Following Sylvis

The most important economic chart you've never seen

2012-01-31T11:10:00.000-08:00

Sometimes economists (even lefty economists) are very frustrating. They tend to operate in extremely abstract terms, and often miss the fact that the import of their analysis is being missed by the vast majority.

The following chart is probably the most important chart describing the economic fate of labor over the past 40 years, and yet it is never shown in this form. I had to assemble this chart myself - although the data is fairly accessible (at least as far as economic data goes). Click to see full size.

So what is this chart showing?

Upper (red) line = (Net Domestic Product) ÷ (Employment)
Lower (blue) line = (Average Non-Supervisory Compensation per Hour) x (Average # of hours worked)

What does this mean?

The upper line shows the average market value of production in the U.S., ie how much the average worker contributes to the economy.

The lower line shows the average distribution to wage and salary workers not in supervisory positions.

The gap between these two lines shows how much goes to profits, rents, management etc.

In other words, it gives us an approximate sense of the level of exploitation, ie what kind of incomes could the economy support if distribution was equal.

Wonder why economists tend not to show these figures?

Wage Theft Resources from NELP

2012-01-31T10:36:00.000-08:00

Just got this in the mail from NELP - think it's worth reposting:

A defining feature of too many jobs in our 21st-century economy is wage theft.

Wage theft occurs when workers are paid less than the minimum wage or another agreed-upon rate, work “off-the-clock” without pay, get paid less than time-and-a-half for overtime, have their tips stolen, have illegal deductions taken out of their paychecks, are misclassified as “independent contractors” instead of employees, or are simply not paid at all.

It’s a trend that spans industries across the economy, including retail, restaurant, home health care, domestic work, manufacturing, construction, day labor, janitorial, security, dry cleaning, laundry, car wash, and nail salons.

And it’s a practice that hurts not only workers whose wages are short-changed, but local economies that are fueled by workers’ spending, and well-meaning businesses that are forced to compete with wage cheats that shave their operating costs by breaking the law.

Luckily, there’s another trend – a wave of grassroots energy and campaigns on the state and local levels to ensure that workers get paid the wages they're owed. From California to Arkansas to Florida to Maryland, workers and their allies are organizing to pass – and defend – policies that help workers receive their lawful wages, level the playing field for law-abiding businesses, and boost the economy at the same time.

To support these campaigns, in January 2011, NELP released “Winning Wage Justice,” a comprehensive guide outlining 28 state and city best-practice policies that community groups can implement to fight wage theft.

Continuing our “Winning Wage Justice” series, NELP is pleased to share these new publications:
A Summary of Research on Wage-and-Hour Violations in the United States
Talking Points on the Need for Stronger Anti-Wage Theft Laws
Choosing the Policy Options Right for Your Community
Round-up of Recent State and Local Activity to Combat Wage Theft

Especially in today's economy, it's critically important to protect the fundamental right to be paid for the work that you do. We hope these publications prove useful in your campaigns and your work!

Occupy Port Shutdown Round-up

2011-12-16T11:08:00.000-08:00

The establishment on the West Coast port shutdown of Dec 12th, the second such shutdown:
http://www.nytimes.com/2011/12/14/us/occupy-oakland-angers-labor-leaders.html

The most inflammatory stuff was saved for the international press:
http://www.guardian.co.uk/world/2011/dec/10/occupy-shutdown-west-coast-ports

Labor Notes' take:
http://labornotes.org/2011/12/west-coast-port-shutdown-sparks-heated-debate-between-unions-occupy

more opinions after the jump

owen paine says it "deserves a real bout of chin scratching":
http://stopmebeforeivoteagain.org/2011/12/deserves_a_real_bout_of_chin_s.html

the story is complex that's clear enough and in general the possible uses of outside actors
as effective union proxy is also clear:
" An independently organized action could allow the ILWU to circumvent the legal minefield set in frontof its own membership"
but
obviously these collisions among the "people" should be avoided if possible and in this case
i'm not sure the action was so urgent it needed to come quickly......
as onne old hand is quoted saying " previous shutdowns took months to prepare....

and elicits an educated comment:

For the record, as a participant in organizing and having dealt with many members of the union, I'd like to say that the union leadership itself was angry that they were not consulted first before the call for a west coast port blockade was called. The rank-and-file were ambivalent about not being consulted, but ultimately worked side-by-side with us to make the action work, and steadfastly said that no matter the way in which the action was decided, they would respect community picket lines.
This action was called both as a response to the police crackdown on the encampments as well as in solidarity with Port truckers in Oakland and Los Angeles as well as the struggles that the ILWU have had in Longview, Washington with EGT. Criag Merrilees, who claimed to be a spokesman of the union, is not a representative of member of the ILWU but is a staffer for the International. He was one of the worst offenders when it came to red-baiting Occupy Oakland as being out of touch with the community as well as the rank-and-file he claimed to represent, insinuating numerous times that anarchist fringe elements had called the action without talking to many other Occupiers and basically saying that this was something that the Union did not support.
As was explained to me by a longshoreman that day, technically, the union never took a vote on whether or not to support the action, so Merrilees had no business saying that the union did NOT support the action; rather, they were neutral and had not come to a decision on the issue.
As a frequent reader of all of the bloggers who commented here, I felt I had to try and give some background to this whole thing. hopefully I'll have more time in the future to interact more, but Occupy Oakland has in many ways Occupied my life.
A very good review of the action can be found at this blog from a participant: http://hyphenatedrepublic.wordpress.com/2011/12/13/west-coast-port-shutdown-oakland-part-2-occupy-oaklands-unstoppable-revolution/
And a radio Interview I was a part of highlights many of the things I talked about earlier:
http://www.kpfa.org/archive/id/75837

Posted by Leo

His two links are worth checking out, too...

Re: Occupy Goes Underground

2011-12-09T12:06:00.001-08:00

In response to: http://inthesetimes.com/uprising/entry/12386/occupy_goes_underground

Thanks for this article - I think you lay out recent developments in a reasonable way. With one exception: your central premise is incorrect.

Not having a central assembly point has not "allowed" the flexibility and mobility which you, correctly, praise. This kind of autonomy was always a key part of the movement.

I'm not sure where you got the idea that actions were supposed to be "approved" by the GA. Maybe some parts of the movement put out that idea, but in NYC when the working group that I'm part of (the Jobless Working Group) approached the GA early on to approve one of our actions, we were told in no uncertain terms that it was unnecessary. I was informed several weeks ago during a GA (by the facilitator) that the GA "no longer approves any actions."

So it is not correct to say that a shift towards autonomy has been allowed by the weakening of central institutions. The tension between consensus and autonomy - both core values of the Occupation - while it has modified, has not definitively changed as a result of the eviction.

What has shifted is the ability to inform and involve a diverse cross-section of the movement about upcoming plans with relatively little notice. This, in my mind, can only be seen as a loss. This does not, of course, mean that we should despair. To follow your metaphor of "going underground," soundly founded parties never *choose* to go underground unless they are forced to, but they do figure out how to operate underground as effectively as possible.

Thank you again for your quality reporting.

In solidarity,

Sam
917-326-1079

http://followingsylvis.blogspot.com

Two Immigration myths

2011-10-21T22:37:00.000-07:00

Comment on: http://labornotes.org/2011/10/alabama-workers-meet-harsh-immigration-law-wildcats

Nice article, thanks!

However, I take issue with this section:

Farmworkers, their families, and tax dollars have fled harshly anti-immigrant states like Arizona and Georgia in search of friendlier states, so farm owners have turned to probationers and prisoners on work-release programs to fill the void.

But those workers have been unable to keep up with the requirements of these backbreaking jobs, many quitting after just hours in the sun and leaving farm owners to watch their crops rot in the fields.

In the process, they dispel the myth that immigrants are “stealing our jobs,” confirming that citizens are simply not interested in such exhausting and low-wage work.

Fox News Latino reported that on one Georgia cucumber farm, some Mexican and Guatemalan laborers were accustomed to filling 200 buckets before lunch, bucking for incentive pay. The fastest probationer filled only 134 buckets in a day.

This section, unfortunately, may dispel a myth, but actually perpetuates a far more pernicious one: that immigrant workers are "a breed apart." To suggest that immigrant workers are so fundamentally different in makeup from native-born that they won't hold the same jobs re-creates the kind of "alienism" that kept black workers in a subordinate position for so many years - and was also used as a reason to bar them from white unions. By denying that one worker can be replaced by another, you remove a key element of solidarity.

I know that this is not your intent. I understand that you are trying to allay fears that immigrants undermine native-born wage earners. Unfortunately, any workers who are denied their civil and economic rights will inevitably undermine the wages of other workers.

In your eagerness, you are committing a serious error.

Thanks again for your otherwise very useful reporting.

In solidarity,
Sam

Goodwin: Chaotic Economic Dynamics (1990) PREFACE

2011-10-06T14:19:00.000-07:00

Preface to "Chaotic Economic Dynamics" by Richard M. Goodwin (1990)

THE origin of this collection of short essays was a series of seminars given in 1988 at the European University Institute in Florence, Italy. My aim has been to elaborate the central conceptual framework of the modern industrial economy. In this sense it derives from the formulation of the problem by my teacher and friend Joseph Schumpeter. Though a neoclassical economist, he perceived the essentially evolutionary nature of the industrialized nations.

By comparison with the natural sciences, economics suffers from the lack of a solid empirical foundation based on generally valid experimental data. To make up for this deficiency, an ingenious substitute has been elaborated with great subtlety and considerable success. The method consists in asking what would a rational man (now fashionably called an 'agent') do when confronted by the manifold problems of an economic nature: he is alleged to maximize his utility or his satisfactions, by minimizing his costs and maximizing his profits or his gains of whatever sort he desires.

Under the banner of General Equilibrium Theory, this has been developed into an imposing analytic web of how a system of a large number of such agents would interact in a unified market mechanism. This programme, in an increasingly mathematical form, has produced impressive results, which may be considered 'mainstream' economics. Some tentative efforts at a kind of experimental economics have raised serious doubts about this 'rational' behaviour.
This analysis appeared to work well for a single moment in time, but there always remained the awkward fact that both agents and goods have a future. So while one could in principle solve simultaneously for all prices and quantities at a point of time, one really needed the impossibly difficult set of solutions also over the infinite future! Since the future had to be regarded as unknown and hence uncertain, it all needed to be reformulated as a gambling game. John von Neumann's formulation of game theory proved too weak a tool to resolve such a gigantic problem.

It is at this point that economic dynamics becomes relevant.

It has been proposed, quite naturally but surely unfortunately, to deploy the powerful tool of rationality to decisions in dynamics. One can apply rational choice to known prices and quantities but not to unknown future ones. The subject of these essays is chaotic dynamics, the most arresting consequence of which is that a completely deterministic system produces unpredictable behaviour-unpredictable in the sense that looking at the past and the present one cannot say precisely what the future will be.

Therefore the very basis empirically of rational prediction is destroyed. Yet agents must and do take decisions, and the aim here is to incorporate such evidence as is easily available as to their behaviour into deterministic systems, the nature of which can be analysed and solved for their behaviour over time.
The character of the model developed here is qualitative rather than realistically quantitative. Only if one has a fruitful analytic scheme can one arrive at satisfactory quantitative results. As I see it one needs a system capable of endogenous, irregular, wavelike growth. The recent discovery and elaboration of 'chaotic attractors' seemed to me to provide the kind of conceptualization that we economists need.

I have tried to provide examples of a number of different simple dynamic models, including both difference and differential varieties. Difference equation systems, though of limited applicability to economics, are included because they provide the simplest, reasonably complete introduction to chaotic analysis: in particular, they require no more than one dimension, by contrast with differential equations which require at least three dimensions.

The grave shortcoming of these essays is that they are aggregative. Schumpeter rightly insisted that innovative technology was essentially specific to particular industries or sectors of the economy. However, satisfactory dynamic analysis of such multisectoral systems is a large and difficult task, requiring the kind of quantitative logic deployed by John von Neumann, and well beyond the scope of this short collection of essays.

Unsatisfactory as they are, my hope is that these essays do illuminate the nature of some of the problems, even if not the nature of economic reality.

R.M.G.
Peterhouse, Cambridge
and
University of'Siena
1989

John Halle reports on #occupywallstreet

2011-09-25T14:23:00.000-07:00

Very good report on #occupywallstreet reposted from Facebook http://www.facebook.com/notes/john-halle/wall-street-protest-sept-24-2011/10150384437470050

Hi Everyone,

The following is a report from the Wall Street Occupation protest march which I am now on the train returning home from.

When I arrived at Zuccotti Park at approximately 12:15, the march which was just getting under way initially appeared to be small, marginal and unimportant. By describing it in this way, I do not mean to denigrate it. After all, I have spent a good part of my life attending small, marginal, and almost certainly unimportant events-namely concerts by obscure ensembles performing obscure "new" music, whatever that means these days. Of course, in these days of internet connectedness, events which attract only a few local participants can attract a national, or even world-wide audience of thousands. A concert in New York of the music of Lamonte Young or Milton Babbitt will almost certainly seem, and almost certainly is marginal, by any reasonable definition of the term. But invariably, scattered around the world there are a few pockets of admirers who will amplify the event into something which is, at least in their minds, of great importance. The same goes for #occupywallstreet. Numerous "tweets", blog postings, comments to blogs, reports of solidarity marches, busses arriving from Madison, St. Louis, etc. gave the impression that this event had the potential to attract large or at least respectable numbers.

The fact is that it did not.   The original group, and I made several efforts to check this, was almost certainly less than 1000, which is to say that it filled about a half the length of a New York city block. Those who were at the Feb 15, 2003 demonstration will remember that the throng extended the entire length of 5th Avenue from 42 St. to 96th, across to and back down again on Second across to the United Nations and then back up again to 96th. That makes for something like 120 blocks or more crammed full with people-a crowd estimated at a million. This was almost certainly a factor of 500 smaller-an indication of where this movement needs to go to get the attention of Lloyd Blankfein, Jamie Dimon, and the other felons who are now our de facto rulers. More on that later.

When I describe the march as marginal, those familiar with protests of this general sort will know what I mean. Doug Henwood's report (http://lbo-news.com/2011/09/23/visiting-the-occupiers-of-wall-street/) of his visit to Zuccatti Park (a.k.a. Liberty Plaza) nicely captured a static version of the basic outlines of the scene pretty well: a throng of college or post college radicals, whatever that means these days (not much, in my experience), with a few moth eaten contingents from the various Marxist sects still carrying the flag based on some more or less idiosyncratic passage in the Grundrisse, a few obvious psychotics best avoided, a few artsy lower east side types, though by now surely displaced to the outer boroughs. Of course, there were lots more: a few vaguely neurotic looking, aging academics like myself, a disarmingly pretty Asian girl with purple hair and her boyfriend, a few hip-hop enthuiasts, likely attracted by rapper Lupe Fiasco who had endorsed the march. In any case, this is what we had to work with. And as Donald Rumsfeld famously remarked, you protest with the marchers you have, not those you wish you had. And so I joined in somewhat skeptically though I was to become less so for several reasons which I'll describe in the following, along with some interspersed commentary and reflections.

First, as the march got close to its ultimate destination of Union Square, it seemed to pick up steam, its numbers increasing, the chants, while still mostly pedestrian, becoming more coherent and less obvious recyclings of decades old slogans which have become by now almost irrelevant. Most significantly, as the march progressed it would be infused with a lot more passion and legitimate anger. On this latter point, it needs to be observed that a double digit unemployment rate means that being college student or a recent grad is likely to be suffused with something in between misery, dread and stark terror of the future which likely awaits. And while this has becoming increasingly apparent to me among the students I teach, it was still more visible in the faces of more than a few of the protestors. This is not just the long term future of carbon induced planetary apocalypse which they will live to see-and which I, thankfully, will not. It is the immediate and midterm future of un- or at best underemployment at wages and working conditions reflecting the tight, employer-centric labor market. That means eking out an living through dead end internships, temporary office work will become the norm for all but a few of the chosen (read Ivy League) grads in the appropriate majors having the right connections. And while for a long time the Nietzschean devil-take-the-hindmost ethos of college students was unforgiving, viewing those unable to compete in the new economy as having only themselves to blame, it is now becoming apparent that the game is being played with a stacked deck. And so for the first time in a long time those in their teens and twenties have an immediate personal stake in that which they are protesting, and while the still dreadful legacy of sociology departments, "non hierarchical" discourse, diversity training and "anti-racism" remains evident in the rhetoric, slowly the smothering layer of academic abstraction and language games seems to be lifting from protest culture and what is revealed is a deep, festering and altogether righteous anger-what the Arabic speakers refer to by the word "hamas."

Secondly, it became increasingly clear that more that a few of the participants were willing to push the envelope of the protest in the direction of outright confrontation, and, more importantly, this seemed both justifiable and appropriate under the circumstances. I use these words advisedly, doing so based on the recognition that demonstrations have become choreographed rituals which have long since lost the capacity to demonstrate anything meaningful. And when I say choreographed it needs to be understood that those doing the choreographing are the police, under orders from higher ups who are well schooled in crowd management techniques designed to marginalize and blunt the effectiveness of protest.

Under the Giuliani and Bloomberg regimes the cold precision of the choreography imposed by the NYPD on protests rivals that of the Bolshoi under Balanchine: since the Feb 15th, 2003 and Republican National Convention protest, the authorities have made use of a highly effective combination of carrots and sticks. Quiet and non-violent-by which is meant non-disruptive protests under the terms set by the authorities are tolerated. However, those stepping out of line, those who insist that protests do what they are supposed to do, i.e. disrupt business as usual and impose a cost on those primarily benefitting from its operation, are dealt with considerable harshness.

The response of demonstrators over the past few years has been to capitulate to these imposed conditions and thereby, often under the rubric of "non-violence", allowing protests to become empty rituals.   What is necessary now is that demonstrations reclaim their roots as a demonstrations of power, specifically, their ability to disrupt. And while the disruptions effected today, in the larger scheme of things were quite minimal, what a critical mass of the participants seem to implicitly understand is that disruption-the ability to inflict real costs on entrenched capital through unpredictable and spontaneous (i.e unchoreographed) direct action is a necessary condition for our success. If these protests succeed in growing with this assumption at their core, they have real potential to become truly meaningful. It remains to be seen whether they will do so.

A couple of examples will give some idea of the potential I'm referring to, one of these extraordinary: after the march reached its eventual destination at Union Square Park, most seemed to expect that we would return more or less the way we came back to Zuccotti Park. While we were there, it became clear that the police had received orders to disperse the group. Their initial attempt to do so was when we were still in the park, and was effected by vinyl mesh barriers which prevented the crowd from returning south back to its original destination in Wall Street. To do this required erecting these barriers at edge of the group, turning back those who had just started on their way south. Among these was a man maybe slightly younger than myself-though not much-who simply demanded to go where he to wanted to, and he would be damned if he would let the cops get in his way. And so he stepped in front of the cops who were trying to hem us in, inviting a violent confrontation and likely arrest. But that's not extraordinary, as this was to be duplicated with greater or lesser degrees of violence at least forty times over the next hour. What was extraordinary was how the man impeded the cop: he did so by pushing a stroller which enclosed the man's three or four year old child in the cops way. The cop pushed the stroller aside and attacked the man with real viciousness, in full view of the child. I didn't see what would later materialize-how or whether the man would be arrested. I did, however, see another small child in the park who was a spectator to the event breaking down in tears, as his father, a dreadlocked man tried to console him.

As a parent of a small child who I was considering bringing along to this, but thankfully did not, I wasn't sure how to respond to what seemed to be an act of almost insane recklessness. Initially, I was was appalled, but in retrospect, in revisiting the mental image, I couldn't help but be moved by the commitment and courage displayed, and by the recognition that finally the stakes of our confrontation are becoming clear. As Marx famously observed "(we) are now compelled to face with sober senses, (our) real conditions of life, and (our) relations with (our) kind." While few of us will find ourselves capable of this man's courage, this is the kind of reaction which will be required of us when we face up to the realities we are encountering with sober senses.

A description of the remainder of the march requires the trite but, in this context, altogether accurate phrase, "violently dispersed by the police", though this is, of course, usually applied to various third world dictatorships.   One block south the police began to erect a second set of barriers with the purpose of dividing the march into smaller groups, separated by a block or so, arresting those who refused to get out of the street, and who resisted.   The arrests were undertaken with considerable brutality which I was a direct witness to, and almost a victim of. The worst which happened to me was to have receive the full brunt of a body which had been slammed with remarkable force by a particularly violent and thuggish cop. Another encounter which I witnessed was worse and somewhat disturbing. A protester who had, I would imagine, prevented the erection of the crowd control barrier, was tackled and set upon by at least seven or eight cops administering a series of blows to all parts of the man's head and abdomen. I had never seen a display of violence of such intensity and it was quite unnerving. The fact that the target of this display of brutality was black will probably not come as a surprise.

These are some of the events which seem worth reporting here. There were others which a more journalistically inclined (and trained) observer would no doubt relate.   Rather than itemizing these I'll close by mentioning a third reason for why I am somewhat optimistic. This is personal and even a bit sentimental so those who don't know me might do well to skip the remainder of this paragraph. At the intersection of West 4th my friend Judd Greenstein who I had called earlier darted in the the crowd next to me. Judd, in addition to being probably the most gifted, passionate and communicative of the younger composers I know, is also one of the finest people-in the most simple and meaningful sense of the term. Pretty much unique in my circle of acquaintances, he is a reliable presence at these sorts of protests, having met up with me a year ago or so at a Wall Street protest following the bank bail outs. More significantly for me, this seemingly random encounter brought back for me one of my most treasured memories. At the Iraq war protest in Feb 2003, I was within a sea of bodies walking southward on the corner of 79th and Amsterdam, when I spotted within the crowd heading west my father Morris who was then eighty and my mother Rosamond who was now walking slowly having begun to be affected by the Parkinsons disease which would take her life this year. I probably shouldn't have been surprised. While they are not political activists (certainly less so than my father's long time friend and colleague Chomsky) their investment in politics is real, though almost exclusively moral-dictated by a simple code which required them to actively protest when their government is enacting atrocities in their name, as it did in Vietnam during my childhood, and as it was about to do in Iraq. Protest is what every decent person did back then-it was not limited to an activist clique. There were lots like my parents back then.

Judd attended this demonstration for exactly the same reasons which my parents did nearly half a century ago, and which were defining events of my childhood. Protest is what decent people do when they are confronted with evil. Having both witnessed the thuggish crackdown south of Union Square, I was grateful to be able to be able take stock of the situation with him. His presence today was for me a validation of the possibility that there maybe some ultimate hope to be squeezed out of what now appears to be a fairly desperate trajectory into something approximating a police state-at least for those who do what is necessary to make protest meaningful.

Finally, a post-script: I'm writing this as the police prepare for what may be a final-and likely, if today's events were any guide, intensely brutal assault on the encampment in Zuccati Park. As I have been posting on Facebook, this appears to me to be a Martin Niemoller moment for us-one where they are coming for a marginal clique, one which is the butt of jokes (including my own above) and regarded as absurd and insignificant by all but a few. Today's NYT's coverage of the protestors, predictably contemptuous and dismissive, sets the stage perfectly for this crackdown-and provides grounds for all the right thinking people who are the Times' primary demographic to avert their eyes. The few decent people who find out about this may get on the subway and head to Wall Street to bear witness, and maybe even act. But I can't say I'm in the least optimistic that anything like this is in the cards-certainly nothing approximating the display of force which we must martial to make a difference. All this is only further confirmation of Niemoller's dictum: when they come for us there may very well be very few left to speak up.

Wednesday Orgdown 9/21/11

2011-09-21T16:13:00.001-07:00

Brandworkers International is an interesting organization, they specialize in business-to-business boycott tactics, such as persuading restaurants to drop suppliers with bad labor practices. I was reminded of them today because they are publicizing an international day of action against Tnuva, a NYC distributor with a truly horrible record of wage theft, intimidation of workers, and illegal firing.

The action against Tnuva is part of the "Focus on the Food Chain" campaign, which, according to its facebook page is "a joint effort of the non-profit organization Brandworkers and the Industrial Workers of the World (NYC) labor union" to "[organize] recent immigrant workers in New York City's food processing and distribution sector to challenge and overcome sweatshop conditions."

A recent article in Crain's New York talks about Brandworkers, FFC, and the Tnuva campaign: http://www.crainsnewyork.com/article/20110821/SMALLBIZ/308219981

Bill Fletcher on Black Power at Work

2011-09-21T08:21:00.000-07:00

Book Review republished from Industrial and Labor Relations Review, vol. 15 July 2011

Black Power at Work: Community Control, Affirmative
Action, and the Construction Industry.
Edited by David Goldberg and Trevor Griffey.
Ithaca, NY: Cornell University Press, 2010,
265 pp. ISBN 978-0-8014-7431-6, $24.95
(paper).

I did not actually meet and speak with Leo Fletcher (no relation) until the 1980s, but in the fall of 1972 as a freshman at Harvard, and as a student radical, I quickly discovered who he was. Leo was the chief leader of an organization known as the United Community Construction Workers (UCCW). This group of Black and Latino workers was on the frontline in the struggle to desegregate the racist building trades industry of Boston. Leo and his colleagues were at one and the same time worker-leaders at the tail-end of the Black Power phase of the Black Freedom Movement while also serving as champions of a radical vision of labor unionism.

The UCCW was not an isolated initiative. It was part of a national phenomenon that has been largely ignored by both labor historians and historians of the Black Freedom Movement. Black worker organizing, whether from the early 1950s and the National Negro Labor Council or much later in the 1960s/early 1970s with the League of Revolutionary Black Workers, has been marginalized by historians as almost being an enigma. The reality is that such efforts, along with many others—including the famous 1968 Memphis, TN sanitation workers organizing and strike where Dr. Martin Luther King was murdered—were essential components of the Black Freedom movement as well as attempts to construct a different vision of labor unionism in the United States.

In this light, David Goldberg and Trevor Griffey’s edited volume Black Power at Work: Community Control, Affirmative Action, and the Construction Industry is an invaluable resource. Through the articles assembled by the two editors, the reader is introduced to an entirely different side of both the Black Freedom Movement and organized labor. The insights offered are quite significant. One of the most fundamental is offered in Brian Purnell’s article ‘“Revolution Has Come to Brooklyn’: Construction Trades Protests and the Negro Revolt of 1963.” Purnell emphasizes that the notion that the Black Freedom struggle could be divided along the lines of a political struggle—which took place first—followed by an economic struggle, is patently and historically incorrect. The struggle for economic justice took place at the same time as the struggles for political rights (including voting rights) and against Jim Crow segregation. Though this point should be fairly obvious, the mythologizing of the Black Freedom struggle, and particularly its Civil Rights phase, has brought with it a caricaturization of the movement and its objectives. The reasons for this caricaturization are not discussed in his article, but one can conclude that they result from the need by the ruling elites to sanitize the history of the movement and remove from it any sense of the complexity of its economic objectives, which in many cases challenged the free market ideology.
Equally important for several of the authors in this volume is the repudiation of the notion that there was some sort of “Chinese Wall” separating the Civil Rights and Black Power phases of the Black Freedom Movement. In fact, the seeds of the Black Power phase could be found in struggles that unfolded throughout the Civil Rights phase. The development of the Congress of Racial Equality (CORE) is a case in point. This organization, a key component of the Civil Rights coalition, engaged in increasingly militant tactics, thereby attracting to it left-leaning and nationalist African Americans who were looking for an alternative politics. In time, CORE , which was instrumental in the early struggle for construction jobs, became a major proponent of Black Power, though as time went on their interpretation of Black Power drifted more and more toward the political Right.

The particular focus of Black Power at Work is on the multi-decade struggle of Black workers (and on the East Coast, Puerto Ricans) for jobs and justice in the construction industry. In many respects, the struggle to desegregate the building trades highlighted the larger problem of moving the objectives of the Black Freedom Movement out of the South and into the supposedly more “liberal” North, Midwest, and West Coast. Immediately, the demands of Blacks and Latinos for jobs collided with the manner in which the building trades industry, including both the contractors and the unions, operated. Each chapter in this volume gives the reader a sense of the closed loop that Black workers found themselves experiencing. For example, they would go to the contractor seeking work only to be told that they needed to go to the union. They would go to the union only to be told that a contractor needed to offer them a job. They would go to the government only to be served a plate of further confusion and double-talk.

It was in response to this situation that there arose organizations of Black workers (and sometimes both Black and Latino workers) to lead the fight for jobs. With names such as the Harlem Fightback, United Community Construction Workers, Black Economic Survival, and United Construction Workers Association (to mention just a few), these organizations conducted a militant, grassroots fight against de facto segregation in the building trades. Most did not survive the 1970s, but they all made a significant impact, in some cases helping to make a major breakthrough in employment practices. In other cases, these organizations served as training grounds for a generation of activists who would go on to play a myriad of roles in both the Black Freedom Movement and organized labor.

Black Power at Work situates the reader in the context of the changing urban environment. As the authors note, the fight for construction employment was a battle in the midst of the transformation of northern cities. The slow decline of manufacturing employment due to technological change and industrial relocation often made the fight for construction jobs a struggle for survival. Specifically, this was a struggle for jobs that could ensure a decent living standard at a point when many other options were vanishing.

In this context, then, the volume is a powerful examination of a social movement that has often been overlooked due to a class bias on the part of many commentators. The leaders and members of these militant organizations were, by and large, not from the middle stratum; they were not doctors, lawyers and ministers, but instead rank and file worker activists. Some came to this fight from other struggles, but their names have largely been forgotten over time.

It is unfortunate that this otherwise exceptional book fails to analyze two very significant formations: New York’s Harlem Fightback and Boston’s United Community Construction Workers. I do not fault the editors for this, but the lack of attention to these two groups is most regrettable. Harlem Fightback became in many respects the flagship of the struggle around construction jobs. It was an organization that, much like Seattle’s United Construction Workers Association (UCWA), edged itself into the broader social justice movement. Boston’s UCCW, also along the lines of Harlem Fightback and UCWA, became a center for many Black leftist activists who would go on to play important roles over the years. In both cases it would have been invaluable to understand what froze these organizations—that is, what stopped or limited their growth. UCCW declined and then essentially evolved into a formation called the Third World Workers Association, which itself declined and was eclipsed by its social service component, the Third World Jobs Clearinghouse. The existence of a worker’s organization in construction among workers of color in Boston vanished.
This book helps us understand the Black Freedom Movement, particularly in the North, as being something far more than an effort at integration and formal equality. Instead it reminds us that it was a movement against a system of racist oppression. This oppression was a matter not only of a lack of constitutional and statutory rights, but also of structures that had been put into place by ruling elites yet were constantly reinforced and supported by those who believed that they benefited from them, regardless of the truth of the matter. The crisis facing U.S. workers, and organized labor specifically, can be unpacked by looking at precisely this paradoxical situation.

Bill Fletcher, Jr.
Labor Organizer and Policy Analyst
Visiting Scholar, CUNY Graduate Center

Conversation with Gregory Butler re: associate membership programs

2011-09-14T11:19:00.000-07:00

Sam Calvin
New Union Approach in New Zealand (2 articles) "undertaking...to build a modern union movement capable of offering easy, low threshold membership to any worker that wants to participate, including having plans and capacity to support unions to change and organize in new sectors."
LISTSERV 16.0 - PORTSIDELABOR Archives
https://lists.portside.org/cgi-bin/listserv/wa?A2=ind1109A&L=PORTSIDELABOR&F&S&P=92
LikeUnlike • • Share • Sunday at 4:37pm
Sam Calvin Also: "Together is a values based organization - by its nature and by the nature of the workplaces of its members, bargaining is not an option at this stage for most members but participation and organization is."
Sunday at 4:38pm • LikeUnlike
Gregory A. Butler
This sounds a LOT like the various "associate membership" schemes that the AFL-CIO have tried over the last 30 years.

Those schemes have to date been a resounding failure.

Bottom line, if a unoin can't get workers more money in their paycheck and protect them from abuses on the job, its useless to them.

Workers aren't stupid. They aren't going to join some amorphous labor social club and pay their hard earned money in dues unless it does something concrete for them.See More
Sunday at 5:10pm • UnlikeLike • 1 person

Sam Calvin OK - I see where you're coming from. But early unions actually did have a lot in common with social clubs. Don't you think having a place where people can gather and communicate is an important step in building unions among the unorganized?
Monday at 8:04am • LikeUnlike
Gregory A. Butler It doesn't matter what you or I think. Do non union workers think that's important?
Monday at 8:06am • LikeUnlike

Sam Calvin Way to duck the question ;)
Monday at 8:07am • LikeUnlike

Gregory A. Butler Actually it isn't. Are non union workers looking to join a labor social club? The evidence seems to say NO
Monday at 8:08am • LikeUnlike

Sam Calvin What evidence is that?
Monday at 8:09am • LikeUnlike

Gregory A. Butler The fact that every "associate membership" program in this country in the last 30 years has been a failure.
Monday at 8:11am • LikeUnlike

Sam Calvin The past and the future are not identical, though...and consider the fact that many many workers belong to churches, which are "values based" organizations par excellence!
Monday at 8:14am • LikeUnlike
Sam Calvin If you're arguing that many general membership programs are structurally crippled, I agree with you. No one likes being in an organization as an inferior. But look back at the history of the so-called Federal Unions of the AFL. Throughout the 20s, they "failed," and yet they played an important role in the developments of the 30s.
Monday at 8:30am • LikeUnlike
Gregory A. Butler Federal Unions were actual unions that fought for their members. Churches, synagogues and mosques also provide real world services for their members. "Associate membership" programs don't.
Monday at 9:39am • UnlikeLike • 1 personLoading...
Sam Calvin Do you apply the same critique to worker centers?
Monday at 9:54am • LikeUnlike

Gregory A. Butler Worker centers that actually help their members in real material ways are quite useful. The ones that don't aren't.
Monday at 11:47am • LikeUnlike

Sam Calvin Ok - so do you think there's no potential to expand the model of worker centers to be national in scope?
Monday at 11:50am • LikeUnlike

Gregory A. Butler Even the best worker centers (the ones that work as proto-unions) work best among tightly knit groups of very recent immigrants.

Due to that factor, I don't see them as a model for the restoration of unions in the broader labor force.
Monday at 12:13pm • LikeUnlike
Sam Calvin So what about general membership unions, like the Federal Unions or the CIO's area unions?
Monday at 6:11pm • LikeUnlike

Gregory A. Butler If they are actual bona fide labor unions that negotiate contracts, handle grievances and lead strikes, yes of course I approve.

If not, they are a waste of time and effort.
Monday at 6:27pm • LikeUnlike
Sam Calvin But both of those examples have worked and not worked, often at the same time with different groups of workers...by analogy, do you consider a strike which fails a waste of time?
Monday at 6:38pm • LikeUnlike
Gregory A. Butler
‎Sam, American workers have loudly and clearly rejected "associate membership" again and again for the past 40 years. From Walter Ruther's "community unions" back in 1968 to the Machinists Union's "U Cubed" today, workers have shunned these groups again and again and again.

The opinion polls are clear - about 60% of workers want unions.

Those workers want REAL UNIONS unions that lead strikes, sign binding contracts, get them higher wages, better benefits and protection on the job.

They want unions for pork chop reasons. Workers need more money and they want some organization to unite them to struggle for more cash. It really is that brutally simple and the harsh lives of workers don't leave us much room for any kind of idealism. We have to fight to make every dollar and that's priority one at all times when it comes to work related stuff.

American workers take care of their spiritual needs by either going to a church, synagogue or mosque or praying by themselves when they get up in the morning.

They take care of their social needs in bars or hanging out on the stoop or in the backyard with friends and family. Since America is a racist segregated country, this socialization tends to be monoracial. For many Americans, their social lives are further compartmentalized by tribe and ethnicity.

Any attempt by American labor to set up social affinity based pseudolabor organizations is destined to be racially and ethnically segregated.

Just look at the workers centers, which, with few exceptions, are based on race, tribe and nationstate of origin.

We need to build real unions, not to go down the failed road of "associate membership" which workers have already rejected.See More
Monday at 10:35pm • LikeUnlike
Sam Calvin
Your point is well taken, but I'm trying to figure out how union development occurs BEFORE the point that a union is in a position to lead a strike, sign a contract, etc - all the things that you say are the signs of a real union.

This development period, of course, should ideally be as short as possible - perhaps this is your point. But I'm not convinced that swift progress through this limbo is always possible. If your point is that we need to not lose sight of the "pole star" of unions capable of winning wage gains, you may be right that "associate" status acts as an impediment rather than a facilitator towards that vision.

Certainly, Reuther's notion of community unions seems a substantial step towards confusing what are distinct forms - unions and community organizations. I think it is worth looking further at this historical example.

On the other hand, you confuse the issue by bringing up U-cubed, which is an organization of the unemployed (unless, of course, you are just objecting to their use of the word union).See More
Yesterday at 7:49am • LikeUnlike
Gregory A. Butler
U Cubed is quite clearly an "associate membership" type structure. It's part of the same school of thought, is quite clearly dreamed up by the same kind of professional union staffers who keep bringing up this failed concept and it is very ...much on topic to bring it up here.

The meta concept here seems to be that it's a bad thing for unions to fight for higher wages and to fight abuses on the job. I'm sure a LOT of middle class union staff types feel that way.

After all, in their class, it's considered gauche and uncouth to talk about money. Only the vulgar rich, ignorant and crass small businesspeople and the selfish, stupid and uneducated working class and poor openly talk about money. Respectable middle class college educated professional people NEVER talk about anything so vulgar as money and income.

Also, if you're a middle class white collar professional, you've had limited experience with truly abusive working conditions. Maybe you had an abusive summer or part time job when you were a student. Even then, in your mind, the solution was an individual one - to study hard and get good grades so you'd do well in school and never have to have a job like that again.

So, to someone coming from that mindset, unions that focus on collectively fighting for higher wages and better working conditions for workers as a group is unseemly and vulgar.

Unions exist to funnel money into the Democratic Party and to provide jobs to folks who majored in labor relations at Cornell, Harvard, the University of Michigan and the University of California.

Also, the modern school of thought seems to be that the only way to grow unions is to build them with management's permission. Of course, management will only promote unions that they see as safe company unions that won't fight for the workers.

Associate membership programs and hybrid forms like U Cubed come out of the same mindset and that is why I'm so dead set against them.See More
Yesterday at 9:34am • UnlikeLike • 1 personLoading...
Gregory A. Butler Bottom line, the working class have clearly voted with their feet against this concept. Anybody who is still proposing it needs to take a step back and listen to what the class has already said on this topic.
Yesterday at 9:35am • LikeUnlike
Sam Calvin
I definitely agree that there are a great number of delusions going into the types of project you're describing - worst of all, that union expansion requires only a change in "the old-fashioned way we're thinking about it."

It is definitely unsupportable to portray the growth of unions as something that can happen gradually, with management's permission, and without decisive struggles.

But I think it is important to be clear as to what we're talking about. Maybe this is "old hat" for you, and you are using a shorthand that I'm simply not acquainted with, but it is not obvious to me what the key characteristics of the associate membership programs are that you feel are a decided issue.

In short, there seem to be numerous "hybrid" forms which have surfaced in union history - perhaps not as stable or unambiguous entities - and played a useful role. I'm trying to get a better grasp on which ones can lead to something worthwhile, and what the obstacles and pitfalls to look out for.See More
Yesterday at 10:12am • LikeUnlike
Gregory A. Butler When I say "associate membership" I mean any type of "union membership" that does not involve the union negotiating for better wages and benefits for that worker and protecting him/her from abuses at work. That type of bogus "unionism" is worthless. Workers agree with me on that, as the last 43 years of "associate membership" programs show us clearly.
Yesterday at 10:32am • LikeUnlike
Sam Calvin So you regard this as a post-sixties delusion?
Yesterday at 10:35am • LikeUnlike

Gregory A. Butler I wouldn't phrase it like that. It is part of the decay and death spiral of modern trade unionism.
Yesterday at 10:52am • LikeUnlike

Sam Calvin And you regard the clear recognition that wages, benefits, and abuses should be the focus of union attention as a key component of the path out of this death spiral? Or do you think that it is likely to continue unabated?
Yesterday at 11:00am • LikeUnlike
Gregory A. Butler Well, the reason that the death spiral of the unions is even relevant to workers is the collapse of wage scales and benefits and the increase in workplace abuses that it's caused. If we want to enlist workers in the cause of rebuilding labor, we have to give them a REASON to get on board. More money, better benefits and a fight against abuse at work are the only reasons that even matter from our class' perspective.
Yesterday at 11:26am • LikeUnlike
Gregory A. Butler If we can't stop the falling standard of living for our class and we can't prevent abuse at work, what's the point of even bothering with unions?
Yesterday at 11:27am • LikeUnlike

Sam Calvin I hear what you're saying - but I've also heard the argument from many folks that unions are a dead letter and not capable of stopping the falling standard of living. I'm trying to understand what your perspective is on the possibility of a renewal of the union movement...
Yesterday at 12:00pm • LikeUnlike
Gregory A. Butler If they're right, then we have to build brand new revolutionary unions from the ground up.
Yesterday at 12:46pm •

Arguing in terms of Virtue

2011-09-02T09:37:00.000-07:00

David Brooks - The Vigorous Virtues (New York Times)

This article is interesting because of the comments it generates. Moving the debate onto the terrain of virtue produces more profound, more populist responses than are typically seen in "policy" centered debates, where many of the moral issues are submerged. Union supporters take note, this shift is very effective, and something that needs to be understood by folks who want to move popular opinion...

It's tempting for those who have seen the effects of the moral style of argumentation used by the right so effectively since the time of Regan to conclude it is demogogic, but in fact it would be more accurate to call it persuasive persuasive...

Aronowitz quote

2011-08-31T19:39:00.000-07:00

The rest of his piece on the split-off of the Change to Win coalition from the AFL-CIO is fairly mundane, if reasonably accurate, but this quote has a bit of fire:

Whatever its practices, until the 1970s, the Teamsters paraded an image of economic power that was unrivalled by its AFL-CIO competitors most of whom were making nice to the bosses. The Teamsters had success because they offered a program of resistance. Are there any sections of Organized Labor that even remember how to talk the talk of class power when for decades, they have assured workers that they can secure justice by peaceful means, that the old methods of baptism by fire were outmoded and the labor movement had become “responsible”?

Can't remember the last time I read the phrase "class power"...

The Rights Revolution

2011-08-24T22:44:00.000-07:00

Originally published in New Labor Forum in 2003. Maybe I'll make a digest, but for the time being I'm just posting this for reference...

By Nelson Lichtenstein

A GREAT PARADOX EMBODIES THE RELATIONSHIP BETWEEN HUMAN RIGHTS AND LABOR rights in the world today. Institutional trade unionism is not doing so well. This is most obvious in Anglo-America, where union density has declined dramatically during the last quarter century, and where unionism's influence, under both Labour and Democratic Party Administrations has been less than potent. With some notable exceptions-South Africa, South Korea, Brazil-one can say the same for union membership and power all over the world.

According to the International Labor Organization's World Labor Report, trade union membership dropped sharply during the 1990s, falling to less than 20 percent of workers in 48 out of 92 countries. The decline was most serious in manufacturing, even though, on a worldwide basis, the manufacture of actual things in actual factories was a booming proposition.1

But in this globalized production system, the connections between employers and employees have become increasingly attenuated. Whereas employees used to work for an identifiable common employer, today they occupy an uncertain location on a global production and distribution chain. Indeed, globalization has shifted much production and employment beyond the reach of the labor law of any single country, and it has blurred the meaning of the employment relationship, both in the nation that hosts the corporate headquarters and in the country where supplier firms are located. World auto production is today near record levels, but the number of workers in the United States, Japan, and Europe, who work directly for the great auto multinationals, has been reduced by 50 percent over the last quarter century. In the United States the big domestic auto companies no longer care all that much about the wages they negotiate for currently employed union workers; the real issues are decentralization, outsourcing, and the flexibility of their supply chains.

This eclipse of trade unionism is not just one of declining numbers, bargaining leverage, and political clout. It has had a moral and ideological dimension as well. The effort to find some international mechanism that will defend trade unionism in a globalized economy has proven painfully slow and difficult, but this is not simply a question of capitalist power and prerogative. In addition, it reflects a decline in the legitimacy and authority of unionism as an institution capable of defending the interests of ordinary people around the globe. Trade unions are too often considered defenders of the status quo; they are complicit in the maintenance of gender and racial hierarchies that are anathema in the global North. And in the global South, those unions that actually do exist often seem an entrenched aristocracy. Thus, in South Africa a showdown may well be in the offing between the leftwing unions, who are nevertheless representative of a strata of relatively well-off workers, and the African National Congress which is desperate for export earnings and development funds.

All this may well be contrasted, even causally related, to the remarkable growth that has taken place during the last quarter century in the moral authority and sheer political potency of the movement for international human rights. War criminals are being tried in the Hague, the rights of women have been put on the social and political agenda even in the Middle East, and the defense of minority ethnic rights has achieved a legitimacy not seen since Woodrow Wilson injected "self-determination" into the diplomatic lexicon some 80 years ago. At no time since 1948, when Eleanor Roosevelt presided over the negotiations that gave birth to the UN's Universal Declaration of Human Rights, has that document been held in higher regard. Even the most abusive governments pay lip service to its principles. All of the major industrial nations, except for the United States and China-admittedly big exceptions-have ratified the International Labor Organization (ILO) conventions that assert "freedom of assembly" as a fundamental human right. Even the U.S. government endorses the key ILO conventions, if not for itself than for everyone else. So as a condition for lifting its trade embargo against Cuba, U.S. law requires that the island nation put in place a transition regime "allowing the establishment of independent trade unions as set forth in Conventions 87 and 98 of the ILO."2

This worldwide endorsement of the human rights idea has become the charter for a new kind of statecraft, even a new kind of globalized civil society. Thousands of nongovernmental organizations (NGO's) make it their business to expose human rights violations and push forward a social, economic, and legal framework to which sovereign states must accommodate themselves. There may well be as many as 25,000 international NGO's in the world today; some 2,500 are recognized by the UN. Not all are concerned with human rights, but many of the most important and high profile take this portfolio as their primary mission. Amnesty International, for example, has more than a million members worldwide and it has affiliates or networks in over 90 countries and territories. Its London-based international secretariat has a staff of over 300 which carries out research, coordinates worldwide lobbying, and maintains an impressive presence at many international conferences and institutions. Human Rights Watch (HRW) went from a budget of $200,000 in 1979 to $20 million in 2001. Two years ago, HRW published Unfair Advantage: Workers' Freedom of Association in the United States Under Human Rights Standards, which is certainly one of the most devastating accounts of the hypocrisy and injustice under which trade unionists labor in one portion of North America. Like the world's first human rights NGO-the anti-slavery society that helped abolish legal servitude within the British Empire-such international organizations command a legitimacy greater than that of many national governments. United Nations Secretary Kofi Annan has called these voluntary international organizations "the conscious of humanity."3

This new sensitivity to global human rights is undoubtedly a good thing for the cause of trade unionism, rights at work, and the democratic impulse. A symbiotic relationship clearly exists between a resolution of the two-century old "labor question" and the advancement of democratic norms and human rights standards.

A manifestation of this relationship and the legitimacy won by rights issues is found in the effort, largely motivated by activists in North America and Western Europe, to hold corporations directly accountable for their environmental, labor, and human rights conduct. This began in the 1970s when organizations like Greenpeace campaigned for ecologically sound whaling and fishing practices, but today it extends to the full range of corporate behavior, of which labor standards and labor rights are a prominent element. In the antisweatshop movement and in the worldwide fight against child labor, slavery, and the subjection of women, a de facto alliance now exists between numerous NGO's and several of the more progressive trade unions in North America and Europe, with some support from struggling worker organizations in Latin America, Africa, and Southeast Asia. Putting aside for a moment any consideration of the effectiveness of this alliance, or its impact on corporate policy, these movement oriented advocacy groups have achieved a high profile potency. Indeed, if hypocrisy is the tribute that vice pays to virtue, then we must nevertheless marvel at the corporate tribute that has been extracted.

At latest count, some 182 labor and human rights codes of conduct have been put in place by transnational organizations, corporations, industry associations, and stakeholder groups. A variety of codes have entered the public-policy marketplace: these are sponsored by nongovernmental organizations like the Fair Labor Association, the Workers Rights Consortium, the Ethical Trading Initiative, the Clean Clothes Campaign, the Rugmark Foundation, the Foulball Campaign, and Social Accountability 8000. At a time when most corporations and many politicians are rethinking and devaluing the idea of a society-wide labor/ management social compact, or even of a more limited collective bargaining agreement, members of these worker rights consortia include company officials, trade unionists, human rights activists, religious leaders, student groups, and university administrators. Corporations have entered into these agreements because they fear adverse public relations and consumer boycotts; but we should not simply dismiss such a stratagem as risk avoidance. It says a lot when these multinationals recognize that human rights activists actually stand a chance of persuading millions of consumers that they should shun products produced under conditions where elementary labor standards and human rights are violated. Whatever their actual impact on Third World labor rights, these corporate codes of conduct undermine, even contradict, the neoliberal globalizers who have heretofore conflated a free market in labor and goods with the capitalist utopianism that has flourished in the years after the end of the Cold War.4

Take Reebok International, for example. Reebok, which positions itself as the rights-conscious shoemaking multinational, first advertised this aspect of its corporate culture when in 1988 it underwrote an Amnesty International concert tour designed to bring awareness of human rights issues to young people. Reebok executives ad-vertise their adherence to a corporate code of conduct "based on the core principles" expressed in the UN's Universal Declaration of Human Rights, and it markets soccer balls and other sportsware with labels that assure consumers, "Guaranteed: Manufactured without child labor." The company even awards a "Reebok Human Rights Award" to activists who fight against child labor and repressive dictatorships.5

To gain some insight into the future of the relationship between human rights, workers' rights, and the fate of trade unionism, one might be well served to look at the history of worker rights in the U.S. In no other large country is rights consciousness of greater potency, in the law, in culture, in foreign policy, in the subtleties of daily life and language. Since the 1960s, a multicultural, gender-sensitive rights culture has been institutionalized, legitimized, and codified within the major corporations, inside the governmental bureaucracies, in academia, and all across the political spectrum. But during the same years that this rights culture became hegemonic, the labor movement, as idea, ideology, and institution, moved well into the imaginative shadows. In no other large nation, aside from those that are outright dictatorships, has unionism lost so many members and so much political and economic leverage. Despite the ascendance of a new progressive leadership at the AFL-CIO and in key unions, and despite the recruitment of thousands of energetic new organizers, the U.S. remains politically and legally hostile terrain for the revival of trade unionism, regardless of its structure, leadership, industry, or demographic composition. As the Human Rights Watch report, Unfair Advantage, points out in such graphic detail, "millions of workers are excluded from coverage by laws to protect rights of organizing, bargaining, and striking . . . recourse for labor rights violations is often delayed to a point where it ceases to provide redress. Remedies are weak and often ineffective. In a system replete with all the appearance of legality and due process, workers' exercise of rights to organize, to bargain, and to strike . . . has been frustrated by many employers who realize they have little to fear from labor law enforcement . . . "6

The dichotomy between U.S. rights culture and trade unionism is graphically apparent when we consider the recent fate of two groups of low-wage, service-economy workers engaged in conflict with their employer. Most were Hispanic or African-American, and both groups of workers endured the kind of arduous, inequitable work lives that had once given moral urgency to the movements for both trade unionism and racial justice. During the 1980s, Shoney's Restaurants still did business in the Jim Crow spirit which had shaped the racial mentality of founder Ray Danner when he opened his first Nashville Big Boy decades before. More than two-thirds of all African-American workers were confined to the kitchen. When Danner found a restaurant in which the dining room staff was too "dark," he ordered the managers to dismiss the blacks and "lighten" it up. All this was embarrassing and increasingly unprofitable, so in 1992 the NAACP had little real difficulty in winning an extraordinary $132 million settlement against Shoney's. Danner was forced to pay nearly half out of his own pocket, and when Wall Street got wind that he might still control the company, its stock plunged and the Shoney's board kicked him out of the company. Thousands of African-American workers took home sizable checks, while Shoney's instituted de facto hiring and promotion quotas designed to rectify the situation. "Our goal is to set human resource standards to which other companies aspire," boasted a company spokeswomen.

But compare all this with what happened to the Latino women who worked for Sprint Corporation's La Conexion Familiar in San Francisco. In the low-wage world of telecommunications Taylorism, their dignity was under constant assault. By 1994 most had joined the Communications Workers of America (CWA), but just before the National Labor Relations Board (NLRB) election Sprint shut down La Conexion and laid off all the employees. After CWA protests, the NLRB slapped the company with more than 50 different labor law violations, including bribes, threats, and firing workers in direct response to the union organizing campaign. The government agency ordered Sprint to rehire the workers and pay them back wages, perhaps as much as $12 million.

But nothing happened. In contrast to the shaming and redemption through which Shoney's passed, Sprint executives felt no cause for alarm. They successfully lobbied the Clinton Administration for various favors, reiterated their hard-line opposition to trade unions, and got a federal appeals court to throw out the adverse NLRB order. The company even codified its tactics in a "Union-Free Management Guide," declaring that of the "myriad of challenges" faced by Sprint, paramount "is the threat of union intervention in our business." Since neither Wall Street jitters, public approbation, nor government pressure held much of a threat, Sprint and most other U.S. firms were quite happy to skirt the law to get rid of union activists and intimidate workers.7

So how do we explain this combination: a powerful, pervasive culture of rights coexisting with a vicious antiunion praxis? We can win some perspective by reexamining, during the first half of the twentieth century, the very different relationship that linked institutional trade unionism and the defense of individual rights, both on the job and off. The U.S. has never had a powerful socialist tradition, but core ideas of that impulse have often been carried forward by the union movement. This was especially true during the Great Depression when two near-hegemonic ideas made the emergence of a mass labor movement resonate with many of the most embedded democratic aspirations of American republicanism.

First, in the depths of the Great Depression, trade unionism promised to police the anarchic competition of the market and push forward a Keynesian revival of the economy. For more than a third of a century, from about 1933 until the early 1970s, a highly politicized system of industry-wide collective bargaining generated something resembling the more formal corporatist frameworks that were reestablished in Europe after the end of the Second World War. In the U.S., however, this macroeconomic function, the role played by unions as Keynesian stabilizer within an inherently unstable capitalism, was not enough to legitimize mass unionism, among either political elites or the mass of American workers. Hence, the second great rationale for the state-assisted rebirth of unionism during the Great Depression: "industrial democracy," or the formal, legal insertion of a rights regime within the world of work.

Arguing for the 1935 labor law that would bear his name, Senator Robert Wagner asserted, "industrial tyranny is incompatible with a Republican form of government." Unionism would bring to the shop and office floor those procedures and standards that had long been venerated in the courts, the legislatures, and at the ballot box. Collective bargaining wrote Sumner Slichter, then the dean of American labor economists, is a method of "introducing civil rights into industry, that is, of requiring that management be conducted by rule rather than by arbitrary decision." And a 1941 union handbook, How to Win for the Union?, confidentially asserted, "The contract is your constitution, and the settlements of grievances under it are the decisions of an industrial supreme court." On the shop floor, industrial democrats envisioned an "industrial jurisprudence," a constitutionalization of factory government, and the growth of a two-party system that put unions and managers on an equal footing. The responsibilities and expectations of American citizenship-due process, free speech, the right of assembly and petition-would now find their place in factory, mill, and office. A civil society would be constructed within the very womb of the privately held enterprise. For millions of workers, a majority of the immigrants or the offspring of immigrants from Europe and the American South, trade unionism was the only road to civil rights, civil liberties, and real citizenship.8

But ideological and political support for this system collapsed even before union strength began its precipitous decline in the 1970s. Before the impact of global competition, before deindustrialization of the old mass production sector, and even before the emergence of a militant brand of antiunionism within large sections of the political establishment, the American trade union movement came under fierce ideological attack. The Cold War had made suspect the whole discourse of "industrial democracy," but unionism's devaluation was not merely a product of conservative assault or McCarthyite invective. By the end of the 1950s, many of America's most famous intellectuals, both radical and liberal, were backing away from their allegiance to the unions, or even to the idea of a working class organized to advance its own self interest. Radicals like C. Wright Mills thought the unions "the most effective tool for the incorporation of the working class in a system of oppression and imperialism." John Kenneth Galbraith and other midcentury liberals thought unionism a handmaiden to a benign, corporate "technostructure."9

Most intellectuals and policymakers came to see the whole system of collective bargaining, at best, as a pillar of the status quo, a system of incremental social advance that actually sustained a liberal variant of American capitalism. In the early Cold War era, this had seemed quite a virtue, which the Voice of America celebrated in those nations where socialist ideals still dichotomized social conflict. Reinhold Neibuhr, America's foremost theologian, and a minister who had once denounced Henry Ford from a Detroit pulpit, summed up this conventional wisdom at the end of the 1950s. "The equilibrium of power achieved between management and labor . . . is one of the instruments used by a highly technical society, with ever larger aggregates of power, to achieve that tolerable justice which has rendered Western Civilization immune to the Communist virus."10

This was pretty thin gruel, especially in an era when the civil rights movement and the New Left were measuring all social initiatives by a democratic standard of far more robust character. Indeed, the rise of a dynamic, morally incisive civil rights movement ratified a great shift in progressive American consciousness. During those dramatic years in the early 1960s, when demonstrations and marches led by Martin Luther King and other militants pushed civil rights to the top of the social agenda, the entire discourse of American liberalism shifted decisively out of the New Deal-labor orbit and into a world in which the racial divide colored all politics. From the early 1960s onward, the most legitimate, and in many instances the most potent, defense of American job rights would be found not through collective initiative, as codified in the Wagner Act and advanced through the trade unions, but through an individual's claim to his or her civil rights based on race, gender, age, or other attribute. If a new set of work rights was to be won, the decisive battles would take place, not in the union hall or across the bargaining table, but in the legislative chambers and courts.

The United States has been a worldwide pioneer in the promulgation of workplace rights encompassing the gender, sexual orientation, age, disability, and parenthood of employees. Title VII of the 1964 Civil Rights Act, therefore, stands with the 1935 Wagner Act as a pillar upon which the world of work has been reshaped. Indeed, while the American labor law has become increasingly dysfunctional, Title VII, which bans workplace discrimination, opened the floodgates to a series of new laws, labeled "civil rights," which proved central to the expansion of workers rights within the realm of factory, office, school, and salesroom. The list of such legislation is quite remarkable. In 1968 came the Age Discrimination in Employment Act, in 1969 the Mine Safety Act, in 1970 the Occupational Safety and Health Act, in 1973 the Rehabilitation Act, and in 1978 the Pregnancy Discrimination Act. More recently, the two most important pieces of "labor legislation" in the United States have been the Americans with Disabilities Act of 1990 and the Family and Medical Leave Act of 1993. Legislation protecting people of differing sexual orientation has either been passed or is being debated in many states. A European trade unionist might observe that such social legislation merely enabled the United States to catch up with some of the welfare state safeguards long present in Western Europe. That's true, because this recent advance in social legislation arises not out of the potency of the American labor left, which has been in retreat, but relied instead on the enormous political legitimacy amassed by the civil rights movement and its many rights-conscious heirs.

Organized labor stood on the winning side when this social legislation made it into the statute books, but in the years since 1970, American unions have been unable to make the rights revolution work for them. In healthcare employment, in California agriculture, in the teaching professions, and in some service trades, the civil rights impulse did merge with and advance the union cause. But for most of U.S. labor, especially that centered in the private sector, rights-consciousness, which has revolutionized race and gender relations, has had little organizational payoff. Indeed, if one just looks at the tuning and the numbers, an inverse relationship may well link the decline of unionism and the rise of 1960s-1970s rightsconsciousness.

When we look at the way the American labor law has functioned, the problems become clear. Rights are universal and individual, which means that employers and individual members of management enjoy them just as much as workers. Under a regime of rights, it becomes very difficult to privilege a trade union as an institution that stands apart and above that of its membership. Take the issue of free speech for example. Under the original Wagner Act, there was no such thing as employer free speech. The existence of a trade union was entirely dependent upon employee choice, facilitated and protected by the federal government. But U.S. employers soon claimed that under any such regime, their constitutional rights of free speech were being abridged. In the 1930s and 1940s, unions and the NLRB (created by the Wagner Act) tried to argue that employer speech in union election contests was tantamount to intimidation or coercion. But this understanding of the social and psychological potency of employer speech was soon cast aside; Congress and the courts proved sympathetic to the management claim that in any union certification election, their voice could not be silenced. The 1947 Taft-Hartley Act codified this claim and American courts have proven highly sympathetic to the protection of this management "right." In the contemporary American workplace, employers use their free speech rights to hire psychologically sophisticated antiunion consultants, organize procompany employee groups, hold mandatory captive audience meetings, tell workers that the factory will close or wages will decrease if they vote for a union, and spend millions of dollars on all sorts of antiunion propaganda.11

As deployed in American law and political culture, a discourse of rights has also subverted the very idea and the institutional expression of union solidarity. This is because solidarity is not just a song or a sentiment, but requires a measure of coercion which can enforce the social bond when not all members of the organization-or the picket line-are in full agreement. Unions are combat organizations, and solidarity is not just another word for majority rule, especially when their existence is at stake. Thus, in recent decades, employer antiunionism has become increasingly oriented toward the ostensible protection of the individual rights of workers as against undemocratic unions and restrictive contracts that hamper the free choice of employees. A national Right-to-Work Committee, initially funded by Southern textile interests, specializes in making use of the new rights language, civil libertarian if not actually that of the civil rights movement, in order to perforate union solidarity and discredit the union idea. The Right-To-Work Committee has therefore declared the NAACP "prostituted" when that organization aligned itself with the AFL-CIO legislative agenda. Because of its "marriage of convenience to monopolistic labor unions," asserted a committee official, the NAACP's "first priority goes not to restricting union racial discrimination, but to striking down all state laws against compulsory unionism."12

A further counterposition between the "rights" of workers and the potency of the union idea has arisen out a series of judicial decisions that privilege an extremely individualistic conception of worker rights. A distinction between the economic and political rights of an individual worker came to seem more natural in the U.S. with the devaluation of collective bargaining and the rise of civil rights and civil liberties consciousness in the 1950s and 1960s. As early as 1961, Hugo Black, one of the Supreme Court's most aggressive civil libertarians, argued that any attempt to make a dissenting unionist contribute to the political funds of his organization was "extortion" that the government had "no . . . power to enforce." Today, right-wing, antiunion forces take this species of rights liberalism and throw it back at labor in an effort to strip unions of any right to use employee dues money to endorse political candidates, mobilize their membership for a particular cause, or lobby Congress or the state legislatures. In California, the unions had to spend upwards of $30 million to defeat a ballot proposition which would have virtually stripped unions of their capacity to mobilize membership dues on behalf of a unified political program.13

Given the evolution of the rights discourse in the United States it is not surprising that courts have begun to question the meaning of industrial solidarity itself, even in crucial strike situations. For example, the Supreme Court has held that workers have the right to resign their membership in the midst of a strike and then scab on their workmates free from the disciplinary penalties sought by their former union associates. "When there is a lawful dissolution of a union-member relation, the union has no more control over the former member than it has over the man in the street." Here the Supreme Court, once again led by its most liberal members, subverted the legal and ethical basis of collective solidarity, transforming this ancient union impulse into a coercive set of legal/administrative pressures that merely trampled on the work rights of the individual exunionist, which was not far distant from the views promulgated by the antiunion right.14

Thus, the same species of rights-conscious liberalism that abolished racial segregation, ended McCarthyism and legalized women's rights, has also undermined the legal basis of union power and turned solidarity into a quaint and antique notion. One might respond to this eclipse of the American trade unions and to the devolution of collective bargaining, by arguing that the protective functions these institutions once embodied are being taken over by an elaborate set of new agencies, new laws, and new advocates. If workers are protected against sexual harassment by a lawyer rather than their union shop steward, the employee's rights are protected nonetheless; and if the laws governing occupational safety and health regulate the work environment rather than a union contract clause, the factory air will smell just as sweet.

But acute problems arise, both in the United States and on a worldwide scale, in the substitution of a rights-based model of social regulation for one based on the collective advancement of mutual interests. The first is that of enforcement. The legal-regulatory system itself is simply not capable of enforcing by administrative order the inner life of millions of workplaces. As antisweatshop and human rights advocates are now rediscovering, no consistent regulation is really possible without hearing from the workers themselves, and their voice will remain silent unless they have some institution that protects them from the consequences of speaking up. Indeed the whole history of social regulation in the industrialized West has shown that no army of government inspectors can ensure management compliance without benefit of systematic, organized pressure at the work site itself. In the United States, few workers, indeed few citizens, have the resources or expertise to advance their own particularistic rights claim. It requires an organization-the American Civil Liberties Union, the National Organization of Women, the NAACP, the AFL-CIO-to vitalize these rights and insure that all enjoy them.

Second, the spread of employee rights has suffered through its necessary dependence upon professional, governmental expertise. No matter how well constructed, such regulation takes disputes out of the hands of those directly involved, furthers the influence of administrative professionals, sets up these experts as the target of everyone's resentment, and ends by increasing litigiousness and undermining government legitimacy. Rights consciousness therefore transfers authority into the hands of another body-a court, a panel, a government agency-to sort out the various claims and strike the approximate balance. Justice is served, but not always democratic participation.

Third, the rights discourse has had virtually no impact on the structure of industry or employment, in either the United States or abroad. A rights-based approach to the democratization of the workplace fails to confront capital with demands that cannot be defined as a judicially protected mandate. In the U.S., workers have used the new work rights that emerged out of the civil rights movement to democratize gender and racial hierarchies, only to see their real security and opportunities undermined by the dramatic transformation of a working environment over which they have had little control.

And finally, the rights revolution has not generated conditions that produce strong unions, or tempered capital's prerogatives, despite the linkages that have historically existed between these worlds. In the American textile industry, for example, where civil rights laws smashed Jim Crow, the rights revolution could not actually transform the character of managerial authority, advance the level of trade unionism, or forestall the massive deindustrialization that began in the 1970s.

If global trade unionism is to avoid the fate that has befallen it in the United States, if it is to flourish in a world that privileges human rights, then two things are necessary. First, the unions must themselves champion the rights impulse so that it does not become the presumptive property of the corporations, the free marketeers, or even the human rights NGO's. To flourish again, trade unionism does require civil rights and human rights and their vigorous enforcement in every global workplace. We should not sneer at the ILO conventions, the Universal Declaration of Human Rights, or the work of Amnesty International and Human Rights Watch. But this is not enough, for as the U.S. example demonstrates, without a bold and society-shaping political and social program, human rights can devolve into something approximating libertarian individualism.

The task before us is to reforge the ideological and practical links that once made the worldwide fight against an atomization of society the natural product of the fight for political equality, civil liberties, and the liberation of those once excluded from full citizenship. Both T. H. Marshal and Martin Luther King thought that the hierarchy of rights was both politically expansive and morally indivisible, that a set of "social" rights involving a minimal standard of living, adequate shelter, educational opportunity, and full employment flowed organically out of the struggle for those citizenship rights usually thought to be of a more ancient lineage. Indeed, the long-neglected Articles 23, 24, and 25 of the Universal Declaration of Human Rights (UDHR) have a definite New Deal flavor, asserting the right to "social security," to "just and favourable remuneration," to "form and join trade unions," to enjoy "periodic holidays with pay," and to a "standard of living adequate for . . . health and well-being . . . including the right to security in the event of unemployment, sickness, disability, widowhood, old age," etc.15

But as UDHR framer Eleanor Roosevelt recognized, the social rights so hopefully enumerated in 1948 were far from self-enforcing. In the name of free-market efficiency, contemporary managers and ministers seek to commodify those few social rights that have won a measure of transnational legitimacy. Not only are pension and public education rights on the privatization agenda, but corporations today seek to transform drinkable water and breathable air into fungible products subject to a market valuation. It is clear, therefore, that social rights will always be contested, because their provision requires a recognition that society, contra Margaret Thatcher's infamous belief, is not in fact an assemblage of atomistic individuals functioning according to the dictates of the market. Social rights, like so many of their civil libertarian sisters, cannot be guaranteed by administrative fiat or judicial opinion, because such rights almost always involve a measure of economic redistribution, collective empowerment, and social vision. Like the Congress of Industrial Unions in 1930s America, like British Labour in 1945, like the South African unions in the epoch of Apartheid, and like Solidarity in the 1980s, the moral and institutional renewal of the labor movement becomes possible when the organic linkage between individual rights and a transformative political purpose is reestablished.

Sidebar

The eclipse of trade unionism . . . may well be contrasted . . . to the remarkable growth . . . (of) international human rights.

Sidebar

This new sensitivity to global human rights is . . . a good thing for the cause of trade unionism . . .

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How do we explain . . . a powerful . . . culture of rights coexisting with a vicious anti-union praxis?

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The United States has been a . . . pioneer in the promulgation of workplace rights . . .

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. . . [The] discourse of rights has also subverted the very idea . . . of union solidarity.

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To flourish . . . trade unionism does require civil rights and human rights . . .

Footnote

Notes

1. ILO, World Labour Report, 1997-98 (Geneva: International Labour Office, 1997), p. 4-8, http://www.ilo.org.

2. K. D. Ewing, "Human Rights and Industrial Relations: Possibilities and Pitfalls," British Journal of Industrial Relations 40:1 (March 2002).

3. James A. Paul, "NGOs and Global Policy-Making," June 2000, Global Policy Forum, http:/ /www.globalpolicy.org/ngos/analysis/ ana100.htm.

4. Lance Compa, "Wary Allies: Trade Unions, NGOs, and Corporate Codes of Conduct," The American Prospect 12 (July 2, 2001), 8-12; Debora Spar, "The Spotlight on the Bottom Line: How Multinationals Export Human Rights," Foreign Affairs 77 (March-April 1998), 7-13.

5. Doug Cahn and Tara Holeman, "Business and Human Rights," Forum for Applied Research and Public Policy 14 (Spring 1999), 52-58. Cahn and Holeman are executives at Reebok.

6. Human Rights Watch, Unfair Advantage: Workers' Freedom of Assoication in the United States under International Human Rights Standards (Washington: Human Rights Watch, 2000), 6.

7. The Shoney-Sprint example above is taken from Nelson Lichtenstein, State of the Union: A Century of American Labor (Princeton: Princeton University Press, 2002), 178-80.

8. Ibid., 25-38, 59-60.

9. C. Wright Mills, White Collar: The American Middle Classes (New York: Oxford University Press, 1951), 318; John Kenneth Galbraith, The New Industrial State (Boston: Houghton Mifflin, 1967), 274.

10. Reinhold Niebuhr, "'End of an Era' for Organized Labor," New Leader (January 4, 1960), 18.

11. David Brody, "Labour Rights as Human Rights: A Reality Check," British Journal of Industrial Relations 39:4 (December 2001 ), 601-695.

12. Reed Larson, "Is Monopoly in the American Tradition?" Vital Speeches of the Day 39 (June 15, 1973), 527-28.

13. Reuel Schiller, "From Group Rights to Individual Liberties: Post-War Labor Law, Liberalism, and the Waning of Union Strength," Berkeley Journal of Employment and Labor Law 20 (1999), 328-30.

14. David Abraham, "Individual Autonomy and Collective Empowerment in Labor Law: Union Membership Resignations and Strikebreaking in the New Economy," New York University Law Review 63 (December 1988), 1281, 1314-23.

15. Universal Declaration of Human Rights is found on the United Nations web page at http://www.un.org/overview/rights.html. During the Cold War, the United States found this enumeration of social rights an embarrassment, because the Soviets claimed that while these articles were respected in the Eastern bloc, they were willfully ignored in the West and in the client states of Latin America and Asia.

AuthorAffiliation

Nelson Lichtenstein is Professor of History at the University of California, Santa Barbara. He is the author, most recently, of State of the Union: A Century of American Labor. Lichtenstein serves on the editorial board of Labor History and on the advisory board of the UC Institute for Labor and Employment. He can be reached at nelson@history.ucsb.edu

Conversation with an NYC Labor Activist

2011-06-24T07:28:00.000-07:00

Gregory Butler is a blogger construction worker, labor activist, and author of Disunited Brotherhoods...race, racketeering and the fall of the New York construction unions.

Here is the text of an (incomplete) conversation we had on Facebook.

Sam Calvin via UnemployedWorkers.org
A disturbing chart...btw I don't know why they don't use the actual percentages...chart should read 67.5% on the left down to 57.5% on the right...

Daily Kos: Workers' share of national income fails to recover after 21st Century recessions
www.dailykos.com
But after the 2001 and 2007-2009 recessions officially ended, workers' share of national income did not recover but continued a downward spiral. It is now at the lowest level it has been since the Bureau of Labor Statistics began keeping records 64 years ago.
June 19 at 1:58am · LikeUnlike · · Share

Sam Calvin one note- part of the decline is attributable to the fact that this measures "wages and salaries" as opposed to "total compensation"...ie healthcare costs squeeze take-home pay...
June 19 at 2:00am · LikeUnlike
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Sam Calvin The really interesting question is why there is no ability on the part of progressive elites to provide real support to unions, the only institutions which have proven capable of reversing this trend...
June 19 at 2:02am · LikeUnlike
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Gregory A. Butler
The Democratic Party represents the liberal wing of the capitalist class - they want to keep workers as impoverished and unorganized as much as the right wingers in the Republican Party do. The only difference is, they see America's weak, timid, incompetent, cowardly, racist, sexist and pro corporate union leaders as useful sources of funding and volunteers for the Democratic Party and they understand that those guys act as a barrier against the rise of an effective and militant working class movement. So, they tolerate unions as long as they are small, weak and divided (and solidly in the Democratic Party camp).
June 19 at 2:17am · LikeUnlike
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Sam Calvin Sure, but that said, independent from the Democratic party there is a real segment of the national elite that wants a curb on the wholesale slashing of working-class standards of living. They are just incapable of making real investment in the institutions that are capable of defending those standards.
June 19 at 3:03am · LikeUnlike
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Gregory A. Butler They see the necessity of raising the living standards of A PART of the working class, but just like the rest of the bosses, they really don't want workers to be independently organized by worker led organizations. That's why they absolutely do NOT want a stronger labor movement!
June 19 at 3:05am · LikeUnlike
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Sam Calvin I agree that it is the prospect of independent working-class power that prevents them from effective measures. But I think there is an interesting contradiction there, and one that we have to understand. The mediating institutions they construct - NPOs primarily - don't seem to be able to effectively blunt the disastrous drive towards immiseration.
June 19 at 10:34am · LikeUnlike
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Gregory A. Butler
NGOs aren't supposed to stop poverty - they are designed to manage discontent, sabotage the struggles of workers and the poor from within and persuade/coerce workers and the poor to be passive recipients of social services, and to jump through all sorts of hoops to get those services and see those services as a favor rather than as a civil and human right.

NGOs do an awesome job of doing all of those things - and providing employment opportunities for the professional middle classes as well.
June 19 at 1:35pm · LikeUnlike
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Sam Calvin I guess I don't agree with you that elites are uniformly, always and absolutely against working-class power, let alone reforms which benefit working people. Under some conditions, an alliance with segments of the ruling class is not only tactical, but strategically necessary IMO.
June 19 at 1:56pm · LikeUnlike
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Gregory A. Butler
Well, I guess we're going to have to agree to disagree here, Sam.

The interests of the capitalists are ALWAYS fundamentally opposite those of the workers - our classes are in contradiction because of our contradictory relationship to the forces of production (they own them and profit from them, their profits come from the value generated by our labor over and above what we get paid - the less we get paid the more they profit).

Since they are a ruling class as well as an exploiting class, any "alliance" with them is going to be an "alliance" on their terms for their benefit.

One of the main reasons that American labor unions are in a death spiral is precisely because they are "allied" with a section of the capitalist class - that "alliance", while it did help a small privileged layer of workers, always and primarily served the interest of the capitalists and hurt the working class as a class.
June 19 at 2:47pm · LikeUnlike
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Sam Calvin I agree that there is a contradiction between classes, but there are also contradictions WITHIN classes. Not to admit the possibility of this puts you at a disadvantage. Surely you admit that the working class can be divided against itself - why not the ruling class?
June 19 at 3:15pm · LikeUnlike
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Gregory A. Butler
The path you're advocating has been tried again and again in the working class movement - UNSUCCESSFULLY.

Collaboration with what Lenin called the "liberal bourgeoisie" has always and everywhere led to defeat for the working class.

The bottom line is, no matter how divided they may be among themselves, they are united by their class need to exploit our class, and the need to subordinate our class to theirs politically to defend that exploitation.

So no, it is NEVER a good idea to form an "alliance" with a section of the capitalists - they are always our enemy and any "alliance" with them will always be to their benefit and our detriment.See More
June 19 at 3:20pm · LikeUnlike
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Sam Calvin I respect your conviction on this issue, but I'm still not convinced. My study of history (and of Lenin for that matter) suggests that the story is less clear-cut, and that tactical compromise has played a key role in most political struggles.
June 19 at 7:01pm · LikeUnlike
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Gregory A. Butler
Based on about 25 years of studying the various branches and ideological trends of the working class, and 13 years of "participant-observer" study of the NYC construction unions, I can safely say that any strategy based on "compromise" or "...cooperation" with ANY bosses (no matter how "progressive" or even "revolutionary" they may claim to be) is an express route to defeat for our class.

The # 1 reason that the American labor movement is in a death spiral is due to 74 years of "compromise" with the liberal bosses who control the Democratic Party.

We need to fight for 100 per cent CLASS INDEPENDENCE for our movement, not "compromise" with the liberal wing of the alien exploiting class that parasitically lives off of our labor - any such "compromise" is the "compromise" between a malnourished child and the tapeworm living in her gut - the kind of "compromise" that only benefits the parasite!
June 19 at 7:47pm · LikeUnlike
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Sam Calvin So you see popular front strategies as a mistake?
June 19 at 8:20pm · LikeUnlike

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Gregory A. Butler
Absolutely!

Popular Frontism was an unmitigated DISASTER for the working class!

Popular Frontism prevented revolutions in France and America, helped crush the Spanish Revolution (causing the deaths of 2 million Spanish, Catalan and Basque workers at the hands of Franco) and made it possible for the capitalist classes of America and Western Europe to wage WW II and carry out another imperialist redivision of the world.

The opportunism that led to Popular Frontism subverted the Chinese revolution of 1925, forced Chinese workers to subordinate themselves to their enemy Chang Kaishek and enabled Chang to slaughter 200,000 communist workers (while simultaneously receiving Soviet aid!)

The flip side of Popular Frontism in the USSR was the Great Purges; forced collectivization of farms, the wholesale denial of workers rights during Five Year Plan industrialization, soldiers and sailors being stripped of the civil rights they'd won in the Revolution and, above all, the slaughter of just about every single surviving participant in the Russian Revolution (all intended to make the USSR into a paletable ally for whichever imperialist power they could ally with in the coming world war - the Soviet state actually spent time on both the Axis side - at the beginning of the war - and the Allied side)

Popular Frontism led to the destruction of everything that was good and progressive about the USSR and led to the slaughter of about 4.5 million Soviet citizens

That episode of colossal butchery paved the way for the slaughters carried out by Popular Frontist regimes in China, North Korea and Vietnam.

So yeah, I see Popular Frontism as the worst defeat of the 20th century for the working class and I am 10,000% opposed to any and all forms of Popular Frontism.
June 19 at 9:58pm · LikeUnlike
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Sam Calvin OK - I guess I see more or less where you're coming from. On the flip side, do you think that there is such a thing as "ultra-leftism"?
June 19 at 10:37pm · LikeUnlike

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Gregory A. Butler The main problem of the working class movement for the past 220 years or so has been right opportunism. That's where ideas like Popular Frontism come from, that's what gave us Stalinism, Maoism, Hoxhaism, Juche, "Pure and Simple Trade Unionism" and, actually, that was the original origin point of Fascism.
June 19 at 10:50pm · LikeUnlike
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Gregory A. Butler Right Opportunism has it's roots in the privileged labor aristocratic layers of the working class, and, in places like America, in the privileged layers of the oppressor nationalities. Right opportunism is the best friend of the capitalists - it's been saving their bacon for about 90 years now.
June 19 at 10:52pm · LikeUnlike
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Sam Calvin To play devil's advocate for a moment: isn't the victory of right opportunism also an indication of ultra-leftism? That is, unless you think there is merely a shortage of left ideas, the conclusion must be that left leadership has not gained traction because it cannot deliver political gains.
June 20 at 11:37am · LikeUnlike
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Gregory A. Butler
Actually, no.

The victory of right opportunism is evidence of a large labor aristocracy within the working class, a layer of privileged workers who's class loyalty is purchased by the capitalists with a portion of their profits (in a country like ours, usually they'd be superprofits extracted by the imperialist plunder of other, weaker, nations, or in countries like ours with national questions, they can also be the superprofits that result from institutional racism).

In other words, ideas reflect not the smarts or lack thereof of groups of leaders but are instead the intellectual echo of class forces - in this case, right opportunism is the ideology of the labor aristocracy.

Those ides are dominant because the labor aristocracy is dominant within the working class, because of its privileges due to the bribes it receives from the capitalists.
June 20 at 1:01pm · LikeUnlike
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Gregory A. Butler
As for "political gains", what exactly does that even mean?

Do you mean that in the Tammany Hall ward heeler sense of the term?

By that definition, it's all about "clout" - that is, can a union chief get face time with politicians and can the narrow needs of a privileged layer of workers get taken care of?

By that definition, the Screen Actors Guild and the Stagehands Union have made "political gains" - their lobbying has persuaded just about every state where movies and TV shows are filmed to give a permanent tax holiday to movie studios that film in those jurisdictions

The result?

A few hundred extremely well paying jobs for actors, and a few thousand well paying jobs for stagehands.

Has it brought the working class any closer to actually COMING TO POWER?

NO!

Has it even improved the conditions of actors and stagehands in the low paying sectors of the industry (porn, independent films, Black movies, basic cable)?

NO!

Its just provided some momentary "political gains" for a few labor aristocrats at the expense of the rest of the class.
June 20 at 1:08pm · LikeUnlike
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Sam Calvin I chose the ambiguous term "political gains" precisely because I'd like you to "fill in the blank".
Tuesday at 9:34am · LikeUnlike

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Sam Calvin Whatever you think political gains are - e.g. development and consolidation of power and position...Isn't the whole purpose of characterizing "right" and "left" errors specifically to refine the debate on leadership?
Tuesday at 9:40am · Like

EXCERPT: The Financialization of the Economy

2011-05-25T11:26:00.000-07:00

EXCERPT FROM "Addressing the Problem of Stagnant Wages," Frank Levy and Tom Kochan http://www.employmentpolicy.org/sites/www.employmentpolicy.org/files/field-content-file/pdf/Mike%20Lillich/EPRN%20WagesMay%2020%20-%20FL%20Edits_0.pdf

Beyond changes in technology, product markets, and labor-market institutions, changes in financial institutions have helped to create wage stagnation and wage inequality.
Four parallel trends are notable:

heightened focus on shareholder value,
increased use of debt financing,
deregulation of financial markets, and
expansion of the financial-services sector.[1]

Shift to Shareholder Value
Under the forms of managerial capitalism that emerged out of the New Deal and were sustained in the Social Compact decades following WWII, corporations made money through investments in productive enterprises and the creation and realization of value through the management of labor, even in the context of increasingly global markets. Shareholder claims were important but not the only consideration in corporate decision-making. Corporate labor-relations negotiators and managers had considerable discretion to negotiate wages and benefits and create incentives for a productive workforce — necessary for long-term growth and profitability.

Today, an increasing proportion of the economy is organized around financial capitalism — where productive enterprises are viewed as bundles of assets to be reconfigured with the goal of maximizing financial returns. The focus of investment activities has shifted — from investing in productive, value-added enterprises to extracting money from companies for re-investment in higher-yielding activities.

As part of this new financial business model, power within corporations has shifted from labor relations and human resource executives to finance and other top executives who serve as agents of increasingly demanding financial markets.[2] Executives’ stated goal of maximizing shareholder value shifts the distribution of corporate profits from wage earners to shareholders. One way this goal is achieved is by lowering labor costs, which often translates into downward pressure on wages or wage stagnation at the bottom of the income distribution.

Reliance on Debt
The success of the new financial business model also has depended on greater use of debt financing among both financial and non-financial corporations (See picture, sectoral gross debt, 1974-2008.). According to agency theory, debt limits managers’ discretion and requires them to prioritize shareholder interests (Jensen 1986). Debt financing grew in the 1980s with the emergence of high-yield, so-called “junk” bonds that could be used to finance hostile corporate takeovers. Investors could band together to take over poorly performing companies and effectively discipline managers — creating a “market for corporate control” (Lazonick 1992). Corporate raiders could profit by buying conglomerates and selling their parts off to competitors, which they did on a large scale (Davis, 2009). These activities became possible as of 1982, due to Justice Department rules that facilitated intra-industry mergers and a Supreme Court decision that struck down state anti-takeover laws.

In addition, new institutional investors — mutual funds, trusts, insurance companies, and pension funds — began holding a larger share of corporate debt.[3] Because they are highly diversified (rarely holding more than 1 percent of a company), they are known to cause companies to pursue risky strategies (such as heavier debt) for higher returns. Higher debt interferes with cyclical-risk insurance for employees, e.g., via wage smoothing and job guarantees, and can endanger a firm when markets turn down. Institutional owners also press firms for a larger share of corporate resources, and, as a result, institutional activism statistically is associated with asset divestitures and with layoffs (Jacoby 2009). Laid-off workers suffer large and persistent reductions in earnings lasting up to 20 years or more, not only for those laid-off in recessions but also for those displaced during better economic periods (von Wachter, Song, and Manchester 2007).

Deregulation of Financial Markets
Deregulation of financial markets has helped create the institutional framework to support the new financial business model. Large institutional investors emerged as the result of a pension reform bill (ERISA, 1974, 1978) that allowed pension funds and insurance companies to hold shares of stock and risky bonds in their portfolios. Saving and loan banks (S&Ls) were allowed to hold junk bonds and invest in risky activities under the Garn-St. Germain Act of 1982. Reagan-era tax-law changes provided incentives for debt-financing over the use of retained earnings for investment, leading many to use retained earnings for stock buybacks to inflate the value of stocks and reward shareholders (Lazonick 2009; Sum and McLaughlin, 2010).

A series of banking-law reforms — culminating in the 1999 Gramm-Leach-Bliley Act (GLBA) — repealed the Glass-Steagall Act of 1933, thereby allowing all types of banks and insurance companies to consolidate into financial institutions with concentrated pools of capital. Investment banks were allowed to hold less capital in reserve, thereby facilitating greater use of leverage in trading activities (Lowenstein 2004, Sherman 2009). New financial instruments (such as credit-default swaps) and financial actors (hedge funds and private-equity funds) emerged and were explicitly exempted from regulation under the 2000 Commodity Futures Modernization Act.

As a result of these changes, one-third of the Fortune 500 were acquired or merged between 1980 and 2000. In almost every industry, the remaining firms restructured to focus on “core competencies” offering higher value-added for shareholders. They outsourced lower value-added activities to lower-cost U.S. subcontractors or overseas suppliers. In autos, for example, G.M. spun off its parts supplier into a separate entity, Delphi; and Ford did the same by creating Visteon. This process turned the largest employers into smaller ones — especially manufacturers that previously provided stable jobs with high wages and opportunities for mobility (Davis, 2009) — and created second- and third-tier jobs offering lower wages and benefits in supplier firms. These strategies were possible, in part, because of declining union power and a growing excess supply of blue-collar labor.

Growth of Financial Services
These changes also have led to dramatic growth in the size and income of the financial-services industry. Between 1947 and 2005, finance and insurance grew from 2.32 percent of U.S. GDP and 2.76 percent of employee compensation to 7.69 percent and 7.65 percent, respectively.[4] Their 2005 share of employment was 4.4 percent; and much of the growth of
total compensation reflected growth in compensation per employee, particularly since the early 1980s. The share of corporate profits captured by the sector also grew from 25.7 percent to 43 percent between 1973 and 2005 (Palley 2007:36).[5]

While it is impossible to assign a causal weight to the effects of the growth in the financial sector on wage determination or the distribution of income, clearly a disproportionate part of the productivity gains in the last 30 years has gone to the top 1 percent or less of the distribution, and this top 1 percent includes a disproportionate share of persons employed in the financial sector (Blair, 2010).

Dew-Becker Gordon estimates that 45 percent of the real-income gains went to the top 10 percent of wage and salary earners during 1966-2001, compared to 27 percent in 1966. Half of that increase went to the top 0.01 percent. The most recent data from Piketty and Saez find similar patterns and estimate that the income share of the top 1 percent of households stood at 10.2 percent in 1980 and 14.4 percent in 1990; 21.5 percent in 2000 and 21 percent in 2008.[6] This inequality has come under greater scrutiny since the financial collapse and the Great Recession.

The financial industries’ large profits and salaries corresponded with an increase in the industry’s influence on Congressional policy (Barley, 2010).[7] During the original Social Compact, such high salaries might have been criticized by an activist president and been constrained by the realization that similar demands would be put on union bargaining tables. In the 1980s, high compensation for bond traders and investment bankers and the dominant rhetoric that short-term alignment of executive and shareholder interests should dominate over all other considerations legitimatized the growing gap between the compensation of corporate CEOs and average workers.

NOTES

[1] See Batt and Appelbaum (2010) for a fuller discussion.
[2] Jacoby (2005) documented the significant differences in salaries of top financial- and human-resource executives in the U.S. in contrast to their relatively equal value in Japan.
[3] U.S. institutional investors in 1960 owned 12 percent of U.S. equities; by 1990 they owned 45 percent and the share rose to 61 percent in 2005. Institutions today own 68 percent of the 1,000 largest U.S. public corporations (Jacoby 2009).
[4] See Philippon (2007). In National Income and Product Accounts, there is no independent output measure for the finance and insurance industries. The industry’s share of GDP is largely determined by its compensation, which is predicated on the theory that an employee’s compensation represents his or her marginal product.
[5] Davis (2009). From a shareholder’s perspective, incentives should reward executives for share performance above average share performance in the industry. In practice, executives were often rewarded for all share-price increases even if competitors’ shares increased faster.
[6] Data downloaded from Emmanuel Saez website: http://www.econ.berkeley.edu/~saez/. These data are updated from Piketty and Saez (2003). The numbers in question come from Table A3 and represent income including capital gains.
[7] An example is Senator Charles Schumer, former chair of the Democratic Senatorial Campaign Committee, who speaks out often on income inequality but was unwilling to deal with the “carried interest” provisions that allowed hedge fund and private equity managers’ incomes to be taxed as capital gains, at particularly low rates. Hedge funds and private equity have been significant contributors to the Democratic Party. See Levy and Temin (2009) for additional examples.

Batt, Rosemary and Eileen Appelbaum. 2010. “Globalization, New Financial Actors, and Institutional Change: Reflections on the Legacy of LEST.” Paper presented at the Colloquium: Travail, Emploi et Competence dans la Mondialisation, LEST, Université de la Méditerranée, May 27-28.
Davis, Gerald F. 2009. Managed by the Markets: How Finance Re-shaped America. New York: Oxford University Press.
Jacoby, Sanford. 2005. The Embedded Corporation: Corporate Governance and Human Resource Management in Japan and the United States, Princeton: Princeton University Press.
Jacoby, Sanford. 2009. “Finance and Labor: Perspectives on Risk, Inequality, and Democracy” in Clair Brown, Barry Eichengreen, and Michael Reich, eds., Labor in the Era of Globalization. Cambridge: Cambridge University Press.
Levy, Frank and Peter Temin, (2009) “Institutions and Wages in Post-World War II America,” Chapter 1 in Brown, et. al., eds Labor in the Era of Globalization, Cambridge University Press.
Philippon, Thomas (2007), “Why has the U.S. Financial Sector Grown so Much? The Role of Corporate Finance.” NBER Working paper 13405.
Piketty, Thomas and Emmanuel Saez, "Income Inequality in the United States, 1913-1998” Quarterly Journal of Economics, 118(1), 2003, 1-39.

Shadow-boxing

2011-05-20T10:00:00.000-07:00

Comments in response to: http://cityroom.blogs.nytimes.com/2011/05/12/bloomberg-administration-is-criticized-on-wages/

1.
Larry Eisenberg
New York City
May 12th, 2011
5:05 pm
Developers, subsidized, are
So fragile, so easy to jar,
Four hundred a week
Such great havoc would wreak,
And lifestyles would grow so bizarre.
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2.
Paul '52
New York, NY
May 12th, 2011
5:07 pm
I'd like to propose a "win-win" for the Council:

Get the City Council in a room with the Kentucky State Legislature. The Council can "win" by convincing the Legislature that its powers don't encompass amendments to the laws of geology, physics and biology. The Legislature's "win" is convincing the Council that its powers don't include amending laws of economics.

Both sides can then come away happy.
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3.
Edward
New York
May 12th, 2011
8:44 pm
I believe there is a disconnect. The real estate developers are the owners of the mall or shopping center but they lease space to retailers. The wage bill is to be imposed on the retailers that lease space in the mall/shopping center. The retailers are not receiving any benefits that I am aware of, unless I am missing something in the overall transaction.

The retailers can be granted a sales tax credit for the increase in wages over the federal minimum wage so they are not at a competitive disadvantage to other retailers in other malls/shopping centers.

I do not appreciate the angry tone of the elected officials. Many residents in working class communities would welcome the jobs and new shopping opportunities in their neighborhood instead of traveling to Rockland, Nassau and Westchester counties to shop.
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4.
followingsylvis
New York City
@Edward I appreciate your sincerity on this issue, unlike some others (I'm looking at you, @Paul52) I believe you really are trying to find a just solution to this issue.

Even though the wage mandates will show up on the retailers' payroll, it is the owners of the mall property who will ultimately have to \"eat\" the difference.

Look at it this way - the goods and services provided in a mall have to correspond to local market prices. So total revenue is fixed within a fairly narrow range by the pricing structure of the retailer. After inventory is paid for, this money must be then divided up among employees, retailers, and the mall owners. Retailers, although they vary in the amount that they are able to lay claim to, operate within a relatively fixed margin, again depending on their business model.

Rent, on the other hand, is peculiar in that it has no costs associated with it (taxes being only an after-the-fact subdivision of profit in the case of commercial property) - it is pure ownership income. So when push comes to shove, it is the rentier who must lower his price.

To put it simply - the landlord will take as much of a retailer's profit as he can, but he doesn't want to kill the golden goose, except, occasionally, as a symbolic gesture to frighten goslings like our friend Paul52.

Wednesday Afternoon Orgdown

2011-05-18T12:09:00.000-07:00

Been a while since my last orgdown, but this caught my eye:

Organizing Upgrade: Left Organizers Respond to the Changing Times
http://www.organizingupgrade.com/

From their "about us" page:

Organizing Upgrade is an attempt to engage left leaders and innovators in the field of community organizing in a strategic dialogue. We hope that this project can bring the kind of inspiration, vision and strategic clarity we need to strengthen our political impact, both in our immediate fight and in our longer-term efforts to build the social justice movement and to revitalize a movement-rooted left in the United States.

Also, this has become a regular source for me for international labor news:

LaborStart: Where trade unionists start their day on the net.
http://www.labourstart.org/
from their about page:

LabourStart is an online news service maintained by a global network of volunteers which aims to serve the international trade union movement by collecting and disseminating information -- and by assisting unions in campaigning and other ways.

Its features include daily labour news links in more than 20 languages and a news syndication service used by more than over 700 trade union websites. News is collected from mainstream, trade union, and alternative news sources by a network of over 500 volunteer correspondents based on every continent.

'Nuff said.

Conversation on Taxes

2011-05-09T07:53:00.000-07:00

Full text of a conversation with some libertarians. Did I win? Did I score points? Or did I flatter them too much by using the term "pathological individualism"? You be the judge.
-----

Paul Nickels
This is class warfare, people! The rich are effing the poor at every turn. Money for tax breaks for the rich, no money for 99ers. Money for corporate bailouts, no money for the people. The poor pay taxes, the rich pay little or nothing. Is this the America our parents and grandparents fought for? Is this the America our founding fathers envisioned?

No. It is not.

Only Little People Pay Taxes | Mother Jones
http://motherjones.com/politics/2011/04/taxes-richest-americans-charts-graph
How a janitor ends up with a higher tax rate than a millionaire, and seven more charts that show how the richest Americans beat the IRS.

April 18 at 11:12pm • UnlikeLike • • Share

You, Deborah L Purdom and Jacquard Guenon like this.
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Denise Gerdes NO! This is not what it should be!
April 19 at 7:53am • LikeUnlike

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Bruce Olson it's not; that's a bit of a misrepresentation... those "in the Helmsley building" are not necessarily representative of "average". It also makes a lot of hidden assumptions about the sources of income for the wealthy person... if that income were mainly salary/bonus, his actual taxes would be MUCH higher; His net taxes in this case imply revenue from mainly off-shore or other tax exempt sources.
April 19 at 11:41am • LikeUnlike
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Sam Calvin ‎@Bruce I'm not seeing your point - the main thing here is that people who work for a living pay a high rate, while those lucky enough to live mostly off capital gains pay much less. The source of the wealth of all the truly wealthy is not work - that's why the tax rate falls as you get into the "upper stratosphere" of the top 1% despite a progressive income tax.
April 19 at 8:06pm • LikeUnlike • 1 personLoading...

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Dave Jilk Nevertheless, high income earners pay the vast majority of income tax. What really makes it non-progressive is the social security pyramid scheme.
April 19 at 10:01pm • LikeUnlike

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Sam Calvin ‎@Dave "Vast majority" is an overstatement. We do have a progressive tax system for income, but regular people pay plenty - and there are way more of us. And what do you mean by "pyramid scheme"? Social Security is a transfer system, so working age people *do* support a smaller number of retirees...but I don't understand where you're going with that idea.
April 20 at 12:18am • LikeUnlike
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Bruce Olson
Some figures published today in AJC (responding to the idiot Michelle Bachman) make the point that language counts here... Top 5% of earners pay 40% of Income Taxes but only 28% of All taxes. Regardless, I don't see the problem; these leve...ls have been in that range for a half-century and given that top 25% of incomes starts around $70K, and top 1% at $400K, this is just pointing out that higher incomes pay more taxes. Comparisons of total taxes paid are irrelevant... discussion has to focus on Marginal tax rates to be meaningful and useful.See More
April 20 at 9:46am • LikeUnlike
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Sam Calvin
‎@Bruce On the contrary, I find discussion of marginal rates confuses the subject. The slip from the oft-quoted Eisenhower marginal rate of 90% too often slips into the idea that high earners "pay 90% of income in taxes." The real clarifica...tion I want to see is the radical difference between income earned "by the sweat of the brow" - ie wages and salaries - and ownership income. These two things could not be more different, and are not taxed the same but both are lumped together in the category of "income." This leads to the justifiable criticism that many folks earning in the $200-$400k range in salaries are over-taxed, while the majority of income over $500k is ownership income - and therefore approaches the 15% tax rate.See More
April 20 at 10:44am • LikeUnlike
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Bruce Olson
Just because someone confuses it, doesn't make the focus wrong. To discuss the IMPACT of any tax policy change, the ONLY relevant issue is how it changes "in comparison to present rates" -->Sam Calvin ‎@Bruce I'm not sure I'm following you at all...are you talking about marginal tax rates - ie how much tax someone pays "on the last dollar earned" - or are you talking about changes in tax rates "at the margin" - ie 1% up or down on a particular type of income?
April 20 at 11:54am • LikeUnlike
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Sam Calvin ‎@Bruce As for my statements about clarifying how "income" is taxed, I think it needs to be made clear that not all income is earned by work, and that the system we have now (relatively) favors investment and punishes work.
April 20 at 11:56am • LikeUnlike
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Dave Jilk ‎@Sam: http://en.wikipedia.org/wiki/Social_Security_(United_States)#Claim_that_it_is_a_pyramid_or_Ponzi_scheme
April 20 at 12:11pm • LikeUnlike
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Dave Jilk It seems to me that marginal and total rates play different roles in the discussion. Marginal rates are about incentives and behavior; overall rates are about "fairness" (using the term loosely, since this is all about compulsion).
April 20 at 12:13pm • LikeUnlike
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Sam Calvin ‎@Dave Thanks for the link, but the comparison is patently ridiculous. A ponzi scheme is based on the notion that by paying in once you can become rich - which can only work for a small number who are in on the scheme early on. SS is based on the notion that working-age people (a large population) can support those who retire (a small population). To claim a similarity is just anti-social mud-slinging.
April 20 at 12:25pm • LikeUnlike
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Dave Jilk ‎@Sam, guess you're smarter than Paul Samuelson. Who was by the way a devoted Keynesian.
April 20 at 12:32pm • LikeUnlike

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Sam Calvin ‎@Dave Just because I can cite shortcomings in Newtonian physics doesn't make it a personal pissing match between me an the old man ;)
April 20 at 1:01pm • LikeUnlike

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Sam Calvin Seriously, though, Samuelson was a classic mid-century ideologue, and as such limeted by certain requisite myths - notably, the idea of the US as a classless society. In this respect, he differed sharply for Keynes, who believed in a ruling class which had to be enlightened to society-wide interests.
April 20 at 1:08pm • LikeUnlike
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Dave Jilk
‎@Sam, none of that affects whether SS is a pyramid scheme. Its continuation depends completely on being able to find more greater fools who will continue to pay, even as benefits get increased (when people live longer, benefits are increa...sing). That is a pyramid scheme - a "one time payment" may be a feature of a Ponzi-style pyramid, but that's only one type. On the bright side, soon enough people will realize that we have to open the borders to immigrants to keep our retirement checks coming.See More
April 20 at 1:18pm • LikeUnlike
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Sam Calvin ‎@Dave On the contrary, it's continuation requires that there be an insufficient number of fools who think it is a "scheme" that should be ended, instead of a needed form of social insurance!
April 20 at 1:24pm • LikeUnlike
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Dave Jilk ‎"Don't break the chain! Otherwise we will lose this crucial social insurance!"
April 20 at 2:04pm • LikeUnlike

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Sam Calvin Don't you believe that SS has kept people out of poverty? The usual "ponzi scheme" argument is that SS is unsustainable, not useless....
April 20 at 2:52pm • LikeUnlike

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Sam Calvin ‎@Dave It's sort of a pity you're so cynical, because I think there is a "scheme" aspect to SS, but the opposite of the one you suggest. Really, it's OVER-funded, and has loaned $2.5 trillion to the government, essentially allowing corporations not to pay taxes (see the MJ chart on payroll vs corporate tax)...
April 20 at 2:58pm • LikeUnlike
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Bruce Olson ‎@Sam, i don't think we're in disagreement so not worth going on about marginal rates... Dave stated it correctly, marginal rates are about incentives and incremental changes in what we are doing now; Total is about perceived fairness; i just like to be sure we keep complaints about tax rates and discussions of the two clearly separate.
April 20 at 3:22pm • LikeUnlike
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Bruce Olson
‎@Sam, re: SS... Dave's ref to Ponzi scheme is a weak analogy, but reasonable as he's mainly focused on two similarities: 1) that SS requires a continual influx of new people to remain financially viable and 2) That due to baby boomers, the... system isn't financially sustainable as benefits are currently defined. And, of course, David's annoyed because SS could certainly have been set up to be sustainable independent of future donors, but he's forgetting that at the time it was established, this country had a fear of "national banks" and "excessive consolidation of financial power" in banks; they explicitly chose to not make it a savings plan because they thought it would bring too much power to big banks and insurers; a fear which is not unsupportable and which generated regulations, e.g. prohibitting national banking, until as late as the mid-90s. I agree; I wish they hadn't been afraid; i wish it now was an independent savings plan rather than a debt owed out of the General Fund... but it's not a productive discussion; because the past can't be changed.See More
April 20 at 3:36pm • LikeUnlike
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Bruce Olson BTW, i don't think Dave's a cynic; I think he's an irrational, head-in-the-sand optimist. He truly believes in the transferrability of idealistic Libertarian ideas from the drawing board to the real world of an economy of this size. I think that takes huge faith! :-)
April 20 at 3:42pm • LikeUnlike
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Dave Jilk ‎@Bruce, I don't think it would work, but it would be right. @Sam, we are in agreement about that part of the scheme.... that fake "surplus" is what has allowed them to continue the scam! In any case, I don't just think SS is useless, I think it's counterproductive. It allows people to think that they don't have to plan for their future, and that's what is going to do us in.
April 20 at 3:58pm • LikeUnlike
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Sam Calvin ‎@Dave The surplus is real - but to return to the original point of the post - it's in the pockets of the corporate elite!
April 20 at 4:37pm • LikeUnlike

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Sam Calvin You're right about the absence of a plan - but I would argue that what is needed is an *industrial* plan. A plan to put Americans to work. If what you're saying about "not having a plan" relates to the probability that finance will raid the SS trust fund again - you're right - but all proposals for "economic realism" coming from Repubs are exactly a step in that process!
April 20 at 4:41pm • LikeUnlike
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Dave Jilk I'm talking about the idea that planning is the individual's responsibility, not that of the nanny state.
April 20 at 6:51pm • LikeUnlike

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Sam Calvin ‎@Dave Yeah right. ha ha. And it's the individual's responsibility to defend themselves against all robbers, be they crack addicts or multi-billion dollar corporations...
April 20 at 7:02pm • LikeUnlike
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Deborah L Purdom ‎@Dave. Yeah and those who did plan and had their own "retirement" accounts just lost most or all of them to the "private markets" gambling schemes.

@Sam, we might me better off if we DID protect ourselves from robbers... Just a thought.
April 21 at 12:13am • LikeUnlike
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Dave Jilk ‎@Deborah, keep up, the financial markets are entirely back to where they were before the crash.
April 21 at 9:26am • LikeUnlike

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Deborah L Purdom ‎@Dave. The financial markets, as far as hedge funds managers, CEOs, etc. are back to where they were, but people who lost all of their 401ks don't have them anymore - they're GONE, kapoot, just like mine, and those who lost a majority are still NOT up to where they were before and won't be for quite sometime, if ever.
April 21 at 11:43am • LikeUnlike
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Dave Jilk
‎@Deborah: really? What did you have it invested in? My IRA is well above where it was before the crash, my wife's 401(k) is completely recovered. I'm not even a particularly good investor, I just have a little diversity and index funds.... Perhaps you panicked and sold everything? Perhaps you were in particularly risky investments? Maybe you should take responsibility for those bad decisions.

That said, I see your profile picture says "End the Fed," with which I couldn't agree more, although probably for different reasons.See More
April 21 at 11:52am • LikeUnlike
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Sam Calvin ‎@Bruce Sorry didn't mean to ignore your comments - by "continual influx" do you mean that we'll continue to have a working-age population in the US? 'Cause that seems like a pretty reasonable condition of being able to support retirees!
April 21 at 12:22pm • LikeUnlike
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Sam Calvin ‎@Bruce Dave''s not an optimist, he's a survivalist. Because "saving" always relies on a collective agreement, it is always vulnerable to depredations. The only "responsible" move, in his world, is to have a sufficient stockpile of food, fuel, and water to see you through your own retirement. @Dave What say you? Am I right? Have a few MRE's stashed somewhere? Or are you just as irresponsible as Deborah?
April 21 at 12:25pm • LikeUnlike
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Dave Jilk
‎@Sam, we all have to make our choices. I can feel bad for Deborah (and I do) without wanting to, or worse yet being required to, take responsibility for her situation. I don't have any MREs stashed but I won't expect anyone to bail me out ...if it turns out that I should have.

Regarding "continual influx," the "pyramid scheme" results from the fact that the outbound benefits are increasing - both in terms of number of people with the baby boom but also because people are living longer; while the inbound payments are decreasing not only because the population is not growing very fast but also because it seems like (and I have no facts or data to back this up, only impressions) it's very common among recent college grads not to be too concerned about making money or even supporting themselves or being independent. This may or may not be a good life philosophy, but it does not bode well for the SS system.See More
April 21 at 3:20pm • LikeUnlike
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Sam Calvin ‎@Dave So it's those rotten kids? Ha ha.
April 21 at 3:25pm • LikeUnlike

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Dave Jilk ‎@Sam, nope, rotten parents
April 21 at 3:25pm • LikeUnlike

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Sam Calvin So help me understand what I can only regard as your "pathological individualism" (as I heard it recently called). Do you have the same hard-assed attitude with your family and friends? Or is it rooted in a distrust of the cultural mores of other backgrounds?
April 21 at 3:27pm • LikeUnlike
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Dave Jilk I like that term, "pathological individualism." I exchange value with friends and family, so depending on who they are and what our relationship has been, I might or might not want to help them in need. And vice-versa.
April 21 at 3:57pm • LikeUnlike
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Sam Calvin But doesn't that just translate into the right to be priggish and aloof? Although I don't think that any law could stop people from being that way, isn't someone who *exercises* that right the biggest fool of all?
April 21 at 4:39pm • LikeUnlike
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Deborah L Purdom
Dave, just think how much more you would have had in your IRA, if the crash had not happened.

What I don't understand is why, people like you, think it is perfectly okay that the "financial wizards" (who knew darn good and well that they w...ere taking HUGE risks with other people's money and it could come crashing down any minute) to "scream" for help from the government and actually get welfare (in the form of bailouts which are still going on today) in a very short amount of time.

But, the people that have lost their jobs, houses, savings and retirement accounts, because of the "financial wizards, and STILL can't find any type of job - those people whose wages were stagnant and were living paycheck to paycheck, for decades, are now called drug addicts and lazy bums just sucking from the government's teat's, and told they should have "planned better".

But the financial sector? Heck no, they don't have to plan for any crises and can suck, from the government's teat's, for as long as they want and get as much as they want and not even be held accountable for how and where they spent that bailout money from "we the people". In the meantime, they are continuing to do the exact same things they did that caused this "recession" which will cause even more problems in the near future. Dave, for your sake, sure hopes your planning works as well the second time around.See More
April 21 at 7:13pm • LikeUnlike
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Dave Jilk
‎@Deborah, I think it's important to remember that the crash was a reflection of a bubble, not an independent event. The market has never really had an opportunity to consolidate since the late 90s bubble - it's been propped up by various p...olicies driven by political pressure. So my IRA would not be worth more in any case. It probably should be worth less, in fact.

Don't assume that I condone what has happened with Wall Street welfare. I can't believe that the American people have tolerated it. But the real problem is not the folks on Wall Street, as piggish as they are. If the government did not offer these bailouts, did not give the impression that it's going to hold the economy together, did not create entities like Fannie Mae and Freddie Mac that stimulated creation of high-risk mortgages to achieve political goals (widespread homeownership), did not insure deposits and then fail to regulate behavior (even though we had the exact same moral hazard BEFORE with the S&L crisis in the late 80s) and then cry "too big to fail," then this stuff wouldn't have happened. The crooks in NY are only possible because of the crooks in DC. Oh, the economy has always had its ups and downs, even when there was less government intervention, but the crashes were not typically an existential threat like they are now.See More
April 21 at 8:39pm • LikeUnlike
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Dave Jilk ‎@Sam, I'm a pluralist, and I know some people are communitarians rather than individualists. I hope they're happy and wish them luck. Unfortunately, that's not enough for them, because they are not pluralists and they want me to conform, even if it needs to be at gunpoint.
April 21 at 8:48pm • LikeUnlike
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Sam Calvin ‎@Dave Ha ha we're all "pluralists" I'm just questioning the viability of individualism when you're sitting on a see-saw. The market requires an unprecedented amount of coordination between individuals and institutions, to deny this requires either exteme credulity, pathological blindness, or just plain cussed inability to give an inch to you brothers and sisters on this planet.
April 21 at 9:06pm • LikeUnlike
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Dave Jilk ‎@Paul Nickels, thanks for hosting our little debate.
April 22 at 7:55am • UnlikeLike • 1 personLoading...

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Denise Gerdes This is exactly what started this debate..... class warfare.... we need to work TOGETHER!
April 22 at 11:05am • LikeUnlike

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Dave Jilk ‎@Denise... but we don't agree... and I don't think this debate constitutes class warfare because unless I'm mistaken none of the participants is either "rich" or "poor."
April 22 at 11:14am • Like

New tools for communication: Whiteboard

2011-04-27T11:32:00.001-07:00

Nice project going on over at RSAnimate ( http://comment.rsablogs.org.uk/videos/ ), using whiteboard with entertaining cartooning to make a lecture listenable which might otherwise be boring.

Here's David Harvey getting animated:

Ucubed election fail

2011-03-07T12:24:00.001-08:00

Too bad. Unemployed badly need a stronger national network...

Fwd: One Truly Is The Loneliest Number

Dear UCubed Leaders and Activists:

One truly is the loneliest number. Only one UCubed member stepped up to run for UCubed State Director in exactly one state. Consequently, the scheduled 2011 elections must be cancelled.

Perhaps, by this time next year, UCubed will have sufficient mass -- and sufficient intensity and drive -- to elect its own leadership. Until then, we will build our organizational infrastructure by appointing activists who will aggressively represent the Union of Unemployed and its members at the state and regional levels.

Here at the Union of Unemployed, just like in your personal lives, each obstacle is simply another challenge to be met… as we continue our fight for the jobless.

In Unity – Strength,

Rick Sloan
Executive Director
Ur Union of Unemployed

Cutting the Wrong Deficit

2011-03-03T09:19:00.000-08:00

Why doesn't the "soak the rich" line work? Even when Reich giving it his all, it lacks the ring of conviction.

Because there *is* an economic problem.

But it is the trade deficit, not the budget deficit.

In a sense, the "common sense" right-wingers are not entirely wrong: we cannot indefinitely continue to be a nation which produces less than it consumes. Of course, they've got their facts mixed up about the cause of the deficit (hint: it wasn't caused by lazy people), and, therefore, are way off on workable solutions.

But right-wing populists have caught wiff of a stinking fact of the system, they are right not to let it go.

So they've been set loose on the wrong deficit, and the "solutions" they're being offered funnel down the to level of personal allegory: the grotesque spectacle of flogging of public sector workers.

But politics is largely a matter of stagecraft, and if you want people to let go of one thing, you've got to give them something else to bite on.

But isn't that what "soak the rich" is? Red meat for the masses?

Only a nincompoop like Reich could think that it was. And there's nothing more insulting to a red-blooded plebian than trying to pass off this political tofu as red meat.

Ultimately, the "soak the rich" line derives comes from an underlying belief that there is no big problem, that this is all a manufactured crisis.

That may be easy for Reich to say, but I don't think I'll join him. It's an attitude comes from complacency, and only lead to complacency. Hardly the secret to Democratic "relevancy" (or is it)?

Bill Fletcher Jr - The Jobs Crisis in the African-American Community (VIDEO)

2011-02-25T14:18:00.000-08:00

Talk given by Bill Fletcher Jr. to the Left Labor Project Forum on February 24, 2011.

Introductory remarks

PART 1 - Black History Month

PART 2 - Optimism in the Black and Latino Commuity

>>>>>>>PARTS 3-7 AFTER THE JUMP<<<<<<<

PART 3 - Blacks and Latinos are not delusional

PART 4 - Neoliberalism's "redundant" populations

PART 5 - Unions as "Guardians of the Public Space"

PART 6 - Organizing the Unemployed

PART 7 - Black Organizations, Churches Need to Do More

Questions & Answers

PART 8 - Questions from the Audience

PART 9 - Answers pt 1

PART 10 - Answers pt 2

PART 11 - Answers pt 3

PART 12 - More Questions

PART 13 - More Answers pt 1

PART 14 - More Answers pt 2

PART 15 - More Answers pt 3

Resolution on Work Among the Unemployed(1931)-COMPLETE

2011-02-22T21:28:00.000-08:00

[Reproduced in it's entirety, the following text is taken from The Communist, the theoretical journal of the Communist Party USA. It was published in September 1931, and represents the most coherent overview of the entire range of activities undertaken by the communists to organize among the unemployed in the years 1930-1933. -Ed.]

The following resolution was adopted by the 13th Plenum of the Communist Party, U.S.A. on the report of comrade Satchel.

1. Unemployment, already greater that at any time during the present economic crisis, continues to grow as a consequence of the still growing depth of the crisis and increasing rationalization, making work among the unemployed more than ever a "central and urgent task." The increase of part time employment and the growth of strikes against the sharpening wage cutting offensive of the capitalists, continually broadens the basis for, and makes more urgent the development of joint action of the employed and unemployed.

2. While we have made certain advances in our work among the unemployed, these have been mainly in the mobilization of the unemployed in demonstrations, hunger marches, etc., as a result of our overcoming our weaknesses in the putting forward of correct slogans and demand, resulting in the forcing of relief to large sections of the unemployed, through city and town governments, and private and semi-private charitable institutions. We have not yet succeeded in developing the every day struggles of the unemployed for their immediate demands and in building up organization among the ranks of the unemployed. This next task which we must now concentrate upon had been summed up in the R.I.L.U. resolution:

"To win the majority of the unemployed does not only depend upon the ability to correctly formulate slogans of agitation and action, but first and foremost on the organization of the everyday struggle of the unemployed in defence of their immediate demands."

3. The main reasons for our failure to develop the every-day struggles of the unemployed are:

(a) too much reliance upon demonstrations and similar actions alone;
(b) underestimation of the daily struggles for immediate needs;
(c) the failure to adopt organizational forms which would make possible the development of the day to day struggles and the drawing in of the unemployed into activity;
(d) bureaucracy in the leading of the unemployed activity from top to bottom, leadership through command, all decisions handed down from the top, failure to develop the initiative on the part of the unemployed.

4. The failure to build fractions and organize the work of the fractions has weakened the leadenhip of the Party in the unemployed organizations only a small number of unemployed Party members are active among the unemployed.

There also exists the tendency of the Party nuclei to carry on work among the unemployed directly instead of through the unemployed organization and exercise leadership of the movement through the Communists organized into fractions. In the center of all this an underestimation of work among the unemployed (in pratiCe) by the majority of Party organizations. The carrying through of the next tasks is only possible, through the correction of this underestimation an the activization of the unemployed Party members into the unemployed organizations and the setting up fractions to lead the movement of the unemployed.

5. Wherever the struggle for the every day demands was undertaken, despite the confsioon on this question, we succeeded in securing relief for the unemployed and in building the correct organizational forms. Particularly important are the experiences gained in the struggle against evictions. In a number of cities and towns we were successful in completely stopping evictions, and developing mass struggles around this issue. The development of the struggle in Chicago against evictions in which tens of thousand, of Negroes and white workers were mobilized, shows the way to organize the struggle of the unemployed in defense of their immediate demands. Through experience we learned the necessity to organize committees from among the unemployed to lead the daily struggles, around which are mobilized the masses of the unemployed.

In a number of cities the unemployed organizations were successful, through the dramatization of hunger and starvation, through bringing forward concrete cases of starvation and formulatIng concrete demands, to secure relief for groups of unemployed, thus demonstrating the correctness of this policy. But in more than a few instances, this form of activity which should have resulted in mass actions against the government, and mass demands for relief, was a owed to degenerate into "neediest cases" activity of a "social welfare" and charity character, in which the unemployed organizations became the agency between the individual unemployed worker and the relief agency, instead of the mobilizer of mass struggles.

In the organization of relief by the unemployed organization through their own collections, we have not yet sufficient experience. In only a few cases (Chicago, Cleveland, Detroit etc.) were kitchens organized and relief activity carried on directly by the unemployed organizations. In the main this activity thus far has achieved a certain stabilization of the leading cadres and unemployed committees, but this work has not yet assumed the character of actually assisting unemployed families who are starving and who are receiving no relief from the government and community institutions. Also this work catered mainly to the single and migratory unemployed, and was not even begun among unemployed families on a neighborhood scale. It is necessary to carry through the directives of the C.C. on this phase of the work. The W.I.R. can be drawn into the development of this activity.

6. The campaign for unemployed insurance which was developed, and in which more than half a million individual signatures and more than an equal number of collective endorsements were secured, and presented to Congress, has been allowed to drift. The signatures collected and placed in the hands of the districts were not utilized to further the work of the unemployed organizations. The state hunger marches in more than a dozen states were successfull from an agitational point of view, but the organizational results were only partially achieved. One of the main shortcomings was the lack of follow up work after the hunger marches.

7. In the development of joint action of the employed and unemployed, little progress has been made. While the unemployed workers have in almost all cases fought side by side with the employed workers in strikes, the mobilization of the employed to fight for the demands of the unemployed has made little progress. Only in the miners' strike did we put forward joint demands for the strikers and unemployed in the hunger marches organized. The fight for the 7-hour day, the struggle against rationalization and the stagger plan, has not been pressed forward. In the fight for the unemployed in only a few instances did we develop demands for part time workers. The fight against forced labor (which is increasing on goverment work) and the maintenance of union rates on all jobs, has received little attention.

8. The work among the unemployed has resulted in the mobilization of large masses of Negro workers, who play an important role in the unemployed organizations. The struggle for relief and particularly against evictions, was centered to a large extent in the Negro neighborhoods. The Chicago developments are a result of this attention to work among the Negro unemployed, and shows the militancy of the Negro masses. The main weakness here had been thfailure to put forward concrete demands against discrimination with regard to relief and employment. Also an insufficient struggle was carried on against the inequality of rents in Negro neighborhoods, the unsanitary conditions, etc.

With regard to work among women practically no results have been achieve in drawing the women workers and Wives of the unemployed, into the councils. Also no special demands were formulated for women, a large number of whom are homeless, and for whom no provisions are being made even to the extent that there exist municipal lodging houses for men. This situation must be remedied, and the basiS laid for work among women.

10. Young workers make up an increasing number in the army of the unemployed. No provisions are made for their relief by the government. Instea tHere is every effort made to utilize their lot for the purpose of forcing the young workers into the military organizations, and they are also told to remain at school and starve. In our work we have completely failed to put forward demands for the young unemployed and draw them into the struggle. 'Ve must put forward the demand for vocational training with full maintenance by the government for unemployed young workers.

11. A task that was almost completely overlooked is the struggle against discrimination, against the foreign born workers who are left to starve without any consideration, and this policy is being strengthened more and more. Also the mass unemployment causes disfranchisement of whole sections of workers because of migration, inability to pay poll tax, etc. We must develop the demands for the rights of all workers, against discrimination against the foreign born, Negro workers, migratory workers, etc. This campaign should be hooked up with the election campaign of the Party. A strulggle must be developed against the growing terror against the unemployed. The organization of Workers Defense Corps must be undertaken.

12. The fight against unemployment has been insufficiently connected With the struggle against war and in defense of the Soviet Union. Particularly is it possible to mobilize large masses for struggle on the basis of the conditions of the workers in the Soviet Union, and the system of social insurance in the land of workers' rule. The Hoover government which is carrying through a policy of war preparations against the Soviet Union through it's attacks on the Soviet Union, embargoes , etc., has been responsible for increasing unemployment.

13. The growing depth of the crisis on the one hand, and the growing struggles of the unemployed, side by side with the beginnings of strikes in a number of industires, has created a feeling of uneasiness in the camp of the bourgeoisie, and its agenst in the labor movement - the A.F. of L. and the Socialist party. The aim of the capitalists remains the same: to give as little relief as possible, and to crush the struggles of the unemployed and their organizations through terror. But in the light of the starvationthat is facing the tens of millions of the unemployed and their families, this, the third winter of the crisis, and the growth of the militancy of the unemployed, is compelling them to adopt new methods. While the Hoover government continues its opposition to any form of federal relief, and unemployment insurance in particular, the leaders of the Democratic Party (Wagner, Roosevelt, etc.) and the "progressives" (Pinchot, La Follette, etc.) are demanding federal aid and even a fake unemployment insurance.

This by no means signifies two different programs. It is part of one program of finance capital which controls the government and both the Democratlc and Repubhcan parties. It is merley a division of roles given to these parties and politicians of the borgeoisie. Which of the two "policies" that the government and finance capital will adopt depends upon the further development of the crisis, but primanly upon the mass struggles for unemployment relief and insurance, which we can develop. But the bosses unemployment insurance bill is a starvation bill, with the aim to defeat our genuine unemployment insurance bill.

The reactionary leadership of the A.F. of L. fully supports the Hoover program and the program of the Republican party. It stands opposed to unemployment insurance. It is in favor of the Hoover stagger plan, and the permanent lowering of the living standards of the workers. The A.F. of L. supports the Hoover program of war preparations and battleships under the guise of a public works program. The Socialist party program is the same as that of the Democratic party and Republican progressives. It supports the Hoover program of the stagger plan under the guise of the shorter work-day. It fights against a genuine unemployment insurance by supporting an unemployment insurance bill which limits the payments to a few weeks in the year, keeps the workers down to the starvation, discriminates against large numbers of the unemployed, and contributions to be made by the workers as well as the entire administration to be in the hands of the bosses government. The Musteites stand on the same platform as the Socialist party.

It is necessary to unmask all these proposals of the Republican, Democratic and Socialist parties, and the A.F. of L., and all kinds of progressives. This can only be achieved by unmasking the politicians, and bosses' agents, on the basis of concrete facts, and through our organization of the masses for struggle our demands for immediate relief and unemployment insurance. It is necesary to show the difference between our proposals for unemployment insurance for all workers, amounting to full wages, and to be administered by the workers, as agianst all the fake proposals.

We must prove to the workers, through their experience in struggle, that only through mass struggles can they force the enactment of a genuine unemployment insurance bill, and other concessions.

14. Both our own experience and the directives of the Comintern based upon world wide experiences, shows that the correct organizational forms for work among the unemployed are:

(a) The setting up of committees from among the unemployed in the neighborhoods, as employment agencies, soup kitchens, lodging houses, elected by general meetings of unemployed at these respective places, regardless of race, nationality or sex, and no matter to what party or trade union these workers belong. The center of the work must be in the neighborhood.
(b) All such committees in a given town, section of the city, or city, meet and elect an Unemployed Committee for the given territory, for leading the struggle of the unemployed in that territory. Such local committees must include representatives from the unemployed (shop unions, etc.) Every effort must be made to establish headquarters in all sections, and neighborhoods, as centers for the unemployed, and activity among the unemployed.
(c) At the same time, to facilitate the work of the committee and to create a firm base for their work, the unemployed should be registered, a membership card may be given, but there should be no obligatory dues payments. There may be, however, voluntary dues and collections from unemployed, employed and petty bourgeoisie, for the purpose of raising funds to carry on the work. But there should be no special privileges for the registered as agaist the mass of the unemployed.
(d) While not formally affiliated to the T.U.U.L., but organized on the broadest possible basis of the united front from below, the T.U.U.L. unions and revolutionary opposition in the old unions must take the initiative in organizing the work among the unemployed, and be the backbone of the unemployed organization, giving them leadership. Every effort must be made to recruit from the unemployed into the T.U.U.L. unions. There shll not be set up a center on a national scale but the leadership is to be exercised through the Party and T.U.U.L. centers. In organizing national actions, such as a national hunger march, etc., the T. U.U.L. shall take the initiative.
(e) In carrying through the above organizational forms, care must be taken not to do this mechanically. Where individual mebership branches exist, the more active elements must be formed into committees, for the neighborhood, block, any municipal lodging house, soup kitchens, in the neighborhood, etc. Regular meetings to which all workers, unemployed and employed, should be invited, are to be held to receive reports of the work of the committee, etc. Such meetings are everywhere to form part of the regular work of the committee.

15. The work of the unemployed committees shall be as follows:

(a) The unemployed committees organized in the neighborhood at the employment agencies, soup kitchens, etc., are to organize and lead the entire work in their territory. Similarly the city, town or section Unemployed Committee is to be in charge of all work in its territory. For the purpose of facilitating the work and carrying through the various phases of it, there should be set up auxiliary or sub-committees charged with the respective phases of the work, such as the struggle against evictions, the securing of food for children, for women and young workers, legal aid defense assistance during strikes, recruiting, press and agitation, regular publications of "unemployed papers," etc. The Unemployed Committees are to supervise all the work, and meetings of all workers are to be convened at which reports on these activities are made. Such meetings should be organized frequently and regularly. At such meetings, at which all workers who are unemployed, should attend, the workers may approve or disapprove of the work of the committees, decide to remove any member of the Unemployed Committee or decide to have new elections. In all these organizations, we must establish a genuine democracy and bring forward the initiative o f the unemployed, and develop cadres from the ranks of the unemployed. Special attention must be given to the development of hundreds of leading workers in all cities from the ranks of the unemployed. Without this no permanent and systematic work on a mass scale can be organized.
(b) Only by organizing the struggle for minutest interests of the unemployed, and showing to the unemployed, through their own experience, how through struggle that can secure relief, can we enlist the mass of the unemployed around our organizations. Concrete demands are to be formulated for all the Unemployed Committees in their sphere. In the employment agencies, for Unemployed Committees are to put forward the demands for fare and lunches when coming for employment. At the soup kitchens the unemployed should put forward demands for sufficient and good food and fight against any form of discrimination. At the lodging houses, demands are to be put forward for clean beds, no limit on the time unemployed can stay, and similar demands. At all the institutions, the demand for the control and administration by the unemployed themselves, must be put forward. In the neighborhoods, we must demand free rent for the unemployed, free gas, electricity, water, etc. The committee must put forward demands for food, fuel, milk for the children, etc. Demands must be put forward for relief to the young workers. Such demands must be linked up with the struggle against the terror against the unemployed, discrimination, etc. All these demands must be elaborated, developed, and modified by the unemployed themselves on the basis of their experience.
(c) In the center of our activity among the unemployed, and on the basis of the struggle for immediate relief must go the demand for unemployment insurance, amounting to full wages and to be paid to all unemployed through the period of unemployment. In the meantime, this demand must be made to the city, town and state governments. The fight for unemployment insurance must also be organized where possible on state lines, through the center of the campaign is the fight for federal unemployment insurance.
(d) The fight for the 7-hour day, without reduction in the weekly earnings, and the fight against rationalization, must form an important part of the struggle of the unemployed, jointly with the employed. The fight against high prices and high rents, which must be developed, forms the further basis for joint struggle of the employed and unemployed. The fight against "forced labor" and for union scales on all jobs given to the unemployed, the fight against the Hoover-Green stagger plan is an important weapon to unite the employed and unemployed in joint struggle. Similarly, we must enlist the employed workers to fight against overtime, by demanding the shorter work day without reduction in pay and for wage increases.
(e) At the same time, while intensifying the fight for relief and unemployment insurance, the Unemployed Committees must organize their own collection of relief on a neighborhood scale, and distribute it to the starving, unemployed through soup kitchens and commissaries. This work can serve to strengthen the work among the unemployed and if it is properly connected up, forms the basis for the extension of the fight for relief from the government and its institutions.
(f) The struggle for relief and unemployment insurance can only be suCcessfully carried through on the basis of the organization of the unemployed. The Councils are to carry through this work by mass demonstrations at city halls, employment agencies, charity institutions, through local county and state hunger marches, through work in the unions of the T.U.U.L., through serious work In the A. F. of L. unions and peneration of all workers' organizations, etc. At all meetings of the government bodies, councils, legislatures, etc., unemployed delegations and demonstrations must appera with their demands. While we must fight against the tendency to minimize the importance of organization of militant mass demonstrations which should be the result of and lead to the organization of the unemployed.

The following is a summary of the basic demands upon which the struggle must be organized:

(a) Unemployment insurance at the expense of the government and employers, securing to every wage worker his full wages when unemployed for any reason, to be administered by the unemployed workers organized in self-governing bodies on a territorial basis.
(b) Immediate relief in lump sum from the government treasury of each unemployed worker with additional amount of each dependent.
(c) Shortening of the excessive hours of labor on the basis of: 7-hour day for all workers without reduction of weekly earnings; 6-hour day for miners and dangerous occupations; abolition of child labor under 14 and a provision of vocational training with government support; 4-hour day for youth workers up to 16 and 6-hour day up to 20 years.
(d) Prohibition of eviction of workers from their homes for non-payment of rent when unemployed for any reason. Free rents, gas, light, water, etc. for the unemployed at government expense. Free distribution of milk for all children of the unemployed.
(e) The struggle against the Hoover schemes of public works which are designed as prepartions for war, as wage-cutting expiditions and systems of forced labor. Against the Hoover public works program we demand the inauguration of the program of building workers homes to replace the present horrible barracks inhabited by millions of underpaid and unemployed workers, building of workers' hospitals, nurseries, etc. All public bulding to be at union wage rates and the 7-hour day.
(f) Absolute prohibition of all forms of forced labor or coercion of any kind in connection with relief and insurance.
(g) Development of trade relations with the Soviet Union (including the demand for recognition of the Soviet Union, not only in a fundamental requirement of international working class solidarity, but also as a vital economic need of the starving masses). In order that the idle factories may work, fill the constantly growing demands of the successful construction of the workers' government and its Five-Year Plan.

The Communist Party demands the financing of all forms of insurance and relief by a diversion to this purpose of all military, naval and police appropriations, sharp reduction of official salaries, sharply graduated income tax on all incomes above $5,000, graduated capital levy on all fortunes above $100,000.

17. The immediate program of action shall conver the period of 4 months, September to December. In the center of this campaign shall be the fight for immediate relief to the unemployed and the part time workers. Demands for immediate relief shall be made upon the town, city, state and national governments. One of the main features in the fight for immediate relief shall be the demand for a fixed sum of winter relief ($150 for every unemployed worker and $50 for every additional depended.) At the same time the fight for unemployment insurance must be made a central feature of the campaign. This demand, together with the demand for winter relief, shall be made upon the national government at the time of the opening of the Congress December 2nd.

The following plan of action is to serve as the basis for the campaign. The dates set must not be observed literally, but are merely a guide to action to be adapted to the local situation and the present activities.

(a) In connection with the reports of the C.C. Plenum, the District Committees and the leading Party and trade union functionaries are to be mobilized for the campaign.
(b) Special meetings of every Party nucleus should take palace. At this meeting the entire program of action is to be taken up and discussed, and the tasks for the unit (street and shop) and for every member of the nucleus, decided upon. The nucleus shall select an unemployment work director who shall be charged with responsibility to the nucleus bureau for the unemployed council. All material (leaflets, outlines, etc.) are to be prepared during this period.
(c) Mass meetings should be called in the neighborhoods at which discussion is to take place on the program of action, and committees elected. The existing brances are to be activated through the election of committees and the mapping out of a concrete program for the neighborhood. Similarly committees should be elected at the employment agencies, breadlines, factories, etc. These committees shall form in the larger sections, Unemployed Councils on a section scale and, in the smaller cities and towns, on a city or town scale. At all the mass meetings and agencies, etc., where the committees are elected, the unemployed workers should be registered, and some form of card designating their affiliation to the unemployed organization given to the unemployed. Those now holding regular membership cards shall exchange them for such cards. The unemployed councils and committees in the various sections of the city shall start meetings where all the unemployed and employed can attend and listen to reports of the activities, give their approval of disapproval of the recommendations, plans of work, etc. During this period steps must be taken to activize all the unions of the T.U.U.L. and the oppositions in the A.F. of L. unions, for the program among the unemployed. Special efforts must be made to form committees inside the A.F. of L. unions and utilize the fight against unemployment to develop the struggle against the A.F. of L. bureaucracy on the basis of the most pressing economic issues.
(d) Unemployed demonstrations should be organized in the cities and towns and county hunger marches. The county marches provide a means of deepenmg the struggle, much more than was accomplished through the state hunger marches. Attention must be given to the preparation of the marches. During the month of October the program for immediate relief, winter relief, and the fight tor unemployment insurance, must reach millions of unemployed and employed workers. For this reason we must penetrate deeptr into the neighborhoods, into the workers: homes, at the factories, wherever the unemployed gather, in the A. F. of L. unions, the workers' fraternal organizations, etc. Resolutions favoring our program should be adopted wherever possible. In this work, we must utilize the more than half a million individual signatures demanding unemployment insurance, collected last winter and now in the hands of the district organizers.
(e) The first two weeks in November must be used for the election of the delegates to the National Hunger March to Washington, timed with the opening of Congress. We must strive by this time to have so popularized our program and strengthened our contact with the masses of the unemployed, that hundreds of thousands of unemployed will participate in the meetings where the delegates are to be elected. The delegation, which shall be a mass delegation of from one to two thousand, must include Negro, unemployed, women and children of the unemployed, young workers an represetatives of as many unions as possible. The Workers International Relief shall be drawn on to help in the organization of the march, the collection of food, clothing, means of transporation, shelter at Washington, etc.
(f) On December 2, the day of the opening of Congress, and the demonstration of the of the hunger marchers at Washington, there shall be organizaed nation-wide demonstrations in every city and town in front of the government bodies, to be preceded or followed by parades through the workers' neighborhoods and the largest factories. A conference of all delegates and hunger marchers shall take place in Washington in connection with the hunger march.
(g) Both in their march to and from Washington, we must organize to reach the masses of the unemployed, For this purpose, organizers are to be sent out in advance of the line of march by the various Districts, to prepare for the commg of the delegates, the organizations of mass meetings, etc. Also in the organization of the march itself, we must take care to provide sufficient literature and experienced agitators. We must aim as a result of the hunger march not only to build organizations of the unemployed, but also to recruit members into the T.U.U.L. unions and Party.
(h) Upon the return of the hunger marchers from Washington (from the first to the second weeks in December) there shall be organized first meetings by the Councils to hear the reports and the next tasks; and mass demonstrations (exact date to be fixed later but just before Christmas) at which the reports are to be given and the masses mobilized for the continuation of the struggle. Between December 2 and these demonstrations there should be prepared and ready the plan of work for the first three months in 1932.
(i) In the entire period of activity when this program is being carried into eifect, it is necessary to connect up the struggle of the unemployed with the election campaign and to draw the masses around the platform of struggle of the Communist Party. It is necessary to connect up the struggle of the employed with the election campaign and to draw the masses around the platform of struggle of the Communist Party. It is necessary to draw the unemployed around the strikes now in progress and the developing strike struggles. In the struggle against the war danger, we must particularly aim to draw the masses of the unemployed into the November 7 demonstrations. This will only be possible if this work is developed on the basis of the concrete demands of the unemployed and the slogans properly fused. One of the major questions that must be brought to the attention of the unemployed is the fight against deportations, lynchings, and the general terror of the government and the fascists and social-fascists.
(j) In addition special programs of tasks for each of the most important districts are to be worked out in consultation with the district leaderships.18. In order to carry through the above program effectively and to crystallized the organization of the unemployed, as a result of these struggles, and present weaknesses and shortcomings in the organizations and the methods of work must be overcome. The Party must through its membership in these organizations, see that this is effected in the shortest possible time. It is necessary that the District Committess look upon uneployment work as a central task and assume full responsibility for the work; that the Party nuclei be mobilized; that the fractions be built in the unemployed organizations; that experienced Party mass workers be assigned to work in the unemployed organizations and that every effort be made to draw in the unemployment committees to be developed, that we overcome the present sporadic actions and replace them by daily systematice work; that demonstrations shall be the result of organization, and not a substitute for it; that a broad agitation and propaganda campaign be developed among the unemployed and the unemployed organizations.

2010 Mass Strike in South Africa DIGEST

2011-02-13T17:20:00.000-08:00

THE 2010 MASS STRIKE IN THE STATE SECTOR, SOUTH AFRICA (2010)
by Ian Bekker and Lucien van der Walt

DIGEST PRODUCED FOR TUSG.ORG

Recently, around 1.3 million state sector workers went on strike for four weeks against attempts to impose neoliberal austerity measures. The strike took place just weeks after South Africa’s government spent billions on hosting the FIFA World Cup, the biggest sporting event in the world. It was the biggest state sector strike in recent history, dwarfing even the month-long mass strike of 2007, involving unions affiliated to the Congress of South African Trade Unions (COSATU), as well as eleven non-COSATU unions linked together in the Independent Labour Caucus (ILC), a loose alliance.

The strike was all the more remarkable given that COSATU, the largest union centre, is part of a Tripartite Alliance with the African National Congress (ANC), the ruling party in South Africa. (The third leg of the Alliance is the South African Communist Party, SACP, many of whose leaders serve as key figures in the ANC government, but also as union leaders.) In striking against the state-as-employer, the federation inevitably had to confront the ANC-as-government, on the eve of the ANC’s September 2010 National General Council (NGC).

Historically, strike action has been illegal in most forms of state employment, but legal reforms in 1993 were consolidated in the post-apartheid Labour Relations Act (LRA) of 1995 (amended in 1996, 1998 and 2002). This covers all employees besides military and intelligence personnel and allows any employee to strike except those in “essential services”, i.e. services that, if interrupted, endanger life, personal safety or health.

The 2010 Mass Strike in the State Sector, South Africa (Bekker & van der Walt 2010)
In this context, state sector trade unionism has forged ahead at a time when mining- and manufacturing-based trade unionism has been hard hit by the country’s economic difficulties and move towards free trade. With 224,387 members, the South African Democratic Teachers Union (SADTU) is now the second largest affiliate of two million-strong COSATU, the largest union federation in the country. It is closely followed by the National Education, Health and Allied Workers Union (NEHAWU), which organizes in hospitals, schools, universities and elsewhere, with 216,652 members.

Both have overtaken the National Union of Metalworkers (NUMSA), with 212,964 members, and are catching up with the National Union of Mineworkers (NUM), with 270,536 members.
While COSATU is a mainly African union federation, with origins in the anti-apartheid movement, the ILC is a front for a range of other unions – almost all these unions proclaim that they are not aligned with any political party, and their membership is noticeably drawn from the more skilled layers of white, coloured and Indian workers.

One such union is the Public Servants Association (PSA), with 205,000 members, affiliated to the Federation of Unions of South Africa (FEDUSA), which has 550,000 members, the second biggest federation in South Africa. Another is the National Union of Public Service and Allied Workers (NUPSAW), with 60,000 members, affiliated to the centre-right Confederation of South African Workers’ Unions (CONSAWU).
COSATU has played an important role in the ANC, most recently in the political rebirth of Jacob Zuma. Zuma was a disgraced politician who had been fired from the post of deputy president in 2005 and prosecuted for alleged corruption (as well as on a rape charge). COSATU’s backing of Zuma against incumbent ANC leader President Thabo Mbeki allowed him to make a spectacular comeback: Mbeki was pushed out of the ANC leadership; Zuma became the country’s president after the 2009 general elections.

COSATU played an absolutely critical role in the ANC’s election campaign.

The Strike

A months-long state sector dispute came to a head in August this year with a one-day general strike on Tuesday 10 August. With inflation running above six percent, unions had aimed at increases of 8.6 percent as well as housing allowances of R1,000 (approximately USD 140). Government officials, claiming “resource constraints,” said could not afford more than 6.3%. The government gave the unions 21 days to consider this offer before the government would unilaterally implement the package.

The state’s hard line was partly a result of its determination to impose the neoliberal framework. It also served to signal that COSATU’s support for Zuma in no sense gave the unions the right to set ANC policy. One of the unions’ gripes with Mbeki had been his continual insistence that COSATU was a subordinate part of an ANC-led Alliance.

Zuma, it seems, shares Mbeki’s view that the unions must play second fiddle to the party and be kept in their place.

On the evening of Tuesday 17 August, the negotiations between government and union representatives collapsed. An indefinite strike started the next day, involving around 1.3 million workers, both COSATU- and ILC-affiliated.

State schools were closed, hospitals were affected; courts were disrupted because stenographers and interpreters were part of the strike action. The army was instructed to assist in the hospitals. Police arrested dozens of strikers for “public violence”, following attacks on strike breakers. Sixty-one strikers had been arrested by the seventh day. Rubber bullets and water cannons were used on several occasions. Zuma condemned the strike for its violence, and for “tarnishing” the country’s image abroad. He also threatened to fire strikers.

The police, however, are also unionized, with police unions linked to both CONSAWU and COSATU. On 21 August, the courts issued an interdict preventing the Police and Prisons Civil Rights Union (POPCRU, a 95,864-strong COSATU affiliate) from joining the strike.
On 24 August, COSATU threatened countrywide sympathy strikes from non-public- sector unions; two days later, there were countrywide rallies.

A Partial Victory

The intractability of the rank-and-file workers forced union leaders to hold out for a better deal despite heavy ANC government pressure and very hostile media reporting.
The state finally made a new offer of 7.5 percent raises, and an R800 (around USD 110) allowance. This was certainly a substantial set of gains, although they fell short of the original demands.

Despite the pressure from below, and widespread rank-and-file resentment towards ANC leaders, COSATU took care to ensure that the strike was suspended before the ANC National Government Council. The strike was suspended on 6 September and officially ended on 13 October, although at that point there was no union agreement on the proposed settlement. Even the next day, a 51 percent mandate from striking unions was still not achieved.
The decision to suspend the strike, despite the power of the strike movement, illustrates how the Tripartite Alliance has a very negative impact on the labor movement.

COSATU maintains the Tripartite Alliance despite the ANC’s overt neoliberalism for two main reasons: loyalty, dating back to the anti-apartheid struggle, and strategy: the hope that the ANC can be shifted towards COSATU’s alternative economic policy – centered on a mixture of Keynesianism, protectionism and union rights – was not even discussed at the 2010 National Government Council, despite initial ANC promises.

Perhaps, however, the most glaring failure of the strike was the failure to link the union struggle to the struggle of other sections of the working class. The strike was strongest by far in the state hospitals, and in state schools in the townships – the slums in which the African, coloured and Indian working class remains concentrated.

In other words, the main impact of the disruption of production at these facilities was on these working class communities.

The disruption of health and education only affected the ruling class indirectly, i.e. inasmuch as it generated public outrage, not least by those personally harmed by the strike. A court interdict forcing essential workers back to work was ignored. Meanwhile, the media widely publicized strikes which left hospital patients without care and students unable to take end-of-year examinations. Zuma’s condemnation of the strike had resonance precisely because such actions are widely and understandably condemned within the working class.

Some have suggested the strike signals the beginning of the end of the Alliance. This is unlikely as long as COSATU’s politics remain unchanged and as long as COSATU ignores the possibility of an alternative alliance: not with the ANC, but with other unions, as well as with the post-apartheid community movements that fight around issues such as housing and electricity.
COSATU’s commitment to using the country’s corporatist system for social partnership – notably the National Economic Development and Labour Council (NEDLAC), but also various forms of workplace and industry-level cooperation – to forward its social democratic agenda also reinforces the trend towards centralization of union power and resources in the hands of the leadership.

A lot of activism and work will be required to ensure that trade unions help focus the energy of the working class on the root causes of current social ills and on the common links between the struggles of workers and the unemployed, unions and community movements, thus developing a broad front of oppressed classes in order to secure social and economic equality, as well as participatory democracy and social justice, in South Africa. This also means that the unions need a clear vision of a libertarian and socialist transformation, and that the unions themselves remain under the strictest rank-and-file control.

More on the Food Economy

2011-02-10T10:41:00.000-08:00

To the editor:

I was excited to see Mark Bittman draw attention to the plight of workers in the food supply-chain, who "labor in difficult, even deplorable, conditions." Yet, in reading further, I discovered that he seems to think these bad conditions end when food leaves the farm or the packinghouse. The continuing growth of low-wage jobs handling food in restaurants, supermarkets, and "big box" stores refutes this.

Bittman's bias towards home food production - indeed, the fourth idea in his "manifesto" is to "encourage and subsidize home cooking" - both ignores the prevailing trend in production of meals and blinds him to badly-needed reforms. His bias is perhaps understandable (he is, after all, an author of recipes for the home cook), but to pose a return to home production of food is as a solution is both unrealistic - because increased time devoted to home cooking would almost certainly mean a reduction of job hours, family income, and national productivity - and utopian - because it simply "wishes away" the reality of low-wage jobs in foodservice and retail.

Krug Fug

2011-02-03T09:11:00.000-08:00

comment on: http://krugman.blogs.nytimes.com/2011/01/30/the-kitchen-test/

This observation totally ignores *who* prepares food and *where* it is prepared. As recently as the '90s, the U.S. passed the tipping point where more meals were produced outside the home than within it. I'd call that a pretty big change, perhaps not quite on par with the movement from an agrarian to industrial society (when considered alone), but a significant index of our change to a "service" economy.

While technology (even in professional kitchens) has been quite stagnant - blame wage suppression on the retardation of labor-saving innovations - both quantitative changes (consider the huge amount of time went into producing food in the home, even with 1950s technologies) and qualitative changes (we have not yet "re-aligned" the nutritional content of commercially produced foodstuffs) continue to have a major impact on the way we live.

Considered in this context, everything from the obesity "epidemic" to the role of women in the labor force is implicated.

RT Reports from the Economic Front: China And The Jobs Issue

2011-02-02T18:37:00.000-08:00

by Martin Hart-Landsberg

originally published at: http://media.lclark.edu/content/hart-landsberg/2011/01/21/china-and-the-jobs-issue/

CONDENSED FOR TUSG.ORG

The President of China, Hu Jintao, just completed a visit to the U.S. and, not surprisingly, many people used the occasion to raise the jobs issue.

The connection between jobs and China is usually made is as follows: China is an unfair trader. Its state policies, including subsidies and labor repression, are a major reason for the destruction of our manufacturing sector and jobs. The U.S. continues to run an enormous trade deficit with China, a deficit that dwarfs any other bilateral deficit, and for this reason, the U.S. economy continues to suffer from high unemployment, i.e. a "jobs deficit."

This nation-state framing encourages us to see U.S. workers in direct competition with Chinese workers, with their gains largely coming at our expense. Unfortunately, this framing misleads more than it helps to clarify current economic dynamics. It is also followed [by most economists] to a counterproductive response: force China to quicken its embrace of market forces so that its economy will become more like ours.

A more accurate framing would start from the fact that contemporary capitalist dynamics have led to the creation of a regional production network in East Asia, with China serving as the region’s final assembly base for exports to the U.S. The primary beneficiaries of this development are the many multinational corporations that have created the network, and the primary losers are the majority of workers in China and the United States. The appropriate response to this development would be to build opposition to the policies that support this corporate strategy, including so-called "free trade" agreements.

Multinational corporations have developed a strategy to cheapen their costs of production, especially of information, technology and communication (ICT) products and electrical goods like semiconductors. This strategy involves dividing production processes into ever-finer vertical divisions and locating the separate stages in two or more countries, creating what are called cross-border production networks. The growth in this strategy is captured by the growth in the international trade in parts and components. Trade figures also make clear that multinational corporations have made East Asia the center piece of their new strategy.[1]

The Asian Development Bank summarizes the situation as follows:

Disaggregating manufacturing trade into final products on the one hand and parts and components on the other shows… [that] intraregional trade in Asia is mainly concentrated in parts and components. The intraregional share of developing Asia’s parts and component trade rose by almost 20 percentage points over the past decade, reaching 62 percent in 2005-2006, as compared to an 8 percentage point increase in total trade in manufacturing over the same period.

China has come to play a central role in the overall operation of this multinational corporation controlled production strategy,[2] holding a unique position as the region’s production platform for the export of final goods.[3] Of course, these are not truly Chinese exports, but rather exports produced [by Multi-National Corporations] in China. Approximately 60 percent of all Chinese exports are produced by foreign corporations; the share is 88 percent for high-tech goods.

The Asian Development Bank highlights the significance of this process for East Asian economic activity as follows:

even though intra-Asian trade has been expanding more rapidly than Asia’s trade with the rest of the world, Asia has become ever more closely linked by globalization to the major global markets of the G3 [the United States, EU, and Japan]. This stems from the nature of Asian trade, with intra-Asian trade driven by vertically integrated Asian production chains and extra-Asian trade driven by G3 demand for the final goods produced in these networks.[4]

Drawing on the above, we can better understand why China now looms so large in U.S. trade discussions. The rest of East Asia has largely stopped producing final goods for export to the U.S., producing instead parts and components for export to China. China, in turn, has also become increasingly export oriented, producing the final products destined for sale in the U.S. market. As a result, our trade deficits with other East Asian countries have fallen while our trade deficit with China has increased. China is the face of a broader multinational corporate dominated East Asian production system.

In other words, our economy is being restructured in line with the economies of East Asia. We are being reshaped, just like East Asia, by a multinational corporate strategy, which also is supported by large U.S. firms. As noted above, approximately 90 percent of China’s high technology exports to the U.S. are produced by multinational corporations and many of them are being bought and sold in the U.S. by other multinational retailers.

Working people in China are struggling in the face of multinational corporate demands that the Chinese government keep wages low and working conditions profitable. And workers in other East Asian countries are also suffering as their governments are forced to implement similar repressive labor policies in order to keep multinational corporations producing in their countries.

In short, Chinese workers are not stealing our jobs. Rather working people in East Asia and the U.S. are suffering from very similar pressures being generated by the very same dynamic. Said more simply, our problems are at root caused by contemporary capitalist dynamics. Forcing China to become more open to capitalism is not going to help us or them.

Of course, this is a framing that the media and business and corporate elite are not eager to promote. Better that we think our system is great and that the problem is that the Chinese government has not yet fully committed to promoting a similar one.

---
[1] Trade figures also make clear that multinational corporations have made East Asia the center piece of their new strategy. East Asia’s share (including Japan) of world parts and component exports grew from 27 percent in 1992-93 to 39 percent in 2005-06, despite a significant decline in Japanese exports in recent years. Developing East Asia’s share grew from 17.8 percent to 32.3 percent over the same period. In 2005-06, developing East Asia accounted for more than two thirds of the total component trade of developing countries.

East Asia’s share (including Japan) of world parts and component exports grew from 27 percent in 1992-93 to 39 percent in 2005-06, despite a significant decline in Japanese exports in recent years. Developing East Asia’s share grew from 17.8 percent to 32.3 percent over the same period. In 2005-06, developing East Asia accounted for more than two thirds of the total component trade of developing countries.

Significantly, ICT and electrical goods together accounted for almost three fourths of total East Asian exports in 2006-2007. And in accord with the logic of this cross border production strategy, a growing percentage of this trade activity involves parts and components. And, a growing share of this parts and components trade now takes place between different East Asian countries.

[2] As the Asian Development Bank describes:

there is the cluster of highly interdependent, open, and vibrant economies in East Asia and Southeast Asia . . . . With the PRC at the center of the assembly process and with exports going mainly to the U.S. and Europe, production in and trade among these economies have been increasingly organized through vertical specialization in networks, with intense trade in parts and components, particularly in the ICT and electrical machinery industries.

The share of parts and components in China’s imports of manufactures from East Asia rose from 18 percent in 1994-1995 to 46 percent in 2006-2007. The import share of parts and components in the machinery and transportation equipment category (which includes both ICT and electrical goods) soared over that same period from 46.1 percent to 73.3 percent.

[3] The uniqueness of this role is highlighted by the fact that it is the only country in the region that runs a deficit in parts and components trade, and whose exports are overwhelmingly final products. It is this unique position that has enabled China to increase its share of world exports of ICT products from 3 percent in 1992 to 24 percent 2006, and its share of electrical goods from 4 percent to 21 percent over the same period.

[4] The rapid growth in the region’s dependence on the G3, and the U.S. market in particular, is well captured by the following trends: the correlation between the growth in East Asian intraregional exports and U.S. non-oil imports increased from .01 during the 1980s, to .22 during the 1990s, and .63 during the first half of the 2000s. Similarly, the correlation between the growth in East Asian exports and G3 non-oil imports rose from .21 during the 1980s, to .34 during the 1990s, and .77 during the first half of the 2000s.

Written by Martin Hart-Landsberg

January 21st, 2011 at 8:05 am

Bill Tabb - The Jobs Crisis (VIDEO)

2011-01-19T08:44:00.000-08:00

Presented to the Left Labor Forum on January 18, 2011 in New York City.

PART 1

PART 2

PART 3

[video of discussion, and incomplete transcript after the break]

Ok, it's good to be with this group - it's the kind of group that comes out on a night like this, which means we're all very committed and hard-working, or a little nuts. But it's good to see you all here.

I want to begin with two things, two recent pieces. One - Paul Krugman, who I must say is about all we have in the mainstream media - beginning to get us half-way there. And I want to begin with the half-way he gets us and then I want to say a bit more.

Last week you maybe saw the column he did on the division in American politics, in which he said something. You know, I liked the column. My wife said: "Everybody knows that, stupid."

[laughter]

So you all may know it! But, I think it's a crucial place to start, and that is:

"One side of American politics considers the modern welfare state a private enterprise economy, but one in which society's winners are taxed to pay for the social safety net morally superior to the capitalism red of tooth and claw we had before the New Deal. It's only right, this side believes, for the affluent to help the less fortunate.”

-your basic social democratic, New Deal, progressive program -

"The other side believes people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That's what lies behind the modern right's fondness for violent rhetoric. Many activists on the right really do see taxes and regulation as...tyrannical impositions on their liberty."

[full article @ http://www.nytimes.com/2011/01/14/opinion/14krugman.html ]

-and there's no middle ground between this progressive, social democratic position, and sort of Margaret Thatcher "there is no such thing as society, only individuals" - and that the Republican Party is now basically a Tea Party, where Nixon - who, you know, I grew up thinking he was the worst possible thing that could happen to America, I'm not sure that that wasn't right up to then.

But, you know [under Nixon] OSHA got passed, EPA got passed. Nixon proposed a negative income tax to help give people a basic standard of living. It was low, we didn't like it, it wasn't enough, but the thinking was of the kind Krugman is talking about. It was a bi-partisan, centerist. You do what you need to do to foster capital accumulation, but legitimation is important. You have to sort of keep the suckers happy and in the system, and all that.

And within that, basic progress was made, important working class victories were won, and so on.

Now the question is: what changed? Because this didn't happen by itself. What happened were a number of things, globalization being - in my view - the most important, because it meant the working classes of France, of Italy, of Germany, of the United States were now thrown into a single labor market, where the lessons we learned in the 1930s, where you had to organize the whole industry, you had to organize all the workers of a trade, and then all could come up together in that form of solidarity or unity there was class power and class strength for the trade union movement.

With globalization, we're now faced with a vast increase in the size of the global labor force. The former Communist countries - which are now part of the capitalist world market - India opening up. The global labor force, minimum estimates are that it doubled, the higher estimates are that it tripled. Where in many ways we are now in a single labor market, with some exceptions which I'll get to. But the point is: for most workers, they're competing against workers in very distant places, who speak different languages, but who work basically for the same trans-national corporations, or sub-contractors for those.

Well that was a tremendous difference. And what you had coming out of the New Deal was an alliance between trans-national capital and labor - the progressive New Deal elements of the capitalist class and the trade union movement, against national capital - those capitalists who just did business in the United States, who were not willing to accept unions under any circumstances, and the trans-national corporations that wanted, they were highly capital intensive. Labor was able to organize the huge factories of Detroit and Chicago and so on, and steel and auto led the way, and you all know that.

Alright. Now we have plants in Brazil, in Korea, all over the place, producing basically the same basic things, tremendously weakening the power of labor.

Second, which we tend to underestimate, is technology, that if you go into a steel mill, there are no people any more. Uh, you know, anyone who has a 1930s view of a steel mill should visit. You go in and you're on this catwalk and there are like three football stadiums and way at the end there there's this guy and that guy. Nobody goes near the blast furnace - because they're huge and you'd be burnt to a cinder - even three football fields away the heat is just incredible. But nobody's there. There are no steelworkers. And all of this - there are people, but the efficiency of a modern auto plant or a modern steel plant, has changed the dynamic so that fewer workers are now producing more things. This is true of washing machines and everything else.

Ok, so the weakness of labor from technological change and the failure to re-employ workers who've had good jobs, in other good jobs, or good-paying jobs. I mean there's nothing good about working in an auto plant or a...these are really terribly hard jobs. If you know people who've worked there or if you've toured the plants. Um, you know, jumping in and out of a car every 40 seconds, to install something and jump out, all day long, is not fun. So it's not a good job, but it's a good-paying job. A paying job with security, with health care, and so on.

Alright, so the context of people saying "we need jobs" is a context in which capital's view of the United States has changed, and that is the second point I want to make.

I want to read to you from an equity guy, and this is from an article that was in the Atlantic - and I'm blocking on her name, uh, Freeland...she's a woman who works for the, she's the U.S. editor for the Financial Times - has an article in the current issue of the Atlantic, and she quotes this hedge fund guy:

"‘A person in Africa who runs a big African bank and went to Harvard, might have more in common with me than he does with his neighbors, and I could well share more overlapping concerns and experiences with him than with my neighbors.’ The circle we move in, he explained, are defined by 'interests’ and ‘activities,’ rather than ‘geography’: ‘Beijing has a lot in common with New York, London, or Mumbai. You see the same people. You eat in the same restaurants. You stay in the same hotels. But most important, we are engaged as global citizens in crosscutting commercial, political, social matters of common concern. We are much less place-based than we used to be.’"

[full article @ http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/ ]

That is, we're seeing a global capitalist class formation - in place of isolated national capitalist class - where the billionaire in Mumbai has more in common with the billionaire in Beijing than he does with his neighbor on the street in Mumbai. So as the global capitalist class…

[Bill

- uh Bill, they said you had to sit next to me -

Bill: Oh good. [Laughter] Is that guaranteeing I'm staying awake, is that the idea? [more laughter]

- they said...well, anyway...[laughter]...I shouldn't tell him, right? [to Bill] They love you, don't worry...

Bill: What's not to love?

[voice from off camera]: And so much to love.

Bill: Then there's that.

OK, so the globalization of production, and the transformation from national classes to global classes, changes the terrain in ways that are not good for us, obviously.

We have Mr. Obama - and I'm going to say very little about him, only to say that the anti-Obama angst on the part of those capitalists, those Wall Street folks, who were saved by Obama, right? Who trillions of dollars were given to, to put their banks back in shape. Bought their toxic assets, lent them all the money they wanted at zero interest. Now, Obama is "anti-business" when he tries to pass any kind of modest regulation of banks, any kind of - they might pay taxes, for a change...that they might think about creating jobs for American workers - he is "anti-business."

So, we have a situation where, to go back to the quote from, or the passage I read you from Krugman, it's a three-way struggle. It is a struggle between the Republicans, the Tea Party, the hard right, and then not *a* Democratic Party, but - of course - the democratic wing of the Democratic Party, and the corporate wing of the Democratic Party, that when William Daley [sp?] was appointed last week to be Mr. Obama's Chief of Staff - the guy who is the gatekeeper for anybody who wants to give any ideas or...Mr. Daley, you know, who is from a great working-class family - I met some of them in '68 when I was in Chicago…

[laughter]

...at the Convention. He was the vice-chairman of JPMorgan Chase just before taking the job with Obama. He was against the financial regulation bill. He was against healthcare, uh, reform bill. This is who Obama put in there. Because Obama cannot win re-election without the money he had in 2008. And we have now seen huge amounts of money turning against Obama. Not because he was a socialist, as the Tea Party says, but because he wanted to re-build America - his infrastructure projects, his job construction, the kind of stuff that during the campaign sounded good to a lot of us. His awareness of the environmental is real, all this. You don't hear that any more. Because, realistically, none of that is possible.

It's not possible for a lot of reasons, one is the Democrats themselves in the Senate refused to change the rules that allow a minority Republican to prevent anything from happening. They could change that the first day of the new Senate if they wanted to. They don't. Because their strategy for a long time was to get money out of the rest of us so they could get 61 votes and pass legislation. They were not interested in changing the rules because it was a great money-making thing.

Nor were they interested in changing the tax system. I just finished a book on financialization, which is an academic book, but people here might find it - I'm not trying to push the book - but one of the things is Schumer, and, of course, Hillary Clinton when she was our senator, and now our new senator, represent Wall Street. That's what they do - they get more money from Wall Street than other senators, because they have a job to do.

Schumer, every season, talks about taxing the hedge fund people. They get their income in what's called "carried interest" - anybody know carried interest? It's 15 percent tax rate. And they take their income, as what they made up, calling it "carried interest." It's regular income. It should be taxed as regular income. But since they're hedge funds, and private equity groups, they say "Well, yeah, but we're making it in capital gains," so it should be - it's not "carried interest." It's not interest, it's not carried, but they have paid off and gotten this.

Schumer shakes them down, and has raised more money for the Democratic Party, than anybody else ever has out of Wall Street. By just saying "we're going to have to tax it, but maybe I can keep it off a year or two. And he keeps doing this.

All this stuff...yeah [laughter]

So, we have the corporate Democrats, we have us, and then we have the right wing. And the problem is, I don't know [inaudible] in a sense I have to tell people in this room about class and class struggle. The political system does not accept there is such a thing as class or class struggle. And the Democratic Party looks to win elections, which means labor will knock on doors, but get nothing when they're elected.

So, when we talk about jobs, when we talk about job creation, it is in this larger context.

[end part 1]

Financialization, which is to the next piece of this, is the change in the American economy from our post-war system - which was based on production of real goods and services - to a system of maximizing shareholder return. Shareholder return is profits to those who own capital.

What this meant was ceasing investment in the United States - although American corporations continued to be very, very profitable, the stock market has come up remarkably again, the bonuses are back, actually they're at record height on Wall Street now, higher than they were before the crash.

Financialization is a package. It involves corporations...

Let me start this way: in the post-war period, in economics class, you learned that households saved money, they put it in banks, the banks lent the money to businesses, the businesses build plant and equipment, created jobs, invested, paid back the bank, and, you know, there was your money.

This is familiar to us, and many people think that this is what banks still do. No. The corporate sector does not borrow money, it contributes money back. The amount of stock - it doesn't sell stock. On net, it buys it's own stock back. It does not raise money this way.

It raises money short-term, in what's called the commercial paper market. That is, one big company that has more money than it needs - there are a lot of them - and a big company that wants to borrow, make the deal outside of the bank.

Very little of this goes to real investment in anything that's going to create jobs.

The other part of financialization has to do with the stagnation of working-class incomes. That, as you know, for the last 30 - now I think I have to say last 40 - years, the real income, real income means your income adjusted for taxes and the rate of inflation. You know: my income went up, but I'm buying less. When I was a kid, you know, you got on the subway for a nickel, a quart of milk is 20 cents, some of you...[looks around]

[laughter]

It ain't like that anymore!

So, money income went up, but real income has stagnated or gone down for the average American. This has meant that the only way to keep up our living standard has been to go deeper in debt.

Credit card debt, and, for a long time, home equity - people who had equity in their home would, as they say, "use it as an ATM machine," borrow money against the value of thier home. And as values were going up, they could do that. Of course, when housing values collapsed, they were screwed, and since the banks planned a little ahead and changed the bankruptcy laws so people can't declare bankruptcy, and a whole generation of students who took out student loans, can't find jobs, and are paying - they can't declare bankruptcy either, because we have returned to a system of debtor prisons. I mean, this is the extent of this.

So financialization has created growth based on the creation of debt and leverage. Debt, we understand: you borrow money, you go in debt. Leverage means you borrow more and more and more compared to your actual capital. So, the banks don't get their money from depositors. It's true people deposit money in banks - and they get half of one percent interest or something - um, but that's not where banks get most of thier money.

Banks now get most of their money from, for instance, money market, you know, because money markets still pays higher, people with real amounts of money put it in a money market fund. The money market pays them interest because they lend it to the bank, the banks then lend it to hedge funds and other speculators, who then borrow huge amounts based on...then they promise the securities they have bought. So let's say they bought some collateralized debt obligations. These are terms people never heard of a few years ago, and now we may not understand what they mean, but we've heard 'em, right?

The collateralized debt obligations - take an example of Macy's credit card debt. I have a Macy's credit card, I pay it every month, right? Macy's knows it's going to collect a certain amount on its credit card. It can go to a bank and borrow money, pledging next month's credit card receipts, because they have to order the spring stuff now.

So, it's a securitizing - it's taking this income that's going to come in in the future - and, uh, get money now, and pay it back later. New York City, in the '70s, did this like crazy. The city had no money, so they promised the banks next year's real estate taxes, if they lend them money now. So we were borrowing against the future, and then when those taxes turned down, you know, you're in a bit of trouble.

So the whole system, the whole economic system, is based on financialization, the creation of debt and leverage. This huge amount of borrowing, on this small base of assets. And most recently hte crisis - what's called the Great Recession - which, supposedly, was from 2007 to 2009 - that was from, again supposedly, those sub-prime mortgages, right? Because what the banks did was they bundled all those sub-prime mortgages, sold them to people, and then, when the value of those mortgages went down, everybody in the whole game got screwed. The banks needed money, everybody needed money, and so you, the taxpayer, and the Federal Reserve, came and helped them all out. Uh. To bring them back to where they are.

But, this is the point: the change in the way our economy worked, from the post-war system, where we produced goods and services, where you had a traditional working class that would save for college and would save to put a down-payment on a house and all that. In the period from roughly Ronald Regan 1980 - he had nothing to do with any of this, of course, the magic of the marketplace - de-regulated the banks, allowed them to do all this stuff. De-regulated everything. And in doing it, created this monster, dependent on asset bubbles - on the value of stock going up, uh, Clinton got all this credit because 1997, '98, '99, 2000, the market went up, the economy was growing great guns. And then, it collapsed, because a lot of these companies weren't worth what they said they were. These internet start-ups, and all the...we could talk about that if anybody wants.

But the point was, there was an asset bubble. The prosperity was based on people thinking they were richer, because the paper value of the stock they owned - and this was true of working-class people and their pension funds, you know, in those days the pension funds were doing better, and it seemed like your retirement was OK, you could spend a little bit more. People had money in other things, some people actually owned stock on their own, whatever. when that collapsed, then the real estate bubble. We've already had three bubbles in a row, each one worse than the last, and each one ending with a "jobless recovery," a jobless recovery.

So in 2010, no net jobs had been created since 2000. Jobs had been created, but jobs had been lost. No increase in income. Harry was talking about people have jobs, he knows people who have a lot of jobs - two, three jobs!

[laughter]

Uh, because, that's the reality. To survive, people have got to put things together, because the traditional job - that was a career, was protected, that had a union, was...

So it is in this context of a change in the way capitalism has been globalized, financialized, and, of course, the politics that has gone with that, and the money politics that has gone with that, it puts us in this situation.

So, it is easy to talk about the kind of jobs we need - I suspect everybody at this table can do it. Anybody have any trouble thinking about, uh, how to create jobs? Day care, neighborhood health clinics, uh, re-build all the schools where the kids are in the gymnasium in five groups, split up, because there are no classrooms. Maybe fix the roof because it leaks, or take the asbestos or, whatever, the PCBs out in Staten Island? I mean, there's a lot of stuff we can think of, to make our society, our lives, working people's lives better, and give the people the jobs they need.

So, it is not a question, in my view, of simply coming up with these proposals. I think these proposals are good, but the answer is always: "Ah, but there's no money!" And so, we have to move to why there is no money.

[end part 2]

I have a little graph here – I’ll pass it around, because I know you can’t see it, it’s little – but it’s taxes on the top 1% of Americans, and just to save the suspense…[laughter]…it begins with Kennedy in ’61, you know, where they’re paying up here [holds hand up high]. And the graph goes sort of like that [sweeps hand to the right and down], so that when we get to George W Bush in 2008, they’re paying less than 40%, where the marginal rate was 90% under Kennedy.
Now, things were a lot better in the ‘60s – there was more employment, the growth was faster.

The taxes were higher – our economy was growing much better. Every tax cut has been a slower rate of growth for our economy. That’s because people don’t have money to buy things. You could lend it to them, but after a while people couldn’t borrow and more, and that collapsed.

The graph under it is the percentage of American income going to the top 1% of American households. Again – to save the suspense – you know, they’re doing alright under Kennedy, but MAN are they doing alright under George W. Bush and on into Obama. I’ll pass it around for those of you who like to see graphs.

Where the money is to pay for all of this should be very clear to us. But, there has been the biggest snow job in the history – well, not in the history of the world, we don’t want to claim too much for this thing – but it is truly amazing. Here we’ve got a situation where the reason the government doesn’t have money is that rich people don’t pay taxes – and those are just individual taxes.

Do you know how many corporations are incorporated in the Grand Cayman Islands? There are these three little Grand Cayman Islands that – they’re not very grand, you know? I don’t know how many people live down there, it’s not very much, but there are corporations headquartered there. And when you go to this place, you wonder – where are the headquarters? And if you’re really that naïve, and you ask somebody – I did – they point out this sort of three-story office building, and inside are these little mail boxes. In there is the corporation!

[laughter]

Legally, it’s in that box! And somebody does come around and check the mail. But it’s all done electronically from New York, and Chicago, and Los Angeles, and these guys have never been down there, you know. On vacation, maybe. But – they don’t pay taxes, because they’re incorporated there. And there’s no public disclosure. And the government does not cooperate when foreign governments – namely ours – asks them questions about these people.

Well, that’s one tax haven, but it’s the fifth largest money center in the world. So we have a situation that’s not just…

[to the person next to him, regarding the graphs] Stop slobbering over it and pass it along!

[laughter]

It’s not just the very rich, and among these very rich are more and more Wall Street people, hedge fund people. There are 25 hedge fund people who made over a billion dollars last year. A billion. You know, and a lot made hundreds of millions. And the ones that are paying – the hedge funds, of course, are a little box in the Bahamas – they don’t pay income taxes, they pay “carried interest” to the United States, paying a fraction of what we pay in our income tax. You may think you’re cheating the government like crazy, but you have no idea about tax avoidance ‘til you’ve seen transfer payments by corporations.

So that Apple, Apple has a postage box somewhere – I’m not sure it’s in the Grand Cayman Islands – that owns all its intellectual property. It buys it from them, and pays them money. But it doesn’t have much money left over after paying for the intellectual property. And of course, the little subsidiary that owns the intellectual property, they don’t pay taxes to anybody!

So we have a situation where trans-national corporations have just – we could go all night on the various ways they don’t pay taxes – and, of course, the rich individuals don’t pay taxes. That leaves [gestures] Bill, and, of course, the rest of us.

So we have a situation where the government supposedly has no money. First, because it bailed out the banks and all that, but – and here I want to be careful, because the banks have all paid back the money they’ve borrowed. They paid it back because government would lend them as much money as they wanted, to buy and sell on the market, make lots of money – their trading profits are huge, as the market’s come up they’ve made out like bandits – and they paid nothing to borrow the money. Interest rates are just about zero.

Retired folks – who were counting on the money they saved, a lot of which is in, you know, IRAs and stuff because they don’t trust the stock market any more – are getting nothing. So in their retirement, when they thought they could count on their 4%, and they could get by – they’re really in a bad way. Anybody who is trying to save now is crazy, right, because you don’t earn anything.

We have this situation where the money is there, we just can’t get at it under the current rules.
The other things, of course, Barry was talking about war, and I don’t think we want to forget that, that the military expenditures have gone up 50% since 2001. The vast increase in military spending of wars of choice in Iraq and Afghanistan, um, cost an incredible amount of money.

They cost in lives, and they cost in dollars. Every time one of those plains drops a quote smart bomb and wipes out a wedding party somewhere, um, that is a huge amount of money, as well as making enemies for us all over the Middle East, insuring that there will be an eternal war on those folks. Obama has the grace not to call it the “war on terrorism” any more, but it has created terrorists all over the place. And if you thought for 5 minutes, if you lived over there and watched what was happening, then you, of course, would be fighting the United States, too. And for Americans not to understand that…

But, we have – and I don’t want to do too much on that – we cannot forget the drain of the military, as well as – Barry also pointed out – on environmental grounds, the military, uh, one of those guys flying around for twenty minutes undoes the good that all those of us who try to think about the environment, you know, in our personal lives, uh, try and change what we all do. So, that’s one thing.

And, of course, the tax cuts, under Bush, to the rich, that Obama’s anti-recession, uh, big stimulus, is really a drop in the bucket. Government spending to counter the recession is tiny compared to what is needed, and is tiny compared to the other things that are taking money from us.

I want to say just a few other things about Medicare, Social Security, and then I’ll stop and we can get into discussion and questions.

The attack on Social Security is the same attack we’ve had since it was introduced in the ‘30s. Social Security is not a problem. With very small changes, it’s good for the next 75 years. We could talk about raising – you know you only pay up to, now, $106 thousand in income – raise that a bit, the problem goes away. You don’t want to have to make people work longer, cut their programs. It’s basically a very sound system. Social Security is not in trouble, and I brought some numbers if you want.

Health Care IS [in trouble]. Not Medicare, Medicare actually offers, or Medicaid. Medicare, which is what they’re going after, is expensive only because American health care costs twice as much as anybody else’s healthcare. Medicare itself is much more efficient that private health plans. It is a very efficient program. It is not a costly program on a per-person basis compared to private health care. The problem is the rate at which health care costs go up in this country, because of our free enterprise healthcare system. If we would adopt – take your pick – the French, the German, the Suisse, the Canadian, ANYBODY’s, and there’s no more health-care problem, because you’re now doing a, uh, reasonable level.

So, for them to – here’s the way I want it: These son-of-a-bitches caused this incredible crisis, which everybody says is the worst since the Great Depression, which is now over for corporations and banks, just not for the rest of us. It has bankrupted the government which bailed them out, and their tax revenues went down, because people were out of work and all the rest of it, and because of this tremendous tax evasion.

The government always, ALWAYS, runs a larger financial deficit after a financial crisis. There is a book – a very famous book – written by these two professors. They go back 800 years of financial crisis. The book is called, I think it’s called, It’s Different This Time. [laughter] But it’s always the same! Which is, [laughter] One of the statistics in the book is: in modern financial crises, government debt goes up, on average, 86% after a financial crisis.

There’s nothing unique about this increase in government debt. It always happens! But the change in conversation, from the destruction done by Wall Street and the financial system, to Social Security and Welfare and Big Government spending, has been an amazing snow-job.

Retired people didn’t cause this crisis. Union pension funds didn’t cause it. State officials did, by not putting money away – they’re still saying their pension funds get 8% a year, if anybody knows how to get 8% of my savings, please tell me, right?

And it was collusion between trade union people and the local officials, uh, to hold down labor costs in the current period, to hold down taxes, they gave more generous retirement benefits, and workers understood this that they would be getting it, and now it’s being taken away because, uh , because the money wasn’t put in for it, and the economy collapsed and all the rest of it, bringing the attack on the public sector.

The attack on the public sector is saying: “Hey, we in the private sector, we’ve lost our pensions, we’ve lost our jobs, hey you fuckers still have jobs and pensions! That’s not fair! You should live in the street like the rest of us.” No, you should have jobs and pensions, and we should, and the working class should live decently in the richest country in the world, and not be betrayed by its capitalist class, that has done this to us, and put us in this situation.

So, all of this is important to understand, rather than to talk about – I love the blue-green alliance stuff, you know, and solar panels, and there are very useful ways that would help the environment and would create jobs in America. It’s not happening, because the solar groups we’ve had are moving to China, because the Chinese give them a better deal – they lend them the money to set up the plant, they give them the water, the electricity – the kind of things the TVA [Tennessee Valley Authority] did in this country. The kind of thing Alexander Hamilton set up.

So that the country – and this is sort of the final point – is, uh, there was a, Fred, uh, UE cartoonist…

[from the audience]: Fred Wright.

Fred Wright, the wonderful cartoonist. “So long, partner” - you know [it]? Where the American jobs are going…he had that, what, 20, 30 years ago. You know, what American capital has done to us. So that until this is seen in class terms – which I know is no surprise to you – but until we are much louder and clearer, on our politics. Because most Americans can see this: you spend 10 minutes with most people, they get it. And this has got to be translated into a political movement. And, of course, disillusionment with Obama doesn’t help anything, but if people understand WHY that took place, and if you were Obama, you’d be doing everything he’s doing.

[from Bill’s left]: Say that again.

[Turning left] If YOU WERE Obama, you would be doing everything he’s doing.

[Towards group] It’s overdetermined. Either, he’s shot, as soon as he does the kind of stuff you would do, the rest of the Democratic Party starts yelling at him “We’re all going to lose the next election, cut this shit out!” Right? And, of course, he doesn’t get re-elected, and all that. And the Republican [unintelligible] would say such horrible stuff, that yes, EVEN YOU would not take the principled stand and see all those things happen. Because there’s not a movement, forcing you to do it, and aware voters supporting you in doing it. So that limits what you could do, or you could do, or you could do, if you were Obama at this point.

But it’s this – and I’ll just maybe stop there – but it’s this larger contest, and how we deal with it, rather than narrow, you know, very good job proposals . Those are important, because they show what we need and what we could do, but we also show why we don’t have it, and what we need to get it.

Thanks very much.

[applause]

[end talk, discussion un-transcribed but part one ins in video above]

Montgomery- Fall of the House of Labor (1987) DIGEST

2011-01-11T21:26:00.001-08:00

THE CRISIS OF COMPETITVE CAPITALISM, 1870-1900
by David Montgomery
Excerpted from The Fall of the House of Labor (Cambridge 1987) p. 44-57
DIGEST PRODUCED FOR TUSG.ORG
The long upswing of American industrial growth in the nineteenth century had different characteristics before and after the depression of the 1870s. Before that decade lay the formative years of the American working class. The ranks of wage laborers had grown hand in hand with rapid accumulation of capital for more than half a century to the point that they represented more than half of those counted by the census of 1870 as gainfully employed. Per capita output had also grown steadily, at least since the 1830s. The 1850s had represented something of a nodal point in this growth: along with the iron ship, the telegraph, and the consolidation of railroad trunk lines, that decade had brought aggressive working-class activity in both economic and political life and had closed with America's achievement of second place in manufacturing output among the nations of the world and a genuine industrial depression. After the early 1870S, industrial growth continued, but at a more erratic tempo. On the one hand, the web of commodity markets and wage labor spread from its source in the Northeast to all but the most remote corners of the land. Steel rails and ubiquitous telegraph wires were the web's visible fibers. Within its domain the number of nonagricultural wage earners increased more than twice as rapidly as the country's population. On the other hand, economic crises appearing in ever shorter intervals, and major depressions only twenty years apart (1873 and 1893), dried up the source of wages for millions of people. Although manufacturing output continued to rise, the rate of growth slowed after 1870, selling prices fell quite steadily, and the resulting downward pressure on profit margins generated, simultaneously, a record rate of business failures in the 1880s, the consolidation of large-scale enterprises, and chronic conflict between employers and workers over the costs of production.
These developments marked the end of the era of competitive industrial capitalism in America. Experiments with business consolidation, with overseas markets for products and investment, with the use of laborers from peasant communities outside the world's industrialized zones and with more systematic management of workers and work relations (all of which were evident in the example of the steelworkers) were previews of a new stage of industrial development that was to mature rapidly after the depression of the 1890s. The amalgamation struggle of the iron and steel craftsmen and Michael McGovern's poetry belong to the final, spasmodic phase of industrial development on the basis of highly competitive capitalist relationships. The character of that period's labor movement was indelibly stamped by the spastic, deflationary character of its economic growth and by the variety of conditions under which different groups of wage earners turned out and distributed its industrial wares.
Between the years 1870 and 1910] the number of manual wage earners in industry rose by 301 percent during these four decades [from approximately 3.5 million to 14.2 million], at a time when the population increased by only 132 percent. Moreover, there were many wage earners not included in these figures at all. In 1870, for example, female domestic servants (902,000) outnumbered construction workers, and by 1910 male and female clerical workers (1,718,500) were more numerous than metalworkers. The point here is simply that the rising output of the century's last decades was fed by the entry of millions of new production workers especially into building construction, metalworking, clothing and textile manufacture, mining, and railroading.
Even more important, all this influx of new wage earners failed to sustain the high rate of growth enjoyed by American industry between the 1830S and the 1870s.[1] Above all else, the boom periods became shorter and the recessions more frequent than they had been before the 1870s. All this does not mean that the United States was experiencing prolonged depression of the sort England suffered between the 1870S and the 1890s. On the contrary, expansion still characterized American industry, and, as Brinley Thomas has argued, both capital and labor moved steadily and massively from Britain to America during these years, so that for the Atlantic economy as a whole, there was no "long depression."
Two points are important here: First, in this final stage in the development of competitive industrial capitalism, ever larger inputs of human toil failed to generate corresponding increases in output. Second, chronic deflation and staggering cycles of boom and bust forced employers to undertake an intensive search for labor that was cheaper and could be more tightly controlled. In that quest they encountered a working class that was becoming not only steadily larger but also more articulate and self-assertive.
It is important to note, however, that those workers still toiled in a variety of settings. Important though factories employing hundreds or thousands of workers were during the late nineteenth century, only a minority of wage earners labored in them. Artisan production existed alongside outwork, sweatshops, and manufacturies.[2]
It was the capital-intensive industries, however, that had the nation's highest rates of growth in the number of workers they employed. The new recruits to the army of labor fed not only a proliferation of small firms but also the new giant enterprises, whose hegemony was unmistakable after the crisis of the 1890s. In the midst of protracted deflation of the century's last decades, entrepreneurs in these industries were creating the firms of the future: consolidating their control over workers in a wide variety of related activities, experimenting with new ways of subordinating those workers directly to management's control, and thus inserting themselves into the front lines in the confrontation with workers' control.
The chemical and oil industries led the way the development of continuous-flow processes. Raising capital, driving out competitors, and distributing the products of high-volume technology were the greatest challenges facing these employers. Their manual workers were almost exclusively common laborers, and such challenges from crafts as the coopers posed in turning out the industries' barrels were ruthlessly overcome as early as the I870S by Standard Oil's smashing of the coopers' union.
Quite different was the case of the railroads. They were the first of the giant enterprises. In the mid-I870S, when Cambria Iron's four thousand employees made it the country's largest manufacturing firm, the Pennsylvania Railroad and its affiliated lines had between fifty thousand and fifty-five thousand wage earners, managed by one thousand officials. Railroads pioneered in the development of management by salaried officials (rather than by the owners personally), as well as in alliances with investment banks to raise the funds needed for building seventy-five thousand new miles of track in the 1880s. The intervention of investment houses in the affairs of bankrupt lines established the pattern of consolidating competing firms, a practice that spread to many industries during the I890s. Moreover, railroad companies promoted standardization of equipment, gauges, accounting methods, and even the time of day (through zones of uniform standard time, established in 1883).
Slowly and unevenly until 1894, rapidly thereafter, railroad managers introduced centralized payroll and discharge lists, personnel records with all infractions of discipline noted, contributory accident insurance, and cooperation among lines to defeat strikes and to standardize wages. As was the case in steel, the systematic personnel policies of the railroads were forged in the furnace of industrial conflict and ultimately were made possible by the decisive intervention of the government in suppression of strikes.
Major metalworking firms, like Philadelphia's Baldwin Locomotive Company, usually were linked to railroad building in the late nineteenth century just as tightly as the steel industry was. But two other groups of large metal firms had appeared by the end of the I880s. One group included the builders of intricate-machinery such as harvesting machines or sewing machines, which needed a widespread network of sales and repair people if they were to be used by hundreds of thousands of individual customers.[3] The second group is typified by the electrical industry, which saw its competing firms quickly consolidated by investment houses, and tightly linked to all levels of government, because they needed capital and franchises to create customers. Power stations, transmission lines, street railways, and urban electrification were all public projects. State capitalism created the markets; productive capacity, concentrated in large modern plants, followed.
Such metalworking industries, together with the machine-tool industry, which remained in relatively small firms, selling to larger ones, could not introduce continuous-flow processes. Metalworking firms did not enjoy economies of scale. Quite small plants were the most efficient. Large and small alike were hopelessly dependent on the skills of labor, in a multitude of different crafts.
This was the domain of the most bitter and protracted struggles the epoch to change work practices, the cradle in which scientific management was born. Here managers sought, first through piecework and inside contracting, to induce "each workman to use his best endeavors, his skill, his ingenuity, and his goodwill - in a word, his 'initiative,' so as to yield the largest possible return to his employer," and subsequently, through standardization of the tasks themselves, to eliminate reliance on the workers' initiative altogether.
Finally, it is important to note the continuing importance of textiles and clothing, mining, and construction. The first of these was the classic habitat of the machine tender. In 1870, cotton goods and worsted goods led all other industries in the average number of workers per plant. Although unions had little staying power in the industry (outside of Fall River, Massachusetts), they were often formed, and strikes were numerous. By way of contrast, the manufacture of clothing was a citadel of outwork and the sweatshop. Factory production grew in several cities (often simply by bringing subcontracting practices indoors) without expelling the older forms. Despite major strikes against the subcontracting system, especially in the 1880s, and despite some growth of factory production, the production of clothing remained subject to uncontrolled, labor-intensive competition past the end of the century.
Building construction and coal mining also remained labor-intensive and fiercely competitive. Although the building trades went through many changes, as standardized wood, metal, and plumbing parts were made in factories, steel girders and electrical power transformed downtown buildings, and speculative contractors began to erect large tracts of uniform housing, the swelling volume of construction was brought about largely by putting hammers, saws, and trowels into the hands of more and more men. In no other industrial country was so large a proportion of the working class made up of building workers. Similarly, despite the introduction of undercutting machinery, especially in the Midwest, the soaring demand for coal was met here, as in Europe, basically by putting ever growing numbers of men underground at the coal face. In fact, it was only after 1920 that the combined impact of rival fuels and mine mechanization reversed the upward spiral in the employment of coal diggers. Construction workers and coal miners together constituted half of the country's union members by the first decade of the twentieth century. Their activities decisively shaped the house of labor, particularly its response to business consolidation and management reform after the 1890s.
These workers, whose numbers were growing so remarkably as competitive industrial capitalism entered its crisis decades, are the historical actors to be examined in the chapters to come. The patterns of struggle found in the iron and steel industry reveal much about late-nineteenth-century craftsmen, but they do not explain all labor activism by any means. Common laborers, factory operatives, and skilled workers in other industries generated their own distinctive challenges to employers' authority during these years. On occasion, workers of all three types acted together, if no in unison. Both their separate initiatives and their concerted class struggles profoundly influenced the responses of industrial managers and government officials to the declining rate of capital accumulation.

[1] According to the calculations of David Gordon, Richard Edwards, and Michael Reich in their book Segmented Work, Divided Workers: The Historical Transformation of Labor in the United States (Cambridge, 1982), industrial output had grown at a rate of 6·5 percent annually between 1839 and 1874, but between 1874 and 1899 the rate slowed somewhat to 5.5 percent. Other measures (real gross national product, capital formation, and inventories) showed similar deceleration of growth.

[2] “Manufacturies” gathered workers under one roof and subjected them to a close supervision and detailed division of labor, but used no power to drive machinery other than that of human muscle.

[3] As Alfred D. Chandler has shown, firms that created such networks (competitive capitalism's counterpart to the state's machine tractor stations amid-Soviet collective farms) readily dominated both national and world markets and thus had an outlet for ever expanding productive, capacity.

Harvey- Enigma of Capital DIGEST

2011-01-06T12:06:00.000-08:00

THE ENIGMA OF CAPITAL by David Harvey (Oxford 2010)
DIGEST PRODUCED FOR TUSG.ORG

Capital is the lifeblood that flows through the body politic of all those societies we call capitalist. Understanding capital flow, its winding pathways and the strange logic of its behavior is therefore crucial to our understanding of the conditions under which we live.

My early seventeenth-century namesake William Harvey is generally credited with being the first person to show correctly and systematically how blood circulated through the human body. It was on this basis that medical research went on to establish how heart attacks and other ailments could seriously impair, if not terminate, the life force within the human body.

In trying to deal with serious tremors in the heart of the body politic, our economists, business leaders and political policy makers have, in the absence of any conception of the systematic nature of capital flow, either revived ancient practices or applied postmodern conceptions and sophisticated mathematical models.

In this book, I attempt to restore some understanding of what the flow of capital is all about. If we can achieve a better understanding of the disruptions and destruction to which we are all now exposed, we might begin to know what to do about it.

THE DISRUPTION

Something ominous began to happen in the U.S. in 2006. The rate of foreclosures on housing in low income areas of older cities like Cleveland and Detroit suddenly leapt upwards. But officialdom and the media took no notice because the people affected were mainly African-American, immigrant (Latino) or women single-headed households. Once again, as happened during the HIV/AIDS pandemic that surged during the Regan administration, the ultimate human and financial cost to society of not heeding clear warning signs because of collective lack of concern for, and prejudice against, those first in the firing line was to be incalculable.

It was only in mid-2007, when the foreclosure wave hit the white middle class in hitherto booming and significantly Republican urban and suburban areas in the US south (particularly Florida) and west (California, Arizona and Nevada), that officialdom started to take notice and the mainstream press began to comment.

By the end of 2007, nearly 2 million people had lost their homes and 4 million more were thought to be in danger of foreclosure. Housing values plummeted almost everywhere across the US and many households found themselves owing more on their houses than they were worth. This set in motion a downward spiral of foreclosures that depressed housing values even further.

By the autumn of 2008 the ‘subprime mortgage crisis,’ as it came to be called, had led to the demise of all the major Wall Street investment banks, through change of status, forced mergers or bankruptcy. The day the investment bank Lehman Brothers went under – September 15, 2008 – was a defining moment.

Global credit markets froze, as did most lending worldwide. Near-fatal tremors had also spread outwards from banking to the major holders of mortgage debt, and by early 2009 the export-let industrialization model that had generated such spectacular growth in east and south-east Asia was contracting at an alarming rate. Global unemployment surged. It became clearer and clearer that only a massive government bail-out could work to restore confidence in the financial system.

Shortly after Lehman’s bankruptcy, a few Treasury officials and bankers including the Treasury Secretary, who was a past president of Goldman Sachs, and the present CEO of Goldman, emerged from a conference room with a three-page document demanding a $700 billion bail-out of the banking system while threatening Armageddon in the markets. It seemed like Wall Street had launched a financial coup against the government and the people of the United States. A few weeks later, Congress and then President George Bush caved in and the money was sent flooding off.

But credit markets remained frozen. A world that had earlier appeared to be ‘awash with surplus liquidity’ (as the IMF frequently reported) suddenly found itself short on cash and awash with surplus houses, surplus offices and shopping malls, surplus productive capacity and even more surplus labor than before.

By the end of 2008, all segments of the US economy were in deep trouble. Effective demand imploded, retail sales plunged, housing construction ceased, and unemployment rose to startling rates. Many traditional icons of US industry, such as General Motors, moved closer to bankruptcy, and a temporary bail-out of Detroit auto companies had to be organized. The British economy was in equally serious difficulty, and the European Union was impacted, though unevenly, with Spain and Ireland along with several of the eastern European states which had recently joined the Union most seriously affected. Iceland, whose banks had speculated in these financial markets, went totally bankrupt.

By spring of 2009, the International Monetary Fund was estimating that over $50 trillion of asset values worldwide (roughly equal to the value of one year’s total global output of goods and services) had been destroyed. The US Federal Reserve estimated an $11 trillion loss of asset values for US households in 2008 alone. By then, also, the World Bank was predicting the first year of negative growth in the global economy since 1945.

This was, undoubtedly, the mother of all crises. Yet it must also be seen as the culmination of a pattern of financial crises that had become both more frequent and deeper over the years since the last big crisis of capitalism in the 1970s and early 1980s. There have been hundreds of financial crises around the world since 1973, compared to very few between 1945 and 1973; and several of these have been property- or urban-development-led. Crises associated with problems in the property markets tend to be more long-lasting than the short sharp crises that occasionally rock stock markets and banking directly.

HOW, THEN, ARE WE TO INTERPRET THE CURRENT MESS?

Financial crises serve to rationalize the irrationalities of capitalism. They typically lead to reconfigurations, new models of development, new spheres of investment and new forms of power. One of the major barriers to sustained capital accumulation in the 1960s was labor. There were scarcities of labor in both Europe and the US. Labor was well organized, reasonably well paid and had political clout.

Capital sought access to cheaper and more docile labor supplies. There were a number of ways to achieve that. One was to encourage immigration. The Immigration and Nationality Act of 1965 abolished national-origin quotas, and allowed US capital access to the global surplus population (before that only Europeans and Caucasians were privileged). In the late 1960s the French government was subsidizing the import of labor from North Africa, the Germans were hauling in the Turks, the Swedes were bringing in the Yugoslavs, and the British were drawing upon inhabitants of their past empire.

Another way was to seek out labor-saving technologies, such as robotization in automobile manufacture, which created unemployment. Some of that happened, but there was a lot of resistance from labor, which insisted upon productivity agreements. The consolidation of monopoly corporate power also weakened the drive to deploy new technologies because higher labor coasts could be passed on to the consumer as higher prices (resulting in steady inflation).

If all that failed then there were people like Ronald Regan, Margaret Thatcher and General Augusto Pinochet waiting in the wings, armed with the neoliberal doctrine, prepared to use state power to crush organized labor.

Capital also had the option to go to where the surplus labor was. Rural women of the global south were incorporated into the workforce everywhere, from Barbados to Bangladesh, from Ciudad Juarez to Dongguan. The result was an increasing feminization of the proletariat, the destruction of ‘traditional’ peasant systems of self-sufficient production and the feminization of poverty worldwide. To top it off, the collapse of communism, dramatically in the ex-Soviet Bloc and gradually in China, then added some 2 billion people to the global wage labor force.
Barriers to trade such as tariffs and quotas were reduced. Above all, a new global financial architecture was created to facilitate the easy international flow of liquid money capital to wherever it could be deployed most profitably. The deregulation of finance that began in the late 1970s accelerated after 1986 and became unstoppable in the 1990s.

Labor availability is not a problem now for capital, and it has not been so for the last 25 years. But disempowered labor means low wages, and impoverished workers do not constitute a vibrant market. Persistent wage repression therefore poses the problem of lack of demand for the expanding output of capitalist corporations. One barrier to capital accumulation – the labor question – is overcome at the expense of creating another – lack of a market.

So how could this second barrier be circumvented?

NEXT TIME: FINANCIALIZATION, FLOATING CURRENCIES, AND THE 3% GLOBAL COMPOUND GROWTH RATE

ORGANIZER'S DIGEST - Stiglitz - Freefall (2010)

2010-12-29T13:36:00.000-08:00

Freefall (2010)
by Joseph Stiglitz
condensed for TUSG.ORG

The only surprise about the economic crisis of 2008 was that it came as a surprise to so many. What was different about this crisis from the multltude that had preceded it during the past quarter century was that this crisis bore a "Made in the USA" label.

The global economy needed ever-increasing consumption to grow; but how could this continue when the incomes of many Americans had been stagnating for so long? Americans came up with an ingenious solution: borrow and consume as if their incomes were growing.

Both borrowers and lenders could feel good about what was happening: borrowers were able to continue their consumption binge, not having to face up to the reality of stagnating and declining incomes, and lenders could enjoy record profits based on ever-increasing fees.

Low interest rates and lax regulations fed the housing bubble.

The economy was out of kilter: two-thirds to three-quarters of the economy (of GDP) was housing related: constructing new houses or buying contents to fill them, or borrowing against old houses to finance consumption.

When the bubble popped, the effects were amplified because banks had created complex products resting on top of the mortgages. Worse still, they had engaged in multibillion-dollar bets with each other around the world.

Global credit markets began to melt down. At that point, America and the world were faced with both a financial crisis and an economic crisis.

The Story in Short: Market Failures

How did it all happen? This is not the way market economies are supposed to work. Something went wrong- badly wrong.

Markets on their own evidently fail- and fail very frequently.

There are many reasons for these failures, but two are particularly germane to the financial sector: "agency" problems and the increased importance of "externalities." When there are important agency problems and externalities, markets typically fail to produce efficient outcomes- contrary to the wide-spread belief in the efficiency of markets.

Agency

The agency problem is a modern one. Modern corporations with their myriad of small shareholders are fundamentally different from family-run enterprises. Scores of people are handling money and making decisions on behalf of (that is, as agents of) others. All along the "agency" chain, concern about performance has been translated into a focus on short-term returns.

In short, there was little or no effective "quality control" on financial dealings. In theory, markets are supposed to provide this discipline. Firms that produce excessively risky products would lose their reputation. Share prices would fall. But this market discipline broke down.

Securitization, the hottest financial products field in the years leading up tot he collapse, provided a textbook example of the risks generated by the new innovations, for it meant that the relationship between lender and borrower was broken. Banks shifted from the "storage business," which had been the traditional business model for banks- originating mortgages and holding on to them- into the "moving business"- where the incentive was to pass on the mortgages as fast as they could to others, usually onto the books of pension funds and others, where the fees were the hightest.

Externalities

In economics, the technical term externality refers to situations where a market exchange imposes costs or benefits on others who aren't party to the exchange. If you are trading on your own account and lose your money, it doesn't really affect anyone else. However, the financial system is now so intertwined and central to the economy that a failure of one large institution can bring down the whole system.

The bankers gave no thought to how dangerous some of the financial instruments were to the rest of us, to the large externalities that were being created. The current failure has affected everyone.

This is one of the rationales for financial market regulation, but after years of concentrated lobbying efforts by the banking industry, the government had not only stripped away existing regulations but also failed to adopt new ones in response to the changing financial landscape.

Today, after the crash, almost everyone says that there is a need for regulation- or at least far more than there was before the crisis. Not having the necessary regulations has cost us plenty: crises would have been less frequent and less costly, and the cost of the regulators and regulations would be a pittance relative to these costs.

In the end, the banks nearly got hoisted by their own petard: The financial instruments that they used to exploit the poor turned against the financial markets and brought them down. When the bubble broke, most of the banks weer left holding enough of the risky securites to threaten their very survival- evidently, they hadn't done as good a job in passing the risk along to others as they had thought.

This is but one of many ironies that have marked the crisis: as a direct result of Greenspan and Bush's attempt to minimize the role of government in the economy, the government has assumed an unprecedented role across a wide swath- becoming the owner of the world's largest automobile company, the largest insurance company, and (had it received in return for what it had given to the banks) some of the largest banks. A country in which socialism is often treated as anathema has socialized risk and intervened in markets in unprecedented ways.

Agency issues and externalities mean that there is a role for government. If it does its job well, there will be fewer accidents, and when the accidents occur, they will be less costly. Every successful economy- every successful society- involves both government and markets. There needs to be a balanced role.

The Big Picture

Underlying all of these symptoms of dysfunction in the United States is a larger truth: the world economy is undergoing seismic shifts. The Great Depression coincided with the decline of U.S. agriculture; indeed, agricultural prices were falling even before the stock market crash of 1929. Increases in agricultural productivity were so great that a small percentage of the population could produce all the food that the country could consume. The transition from an economy based on agriculture to one where manufacturing predominated was not easy.

Today the underlying trend in the United States is the move away from manufacturing and into the service sector. As before, this is partly because of the success in increasing productivity in manufacturing, so that a small fraction of the population can produce all the toys, cars, and TV's that Americans can use.

But in the United States and Europe, there is an additional dimension: globalization, which has meant a shift in the locus of production and comparative advantage to China, India, and other developing countries.

Accompanying this "microeconomic" adjustment are a set of macroeconomic imbalances: U.S. consumption has been financed to a large extent by China and other developing countries that have been producing more than they have been consuming.

While it is natural for some countries to lend to others- some to run trade deficits, others surpluses- the pattern of poor countries lending to the rich is peculiar and the magnitude of the deficits appear unsustainable.

Conversation with Atlas

2010-12-21T10:03:00.001-08:00

Original comment by AtlasHBS in response to: http://www.youtube.com/watch?v=ONv-xrjC9Qg

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I have 3 jobs in Omaha NE. I am an employer. Every dollar I spend on my workers is a dollar I CANT spend on my children, so I am looking for workers that won't cost a ton of money. Every one of those people looks expensive. I heard multiple times it said "good pay rate", and to me that is code for "expensive"

everyone in that vid, and on this board (me included) needs to wake up to one fact. YOU DON"T DESERVE MIDDLE CLASS, get over yourself.

Collect cans, beg, pick crops START OVER.

AtlasHBS 2 months ago

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@AtlasHBS OK- you've raised my curiosity. If I may ask: what industry do you work in?

Just wondering, cause you seem like quite a hard-ass, which I respect in a man of business, but...

I guess it's interesting that you consider yourself judge of those who "deserve middle class"? AND don't view yourself as worthy?

samcalvin47 2 months ago

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@samcalvin47 Service sector (business to business and residential). over the years I have seen all types come and apply for jobs at my company and I will tell you the ONE SINGLE thing that I screen OUT of my hiring pool. People that think they deserve the job or have any kind of "right" to work. I will not hire a person if they have even a HINT of that kind of attitude.

Want a job? learn to be Humble and thankful (not just act, but actually BE). A tall order for any middle class American.

AtlasHBS 2 months ago

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@AtlasHBS

OK I respect where you're coming from- but do you really think our society rewards humility? I see the humble and thankful get mercilessly tread upon all around, while arrogance and greed are rewarded.

Do you disagree?

Out of interest- are you from the U.S.? You've got a tough take on the U.S. middle class, which makes me wonder where you get this perspective.

samcalvin47 2 months ago

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@samcalvin47 I was born into the bottom of the US working class. I struggled to get where I am now, nobody helped (as a matter of fact most of my struggle was against people who now cry about their 99 weeks). I guess I am upper middle class now ( most of my old peers have been bumped down a few notches).

I wasn't saying society will reward the humble. I was saying be humble just to get a job (crappy job) and survive!

When this is all over it will be the survivors who are left standing

AtlasHBS 2 months ago

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@AtlasHBS In what sense do you see your struggle as being "against people who now cry about their 99 weeks"?

In competition for jobs, as an employer, as a taxpayer, or something else?

samcalvin47 2 months ago

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@samcalvin47

as a self employed small business owner

as a taxpayer (99ers are tax consumers not tax payers)

as a human in general (I work so they don't have to)

Starting and running a business is difficult in this country because of the taxes we small businesses have to pay (most don't survive their first 5 years). When I started out I had to lift the heavy burden of paying taxes so the 99ers could enjoy their time off. It wasn't right, it wasn't fair and SHOULDN'T have happened at all.

AtlasHBS 2 months ago

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@AtlasHBS I get being angry about the heavy burden small businesspeople are made to bear. I started my own business too- that's why your comments here resonate with me.

But there are many who benefit from the unjust policies of the government- much more so than an unemployed person trying not to get evicted.

Don't you worry that- if you direct your anger at those who have less than you- people will see you as a coward, like the man who kicks his dog because he can't stand up to his boss?

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samcalvin47

Hi Atlas

Hi Atlas-
I was disappointed to see that you dropped out of the conversation on unemployment benefits. I figured you for a "bitter ender" ;)

I hope you didn't take my comment as a "cheap shot"- I didn't intend it as such!

I would earnestly like to know how you square your admirable qualities of toughness and self-sufficiency with what I see as cowardice- beating up on those who have less than you while much greater villains exist.

I would be truly grateful if you could help me understand your thinking on this subject.

Either way- thank you for your participation in the conversation!

Regards,
Sam

Sent to: atlashbs

Delete

Oct 20, 2010

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AtlasHBS

Re: Hi Atlas

I hadn't heard back from anybody, and I had made my points, so I thought the conversation had ended.

Self sufficiency is the responsibility of every able bodied working adult, and if not it should at least be a goal. as for beating up on those with less than myself I keep in mind some of the fallowing facts.

I don't make enough money to send my kids to collage, they will need to pay on their own or go into heavy debt to go.

I WOULD have had the money if I didn't have to pay 100 - 200 dollars PER MONTH to these squealing rats in unemployment for the last 15 years of my business (roughly $30,000)

My children suffer to pay for the entitlement of others. I work for my pay, it isn't handed to me by the government at the expense of others.

Now as far as the "greater villains" I am not concerned with their fate. I have a house because a banker gave me HIS money on loan. He did me a favor, he is no villain. I use and pay for my loans as I need them and I am responsible for the outcome. If I fall behind the shame is on ME, not the credit card company or the banks. we are not "entitled" to other peoples money on loan, it is a privilege. IF a man moves his factory over to china or India to save his money I don't fault him, I envy him, I wish I could outsource some of MY costs, alas I am stuck (service sector can't move overseas).

The only people I am beating up are the ones who are DIRECTLY TAKING MY RESOURCES.

Atlas

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samcalvin47

Re: Re: Hi Atlas

Thanks for responding- I know it took me a couple of days between posts :)

As far as "greater villains" go, how do you feel about:
1) Monopolies?
2) Government give-aways to corporations?
3) Fraudulent business practices?

Each of these is directly taking your resources, aren't they? Just because there's no line announcing them on your tax forms doesn't make it any less direct, does it?

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AtlasHBS

Re: Re: Hi Atlas

please clarify no. 2. The corporation in question, is it using the govt hand out to help or hurt the economy? Example the govt gives several billion dollars to Lockheed, they give thousands of jobs in return, tons of payroll tax revenue right BACK to the fed, plus the planes and missiles to defend this nation and explore space. another would be fannie may. The govt gave them 124 BILLION dollars, they gave themselves bonuses, but they also kept the housing market alive (wounded badly but alive). I disagreed with that bail out (I say let the market fail, we will rebuild it better next time) but they did it any way, now I try to find the good in the situation.

Monopolies are ANTI capitalism incarnate. They seek to crush all business but their own using threat and intimidation and bribes (Intel vs. AMD). They are illegal, they use lawlessness as a business tool. One of the few legitimate uses of Government is to break them up and shut the down, sadly the govt fails at this (in a country FULL of monopolies name me ONE that Bush or Obama has broken up) That said the remedy is to break them up when they appear, but leave the system open for new start ups to get going (regulate AFTER the crime, not before).

Fraudulent business practices is a pretty big topic, I would need some specifics. The guy that cleans my carpet uses fraud sometimes (suckers me in with a 99 dollar coupon then hits me with a 400 dollar bill after the work is done!) and so does Monsanto ("GMO food - Good for the enviornment, ok for you).

Your last statement hints a the idea that these guys take from me indirectly. I would say with the exeption of taxes (which you know that I love) they don't TAKE from me. I might GIVE them money and resources, but they can't TAKE. Buyer be ware. If we don't like the goods and services they provide, don't buy them. We have choices like shop elsewhere, find an alternative product, make it ourselves, or do without.

The real question is can we do anything about these greater villains. Reagan helped them, so did Bush senior, Clinton handed them all of North America on a silver platter (NAFTA and GAT), Bush Jr. fully activated the secret police and war machine, and Obama is bought and paid for by Wall Street and has give EVERY top White House job to a wall-street banker or Goldman Sacks operative. I honestly think our political system has evil in its heart, it can't be stopped and can barely be slowed down.

Politics is not the answer.

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samcalvin47

Re: Hi Atlas

I would argue that each of these acts take money from your pocket just as directly as the unemployed- and you get far less return.

For instance, monopoly practices on things we need- such as food, housing, or gasoline, cost us a great deal of money in terms of inflated prices. It's not voluntary if you have no real alternative!

To clarify #2: I don't regard all government purchases as "give-aways." As you say, buy a plane from Lockheed and the government gets a plane. But there is a pretty clear line between that and pernicious patterns of "no-bid" contracts, bail-outs, and flat-out cash gifts to corporations.

You're correct that the topic of fraud is a big one. Again, however, I say start from the top. It's clear that major fraud was accomplished by hedge funds in re-packaging sub-prime mortgages, garnering triple-A ratings for them, advising their clients across the globe to buy them, and then profiting from secret bets placed against them.

I think you really cut right to the heart of the issue when you say: "The real question is can we do anything about these greater villains." This tells me (along with your other answers to these questions) that you are a person with actual integrity.

I agree whole-heartedly: this is the real question.

But, I ask: If politics is not the answer, what is?

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AtlasHBS

Re: Re: Hi Atlas

The short answer is "personal responsibility".

Most of the problems we as a nation face are leftover problems from last generations "solutions". If we fix today's problems our solutions will most likely set the stage for the next set of "problems". Most of them are out of the individuals control. But we as Americans want action, so we talk them problems to death all the while ignoring our personal issues.

When a guy has a decent job making $30,000 a year it is his responsibility to set money aside for disasters, personal money problems, car repairs all of that. 10 years the guy has this good job then all of a sudden he is laid off, now a typical American has SPENT all of his money each and every payday, being irresponsible buying ipads, and big screen tv's and furniture. in no time the guys is flat broke and crying about being poor and collecting unemployment. What about the last TEN YEARS? If he had done his job he would be in fine shape.

Credit cards = irresponsible
car loans = irresponsible
mortgage refinance = irresponsible
vacations in the summer but no money in the bank = irresponsible

If a person was more responsible in his personal finances and saved up money to buy a car he can actually afford, greedy car loan companies COULDN'T affect him.

If he payed for his home electronics with cash instead of credit cards greedy corporate thugs couldn't raise his rates suddenly.

If he had 1 mortgage fixed for 30 years, paying extra when he can and resisted the impulse to cash out his equity he would have paid the house off by the time his kids are going into college, thus avoiding the dreaded rate hikes of an Adjustable Rate Mortgage.

Discipline, Self Control and Personal Responsibility are the key that EACH and EVERY one of us can TAKE for ourselves.

Nearly every one of the "too big to solve" problems can be FIXED, NEUTRALIZED, or BYPASSED on a personal one to one level if the individual practices personal responsibility.

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samcalvin47

Re: Hi Atlas

So you think that the "big villains" can be vanquished simply by keeping to yourself?

I think that's horribly naive, and over the long-term a sure road to slavery (or at least serfdom).

Look at it this way: let's say someone established control over a basic necessity of life, for instance water. Everyone would have to pay whatever they demanded for water, right- totally on their terms. No amount of "personal responsibility" would alter the fact that they were given an undue amount of control within society.

This situation does exist- to a meaningful extent- around a modern necessity of life: a job. There is no freely available farmland that we can retreat to for the kind of "keep to myself" subsistence lifestyle you advocate. Collecting cans? How many can that support. Same for begging. Starting even a small business takes capital, something most long-term unemployed have no access to.

Face it: working for someone else is- for the great majority- an absolute necessity. So is the banking/credit system. These institutions can work for the collective good, too, but only if we have the courage to face the "big villains."

What do you think?

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AtlasHBS

Re: Re: Hi Atlas

First off you have put a phrase in my mouth. "keep to yourself" I have not said that. Personal responsibility is what I said. The two are very different.

Keep to yourself implies an attitude of not paying attention, and not engaging the culture we live in. It implies the idea of ignoring problems.

Being responsible for yourself is the opposite. Watch out for predators and stay out of their way (like refusing to refinance even when you would like too). Identifying pitfalls like easy credit, or wanting more than you can afford to buy (with cash of course).

You said "..sure road to slavery" The Bible is very clear that to be in debt IS to be in slavery. Say what you want about the book, and the authors, but I don't want to be in debt bondage to ANYBODY.

We can go back and forth on different issues all day long, I think we need to focus on what we can agree on. Do you think that WE THE PEOPLE are responsible for the foolish deceptions we make, or should we be able to make OTHER people responsible for our mistakes.

If I invest 50,000 dollars in a new business and it fails should I get a Govt handout? My money back? Bailout?

If I invest my employment in a failing business (horse buggy whip maker) should I get a handout? a guaranteed new job? 99 weeks of unemployment benefits?

When do we have to own up to our mistakes? Or should other people have to carry us along when we screw up?

We need the courage to fail. so we can learn and try again.

block user mark as spam

ReplyDelete

Nov 02, 2010

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samcalvin47

Re: Re: Re: Hi Atlas

Again you have not answered the question about cowardice and greater villains. If there are monopolies in control on many parts of the economy- including things which are essential to all people- how does someone avoid being in debt to them without confronting them?

Delete

Nov 07, 2010

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samcalvin47

Re: Re: Re: Re: Hi Atlas

Three ways

1. if you have no debt you have more money. It is better to confront a villian when you have money and means than it is to stand before them broke. (I think we would be able to agree to that point)
2.When you have your own money YOU get to decide what you buy and what you don't. When you live off of debt somebody else decides what you can and can't have. (we call them underwriters, they look at your credit and decide of you can have the car, house, or business equipment you are asking for.)
3.Altered thinking. When you are spending somebody else's money (credit) it warps your thinking and values about what is really important. You start asking questions like "can I afford this" but you already KNOW you can't, that is why you are asking for a loan. Instead of asking "do I need this" you ask questions like "do I WANT this". If you spend your own money things are clearer. When you realize you are blowing YOUR hard earned money on the newest crappy gadget instead of the banks money it clarifies your attitude.

Now I answered your question but I think the question itself is missing the point. We need food, water, shelter, and security. The rest of life are WANTS not needs. There is no food monopoly, or a water monopoly. You and I have hundred of options for shelter. The final need is security, and I am unaware of any corporation providing an air force or navy to fight off the bad guys.

Your internet service is not needed, it is wanted (VERY wanted). An Ipod is not needed, nor is a fancy car (walk, bike, used car, bus, taxi, get a ride from a friend are all options). Food is needed, Mcdonald's is NOT.

Living in America is possible on minimum wage. Living the "American Dream" of a fancy house, and a new car, wearing the latest fashions, and having the latest gadgets. THAT is only possible with Debt or a larger income. Show me a need that a common man must get a loan to have.

Want to fight the Beast, stop asking him for a loan.

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ReplyDelete

Nov 08, 2010

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AtlasHBS

Re: Hi Atlas

What kind of reality testing do you apply to this thinking? You are obviously noy averse to going against the crowd, but how are you sure you're not just chasing a foolish dream?

As far as I'm concerned, the tactics you describe wer shown to be futile in the U.S. by the time of the Great Depression. Those who believed in such a path were forced to capitulate to the banks, and were swept into the cities as jobless destitutes. Whether or not these banks represent monopolies in your view (they doin mine), it can't be denied that they proved themselves both indespensible, powerful, and villainous.

In this light, I see your recommendations as being like a man who, on a sunny day, preaches the corrupting influences of umbrellas!

Delete

Nov 12, 2010

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AtlasHBS

Re: Re: Hi Atlas

If you hate the banks why would you even consider borrowing their money? Are you unable to pay for cars without them? forget the back and forth for a moment, I would like a strait answer on this point. I think using a bank to buy a car is wasteful and irresponsible, save and buy one you can afford. Do you really think that a car is unattainable without a bankers loan?

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Nov 12, 2010

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AtlasHBS

Re: Re: Re: Hi Atlas

I'm not sure I hate banks- I'm just sure I hate the way they're run.

I principle you're right- but only in principle. The circumstances we live in in the U.S. don't really allow. Wouldn't you take out a bank loan if it would let you hang on to your business? If not- then you become just another wage slave. If you do- then you have to answer to higher powers.

My point is this- at some point we all have to answer to the "higher powers" that exist in our society. If the banks don't get you, then the government will! (You asked what monopolies there in effect today- how about the monopoly the government has over extracting taxes!)

If we don't want other people to control us, don't we have to work to disarm or reform these higher powers? Is simply surviving without taking a penny from them a viable or worthwhile goal?

Delete

Nov 14, 2010

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AtlasHBS

Re: Re: Re: Re: Hi Atlas

You didn't answer my last question about cars and car loans.

Please answer on that, then I will talk about your last set of points

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Nov 14, 2010

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AtlasHBS

Re: Re: Re: Re: Re: Hi Atlas

Do I think a car is unattainable without a loan?

For the most part, no.

(And for those people who truly cannot afford a car without a loan, they are unlikely to be eligible for a loan from a bank.)

Delete

Nov 15, 2010

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AtlasHBS

Re: Re: Re: Re: Re: Re: Hi Atlas

I am glad we agree that cars can be had without financing. Cars are the second most expensive item that we Americans use credit for. A ton of money is wasted every year on interest payments for vehicles. When people use money with personal responsibility and good stewardship as a component to their life they are better off. When people get greedy and envious of others cars and go sign up for a loan at the dealership their troubles in life are multiplied and they use up their own personal safety net on instant gratification.

I think that you and I could agree that like cars, credit card purchases (trips to best buy and such) are similarly unnecessary and wasteful of money.

Credit is not needed by the vast majority of Americans.

Credit is WANTED by the vast majority of Americans.

I will address your other message now.

P.S. I know I left out houses, which we will probably not have much common ground on that item so I figured we would save that topic for next time.

Sent to: samcalvin47

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Nov 17, 2010

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AtlasHBS

Re: Re: Re: Re: Hi Atlas

I am going to respond to your message point by point.

"I'm not sure I hate banks- I'm just sure I hate the way they're run."
I dislike banks and don't like how they are run, but I just avoid them so it's really not my problem.

"I principle you're right- but only in principle. The circumstances we live in in the U.S. don't really allow. "
We dealt with this in our last set of emails. Your mistaken, you can have a car, you can have consumer goods, and you can live without credit and the banks. (houses are a bit different but that will be our next topic) The system does allow for good judgment and not having banks run your life.

"Wouldn't you take out a bank loan if it would let you hang on to your business?"
This is a straw man argument, if you run your business right you don't need the loan. If you can't survive without the loan then you should be out of business because you have bad judgment.

"If not- then you become just another wage slave. If you do- then you have to answer to higher powers."
this is a false dichotomy fallacy, it implies that there are only two possibilities when in fact there are many (actually a straw-man,false dichotomy double fallacy to be exact)

"My point is this- at some point we all have to answer to the "higher powers" that exist in our society. If the banks don't get you, then the government will! (You asked what monopolies there in effect today- how about the monopoly the government has over extracting taxes!)"
I have dealt with the "banks running your life" issue They are powerless if you keep them out of your life, and you CAN do that. Govt taxing reform is necessary (Govt spending reform must come first though)

"If we don't want other people to control us, don't we have to work to disarm or reform these higher powers?"
Keep the banks and their loans out of your life and they are disarmed. Reform becomes irrelevant and unnecessary.

"Is simply surviving without taking a penny from them a viable or worthwhile goal?"
Another false dichotomy fallacy. Living without credit is easier and cheaper than living with it, it isn't "simply surviving". Not taking their rotten loans IS viable and it IS VERY worthwhile. Living on credit is the most expensive way to live.

In the end we all have choices to make, when we make good choices we are rewarded, and when we make poor choices we suffer. Banks, monopolies, and even governments are all bad but clearly WE are our own worst enemy. Taking responsibility for ourselves MUST be the first step if winning against these forces, for it is THERE that the battle will be won or lost.

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Nov 17, 2010

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AtlasHBS

Re: Hi Atlas

Lot of straw men to beat down ;)

What our country learned during the Depression is that the market subjects us to absolute but potentially irrational forces. Farmers- who had been "running their businesses well"- found that they were unable to subsist when prices for farm products plunged. For individual farmers, the answer was to produce more- but this further depressed prices.

Eventually, millions were forced to take loans to survive, and when that failed, they lost their farms. They became jobless migrants, who flooded the cities- exacerbating the unemployment crisis there.

Those were exceptional times. There have been many years since then when all the things you say were basically true- if you ran your business well, you could prosper.

But I fear that we are heading into "irrational" times again- and that no amount of personal responsibility will protect us.

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Nov 24, 2010

UI and job-seeking behavior

2010-12-09T09:54:00.001-08:00

In response to: http://www.ourfuture.org/blog-entry/2010124907/nothing-99ers-and-not-much-anyone-else#comment-13378

In part informed by: http://www.philadelphiafed.org/research-and-data/economists/fujita/economic-effects-of-unemployment-insurance.pdf

I think you're missing the key point here- "99ers" do not collect benefits. That's the whole point of the term! So when you say 99ers are unemployed by choice because they're getting benefits you're confounding the issue.

You are right, however, that we have to be careful not to be "blind" in the way we look at this issue. Many folks on both left and right form their opinions by either extrapolating from anecdotes or inventing from whole cloth on the basis of axiomatic certainties.

There are three distinct effects of UI benefits on job-seeking- and job-taking- behavior, roughly divided into different phases of unemployment. These need to be examined and dealt with separately and not lumped together.

First is the effect on those in short stints of unemployment. Might someone who can collect benefits "coast" for a month or two before seriously setting themselves to find a job? Certainly. If they are fairly certain they can find work, might they be overly "choosy" and reject jobs that contain an element of difficult compromise? Of course.

This effect is limited, however. With average benefits of $300/week, most people run through discretionary cash reserves within a few months. For people with very few obligations (no children, no mortgage, etc) or larger-than-average savings, this period might be longer.

This type of pay-out is good for the economy in the short term (ie keeps people spending), but does involve a moral hazard. Still, thought the amount of UI which goes towards this kind of "hand-out" is not insignificant, it is nowhere near the majority of UI, and is less and less of the total as a joblessness crisis lengthens and deepens. Still, there may be ways to effectively "weed out" these payments- such as means-testing benefits. In terms of actual savings, however, the cost of installing a system to means-test probably doesn't make sense. If it would be reassuring in terms of the moral hazard, however, by definition it doesn’t do any real harm to the unemployed.

The second effect of UI benefits is the "hold-out" effect- the refusal of job-seekers to take jobs which would substantially lower standards of wages/salary or make difficult transitions (eg moving, splitting up a family, changing to a new field of work). Even once a job-seeker is “seriously” looking for work, UI benefits allow job-seekers to resist taking "bad deals." The benefits to society of such choices are mixed- and there is legitimate room for disagreement. On the one hand, liberals may overly “coddle” those people who have difficulty making hard choices or needed changes. At the same time, conservatives tend to underestimate the value to society of protecting established ways of life and higher-productivity jobs. Not all disruptions are productive- keeping a community intact through a “job drought” does have benefits. I’m suspicious of people who take too much pleasure in contemplating the pain being inflicted on “comfortable” middle-class folks by forced adaptation to “the market.” There is also a more-or-less acknowledged favoritism towards employers over employees - high unemployment allows employers to lower pay for the same job, with dubious benefits to society. Allowing people to “hold out” against such devaluations may be an additional positive benefit. (Note, too, that the hold-out effects overlap with the moral hazard effect in a non-mutually-exclusive way- that turning down job offers in a way which might be regarded as personally irresponsible could also benefit society).

The third effect is that UI benefits keep the unemployed in the labor force. This is the primary consideration which needs to be weighed when looking at the long-term unemployed. Studies which claim to show a large “moral hazard” effect on extending long-term benefits typically measure “exit” from unemployment in the period after benefit exhaustion- but this “exit” includes people who simply drop out of the labor force! On the other hand, studies which analyze whether or not UI benefits meaningfully change the rate of job-taking for the long-term unemployed find that they do not. Keeping people in the labor force is a major good for society, both because drop-outs have a good chance end up on government rolls anyway through either disability, welfare, etc payments, and because any reduction in the labor force constrains future economic growth.

Next up: Where does all this leave the 99ers?

FBook recap: "a decade of decline"

2010-11-18T10:33:00.000-08:00

Sam Calvin Good Analysis of new census figures: "Our new century has begun, as Harvard economist Lawrence Katz noted
after the new Census figures appeared, with a 'decade of decline.'
And this decade of decline comes after a generation
of income stagnation."

One Decade Down, One Decade Wasted | OurFuture.org

www.ourfuture.org

Home Feature Box: The 21st century has opened with a decade that has seen the vast majority of Americans go backwards economically. Just-released Census stats tell that tale — but not the whole income story. The 21st century has opened

Sam Calvin

Updated 07.15.10, The Decline: The Geography of a Recession by LaToya Egwuekwe (OFFICIAL)

www.youtube.com

According to the U.S. Department of Labor's Bureau of Labor Statistics, there are nearly 31 million people currently unemployed -- that's including those involuntarily working parttime and those who want a job, but have given up on trying to find one. In the face of the worst economic upheaval since...

2010-11-18T10:27:00.001-08:00

Sam Calvin Fascinating chart- the top bar is the actual wealth distribution by quintile (the wealthiest 20% hold more than 80% of the wealth while the bottom 40% hold nothing), the middle bar is what people estimate the distribution is, and the bottom is what people believe a just society would look like (the wealthiest hold just over 30%). Even those IN THE TOP income groups think society's wealth is far more equally distributed than it actually is, and believe that society should RIGHTLY be even fairer than that!

Estimates of Wealth Distribution Are Widely Wrong | The Big Picture

shar.es

I've been meaning to get to this chart for some time, so I am glad Good reminded me to: The actual United States wealth distribution plotted against the

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Conversation with Atlas

samcalvin47

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UI and job-seeking behavior

FBook recap: "a decade of decline"

Sam Calvin Good Analysis of new census figures: "Our new century has begun, as Harvard economist Lawrence Katz notedafter the new Census figures appeared, with a 'decade of decline.'And this decade of decline comes after a generationof income stagnation."

Sam Calvin

Sam Calvin Good Analysis of new census figures: "Our new century has begun, as Harvard economist Lawrence Katz noted
after the new Census figures appeared, with a 'decade of decline.'
And this decade of decline comes after a generation
of income stagnation."