Victory, it seems, for workers in Chicago

Photo Courtesy of AP

As many of you are no doubt aware, employees of Republic Window and Doors have been occupying their closed factory in Chicago since last Friday. As of today, they appear to have achieved a major victory. Before I go into the details of what exactly the workers have achieved, here's some background on the situation.

The workers, who are members of United Electrical, Radio, and Machine Workers (UE) local 1110, were told last Tuesday that the plant will be closing its doors in just three days. In doing so, Republic violated federal law, which requires that employers give their workers 60 days notice prior to mass layoffs. The workers are also entitled to vacation and severance pay, which they have not received. As a result, the workers are occupying the factory until they get the pay they deserve or until the plant resumes production.

At first glance, Republic Windows and Doors comes off looking like a major Scrooge in this situation. However, it's a bit more complicated. According to Republic, they were forced to abruptly halt production because their major financier, Bank of America, closed their main line of credit. This, despite the fact that Bank of America has received over $25 billion dollars in taxpayer loans from the Troubled Assets Relief Program (TARP) Federal bailout, whose express purpose was to jump start lending to the real economy. Upon learning of Bank of America's unconscionable greed, the state of Illinois (before it was revealed that Governor Blagojevich tried to extract bribes in exchange for Obama's now vacant Senate seat) and later, the city of Chicago, began to divest their holdings from the bank. President Elect Obama, in a rare act of transition progressivism, defended the workers and castigated Bank of America's callousness.

Fast forward until today and apparently in response to the actions of the state of Illinois, city of Chicago, and all the bad publicity they've gotten, Bank of America has agreed to lend Republic some money to make things right with their workers. The details of the agreement still need to be worked out and nothing will be approved without a majority vote of the workers occupying the factory. Ideally, BOA will extend Republic a line of credit large enough so they can resume production rather than just pay the workers their severance and back pay. According to Carl Rosen, President of the UE, that's what the workers are really looking for. Plus, it would make economic sense to do so. A major portion of Obama's stimulus package will be dedicated to retrofitting buildings in order to make them more energy efficient. And energy efficient doors and windows are exactly what the workers at Republic Windows and Doors make. According to Thomas Balanoff, president of SEIU Illinois Council and frankly, anyone with half a brain, it doesn't make any sense to close the factory in this context.

When I first heard about the factory occupation, it immediately called to mind memories of the Argentine recovered factory movement(dramatically portrayed by Avi Lewis and Naomi Klein's film, The Take) as well as the 36-37 Flint Sit-Down Strike against GM. Personally, I think if Bank of America refuses to extend a large enough loan to resume production, the workers inside the factory should take control of it and just start running it themselves, as the workers did in Argentina. It would lose them a lot of their moderate supporters, but I think the Federal Government would be still be compelled to use the stimulus money to buy from them. Or more likely, why not just use some of the TARP money to lend directly to Republic Windows and Doors and allow them to start production again and cut the BOA middle man out of the process?

Regardless of the exact details of any eventual agreement between the union, BOA, and Republic, local 1110's factory occupation is truly cause for hope. FDR didn't sign the Wagner Act, require participants in the NIRA to allow unions to organize, create the Works Progress Administration, or pass any of his other progressive reforms just out of the goodness of his own heart. He did these things because public ferment in the form of strikes, unemployment demonstrations, actions against evictions, and other protests forced him to act. LBJ didn't sign the civil rights act because he was such a nice guy, either. The pressure generated by the civil rights movement forced him to do so. Such is the history of our country, of any country for that matter. As Frederick Douglas famously said, "Power concedes nothing without demand". As a result, I congratulate the workers at Republic for their fearless, patriotic actions. Congress may not have had the spine to stand up to the finance industry and force them to use the bailout money to make loans, like Gordon Brown did in Britain, but the workers at Republic were. Hopefully they will inspire other workers around the country facing similar straights to do the mobilize againstt layoffs or any other form of injustice. Actions like these, if they become generalized, have the power to force Barack Obama to live up to his campaign promises and perhaps, go beyond them.

Furthermore, I am hopeful that Obama will continue to make such statements in support of workers fighting for their rights. I agree very much with the folks at Open Left that Obama played a huge role in this just by rhetorically supporting their cause. During the 30s, popular protest forced FDR in a more progressive direction, but according to Melvyn Dubofsky who wrote the great book, The State and Labor in Modern America, the effect went both ways. Not only did the popular protests force FDR's hand, but FDR's legislation and his rhetoric was seen by many workers as a green light to start organizing. In discussions with fellow workers, union supporters often claimed that the President wants you to join the union. In their negotiations with their bosses, workers claimed the President ordered the company to recognize the union. Whether or not these claims were actually true (often they were not), FDR's words and actions emboldened an already angry and mobilized populace. Obama could fill the same role in the coming months.

All of this, of course, depends on whether people like you and me follow in the footsteps of the Republic workers and get out there and make our voices heard. So from my highly influential and not at all hypocritical position as a blogger currently living outside the United States, I say, get out and do something!

More on the auto industry

Robert Weissman over at Znet echoes my call to consider nationalizing the U.S. auto industry. He also shares my belief that the double standard for the auto and finance industries "reflects an anti-union and anti-blue collar animus" among "many policy makers and opinion leaders".

To be completely honest, I would not be upset if we provided the auto industry with a bailout, with firm conditions attached, instead of nationalizing them. What's most important is that we do something to save these companies and thus prevent the enormous economic devastation, on the lines of as many as 3 million jobs lost, which will likely follow in the wake of their collapse. We should not let the ideal become the enemy of the absolutely necessary. However, there are some facts we should consider. G.M is now asking for an $18 billion loan but Michael Moore pointed out yesterday that the total share value of GM is just $6 billion dollars. Arguably, if we were willing to sidestep the prevailing belief among the U.S. elite and likely most of the population that private ownership is innately superior and always preferable to public ownership (a paradigm shift of magnanimous proportions, I admit), we might just realize that nationalizing G.M. is a better deal for taxpayers than a bailout.

If we would at least consider the nationalization proposal, Weissman and I would be happy.

Funny, though sad cartoon

This came to my attention via Dean Baker:
Originally published in the Washington Post

Fed tries to pump some more air into our bubble economy

Photo courtesy of MSNBC

The Federal Reserve has just announced yet another dramatic intervention in the financial markets. This time around, they are trying to jumpstart consumer lending (aka car loans, student loans, etc), as well as mortgage lending. In order to do so, the Fed is buying up more of Fannie Mae and Freddie Mac's mortgage backed securities and, according to the Washington Post (articled linked above):

creating a $200 billion program that will lend against highly rated securities backed by auto loans, student loans, credit card lending and small-business loans backed by the Small Business Administration

Now, I recognize that the economy cannot function if people cannot get access to loans for major expenditures. Nonetheless, I think this plan reflects a fundamental misdiagnosis of the root cause of our economic crisis on the part of the Federal Reserve/U.S. Treasury. That misdiagnosis could be the result of sheer incompetence, but I doubt it. Rather, I think it's more likely a function of the disproportionate role of finance in our economy, and its concomitant excessive and destructive influence over our political leadership and institutions.

According to the Washington Post and seemingly, according to the Federal Reserve and the Treasury, the most pressing problem facing our economy right now is the refusal of financial institutions to lend to businesses and consumers. Hence, the above mentioned intervention and all previous bailouts of the financial sector. However, according to Dean Baker, this argument misses one absolutely essential detail: The United States has just experienced the collapse of a gigantic housing bubble, which was allowed to grow for far too long thanks to the policies of libertarian ideologues like Alan Greenspan. As such, the country now finds itself with $5 trillion less in housing wealth today than we had, collectively, at the beginning of last year. The result?

In addition to leading to a fall in residential construction of more than 50 percent (3 percent of GDP), the loss of $5 trillion in housing wealth would be expected to lead to a fall in annual consumption of between $250 billion and $350 billion (1.7-2.3 percent of GDP)

In other words, it's not all that complicated: Housing bubble collapses --> residential construction tanks + consumer spending drops --> we're in a recession. As for the lending bit, if you were a bank, would you really want to make a car loan to someone who might lose their job next week? Thus, we're in a recession, the proximate cause of which is the bursting of the housing bubble.

If we take a broader look at this crisis, however, it goes beyond just the housing bubble. Prior to the housing bubble, we had a stock market bubble, which Dean Baker, in another piece, says was worth $10 trillion dollars. Its collapse in 2001 left us with a short, but painful recession and a slow, almost jobless recovery. Prior to that, we witnessed an explosion in credit card debt, which continues to this day. For decades, Americans have increasingly been living beyond their means and financing personal expenditure with debt. Our Personal savings have reached record lows and have been on the decline since the 1980s. In its current policies, the Fed is trying to pump some more air into the debt bubble but is doing nothing to address the route cause: we just have too much debt.

The key question, of course, is why we have so much debt. The most oft-cited explanation in the popular culture is that Americans just spend too much money on frivolous things like SUV's, flat screen tvs, meals at restaurants, and the like. If you asked a conservative, they'd likely argue that such reckless spending is the result of some sort of collective moral failure on our part and an overly permissive culture. If you asked a progressive, they might place the blame on the marketing industry and the rat race mentality that pervades our society. In actuality, none of the explanations are true (though the marketing industry is indeed rather evil) because the underlying premise--that we're in over our eyeballs in debt due to fiscal recklessness--is simply false.

One of the foremost experts on the issue of increased indebtedness is Elizabeth Warren, a law professor at Harvard. She wrote one of the chapters in John Edwards's 2007 book on poverty in America and I highly suggest you read both her chapter and the book (Yes I know I'm supposed to despise Edwards because he lied about sex, but excuse me if I think that's less of a crime than two illegal wars, warrant-less spying, and the various trillion dollar bailouts). What she's discovered is that in actuality, the average middle class family today spends less, that's right, less of their income on clothes, food, electronics and luxuries than the average family three decades ago. Rather than being due to increased frivolous spending, the average American family is suffering from increasing levels of debt because the prices of a few big ticket essential items have gone through the roof. Namely, the cost of education, transportation, and in particular, health care have gone up dramatically. (On a side note, this is why the argument that Wal-Mart benefits American workers overall because of its low prices, despite its negative impact on wages, is patently false. Wal-Mart sells things that consume less and less of our incomes, largely due to forces outside of its control, yet exerts powerful downward pressure on wages for low income workers, which are used to buy essentials like health care, which Wal-Mart doesn't sell. But I digress.) These increases wouldn't be so bad if the past thirty years saw a concomitant increase in wages. However, as most Americans know all to well, wages have largely stagnated since the late 1970s and have lagged behind productivity growth considerably. In fact, had wage growth tracked productivity growth over the past 30 years, the median American income would be $20,000 higher and the minimum wage would be $19.12 per hour. That's right, over 19 bucks an hour.

Unless we take steps to both control the cost of transportation, education, and health care and increase wages, we will inevitably continue down our current destructive path. Who knows, maybe the fed has discovered some new form of wealth, the value of which it can inflate or allow to inflate in order to create a new bubble. I doubt it, however, and even if they could it would merely delay the inevitable and exacerbate our current problem of excess debt. Thus, I would contend that policies like single payer health insurance, expanding public transportation, and the Employee Free Choice Act, which would make it less impossible for workers to join unions, are not only essential to make our society more decent and equitable but also for restoring economic growth. That would be change we can believe in.

Why not nationalize them?

You know what? While it was certainly worthwhile to point out the manifest hypocrisy of the MSM's double standard on the auto industry bailout and the financial industry bailouts, I think my words in support of the auto industry bailout were wasted. Rather than bailing them out, why not just nationalize these companies? We could replace all the executives with civil servants and cap their wages at reasonable rates, making these companies far more efficient. We could guarantee that not a single worker was laid off. We could also force the companies to make more fuel efficient, cleaner cars because heck, we'd own them! Moreover, we could even use the newly nationalized auto companies as mini policy laboratories. For instance, we could set up a pilot version of a public, single-payer health care plan for auto workers, retirees, and their families, which could later be expanded to the entire population. We could convert their pensions into a single, publicly managed system, which would likely be much more efficient than their privately managed pensions, according to Dean Baker. We could even experiment with cogestion/co-management and allow the autoworkers to manage some of the state-owned factories. We could use Alcasa, a state-owned aluminum company in Venezuela, as a model.

Woah, I just suggested we could learn something from Venezuela. At that point, this post stopped being anywhere near practical and became, pardon my French, more of a lefty wet dream. But heck, I can dream can't I? Now, of course there could be some real downsides to nationalization. If these companies fail anyway, in spite of the efforts of the federal government to save them, the losses would be on us, the taxpayer. Additionally, the publicly owned auto industry would still have to produce cars that people like. Even lefties like me ought to be at least a bit skeptical about that proposition. Nonetheless, I think it's worthwhile to at least consider the possibility. Wouldn't it be great if our national discourse was so bold and so inclusive that nationalization was discussed on the opinion pages of major papers and in the halls of congress (by someone other than my man Bernie Sanders)? That, as I've said before and will certainly say again, would be change we can believe in.

Robert Reich: a voice of sanity on the auto bailout

Robert Reich injects some much needed sanity into the auto industry bailout debate. Can someone please tell me why isn't he one of the many Recycled Clintonites joining the Obama administration?

I disagree with just one of his many otherwise great points, his contention that:

GM's creditors, shareholders, executives, and workers [my emphasis added] should have to make substantial sacrifices before taxpayers should be expected to sacrifice as well.

As one of the commenters on Reich's blog smartly pointed out, the UAW already made considerable concessions in its 2007 contract. Detroit's executives, creditors, and shareholders should certainly have to sacrifice, but not their workers, in my opinion. Doesn't that defeat the purpose of an auto industry bailout, which ought to be, in my opinion, saving the many good paying jobs at these companies that so many communities in the mid-west depend on?

Unbearable hypocrisy on the proposed auto industry bailout

Congress is currently engaged in a heated debate over another taxpayer bailout, this time for the U.S. auto industry. More specifically, Congress is debating whether to provide the Big Three with an advance on a $25 Billion loan the government has already promised them and draw on funds allocated for the financial sector bailout for another $25 Billion loan to help them retool and start building greener cars. According to economists Paul Krugman and Dean Baker, the collapse of the U.S. auto industry would be devastating for the American economy and the economies of Michigan and Ohio, which are already reeling, in particular. Many parts suppliers and other businesses in the Mid-west depend on the Detroit automakers for most of their business so if they were to cease production, the result could be the loss of as much as a million jobs. Of course, this is the last thing we need right now, as unemployment and home foreclosures continue to surge upwards and productive investment is on the decline. As such, I support, though not without qualification, extending U.S. auto makers a helping hand.

Now, like any rational person, I fully admit that the management of Chrysler, GM, and Ford brought much of this crisis upon themselves by maddeningly refusing to produce smaller, more energy efficient cars for many years and relying on gas-guzzling SUVs and trucks for far too long. Further, the United Autoworkers (UAW) must share in some of the blame as well, because they've basically echoed Detroit's line on environmental issues for many years. Any cash we hand out to the auto industry should come with strict conditions regarding environmental standards. There should also be aggressive government oversight of how they use the money, unlike the current financial industry bailout, which Naomi Klein rightly calls a giant corporate crime scene.

Bearing that in mind, however, I simply cannot stomach the excessive hand-ringing in the mainstream media directed towards the auto industry, particularly in light of the MSM's intense and near unanimous support of the financial bailout several months ago. Frankly, all too many commentators in the mainstream media are pure hypocrites and I, like Dean Baker, suspect that much of the criticism of the auto industry among our nation's opinion elite stems from their intense hatred of the UAW, labor unions, and working people in general. To prove my point, let's have a look at how two influential and supposedly "liberal" sources of elite opinion, the editorial page of the Washington Post and New York Times columnist Thomas Friedman, responded to the proposed bailout of the auto industry and the actual bailout of the financial sector.

Back on November 8th, here's what The Post had to say about bailing out the auto industry:

the only sensible bailout of Detroit would be one with strict conditions...

Post columnist Steven Pearlstein has suggested that these companies need to be reorganized top to bottom, through a kind of "prearranged" bankruptcy greased with federal aid: Under court direction, the firms would trim wages and benefits that far exceed those of non-union competitors, reduce the burden of pension payments, which stands at $90 billion over the next decade, and prune an outmoded network of 10,000 dealerships.

In his November 12 column titled "How to Fix a Flat", Thomas Friedman largely echoed the Post's recommendations, though he also added his own self-righteous diagnosis of how the industry got in this mess:

How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it...

The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote....

if we are going to use taxpayer money to rescue Detroit, then it should be done along the lines proposed in The Wall Street Journal on Monday by Paul Ingrassia, a former Detroit bureau chief for that paper.

“In return for any direct government aid,” he wrote, “the board and the management [of G.M.] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp G.M. with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company ... Giving G.M. a blank check — which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant — would be an enormous mistake.”

These are some harsh words, indeed. Without a doubt, these guys don't want the government to give Detroit any help without forcing them to make drastic changes. In particular, they must deal with their pampered workforce. Going further than that, Friedman is quite critical of Michigan lawmakers, mere appendages of the industry in his view. Certainly then, they must have been quite critical of the pay packages on Wall Street, which are far more excessive, than those of auto workers, who make about $57,000 a year, as well as the members of congress who did Wall Street's bidding by pushing for deregulation, one of the main causes of the financial crisis. Moreover, they must have called for strict restrictions and oversight.

Well, you can see for yourself what they actually said. Both The Post and my buddy Tom Friedman stressed expediency and discouraged government micromanagement of the Wall Street bailout:

The Post, on October 2nd:

AMERICA is the land of second chances, so it is fitting that the House of Representatives should get an opportunity to redeem itself for its reckless rejection of the financial rescue package on Monday

The case for the plan, known formally as the Troubled Assets Relief Program (TARP), does not hinge on its perfection. As we have said, it is possible to imagine alternatives, some of which, such as a direct federal purchase of bank equity, might prove more effective at a lower cost to taxpayers. Or they might not. The point is that TARP is the only plan on the table that has both a reasonable chance of political success and a reasonable chance of economic success. Under the circumstances, which at the moment include a mounting worldwide financial collapse, we do not have time to run a legislative seminar on the theory and practice of financial rescue.

Friedman, on September 30th:

Message to Congress: Don’t get cute. Don’t give us something we don’t need. Don’t give us something designed to solve your political problems. Yes, Hank Paulson and Ben Bernanke need to accept strict oversights and the taxpayer must be guaranteed a share in the upside profits from all rescued banks. But other than that, give them the capital and the flexibility to put out this fire.

Further, concern over excessive compensation at Wall Street firms was either nonexistant (The Post) or written off as a minor issue, by Friedman:

I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don’t deserve it. Otherwise, you’re saying: I’m going to hold my breath until that Wall Street fat cat turns blue. But he’s not going to turn blue; you are, or we all are. We have to get this right

Finally, if there was any concern on the part of these wise men that lawmakers were unscrupulously heeding the will of a particular interest group, that interest group was the American people, who overwhelmingly opposed the Wall Street bailout. Responding to the will of the people was instead regarded as "reckless" by the Post or poo-pooed by Friedman, who assured us that if we knew as much about the world economy as him, we'd surely come around to supporting the bailout:

you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy.

In a nutshell, as I said before, these people are total hypocrites and imposed completely different standards on the auto industry and the finance industry. Now, granted, I'll buy the argument that finance is of central importance for the whole economy but that's still no excuse for excusing the myriad abuses of Wall Street. Furthermore, anyone who regards the pay and benefits of unionized autoworkers as excessive is completely ridiculous, at best. Did the Post or Mr. Friedman perhaps consider that maybe the non-unionized, largely southern workforce employed by foreign automakers are underpaid, giving them an unfair advantage? One of the conditions imposed on an auto industry bailout ought to be accelerated passage of the Employee Free Choice Act, which could help level the playing field between American, unionized automakers and foreign-owned, non-unionized companies. Unionized, good paying blue collar jobs ought not to be such a rarity. We could also help the auto industry deal with their high health care costs by enacting single-payer, universal health care, which is absolutely essential if we want to get health care costs under control and deal with the gross inequities of our health care system anyway. That would be change we can believe in.