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Why is Washington Dithering with Unemployment High?

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Brad DeLong points out that Ronald Reagan was far more concerned about unemployment than Team Obama (or Washington generally) is, and also took far more aggressive measures to combat it. From The Week (hat tip reader Marshall):

By the start of 1983, labor unions were frantically giving back previously-promised wage increases and offering wage cuts to employers who were delighted to reopen labor contracts. The unemployment rate hit 10.5 percent. The Mexican government was bankrupt. And the Federal Reserve began shifting course, acknowledging that its policies had overshot their mark.

Washington, D.C. was in a panic. With high unemployment perceived as a genuine national emergency, the Federal Reserve embarked on a policy of massive monetary ease. The Reagan administration promised that the deficits created by its 1981 tax cuts and increased defense spending were the recipe for putting America back to work. Everybody had a plan to reduce unemployment. And every lobbyist or speculator with a scheme unrelated to jobs recast his pet project as a magic unemployment-reducing bullet.

Today, the unemployment rate is kissing 10 percent. Global financial markets are sending us a message that the excess demand for high-quality financial assets is growing again.

Yet, unlike 1983, there is no sense of urgency in Washington.

The policy response when the market wants more safe assets is simple: Give it what it wants. In early 1983 the Federal Reserve frantically expanded the money supply to give the market the cash it wanted. The U.S. Treasury frantically printed huge, honking tranches of Treasury bonds for the private sector to hold. The hope and expectation was that satisfying the demand for high-quality financial assets would relieve the excess supply of goods and services and workers. That expectation was duly realized. The unemployment rate, which had been 10.8 percent in December 1982, fell to 8.3 percent by December 1983. Come Election Day, November 6, 1984, unemployment was down to 7.2 percent. It was morning in America.

It’s also worth noting that the increase in unemployment in the wake of the financial crisis is greater than occurred in the early Reagan era:

Picture 31

Picture 30

And that’s before you consider that the definition of unemployed workers has been tweaked over the decades to exclude discouraged job-seekers, so that 10% ish headline unemployment today is worse than 10% ish headline unemployment in the early 1980s.

Given that the explosive debt growth in the US from 1999 onward was in household debt, improving unemployment would also help repair financial firm balance sheets (highly levered households + a fall in income = default).

Clinton, and Reagan before him, understood that a President’s most important responsibility in peacetime is creating jobs. Complacency on this issue by the Democrats looks suicidal.Thomas Ferguson and Jie Chen performed a detailed analysis of the Massachusetts Senate election that Republican Scott Brown unexpectedly won. Their conclusion:

This paper takes a closer look at the Massachusetts earthquake. It reviews popular interpretations of the election, especially those highlighting the influence of the “Tea Party” movement, and examines the role political money played in the outcome. Its main contribution, though, is an analysis of voting patterns by towns. Using spatial regression techniques, it shows that unemployment and housing price declines contributed to the Republican swing, along with a proportionately heavier drop in voting turnout in poorer towns that usually provide many votes to Democratic candidates. All these factors are likely to remain important in the November congressional elections.

Yves here. The fact that Washington is wildly out of touch with America becomes more apparent with every passing day. Pat Caddell (pollster to Carter, who has since left the Democrats) has told me that he has never seen anything like the gap in responses on various issues between the population and the governing apparatus in the capital.

So what explains this bizarre, self-destructive posture? One simple explanation is that the neoclassical economics orthodoxy has become so hopelessly entrenched despite its manifest failure (witness the crisis) that few can see how deeply captured they are by its ideology. A key tenet is the demonization of organized labor, combined with a refusal to recognize that many forms of commercial activity tend to lead naturally to agglomeration of power. Thus unions serve as a useful counterweight to concentrations of corporate power.

Before I hear reader howls, it is important to recognize that anti-union sentiments have been marketed aggressively since the early 1980s. I grew up with a father who ran major manufacturing operations, dealt with multiple unions throughout his career, and was horribly right wing. I never once heard him say anything bad about unions. Similarly, I graduated from Harvard Business School in 1981. I cannot recall a single person at the school, either faculty or students, criticizing unions. And this was after a near-decade of stagflation, with Japanese and German manufacturers on the rise. Germany, then as now, had strong unions; Japan did not, but was famous for having enlightened policies towards workers. In other words, treating workers decently was not seen as contradictory to economic might.

It is perverse that unions for middle and lower income workers are demonized, but unions for the educated, like the legal, accounting, and medical professions, get nary a second thought. And how about CEOs? While not a formal union, there are mechanisms that help keep pay aloft (most important, comp consultants who are hired by the CEO human resources department who manage to persuade boards to set the standard for their CEOs pay in the top 50% of his peer group or higher. That assures constant leapfrogging of pay). Why is collusion among workers to achieve higher pay levels savaged, but far more egregious featherbedding by top executives and boards given a free pass?

But most of America appears to have deeply internalized the belief that labor lacks, and perhaps more important, ought not to have any bargaining power. This is a wonderful state of affairs for the managerial elite and investors. Having labor share in productivity gains was no impediment to growth; indeed, the record from the end of World War II through the mid-1970s versus the last two decades would suggest the reverse.

And the argument that US labor cannot compete with China et al is overblown. In most cases of outsourcing and offshoring, the results are disappointing (a dirty secret you will find if you burrow into the literature; for instance, IT, a popular candidate, has a particularly poor record). But it also serves to reduce lower-level labor costs and INCREASE managerial costs (greater coordination required). From the Wall Street Journal on IT outsourcing:

Dean Davidson, an analyst who follows outsourcing for Meta Group, in Stamford, Conn., says that companies usually find their actual cost savings from moving offshore are less than they would expect based on straight wage comparisons. “The reality is a general savings of 15%-20% during the first year,” Mr. Davidson says. That’s far less than the 50% to 80% savings based on hourly labor rates, he says.

Yves here. Recall this is software: no shipping or inventory financing costs. The gap between the raw labor costs and the net savings is an increase in compensation to managers (which could be either via larger bonuses or an increase in headcount).

I’ve had corporate staff of manufacturing companies (not in the production part of the business, hence no dog in the fight) maintain, having seen the internal plans, that the case for offshoring and outsourcing were not compelling, and could easily be depicted as not worth the risk given transit times and greater business system rigidity. But their corporations went ahead anyhow because Wall Street looked favorably upon outsourcing. Yes, some jobs and activities probably would have been lost regardless, but far more was ceded than had to be.

A second reason for complacency about unemployment is just as deeply rooted. There is little confidence in conventional policy remedies. Neoclassical economics posits equilibrium, so near collapses of the world as we know it are not supposed to happen. The Austrian and Keynesian schools believe in disequilibria and have prescriptions. However, the risk of the social breakdown with the Austrian prescription is correctly seen as high (one of the reasons Roosevelt had a block of support among major corporations was they recognized the country really could fall apart, and they saw aggressive intervention as less dangerous than violence and an increasingly popular Communist movement).

The Keynesians have become discredited due to the perception in some circles that the government has been too quick trigger with stimulus, which has led to an aversion to using it in a deep downturn, when it is a useful tool (an analysis in chapter 8 of ECONNED indicates that fiscal stimulus was too aggressive in the 1990s).

But the real problem may be that all these approaches are past their sell-by dates, helpful around the margin but insufficient to provide lasting relief to our current malaise. We may be at the end of a paradigm. The US and its trade partners have engaged in a 30 year experiment of deregulation, financial liberalization, more open trade, and deep integration of markets. But most other countries had clear objectives: they wanted to protect their labor markets, which usually entailed running a trade surplus (or at least not a deficit). Many of them also had clear industrial policies. By contrast, the US pretended it was adhering to a “free markets” dogma so that whatever resulted from this experiment was virtuous. But in fact, we have had stagnant real worker wages, with a rising standard of living coming from rising household borrowings and to a much lesser degree, falling technology prices. We have also had industrial policy by default. Certain favored groups, such as Big Pharma and the sugar lobby, get special breaks.

And who has been the biggest beneficiary of our stealth industrial policy? The financial services industry. How many Treasury Secretaries have lobbied for more open financial markets with major trade partners? Has any other industry seen as extensive a reduction in regulations? And we’ve had first the Greenspan, now the Bernanke put, with the financial services well aware that the Fed will run to the rescue of the markets (ie the banksters) should any serious trouble arise, but the resulting low rates work to the detriment of savers, and push all investors to take undue risks to compensate for artificially low yields.

So the inaction over unemployment is yet another symptom of deep seated rot in the body politic. But recognizing the true nature of the problem is the first step to finding remedies.

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204 comments

  1. Pierre

    Our government being out of touch with the unemployment problem? Yes. But as a major tenent being demonization of unions is hard to swallow. Especially for a Democratically controlled Adminstration and Congress. If anything, they are supposed to be on the side of strong unions.

    Unions having bargaining power is irrelevant to employment rates. Take any European country with strong and friendly union-government policies and compare to their long term structural unemployment rates. Germany? Spain? Italy? UK? Even the nordic countries (except Norway with their oil) have all lived with 10+% unemployment for over a decade.

    I wouldn’t argue either that strong unions creates unemployment through inflexibilities in the labor market (e.g., not being able to fire people). Denmark has very strong unions but also has a flexible labor market and relatively low umemployment (5% with a caveat their “U6″ is closer to 10%).

    Fixing unemployment – long term job creation – is not possible for the US and Europe (except countries with natural resources). The employment growth in established markets comes from the service sector which feeds off of consumer spending. Industrial production doesn’t create jobs – you don’t need many people any more to make stuff. Consumer spending has only generated jobs because in our country we went massively in debt to grow “disposable” incomes. That doesn’t work in the long run. Germany has huge unemployment because they don’t need many people to make stuff (their old model) and the people haven’t hocked their futures to spend money on credit either.

    I bet someone to find one major developed western economy who has a sustainable long term job creating model not based on debt or selling of natural resources. Unions are a footnote in any sustainable model.

    1. Yves Smith Post author

      Pierre,

      Democrats supporting unions today? You are kidding, right?

      Follow the money. There is not only little substantive support for unions in the Administration and in much of Congress, they don’t even bother with optics. Tell me the last time you can recall a major political leader meet with a major union leader. Contrast that with the time they spend with CEOs.

      Look at the way in the auto bailouts (for one example) that Obama crammed down the union pensions. Yet the same Administration cries “sanctity of contract” and refuses to renegotiate AIG’s CDS when MORE money was at stake. Oh, and we somehow couldn’t renegotiate the employment contracts of AIG’s staff either. All these companies were wards of the state, but the union members were given the shaft while white collar staffers were treated with kid gloves (and people in the industry who know CDS tell me very few of the existing staff were really needed to unwind positions, most could be handled by good back office types at vastly lower rates, and given Bear and Lehman, there ought to be people like that on the street).

      I’m not arguing against some degree of haircut at the auto unions. I’m pointing out the obvious disparity in treatment between union and white collar workers.

      And although anti-union sentiment is an obvious symptom, the critical point is the more general one: the widespread acceptance that workers have no bargaining power. I don’t mean simply in organized labor settings. How many people do you know who put up with unreasonable work demands because they are afraid to say no? If the company has some loyalty to its workers, that might not be so bad, but many companies are exploitative (such as Wal-Mart requiring workers to work off the clock) and that is now considered an acceptable way to do business.

      1. Winc74

        “Tell me the last time you can recall a major political leader meet with a major union leader.” Wow, really? The most frequent outside visitor to the White House in 2009 was Andy Stern, the soon-departing head of the SEIU.

        The same SEIU that spent $85 million to get Obama elected in 2008: http://tinyurl.com/pu52d5

        Which resulted in: “Mr. Obama has so far named Patrick Gaspard, a former SEIU official to be White House political director, and more recently nominated Craig Becker, associate general counsel to the SEIU and the AFL-CIO to the National Labor Relations Board. Anna Burger, the SEIU’s second highest ranking officer, is a member of the president’s Economic Recovery Advisory Board.”

        1. Yves Smith Post author

          And why the SEIU, and ONLY the SEIU? Because Andy Stern claimed to have a new model. Recall his PR:

          http://www.nytimes.com/2005/01/30/magazine/30STERN.html?pagewanted=print&position=

          Oh, and he came from a white collar background….”a man we can deal with…” He started on areas where wage increases could be presented as a win-win. In other words, he did not position himself a threat to Corporate America:

          He came to embrace a philosophy that ran counter to the most basic assumptions of the besieged labor movement: the popular image of greedy corporations that want to treat their workers like slaves, Stern believed, was in most cases just wrong. The truth was that companies in the global age, under intense pressure to lower costs, were simply doing what they thought they had to do to survive, and if you wanted them to behave better, you had to make good behavior viable for them.

          Stern’s favorite example concerns the more than 10,000 janitors who clean the office buildings in the cities and suburbs of northern New Jersey. Five years ago, only a fraction of them were unionized, and they were making $10 less per hour than their counterparts across the river in Manhattan. Stern and his team say they were convinced from talking to employers in the fast-growing area that the employers didn’t like the low wages and poor benefits much more than the union did. Cleaning companies complained that they had trouble retaining workers, and the workers they did keep were less productive. The problem was that for any one company to offer better wages would have been tantamount to an army unilaterally disarming in the middle of a war; cheaper competitors would immediately overrun its business.

          The traditional way for a union to attack this problem would be to pick the most vulnerable employer in the market, pressure it to accept a union and then try to expand from there. Instead, Stern set out to organize the entire market at once, which he did by promising employers that the union contract wouldn’t kick in unless more than half of them signed it. (Getting the first companies to enter into the agreement took some old-fashioned organizing tactics, including picket lines.) The S.E.I.U. ended up representing close to 70 percent of the janitors in the area, doubling their pay in many cases, from minimum wage to more than $11 an hour. Stern found that by bringing all of the main employers in an industry to the table at one time, rather than one after the other, he was able to effectively regulate an entire market.

          http://www.nytimes.com/2005/01/30/magazine/30STERN.html?pagewanted=print&position=

          And one union leader, a poster child, versus how many visits from CEOs? Exception that proves the rule.

          1. tyrone shoelaces

            Winc74 wrote:

            “Tell me the last time you can recall a major political leader meet with a major union leader.” Wow, really? The most frequent outside visitor to the White House in 2009 was Andy Stern, the soon-departing head of the SEIU.

            Yves replied: And why the SEIU, and ONLY the SEIU? Because Andy Stern claimed to have a new model.

            I don’t read winc74 as saying only the SEIU has met with a major political leader. Winc74 only gave one example.

            In fact when I read the article I recalled the meeting Trumka had with the White House the Wednesday before the weekend House vote on health care. I googled and found out that Trumka frequently visits the White House, and April’s visit was notable.

            http://tpmdc.talkingpointsmemo.com/2010/03/trumka-to-tpmdc-im-happy-with-final-health-care-bill.php

            http://www.huffingtonpost.com/2010/04/16/richard-trumka-vomits-at_n_540986.html

            http://www.workdayminnesota.org/index.php?news_6_4483

          2. Doug Terpstra

            Great handle, “tie your own shoelaces”, pertinent fo all of us.

            Your link to “Richard Trumka Vomits At White House Meeting With Obama” says it all. Though not in Obama’s lap, Trumka’s retching may be a result of swallowing some of Obama’s poison.

            FireDogLake has an article that explains Obama’s total betrayal of unions quite well and how Trumka was being sold and co-opted by raiding student loans: “Why Is Richard Trumka Taking Money From College Students to Pay for Union Fix?”

            http://fdlaction.firedoglake.com/2010/03/25/why-is-richard-trumka-taking-money-from-college-students-to-pay-for-union-fix/

            Disgust for this administration causes intense nausea.

          3. DownSouth

            tyrone shoelaces,

            Bill Moyers interviewed Trumka in January.

            Trumka laid out the unions’ prescriptions for what ails America:

            1) Extend employment benefits
            2) More money for state and local governments
            3) More investment in infrastructure
            4) Direct funding of jobs

            When asked “where does the money come from?”, Trumka’s response:

            It’s a real simple thing. You know, let’s look at who created the mess. The banks created this mess. Wall Street created this mess. And the super rich have had a tax break from Bush of $1.2 trillion. We can take a little bit back from the rich that have really enjoyed the last ten years in an unprecedented way, and pay for the creation of jobs that they actually destroyed.

            If we look at the actual policy direction Team Obama is taking, do you see any of the policy prescriptions preferred by the unions being implemented?

            Obama is a master of deception. One must concentrate in keeping one’s eye on the ball, that is what Obam does, not what he says.

      2. alex black

        “tell me the last time you can recall a major political leader meet with a major union leader”

        Does the fact that Andy Stern, head of SEIU, has logged in more visits at the White House than anyone else count?

        That aside, most of the howling I hear about unions isn’t about PRIVATE unions – it’s about PUBLIC EMPLOYEE unions. For every public employee laid off in the recession, there have been 7 private employees laid off. Workers in the private sector are seeing lowered wages and benefits. Public employee unions are screaming over lack of increases.

        Most states are facing Greek-like budget scenarios, fueled largely by bloated public sector payrolls, health benefits, and pension benefits – the kind of compensation that private sectors can only dream of these days. Maybe my view is skewed by living in California, where the public employee unions have permanent leverage over a permanently-gerrymandered Democratic legislature, and we have a $20 billion deficit. The private sector is being ravaged here – the public sector is doing quite well, thank you…..

        I rather enjoyed the town hall meeting in New Jersey, where Governer Christie was confronted by a teacher who makes $86,000 a year, plus $20,000/yr in health benefits, plus another $20,000/yr in pension benefits (she will retire with over $1 million in pension benefits to her name), who was complained angrily that for her education and experience, she was NOT getting compensated enough for her labor. To which the Governor replied, “Well, you know what? You don’t have to do it then.”

        I wonder if she could earn that much in the private sector? And if she somehow could, would she miss her 15 weeks of vacation time per year?

        Private unions negotiate against private management who is looking out for shareholders’ money – a very fair arrangement and a level playing field. No complaints, no howling, no demonizing. But public unions negotiate against politicians, who not only don’t give a rat’s ass about the taxpayers’ money, but actually stand to gain by giving public unions everything they ask for – because public unions give the politicians a nice quid pro quo for the favor – lots of campaign money and campaign workers. NOT a level playing field. I am hearing howling hear, and to my ears, the howling sounds pretty legitimate.

        1. Winc74

          Amen. Public unions are an absolute menace to state budgets, and will poison the well in the American psyche towards the labor movement in general for generations.

          1. Richard Kline

            Or those public unions are going to lead the way toward a more just and socially conscious society.

            Just who do you think would take those public sector jobs for the tuppence ha’penny and no pension that ingrates like you two would be willing to pay. Few and none, and those not competent. Some of think that teachers are good for their society. Clearly some of you think that they should work for free. Wanna save your dough for ‘your’ charter schools who don’t take any of ‘them’? Well, teachers in a lot of those charter schools are paid far less (because they are typically non-union), and one should not be surprised at the general record of educational failure that follows.

            We’ll get the society we are willing to pay for. Cheapskates and ingrates would have us all live in the kind of mutually hostile realm to which their rhetoric speaks. Most of us have better things to to than listen to that kind of cant.

          2. alex black

            To Richard Kline: When I say that I think it’s silly for a teacher who makes $126,000 a year to demand more right now, you say that I am saying that she should work for free, and then you call me a cheapskate and an ingrate.

            Nice, Richard, nice…..

          3. Anonymous Jones

            Richard, I don’t think they should work for free, but as with everything in life, if the competing forces aren’t relatively even, one is going to run over the other. That’s just what happens. The government is constrained by due process concerns and an agency-to-the-extreme problem (mostly short-term agents (politicians) running a *very* long-term enterprise with shareholders (constituents) always wanting to believe in fantasyland kick-the-can-down-the-road-and-everything-will-magically-work-itself-out delusions). This is a serious problem, and while I’m not in favor of completely disbanding public sector unions, I am certainly in favor of structural reforms that limit the occasional abuses that result from a system with misaligned incentives and certain “lumps” of overwhelming power because of access and structural leverage (“structural leverage” is a term I use for “so what? Sue me” bargaining positions).

          4. Gary Anderson

            Mish has been arguing at his blog about the terrible public unions. But I agree with Yves, and have posted at Shedlock’s blog that the SIEU is the only group protesting the bank abuses, the real threat to democracy. Corporate power is so monolithic now that our government only took on BP when it started tanking in the polls. There will be a weakened middle class if you take away public unions. We have fascist, or as Ron Paul says, corporatist control of government by the private sector. So, it becomes necessary for some kind of offset.

            And what is going to happen when all these people lose their extended unemployment benefits and have nowhere to turn? Obama is sleepwalking no doubt.

            I have been advocating walking away from all debt as well: http://hubpages.com/hub/The-American-Public-Is-Incredibly-Stupid-About-Walking-Away-from-Debt-and-Underwater-Mortgages

          5. Richard Kline

            To alex black at 6:13, the substance of your remark was exactly to sneer at the speaker as a gravy-training union fat catter. You made the remark, and there’s no way to wriggle off your own hook. My comments to your were and are germane. It seems obvious that you do not understand what public school teachers do, how they are paid, or anything else about their lives or professions, yet you feel qualified to comment upon their pay an profession, expressing to all your ignorance as objective remark. And that $126 ‘money quote’ in the slam journalism, which is an obvious hit piece, if you do not understand where that number comes from or how it is deliberately misrepresented in the article, you have no business whatsoever commenting on it.

            . . . But I _do_ think you understand how that number is a misrepresentation, and how your choise of an example is chosen to smear all teachers and by association all union members. I don’t see your remarks as ingenuous at all. You want to be a waterboy for the anti-social right, alex, that’s your privilege. Don’t expect others to be blind to the agenda embedded in your words and actions. We’ll leave the blindness to you.

        2. RalphR

          Let’s be clear. The teachers makes $86,000 a year. Counting the rest as being salary equivalent is spurious. Most white collar jobs in largish organizations provide health insurance, and some provide 401 (k)s. Yeah, you have to contribute, but the employer often provides some level of matching. And you have no idea how skilled she is. Has she created innovative teaching techniques? Produced a Westinghouse science finalist? Have a PhD? You have presented no evidence that her self assessment is wrong. Why shouldn’t really good teachers be particularly well paid to induce more good people to become teachers? You probably head or read about her on some right wing news outlet that was out to get you wound up and they succeeded. Are you even a New Jersey resident? If not, she has zero relevance to you. And exactly how representative is her pay of teachers generally in the US?. Answer: not.

          And in my book, she’s worth every penny and more if she can teach younger versions of people like you some sense of proportion. I saw a link somewhere to a study from Pew that the costs of the financial bailout are over $100,000 per household. But instead you are mad about teachers. Yeah, you clearly have your eye on the real problems with our economic system.

          1. Yves Smith Post author

            To Alex (picking up on Ralph)

            In the Great Depression, teachers were paid on the high end of white collar workers. It was a very attractive job for single (as in spinster) women. They bought cars and the more venturesome ones also bought GM stock. Pretty much everyone extolls the quality of education in China versus here. A good bit is that the families are keen to see the children educated (and hence make sure they study) but teachers are also a highly respected profession. Here, you need some level of money to convey respect. Granted, union tenure structures are problematic, but your real premise is that any moron can be a teacher, hence they should only get crappy pay. That’s a lack of willingness to invest in the next generation.

          2. alex black

            “your real premise here is that any moron can be a teacher, hence they should only get crappy pay.”

            Yves, someone has posted a response to me, falsely using your name. I know from reading you for years that you would not make a blatant distortion of what someone is saying. But to whoever posted that reply (and I know it’s not Yves), I never said anything close to what you imply my premise to be. So to clarify what my premise is:

            Teaching is obviously a valuable occupation, and is especially tough in America, where for the most part, students don’t receive adequate encouragement to study hard, and are often undisciplined, unruly, and disruptive. It’s a tough job, and a noble one.

            My premise is simply that if one compares a worker in the private sector who is performing labor that is equally valuable to the society (whatever that might be – and please don’t throw in strawmen – “hey, look what banksters make!!” – I’m referring to workers who produce equal value to the society) most public employees, including teachers are being compensated at a higher level (when you include all compensation), plus they get greater job security (7 to 1 ratio of private sector workers being laid off compared to public workers).

            I pointed out this simple assertion in the context of Yve’s noting that unions are being “demonized”, by noting that I see no one complaining about PRIVATE unions, but I do see a LOT of people complaining about PUBLIC unions – and I was offering up a possible explanation as to why this might be – which is: people who are getting laid off, or losing benefits, or taking wage cuts, or losing their jobs and can only find new jobs that pay 50% of their former salary (with no benefits), whose taxes pay the salaries of public employees, who they see as being much better compensated, are getting a bit pissed off at the inequity.

            For noting that, I have now been called a cheapskate, an ingrate, and someone who is obviously being manipulated and “wound up” by right-wing news sources. And now someone even pretended they were Yves and accused me of asserting that any moron can be a teacher and they only deserve crappy pay when I said no such thing.

            And to RalphR – I have no idea if she produced a Westinghouse finalist, but the figures reported are the standard figures for ALL New Jersey teachers of her tenure. If each and every one of them has, you might have a point. But if you’ve met many New Jersey high school students, I think you’ll agree that not every New Jersey teacher has produced Westinghouse finalists. And no, I do not live in New Jersey – I live in California, where the state budget deficit is worse than New Jersey, and the compensation for public employees compared to similar private sector employees is even more distorted, where many public employees retire at age 50 at 90% of their salary, plus full medical benefits, while we run close to a 13% unemployment rate, and a 10.3% state income tax rate if you make $47,000/year, and where we are running a $20 billion/year deficit – and where the public employee unions are demanding raises.

            Oh, and the source of the New Jersey teacher complaining to Governor Christie? Yes, it was that ultra Right-wingnut news source – CNN.

          3. alex

            “Counting the rest as being salary equivalent is spurious. Most white collar jobs in largish organizations provide health insurance, and some provide 401 (k)s.”

            20k pension contribution on top of a 86k salary? That’s 23%. I’ve never heard of a 401k match like that. 6% would be generous. Comparing her to a private sector employer making 86k w/ a 6% 401k match means her equivalent compensation is $101k.

            Now take into account that teachers work about 3/4 of a normal work year. Pro rata that’s $134k, with job security that people in the private sector can only dream about. There’s tremendous hoopla over public sector layoffs but HP cutting another 9000 jobs? Yawn, that’s the way it is.

            FWIW I’m opposed to most public sector layoffs, especially now. But that job security is worth a lot, just as low risk investments should pay lower yields than high risk ones.

            Worst of all complaining about a salary like hers at this time is amazingly tone deaf. Do public sector workers really expect much sympathy on pay scales these days? If you have a job stop complaining. Too many public sector workers seem to think they have a God given right to be shielded from all the vicissitudes of the economy and the pressures of merit based compensation and yet still be paid “comparable” salaries to the private sector.

            “Has she created innovative teaching techniques? Produced a Westinghouse science finalist?”

            And if she had the teacher’s union rules in most places would keep her from getting merit pay based on that.

            That’s the biggest complaint from most people, including me. It’s not the pay but the way that union rules prohibit paying teachers based on merit or, in practice, dismissing those who are incompetent.

            “Have a PhD?”

            Union contracts, at least around here, provide automatic pay raises based on additional graduate credits. But does that make sense? Is an elementary teacher with a Ph.D. automatically better than one with a masters? Automatic pay raises based on additional graduate credits is _not_ merit based, and I’ve never heard of private sector employers doing anything like that.

            “Why shouldn’t really good teachers be particularly well paid to induce more good people to become teachers?”

            Fine, if it’s merit based. It’s not. Once you get tenure (after only 3 years) pay is based on seniority and number of graduate credits earned. Same deal for the best and the worst teachers.

            “Are you even a New Jersey resident? If not, she has zero relevance to you. And exactly how representative is her pay of teachers generally in the US?. Answer: not.”

            I’m a Long Island resident and pay scales are similar here (maybe higher). I’ve heard horror stories of experienced teachers in Las Vegas getting paid $25k – as a Long Island resident those stories are irrelevant to me. It’s probably true that in most parts of the country teachers are underpaid, but around here that gets spun into a “everyone knows teachers are underpaid” theme that doesn’t apply locally.

            “And in my book, she’s worth every penny and more if she can teach younger versions of people like you some sense of proportion.”

            “If” being the key word in your sentence. What if she’s not? Union rules prevent any distinction.

            P.S. Just occurred to me this thread might be confusing. ‘alex’ is not ‘alex black’.

          4. alex black

            To RalphR – I’m sorry, I failed to respond to one of your criticisms – that the average household is on the hook for $100,000 for the bailout.

            We agree that that is outrageous. But the topic being discussed was why unions are being criticized by some. My post was on topic. But I take your point to heart – from now on, WHATEVER topic is being brought up on this blog, we are NEVER to discuss that topic, but must completely limit our comments to the criticisms that we all share about TARP, AIG, etc etc.

            And I suggest that you fire off an outraged letter to Yves for writing an article about the Obama administration not addressing high unemployment, and the waning influence of unions, instead of making sure that every article she writes focuses solely on her criticisms of bailouts. For bringing up another topic, tell her snidely, as you told me, “Yeah, you clearly have your eye on the real problem with our economic system.”

            Again, my apologies for responding to the topic that was raised.

          5. Vespasian

            I’m with the Alex’s here. Public sector unions (including police & firefighters, as well as run of the mill inspectors, office workers, DMV, etc etc etc) are incredibly tone-deaf and far too politically powerful. They’ve slipped nooses around the budgetary necks of many states, counties, & municipalities. The same would be true at the Federal level if it didn’t have printing press authority.

            I don’t have a problem with organized labor in private businesses … if they ask too much and kill the goose laying their (golden, maybe silver, or just copper) eggs, they suffer the consequences (assuming the business doesn’t get bailed out). That’s fair.

            Public employees — on balance, as there are always exceptions — enjoy far too high compensation when direct pay, benefits, job security, and actual productivity are factored in. Right now, public employee union outcry’s over austerity measures in the face of severe budgetary shortcomings are incredibly tone-deaf.

            Gov Christie was absolutely correct to put that teacher in her place. If she doesn’t like the fact that NJ can’t afford to give her the INCREASE, not decrease, she felt entitled to (while arguably in a deflationary environment!), she can pitch her qualifications in the private market.

          6. DownSouth

            Pierre, Winc74, tyrone shoelaces, alex black, alex, Vespasian:

            And anybody else who wants to join the pro-laissez faire capitalism chorus.

            Why don’t you guys just come out of the closet and admit to what you are—-polemicists for corporate thugs.

            Do you really believe people are stupid enough to fall for your rhetorical strategy?

            You’re trying to scapegoat public workers, when the real problem resides within the corporate executive suite.

            You hope to get people off on some bunny trail so that they will lose scent of the real perpetrators of one of the biggest crimes in the annals of human history.

            You certainly don’t have Trumka fooled (see Bill Moyers interview).

            What you guys are doing is tantamount to complaining about an acne attack as they’re rolling you into the emergency room with a massive coronary failure.

          7. alex

            DownSouth says: “Pierre, Winc74, tyrone shoelaces, alex black, alex, Vespasian: And anybody else who wants to join the pro-laissez faire capitalism chorus. Why don’t you guys just come out of the closet and admit to what you are—-polemicists for corporate thugs.”

            That’s beneath you and uncharacteristically incoherent. How does “corporate thugs” get into an argument about government and unions?

            “You’re trying to scapegoat public workers, when the real problem resides within the corporate executive suite. You hope to get people off on some bunny trail so that they will lose scent of the real perpetrators of one of the biggest crimes in the annals of human history.”

            So the crimes of the banksters means we’ve lost any right to complain about other aspects of how our (taxpayer’s) money is spent?

            This thread started with Alex Blacks’s (correct IMHO) observation that hostility to unions from the peasantry is mostly directed at public sector unions, not unions in general. I’ve been attacked for suggesting that this is not a good time for a teacher making $86k (equivalent to $134k for a no-summers-off job with a 401k) to be complaining about not getting a raise.

            Even if we summarily executed very bankster and put real financial reform into place this economy would not magically turn around overnight. Therefore it’s entirely reasonable for the peasantry to bicker amongst themselves about how the pain will be shared.

            And please spare me the overdone class solidarity line. Of all the things that Trumka mentioned the only one that public sector unions have seriously pushed for is more money for state and local governments. As for us shnooks in the private sector, the public sector unions don’t seem overly concerned about class solidarity.

          8. DownSouth

            alex,

            This thread started with Alex Blacks’s (correct IMHO) observation that hostility to unions from the peasantry is mostly directed at public sector unions, not unions in general.

            That’s alright. I’ve already fixed Alex Black’s comment (see below).

        3. Yankee Frankee

          When looking back to prosperous times in this country, say the 50′s and 60′s, the top tax bracket was between 70-90% and we had strong unions. There was a living wage available in both the public and private sectors. CEO’s made around 15-20 times what there lowest paid workers earned, and as I mentioned above, they were taxed very highly. Now we have the reverse: workers do not earn a living wage in most cases, CEO’s and upper management earn 350 times their lowest paid workers, and they pay a maximum tax rate of around 35%. So, instead of looking to where all the money has actually flowed in the past 30 years (upwards to what has now become an oligarchy), some decide to bash the one group of workers that are actually earning a living wage — public sector employees. It would be funny if it weren’t so sad. I read the same drivel from Mort Zuckerman, the poor little rich boy, on HuffPo a few weeks back. So we should all (except the top 1%) live in debt slavery because states are broke? How about restoring true progressive taxation and bringing upper management salaries down from the stratosphere? If we do that and we’re still broke, then fine, we should cut worker wages in the public sector. But until that time, the people calling for the blood of our teachers should really just shut the f-ck up.

          1. alex

            “But until that time, the people calling for the blood of our teachers should really just shut the f-ck up.”

            Saying this is a bad time to ask for a raise is “calling for their blood”. Wow.

          2. Yankee Frankee

            Alex, I couldn’t reply directly to your response as there was no reply link, so I’m replying to mine. Implicit if not outright stated in your many responses to this post is that it is wrong that public sector workers earn more than private sector workers. Its not a leap to think you are suggesting public sector wages and bennies must drop to match the private sector. I don’t recall you stating that private sector wages should rise to match the public sector. So calling for blood is accurate. If you want to backtrack and now claim you were only complaining about raises fine. It leaves your original argument in tatters though.

          3. DownSouth

            Yankee Frankee,

            You got it man!

            Get in there and give these proponents of corporate thuggery hell!

            And just remember what the WWII fighter ace “Boots” Blesse said:

            No guts, no glory. If you are going to shoot him down, you have to get in there and mix it up with him.

            They’re piloting planes whose engine is built of greed and whose rudder is immorality.

        4. DownSouth

          alex black,

          “tell me the last time you can recall a major political leader meet with a major union leader”
          Does the fact that Andy Stern, head of SEIU, has logged in more visits at the White House than anyone else count?

          Yep, now that the apologists for laissez faire capitalism have their Trojan Horse in the Whitehouse—-Barak Obama—-they’ll trot him out at every possible opportunity. alex black, you seem to believe that people can’t distinguish the difference between theatrics and substance. Maybe you’re right, but there exists at least some possibility that you’re wrong.

          Now let me fix the rest of your comment:
          That aside, what’s all the howling I hear from Wall Street workers. For every financial sector employee laid off in the recession, there have been 7 main street employees. Workers in the productive sector are seeing lowered wages and benefits. Workers in the financial sector are screaming over lack of increases.
          Most corporations are facing Greek-like budget scenarios, fueled largely by bloated executive payrolls, lavish expense accounts, perks like corporate aircraft, and golden parachutes – the kind of compensation that the producers (workers) can only dream of these days. Maybe my view is skewed by living outside Delaware, Wall Street or Washington DC, where the corporate honchos have permanent leverage.

          The private sector is being ravaged here – the public sector is the only sector half-way holding its own, thank you…..

          I rather enjoyed the letter to the NY Times, where a Wall Street trader who makes over $1 million per year, plus other lavish benefits (he will retire with over $100 million in pension benefits to his name), complained angrily that for his education and experience, he was NOT getting compensated enough for his labor. To which I replied, “Well, you know what? You don’t have to do it then.”

          I wonder if he could earn that much in the productive sector? And if he somehow could, would she miss her 15 weeks of vacation time per year, with free use of a company jet and a number of corporate-owned vacation homes scattered over the globe?

          Corporate executives negotiate against themselves for their pay and benefits, and there is no one looking out for shareholders’ money – a very unfair arrangement and an unlevel playing field. No complaints, no howling, no demonizing, at least from corporate executives. But unions negotiate against corporate executives, who not only don’t give a rat’s ass about shareholder’s money, but actually stand to gain by depriving workers of everything and anything they ask for. Politicians stand to benefit too, because corporate executives give the politicians a nice quid pro quo for the favor of ignoring unions – lots of campaign money and millions upon millions of dollars spent in promoting laissez faire capitalism, both within and without the academe, and demonizing unions. NOT a level playing field. I am hearing howling hear, and to my ears, the howling sounds pretty legitimate.

          1. Piero

            Sir, with all due respect, you’re getting a bit overheated and, frankly, silly. When a thread topic is unemployment and Washington’s response to it and the article features a discussion of unions, you seem a bit unhinged in castigating other posters for talking about unions.

            And, Barack Obama, a laissez faire trojan horse? In my copy of the Iliad, the greeks didn’t sneak into Troy and then knife each other. That would be the rough equivalent, sticking to your metaphor, for a president who desperately works to create a new government entitlement even as debt and unfunded liabilities are being recognized as unmanageable.

          2. DownSouth

            Piero,

            I’m getting overheated?

            Now that’s a classic O’Reilly stunt.

            Tell you what. Why don’t you go watch some Glen Beck and give me a break!

        5. run75441

          alex:

          Incomplete story. Is she part of a family of 4? If so her kids up till 18 are entitled to CHPS healthcare. Qualification for such a program starts in the eighties. If it is just her and hubby, by no means is she wallowing in wealth. $86,000 is middle class at bestt. $1 mm in retirement is about what is needed. Healthcare insurance costs are driven by the healthcare industry and not the insurance company or the people.

        6. alex black

          Richard Kline, you’re just digging your hole deeper. You make comments about who I am and who I know – and you don’t know shit about me. I’d respond to your ad hominem slurs, but why bother? Life’s too short.

      3. Pierre

        There is no disagreement from my side regarding the loss of union “power”, and I should have made my sarcasm about the current administration clearer.

        But that is a diversion from the main topic which is I thought was unemployment and union relevancy. Even countries with extremely well entrenched “social contracts” face chronic unemployment. There are few exceptions, I believe a commenter mentioned Switzerland. And there are reasons why the Swiss are good at employing. Unfortunately they don’t have a model which is very exportable (highly specialized industries, and beautiful mountains)

      4. greg b

        Good post Yves

        In Jeff Sharletts book “The Family” he describes the almost singular focus of the “Christianization” of the powerful in this country as being driven by a fear of the power of the little people, which the founder of the movement in the early 20 th century witnessed in the “unionization” battles. I cant recall the mans name who is credited as the spiritual grandfather of “The Family” but he was driven by watching how the politics of the workers of the west coast dock workers from San Francisco to Seattle threatened the power structure.

        Unfortunately it is in many of our churches where people are learning to worship the powerful and be suspicious of the lowly worker who wants to organize as a way to gain some power.

      5. MG

        There is one great union bastion left that is a key Democrat supporter in terms of its number of members, raises a ton of money for them, and its consistent record of voting in large blocks for Democrats – teacher unions. It really is the last one left as their isn’t a single private sector union that has the pull, raises the cash, or has the large number of members.

      6. sgt_doom

        Thank you, Yves! How anyone can even question this administration on ANY support for working Americans is beyond belief!

        After Obama appointed Diana Farrell, the patron saint of jobs offshoring, there was never any further need to research all of Obama’s myriad appointments which, for the record, are the most antiworker, antilabor and antiunion people possible.

        Nothing further need be said on this issue….

    2. Richard Kline

      So Pierre, you are obviously not keeping a scorecard: labor has gotten nothing from Obama but a poke in the eye with a sharp stick. Nor did this Democratic Congress make any serious effort to deliver, either. Card-check (a simple sign-up process for union certification of a given worksite) was left on the mountain by Obama and leadership both in a clear instance of legislative infanticide. Obamacare expects to get a notable slice of its funding by _raiding medical pensions of retired industrial workers_, a claw-back of the worst kind if ever there was. Obama did ‘save’ GM, but it wasn’t for the workers but the bondholders; workers are amongst those expected to make heavy pay and benefit concessions to finance Obama’s ‘salvage’ operation. Did Obama meet regularly with Andy Stern, a noted labor leader? I don’t doubt it, any more than I expect that Barack the Gelid never let the agenda go beyond how much more in contributions and leg work he was expecting Stern to deliver for him.

      You must have been sleeping during the last twenty years that the Democrats have abandoned organized labor in every way except the rhetorical. And it is a plain demonstration of the terrible weakness and lack of intellectual capital in US organized labor that they haven’t abandoned the Democrats for a real ‘Labor Party’ of their own.

      1. DownSouth

        Richard,

        Gosh, I think it must be Rush Limbaugh day on Naked Capitlsim.

        Where did all these died-in-the-wool advocates of laissez faire capitalism materialize from so suddenly?

        1. Doug Terpstra

          “Gosh, I think it must be Rush Limbaugh day on Naked Capitlsim.”

          Those are the best days for the rest of us to admire and learn from musketeers like you, Attempter, Richard, Yves, etc. For your skill and stamina, Bravo!

        2. Skippy

          You should see some of their antics over at TD house.

          Skippy…obviously *self made men*, born with the knowledge and skills to over come all things, if we just got off their backs.

          PS. so many hand breaks in life…sniff.

        3. Richard Kline

          So DownSouth, it isn’t sudden: they’re always there. Sulking in resentment, pinching pennies, pushing mis/dysinformation when not spinning rhetorical whole cloth or outright lies. Don’t get mad, get elevated: trolls are toenail high in heaven.

    3. Ronald

      “I bet someone to find one major developed western economy who has a sustainable long term job creating model not based on debt or selling of natural resources.”

      This is critical to today’s topic since it has nothing to do with pointing fingers and blaming the right wing or elite political /financial class. Our industrial manufacturing productivity and automation outstrips our need for labor by larger increments every year. In so doing it also has outstripped our consumer driven modern economy ability to acquire its output without creating cheap credit to push the demand side.
      America’s economy is still centered around cheap available oil to drive our present industrial/consumer model. It should be clear that drilling rigs costing 500K a day will not lead to cheaper fuel further putting a spike into our modern economy. We have major structural problems in our economy that go well beyond class disagreements and will need to be addressed sooner or later.

  2. Stefanie

    Switzerland is a good example for your arguments: Since WWII the aim of the Government, the corporations and the unions was to keep ‘social peace’. Thus the unions are strong enough and respected, and their leaders participate in all political discussions. Because unions have a voice in economics policy, wages for workers are still fair. Of course, neoclassical free market ideology also has gained ground here, but it is still contained by the counterweight of the Social Democratic Party and the Green Party. And we have the one weapon you Americans lack, sadly: We can form a so-called Initiative, demanding a vote on subjects important to us.

    1. UnnaturalIntelligence

      I’ve been fortunate enough to reside in Switzerland for the past year. I will cry when I have to leave. It is indeed a vexing case for those that claim to know exactly who is at “fault” for the sad state of their country, whatever that country might be.

      Where else on earth do you have:
      - fairly high militarisation of society and open gun ownership policy; very low crime rates
      - open immigration policy (20% immigrant population in country); relatively few problems with immigrants
      - very low taxes; outstanding and efficient public services and infrastructure
      - high salaries for white collar workers; high salaries blue collar workers

    2. NOTaREALmerican

      People are missing the historic cause and effect of why unions fell apart in the US. It had nothing to do directly with unions or businesses, it was “those people”.

      Here is the American sequence of events. 1950′s: the white people were unionized, fat, dumb (peasants), and happy. The unions screwed the management, management screwed the customers and stockholders, the world was in balance. 1960′: the civil rights movement and the Democrats sided with “those people”. The white people massively resented being forced to treat “those people” as humans. The ideological fascist were able to use this dynamic to split the white dumbasses from the only two things that protected them from the fascists: unions and Democrats.

      So, now the present: The white dumbasses have no unions so no power, so – obviously – a falling standard of living. The fascists are on the rise as their white dumbasses supporters are determined to “get even with those people and for what those liberals did to this great and glorious nation”. The liberals are – as usual – clueless and guilt-ridden.

      Moral: Stupidity wins, as always.

      1. DownSouth

        NOTaREALmerican,

        It’s called divide and conquer, and it’s a strategy that’s as old as the hills.

        And while I largely agree with what you have to say, I nevertheless believe there’s plenty of blame to go around. For besides the “white dumbasses,” there are certainly plenty of black separatists in the mix too.

        I think if you will delve into where the money comes from to fund the culture warriors of the New Left, you will find many prominent names like the Rockefeller Foundation, the Ford Foundation and the MacArthur Foundation contributing massively to the cause. And it doesn’t get much more status quo than that.

      2. Doug Terpstra

        “Those people” today are “beaners.” In Arizona we will cut off our own noses to spite them, the fellow victims who built our magnificent slumdivisions, mow and maintain our Versailles parterres, and clean our commodes.

  3. attempter

    I can see two differences between Reagan’s time and today.

    One is the political difference the post discusses. Neoliberal/corporatist ideology has advanced since then. The US polity and media have moved far to the right. Only right wing “ideas” even get aired, let alone enacted into policy.

    Thus for example a Democratic president could proclaim health care “reform” his centerpiece policy initiative and then with the full support of right-leaning corporate liberals everywhere end up demanding a reactionary bill, a gangster mandate, which is so bizarre and so extreme it seems to not even fit on the regular political spectrum. I guess with the health racket bailout corporatism has gone politically post-modern, post-spectrum.

    Obama’s psychopathic unconcern with unemployment is another such political manifestation. If he can see a way to use the crisis to bestow more benefits on corporations like job creation tax credits (which we know don’t lead to new job creation but only loot the public in order to hand another rent to employers), he’s happy. But otherwise he doesn’t care.

    I personalized that with Obama, but he’s just an example of the regular type in today’s kleptocracy.

    The second is the structural difference. In Reagan’s day globalization and financialization were still in the stage of co-opting the Western “middle class” through the exponential debt economy. That imposed certain political imperatives like not allowing unemployment to get out of hand. People wouldn’t feel confident about taking on huge levels of consumer debt under those circumstances.

    But today the “regular” debt economy has collapsed. We’re now Bailout America. While the system may still have some residual political concerns about mass unemployment, it’s no longer counting on consumer confidence and consumer debt from which they can extract rents. The elites know this stage is dead. They’ve moved to increasingly direct robbery. They’re going to borrow, print, and steal as many fictive dollars as possible, and then use that fictive wealth in turn to privatize all public property and expropriate all real wealth in land and other physical assets. That’s the Bailout.

    In the end, they intend for the people to be left with literally nothing but public debt and endless private tolls they must pay which they cannot pay. So they become private debt slaves as well, and that’ll be the new feudalism, that’ll be the new serfdom, all enforced by a violent police state.

    Under these conditions, even massive unemployment is no structural barrier. On the contrary it’s expected to help – to drive down wages even further, destroy benefits and work conditions even further, and to keep everyone who still has a job in a state of quiescent unpolitical terror.

    1. DownSouth

      Bienvenidos a México,

      It’s called a Banana Republic.

      And let me assure you, it’s not the Mexicans in the United States, who are fleeing this Libertarian-Austrian-Neoliberal hellhole, who are to blame for America’s demise.

  4. michel

    Problem is, unions are not a counterbalance to large companies. The only effective counterbalances to that are, one, a strong trust busting central government agency equipped with anti cartel legislation, and effective competitors.

    Yes, the German union model worked. The British one famously did not. Where is British Leyland, aka Rover, today? And why? Driven out of business by its unions over the years. If you look at British Airways today, the same thing is happening.

    I knew cases where UK unions resisted health and safety procedures on the grounds that they would not accept the disciplinary measures necessary to enforce them. Resistance to introduction of IT, because they would rather see it done manually, to ‘save jobs’. Resistance to training to improve job skills, because it would increase inequality. Resistance to management training which would ‘siphon off the natural leadership of the working classes’.

    Ask the people who used to work for Rover what they now think of their union. Ask the British Airways people too. Well, you have your answer in the number of people who are flying through the strikes.

    Its not about unions in themselves. Its about the form of unionization in a given jurisdiction. As when in the UK, the previous Government, whose ruling party was mainly funded by the two large unions, talks about ‘investing in our great public services’ and what they actually do is raise the salaries of the public sector union members, and in particular, incur huge unfunded public sector pension liabilities.

  5. SidFinster

    As a feline, my biggest beef with Keynesianism is not that governments are too quick to stimulate, but that they lack the discipline to build budget surpluses during good times and that they are slow to withdraw that stimulus once applied.

    Far easier to spend now, pay later.

    1. aet

      During good times, they cut corp taxes.
      Come bad times, they cut corp taxes.
      Oh, and there’s no money to help the sick, poor and infirm.

        1. reprobate

          First, you brought up corporate taxes. This post was about unemployment and brought up class issues. No mention, nada of CORPORATE taxes. Individual tax rates have declined substantially, with even greater breaks to the affluent (more favorable treatment of dividend income, lower capital gains tax rates, absurd treatment of PE and hedge fund “carried interest” income at cap gains rates).

          And citing nominal tax rates isn’t relevant. Hardly any corps pay the nominal rate. The data is dated but the premise holds:

          “Ostensibly, the U.S. federal tax code requires corporations to pay 35 percent of their profits in income taxes.

          “But of the 275 Fortune 500 companies that made a profit each year from 2001 to 2003 and for which adequate information to draw conclusions is publicly available, only a small proportion paid federal income taxes anywhere near that statutory 35 percent tax rate. The vast majority paid considerably less.

          “In fact, in 2002 and 2003, the average effective tax rate for all of these 275 companies was less than half the statutory 35 percent rate. Over the 2001-2003 period, effective tax rates ranged from a low of -59.6 percent for Pepco Holdings to a high of 34.5 percent for CVS.”

          http://www.reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

          1. Piero

            The beginning of your post seems rather childish. The previous post twice mentions “corp” taxes. What is that? I’m sorry if you and another poster were hurt so badly by my earlier post. I felt it was justified because another poster went completely off on a tangent/fixation. I might have left this one alone but knew that it was counter to the fact of the rates.

            But, the second part of your post makes a good point. Politically connected larger companies get out of a lot of taxes while the actual job creating small (unconnected) businesses pay the full freight.

  6. Vijay

    And the argument that US labor cannot compete with China et al is overblown. In most cases of outsourcing and offshoring, the results are disappointing (a dirty secret you will find if you burrow into the literature; for instance, IT, a popular candidate, has a particularly poor record). But it also serves to reduce lower-level labor costs and INCREASE managerial costs (greater coordination required). From the Wall Street Journal on IT outsourcing:
    >> This link that you have given is a poor example of outsourcing. That talks about outsourcing documentation. One sparrow doesnt make a summer. Neither does a write up about documentation sum it up!

    1. Yves Smith Post author

      First, you miss the significance of this example. Technical writing ought to be EASY to offshore given that it is less dynamic (in particular, is less or not at all affected by interaction with the client). The fact that something with fewer moving parts than many other parts of IT development still fails is telling.

      Second, this example is replicated across many sectors. I’ve seen repeated studies by Deloitte Touche over the years with Fortune 100 companies. 70% ish are disappointed with outsourcing. If the biggest companies can’t succeed, who can?

      And the structure and incentives guarantee lousy outcomes. Companies hire a consultant to manage the contracting process. The consultant drives to lower costs to the max. That squeezes vendor margins. You see one if not both outcomes: one, vendor scrimps on quality, making client unhappy (recall these relationships are hard to unwind, so once you are in them, they can easily become very unhappy marriages). Two, if you as client need a variance (something beyond contract norms), the vendor will charge through the nose for it, to make up for the margin squeeze. This makes client unhappy, he feels (and is) exploited.

      My brother and his wife has spent their entire careers in outsourcing, I have tons of data points here.

      1. Pierre

        If you are talking about outsourcing in the sense of offshoring IT jobs, call centers etc. I fully agree. But in a broader sense, outsourcing can really be defined as someone else making or providing the inputs for your business. Nokia for instance has never manufactured a phone, ever. Auto companies don’t make cars, they assemble semi-composed components (auto labor has shifted from the OEM to the suppliers). When this is done poorly it can be a disaster (GM), when it is done well, people get jobs.

      2. Yankee Frankee

        My own experiences of outsourcing are IT at a very large bank and a very small software shop. The small shop was much more successful, but that is because two of the three principals in the company offshored themselves to the office they opened in eastern Europe. The large company made such a hash of software management locally, that when they outsourced to India, things went from bad to disaster. But then again, management today seems to consist of scaring employees and keeping them off balance, rather than fostering relationships and spotting talent to promote and nurture. In software it is really bad in that software projects are generally immensely complex, and at banks especially, you have business types managing developers and treating them as fungible quantities — as if they never read The Mythical Man Month from 1975… and I’m sure they didn’t. Instead, they read crap from management “experts” who teach them how to screw employees. Management in the US has become a joke; so no wonder we can’t expect outsourcing (the premise of which is self-contradictory in the big picture, as Yves notes above), which makes the managers job ten times more complex, to work out to the company’s advantage.

      3. NOTaREALmerican

        Re: If the biggest companies can’t succeed, who can?

        There’s a common misconception about IT and success. The purpose of IT in big companies is to spend money, success is generally the lack of massive failure. Nothing is more like an embedded government agency (like a tic) than IT. Nobody – outside of IT – knows what we do, why we do it, or if anything we say is really “real” (meaning, they can’t tell when we spew bullshit – in fact, IT many have invented business bullshit, this might make an interesting book some day for someone. Nobody level-sets the tablesteaks in a going forward-space like IT management)

      4. purple

        At this point, I think quite a bit of off shoring is being to gain access to China’s domestic market. I’m pretty sure China has laws regarding this.

      5. RagingDebate

        Some of the funds I was once discussing with you Yves outsourced to the Indians for technology build-out of video conferencing tech. They were VERY unhappy. I had a working system up in three weeks whereas a year had gone by and the code was not completed. It was profitable to outsource tech to the Chindians in 2000 when the wages were half what they are now. The Chindians still require an expensive technology manager.

      6. sgt_doom

        This entire concept of “offshoring” is an idiocy, as the principal model of labor arbitrage is to increase the internal profits (to the senior management and owners) while externalizing the costs through cheaper labor.

        Since they are offshoring the jobs, causing a major leak in the economy loop, while bringing back the products of said offshored jobs, part of the lowering in demand, it is obviously self-defeating from the get-go.

        And, since that BLS study last summer so effectively pointed out, we have reached critical mass in the abominable offshoring process in America since July 1999.

        “My brother and his wife has spent their entire careers in outsourcing.”

        Well, we know who’s related to the devil, don’t we????
        (And may all traitors to the tribe and country suffer the consequences of their misdeeds!)

  7. Richard Kline

    The US has a long, ugly history of virulent anti-union repression going back to before the Revolution. Yes, there have always been citizen organizers and activists, but it’s been a long uphill battle. The fact that unions won the legal sanction to bargain at all in the early 20th century was, in many respects, an historical accident.

    There are numerous reasons, both social and historical-cyclical why the current anti-union rhetoric and activity gained currency, and by that gained traction in the later part of the 20th century. I’m of the view that what galvanized the corpocracy into a full scale assault against their own workers was the wave of judgments against corporations in the 1970s. OSHA violations, discrimination violations (especially in cases of sexual harrassment and promotion), impending problems from their outrageously underfunded pension obligations as their existing workforces aged all pointed one way: employees were viewed as hazardous to a company’s profitability. So corporations set out to get rid of their employees as much as possible. The best way was to hire somebody else to hire the actual employees upon whom such legal obligations could be shed while the original corporation retained product rights, profits, and distribution intermediation. It matters not to the modern corporation that the job losses impoverish large parts of the communities in which said corporations are socially embedded. Corporate profits have soared, and with them managerial bonuses because costs were externallized even more than sales declined. In short, modern corporate enterprises, notably the American variety, turned themselves into social pathogens over the last forty years, sucking the wealth out of their communities and returning the waste into their social environment. This was a deliberate policy, successfully executed, and now vigourously defended by both castes of the political one-party system, the Profiteer Party. This attitude is easy to see in any modern corporate for whom their employees, regardless of rhetoric, are considered an embarrassment at best, and a liability at worst to management, that is to ‘the real company,’ an attitude which would fit the 18th century aristocracy in Europe very well indeed.

    As for the public, we have a thick strain of wannabe riche in the US, and always have, the land of opportunity to become personally rich. And when one doesn’t, or does a little but worries about losing what rentier slice one has acquired, it’s useful to have someone else to blame for ones inability to secure ‘what one is owed.’ The more one become rich, the more useful still to have ‘them’ to denounce to others to throw society off the scent of to whose good the way of things is rigged. Because unionism was weak here, and often loudly advanced by recent immigrants with pro-labor ideas, stigmatism of organized labor has always gone club in fist with anti-immigrant agitation as well. If one puts that tawdry cloth of deviousness and bigotry together, it is evident to any historical study that anti-unionism has always been a ‘blame the victim’ process, with a strong element of drawing attention away from the crimes of capital, often petty capital. This is an unlovely part of American society, that too many here are more ready to embrace the successful heel and criminal than those who also toil.

    Yes, there are certainly corrupt unions. No process is entirely one-sided. No one would join a union if there was a better option, but workers get what they are prepared to get for themselves. The comments above that ‘what we need are powerful trust-busting organizations’ are historically naive to the point of irrelevance. Government _always_ follows, never leads. It was agitation for the eight-hour day, public fear and disgust concerning grossly unsafe food and manufactured products, and increasingly effective strike activity by anarchist and socialist activists under great personal peril that pushed the Federal Government to tepid reforms. Has anyone actually read those putatively landmark ‘trust-busting’ activities. Much of the push for them came because other corporations and great centers of financial wealth were threatened by monopoly power in the hands of a few: the government didn’t act for society but to preserve the bulk of capitalists. And in case some of you haven’t looked up the historical records, those trusts didn’t lose any money, they just had to sell, at a profit, some of their operations or diversify. This is much of what marked ‘anti-trust,’ a level playing field for master capitalists. There was little in the way of labor reform that came out of that: this took labor agitation another generation to win.

    Ain’t no Guvmint gonna ‘regulate’ for the citizenry out of a sense of fairness, decency, or respect for society. Guvmint will get off the public’s dime when the public steps on the governators feet, and not until. And that takes, well, _organization_, as in labor organization.

    1. anon

      Brilliant.

      Thank you,Richard, for participating here and taking the time and thought you give each issue. Your posts are always signal vs noise in the posts. . It’s time for you to break from the hoi polloi and get a standing guest post slot on Yves roster.

  8. greg b

    One of the reasons for the huge disconnect between more American workers and unions is that that since the 80s more American workers have become investors. Everyone is a 401k watcher and CNBC is probably on in every employee lounge. When your future income is so dependent upon these companies you’ve invested in staying profitable, its easy for you to view “other” workers as impediments to your future well being. “Those greedy employees just killing the profit margins of my favorite stock and killing my portfolio…………………………………….. oooohhhh the NERVE of them”

    We dont view other workers as fellow travelers, they are either people to envy and try to be like or vermin to despise and wish they got their comeuppance.

    Pretty sad really.

    1. Mandy

      Hold on there greg b. “Everybody” is not a 401k watcher– see here:

      “How many Americans working in the private sector have retirement plans?

      Half of America’s private sector workforce are not covered by any retirement savings plan; their retirement will be anchored only by Social Security and whatever they have managed to save on their own.

      The other 50 percent have one of the two main employer-sponsored retirement savings strategies: a traditional lifetime pension or a 401(k)-style investment plan. Today, twice as many workers have 401(k)s than have lifetime pensions, a complete reversal from 25 years ago, according to David Wray of the Profit Sharing/401(k) Council of America.” http://www.pbs.org/wgbh/pages/frontline/retirement/need/#1

      1. greg b

        Certainly “everybody” was an overstatement, but I hope my general point is not being denied.

        Having more people who either view them selves as owners or whose vested interests are seen as tied to the owners does not make for a worker friendly society and no society can be primarily made up of owners.

        The focus on stock returns leads to a very shortsighted society as well, simply wanting the next quarter to be a sprofitable as possible.

    2. DownSouth

      greg b,

      A great book to read on this is Jacob S. Hacker’s The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream.

      What you describe is all part and parcel of the “ownership society,” and none of it happened by accident.

      One of the great quotes from the book:

      Asked why conservatives should support 401(k)s, a Heritage Foundation economist said simply, “When citizens have a vested interest in the economy and own more property (or investment assets), the more…politically conservative your society will be.”

      1. alex black

        Or, as Winston Churchill said, “Anyone who isn’t liberal at age 20 has no heart, and anyone who isn’t conservative at age 40 has no brain.”

        1. greg b

          Of course Churchill didnt describe someone who views workers as costs to be cut and looks only at short term gains as conservative. Those guys were called bad businessmen in his day….. idiots.

          1. DownSouth

            It’s amazing how the modern-day corporate thug tries to cloak his criminality in the respectability of traditional conservatism.

          2. greg b

            Yes DownSouth, there are no conservatives in the American sense who get much of a voice in England. Over there they refer to them, rightly, as lunatic fringe.

            Heck even Reagan, the guy no modern conservative can go three sentences without bringing, was a reasonable man in relation to the Boehner/Gingrich/ Pailn/ Demint crowd.

  9. Sufferin' Succotash

    For those who believe that busting public employee unions would somehow solve fiscal problems:
    Public employees, despite their Vogon-like appearance, are actually people who buy things. Since consumption does account for 70% of the country’s economic activity, it doesn’t make a whole lot of sense to underpay them the way most of the workers in the private sector are underpaid. Or maybe another consumer credit bubble like the one we’ve had for the past 25-30 years would help. No? Well, how about reversing the trend towards a 1928-style income structure? Hmm?

    1. Vespasian

      “Public employees…are actually people who buy things. Since consumption does account for 70% of the country’s economic activity, it doesn’t make a whole lot of sense to underpay them …”

      You’re putting the cart before the horse. Such logic (“that’ll have a negative impact on consumption! The horror!”) has led us to where we are nowadays with bailing out the banks (“they won’t be able to lend! The horror!”). I don’t buy it. Time for the knock-on effects of gluttony to be heard.

    2. NOTaREALmerican

      I don’t resent public unions other than there’s no way for the citizens (the taxpaying marks) to shrink the government.

      Life is about running a scam or being in on one. Public unions – like the defense industry, or my Zombie bank – are the perfect scam. We’ll never go away.

      As an amoral scumbag, I like the fact I’m able to screw somebody. As a taxpayer I resent paying for other people’s scams.

      1. reprobate

        You are looking at the wrong scam. Financial services bailouts and our misadventures in the Middle East have taken far more out of your pocket than that proportion of public sector (state and local) workers that might be highly paid relative to their private sector counterparts.

  10. billwilson

    A couple of thoughts

    1. With record low interest rates and record high deficits what exactly is left for governments to do? They are out of ammo.

    2. The scary thing is looking at what proportion of Americans are employed in “non-productive” occupations. About 1% are in jail (than add on the guards etc), higher than just about anywhere. Look at the numbers in the military or in military support – hardly productive. Look at health insurance (health care being the one continuous gainer in employment) – how many clerks are used to argue over who gets paid. Finally look at the financial services industry which adds little if any value.

    3. One of the fundamental problems is that in some occupations there has been almost no “productivity gain” from the application of technology. Unfortunately many of these are in the public sphere (teachers, firefighters, etc.) Their “relative increase in cost” versus the rest of the economy is a major burden on government.

    4. As for unions perhaps the problem is that public sector unions have remained stronger (with no counterweight from fiscal reality), while private sector ones have gotten weaker (and now can not act as a counterweight to corporations). I continue to expect that before this is over public sector unions will become major targets.

    1. aet

      If deficits are at record highs, then why are interest rates at record lows?
      Ought not it be rather the reverse…when there’s lots of demand, interest ought to be high, no?
      You’d think that with all that borrowing, rates would be up.

  11. kstills

    Hey, Yves!

    I agree with this.

    Unions, by and large, are not inherently ‘bad’ up until they capture the political process (see: public service unions).

    So the give and take from unions and corporations would appear to be as necessary as the give and take among political parties and branches of the government.

    As always, however, the devil is in the details.

  12. Ignim Brites

    Why is there no sense of urgency today about unemployment as compared to the early 80s. Part of the answer lies in the stunning rate of increase in unemployment last year. I emphasize stunning. The intellectual, cultural, and political elites gaze in disbelief. And, of course, they certainly don’t want funds for the relief of unemployment to compete with funds for propping up the stock market and property values. The main aim of all the bailouts has been primarily to prop up home prices of the saltwater drinkers on the East and West coasts where the intellectual and political elite are domiciled. Disbelief, self-protection, self-soothing, catatonia. These are the reasons why unemployment is not an issue.

  13. dave

    I come from a union family, one that has steadily become disgusted by unions in America. Unions exist for the purpose of improving the lives of union administrators and nothing more. All that crap about workers is a bunch of shit. Unions today frequently sell out younger workers (divert huge resources to pension plans while cutting new worker pay). They are often racist and xenophobic (keep out “cheap” labor). They are often violent (destroying property and attacking “scabs”). And they almost always resist any technological or efficiency change (having a robot build cars means less jobs for union workers, even if it means cheaper cars for millions of consumers).

    Union bosses are just a different kind of management parasite, trying to extract their rent based on pitting people against each other.

    Low skill workers have no bargaining power, why is that a surprise? Why is that wrong? Bargaining power is based on supply and demand. In an automated world there is no demand for semi literate assembly line schmoes. Either they can get some real skills (I have a lot of bargaining power) or they can accept reality.

    My grandfather worked hard to organize people so they could achieve a basic level of living. Safe working conditions and enough pay to feed themselves. When my mother quit being union shop steward 50 year later it was because her workers were demanding 15 min smoking breaks every hour on the hour. That’s the state of unions today.

    1. PDC

      Dave

      let’s suppose that your picture of Unions is a correct one (though I have my doubts). Do you think, then, that the solution is to trash the Unions? Let each individual to “fight for himself”?
      What kind of outcome do you expect from such a strategy?
      And again, I still don’t understand how you can put the blame of unemployment on the “low skills” of the workers.
      Do you seriously think this is the problem?
      Do you seriously think that qualified workers do not loose their job? Or that they can easily find another one?

      1. anonymous

        It’s not that simple. India’s automobile market enjoyed an excellent 2009 and is off to a great start in 2010. Moreover, India’s auto producers are seeing significant increases in export sales. The industry leaders are often hybrid companies formed from Japanese or Korean companies and Indian firms. They produce a product that consumers purchase. Too few US and European workers possess skills of any meaningful kind. Knowing how to build a spreadsheet is one thing, knowing what to do with it another, and building something unique and valuable, often another. The US has decided to rely on fossil fuel technology at a time when most nations have already committed to nuclear.

        Betting against Uncle Sam has been a bad idea for about two hundred years. A 14 trillion dollar economy produces a lot of demand. It isn’t clear, however, why a mail carrier should be paid a middle-class wage in 2010 for carrying a bag of paper around. The jobs problem will be solved at the state and local level once Americans understand the cavalry is coming. The unemployment rate and the underemployment rate is likely to remain high as long as sensible people continue to wait for inept and corrupt politicians to provide answers.

        Locally-owned, grown or made is the way out of this mess. My 2 cents.

          1. charcad

            Locally-owned, grown or made is the way out of this mess. My 2 cents.

            Sure it is. The truth is the vast majority of people have been conditioned to passively whine for Washington or someone to mail them a check which they’ll then spend at Wal-Mart.

            “Local”? It’s easy to start with the local waste/recycle stream and other locally available materials. When I look at local landfills I personally see vast mountains of fuels and raw materials being allowed to rot and oxidize away.

            In North America everything needed to set up a commercial quality foundry can be found within a very few miles.

            Local waste biomass continues to rot by the megaton when it could be processed into metallurgical grade charcoal. Political log rolling leads to the export of “recycled” scrap iron, steel and aluminum, rather than reuse in manufacturing closer to home.

            Polycarbonate is a superb plastic suitable for remelting and reuse as components for hydroponics systems.

            Just add knowledge. Easy. Except when one deals with a population afflicted by induced amnesia, apathy and abulia (look it up).

        1. Ronald

          “It’s not that simple. India’s automobile market enjoyed an excellent 2009 and is off to a great start in 2010. Moreover, India’s auto producers are seeing significant increases in export sales.”

          Emerging countries offer significant economic gain for traditional industrial activities including automobile manufacturing,road building,shopping center build outs,housing,forest clear cutting, mining to name just a few. The issue is not emerging countries but the U.S. which is built out, has plenty of roads and auto’s, shopping centers etc. The problem is that America was built out during a period of cheap energy, oil back in the 60′s was less then a buck a barrel but maintaining and continuing that build out with energy costing $80 to $100 a barrel gives very different grow rates. Our modern economy based upon consumer spending is quickly fading as an alternative to the prior manufacturing labor intensive model. JIT inventory sounds great but in reality modern manufacturing requires volume production 24/7 as high cost of equipment and overhead quickly eat into profit margins. The modern
          manufacturing plant can produce millions of items that consumers cannot afford and fill up various warehouses and inventory points around the world as we have recently seen with excess auto production. It maybe that our modern economy is a bit to complex in the final analysis.

          1. anonymous

            Ronald writes…

            Agreed. I see things somewhat differently, however. The question of perceived value is key here, especially in demand. Do I need another pair of shoes? Actually, I need two.

            So it doesn’t really matter whether the US was built out at a time of cheap energy, what matters is whether anyone in America knows how to build something of value, new or old. An educated and skilled workforce and access to relatively cheap raw materials requires only reliable demand to produce a local economy. And I’m not talking about barter. We’ve all seen the Wire episode where Frank observes ‘nobody makes anything anymore’. Frank’s right and he’s not the first or only one to notice.

            If I’m willing to settle for crap, then I’m likely to have crap offered to me. If I want or demand something better and I’m willing to pay for it (and I am!) then I stand a much better chance of getting the value I want.

            We settle for less too often. Don’t work so hard, you’re making the rest of us look bad is an attitude that can’t really be tolerated in any successful economy. There’s too much of it at all levels of business.

            The great thing is that the market is going to sort most of this out for us. Those without real skills are going to face real problems, just like we always have. Prick up those ears and sniff the changing breeze. That’s the scent of fresh meat and greener pastures.

            Time to pick up a spear.

      2. NOTaREALmerican

        One of the major problems that any of the guilt-ridden political ideologies have is that peasants will always resent the success of other peasants, much more than they resent the success of “their betters”. Then there’s the perpetual problem of the smart-amoral-scumbags infesting any organization where there is loot to steal.

        Perhaps all peasant organizations will self-destruct before they can succeed simply because the peasants in the organization will never be smart enough to understand they need smart-amoral-scumbags (the union management) to screw business management, and this screwing process requires less-than-pure people.

        The typical American peasant is wishing for purity in their political system, and are unable to comprehend why they need their own smart-amoral-scumbags to win.

        1. dave

          Union bosses tend not to screw management. Usually they work together with them to steal from the next generation. Unfunded pension ponzi schemes are a unions best friend.

          Even when they succeed in screwing management and raising wages this then attracts new employees to the field. Then the only way to keep wages up is to keep new employees out, often by discriminating against new entrants and “scabs”. Any victory for union workers usually comes at the exclusion and detriment of workers not in the union.

          1. NOTaREALmerican

            Well, you’re surely not suggesting that the union bosses should ask for lower wages, are you? Less is never more. If the management scumbags know you’ll accept less, they’ll screw you (trust me on this, I’m an amoral scumbag – I know that’s what I’d do).

            Life is about screwing somebody. That’s what capitalism 101 teaches and why capitalism is the perfect system, it’s simply the name used for natural human economic scumminess.

            So, what is the alternative to smart amoral scumbags union bosses? Some sort of libertarian-fantasy saintly human union boss? You can go with the assholes or with the nice guys, guess who gonna wins?

  14. Cocomaan

    This was a nice speech which outlines exactly what Yves is talking about. It was given in 2008, but it could have been given today:

    http://www.irle.berkeley.edu/events/spring08/feller/

    The Berkeley Journal of Employment and Labor Law presents the Second Annual David E. Feller Memorial Labor Law Lecture

    “How a Low Wage Economy with Weak Labor Laws Brought Us the Mortgage Credit Crisis”
    Featuring Damon Silvers, Associate General Counsel for the AFL-CIO

    April 2, 2008 – Boalt Hall, UC Berkeley

    “… To grasp what needs to be changed, it is necessary to review the thirty years of policy that got the United States to where we are. But in the area of labor market regulation, we really need to go back further, to give the background of a time when we had a high wage national labor market policy. Between the passage of Section 7 of the National Recovery Act in 1933 and the passage of the Taft-Hartley Act in 1948, it was pretty clearly the policy of the United States government to foster unionization in the private sector. This policy found its clearest expression in the preamble to the National Labor Relations Act, but its most powerful political expression in the actions taken by the War Labor Board. Here is the War Labor Board in action. This man was the CEO of Montgomery Ward, the Wal-Mart of its day.

    [Picture]
    Army Seizes Montgomery Ward President
    Avery Sewell on April 27, 1944

    If you saw this picture in your newspaper, as most American employers did in 1944, it didn’t take much legal analysis to understand that there could be serious consequences to opposing workers’ right to organize.”

  15. Wayne

    “But the real problem may be that all these approaches are past their sell-by dates, helpful around the margin but insufficient to provide lasting relief to our current malaise. We may be at the end of a paradigm.”

    Exactly! But what if it’s a much bigger deal than the end of the neoliberal deregulation paradigm? What if it’s the end of the industrial capitalism paradigm? With the benefit of hindsight, it was probably not the best idea, in an era of looming resource constraints, to hollow out our industrial base and beggar the American working class while encouraging and enabling American-sized consumer appetites in the countries with populations geometrically larger than ours. (When you are 5% of the global population and consume 25% of its resources, best to let sleeping dogs lie.) Now Macondo – the second major deepwater environmental catastrophe with just 130 or so deepwater rigs deployed so far – becomes a forcible reminder, not just of how hard it will be to extract what oil remains, but also of the incredible financial risk energy companies undertake in attempting to extract it. Industrial capitalism simply can’t function without the implicit assumption that an ever-increasing energy supply can be profitably extracted. That is why the global economy has entered its zombie phase.

  16. ds

    some of the criticism of public sector unions here is misplaced. Firstly, the supposedly lavish salaries are only for the most senior employees. Secondly, there really is no management track in many public service professions. There is no “middle management” in a public school like there is in a corporation – so in terms of experience and knowhow, many of our public school teachers are the equivalent of managers or directors in a corporation.

    Most important however is the context of this criticism. Some would say public sector workers are overpaid when compared to private sector equivalents. But why isn’t it the other way around? if anything, the reality is that private sector workers are UNDERPAID relative to public sector workers. So our focus should be on raising the wage level for all rather than trashing those who already earn a fair wage.

  17. zanon

    have you heard NPR story on NUMMI union?

    they come in drunk. they do drugs. they have sex. anything but actually make cars that run.

    they ran the plant into the ground.

    i work with union workers. they come in drunk, collapse on desk, and urinate on it. i cannot fire them. they file greivance over every little thing.

    it is not way to run a company.

    maybe unions in other countries are different — that is fine other countries are different. but in US they are disaster, and mostly for work rules.

  18. Ishmael

    Dave had it right when he said — “I come from a union family, one that has steadily become disgusted by unions in America. Unions exist for the purpose of improving the lives of union administrators and nothing more.”

    I have worked around unions for close to 20 of my 30 years in business. Almost all in upper management and many in the C ranks. Unions are job killers. It is not just the pay it is the work rules and the inflexibility of compensation when the economy changes. How many times have I seen businesses shut down due to unions not willing to take cuts when the whole macro enviroment change.

    Any more if I had a business and the unions tried to unionize it I would either (1) sell it or (2) close it. Otherwise it is slow death. Public unions are the worse of the unions. They are like a big vampire that has fastened upon this country.

    Now many reading this will say what an A-hole, but people hire me now days to fix troubled operations. How do I do that. I fire slackers and pay the performers better. Most times with me, average compensation goes up a lot over what it was previously, but guess what else goes up — productivity. Can’t do any of that with unions. The biggest criticism I have heard is C players hate working for me and A players love it. What do you want working for your organization. None of this can be done in a union enviroment.

    As far as Europe (I have worked there also), well it’s heavily union situation is melting down every day. Check out the Euro.

    Developed countries due to over population will have lowering standards of living.

    1. PDC

      I’m sure that your A players must be delighted to work under your enlightened guidance. I’m particularly interested in your theory, which is totally new to my knowledge, that US economic problems can be explained by a widespread vampirism… this is scary! Must remember my garlic next time I come…
      greeting from (melting) Europe.

        1. aet

          Gee I love the internet: sooner or later, the conversation always seems to turn to the subject of blood-sucking freaks.

  19. anonymous

    I belong to a union and agree that public service unions give trade unions a bad name. The hollowing out of the US manufacturing sector occurred for three reasons: CEO’s who placed their own earnings before those of long-term investors, union workers who defended workers who should have been fired, and consumers, many of them middle-class, who decided to purchase cheap goods made in third-world countries.

    That’s the reality today. In areas where domestic demand is high, jobs and local economies survive. it’s not all grim. But the steady erosion of income and profit-producing skills is the real story, IMHO. Obama and the Dems in power are part of the millionaire elite who really don’t understand what the rest of us are going through. They don’t know and they don’t care.

    Nobody should be surprised and everyone should organize.

  20. mytwosenseworth

    I’m a member of a private labor union, but in a state with a “closed” shop – a condition of employment is that you must join the union within a short defined period. Many states are “right-to-work” states, where you can opt to be in a union or not as you so choose. The problem is that in an “open” shop situation such as this, the non-union person derives many benefits of the union without paying for them. If discipline is threatened, they can demand the union to represent them in meetings with management; this I find to be deplorable.

    Unions are far from perfect entities, and public unions are especially rigid about work conditions, as has been noted here. But without a set of check and balances, many employers would run roughshod over their workers via wages, hours and rules of conduct. And without unions, the middle class would never have evolved in the first place; Those on the floor would be the “working poor” with supervisors and executives extremely well-off in wages and benefits. So until sometime better comes along, or there is a major culture change in Washington about companies being “too big to fail” and public corporate welfare, private and public unions are “necessary evils” to counterbalance the skewed policies and laws passed by those elected officials.

    1. DownSouth

      mytwosenseworth,

      My father was a life-long union member, and his take was very similar to yours.

      zanon, Ishmael and dave above are all quite inventive, spouting their concoctions and outright lies. But it is abundantly clear from anyone with a working-class background that they know absolutely zilch about unions, union members or what it’s like to live in a working-class household.

      1. charcad

        Yeah? Well I come from a union home too. IUE 901. I even remember a thin Christmas time when I was about four, and walking a picket line with my dad at GE’s old Taylor Street plant.

        My own summer working in a UAW shop brake parts plant totals precisely with what “Ishmael” reports. Aged, antique equipment and piece processes that were 40-50 years old then in the late 1970s, a corrosive “us” versus “them” attitude systematically inculcated into the work force, so-called union leaders making their way by pure rabble rousing.

        Owners and management would have had to be insane to have invested in capital equipment upgrades in that plant given the human environment. They instead moved their antique machinery to Mexico a short time later.

        Here’s a classic example of the “leadership” that routinely appears in US labor unions: http://en.wikipedia.org/wiki/Carla_Katz

        She’s ex-Goldman-Sachs ite Jon Corzine’s main squeeze. “President”. Yeah right. There’s no evidence she even worked one god-damned day in her life on any shop floor as a communications worker. And the only utility pole this harlot ever worked was Jon Corzine’s.

        You can take your Marxist oriented labor unions and put them in the Henry Ford museum where they belong. They’re long obsolete, just like manual labor on production lines.

        1. DownSouth

          Owners and management would have had to be insane to have invested in capital equipment upgrades in that plant given the human environment. They instead moved their antique machinery to Mexico a short time later.

          And you think this had nothing to do with it?:

          Cost per hour of factory labor (1998–In US Dollars)

          México 1.51
          Taiwán 5.82
          South Korea 7.40
          United States 17.2
          Japan 23.66
          Germany 31.88

          http://alainet.org/active/1075&lang=es

          1. charcad

            Hello? I’m talking about events in 1978. I personally ascribe the USA’s partial industrial collapse back then to:

            1. Oil price shocks and effects of oil industry offshoring. Conveniently forgotten is the fact that about 20% of US electricity in the 1970s was generated by oil fired plants. A lot of nuclear plants came online in the late 1970s and 1980s to replace these.

            2. Cumulative cost effects of OSHA, EPA, EEOC and liability insurance to defend against “creative” tort law.

            3. Hyper-dysfunctional and politicized labor union leadership.

            3a. When people identify their organizations with aggressive partisan causes they are entitled to no complaints when the “other guys” reply in kind and screw the shit out of them without mercy.

            4. Perverse tax disincentives to modernized capital equipment investment. This worked in tandem with rigid union work rules preventing efficient redeployment of labor.

            5. The 1972 Tokyo round of GATT.

            6. The cumulative effects of Wall Street “advice” on subjects which the “The Street” doesn’t know its ass from a hole in the ground, to put it very mildly.

  21. Edward Lowe

    Yves … you’re getting closer to recognizing class-based interests. You may find yourself re-reading Marx one of these days after all — ;) — (not the crap about Utopian projects, but his analysis of capitalism). Michael Hudson has written often about the conflict between the rentier class on the one hand and labor and capital classes on the other. Obama is a creature of the former (indeed, given Michelle’s past, it’s a regular family concern). The squeeze on labor has been a 40 year policy project now, and, frankly, it his run up against a wall. Households are de-leveraging because they have to … wages are stagnant in real terms, dual earners in families with children (who consume the most) cannot increase their hours working and still maintain said household.

    Since rentiers are making out like bandits in the current system, they simply don’t care what happens to the laboring classes, moreover, on a national level, they are happy to see the complete loss of productive capital too. BTW, I wouldn’t consider Big Pharma a capital interest, their profits seem to be coming from creating enclosures in human health (i.e., “depression” and “cholesterol”) and then putting people on life long, debilitating drug regimens — i.e., collecting rent from the sick and infirm — often made that way by said “treatments”.

    The policy fix here is that same as it always has been for the 200+ years of capitalism as a world system … tax the crap out of unproductive rentiers and reward labor and capital (i.e., sectors that actually add value to the economy). Basically, a return to Fordist alliances between labor and capital against the rentiers.

    When the democrats start running on that platform, then I will be listening.

    1. MG

      “Yves … you’re getting closer to recognizing class-based interests.”

      Where do you get this conclusion from any actual polling or data? I haven’t seen anything that really supports this. If anything, the polls I have seen show a fair amount of disgust & apathy towards public unions across a wide spectrum of voters in both parties.

      1. Edward Lowe

        On the one hand, people are susceptible to propaganda just as Edward Bernays said they would be. On the other hand, lets face it, unions haven’t really been doing so well in representing the interests of labor in the private sector (they are losing ground rapidly in the public sector too, no matter the nonsense one reads or sees in the MSM outlets like CNN — our local teachers just ‘won’ and 10% pay cut and had to strike to get it!, for example).

        Americans have been so confused about what “class” means by 60 years of BS sociology that equates class with position in an income/status hierarchy. A proper definition of class is one that recognizes your position in the division of labor and the primary source of your income associated with it (to *grossly* oversimplify). Income can come from three sources — labor, capital, or rent. That’s been true since before Adam Smith wrote about the Wealth of Nations all so many years ago, it remains true today. A social class’s interests are largely aligned with its primary sources of income and the activities it must do and relationships it must maintain to sustain that income (i.e., selling labor in the market, owning or managing or representing capital, or enclosing key economic resources and charging rent to either labor or capital to access them — and servicing rentiers rights through professions like law — again a gross oversimplification for descriptive purposes).

        Since most people in any industrial society are dependent on their labor for their livelihood, they are, by definition a class and their interests are in maintaining access to labor markets and earning enough from their labor to sustain a modicum of a decent lifestyle. Sure, some in the higher end of the laboring classes may make some money in the markets (a rentier activity) but they don’t butter their bread with it.

        Unions on the other hand are institutions that purportedly represent the interests of labor against the owners of capital or their managers — unions are not a social class in and of themselves. Therefore, people can still have a shared class interest and dislike unions (either because they have swallowed propaganda or ’cause the unions suck at representing their interests). I see no contradiction here.

        Labor and capital do have a allied interest — building real wealth (i.e., stuff that has value) of the economy — rentiers typically sit on their butts and collect money simply for maintaining a legal fiction that grants them exclusive right to a key economic resource…they don’t actually add stuff that has value to the economy, rather, like parasites, they extract that value or redirect it into their pockets. Thus, historically, they have been vilified by both labor and capital.

        1. JTFaraday

          Historically, maybe. But it seems to me that today’s grossly overcompensated executive class in US real economy corporations have aligned with finance, which assisted them in developing ever more creative ways of looting their organizations.

          Also, over the past 20 years, Finance went from being a relative academic backwater in business schools to being front and center, calling all the shots. It seems most MBAs today are finance MBAs.

          In other words, they’ve blurred the distinction between capital and rent seeking. Corporations exist to pay the executive suite. They’re ALL rent-seekers. If they manage to do anything else, with this kind of “leadership,” well, that’s just coincidental.

    2. DownSouth

      Edward Lowe,

      While a few crumbs might fall out for the workers as the landed aristocracy and the bourgeoisie duke it out, I wouldn’t get too teary eyed over the new capitalist set.

      For instance, C.R. Boxer in The Dutch Seaborne Empire: 1600-1800 writes of the struggle between the monarchs and aristocrats and the new middle-class in Holland:

      When the States of Holland formally renounced their allegiance to King Phillip II of Spain in 1581, they also enacted a law forbidding the town councilors to consult with the representatives of the guilds (from whom they had originally sprung in the Middle Ages) or of the civic guards (as such) on any provincial matters. The regents thus took advantage of the struggle with Spain to consolidate their position as a self-perpetuating burgher-oligarchy and to exclude the ordinary citizens from any direct say in either the local or the provincial administration.

      Having thus consolidated political power, the new bourgeois ruling elite were no easy task masters, perhaps even worse than the aristocracy they displaced. As Boxer goes on to explain:

      Although adequate unemployment statistics and other relevant materials are lacking, it is clear from numerous contemporary accounts of the Dutch Republic in its ‘Golden Century’ that economic expansion and national prosperity were accompanied by great poverty among many groups of workers, as happened later in England during the Industrial Revolution… As early as 1566 a Leeuwarden chronicler noted that, in sharp contrast with the wealthy regents and merchants, stood the mass of the ‘humble, distressed, and hungry common people’.

      [….]

      Out of 41,561 households at Amsterdam in 1747, some 19,000 were living in squalid back premises, cellars, and basements.

      [….]

      Taxation in the Dutch Republic, as in most other countries, was apt to fall more severely on the poor than on the rich, but it was not framed entirely without consideration for ‘ability to bear’. A vast net of excise was levied on most consumer goods and on many of the ordinary activities of living. These imposts naturally bore more heavily on the peasant, the sailor and artisan than on the wealthy burgher, the merchant and the rentier.

      [….]

      If the peasants had to be satisfied with what Sir William Temple called ‘short and heartless food’, at any rate they usually got more to eat than the lowest class of urban workers, the so-called grauw, or rabble. This element proliferated in the larger towns, and the strong aversion with which it was regarded by the upper classes comes out very clearly in contemporary literature and correspondence….’the sottish ill-natured rabble, who ever hate and are ready to impeach the aristocratical rulers of their republic’, as the author of the “Interest of Holland” declared in 1662. Nor did this scorn mellow with the passage of time; for over a century later the regents still denounced the ‘surly gruffness, bestial stupidity and disgraceful dissoluteness’ of the urban proletariat. A]s may be gathered from these and many other typical denunciations of the grauw, the regents were also rather afraid of the rabble, or rather, of what the rabble might do if it got out of hand.

      [….]

      It is true, however, that class differences in the Dutch Republic, as elsewhere, were usually accepted as an aspect of the eternal scheme of things. Moreover, the urban proletariat were unarmed, and the burgher militia or civic-guards could be relied on to obey the orders of the regents in the event of any conflict with the grauw.

  22. charcad

    Brad DeLong points out that Ronald Reagan was far more concerned about unemployment than Team Obama (or Washington generally) is, and also took far more aggressive measures to combat it.

    Reagan was willing to tackle illegal immigration in the sense of also restricting it. The Great Compromise he promoted ultimately turned out to be a classic bait ‘n switch scam. We got Amnesty without improved illegal immigration enforcement.

    The reasons for the long standing bipartisan agreement to undemocratically subvert the national laws on immigration are well known. The white trash WASP country club element of the GOP is addicted to dirt cheap labor. The so-called “progressives” (think Andy Stern) want to import as many non-whites as possible to swamp the GOP demographically.

    The moment the high unemployment rate is brought front and center on the agenda is the moment a spotlight hits the large population of illegals. A logical and reasonable conclusion is they contribute to the twin problems of high unemployment rates and rapidly growing income stratification.

    1. sherparick

      I love how Authoritarian Cons like Charcard excuse the Sainted Ronald from all the ill effects of his policy decisions. Let’s see, from January 1987 to January 2009, Reagan, Bush Senior, and Bush Junior held the Presidency for 14 of those 22 years. And of the 8 held by Clinton, 6 years of that was controled by a Repulbican-Conservative majority in the Congress. The point of the 1986 law was to create employer sanctions for employing illegal alieans. And from the start, under Reagan, those provisions became a dead letter. Instead, the drift has been to scapegoating and outlawing the illegal immigrant so that they would be more and more under the dominion of their employer.

      Andy Stern and the SEIU simply had to go where they did since so many of the people they wish to represent are illegal, or married to someone illegal. If a union is to represent the interests of its members, in requesting amnesty it just defending and promoting the interests of the people it has organized or hope to organized.

      1. charcad

        I didn’t excuse Reagan. I clearly stated his policy was a failure. And in my opinion it was designed to fail. Afterwards neither Bush was interested in enforcing the immigration laws. They did all they could to subvert it.

        Bush II very openly pushed for Amnesty II. And he resisted enhanced border control and immigration law enforcement until late 2007. At that point Michael Chertoff at DHS started a show of enforcement on high profile illegals. This was designed assuage GOP voter hostility over the repetitive GOP elite betrayals on immigration. The objective was to help McCain slip in.

        Your problem is you’re in such a rush to emotionally masturbate yourself with a sense of self-righteousness you didn’t bother to read what I wrote.

        scapegoating and outlawing the illegal immigrant

        Very illustrative of the real mentality prevailing. The immigration laws are not the only laws these illegals think they don’t have to follow.

  23. rickstersherpa

    Peter Dornan at EconoSpeak, via Mark Thoma and “Economists View” has the following comment which perhaps looks deeper at why the elite is so indifferent to mass unemployment and growing poverty in the U.S.

    “…The process is more complicated: where one sits in society and the kinds of problems one typically has to solve leads to a way of thinking, and this manner of thinking then informs politics. For centuries, the finance perspective has played a central role in economic theorizing, and there is ordinarily a body of research to support it. What I am proposing is this: economic orthodoxy is regaining control over policy because it reflects the outlook of those who occupy the upper reaches of government and business….”

    http://economistsview.typepad.com/economistsview/2010/05/a-political-economy-moment.html

  24. vlade

    So, how exactly do unions differ from any other special interest group?
    I’m sorry, but if you’re telling me that “some one should fight for workers rights”, I say “yes, the workers themselves, not their self-selected representatives”.
    I can see it in the UK, with people like RMT’s Bob Crowe. I’m sorry, but union leader which is on salary over 100k GBP, representing people earning on average twice UK’s median salary in an effectively government organization, with ability to bring London to halt is not my idea of protecting wider’s society’s interest.

    Unions are ultimately the same political vehicle as are professional bodies, cosy oligarchies and political parties, nothing else (UK’s Labour is a prime example of that – political vehicle for the most powerful UK’s unions).
    Any of those can be a vehicle for good or for evil, it’s not inherent in either of them to be more good or more evil than the other.
    If anything, given the propensity of bastards to be more power hungry than decent people I’d say that they are are more evil than non-organised workforce.

    Any elected “representative” bodies are and will be subject to gaming by special interest groups, and it will be in their interest to put in rules that will enhance they power.

    I say Athenians were on something and sortition (while not perfect) should be brought back!

  25. Charlie

    “Richard Kline says:
    June 2, 2010 at 5:47 am
    Or those public unions are going to lead the way toward a more just and socially conscious society.

    Just who do you think would take those public sector jobs for the tuppence ha’penny and no pension that ingrates like you two would be willing to pay. Few and none, and those not competent. Some of think that teachers are good for their society. Clearly some of you think that they should work for free.”

    That’s a straw man; there’s a big gap between a public-sector job and minimum wage. Or do you really think that, say, $40,000 a year can only fetch the dregs of society?

    As for teachers, maybe you should learn about those people who taught for a “tuppence ha’penny” in the bad old days – for instance Samuel Johnson. Do you think he taught worse than the modern product of an education degree?

    The problem with unions today is that they’re alive through inertia; collective bargaining is natural in an environment with high demand for labour, and doesn’t work very well when there isn’t.

    That’s why stimulus didn’t fix the Great Depression in America but WWII did – the fact is that the “broken window fallacy” isn’t always a fallacy, because it forces a more equal distribution of resources that in turn stimulates the economy. A country that exports much more than it imports (as we did during the war) has more need of labour – not to mention the artificial labour shortage created by Army.

    If we could increase the demand for labour without bombing Europe into rubble that would be a plus. And it would lead to more collective bargaining by workers. But on Team Obama’s list of priorities increasing the demand for labour is somewhere around last.

    In a nation that imports most of its manufactured goods, manufacturer’s unions become a useless relic. Then their jobs get “outsourced”.

  26. purple

    This is one of your best posts. I can’t see things changing unless there is push back by ‘the masses’, for lack of a better word. The increasing emphasis on analyzing behavior by ethnicity – beginning at a very early age – is helpful to the elite in preventing any kind of broad based movement. Divide and Rule is an age old and effective strategy.

    One does wonder where Demand will come from. China really has no interest in improving the lot of its peasants for similar reasons, but the mono-ethnic nature of their working class means there might be more resistance and pushback.

    1. NOTaREALmerican

      There won’t be a “push back” until things are really “bad”. In Sacramento, supposedly with high unemployment, there’s still lots of new peasant blingmobiles and high-end German automotive iron driving around. The US is a wealthy country, there’s huge amounts of fat that needs to be burnt off before “things changes”.

      White tea-partier – fat, dumb, and happy – living off their socialist public dole – aren’t going to change anything. People have to be hungry and mad, not just stupid and mad.

      1. purple

        Unless there is push back we will see real AD continue to be weak. Capitalists may be ‘smart’ when it comes to running individual companies, but not an economy. What’s good for the goose is not good for the gander. They are betting on China for Demand but China has over capacity.

        I suspect smarter members of the elite realize this and may even resurrect aspects of union apparatus.

  27. Ishmael

    Anon says — CEO’s who placed their own earnings before those of long-term investors, union workers who defended workers who should have been fired, and consumers, many of them middle-class, who decided to purchase cheap goods made in third-world countries.

    Ish here:

    Agree with those comments. Consumers who sacrifice quality for cheap products ultimately pay the price in the long run.

    Maybe some might not approve of my enlightened form of management. What makes an A player is usually attitude. A players usually will do what it takes. C players will do what it takes to get by. Unions in the end ultimately fill a company with C or worse employees because it is near impossible to fire them. A players end up leaving unionized operations because those that out perform mediocrity can not advance and are not rewarded.

    Mytwosense says — But without a set of check and balances, many employers would run roughshod over their workers via wages, hours and rules of conduct.

    Ish here – The Check and balance is the difference between winning and losing. A good company keeps executive compensation under control (I believe in no secrets on compensation and would post mine on the employee bulletin board if necessary – anyone who wants to work the hours I work and can do a better job is welcome to my position) and reward employees for performance. Employees have to be part of the process and understand how things stand. Treat most employees well and with transparency they will deliver, treat employees poorly with a lack of transparency and they will not and ultimately the complete organization will enter a death spiral.

    If you want incomes to rise you get rid of the illegals who suppress lower income jobs (go to the Midwest and you see white people doing the work that Hispanics do in Southern California) and get rid of H-1-b’s which are suppressing the income of higher educated people. Besides if we have a shortage of a certain field don’t wages go up and people then major in that area in college. What a load of crap that we need to bring in these people for rare skills. The number one degreed person brought in on the H-1-b programs are accountants for Big 4.

    For those who gasp at my comment about Europe, please read the comments today in the WSJ and Mish’s site.

    ‘The Euro Zone Has Failed’
    By VÁCLAV KLAUS
    Czech Republic President Václav Klaus
    Extensive studies published prior to the launch of the European single currency promised that the euro would help to accelerate economic growth and reduce inflation and stressed, in particular, that the member states of the euro zone would be protected against all kinds of external economic disruptions (the so-called exogenous shocks).
    This has not happened. After the establishment of the euro zone, the economic growth of its member states has slowed down compared to previous decades, increasing the gap between the rate of growth in the euro-zone countries and that in other major economies—such as the United States and China, smaller economies in Southeast Asia and other parts of the developing world, as well as Central and Eastern European countries that are not members of the euro zone.
    Economic growth in Europe has been slowing down since the 1960s, thanks to the increasingly damaging economic and social system which started dominating Europe at that time. The European “soziale Marktwirtschaft” is an unproductive variant of a welfare state, of state paternalism, of “leisure” society, of high taxes and low motivation to work. The existence of the euro has not reversed that trend. According to the European Central Bank, the average annual rate of growth in the euro-zone countries was 3.4% in the 1970s, 2.4% in the 1980s, 2.2% in the 1990s and only 1.1% from 2001 to 2009 (the decade of the euro). A similar slowdown has not occurred anywhere else in the world (speaking about “normal” countries, e.g. countries without wars or revolutions).

    Ish here

    For those who think the heavily unionized European model is the one to follow. For further evidence look what unions did to industrial UK (they use to call it the English Disease). North Sea oil and dodgy banking has kept the UK afloat subsequent to the failure of industry in the UK.

    1. DownSouth

      Ishmael,

      It is extremely difficult to respond to your distortions and outright lies in a civil manner.

      You pontificate: “A players usually will do what it takes. C players will do what it takes to get by. Unions in the end ultimately fill a company with C or worse employees because it is near impossible to fire them.”

      My father was one of those “A players.” In fact, he was an AAA player. He was a finish carpenter and cabinet maker of the highest order. We lived in Midland, Texas, which back in the 50s thru 90s was, because it was the control center of the most prolific oil basin in the United States, one of the richest little towns in the nation. When I left there some years back, it had a population of about 100,000 but had seven of the Forbes 400. And my father built the cabinets and did the trim work in many, many fine homes.

      And my father was also an avid union man until the day he died.

      Your campaign of disinformation and outright lies is dehumanizing and insulting to working class people. To think that working people can’t instantaneously see through your claptrap is an insult to their intelligence.

      So in my book you take the prize, hands down. Your commentary is the most arrogant, pompous, ignorant and benighted that I ever recall seeing here on Naked Capitalism, and I’m sure that if my father were still alive, he would have a few choice words for you. Let me assure you that he, like most working-class men, didn’t mince them, and it wouldn’t have taken him but about two seconds to sum you up and tell you to cram it up where the sun doesn’t shine.

      1. JTFaraday

        Tsk. There are no “As.”

        The only “A” in a business consulting situation is the middleman parasite who has inserted himself into the organization–probably through some personal or prior business relationship with Teh Boss–in order to leech off existing payroll, by conveniently and universally grading all underlings with a “C” and siphoning off their pay accordingly.

        Call him “Ishmael.” Call him “MBA.”

        1. DownSouth

          The point I’m trying to make is that my father knew he was probably better than 95% of the other carpenters in his union, maybe 99%.

          But he was intelligent enough to also know that, regarless of how good he was, without the union and the solidarity with his fellow carpenters and other construction workers, he wouldn’t be making a fourth of what he was.

  28. Paul Tioxon

    Well you really get to know who your friends are when you talk about economic stratification aka class in America. In jolly old England, the working class trusts their overlords as far as they can throw them. The fact that the unions there do not function as admirably as you would like them to speaks more about the economic wasteland that is Great Britain than what enlightened workers should be doing about it. Let’s start with the published facts about real estate, property. Who owns England? You can count on one hand the owners of at least half of the land. Gee, I would really be glad to be a freeman in England. Stakeholder theory kind of goes out the window in a withering class arrangement that continues to this day. Do not try to compare us with a country with a Queen Mum as the leader, owner, and hereditary parasite par excellence. They could start with some serious land reform over there, not union carping as the principle causal agent of a weak economy vis a vis Germany. What Germany has that is comparable to the USA is a social order created tabula rasa. And a heightened sense of zero tolerance for economic promises that are easily seen through lies. The Germans do not have the class system as intact as the British for obvious reasons, the younger among you Wall Street types, check out the history channel some time on yr iphones to see what I’m talking about. It is at times like these that the well off see what the blue collar knows from direct experience, even without the benefit of social sciences. Oral history, what happened to us when we got here, the molly mcguires, the coal company Pinkerton private armies, we don’t need no stinkin lectures about the White House not jumping out to our side from Ivy League trust fund types. The unions are survival organizations, not bastions of white privilege, not institutions of male hegemony, and with 15 million members, much larger than the petit bourgeois tea bag political posers. Even larger than Moveon.org and FDL. Seriously dude, even bigger than the NAACP and the ACLU. The unions are here for a reason and they won’t be disappearing anytime soon. Unless of course, Wall Street shares the wealth, allowing for the 3 day work week. 3 days of economic duty to keep the republic fed, housed and educated in health, 4 days to do whatever, mostly take care of my family.

    1. NOTaREALmerican

      The natural order of things is management (vassals) screws labor (peasants) and stockholders (nobility), and – of course – vise-versa.

      The American peasants don’t know they are peasants, they think they are vassals. They’ll figure it out in about 30 years.

      1. RagingDebate

        No, the American people began figuring that out from 2008-current. What they haven’t figured out is that the joke of the entire world is on the American citizen. But I would not rejoice about them just starting to catch on. That global paradise for the elite is about to become highly soiled.

        As for peasants, if your an American since we are discussing IT, use that Internet for something other than Facebook and learn about economics. Then go and work for the elite. There is always a way to get the money back, meet the demand. It also provides an opportunity to provide a bit of moral guidance in the veiled form of risk management. Demonstrate the opportunity for the Kingmakers to benefit which just so happens to be win-win with the people.

  29. S Brennan

    By screwing over Democrats, Obama wins.

    The press are openly laughing at the Democratic Congress’s stupidity.

    …and still they don’t get it. Too funny

    “….good news for Obama…a Republican House would give him a handy target for any blame in his anticipated 2012 re-election bid, something he wouldn’t have if both houses remained Democrat…with low approval ratings.”

    http://latimesblogs.latimes.com/washington/2010/04/tea-party-obama.html

  30. ep3

    thanks for the fair comments on unions Yves. yes, they made mistakes. but so did CEOs. just come to Michigan and see the “wonderful” cities of Detroit, Lansing, and Flint where once strong unions built great cities and when the union membership was demonized and membership collapsed, these places look like warzones.

    1. bob goodwin

      unions built Detroit, and demonization destroyed Detroit?

      How about, free markets built Detroit, and unions destroyed Detroit?

  31. Ishmael

    ep3 says — “wonderful” cities of Detroit, Lansing, and Flint where once strong unions built great cities and when the union membership was demonized and membership collapsed, these places look like warzones.

    Now that is one weird cause and effect. The most heavily subsidized city in the US was destroyed through the demonization of unions.

    Wow now that is power.

  32. purple

    Union represent a small portion of the US working population. It’s rather odd to see them blamed for problems in the economy. Their power has been diminishing over the years, so therefore, the overall economy should be getting better – at least following the logic of union-bashers.

    Increased productivity doesn’t mean anything unless the productivity gains are distributed equally. Which they aren’t and haven’t been for a long time.

    But keep blaming unions, who represent a dwindling less than 10 % of the workforce.

    1. NOTaREALmerican

      Re: But keep blaming unions, who represent a dwindling less than 10 % of the workforce.

      It’s not the unions, it’s the inferred relationship.

      Who likes unions? Liberals. Who else do liberals like? “Those people”. Who ruined this great and glorious nation? You figure it out.

      Never underestimate the stupidity of the masses.

    2. Ishmael

      As I indicated earlier, increased salaries for performers were tied to increased performance. I do not disagree with you on this point.

  33. bob goodwin

    Howl.

    Unions have earned their scarlett letter, as other pockets of power are now earning theirs. I believe one of the most hated unions is college educated: the teachers union. They don’t just steal our money, they hold our children hostage in the process.

    Big Finance is a bigger threat than Unions today, as is big government. That does not make big labor somehow good.

    Of course treating and paying labor well is important. But as bad as the free market is, big labor/big government/big finance is worse.

    1. DownSouth

      Let me fix that for you.

      Big Finance owns big government.

      Labor doesn’t even have a place at the table.

  34. tegnost

    this story will be increasingly told in the U.S. as well
    http://www.bloomberg.com/apps/news?pid=20601109&sid=aDV8xNMvI484&pos=12
    The elite of our country are completely tone deaf and I am consistently astounded by the lives they expect their lessers live. Richard Kline of course has the macro spot on. The oil gusher, the middle east,the eurozone, the Fed and its spoiled children the big banks, California(no I don’t live there, but I visit often and they are screwed, sooner or later, one way or another, think H2O)no summer jobs for kids,option ARM resets…I’m sorry, but the anti union thing seems quaint at this point because every public citizen has been completely ripped off by a devalued dollar if you get a wage of any amount, and the rentiers are absolutely gleeful when they hear you fight among yourselves. Let’s not forget the hedge fund payoffs of billions (that’s a thousand million, just for perspective)How many of you would honestly keep working if you made a billion in one year? These guys will never stop.These guys will never get enough.Greed can’t describe it.Hubris is more appropriate, and I will align myself with those who say “this will not end well…” simply because one plus one equals two.

  35. Tom Hickey

    1. Ronald Reagan was probably concerned with unemployment because he was the former head of a union.

    2. The Tea Party is America’s response to “Washington being wildly out of touch with America.” The Dem Establishment had better find its inner FDR, or the Dems are toast in ’10 and ’12, and the probably coming to power of a demagog that will impose fiscal austerity in the foolish belief that the government can run a surplus as the same time as nongovernment to create prosperity — when that is an accounting impossibility.

  36. RSDallas

    Dithering???? Are you serious? Our Government is basking in this economic malaise. I bet Rhom gets up every morning and says’ “I love the smell of a high unemployment number in the morning”. This is turning into a National joke. Especially with the BP leak happening. It’s just way to coincidental, to me, that this BP episode occurs just knowing that another one of Obama’s goals is to institute a cap & trade system in the US. If this is not a set up, than I’ve never seen one.

    I’m sitting here getting madder every minute as I listen to Obama talk about what “we” need. I’m tired of hearing what I need from Obama and his goons. Has he ever asked me what I need? No. What would I say if he asked me? I would say thank you, but no thank you. You see, what we need is for Obama to shut up! Quit interfering with the market, business and especially the business cycle. I would further explain to him that things are screwed up because of HIM!

    This is wrong America, just wrong. This administration must go. Please, Please get out and vote this year.

  37. sgt_doom

    If the German president can resign, and the Japanese prime minister can resign, then bloody hell the American president, Barack Obama, should resign and allow either Rep. Kucinich, Rep. DeFazio, Sen. Feingold or former Representative Cynthia McKinny to take his place.

  38. Ishmael

    Cynthia McKinny — Oh my! From Wikipedia

    “her controversial profile, which included support for Arab causes and a suggestion that Bush knew in advance of the September 11 attacks.”[5]

    1. sgt_doom

      Your response isn’t very clear. Are you suggesting all people aren’t deserving of human rights?

      Or that Ms. McKinny is an obvious choice?

      And yes, the Israelis are guilty of illegally boarding a vessel in international waters, clearly against the international laws of the seas, which the US is a signatory to, as well as against US maritime law.

      And yes, after illegally boarding a vessel in international waters, the Israeli military did then, illegally, abduct said passengers to Israel against their will.

      Piracy, brutality, kidnapping.

    2. Doug Terpstra

      Indeed, your response is not clear at all. Is the Wiki quote intended to discredit McKinney? I suppose empathy for “Arab causes” is automatically discrediting. It reveals incredible (but typical) ignorance about the root causes of terrorism.

      McKinney was on two earlier humanitarian boat-lifts to the concentration camp known as Gaza, also boarded illegally by the Israelis in international waters. In July of ’08 she was imprisoned for several days while refusing to sign a confession of self-incrimination. You may disagree with her politics, but she’s got more guts than most macho commenters here.

  39. Mike the Mad Biologist

    I think the lack of concern about unemployment has far less to do with ideologically-based union bashing (which I detest), and more to do a lack of incentives for Congress to do anything. Most congressmen will be re-elected no matter what: even in this ‘populist’ election cycle, more than 85% of members will keep their seats–and some of those ‘losses’ are due to retirements.

    But the other thing is that many representatives are worried about life after Congress. It’s all about the de facto Congressional retirement plan. ‘Fiscally responsible’ ex-congressmen have a much softer landing than do those concerned about unemployment.

    1. RagingDebate

      The 160 year trend shown here says you are wrong. Note the correlation between depressions and wild political swings. The Republican party eveolved from the Whigs out of such times. Scott Brown, Chris Christie, Rand Paul. We haven’t even got started yet. The trend is 4 years after depression (Q4 of 2008) voter revolution occurs.

      http://ragingdebate.com/uploads/image/Party_Retention.gif
      http://ragingdebate.com/uploads/image/Party_Retention_Rates.gif
      http://ragingdebate.com/uploads/image/Seats.gif

      1. Doug Terpstra

        Hmmm. Your timeline coincides with the winter solstice of 2012, a portentious time indeed.

  40. Jim

    Since the 1870s/1880s Government/State intervention in the economy has had primarily to do with guaranteeing the profitability of Big capital.

    The organization of private labor unions in the 1930s successfully corporatized the working class.

    After World War II an increasingly affluent middle class emerged that focused on consumption and sealed a class compromise that guaranteed the stability and profitability of corporate capital while as the same time providing organized labor with legal recognition, higher wages and social benefits.

    Big Capital and Big Government were able to harmonize private labor into a mass of disciplined, interchangable producers and a general public into a mass of manipulable consumers.

    There is nothing “radical” in demanding a larger share of the pie (which is part of the very logic of the market and an intregal part of the “American way.”

    Far from paving the way to a qualitative alternative to this system of domination, the organization of labor unions contributed to the corporatization of our politics, that, in turn, was supported by the State.

    Maybe the much maligned American populists of the 1880s were on the right track back then when they tried to construct an alternative to wage labor that emphasized producerism, a defense of endangered crafts (including the craft of farming) and opposition to the whole machinery of modern finance.

    Today no one asks, anymore, whether freedom is consistent with hired labor?

    1. aet

      Increases in tech productivity = much more produced by far fewer
      So: scarcity not a problem – but equitable distribution of benefits of automation – the problem is overproduction
      Perhaps “surplus societies” of the past ie NW American Coast Indian tribes had way more food than needed, , thus for six months of each year devoted to festivals & play, etc
      And the ritual distribution of surplus wealth as the only esteemed behavior..or most esteemed.
      Perhaps people ought to change their ways, if they have changed their means.

    2. attempter

      Maybe the much maligned American populists of the 1880s were on the right track back then when they tried to construct an alternative to wage labor that emphasized producerism, a defense of endangered crafts (including the craft of farming) and opposition to the whole machinery of modern finance.

      Today no one asks, anymore, whether freedom is consistent with hired labor?

      The very fact that no one asks proves how much freedom is not consistent with wage labor, and how much brainwashing is required to prop up a system so obviously failed on a practical level, economically bankrupt, and morally repulsive.

      If there’s to be any chance at all of defeating neoliberal totalitarianism and restoring political and economic freedom, as well as any kind of productive economy at all post-Peak Oil, relocalization will have to comprise a renaissance of many of the things the Populists fought for.

      But to this day even those who style themselves true progressives to distinguish themselves from treacherous corporate liberals still remain mired in the mindset and terminology of “better wages”, “living wage” and so on, rather than attacking the alienation of labor as such.

      I even do it myself sometimes, as far as feeling constrained to use the terminology in order to try to get a camel’s nose into the tent of discourse at all.

      If the goal (and the physical necessity anyway thanks to resource limitation) is decentralized power and relocalized economy, that could work on a communal basis or on a cooperative smallholder basis (IOW it could be “socialist” or based on “private property”), or some combination of those, but it could never be based on rentiers and tenants; employers and wage slaves.

      (On a related topic, up above in the thread there’s a reference to the scam version of the “property” ideology.

      Notice how the liars who ideologize about property and how property ownership are the basis of any sound society are NEVER talking about broad ownership of real property like land, but instead “ownership” of fiat-based phony paper assets like “retirement accounts” and so on.

      Needless to say, the system of condemning vast tracts of farmland to uselessness via suburban sprawl and stripmalling, and of routing “ownership” through astronomical amounts of bank debt, doesn’t constitute an ownership society either. It’s just as fake as the “ownership” of toxic assets like IRAs.

      The goal everywhere is the complete concentration of all real property in the hands of a few gangsters.)

  41. Arciero

    “But most of America appears to have deeply internalized the belief that labor lacks, and perhaps more important, ought not to have any bargaining power.”

    My bargaining power is I can go look for a job more high-paying elsewhere.

    1. reprobate

      Try doing that. Hiring criteria are specified very narrowly now. In the old days, employers would hire someone with good general skills. Now they will only hire people who have done exactly the same job somewhere else that looks a lot like that company. And you need a good credit score too, BTW.

      I bet you are under 35. As you get older, your skills become more specialized, which makes it MUCH harder to find a job elsewhere.

  42. Peripheral Visionary

    How did a post that started about unemployment end up being about unions? They are only tangentially related topics. How do unions contribute in any way to job creation?

    It all seems to entirely miss the point. We are like a family where both parents have lost their jobs and the children are arguing with them that their allowances aren’t high enough.

    When are we going to face the fact that we do not have a sustainable economic model?

    1. NOTaREALmerican

      I think it’s because of cause and effect (again). A discussion of unemployment generally leads to a discussion about: people might be working but are making less. Then, “making less” leads to the questions of why: which leads to the notion that the 1950′s was paradise-on-earth-for-middle-America (if you were white) with the realization that lots of unions were around then. Which leads to the question of why not now. Which leads to the down-fall of America and our pending destruction at the hands of the team-masses of Chinese and Indians who are happy making a few buck an hour and living in toxic waste lands that makes the current Gulf of Mexico look like a tropical paradise. Which leads to lots of wailing and gnashing-of-teeth and the final conclusion that there must be “change” (which I think we’re now pretty sure isn’t the “change” some people expected – but it never is).

  43. The Rage

    You gotta remember, if the FED actually loosened the money supply to business outside the investers/bankers/Corporate elite, the economy and unemployment would rise/decline, the tax base would rise inflation would rise again and IRX would start demanding rate hikes.

    This is what happens when you have a defacto “gold standard” via fiat. Instead of hoarding gold, they hoard fiat. While we wait for it to “trickle down”. I suspect they prefer it because it does stop noticeable monetary deflation while keeping inflation down along with the debasement of American industrialization. We have been running this policy since Volcker.

    It is what alot of people don’t understand and why ‘inflation’ is a myth right now. Since the banks are the “finance” arm of the group, they can’t give the loans out to the investers and so forth down the food chain until their debts are paid off, which may take another X years to do. I suspect something will come up again to ruin their plans over the next few months to years.

    1. aet

      That make more sense than “record deficits with record-low interest rates” being the natural order of things.

  44. Ishmael

    Aef says — Perhaps “surplus societies” of the past ie NW American Coast Indian tribes had way more food than needed, thus for six months of each year devoted to festivals & play, etc

    Ish says I agree with this concept. What keeps it from happening? One thing is the speculative bubble which has driven the cost of most things in our life far higher than they should be. Housing, food and most commodities. It should also be noted that if this did not happen then the US would also be a far more competitive location for manufacturing. Who caused this, our good old Federal Reserve!

    Peripheral says — How do unions contribute in any way to job creation?

    Ish answers – How do unions hurt job creation? Well several ways (1) most unions are in the government sector which is the least productive (by several multiples) part of the economy which in-turn pulls tons of capital (through taxes) from the private sector, (2) companies performing work for the government must pay prevailing wage which is triple the same wage for other construction which means only 1/3 of the people are put to work which could be, (3) the reporting requirements for prevailing wage is amazing and adds significant cost to companies and employs a ton of useless labor in the government checking this documentation and (4) union wages and their inflexible work rules has contributed to companies moving their manufacturing facilities outside of the US. Is that enough reasons?

    By the way, I peddle my labor on an hourly basis. I am not cheap and if people do not want to pay it they can take their business else where. All my business comes from word of mouth. I eat what I kill.

  45. Ishmael

    Want to get the US going. Here is a perscription that will have all of the Uber Liberals screaming.

    1. Worse the banks to take their losses and perform a cram down on the debt of banks. Foreclose (or restructure which ever is cheaper) assets which are not having payments made on the loans.

    2. Get rid of illegal labor.

    3. Revoke H-1-b’s

    4. Discontinue all unemployment payments after 26 weeks and all transfer payments.

    5. Downsize all government. Cut employment by half over a five year period. Cut total compensation of remaining half by two thirds which will make their wages competitive with private industry.

    6. Cut cost of military by 2/3 (either real cuts or make the leeches of the rest of the world pay for the cost of the world police man).

    7. Implement fair labor standards for imports.

    Problem fixed.

    1. charcad

      6. Cut cost of military by 2/3 (either real cuts or make the leeches of the rest of the world pay for the cost of the world police man).

      Surely you don’t mean eliminate all the political corruption embedded in so-called “military” procurement? This might compel Lockheed to reduce its F-35 subcontractor base from around 1,000 (20 per state, 2+ per Congressional district) to a lower number.

      Do you have any idea what kind of revenue hit the railroads and trucking companies would take if parts weren’t shipped back and forth cross-continent 8-10 times during manufacture?

      The concept of setting up 250 Hardinge and Haas vertical machining centers at Air Force Plant #6 in Marietta just doesn’t get it. I mean what’s next? Set up a foundry nearby to pour the castings before machining?

      Look how many inspectors traveling around on per diem we’d have to layoff. Delta would probably lapse back into Chapter 11. And Marriott and Hilton? Look at all the prime real estate in Crystal City near the Pentagon. They already have occupancy problems in the office parks near Dulles and Herndon. My God, man! You’re attacking the industrial backbone that’s made DoD what it is today!

      7. Implement fair labor standards for imports.

      I think OSHA, EPA and EEOC “tariffs” should be levied on imports, too. The Foxconns of the world have gone a long way to help conceal the real very high cost of these social policies.

    2. NOTaREALmerican

      Only possible if the current crop of smart amoral scumbags – who run the existing system – see some benefit for themselves. I think you lost them at “make government smaller”.

      If you were a smart amoral scumbag – living off the Federal, State, or Local governments of America, would you want less government? I sure wouldn’t. The first question I’d ask (myself) is “What’s this guys angle?” He doesn’t want smaller government for himself, only for me! Living off the government is the ultimate scam. The trick is the get in on the scam. (I work for Zombie, btw, so we’ll be a parasite on the taxpayer forever.)

      Here’s a general rule of complex systems. Nothing gets smaller gracefully.

  46. Jerry

    It’s bigger than unions,….The world has too many people to employ people as we currently do now! So it’s time to think outside the box…is full world employment even possible or do we need to look at things from a different view. Maybe first looking at can we feed everyone in the world and if so how would that look…small farms where seed is provided by governments, larger farms in some places to grow wheat, rice, and how would that be dispersed? What next, education or medicine???

    1. NOTaREALmerican

      Your solutions don’t reward the smart amoral scumbags. Any solution – which happens to involved humans – must take into account that the smart amoral scumbags will always get at least half the benefits.

      Therefore, I’d go with war as the only solution.

  47. Arciero

    I’m reading through the comments here, and I’d just like to state this is Exhibit A why I don’t take the discourse of blogs seriously or that they are replacing newspapers. Person makes a point, he gets told he’s implicitly hated, and it goes the other direction too. Completely stupid discussion where no one is enlightened, everyone has a hardened point of view and refuses to accept they may have a skewed view of things in the slightest.

    1. reprobate

      1. This is a more active and higher quality discourse than you see in MSM blogs (at which pretty much every outlet screens comments very heavily). Letters to the editor not at all comparable, those are cherry picked.

      2. Blogging is mainly about the posts, not about the comments section. High quality comments are icing on the cake. Spurious argument.

      3. Your beef per your other comment here appears to be that you simply don’t like the post and are not happy that viewpoints like yours aren’t getting much traction in comments. And there is a reason why. It’s not well grounded in fact. But you blame the messengers instead.

    2. NOTaREALmerican

      Perhaps that’s reality tho. Billions of people, each with hardened positions, in a battle to the death. What we call democracy is just a peaceful way to find the average hardened position. Why does everybody think people want to change their minds? I don’t. I’m always right.

      1. RagingDebate

        More like 90% right and in relation to cause and effect which is good critical level thinking.

        Your missing that the opportunity to benefit for the population has diminished over 40 years so your miscalculating on time tables or reform. Also, I do not believe you are factoring the rate of business in the information age.

        I posted a comment that you may have read or agree or we may just think alike about the Kingmakers. They must see solutions as an opportunity to benefit. We also agree that othewise, world war will be the natural effect of inequal revenue distribution and hoarding. A worldwide focus on energy production would be the place to start. The T.Boone’s aren’t going to wait around forever for Washington to get it’s head out of its ass.

        The solution set to avoid world war must also include the opportunity to benefit for the global citizen meaning win-win. On a collective historic basis of the CB model, it has never really happened. This time will be different as we are in the age of WMD. They will be used and the remaining 2/3rd’s survivors after a global conflict will end the model. Good riddance in my opinion. Peer-to-peer banking will replace it with millions of bankers that will reflect democratic goverment process of representation in the money supply as it is in politics. Even though such a system will be stable and work for a good long time, an X number of centuries from now mankind will be in the same exact place again.

        In the end, I don’t share all of your value system but I think we are both dreamers. Nothing wrong with that, just analytical mental masturbation which has a bit of useful problem solving purposes in the real world.

  48. charcad

    But the real problem may be that all these approaches are past their sell-by dates, helpful around the margin but insufficient to provide lasting relief to our current malaise. We may be at the end of a paradigm.

    Yes. This includes outsourcing manufacturing to low margin operations like Foxconn. The future of ALL manufacturing is Ford’s Camaceri operation. Highly automated and increasingly so. Instantly retoolable for multiple products. Not just car plants but all kinds of industry from light to very heavy.

    We had better recognize that while a lot of manufacturing will be repatriated back to the USA, most of the former human jobs will not return with them. Low cost robotics are the present reality. And not even $120/month Chinese workers will be able to compete. Rather than attempting reactionary policies of sabotage and Luddite-ism perhaps we should aim at catching and riding this wave?

    Trying to support manufacturing wages at a certain point is clearly a losing game. Why not adopt a policy of intentionally driving manufacturing wages to zero instead, and redeploying the labor to other productive uses?

    The emerged social consensus in the USA is that industrial conditions are too inhuman for humans. Someone among OSHA, EPA, tort lawyers, EEOC and PETA are guaranteed not to be satisified.

    So replace the humans with ‘bots in all production roles.

    1. NOTaREALmerican

      Re: and redeploying the labor to other productive uses?

      But what do you do with the huge numbers of people that – like me – aren’t all that creative, have inflexible personalities, and are basically semi-autistic. There’s huge numbers of us. We’re (collectively) a lean (really) mean, potential killing machine if you don’t give us something to do. The good thing about repetitive jobs is that they are almost like watching TV, it focuses the peasants minds on something useless.

      The real trick for a sustainable future will be creative liberals to figure-out something to do for the teaming-masses of mean unpleasant humans, while they bitch about life. Government is about controlling males, you lose control of the males, the society is gone.

      1. RagingDebate

        No. You are highly creative and intelligent. You can either join the 8% corrupt, have no purpose-driven life and ultimately be bored or join the 8% fighting the systemic corruption for a better world. The real trick is discovering how to do both effectively. I am still learning on the job :)

    2. Peripheral Visionary

      charcad, very insightful post, and one I generally agree with. Manufacturing, in particular, will become increasingly automated, requiring much less labor (although there will be some, by way of technicians, finishing work, etc.) A very small labor component means less sensitivity to wages, which potentially means higher pay for the few workers who remain. A classic example would be the longshoremen industry, which became nearly completely automated, resulting in the eventual loss of jobs for a majority of the workers, but with the few remaining workers commanding high wages.

      The critical question, however, is how to handle the fact that a highly automated productive sector results in a high concentration of capital. With only a few people necessary to design products and run the plants that make them, what becomes of the massive cash flows that come through the process? Do they go exclusively to the (presumably few) owners of production, or are they redistributed to the rest of society in some way, either voluntarily or involuntarily?

      I don’t have an easy answer for that question, but my fear is that it will be someone else, other than us, figuring it out. I worry that we are trapped in a 1950′s mindset where we see prosperity and near-universal employment as a fundamental right requiring nothing more than for us to simply step up and claim it, which is a dangerously out-of-touch way of thinking.

      1. charcad

        It’s not obvious to me that all future manufacturing will be highly concentrated. With the internet and ‘bots a great deal of manufacturing could just as easily be extremely decentralized and highly scalar.

        There’s nothing especially magic about “robots”, either. They’re a series of leadscrews, mechanical movements, stepper motors, driver boards, maybe some sensors and a power supply connected to a computer.

        This shows just how cheap these parts are becoming.

        http://www.kelinginc.net/index.html

        We’re still very, very early in the personal computer revolution and even earlier in the internet revolution. In the real world new technologies typically take 5-7 decades to mature, propagate and gain traction.

        We’re entering a knowledge singularity at this point. Consider the accessibility of “technical knowledge” now compared to 10-15 years ago. There is no comparison.

        If the cost of factory labor becomes essentially -0-, and the cost of “intellectual capital” at the same time is very heavily discounted, then other production costs will become relatively far more important. Think of fuels, electricity, raw materials, proximity to markets and the transport costs to bring it all together. And also all kinds of regulatory costs and extortions.

        1. anonymous

          Excellent posts. Where’s the rest of the story, however? Are we all going back to the land? I’m currently in the market for two pairs of dress shoes. There’s a local shoe repair shop that does good work, but this old-timer does not possess the skills to repair my existing shoes or craft me a two pairs of new ones, for which I’m prepared to pay four hundred dollars. After school our son goes to an art school where he is taught to, you know, actually draw and paint. Our daughter, at middle school, practices piano and is considering one of two agricultural high schools (public) in our area. Right now, most sports shoes sold in the first world are made in several factories in China. Apple has evidently lost control of its I-Pod, I-Phone, and I-Pad supply chain to three Chinese firms. (Don’t have the links handy) Slate is currently featuring stories instructing readers on which parts of the oil spill they can blame Obama for and questioning whether all the hip Apple users can fairly be called callous uncaring union-busters for purchasing products manufactured in the worst sort of sweat-shops.

          Attended a conference several years back where I had the chance to chat with a retired senior UK number-cruncher. We’ve forgotten, it seems, the real costs of purchasing that fifty dollar pair of sports shoes made in China, or the car produced by a robot. We take ourselves and our fellow workers/consumers out of the equation.

          Can anybody in America make anything anymore? Yes. These people are national and local treasures and need to treated as such. Thanks for the great posts on high-tech back to the land. I agree very much, but we’re going to need to see a complete change in the way communities are defined to see some success. Too many are simply showing up at Micky D’s to have their feeding tubes filled. Cheers.

  49. Dan Seiden

    Don’t forget that the other side of offshoring is scaring the beejeezus out of the remaining employees. No one is going to kvetch about salaries or benefits while watching the guys in the surrounding cubes being asked to turn in their ID cards.

  50. Ishmael

    Sorry, do not mean to make too many posts on this subject, but I have been working like a dog the last two months and taking a week off.

    Charcad makes an excellent point when he says —

    Yes. This includes outsourcing manufacturing to low margin operations like Foxconn. The future of ALL manufacturing is Ford’s Camaceri operation. Highly automated and increasingly so. Instantly retoolable for multiple products. Not just car plants but all kinds of industry from light to very heavy.

    Now there is lots of handwringing over the lowering populatin of developed world. Now is that not the natural out growth of automation and not needing as much labor. Western governments should recognize this and let populations drift downward due to automation. Lower population and lower demand offset one another. On the other hand the increasing supply of labor causes the value of labor decline in this formula.

    One thing I failed to mention above. Making banks to take their losses will deflate the asset bubble and make assets more affordable so people can then afford the assets where now they can not.

    As Yves indicated — indicated. The old model is broken and we need a new model. Transitions cause pain. Hopefully we can get there without a world war.

    1. charcad

      The old model is broken and we need a new model.

      When this subject has been seriously raised in the past I’ve suggested moving the USA back to real fuels independence and making this the focal point of industrial economic recovery activities.

      1. One practical possibility is electrifying the railroad mainlines using nuclear power plants. This directly replaces diesel fuel.

      2. Another real opportunity is to replace Big Farm diesel power with hydrogen fuel cell powered equipment. Here are the hard realities of “hydrogen economy”.

      http://www.woodgas.com/hydrogen_economy.pdf

      H2 simply doesn’t travel well as a fuel. It’s best used on site. Another hard reality of alternate energy is the unreliability and high cost of wind turbines for electric power generation.

      But if power from wind turbines, which are commonly sited on agricultural lands, is mainly used to electrolyze water then several advantages can be realized. The hydrogen fuel need not be transported very far to the using devices. And instead of competing with Powder River steam coal at $15/ton this hydrogen replaces higher cost per BTU liquid petroleum fuels.

      Hydrogen fuel cells using atmospheric oxygen will leave us with byproduct industrial grade oxygen (O2) from the electrolysis stage.

      And I have an immediate use for this O2, also. A “waste biomass” gasifier oxydized with air yields producer gas (CO, H2, N2). A waste biomass gasifier oxydized with industrial grade O2 yields synthesis gas (CO + H2). Synthesis gas can be readily reformed into methanol, ethanol, and a range of longer C chain hydrocarbons by Fischer-Tropsch catalysis processes.

      Waste biomass from agricultural residues is also very abundant in farm country. The principal cost in converting this biomass to liquid fuels or other usable chemicals is the cost of the oxygen.

      1. Peripheral Visionary

        Good thoughts, thanks charcad. I particularly like the idea of moving farming to energy independence; farming is well positioned for it, and in a worst-case scenario, would mean that one of our core productive activities could continue without worrying about the energy supply.

        1. charcad

          Thank you.

          There is a good table of modern US fossil prices since 1949:

          http://www.eia.doe.gov/emeu/aer/pdf/pages/sec3_3.pdf

          The present wind power policies put wind head to head with coal, natural gas and uranium fuels for electric power generation. These policies are partly driven by the belief in the most catastrophic scenarios for anthropogenic global warming and a desire to do something, anything. Even if it’s not effective. And partly driven by connected people getting government subsidy $$$.

          If we look at the fossil fuel pricing tables we can see that coal is the cheapest fossil fuel, followed by natural gas. Not surprisingly wind power comes off 4th best in electric grid sales. It needs heavy subsidies to be economic. If these policies continue we can anticipate these higher costs of electric power to flow through to declining income consumers. This will come directly in the electric bill and indirectly in virtually everything as prices flow through supply chains.

          I prefer to pick juicier fruit, meaning crude oil. Look at the fast rising cost per million btus for crude oil. We can anticipate large long term returns on investments in implementing scientifically and technologically viable substitutes.

  51. Duke

    With all due respect, I do not see an anti-union sentiment in general, but rather an anti-public-worker union sentiment. In the private sector any increase in wages must come from increased sales/profit arising from improved quality/efficiency, or from sharholder value. No such natural tension exists in public sector unions; self-interested politicans grant excessive pay/benefits in exchange for union support/votes at the ballot box. It is self-perpetuating but fully at taxpayer expense. At least for US comparisons there are a bevy of charts floating about plotting public sector compensation, value of benefits, retirement age, retirement benefits, and even rate of voluntarily changing jobs against their private sector counterparts. Unless these are mis-informing, the argument is done and what remains is deciding which resolution is most appropriate. But none of this anti-union sentiment is relevant to the private sector, excpet perhaps to use private sector union compensation as the comparison baseline.

  52. Roger Chittum

    Excellent post, Yves. I particularly liked your tightly-crafted description of the fundamental problem and broken paradigm:

    “But the real problem may be that all these approaches are past their sell-by dates, helpful around the margin but insufficient to provide lasting relief to our current malaise. We may be at the end of a paradigm. The US and its trade partners have engaged in a 30 year experiment of deregulation, financial liberalization, more open trade, and deep integration of markets. But most other countries had clear objectives: they wanted to protect their labor markets, which usually entailed running a trade surplus (or at least not a deficit). Many of them also had clear industrial policies. By contrast, the US pretended it was adhering to a “free markets” dogma so that whatever resulted from this experiment was virtuous. But in fact, we have had stagnant real worker wages, with a rising standard of living coming from rising household borrowings and to a much lesser degree, falling technology prices. We have also had industrial policy by default. Certain favored groups, such as Big Pharma and the sugar lobby, get special breaks.”

    One way to see the difficulty in getting America moving again is to force people to pick a side on whether they want the general US wage level as represented by real pre-tax median wages to rise consistently and substantially or not, and secondarily if they want unemployment to go down enough to create tight labor markets. The current paradigm requires the answer to be “No” because we have to compete with low-wage developing nations and the competition is on price. That is why, IMHO, we see politicians of every stripe talking only about how to respond to stagnation and decline of personal incomes and tax bases, and not promoting ideas to create a tight domestic labor market, rising median incomes, and a revival of the American Dream.

  53. Hugh

    Haven’t read all the comments but just a few points. Stagnant wages over the last 30 years is as Yves points out the major evidence of the loss of union power.

    Obama got the unions to support him in his run for President but, much as with progressives, he has been screwing them over since he was elected. EFCA, a move to make it easier to form unions and harder for employers to stop certification, was labor’s prime piece of legislation. It got spiked. Obama never pushed it. During the healthcare debate, labor leaders like Trumka made a bad and politically unpopular deal to save some union plans from a cadillac tax. It kind of showed the face of the current crop of labor leaders. They get stiffed by the Democrats but try to make whatever deal they can with them. As for Andy Stern, isn’t he on Obama’s Simpson-Bowles deficit, i.e. catfood commission, you know, precisely because he is open to slashing Social Security?

    If you look at Obama and the Democrats, as some of us do, as just as corporatist in their orientation as the Republicans, the complete lack of interest in job creation isn’t only explainable. It’s predictable.

  54. notabanker

    Yves-
    Over the last few years, your blog has become required reading for me and I sincerely thank you for the extraordinary efforts you have put into it. Hopefully you will have waded through the 140+ comments to actually read mine.

    This whole line of debate strikes me as intellectually interesting, but missing the larger point, that is the USA body politic is clearly run by corporate capitalist interests. Carrying forth the Democrat vs Republican or Management vs Union (be it private or public) ideological arguments perpetuates the fallacy that there is some semblance of balance to the current equation, when in truth, there is little to none. Democrats are controlled by corporate interests, as are Republicans,
    Management and Unions. Anyone with the capacity for independent, critical thought only has to look at the financial bailout crisis and the gulf oil spill to come to this conclusion. Subtly yet even more pervasive is the mountain of evidence of the “biotech” agriculture, defense privatization and pharmaceutical takeover of government.

    What I believe your post does underscore is the divergence we are now seeing from historical norms. I agree that we are at the end of a paradigm. America in it’s quest for capitalism, found it, and the results aren’t by the people, for the people.

    Ironically, Obama was put into power as a populist to quell the masses, and his inability to do so will ultimately expose the system to the very constituency it has been designed to subvert.

    I wish I had the wisdom to know how the movie ends. My guess is that we are well past intermission, and Bruce Willis won’t be there to save the day.

  55. lambert strether

    Versailles isn’t “dithering.” They’re creating a permanent class of jobless as a matter of deliberate policy. The pain is not a bug. It’s a feature.

    1. anonymous

      Motivated by what? The use of the term Versailles in this context pretty confirms complete ignorance of the economic forces at work in France during the late eighteenth century.

      1. Hugh

        Yes, I do not see the parallel at all. Back then you had a corrupt political class completely out of touch with the country, pursuing ruinous economic policies, and dedicated to the maintenance of their own privilege and position. Nothing like today at all. /s

        1. anonymous

          Wonderful. An expert. What ‘ruinous’ economic policies was the French monarchy pursuing when the monarchy fell? Tax farming? Financing war on credit?

          The monarchy, btw, didn’t ‘fall’. France was ruled by two dictators and an emperor until 1814 when the Bourbons kings regained power. France was ruled by some form of monarchy for most of the first half of the nineteenth century.

  56. i on the ball patriot

    Sheesh, so many intentionally created ‘bubbles’ in the “deep seated rot” of the global fabric of society …

    • public workers pitted against laid off corporate workers
    • prudent home owners pitted against the not so prudent intentionally debt trapped homeowners
    • ‘legals’ pitted against the allowed in by corporations, ‘illegals’
    • prudent borrowers pitted against the not so prudent borrowers
    • gays pitted against straights
    • etc.
    • etc.

    All in all a very well executed top down macro orchestration of propaganda, co-option, divisiveness, oppression, and exploitation, rolling over the global society like a plague. And the rubes are swallowing down the bait like their favorite penny candy. Look at them piss on and agitate each other. What superb name calling and expressions of anger. Look how the macro orchestration has shaped and changed them in the past forty years. From AMERICANS, focused on the American dream, desire, opportunity, love and respect for one another, and love of family values, into heartless, fearful, look the other way, puckered asshole, chicken shit, automaton, hate mongering scamericans with corporate values that honor preemptively killing one another simply for suspecting another of any abstract crime.

    Of course there is friction and unemployment, and of course puppet Snowbama doesn’t give a rat’s ass. A two tier ruler and ruled world is his ruling elite mandate, he is simply getting the required job done.

    Those that think they can run and hide can not. Nor will prudence and an alternative lifestyle spare you. This is a full court global press for Full Spectrum Dominance of the masses by the world’s wealthy ruling elite.

    The factional infighting in finance at the top — covered so well on this site — is a struggle between the old profit driven Vanilla Greed, and the newer, more elite Pernicious Greed. Regulation vs no regulation. That factional infighting is now mostly more duopoly dodo theater for the masses. Pernicious greed clearly has the upper hand. It is motivated by control rather than profit and we are headed towards a two tier, ruler and ruled world with the ruled engaged in perpetual conflict with each other. If ever there were a time to see the common enemy, the noble lie of the rich elite, it is now. If ever there were a time to see the more clearly emerging class lines it is now. If ever there were ever a time to stop the backbiting and pull together it is now. This is a well planned incremental take down of the masses, many slated for elimination by starvation, and the longer it persists the fewer resources you will have to resist that take down.

    Yes, “recognizing the true nature of the problem is the first step to finding remedies.”

    You are what you have been through, but now and the future are up to you!

    Deception is the strongest political force on the planet.

    1. sgt_doom

      It’s people like you, i on the ball patriot, who spoil all that hard work of Edward Bernays’ life achievements. (And direct people to the likes of French philospher Jean Baudillard, and American critical thinker, Chris Hedges.)

      Best comment of the day, sir or madam, goes to you.

      +100,0000

  57. dbrown

    The characterization of massive borrow and spend fiscal stimulus as
    the provision of high quality financial paper to the markets is all
    that needs be read, Delong sees red and calls it green. And Ronald
    Regan as the paragon of democrats? well yes if increasing the nations
    debt from billions to 3 trillion, installing Alan Greenspan, and
    setting into motion the debt spiral we’re locked into is what the
    democrats stand for. I learned early on to delete Delong’s site,
    and not to follow links to him, but he went and showed up on the front
    page of Naked Capitalism – there is no escape. It’s idiotic, I guess,
    to be a german and to worry about truth and falsity and fairness and
    better to focus on a a way to configure the government to print money for
    me.

  58. Piero

    “And we’ve had first the Greenspan, now the Bernanke put, with the financial services well aware that the Fed will run to the rescue of the markets (ie the banksters) should any serious trouble arise, but the resulting low rates work to the detriment of savers, and push all investors to take undue risks to compensate for artificially low yields.”

    The particularly frustrating thing about the truth of these sentences is that the whole point of allowing Lehman to go down was to set an example that rescue would not always be offered. Wasn’t it? And yet, the economies of the world went through the wrenching seizing of credit and other repercussions that followed and still, today, we have that same ironclad presumption.

  59. Glen

    Man, who gives a rat’s ass about unions when you can get in the TBTF CEO club!

    Get called the smartest guy in the room by the President.
    Get millions in salary, tens and hundreds of millions in bonuses.
    Drive your company into the ground at the speed of sound.
    Wreck the world’s economy.
    And have the US tax payer pick up the tab!

    Unions, a waste of time.
    Why go for a “fair wage” when you can earn billions, screw up the whole world, and get the little people to pay for your mess?

  60. S Brennan

    “Ronald Reagan was far more concerned about unemployment than Team Obama (or Washington generally)”

    True, our current Congress President & Courts are truly a step down from streetwalkers when it comes to whoring themselves out to moneyed interests.

    “The Bureau of Labor Statistics reported that February, 2008 unemployment among Engineers, Software & other technical professionals stood at 656,000 persons who were receiving unemployment benefits…that does not count long term unemployed. Since 2008 things have grown much worse for our most highly trained citizens. And yet….

    Exemptions effectively increases the ceiling for H-1B workers to more than 100,000 persons in 2009.

    Since that last change, there have been continuous efforts in Congress to get the ceiling on H-1B visas increased again both directly and indirectly. One active proposal is to offer permanent residence (green card) to any foreign graduate of a U.S. university outside of any immigrant visa ceiling. Another proposal is to offer H-1B visas to any foreign worker with a foreign degree or to exempt some number of such workers from the H-1B ceiling.

    Sham Worker Shortage

    Industry lobbyists with Microsoft’s Bill Gates at the forefront have tried to convince Congress that there is a shortage of specialty occupation workers and American competitiveness will suffer if they are not able to hire more foreign workers. They have tried to convince Congress and the public that they only hire the ‘best and brightest’ foreign workers and do so only when comparable U.S. workers are unavailable. This propaganda campaign ignores the fact that there is no requirement in the H-1B visa program that employers have to hire available U.S. workers first. It also ignores the fact that nearly half of the foreign workers that they seek visas for have no more than an undergraduate degree.

    Because H-1B visas allow employment for up to six years, the number of H-1B foreign workers in the country at any point is the sum of those who have been admitted and remained within the last six years. In 2002, there were an estimated 710,000 H-1B holders in the United States. Although the H-1B program is meant to provide companies with labor unavailable in this country, no evidence exists of a worker shortage; to the contrary, there are many laid off, unemployed and underemployed American high tech workers.

    The Bureau of Labor Statistics reported that February, 2008 unemployment among professional and related occupations stood at 656,000 persons. This BLS report refers to official unemployment persons receiving unemployment benefits. Not included are those persons who have lost unemployment coverage, those who have taken part-time jobs because they could not find full-time jobs and those who have yet to find their first job. Generally, this more comprehensive focus on unemployment yields an estimate about twice as high as official unemployment.1

    The advocates for increasing the admission of H-1B workers suggest that our ability to compete internationally depends on being able to employ the ‘best and the brightest’ professional workers from around the world. This claim is belied by the fact that nearly half of all of the approved petitions are for persons with undergraduate degrees rather than advanced degrees (see chart below). In addition, the rate of conversion of H-1B workers to green card holders indicates that most employers are not keeping their temporary workers after their temporary visa expires.

    Workers—Or Cheap Workers?

    Simply having a large influx of workers into the industry floods the labor market and drives down wages.2 Study after study shows that H-1B workers are paid lower wages than their American counterparts, driving down the prevailing wage: A UCLA study found that H-1B engineers were paid 33 percent less than comparable U.S. citizens. 3 A Cornell University study found that H-1B programmers and engineers were underpaid by 20 to 30 percent.4 An INS report found that the computer-related H-1B employees were paid a median salary 25 percent less than the national median for their field. 5 A National Research Council report found that “H-1B workers requiring lower levels of high tech skill received lower wages, less senior job titles, smaller signing bonuses, and smaller pay and compensation increases than would be typical for the work they did.”6 It also found that H-1Bs have an adverse impact on overall wage levels.7 The Independent Computer Consultants Association reports that the use of cheaper foreign labor has forced down the hourly rates of U.S. consultants by as much as ten to 40 percent. 8

    The effect of depressing wages by increasing the available pool of qualified workers is not an innocent by-product of the H-1B visa program. Statements by Alan Greenspan, former Chair of the Federal Reserve Board make the point that this wage lowering effect is intended.

    “Our skilled wages are higher than anywhere in the world. If we open up a significant window for skilled [foreign] workers, that would suppress the skilled-wage level and end the concentration of income.” 9

    “Significantly opening up immigration to skilled workers solves two problems. The companies could hire the educated workers they need. And those workers would compete with high-income people, driving more income equality.” 10
    Displacing American Workers

    Nothing in the law regulating H-1B visas requires employers to hire U.S. citizens first or lay them off last. As a result, legions of high tech workers report receiving pink slips while the H-1B workers in the cubicles next to them kept their jobs. Only a few employers, basically those termed ‘body shops’, and classified as “H-1B dependent,” must certify that American workers have not been and will not be displaced within a 90-day period.

    The AFL-CIO contends that companies are actively choosing to lay off U.S. workers instead of H-1Bs.11 U.S. workers are now filing formal complaints charging that foreign guestworkers are replacing Americans during the downturn of the high tech industry.12
    Inadequate Protection for U.S. Workers

    A frequent claim in defense of the H-1B program is that protections are built in to prohibit employers from engaging in practices that will harm American workers. In reality, the protections are either very weak or nonexistent, as is enforcement of these rules. Instead, the system relies heavily on the honor system, merely trusting companies to be good corporate citizens.

    An audit of the H-1B program by the Department of Labor’s Office of the Inspector General found that “DOL’s role amounts to little more than … a ‘rubber stamping’ for LCA [labor condition applications] program applications.”17
    Fraud and Abuse

    The temporary worker program has been found to be exploited by fraudulent applications. The INS conducted a study of 3,247 H-1B applicants who applied at an American consulate in India (Indians account for about half of all H-1B visas issued13) and were unable to verify the authenticity of almost 45 percent of the claims made on the petitions. Twenty-one percent of the work experience claims made to the INS were confirmed to be fraudulent.14

    A Department of Labor (DOL) audit found that 19 percent of H-1B workers were being paid below the salaries promised by their employers on their labor application forms (which must be filed with the DOL in order for companies to receive permission to use H-1B workers). The audit found that employers use H-1B employees to get around prevailing wages and personnel costs and that the large-scale use of H-1B workers lowers the level of wages in the affected professions.15
    Job shops abuse the system and workers.

    The DOL found that six percent of H-1B aliens were contracted out to other companies. These ‘body shops’ typically treat workers as indentured servants, giving the alien enough money for living expenses and keeping the rest as a “fee.” Employers also abuse workers through the use of non-performance agreements. Typically these entail the payment of a large sum of money in return for allowing the alien to seek work with another employer. Combined with the ability of employers to sponsor aliens for their permanent labor certification (a “green card” that allows the alien to remain in the U.S. for good instead of the three-to-six-year period of the temporary visa), the leverage of employers over these temporary workers reduces them to indentured servitude.

    Among the largest employers of H-1B workers are Indian-based body shops that act as employment agencies and furnish foreign workers to American companies. Three Indian firms Infosys, Wipro, and Satyam, collectively had more than 8,600 H-1B visa approvals in 2007, and each had many more approvals than did Microsoft.”

    1. “Table A-12, Alternative measures of labor underutilization, U.S. Department of Labor, Bureau of Labor Statistics. In February, 2008 the “official unemployment rate” stood at 4.8 percent while the “Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons” stood at 8.9 percent.
    2. Jessica Gurcak, Thomas Espenshade, Aaron Sparrow, and Martha Paskoff, “Immigration of Scientists and Engineers to the United States: Issues and Evidence,” The International Migration of the Highly Skilled, Center for Comparative Immigration Studies, 2001.
    3. “The State of Asian Pacific America,” Paul Ong (ed.), LEAP Asian Pacific American Public Policy Institute and UCLA Asian American Studies Center, 1994, pp. 179-180.
    4. Stephen Yale-Loehr and Demetrios Papademetriou, Balancing Interests: Rethinking U.S. Selection of Skilled Immigrants, Carnegie Endowment for International Peace, 1996.
    5. Characteristics of Specialty Occupation Workers (H-1B), Immigration and Naturalization Service, July 2002.
    6. Building a Workforce for the Information Economy, National Research Council, 2001.
    7. ibid.
    8. Diane Levick, “Displaced U.S. Employees Frustrated, Angry at Information Technology Industry,” Hartford Courant, January 6, 2003.
    9. “Greenspan: Let more skilled immigrants in” Bloomberg News account in Boston Globe, March 14, 2007.
    10. Dallas Morning News, February 14, 2008.
    11. Michelle Zelsman, “The H-1B Catch-22,” Infoworld, June 8, 2001.
    12. “U.S. Workers Taking H-1B Issues to Court,” Mercury News, September 26, 2002.
    13. Report on Characteristics of Specialty Occupation Workers (H-1B): Fiscal 2001, Immigration and Naturalization Service, July 2002.
    14. Statement of William Yates, Acting Deputy Executive Association Commissioner of the INS, before the House Judiciary Committee, Subcommittee on Immigration and Claims, May 5, 1999; “House Immigration Subcommittee Holds Hearing on H-1B Visa Fraud,” Tech Law Journal, May 6, 1999.
    15. The Department of Labor’s Foreign Labor Certification Programs: The System is Broken and Needs to be Fixed, Final Report No. 06-96-002-03-321, Joseph Fisch, Assistant Inspector General for Audit.
    16. “Number of H-1B petitions approved by USCIA for initial beneficiaries 2007,” website of U.S. Sen. Chuck Grassley, http://grassley.senate.gov/public/releases/2008/031020082.pdf, consulted March 28, 2008.
    17. The Department of Labor’s Foreign Labor Certification Programs: Broken and Needs to Be Fixed, U.S. Department of Labor Office of Inspector General Audit Report No. 06-96-002-023-321, May 22, 1996.

    http://www.fairus.org/site/PageServer?pagename=iic_immigrationissuecenters13e8

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