Month: December 2011

You know how little I like the "Here, I'm gonna copy someone else's writing rather than generating original content" posts, but I've been trying to improve upon this ("A Tale of Two Systems") for the past week and I don't think I have much to add to it.

American autoworkers are constantly told that high-wage work is an unsustainable relic in the face of a hyper-competitive, globalized marketplace. Apostles of neo-liberal economic theory — both in the public and private sectors — have stressed the message that worker adaptation is necessary to survive. Indeed, Steven Rattner, President Obama’s “car czar” during the restructuring of General Motors and Chrysler in early 2009, spoke last week of his regret that the federal government had not required the United Auto workers to take a wage cut at that time to enhance the competitiveness of those companies, comments similar to those he made in a recently published book (after the outcry created by last week’s remarks, Rattner yesterday backed away from them, though reiterating his view that more “shared sacrifice” would have bolstered American competitiveness).

Governments, too, the globalists have contended, should not think that markets can or should be controlled. As Remapping Debate reported earlier this year in an article about the role of large consulting firms in the promotion of the notion that national policy can and must allow global capital a free hand, McKinsey & Co. was already arguing back in 1994 that “a national government has no choice but to move forward to embrace the global capital market unless it wants to harm its own citizens, its economy and its own purposes.”

But the case of German automakers — BMW, Daimler, and Volkswagen — tells a different story. Each company produces vehicles not only in Germany, but also in “transplant” factories in the U.S. The former are characterized by high wages and high union membership; the U.S. plants pay lower wages and are located in so-called “right-to-work” (anti-union) states.

It turns out that “inevitability” has nothing to do with the differing conditions; the salient difference is that, in Germany, the automakers operate within an environment that precludes a race to the bottom; in the U.S., they operate within an environment that encourages such a race.

OK, two things.

First, "Car Czar" Rattner is a jagoff, despite the fact that I greatly enjoyed his book Overhaul. He apparently believes that the UAW should have taken bigger wage cuts so…so what, so that the bondholders could take a smaller haircut? The GM bondholders got more than half, when in any other bankruptcy they'd be entitled to (and receive) exactly jack shit. Convenient fact to omit with all the sweet talk of "shared sacrifice".

Second, as always the elephant in the room is the cost of private health insurance and health care overall. American neoliberals and assorted other Heritage-affiliated pud pullers love to whip out the "total compensation" canard to make wages look equal across borders. Of course Americans make a fraction of their European counterparts in terms of actual, you know, money. But I guess we should feel well compensated because the few employers that still provide insurance have to pay out the ass to do it. Awesome.

Gotta love the moral of the story, though: German auto manufacturers can obviously afford to pay workers in their American factories $30+ hourly…but why bother when people in Alabama and South Carolina are stupid enough to do it for half that? They know a rube when they see one, wrapped in a XXL-sized "These Colors Don't Run" t-shirt and clutching a Bible.

Many Americans below the age of thirty would probably be shocked to learn that the federal government used to control the entire airline industry. And when I say "control" I don't mean in the abstract; an agency called the Civil Aeronautics Board, which in 1967 was integrated into the Department of Transportation, determined which airlines would service each route/destination and set passenger ticket prices that were standardized across the industry. Consequently the industry was dominated by a small number of very large operations – Pan Am, TWA, Delta, and so on.

The Airline Deregulation Act of 1978 changed all of that, of course, and set the stage for the bankruptcy-riddled, shambolic industry we have today.

One thing that Congress realized when passing the ADA was that major airlines would quickly drop unprofitable routes. In order to receive highly profitable routes under regulation – New York to Chicago, or whatever – the CAB would require airlines to provide service to Joplin, MO or Saginaw, MI or some other such isolated red ink route. Absent the government mandate, Delta and United would find it in their interest to abandon such routes immediately. To prevent that from happening, and recognizing the value of having a national network of scheduled air service, Congress created the Essential Air Service (EAS). That sounds like some kind of team of highly trained covert operatives and would be a fantastic band name to boot. The reality is more mundane, though.
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The EAS program simply subsidized service to populous but remote locations that would not otherwise get scheduled service from airlines. This is the sole reason that passengers can fly to places like Muscle Shoals, AL and Bismarck, ND. The program is not large in the context of the federal budget, but it clocks in at a not-insignificant $100-120 million annually. (Curious to know if your airport is one of 110 in the Lower 48 that receives EAS money? Look here.)

Raise your hand if you know where this is heading.

The Essential Air Service program began in 1978 as a temporary way to help small airports survive federal deregulation. Rep. Tom Petri, chairman of the House aviation subcommittee, says the program is obsolete.

"Why should the government have to pay for all this?" asks Petri, a Wisconsin Republican.

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What comes next is stupid even by the standards of modern House Republicans from rural Wisconsin:

Being from a big state, Petri is very aware that small airports are important to rural voters. What does he tell them when they complain about his plan to cut subsidies?

"Up in northern Wisconsin, a number of people weren't happy about this sort of thing," he admits. "I say well … my part of the state, Appleton, had air service and it was canceled numerous times and each time it was canceled people got together and started a new airline themselves. It's not that hard. You just need a pilot and a small plane."

Let that sink in for a moment. OK? Good.

It's important to move past the prima facie stupidity of that statement and explore its very deep ignorance of the history of the industry since deregulation. Airline startups boomed in the 1980s; I remember names like Midwest Air, Air Illinois, Midway Airlines, Chicago Air, Ozark Airlines, and ATA in my neck of the woods as a kid. A funny thing happened to these airlines, as you might have guessed already looking at that list: every goddamn one of them failed. Some of the larger ones were purchased by major carriers to serve as feeders once they could no longer survive on their own. Most of them just went belly-up and disappeared. This happens because providers that serve small markets inevitably discover that A) providing the level of service people expect from major airlines is too expensive and B) to make money you have to cut costs, well, everywhere. Cheap planes, cheap maintenance, cheap wages, cheap safety procedures…that's how you make money flying from Helena to Denver. But the funny thing about "cheap" and "airline" is that when you try to combine the two, planes have a tendency to fall out of the sky. Turns out that the deicing equipment couldn't last three months beyond its spec replacement date, and those 100 hours in the simulator didn't really prepare Captain Bob (who was working an office job six months ago) to fly an ATR at night in the snow.

But perhaps the problem is that people who don't have the decency and good sense to live near an airport that major carriers can profitably serve just expect too much. Maybe "a pilot and a small plane" is all they need. Remember, It's not that hard. To start an airline. Would-be passengers can just show up at the airport and say "Hey, can someone fly me to Minneapolis today?" Then they can clamber on board some guy's Piper Cub for a no-instrument adventure flight to the big city.

Sounds like the kind of transportation experience we should have here in this industrialized country that touts itself as the greatest, most advanced, and most economically powerful in the world.

In keeping with yesterday's post about the Establishment Republican view of what ails us economically, here's Ron "Can you believe I beat Feingold? Me neither!" Johnson explaining why the minimum wage is just fine where it is:

JOHNSON: Bottom line: when you’re a good worker you don’t stay at minimum wage for long. Trust me on that. (Crowd laughs)

It’s not universal. It’s not universal, but trust me as an employer, as an employer I certainly didn’t want to lose good employees. And so you actually have a better marketplace. And so if your employer is not paying you good wages and you’re a good worker, you go look for other places. Now that’s hard to do, that’s hard to do when we have such high levels of unemployment. But again I would get back to we don’t have a very attractive place for business investment.

To summarize, being a "good worker" means that you'll make more money. If you are stuck at a low paying job, by implication you are a Bad Worker.

Bad! We do that outside, mister.

When I hear logic such as this I always wonder…do people like Gingrich and Johnson actually believe that this is the way the world (or at least the economy) works? That the job market and wages are as described in Chapter 3 of a junior high economics textbook? Or do they realize that the worldview they're promoting is ludicrous but do it anyway because it's politically expedient?

If it's the former, from where did this understanding of the economy arise? In Johnson's case it certainly isn't from personal experience; he married into a rich family that put him at the top of the family business. I guess that was his reward for being a Good Worker.

I reference Horatio Alger often on here – he of the classic 19th Century juvenile literature exemplified by Ragged Dick, wherein plucky, bootstrap-pulling protagonists rise from vagrant or shoe shine boy to powerful socioeconomic status using nothing but their own "luck, pluck, and diligence." The reason I so often reference him here is that his oversimplified worldview, packaged and aimed at children (today we'd call him a Young Adult author, although that genre is now known as Teen Paranormal Romance) as it was, perfectly summarizes the modern conservative understanding of social class, labor markets, economics, and the state. Everyone who works hard makes it! The world is a fundamentally Good place and it will reward the deserving! A magnanimous rich or powerful person will notice your outstanding qualities and pull you up the social ladder!

Alger is widely scorned today, much as we can assume that modern authors aiming at tweens will be scorned by future generations. However, America during the Industrial Revolution was a ready market for his literature – simple, inspirational stories intended to make young people feel like life might hold something other than misery for them.
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But his books were stories, not empirical studies. Even Alger himself, ever the chipper fellow, understood that his fiction for kids was not an accurate representation of how the world really worked. Yet here we are more than a century later and the gospel of wealth and social mobility in a classless society has become a rare trope in fiction…but a disturbingly prominent one in real life, if the attitudes of our ruling class are any indication.