Inequality is necessary for a free-market system to function efficiently. People must be rewarded for working harder, and those who respond better to consumer preferences should reap greater profits than those who do not.

But for capitalism to thrive, society must not have more economic inequality than is necessary; at some point too much inequality becomes economically damaging – and potentially destabilizing as well.

America has been in that latter situation for more than a decade. Over the past 15 years, I’ve asked two Republican chairs of the Federal Reserve system whether they thought the distribution of wealth in America has reached a point where it is socially and economically damaging. Both Alan Greenspan and Ben Bernanke agreed that was the case.

Interestingly, both men recommended, as one way to deal with this over time, increased funding of community colleges, which do an excellent job of transmitting the vocational skills that allow people to earn decent livings. Sadly, these institutions have been among the victims of a failure to provide adequate funding for state governments, which have been the major source of community college support.

Beyond the consensus that we have too much inequality, opinions differ sharply along partisan and ideological lines. But as this debate goes forward, one very critical element has gotten too little attention: the role of labor unions in helping middle- and lower-income people benefit from increased prosperity.

Conservative Republicans have been waging a very successful war against unions, in substantial part precisely because they do not want unions to play that historic role.

A series of divided votes on the National Labor Relations Board reflects the sharp partisan-ideological dispute over unions. With President Obama having named a majority of the five members, several recent decisions have encouraged efforts to organize unions, over angry Republican dissents.

Historically, it has always made a difference whether Republican or Democratic presidents have appointed a majority of that board, but never has the difference been as stark as now.

Despite early Republican opposition to organized labor, both parties ultimately accepted the notion that unions play a constructive role, although Republicans wanted them more tightly regulated.

Richard Nixon appointed as his secretary of labor Harvard professor John Dunlop, a strong advocate of the role of unions in the economy. Ronald Reagan had been president of a union, and while he fired the air traffic controllers for striking, he continued to voice support for unions. At a time when Republicans were appealing to the group known as “Reagan Democrats,” dissatisfied with Democratic positions on the war in Vietnam and social issues, the construction unions in particular were targets of Republican appeals.

But the rightward movement of the Republican Party in this century has brought with it an explicit anti-union attitude.

Recently many Republican governors made their national reputations not by fighting union excesses but by challenging the notion that there should be unions at all in the public sector. This has extended to efforts to weaken unions in the private sector as well – for example, by adopting the right-to-work laws that used to be the province of explicitly anti-union southern conservatives.

To some extent, this is political. Since the New Deal, unions have been an important part of every movement advocating the adoption of liberal policies, and it is understandable that conservatives object to this form of politicking, which allows the mobilization of ordinary working people to lobby the legislative process.

During the fight to adopt tough financial reforms in 2009-2010, then-Sen. Christopher Dodd, D-Conn., and I were greatly aided by a lobbying coalition in which the AFL-CIO was a major factor in beating back the opposition of the well-organized financial services industry.

But Republican opposition to unions is based also on the explicit view that high wages can be a bad thing in the economy, and that one reason to break unions is precisely to keep them from increasing the share of income that goes to working people.

Far too little attention was given last year to the successful effort by Tennessee Republicans, led by Sen. Robert Corker, to extort workers at a Volkswagen plant in Tennessee into voting against recognition of a union.

The owners of Volkswagen were in support of the United Auto Workers organizing drive because they wanted to be able to import techniques that have provided good labor relations in Germany. When the election approached, Corker and other Tennessee Republicans threatened the workers in a manner that came to mind when I recently re-watched “The Godfather.” They made them an offer they couldn’t refuse.

Tennessee Republicans warned the employees at Volkswagen that if they voted in favor of a union, funds the state had promised to support an expansion of the plant would not materialize. That is, if the workers exercised their federally guaranteed rights to be represented by a union, this state of Tennessee would punish them.

And Corker made explicit that the reason for blackmailing the workers into voting against the union was precisely that the union might raise workers’ wages.

The problem, he noted, was that the wages would not just be raised for Volkswagen employees. An increase in wages for the workers at Volkswagen would have an upward effect on wage levels in Tennessee in general, and that this would weaken his state’s ability to persuade employers to locate facilities in Tennessee as opposed to other states.

In other words, the Tennessee Republican position was that they had to block the recognition of a union that the company was willing to accept because it was important for them to maintain a low-wage situation in Tennessee.

In a way, this was paying a tribute to unions that conservatives have sometimes denied. It was an explicit acknowledgment that the union would be successful in winning higher wages.

The argument that the Republican threat was the reason that the union lost is easily made. The final vote was 712-626, a surprisingly close one given that the workers were being threatened with economic harm at the plant where they worked if they voted “yes.”

So the Republican position on wages is not simply opposition to public policies that specifically seek to increase wages, but a multi-phase campaign against labor unions precisely because they are effective in doing that.

One last point is important. The argument against unions for some time was that they damaged Americans’ competitive position internationally. There is no longer any plausibility to this.

While this case did represent a manufacturing plant, most of the organizing efforts opposed by conservatives involves workers in service industries – hotels, food service, health care, etc. – that are not internationally competitive. The Tennessee Republicans were worried about the need to maintain a competitive advantage, but it is over other American states, not foreign countries.

How to deal with growing economic inequality is one of the two most important debates we have (race is the other). It will not be conducted appropriately if it does not address the current conservative assault on unions, and the role that this assault has played in exacerbating the problem.

Barney Frank is a retired congressman and the author of landmark legislation. He divides his time between Maine and Massachusetts.

Twitter: BarneyFrank

— Special to the Telegram