GM, the new Conrail

Here's a shock: the media are reporting this story all wrong. "GM files for bankruptcy protection," "...a low point in the carmaker's 100-year history...," "... a powerful reminder of how far GM has fallen ...," blah, blah, blah.

The closest they come to the real story is generally on the jump page: "To achieve the lower break-even point, GM will have to shed thousands of employees, several car brands, hundreds of dealerships, health care and pension benefits, and a mountain of debt."

Whoa, rewind there: " ... GM will have to shed thousands of employees, ... health care and pension obligations ..."

Lemme get this straight. The US Government now has controlling interest in GM. The same US Government that has been telling us we have to pump millions of our dollars into GM, et al., because if por exemplo the Big Three go down we could lose jobs big time. The same US Government has also been talking about creating jobs, public works, etc., etc. Now they own GM (mostly), and the jobs go down the toilet anyway? On their watch? On their orders?

Admittedly we're now talking 40,000 jobs instead of 2 million, but the game ain't over yet. We still have more bankruptcy tickets.

This is the wrong kind of restructuring, folks! This is the (now discredited?) IMF all over again, just the opposite of what we need, what we need being what we might call a Social Monetary Fund - that would fund job creation, not "job shedding"; expanded health care that would cover more people, not fewer; likewise pensions.

Instead we seem to be getting, as Greg Palast puts it, "Grand Theft Auto:" nevermind ERISA, nevermind the fact that the pension money isn't theirs to take, and how DO you walk into to the doctor's office and pay with a bankrupt car company's stock?

That's clearly what we should be pissed about. But I'd like to add one more little observation, while we're on the subject (or I am). A little history, just a sort of after dinner mint to tip us right over the edge. It concerns Conrail, pretty well named in retrospect.

You see, this has all happened before. Before 1975 there were a number of old private, for-profit railroad lines running in the Northeastern US. Only they went bankrupt. So the Government bought them, and restructured them, downsized them, "shed" some of their operations and the attendant workers, etc. At the same time, with the same Act, the Government began a program of "regulatory reform" - i.e. deregulation. Several such "reforms" followed, but that's another story.

The long and the short is, by 1980 Conrail turned a profit (NB: as a government run enterprise it became profitable). So the Government took the next logical step - claro. It re-privatized the company, the largest sale of public stock in US history!

Get it? Private enterprise not working - government/taxpayers assume debt, invest billions to rebuild and repair - then hand it back to the profiteers, this time with far fewer regulations, like, for example, secret contracts, etc., etc.

They call this 'socialism'? The smart guys have a better way to describe it: "Socialized risk, privatized profit." What it means is, socialism for the rich, while the rest of us get to take our chances with wild west capitalism.

Same Song, Different Day

Can you name the song?

Here's another observation similar to mine about Texas below, this one from the University of Mississippi, where I went to school - and used to write about "Neo-Confederates" in the student paper once upon a time.

Atkins is absolutely on the money that, "The recent spectacle of Corker, Shelby and Mitch McConnell of Kentucky leading the GOP attack on the proposed $14 billion loan to the domestic auto industry -- with 11 other Southern senators marching dutifully behind -- made it crystal clear. The heart of Southern conservatism is the preservation of a status quo that serves elite interests."

And, "Expect these same senators and their colleagues in the U.S. House to wage a similar war in the coming months against the proposed Employee Free Choice Act authorizing so-called "card check" union elections nationwide."

These guys are completely unreconstructed in essence. I remember a study a friend of mine at Mississippi did of proposals for economic development in the Delta region: the big land-owners opposed it, even though they themselves would have profited as much as - actually much more than - the sharecroppers and reserve army of the barely employed. Why? Because it would have brought increased social mobility for the local downtrodden, who might begin to entertain some crazy notions of going to school or running off to Memphis, or Chicago... or just that there might be other options for them than modern serfdom.Excellent point.

And to wit, Atkins says, "In their zeal to destroy unions and their hard-fought wage-and-benefits packages, the Southern senators could not care less that workers in their home states are among the lowest paid in the nation. Ever wonder why the South remains the nation's poorest region despite generations of seniority-laden senators and representatives in Congress?

"Why weren't these same senators protesting the high salaries in the financial sector when the Congress approved the $700 billion bailout of Wall Street? Why pick on blue-collar workers at the Big Three who last year agreed to huge concessions expected to save the companies an estimated $4 billion a year by 2010? These concessions have already helped lower union wages to non-union levels at some auto plants."

Excellent point - that only a commie pinko would make - like his others. Keep an eye on these clowns in the Southern caucus, they're up to serious skulduggery.

Butterflies caused the financial collapse

They just can't bring themselves to say the word: deregulation. Zachary Roth finds the obnoxious tip of an obscene iceberg at McGraw-Hill. Or maybe the metaphor is upside down: propaganda like this aimed at kids must be the lowest dung in the proverbial hill.

Zombie banks, zombie cars

When the AFL-CIO gets behind nationalizing banks, you know it's past due.

Some crazy radicals have even suggested a similar strategy for the auto industry. I mean, where's that "value" for our public bucks otherwise?

But critics of nationalization have a point that 'there are no guarantees.' And Fmr-Transport Sec. Barnum's off-base: we don't need "slimmed down" corporations, just the reverse. We need an expanded, social vision for them.

It's the original idea behind corporate charters, updated. The king/parliament, then Congress, used to grant charters to corporations in order to serve a particular function, assumed to be a good (for them). What we need is control over that purpose. Social Monetary Fund, folks, I'm tellin' ya!

The thin edge - we're hoping

OK, I admit it. I am more satisfied making $8.50 an hour, and even happy making $10 an hour, because my feet remember so well making $3.25. I gladly sit in front of a computer for $350 a month, or stock produce or run a cash register for $300 a month, because it seems like only yesterday I was toting a claw bar down a dry, dusty railroad track - pines in the distance wavering in the 110F heat - through Sharp's Bottom, a snake pit punctuated by coyotes and pistols just far enough from the paper mill that the acid rain that hung around the smoke stacks didn't take the skin off unless you had to service that part of the track ... for $4 an hour.

So after Reagan and Bush, and Clinton, and then another Bush - meaner, nastier - yeah, I'm positively goo-goo over some of Obama's doings. Like today: anybody who wants bailout money from here on in, he says, pays no more than $500,000. See, I just got no problem at all with that. In fact I'll take half. Easy. And I'll throw in a bonus even though nobody has asked: if I manage to screw up the business, any business, let alone the world economy, even a fraction as monumentally as my predecessor(s) ... hell, I'll give back half of the salary I did keep.

I'm actually pretty confident that bonus would never be implemented. But that's beside the point: how come nobody's asking?

But even if they were, seriously, would it be enough? Do we really believe the executive's out-frigging-rageous pay grades are the biggest kink in our collective hose? It's so micro.

Sure, it's longterm stupid to pay people a commission to dismantle our economic base one factory at a time - that is, assuming a perspective of "promoting the general welfare," which I don't - but the hole we're dug into is way too deep for a long, sloping incline out. We've got to get macro on their asses.

How about, just for starters, something like: You want bailout money? Stop spending it busting unions and conspiring to block the Employee Free Choice Act. Stop dodging OSHA regs, the EPA, overtime protections and discrimination cases with merit. You want the money? Settle those legitimate lawsuits, fix that pollution problem, and pay your damn workers what they've earned. And by the way, federal inspectors get unfettered access to every square inch of your operations - including offshore subsidiaries - and 24-7 access to all the books (both sets). Congress calls you up and says, How'd you spend the money? and you say, Dunno, and if I did, wouldn't sing - and you can just whip out that big, fat corporate checkbook and pay it all back - at about 15% APR.

Still want it? I got some ideas for a "Social Monetary Fund" to talk to you about. There's a certain flexibility we expect from you, too. No, I don't mean logistics or whatever you call outsourcing these days. I mean you need to be about developing technology that will re-tool for new trends in the economy, and new priorities for energy and social margins, not just for the latest model of the miracle of built-in obsolescence you sold us last year. We - it is we who will have to demand it - want to see swords beat into plowshares, just about literally: military capital converted for local and global standards of living. And so on.

Is Obama the savior who'll bring us all that? It's the wrong question. The real question is what are we going too do to get started in that direction?

Green but not Soylent Green

"It's people. Soylent Green is made out of people. They're making our food out of people."
- "Soylent Green" (Richard Fleischer, 1973)

For as long as there have been bailouts, people have known that bailouts suck. The rich play, we pay. "Privatized profit, socialized risk," it's called. Now, with more bailout requests in the pipeline and the President-Elect promising the mother of all stimuli, critics are girding for battle - and rightly so - but let's not throw the baby out with the bathwater.

The bailouts have many critics on the left - not just the nutcases on the right who still believe in "free enterprise" - but some are seeming more insightful than others. US Sen. Bernie Sanders says if a corporation is "too big to fail," it's "too big to exist." He says the government should break them up. Sanders also says, "let the rich bail out the rich" by paying a surcharge on income over $1 million to cover the costs. Jobs With Justice, ACORN and others in the grassroots left are calling for a "People's Bail-Out." All good ideas. Then there's my personal broken record: a comprehensive Social Monetary Fund to restructure the whole ball of wax.

But some of our friends, in their haste to fund "green infrastructure," sometimes forget who the effort is for.

Reede Stockton of Global Exchange, writes in an article on Common Dreams about a "new green economy" with massive public expenditure to rebuild the nation's rail network and support free public transportation using all clean energy. It's a great idea, but he says we should do it instead of rescuing the auto industry.

The US economy is on track to lose as many as a million and a half jobs by the new year. If even one of the Big Three car companies goes under, that failure and its ripple effects could add another 2-3 million jobs lost next year - not counting other job losses, already estimated as high as 300,000 a month by year's end. But they can go anywhere they want to go for free.

To be fair, the public investment in infrastructure Stockton proposes would create some jobs. But these are different jobs, very different. A comprehensive plan is needed, with public money for retraining, provisions for people who can't make the transition so easily - retirement, maybe a kind of G.I. bill for veteran of the workforce - etc.

But if the government decided to now turn its back and let an integral part of the economy collapse, millions of people fall into the dustbin of redundancy, buildings and machines tossed in the landfill or left to obstruct new development, that would be recklessly destructive. And it would gain the "new green economy" a generation of enemies that could have been allies. Why throw away the product of a hundred years of public subsidy and entrepreneurial ingenuity (albeit not "free")? The car industry could help, with the proper realistic incentives.

If we can put a man on the moon - if we can put an intelligent, well-spoken man in the White House (a black man no less, whose middle name is Hussein) - we can do this.

Structured by cows

"It could be structured by cows and we would rate it": another fascinating peek into the parallel universe that, unfortunately in the end, did intersect with ours ...

http://tpmmuckraker.talkingpointsmemo.com/2008/11/it_could_be_structured_by_cows.php

Maybe it’s the whole economy that was structured by cows. The focus has been Wall Street, and there’s plenty of craziness there to focus on. People buy and sell hogs that aren’t born yet, fer chrissakes! Crops that haven’t grown yet, all kinds of insanity. They take bets – essentially bets – on which loans will go bad, and so on. It’s nuts, and that’s even with regulation. Without regulation it gets downright bestial.

But it’s obviously much more than Wall Street.

There’s been a lot of talk about debt – private debt, public debt – and how it’s been ballooning for 30 years. It was already considered problematic when Reagan, the balance-the-budget president, jacked the federal deficit to record levels. And as we all know, Bush had to pull out all the stops. Jack Rasmus (Z, Nov. 08) has a very thorough rundown of US debt accumulated during the ‘W’ years, including $8 trillion in new debts to banks (speculative, etc., added to $6 trillion in household mortgages), $1 trillion to credit card companies (largely because people don’t earn enough to pay bills), $3 trillion in government debt (Iraq mostly) and over $3 trillion in “non-financial” business debt: it adds up to around $21 trillion in new debt just since 2000.

Credit card and mortgage companies are now pushing new debt with ads that center around the bailouts!

Yesterday the Senate killed the vote on the auto bailout - playing 'chicken' with maybe 2 million jobs, and possible economic depression - but they keep talking about this the wrong way. It isn't clear at all to the American people why these humongous companies are in debt in the first place. It isn't just because sales have been declining. And it isn't really, except just in the immediate, because of the Wall Street crunch. Why would that bother big manufacturers? Don’t they have money? Or if they don’t, why didn’t they realize it before now?

It’s the way they run their businesses, by trading on their status - in a way that small businesses can never do, so really on their size. (Similar, you have to admit, to the way the big financial institutions were running: these are not bad loans, not irresponsible reckless screwball cowboy ventures, we wouldn’t risk our business that way, we’re big and well respected!)

Turns out, really big businesses don’t run the show on the money they take in, or on their savings or cash reserves, or even on loans that they plan for and include in annual or even monthly budgets. It’s more proof, in case we needed it, that capitalism doesn’t actually work, at least not without passing a giant collection plate around the plebes, sometimes (and always at least indirectly) at the point of a gun – serfs, Native Americans, African slaves, taxpayers, somebody has to prop up this façade at all times.

The dirty secret is, the Captains of Industry keep their show on the road by borrowing money, tens of millions, on a near-daily basis, and pay it back almost daily, too, usually. Your typical manufacturing giant or other towering edifice of capitalist potency will have, secreted away in the bowels of the organism, a small office that swings into action at the end of every business day, or at some point near the end. The function of this office is to check the daily balance – take versus layout – and if there’s a shortfall, borrow, say, $10 million or so, over the phone, just to tide the big boss over until tomorrow. Or, on days when there’s a surplus, pay it out.

There was a recent episode of “This American Life” that told the story, and jaws hit the ground in kitchens and living rooms all over America. They depend on these day-to-day loans so heavily that, in the case of the carmakers (and others), when the loans locked up, the businesses started to bleed out immediately. That’s why the crisis seems to have exploded out of nowhere with every major institution, bar some, whimpering about mountains of debt – mountains of debt that moreover continue to grow at least arithmetically even as they struggle to slow it down. They can’t stop it. They have no other resources. They have been operating miles beyond their actual capacities for decades. Their very capital, the physical existence of the corporation itself is constructed out of this fact. It is literally who they are.

For some like GM the unwinding is happening so fast, they may code by the new year or soon after, taking 2 million or so jobs with them (in addition to the million-plus already down the crapper this year). That’s a lot like a depression, folks.

Talk about a house of cards.

But it’s an inescapable fact, it seems to me, that the kind of free money the carmakers are or were hoping for, sans fundamental restructuring, is just feeding the bad wolf. It wouldn’t even seem to delay the inevitable very long, maybe just long enough for stockholders to pull out but probably not long enough for 10-plus year employees to find another home, especially not nowadays. So the “free” marketeers don’t like it because it enables bad practice. But there’s a good reason for social progressives not to like it either: we could wind up paying them to kick people out of work.

And I know I’ve said it before, but we need to pay them to put people back to work. We need the opposite of an IMF, something like a Social Monetary Fund, and it needs to be one with a vision beyond the WPA or CCC. It needs to encourage investment in what economists might call “externalities”: infrastructure needs; gainful employment, yes, but also alternatives – a kind of social diversification – renewable energy, public transportation, etc.; we need to encourage freight to move by rail, not over public roads; so many things.

Now, GM can’t do that alone, no matter how much we lend them. But that’s where the Fund’s management comes in, a sort of coordinating function – “planning” you might call it. GM, for example, gets a bailout and it required to participate in restructuring, not just internal restructuring but external restructuring, of the whole economic mess.

It doesn’t have to be structured by cows. We are smarter than cows, in theory. The economy can be structured by people. It is anyway, just not by the right people, and not by enough people.

How to Save Capitalism - in case we want to

I’ve just been reading Harper’s Magazine –which I don’t usually do. But this month there are a number of articles on “How to Save Capitalism” – which I don’t normally advocate, either. But it seemed pertinent, and there are quite a few interesting ideas.

Joseph Stiglitz (“The Three Trillion Dollar War”), who I think some of our friends were praying would be Obama’s Treasury Secretary, has an almost impenetrable article on Wall Street and tulip mania in the 1600s – arguing that the long-neglected purpose of financial institutions is to *manage* risk, not just auction it off for fun and profit. That sounds hard to argue with. He has ideas about fixing this, like requiring the troublemakers to invest their own money with ours, but he doesn’t seem to me to get at the larger picture we’re grappling with at the moment.

(From the revised job loss figures for late summer (even more people kicked out of work even before this fall than they told us, which was already a lot), as if we didn’t already know it, that the recession was locked in well before the Fannie & Freddie extravanganza. Well over a million jobs lost this year – job losses may hit 300,000 a month by the end of December. Merry Christmas!)

Similarly Barry Lynn (“The Rise and Coming Fall of Global Capitalism”), who advocates abolishing stock options or at least reforming them so that corporate managers don’t get quite so much encouragement for short-term profits while if not giving away then selling (low) the proverbial store (e.g. GE CEO proposal to sell off their R&D! That must be right up there with a passenger on the Titanic selling his spot on a lifeboat?) Again, I think he makes a good case for the reform he’s advocating – it just doesn’t seem like enough.

And, Elizabeth Warren and Amelia Warren Tyagi (“The Two-Income Trap”) suggest something like a Consumer Product Safety Commission for financial ‘products’ – a “Financial Product Safety Commission” – to detoxify the financial environment. Probably a great idea, but the most interesting part to me was their story that “each year millions of credit-card offers go out with tiny print detailing ‘double-cycle billing’ and ‘trailing interest,’ terms which have enormous financial implications but are meaningless to most people.” Include me. What the hell?

Then they get more radical.

Michael Hudson (“Super Imperialism”) – after a short history of the rise and untimely demise of the progressive income tax – says tax the land. He says tax breaks on property and capital gains, plus tax deductions for mortgage interest amount to “powerful incentives for buyers to go into debt.” He says we should be taxing the privilege of owning land, not socially useful activities like producing and earning money. Especially, he says, tax “’unproductive’ incomes” like hereditary estates and monopolies – e.g. currently privatized natural resources, public airwaves, etc.

At first I thought, wait a minute! No tax deductions for mortgage interest? What will we struggling homeowners do? Then I remembered: those of us who are struggling don’t actually earn enough to itemize deductions anyway. Not sure how this ‘tax the airwaves’ idea would affect small operations like WEFT and WRFU, etc. but I’m sure there’s a way to tweak it. The solution might be as simple as a kind of standard deduction that effectively exempts small operations. Same could work for the land tax, really, when it comes to lower-middle-income folks trying to buy their first house … not their first *ten*, of course. (Can you really live in ten houses?)

James Galbraith (“The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should, Too”) jut comes right out and says we should “plan.” Dude!

No kidding, Galbraith is pointing out once again that the myth of ‘free enterprise’ is just that. It doesn’t exist. The trick is to acknowledge, I think he means officially, that the government always has and of necessity must and should intervene to manage and shape the direction of the economy. It isn’t clear to me exactly how he thinks we should do this, except that he says his idea “is not coercive” but based on budget priorities and such – to encourage the *kinds* of development we want. Clearly, I think, he’s right.

He seems a little short on what exactly those kinds of development are, too, but he mentions one example: a Federal Department of Energy and Climate, which would be “independent” of lobbyists and other evildoers – even Congress – (how?) and (miraculously) free to evaluate new ideas for renewable energy, etc. Our local experience, which may or may not be a useful guide, I think is that the ‘independence’ part is a humongous ‘if.’ To the extent to which city planners around here have been ‘independent’ of elected officials it seems to me they have been ‘independent’ of social considerations, even more than the elected officials: they just listened to developers and trusted their business school training. To the extent to which the planners have been ‘dependent’, well, it has depended on who was in office and what their (election-dependent) priorities were. I just don’t see it working this way.

Galbraith may have some great ideas, and he’s certainly right on about the faith-based nature of “free enterprise”. But it seems to me he’s trying to take a shortcut around the truly back-breaking work of this thing: the organizing, the building of public or cultural or national will, the social will, the social demand for radical changes like these. Maybe it’s because in the process a lot of good ideas will be shitcanned because the huddled masses don’t get them – in favor of gettig paid now. But that is the uphill battle. The biggest public relations industry in human history is against us, not to mention the monopolies on resources and organized violence currently aligned (maybe a little more loosely since last month) with property interests and so on. Tough question, but we can’t just skip it, IMO.

Finally, Eric Janzen (pres., iTulip Inc.) and Bill McKibben (“The End of Nature”) have I think related but different suggestions all to do with what kinds of development we want to foster. Janzen says we have to “reindustrialize”: and he’s talking innovative startups, publicly encouraged. McKibben says “localize”: farmer’s markets and other smaller, more localized economic developments make more sense (as we run out of oil, he says – not so sure that we are any time soon, but) and are much more deserving of public investment – *social* investment again – that ADM and the oil industry & co.

Janzen presents a more destructive version of a similar notion, in my view, advocating that we allow the financial and insurance sector, and the 4-million-job US auto industry to sink or swim on its own. Now. He’s not even just saying don’t bail them out; he’s saying withdraw the subsidies we already give them. No weaning, no methadone. Economic Armageddon.

I think that’s an even steeper ramp down to economic (and medical) depression, myself. You have to remember why we bother to discuss this at all. It’s not a board game. It’s people’s lives. And we don’t want to destroy this village in order to save it.

But in the long run I think Janzen’s got something there: he says in essence that our economy needs to be based on producing things and not just on insuring things that other people make and lending money to buy things that other people make, and then gambling on who will lose the most money when it all comes crashing down. Hm, you think?

He has a zillion ideas for startup businesses – that’s what he *does* – and the model is “public-private partnerships” (i.e. joint ownership). I’m skeptical of this on the scale and with the suddenness he seems to be proposing, at least in the contemporary capitalist context; seems like a tender box. I see armies of scam artists swarming to make living while the tourists wander the burning cities in a daze. But I think we can begin to reorganize our society along lines that are at least informed by these sorts of ideas.

McKibben, for example, addresses the human cost of some of these proposed changes. We don’t want to “beggar the populace,” he says. He’s a little slim on the specifics, but he says there are all sorts of schemes for rebates and discounts and things to ease the burden of yanking the carpet out from under tens of millions of individuals and families. They’d better be damn good ones, is all I can say. I like a lot of these ideas, but we must keep perspective. The biggest problem with the solutions we keep seeing come out of Washington (and downtown Manhattan, and Detroit, etc.) is that they ignore who they are (at least allegedly) *for*.

We must be the nagging reminders.

Better than Bush, but ...

[...] The Democrats' bill would require companies to submit a plan for long-term viability, share a portion of future profits with the Government and reimburse taxpayers before any other shareholder. [- AP 11/14/08]

Still need to hear more about what "viability" means - the looking out for Number One sense, or the we all exist as members of a society sense - and to get the damn thing passed - without giving away the store!