that the hostile takeover had backed IFFA into a corner and that concessionary bargaining with Icahn was a necessary survival strategy for flight attendants facing financialization. Therefore, on August 2, 1985, she sat down with Icahn in a private, one-on-one meeting in New York. As they began to talk, Frankovich had two basic goals: come away with a deal that would shield TWA flight attendants from further cuts after the takeover, and design the agreement to spare flight attendants from the deep hourly wage cuts forced on much higher-paid pilots. To achieve this goal, Frankovich offered to match the concessionary agreement that the International Association of Machinists and Aerospace Workers (IAM) was finalizing with Icahn, one centered on a 15 percent reduction in hourly pay. Locking in wage givebacks that were smaller than pilots’ would preserve flight attendants’ longstanding commitment to closing the wage gap between flight attendants and the mostly-male employee groups.32
Icahn scuttled Frankovich’s overture, refusing to entertain a universal agreement that would standardize IFFA and IAM concessions. “I’m going to need more from the girls,” Icahn told Frankovich, rotating the terms “girls” and “stewardesses” when he spoke about flight attendants, as he often did in public presentations. According to Frankovich, Icahn made an explicit argument about gender, sexuality, and family as he laid out a concessionary agenda that would, on a percentile basis, hit flight attendants harder than any other TWA employees. Icahn began by claiming that flight attendants were unskilled. “I can get nineteen-year-old girls off the street to do this job,” Icahn told Frankovich. Even though hiring credentials—including college credit and foreign language proficiency—were stricter for flight attendants than for aircraft cleaners, ticket agents, and many others in the IAM, flight attending was, for Icahn, a job that any woman could do. Because of his assumption that all women are naturally good at homemaking, caregiving, and entertaining, the financier insisted that the airline could tap an unlimited applicant pool even if it drastically lowered wages. Icahn then deepened his analysis, using traditional family values to insist that flight attendants deserved to earn less than everyone they worked with. “Stewardesses aren’t breadwinners,” Icahn told Frankovich. “They don’t have dependents like the men do.” Invoking the family wage system, Icahn insisted that it was fair and appropriate to put a floor under mechanics’, custodians’, and customer service agents’ wages, as those workers needed to fulfill their responsibilities as husbands and heads of households.33 Regardless of how many flight attendants were the sole providers for friends, lovers, and children, Icahn insisted that no such floor should exist under IFFA bargaining.
Though he dredged up timeworn clichés about “women’s work” as he dismissed Frankovich, Icahn made a historically specific argument about men’s and women’s labor in the 1980s. He instrumentalized widespread sentiment among white men that radical feminists’ and gay liberationists’ 1970s advances had undermined traditional manhood. To defend ordinary men, Icahn vowed to use the LBO and the collective bargaining process as tools in a countermovement against the culture of the 1970s. Thus, the financier proposed a new alliance between management and pilots, machinists, cleaners, and clerks around a common commitment to restoring men’s authority at home and at work. Icahn referenced that solidarity as he described to Congress his plan to sack failed managers: “I am not talking about the real employees, the real guys doing the work, I am talking about what I consider the top layers in these companies that have built up bureaucracy on bureaucracy, and these bureaucracies really throttle up the productive engine in this country.”34 By naming the “real guys” as his allies and by couching the LBO as a means to restart the economy’s “productive engine,” Icahn described his involvement with TWA as an effort to restore the mobility for workingmen that had vanished in the 1970s. Rather than making an inequitable bid to upwardly redistribute wealth, the Icahn buyout would protect the interests of the “guys doing the work.”
As he framed financialization as a means to restore the value of a hard day’s work, Icahn took aim at the gains that women had made in the labor market in the 1970s. In an interview with Cosmopolitan magazine, Icahn focused on flight attendant labor relations as he explained the importance of his managerial strategy. Perhaps because Helen Gurley Brown’s publication had long provided a space to talk about gender while dismissing feminism, Icahn was particularly candid as he argued that flight attendants were overpaid and that financialization would help him cut women’s wages:
I have been able to build a successful airline because I was willing to confront the task, to stand up to unpalatable situations. When I looked at the unfavorable contract we had with flight attendants, I said, “I am not going to live with this.” The top management told me they’d handle it, that they always negotiated a deal. I asked, “What happens if the flight attendants won’t negotiate?” They said, “Well, we have to work with them.” But I said, “We have a training school. Why don’t we start training new people so we have some leverage just in case?” You don’t have to be a genius to figure that out. We live in a world based on supply and demand. The flight attendant chose to be one, and she’s in a business where there are a lot of flight attendants willing to work for a lot less.35
Traditional manliness—a willingness to “confront the task” and to “stand up to unpalatable situations”—allowed Icahn to bring financialization to TWA. That process included aggressive new anti-union tactics, which, in turn, unleashed market forces that pushed flight attendants to work for “a lot less.” As IFFA’s bargaining power evaporated, management confiscated the economic resources that had allowed flight attendants to be breadwinners for their families. The financial revolution of the 1980s would, in other words, roll back the cultural revolution of the 1970s.
Events at TWA in the fall of 1985 helped Icahn deliver on his commitment to changing the value of men’s and women’s work. On Monday, August 5, Icahn settled with IAM-represented employees, signing the agreement that he had rejected from Victoria Frankovich forty-eight hours earlier.36 As he compromised with workingmen, Icahn remained unyielding with flight attendants. To secure their jobs at the new TWA, activists would have to come up with a set of givebacks that would lower the airline’s total flight attendant costs by at least 44 percent. Furthermore, and contrary to his approach with the pilots or IAM-represented groups, Icahn was not open to “snap backs” that would end the most painful flight attendant givebacks after TWA reorganized. Finally, and once again in a demand made only of IFFA, flight attendants would have to forfeit their “dues checkoff” agreement, a change that would force union leaders to collect monthly dues on an individual basis rather than expecting TWA to deduct the correct amount from paychecks.37 Instead of rallying their members around key political issues as pilot and IAM leaders could continue to do, IFFA activists would have to spend long hours collecting and processing union dues once checkoff disappeared.
The situation further intensified on November 1, when activists opened major newspapers to see that, in the middle of a corporate downsizing, TWA was hiring flight attendants. The small print in the advertisements revealed that the job postings were a strategic move on Icahn’s part. New recruits would earn $1,000 per month in base pay, about half of what the union contract guaranteed flight attendants in their first month. The discrepancy meant that new flight attendants would earn their wings only if existing crews called a strike, taking to the skies as permanent replacement workers.38 As Icahn continued to harden his position against IFFA, front-line TWA employees were in vastly different situations by the time he completed the hostile takeover in January 1986. Though Icahn had pared down machinists’, pilots’, and ground workers’ wages, he was legally bound to take the knife no deeper. Flight attendants, however, would have no such certainty: by springtime, a hotel full of strikebreakers in Kansas City would be ready to help Icahn confiscate the spoils of flight attendant unionism.
“We Are Breadwinners”: Culture, Political Economy, and the TWA Flight Attendant Strike of 1986
Flight attendants crafted a hard-hitting response to Carl Icahn’s unprecedented challenge. Instead of sidestepping the political debate about the nature of work and family that Icahn had helped initiate, IFFA intervened in that debate. Making themselves rather than Icahn the center of their campaign, flight attendants rolled out a simple, three-word slogan: “We Are Breadwinners.” Claiming their economic role at the head of the household, flight attendants refuted the story that conservative activists were telling during that decade. IFFA activists argued that as it had pitted hardworking American families against single mothers, female-headed households, and nondomesticated relationships, the pro-work political movement of the 1980s had levied a cultural judgment against independent women. Activists insisted, however, that the economic reforms based on that judgment would force every front-line employee to work for less. After a 40 percent pay cut and benefit givebacks, every flight attendant, every machinist, every ramp service worker, and every pilot would have a harder time providing for her or his dependents. As they made their own families front and center in the campaign against concessions, TWA flight attendants demonstrated that there is no way to contest financialization without confronting its cultural underpinnings. There is no such thing as fighting pro-work politics, flight attendants argued, without fighting “pro-family” politics.
Flight attendant leaders had little time to prepare for this cultural confrontation. On his seventeenth day on the job, Carl Icahn formally rejected all flight attendant alternatives to the agreement sitting on the table, demanding a 44 percent cost reduction, no snap backs, and the end of dues checkoff.39 As talks collapsed, the IFFA’s executive board extended its long-standing commitment to rank-and-file democracy and sent the Icahn proposal directly to flight attendants for a ratification vote. On February 1, 1986, 98 percent of flight attendants who went to the polls in a referendum voted against Icahn’s terms.40 Even in the face of nearly unanimous opposition, however, activists hedged, figuring that stalling was preferable to a walkout, given the number of replacement workers ready to take flight attendants’ jobs. Continued bargaining would delay a concessionary contract or a risky strike.
Icahn quickly called IFFA’s bluff and petitioned the National Mediation Board (NMB) to formally declare an impasse in the TWA conflict. Since anti-union Reagan appointees controlled the NMB in 1986, Icahn hoped the board would endorse his effort to force concessions on flight attendants by rejecting IFFA’s plea for more time in mediation. With an impasse declaration, Icahn would be allowed to implement wage cuts in thirty days and to replace any flight attendant who struck in protest with one of the strikebreakers in training in Kansas City. On February 5, the board obliged Icahn, thwarting IFFA’s bid for more time in mediation and beginning the countdown toward a strike: midnight on Friday, March 7, 1986.41
That moment passed without a deal. Any flight attendant who came to work on Saturday morning would do so on Icahn’s terms. Refusing to comply with Icahn’s demand, flight attendants abandoned their aircraft en masse, grounding TWA as the sun rose across the eastern end of the operation in Bombay, Tel Aviv, and Cairo and rolling like a wave all the way west to Honolulu. With operations halted, flight attendants in the middle of trips would have to stay on friends’ couches or hitch rides home on other, unionized airlines. After Icahn cut off payments to strikers’ layover hotels, IFFA chartered a series of jumbo jets to perform “sweeper flights,” hopping across Europe, the Mediterranean, and the Middle East to pick up stranded crews.42
Once back at their domiciles, TWA flight attendants picketed around the clock in front of passenger terminals, maintenance hangars, reservations centers, and ticket offices. All signs they carried included the IFFA logo and the “We Are Breadwinners” slogan. To draw out the theme of the strike, activists included the image of bread in all strike paraphernalia. There were, for example, the scores of picket signs with Icahn as Dracula, wielding a cleaver to hack off pieces of bread marked “wages” and “pensions” and “job security.” There were the larger-than-life Styrofoam slices with fang bites missing, presumably lost to the Dracula/Icahn on the posters. There was actual bread at every demonstration, with ready-to-eat baguette, ciabatta, and sliced Wonder Bread serving as both a political prop and free food for protesters. Finally, there were the agit-prop bread deliveries. Activists had sought out moles among unionized clerical workers, banquet waiters, and hotel desk staff with access to Icahn’s schedule and whereabouts. Acting on secret tips, flight attendants would barge into meetings and present Icahn with whole wheat, caraway, rye, and pumpernickel, disrupting his business dealings by condemning his claim that “stewardesses are not breadwinners.”43
With bread at the center of their protests, flight attendants reminded their audience that the labor movement had always been both an economic and a cultural project. Referencing the century-old union slogan “bread and roses,” IFFA activists pointed to generations of workers who walked out on strike to meet their needs and their wants, demanding economic security and the time to pursue personal pleasures. Breadwinning also helped flight attendants make a particular cultural intervention about the 1980s. Naming their position in the crosshairs of the “culture wars,” breadwinning allowed flight attendants to frame the strike as a conflict between their own feminist commitments and the visceral antifeminism of the “pro-family” movement. Unwavering in their seriousness, flight attendants nevertheless used humor to respond to their opponents. For example, strikers frequently pumped their fists in the air and roared as they posed for picket line photographs. Skewering dismissive, objectifying press coverage that labeled the strike an angry feminist protest rather than a rational workplace dispute, the fist pumps quoted Helen Reddy’s 1972 hit “I Am Woman, Hear Me Roar,” which was both an anthem and a cliché by the mid-1980s.44
Fist pumps were often accompanied by flying bras. Posing for the camera while walking the picket line outside TWA’s Kansas City overhaul base, a flight attendant launched her bra toward an imaginary “freedom trashcan.”45 That trashcan, which gained notoriety in a feminist protest outside the 1968 Miss America Pageant, had been vastly overrepresented in media accounts of the women’s liberation movement, accounts that ended up being used to label 1970s feminists “bra-burners.” On the same picket line, another flight attendant reclined in a lawn chair and theatrically read a copy of New Woman magazine while being photographed, a pose that humorously characterized the strike as a rejection of traditional femininity.46 Flight attendants’ most dramatic performance came in a series of “We Hate Carl Wienie Roasts.”47 As they cooked, sliced, and speared hotdogs, bratwursts, and Polish sausages, all while photographing their knife work, activists’ satirized the “pro-family” movement’s dismissal of feminism as irrational, obsessive, and castrating. Throwing a few Rocky Mountain oysters on the grill, flight attendants theatrically identified as ball busters.
As they made the history of feminism and the sexual revolution germane to the picket line, TWA flight attendants rejected the dominant cultural approach to working people in the late twentieth century. In mainstream discourse about “working families” and “defending the middle class,” workers were defined by their commitment to traditional family values. This pro-family framing came from both anti-union and pro-union constituencies. The business lobby, for example, exalted white working-class “Reagan Democrats” for sticking to moral traditionalism and voting against the cultural agendas of people of color, feminists, and gay activists.48 Defending the working class against anti-union attacks, the labor left often used the same ideas, offering procreation, domesticity, and moral traditionalism to portray the working class as innocent and dignified.49 Urban liberals, meanwhile, used the concept of family values to scorn the white working class, dismissing it as reactionary, sexist, homophobic, and racist.50 With a double entendre about castrating Carl Icahn, flight attendants separated working families’ struggles from the moral traditionalism and sentimentalism that elite critics often imposed on those struggles. By taking control of the conversation about breadwinning, flight attendants demonstrated that mainstream invocations of traditional family values were, more often than not, a means to dispossess the working class.
Humor-driven, pointed cultural criticism gave TWA flight attendants momentum on the picket line. But a good campaign would ultimately fail to counteract Icahn’s strategic economic advantages. First and foremost, the vast majority of flight attendants’ peers on the front lines failed to offer their solidarity. Once flight attendants struck, pilots followed the no-strike clause in their pact with Icahn and crossed IFFA’s picket lines. And although 75 percent of front-line IAM members sided with flight attendants and walked out on the first day of the strike, IAM higher-ups showed no more sympathy than pilots. IAM International president William Winpisinger refused to grant a strike authorization to his members at TWA, abandoning the TWA local when Icahn—successfully—sued to force IAM members back to work five days after the flight attendants walked out.51 Both pilots and IAM leaders knew that the family wage system had guaranteed immense wage premiums to the mostly-male groups at TWA. As that system collapsed in the 1980s, traditional breadwinners among machinists and pilots recognized that they had farther to fall than lower-paid employees such as flight attendants. Facing the prospect of losing that privilege, pilots and machinists were paralyzed with fear.
Meanwhile, Icahn was making good on his threat to hire “nineteen-year-old girls off the street.” At the end of the first month of the strike, 1,850 replacement flight attendants worked for TWA, a process expedited when Reagan’s Federal Aviation Administration obliged Icahn and reduced the airline’s flight attendant training program to eighteen days. The new group—which strikers pejoratively called “eighteen-day wonders”—earned half the wage of those they replaced but could jump the industry’s infamously long seniority line. Once they pushed through chanting picketers and entered the terminal, strikebreakers would walk onto jumbo jets bound for Paris and Zurich and Cairo, trips that required twenty or more years of seniority before the strike. Additionally, as they watched a constant stream of replacements take more and more of their jobs, one thousand existing TWA flight attendants made the decision to give up on the strike and cross the picket line. Watching the non-union ranks swell, Icahn showed little interest in finalizing a deal with IFFA and thus kept the bar just above what flight attendants offered. When Frankovich floated a new proposal on April 28 that would lower TWA’s flight attendant costs by 28 percent, for example, Icahn spontaneously conjured 30 percent as the new benchmark for flight attendant concessions.52 That intransigence came at a high price for Icahn: TWA burned $3 million a day during the strike and posted its least profitable quarter ever, a loss of $186 million for the first three months of 1986.53
Despite TWA’s losses, and even though the “eighteen-day wonders” could never replace the experience of thousands of their older peers, it became clear as spring led to summer that the numbers were not adding up for the strike. Staying on the picket line would, it seemed, only give Icahn what he wanted—an excuse to permanently replace all unionized flight attendants. IFFA leaders thus exercised their rights under the Railway Labor Act and called off the strike. Frankovich’s stoically crisp yet clearly morose prose communicated the intensity of the situation to all TWA flight attendants on May 17, 1986:
Last night at 10pm IFFA made an unconditional offer to return all striking flight attendants to work immediately. This does not mean our fight is over—that decision is up to you. What this does mean is we are no longer withholding our services. Therefore when the company calls you to return to work, you must return. This is a strategic move on our part which is designed to prevent TWA from further attempting to replace us with scabs and new hires.54
With Frankovich’s message, pickets came down and flight attendants headed home to pack their crew bags and to wait for crew scheduling to call with a flight assignment.
TWA never called. With that silence began the longest—but for flight attendants the most successful—part of the campaign. Hoping to take advantage of a rightward shift in the judiciary of the 1980s, Icahn filed a lawsuit in the Federal District Court for the Western District of Missouri that aimed to dissolve IFFA’s union security clause.55 Perhaps the most important section in any collective bargaining agreement, the security clause requires that managers assign all work to union members who earn a union wage. If the court voided IFFA’s security clause, Icahn would be able to continue hiring permanent replacement workers to staff TWA’s operation. With the lawsuit, Icahn aimed to set another anti-union precedent in the age of financialization. An Icahn victory over flight attendants would make it easier for employers to permanently replace union members with younger, cheaper workers.
Backing up their effort with a grassroots solidarity and media campaign called the “Boycott of Conscience,” IFFA activists carried their case all the way to the U.S. Supreme Court. In the landmark case TWA v. IFFA, the justices blocked Icahn from shredding IFFA’s union security clause, mandating instead that all new flight attendant positions be assigned to union members returning to work. Although the decision allowed Icahn to retain all the strikebreakers he had already hired, the financier was forced to fill all new positions with IFFA members with full collective bargaining rights and with their full date-of-hire seniority. Thus, in the fall of 1989, the last striking IFFA member returned to the skies at TWA. Despite work rule givebacks that returned flight attendant real-dollar compensation to levels not seen at the company since before the modern flight attendant union movement, the “Boycott of Conscience” and the TWA v. IFFA decision guaranteed that all flight attendants could continue to use their union as a check on Wall Street’s political and cultural power.56
IFFA’s Supreme Court victory notwithstanding, financialization had made the 1980s the most devastating decade in the history of airline labor. Whereas airline unionists, from IAM strongmen like Northwest’s Guy Cook to feminist insurgents like American’s Patt Gibbs, had written the industry’s economic equation in the 1970s, the commitment to mere defense of the status quo had become an unachievable goal by 1985. Once an economic asset and political organizing tool for the labor movement, the strike was blunted in its effectiveness. Though United employees used a walkout to defang management-imposed concessions in 1985, workers at Texas International, Continental, Eastern, and TWA were forced to call off long, painful strikes and return to work on management’s terms. Workers who voluntarily complied with airlines’ giveback demands fared little better, and Pan Am collapsed after employees tried in vain to save the company by cutting their pay. Even for those at the strong firms United and American, new pressure from the ultra-low wages that followed failed strikes forced employees into concessionary contracts. Indeed, after the social movements of the 1970s had brought new horizons for marginal workers like flight attendants, deregulation and financialization turned the tide of political economy toward management. “It felt like the ground was washing out from under us,” TWA flight attendant Dixie Daniels commented as she recalled returning from the picket line to work at Carl Icahn’s TWA.57
Financialization and the End of the Family Wage System
Although every unionized TWA employee struggled to cope with longer hours and lower pay after the hostile takeover, the adjustment was particularly difficult for flight attendants, who bore the deepest concessions. The concessionary contracts recycled the old inequities of the family wage system, returning flight attendants to their familiar position at the bottom of the airline pay hierarchy. But as they forced flight attendants backward in time, Icahn’s concessions also did something very new to the airline workforce of the 1980s. After the hostile takeover, all TWA labor became temporary, contingent, and low paid. Icahn, in other words, made everyone’s work “women’s work.” After Icahn’s cuts, mechanics, aircraft cleaners, ramp servicemen, and even junior pilots lived much more like flight attendants. No longer capable of being the family breadwinner, TWA’s workingmen began taking second jobs to supplement their income and struggled to balance household responsibilities with a working partner and working children.58 Thus, despite Icahn’s success in selling the hostile takeover as a means to save American manhood, financialization brought the end of the workingman as we knew him. Far from an airline anomaly, the proliferation of women’s work was even more pronounced in the service, agricultural, and temporary employment sectors, where the lack of unions left workers more vulnerable to management’s agenda.59 By 1990, and even as big business’s allies in the “pro-family” movement underscored men’s natural roles as husbands and breadwinners, Wall Street had eliminated the family wage system.
With the ink dry on the concessionary contracts, Icahn shifted focus to designing a new set of mechanisms to redistribute wealth away from workingmen and women and toward owners and investors. On June 23, 1987, for example, Icahn announced a deal to privatize TWA, buying out the other investors who had helped finance the 1986 hostile takeover and making the airline his personal possession. To fund the privatization, TWA would spend $1.2 billion to purchase all outstanding company stock, including Icahn’s 73 percent stake, at $40 per share. Like a home mortgage refinancing, TWA was both the buyer and the seller in the deal. Icahn, however, would be the primary beneficiary, as the deal would yield the financier $440 million in cash and 90 percent of the new TWA’s stock. Investors who became Icahn’s business partners in the original LBO stock swap also made a healthy profit, selling shares they had bought at $24.50 just eighteen months earlier for $40. The parties cashing in on Icahn’s privatization insisted that the deal was fair, a simple compensation for “saving” TWA from “out of control” labor costs in 1986. However, even the relatively conservative Wall Street Journal was putting such “salvation” in quotation marks by the summer of 1987.60
While another $1.2 billion in debt jeopardized TWA’s future, the airline’s insolvency was nevertheless a strategic tool for Icahn. As he blamed union wages, pension benefits, and work rules for TWA’s crisis in the 1980s, Icahn insisted that Wall Street’s high-risk capital markets were the only lifeline for struggling old-line firms like TWA. On the surface, Icahn was right, because TWA was able to make its interest payments only because Icahn’s name and reputation allowed the airline to borrow even more money. On July 2, 1989, for example, when TWA was nearing default on its existing debt, Icahn floated a $300 million high-yield note to investors. Since all hard assets were already leveraged at Icahn’s TWA, the new bonds were backed up by the airline’s dwindling inventory of consumables, from paint to light bulbs to cleaning solution. The unusual collateral earned the securities the nickname “light bulb bonds” from the Wall Street Journal. Icahn’s latest proposition seemed absurd to lay observers, like asking someone to invest in the food in your refrigerator or the gas in your car. Light bulb bonds, however, allowed private investors access to the famously high returns on Icahn deals, which in this case promised 16.5 percent annual interest.61
In those robust profits for wealthy private investors lies the upwardly redistributive mechanism of the financialized economy. After Icahn implemented the post-strike wages and working conditions, he paid TWA flight attendants $110 million less in 1989 than he would have if the previous contract had remained in place. That same year, Icahn made $475 million in interest payments to investors.62 Hence while flight attendants were forced to learn the art of deferred gratification, financialization ushered in an age of immediate gratification for the three big winners in the hostile takeover of TWA: for the investment bankers who arranged it; for the hedge funds, bond traders, and other elite private investors who bought in; and for the lawyers who wrote the contracts to define it. Light bulb bonds and similar securities demonstrated that financialization had redefined who would get to indulge after a hard day of work.
The indulgence of financialization came, of course, with consequences. By the fall of 1989, the market for junk bonds was in free fall. During the first week of October, the highly anticipated hostile takeover of United Airlines collapsed. Los Angeles billionaire Marvin Davis put United’s stock in play in early August, offering $240 a share for the carrier and touching off a bidding war that ran share prices up to $300.63 Davis had recently made a run on Northwest Airlines, ratcheting up the stock price until fellow California billionaire Alfred Checci won control of the Minneapolis-based carrier and then enforced deep concessions on unionized employees. But when the United Board of Directors accepted an offer from a labor-management coalition that was trying to fend off Davis’s latest conquest, the buyers choked as the banks pulled the funding amid fears that the offers for United were too high.
The Dow Jones Industrial Average shed 7.4 percent of its value on the United announcement, intensifying widespread speculation that the corporate mergers and acquisitions boom of the 1980s was unwinding.64 Drexel-Burnham-Lambert was, after all, already in bankruptcy. In late 1988, after Drexel pled guilty to scores of felony counts of securities fraud and insider trading, paying the federal government $650 million in fines and sending its leader Michael Milken to jail, a run began on the investment bank from which it would not recover.65 Although less eye-catching than Milken being hauled out of Drexel in handcuffs, the most costly consequence of the downturn in the junk bond market came from the small “savings and loan” (S&L) banks that had begun buying junk bonds after financial deregulation. By 1991, eight hundred S&Ls had gone bust, due in part to bad investments in the risky financial products that became so central to their business in the wake of deregulation. The S&Ls’ failure left taxpayers on the hook for, by the federal government’s own estimate, $132 billion worth of insured deposits.66 In the deeply unpopular taxpayer S&L bailout that helped sink George H. W. Bush’s reelection effort, the go-go 1980s went bust.
Conclusion
A poster boy for the culture of hedonism that squandered hardworking families’ money during the S&L scandal, Michael Milken drew scorn from the American people. Scorn, however, would do nothing to change the political economy that Wall Street ushered in during the 1980s. Light bulbs and toilet paper would disappear as collateral for investments after 1990. But mortgage-backed securities would soon provide even more liquidity for capital markets than junk bonds, a financial trend with consequences far more dire than Icahn’s dealings. Perhaps more importantly, the S&L scandal prompted no reconsideration of Wall Street’s intervention in the labor market in the 1980s. Rather than temper their anti-unionism, employers became even more aggressive in the 1990s. TWA, for example, filed for bankruptcy not once but twice during Icahn’s tenure, extracting new wage and benefit givebacks from workers both times. The situation was similar at larger and stronger airlines, where management made the concessions enforced during the 1980s crisis permanent. At industry-leading United, for example, flight attendants’ starting hourly real wage in 1996 was roughly 45 percent lower than it was at TWA fifteen years earlier.67 Therefore, it was working people—not the scorned Wall Street bankers—who were forced to learn a bitter, permanent lesson about self-denial and deferred gratification in a financialized economy.
As financialization hobbled the labor movement, the political economic formula that brought flight attendant unionists unprecedented success in the 1970s no longer worked. Before deregulation and financialization, flight attendant activists built a principled commitment to social justice by pursuing their own economic self-interest. When APFA, IFFA, or other unions won an hourly pay bump or a new trip rig, they delivered economic resources to the single women, the unmarried mothers, and the mixed families who had been locked out of the family wage system. An economic victory for a flight attendant union meant a social advance for the women’s, gay, and lesbian liberation movements. Carl Icahn and Frank Lorenzo could never take those political commitments away from flight attendants. They could, however, make it much more difficult—and in some cases impossible—for flight attendants to pursue their economic self-interest. When the union’s ultimate goal was a smaller pay cut rather than a larger raise, it was far more difficult for activists to mobilize their coworkers for protests and pickets. In the age of financialization, the labor movement withered as collective bargaining became an ineffective means to enrich the struggles against homophobia, sexism, and racism that remained central to U.S. social movements.
The task for the activists of the 1990s, then, was to craft a new strategy to engage new events on the ground. The flight attendant union movement had always been one with broad cultural horizons. The narrow strictures of collective bargaining had, however, been the primary means for flight attendants to put their politics to work. After 1990, flight attendants would have to build new connections to movements for economic and social justice, connections that would deliver the wages, benefits, and work rules that had always been important to flight attendants and would help circumvent the tight new restrictions placed on collective bargaining.