Tag Archives: labor

The American Economy, part 2

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The American Economy, part 2

Following up on last week’s post–

We are all inheritors of the labor movement

Another fundamental of the U.S. economy is one that we have had for more than fifty years: We are all living on a gigantic store of assets, workplace conditions and industries produced by the American labor movement from the 1930s through the 1970s. This fundamental fact remains even in the historic economic slump from the mortgage-derivatives debacle. Despite the decline of labor unions and despite even the unthinkable wealth disparity between top and bottom in our economy, our middle class is still living on residuals of wealth and productivity from the earlier labor movement. The ‘boomerang’ phenomenon—young adults moving back in with their parents, because their parents have houses with space for them to live in—is only the most obvious example. This fundamental is not just a matter of inheritance in the limited literal sense of inheriting the parental house, a car or two and whatever is left in the family’s checking and savings accounts, etc., after end-of-life medical bills. It is a matter of being able to go to work with a reasonable expectation of a paycheck, a defined workday and a defined workweek with a weekend or other days off. It includes extensive nationwide use of ports, highways, public schools and public services that we tend to take for granted. And it is a matter of successful social programs brought about by the New Deal and the fight of the labor movement on behalf of the middle class—Social Security and Medicaid, which moved America’s elderly population out of the poverty column from the middle of the twentieth century onward. And it includes an incalculable amount of intellectual capital, much being donated or at best going for under market value in the nation’s universities, mass media and publishing.

Post-war housing

The amount of wealth that the majority of ordinary people have inherited from past labor becomes clearer when one thinks about inheritance in the more limited sense, as in housing and the giant second-hand market in the U.S. The overwhelming majority of individuals post-World War II in this country did not grow up thinking of themselves as heirs and heiresses. The exceptions who did grow up thinking of themselves that way—figuring out how much they stood to inherit in due course—did not necessarily benefit from the perception. It can be a disincentive to good work. Nonetheless, the amount of wealth being quietly passed along by inheritance, one way or another, to people not yet senior-citizen age in this country is staggering. It isn’t written about much—most people don’t want to talk about it, for reasons ranging from grief and mourning to simple self-protection—but it is one of the reasons why so much of the American middle class can make ends meet even in a time when this country’s wealth inequality approaches that of Sri Lanka.

 

Two-carat diamond engagement ring

Some specific examples of inheritance in the limited sense, in order of generally ascending value:

  • House contents. Admittedly, a stack of empty plastic margarine containers for left-over food—hoarded by thrifty post-war parents to keep from having to buy that expensive Tupperware—may not look like a treasure trove. But the total cost of all the tools, kitchen and garden supplies, clothing, furniture and ‘miscellaneous household’ would mount up fast if purchased simultaneously, even in big-box discount chain stores. People who inherit a household of items keep them, give them to younger relatives, sell them–on eBay, at yard sales, or at auction–or donate them to charity. The thrift stores in metro areas burgeon with aids to social mobility for legal immigrants and others less likely to have inherited the equivalent supplies. As with yard sales, auctions and sometimes eBay, marginalized buyers are getting the most price-elastic goods at a discount. And an additional benefit of Keep using, Re-use, Recycle is, of course, that it keeps the stuff out of landfills. As in the household Tip O’Neill grew up in, described by Jimmy Breslin in How the Good Guys Finally Won, nothing goes to waste.
  • With some exceptions such as unsafe baby beds, house contents are the innocuous, Mamsie-Pepper side of inheritance. Diamonds are pretty much the obverse side of inheritance. Let’s note first that most diamonds are not very valuable. Any diamond less than a quarter of a carat should not cost much, and the price of a piece of jewelry set with many tiny diamonds—under 0.25 carat each—should reflect only a multiple of that individual price, skilled labor and the gold aside. Even with larger diamonds, the wholesale price is going to reflect the quality of the stone, meaning clarity and color (colorlessness), and the overwhelming majority of diamonds are not D-E VVS-IF; nowhere near. That said, someone with a solitaire diamond purchased more than five years ago—let alone thirty or more years ago–might have an asset, if s/he can get it graded accurately–not ‘appraised’, but graded for color, clarity, cut and weight. Two- or three-carat diamonds of top color and clarity are going for astronomical prices, bigger ones for even more. Regardless of whether diamonds are ‘the new gold’, as the New York Times recently suggested, good solitaires have near-immediate cash value. I am intrigued that seemingly few banks and other mortgage lenders have taken them in exchange for a mortgage balance. A six-figure diamond has got to be worth more than a risky outstanding loan (lender), and switching the genuine article with a good simulant or a white sapphire seems like a small price to pay for getting out of debt (borrower). Maybe it’s happening and they’re not talking about it.
  • Houses and land are among the most obvious inheritable assets, and tend to be written about the most comprehensively. Many articles are published in the business press, in consumer blogs, and elsewhere about the pitfalls in inheriting a house, the possible tax liability—not large, for most people—or about options for what to do with an inherited house. A modest house in a post-war tract development is not the immense treasure that many people may have imagined during the housing boom. But if the house is sellable at all, given condition and neighborhood, obviously it can generate cash to offset a car purchase, college tuition, etc., or to build a rainy-day fund. A bigger windfall could pay down or pay off descendants’ mortgages—nothing to sneeze at, if you value your health and would benefit from reducing stress in your life. Multiply that by a few million, and you’ve got something with real impact.
  • Life insurance policies are among the last few reasonably good deals in the private insurance market. It’s interesting how vague and moderated the ads for life insurance policies tend to be; looks as though the rest of insurance—health, disability, malpractice—has frowned down anything that would highlight contrasts. Back to inheritance—any parents who purchased life insurance policies at a reasonably young and healthy time of life managed a boon to their offspring, pretty much uncomplicated by tax or other liabilities.
  • Et cetera.

The collective amount of just the above-mentioned specific assets is virtually incalculable. On a macro scale, these assets are what enable so many in our population to survive while underemployed. Just the collective assets involved in home gardening for food production, and for home improvement, contribute significantly to the national economy. However, as mentioned, our national inherited wealth far exceeds the limited, literal kind of inheritance sketched here.

University of Michigan

We have inherited industries, farmland and natural resources including (for now) potable water. We have inherited universities, museums and a vast communications system, an immense intellectual infrastructure. We have inherited a national physical infrastructure with the potential for improvement that would also ‘put people back to work’, as candidates for office keep saying while refusing to do so.

Current mouthings of GOP politicians and their television shills about ‘jobs’ and ‘unemployment’, fed into media outlets for the election, do not acknowledge our immense inherited wealth. To do so would acknowledge the importance of American labor, and would acknowledge the necessity of regulation (law) to safeguard natural resources and human lives. No one on their side of the line points out that a country of our resources and assets has the capability, for example, to educate all its youth. Quite the contrary: When President Obama suggested that everyone who wants to go to college should be able to, Rick Santorum called him a “snob.”

This wasn’t mere campaign rhetoric, stupidity and mean-mindedness. Santorum and his ilk jumped on Obama’s case because, from the perspective of GOP candidates for office, the reminder that we have immense assets for education is dangerous. Once it is recognized that we can educate our population, after all, the inevitable question becomes why don’t we? We have more than enough resources and assets to provide for our health needs, too, and look what happens when someone tries to do so. Aside from what notable newspapers like the Washington Post did to health care reform, the supermarket tabloids are vile, even beyond their usual hysteria, in attacks on first lady Michelle Obama in the context of health–beauty or nutrition, exercise or fashion.

There is danger in the reminder that the U.S. has immense assets–for health, for nutrition, for music and the arts; for national parkland, our coasts, mountains in West Virginia, clean water in any river, lake or aquifer. You name it; if someone brings up or indirectly reminds the public how genuinely wealthy this country is, the rightwing noise machine gets hot to trot.*

 

More later

 

*An individual heartening exception: David Koch, to do him justice, recently donated $35 million to the Smithsonian Museum of Natural History. My view remains that the wingers funded by the Koch brothers mostly take from, rather than give to, the public. But this is going in the right direction.

The scandal of parasitical management–disgraces continue

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Disgraces continue

The scandal of parasitical management

W. Edwards Deming, the wise man of American industry, said decades ago that industrial problems were overwhelmingly the failures of management rather than of labor. No flame thrower, Dr. Deming attributed U.S. manufacturing problems 90 percent to management, 10 percent to work force.

Deming

That kind of clarity now is 100 percent obstructed by most Republicans running for office. Call it the not-Gov. Walker, or –Gov. Kasich, or –Gov. Daniels principle. Instead, we have ongoing disgraces. The treatment of the work force by so-called managers at the beginning of the 21st century would often shame the 19th century, and the problem is politically exacerbated. Outright shameful conduct is at least passively condoned and is at worst actively supported by GOP leadership, who almost to a man always heed their corporate donors and future K Street employers. Call it the Gov. Walker, or Gov. Kasich, or Gov. Daniels principle. Three examples, out of many possible, follow below.

Cooper Tires lockout

  • Cooper Tires, of Findlay, Ohio: Unionized workers at Cooper Tires gave up millions in concessions in pay and benefits in 2008, to help save the company. Reviews of Cooper’s pay and benefits remain mixed among people who work there. Sales for the company have grown significantly, even in the sorely stressed economy that is the state of Ohio under Kasich, largely because the Obama administration bailed out the automobile industry (over GOP opposition). How did management at Cooper Tires return the favor? By locking out workers in November 2011—that would be right after Thanksgiving—and the workers remain locked out to this day. Lockouts always cost the company money, by the way; they entail hiring and training new help, with all the cost and risk entailed in higher turnover and lack of experience. That these are production workers doesn’t help. Meanwhile, compensation for five top executives at Cooper totaled $9,531,521 in 2010—up from the previous five years, and an all-time high, though listed as lower in percentage terms by Morningstar. The percentage ‘decline’ is owing to a decline in Cooper’s stock price, making options less valuable. Cooper CEO Roy V. Barnes took home $4.7M that year. The kicker is that the company, now pressuring employees to accept a worse contract, has ample funds on hand to purchase a plant in Serbia. Cooper Tire & Rubber still has problems with profitability in terms of its stock price, partly because the company is losing goodwill and suffering in public esteem over the way it is treating its employees. But cost-cutting measures have yet to extend to executive compensation for top management; the Human Resources officer responsible for pushing around employees in ways including the lockout also took home six figures in 2010. The excuse for raising executive salaries, of course, is the declining value of company stock options.
  • Apple, Inc.: Software giant Apple is less susceptible to accusations of lack of innovation or of failing to move with the times. Nor is its profitability suffering. However, its executive compensation is suffering even less, so to speak. Business Week and the Wall Street Journal are among business publications reporting that Apple CEO Tim Cook will receive 2011 compensation valued at $378 million. This, as they point out, stands in some contrast to the $1M annually drawn by late Apple CEO Steve Jobs. It stands in more dramatic contrast to conditions at Foxconn, a Chinese sweatshop used by Apple, where workers committed suicide in waves in 2010. The Apple-Chinese sweatshop connection was highlighted again by Rachel Maddow last night and was reported again by the New York Times recently. It was reported earlier by the Guardian. The story will continue to surface until the conditions are addressed—meaning corrected, once and for all. Whatever the problems of our struggling heavy industry, Apple, Inc., cannot convincingly claim that its pockets are too full of nothing but lint to pay its cheapest employees. N.b. There is also that niggling question of whether Apple couldn’t make more of its products here in the U.S., of course. Another question we’re not hearing raised on the campaign trail. Could it be that Apple is avoiding OSHA and EPA oversight?

Apple employee overseas

  • American Airlines, Inc./AMR: Any passenger who has had to endure AA’s baggage policy, fees for changing tickets, multi-stop routes, and teeny-weeny aging prop planes understands intuitively why American Airlines might need to apply for bankruptcy protection. Like almost every U.S. airline except Southwest, AA socks it to you at every possible juncture, including a baggage fee for checking just one suitcase. At least the company does not charge a baggage fee when it has to check your small carry-on bag, for passengers shunted onto a plane with overhead bins too tiny to accommodate even a carry-on–a frequent occurrence. Since AA is also using an aging fleet and, as mentioned, a large number of smaller and less-safe planes, operating expenses do not look to go down any time soon. Be it noted that decisions not to upgrade the fleet, not to purchase new planes rather than maintaining clunkers, and not to purchase larger rather than smaller planes are all managerial decisions. They violate Deming’s core principles for management; see the link above. They have not made AA profitable. But needless to say, AA top management is not seeking to lay itself off in the bankruptcy. The bankruptcy move is being used to break airline unions. Haven’t we seen this before?

How the company treats passengers is also a managerial decision, or series of decisions, determined by managerial policy—although the corporation does not hesitate to blame ‘government’ at every opportunity. While it is risky to use individual first-person experience as data, I have a first-hand anecdote to fill in the broader picture. For common-sense reasons, I do not usually fly at Thanksgiving. Last Thanksgiving, however, I had to fly to another state to tour Alzheimer’s-certified facilities for my mother, who needed to be relocated. That project is accomplished; all to the good. The trip home to DC on the Sunday after Thanksgiving entailed my getting on four planes. Naturally, there was a mechanical failure on the first of these, a small prop plane, and the two-hour delay meant that I missed the next three connections. Incidentally, the announcement we got about this did not explain the mechanical issue but blamed ‘paperwork’ for the delay, also stating that many mechanical staff were off for the holiday.

I did not know that I was booked on AA in the first place; I had bought tickets on Delta and on a local airline. But Delta was borrowing American planes, or AA was borrowing Delta’s brand. Either way, when I phoned the company about the problem, I was shuttled via phone from one company to the other, each disclaiming responsibility. Both companies had overbooked virtually all flights for the day; “They all overbook,” as one airport employee remarked matter-of-factly. Perhaps company management thought that few people would be traveling over Thanksgiving. That said, the story for me at least had a happy ending: eventually I asked the right question of the right person, who pointed me to the right in-house phone, which got me to someone with an Indian accent who was able to put me on a direct flight to DC at no extra cost. In fact, for the first time in my life I came home with more travel money than I left with—a combination of refunds and vouchers for being bumped. The next day, American’s bankruptcy was announced. Click.

Treatment of customers, including a deliberate policy of overbooking flights, is again a managerial decision.

More later.

To call for an end to the lockout in Findlay, Ohio, go here.

Rick Perry doing in private what he does in public

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That Rick Perry retirement pension

Rick Perry resignation

On top of more important questions, it really will be interesting to see whether Rick Perry can live this one down. The Texas Tribune reported Friday that Perry is drawing his state retirement pension as well as his governor’s salary. Filings with the Federal Election Commission show that the combined incomes mean Perry gets an annual $240,000 from Texas citizens, rather than just $150,000 as governor. Perry filed the FEC report yesterday.

Admittedly, Perry is an empty suit anyway. The Texas governorship is historically among the weakest in the nation. The state constitution has yet to be updated, partly because the process of a state constitutional convention and ratifying a new constitution has not been feasible. The city of Austin is a canyon of lobbyists, as befits a governor who is basically a walking set of pressure points. But Perry’s public career of mouthing fiscal pieties about budget and austerity, etc., makes his double-dipping noteworthy even among other GOP corporate shills running for the White House as fiscal puritans. What makes it worse if possible is that Perry has gone gunning for exactly this kind of double-dipping among Texas state employees who make far less, while working far more, than he.*

Perry in public

As widely reported, Perry has also repeatedly attacked government workers in general. Like the other GOP candidates selected by themselves for the White House, he has also worked steadfastly to undermine pensions, pension funds, pension guarantees, medical benefits, benefits for seniors, and retirement protection in general. Simultaneously, and again like most other GOPers, he has been stalwart in protecting large companies’ treatment of employees, however egregious, along with management’s ability to offshore jobs and taxable assets, to evade contracts through bankruptcy and other measures, and to avoid prosecution for fraud and civil lawsuits for incompetence, waste and lack of due diligence.

Donald Trump

Watching the GOP in the current election cycle was already a continuing indulgence in Schadenfreude. Anyone who cares about either mental health or human goodness has to be careful about witnessing too much of it. Pity the ‘political reporters’ who have to pretend that the bunk we’ve been hearing has any claim to credibility as public policy, any at all. But even in a field featuring Rick Santorum, Donald Trump, Newt Gringrich and Herman Cain, Perry’s performance takes the cake. No mean feat.

Predictably, the most recent disclosure means that Perry is being accused of hypocrisy. Once again, calling this kind of thing ‘hypocrisy’ is not political analysis. It is just an insult to hypocrites. Perry is drawing all he can from a long-suffering public while calling on more poorly paid public employees to draw less. He has stayed in office in Texas as long as possible while calling for many thousands of public employees to be fired. He is drawing a large pension for work he is no longer doing—if he ever was–while calling on most people, poorer than he, to tighten their belts. Above all, he himself is driving up the cost of government, directly, in first person, and by choice, while railing against government cost and government ‘spending’.

This is not hypocrisy. It is imposture. It is like railing against ‘regulation’ (mine safety) and ‘government spending’ (courts to prosecute child abusers). It is rapaciousness masquerading as fiscal prudence. It serves the same purpose this imposture always serves: It removes public assets and public resources from the public, and diverts them into the hands of a grasping few. Rick Perry is just the non plus ultra, an individual sterling example but by no means alone. Perry, in short, is not actually doing in private what he opposes in public. He is doing in private—grasping from the public—what he does in public.

Rich tax cuts

As written before, this was the fiscal and monetary policy of the Bush administration, the centerpiece of the Bush years, almost unreported in the political press. It went so far as to include war as fiscal and monetary policy, it was and is reverse-Robin-Hood, and its consequences remain the mess for everyone else to clean up.

Note:

Gov. Perry’s income from the Texas state pension alone is now $7,698 before taxes, or $6,588 net, in retirement benefits–$92,376 per year gross, or an annual net income of $79,056.

For perspective, average per capita money income in the U.S. (previous twelve months, 2005-2009) is $27,041. From the U.S. census, median household income in 2009 was $50,221.

This information is yet another reason why the cardboard robber barons are always hot to trot to abolish the census.

*Full disclosure: my mother, who suffers from advanced Alzheimer’s, draws retirement as a longtime Texas state employee. Hers is considerably less than Perry’s, for considerably more work, far more worthwhile. Admittedly the comparison might be considered inexact, since she did not work for decades to sell out Texas resources and the public for political advancement.