Open thread Nov. 22, 2016 Dan Crawford | November 22, 2016 7:02 am Tags: open thread Comments (11) | Digg Facebook Twitter |
Trump: Reaganomics Redux
by George Tyler on 22 November 2016
It’s wages, stupid!
Analysts are pondering why millions of the same voters who favored President Obama in 2008 and (less enthusiastically) in 2012 pivoted to favor his antithesis, Donald Trump, in 2016. Economic frustration centered on stagnant wages is mostly the answer, reflected in a generalized desire for “change” expressed by 39 percent of voters in exit polling.
American corporate executive suites were provided political and philosophical support to divert cash flow to profits from wages beginning in the 1980s by the Reagan administration, which also demonized trade unions. This executive suite transformation, symbolized by an embrace of job offshoring and Randian rational selfishness, is the genesis of the ensuing decades of wage stagnation. Wages are inching up for the moment as American labor markets episodically tighten. But the Bureau of Labor Statistics (BLS) reports that the median weekly wage of a full-time American worker in the all-encompassing nonfarm business sector in 2016 was a bare 5 percent ($17) higher than in 1979, adjusted for inflation. In Germany, by contrast, real wages are 30 percent above 1985 levels. In fact, the average 2.5 percent real wage gains reported by the Statistische Bundesamt (Federal Statistics Office) for German workers in 2015 alone was one-half the cumulative rise in median real American weekly wages since 1979.
Globalization, technology change and a handful of other exogenous factors are typically blamed for this stagnation. Yet, experience in other rich democracies during the past generation belies that thesis. Real salaries abroad have risen steadily enough for decades so that wages and benefits in the capstone manufacturing sectors in 13 other rich democracies have soared well above America. Compensation in 11 of them is more than $10 per hour higher than in the US, according to the Statistische Bundesamt and the Conference Board. That is because new jobs being created in America (unlike in other rich democracies) over the course of the business cycle in recent decades have consistently paid less than the old ones they replaced. More than 40 percent of the 8.5 million jobs lost in 2008 and 2009, for instance, had median wages above $20 an hour. But only 30 percent of the new jobs created through February 2014 were comparable. The consequence is documented by the OECD, which has concluded that the US has the largest share of low-wages jobs of any rich democracy. That explains the Federal Reserve finding that 22 percent of Americans work two or more jobs.
Other rich democracies like the Low Countries or Germany are more engaged in international trade than the US and have no better productivity records of late than America. Yet, wages have steadily inched up in Northern Europe for the past generation, because the quality of their democracies is higher. Middle class hopes of rising prosperity are satisfied by politicians who demand both codetermination in the governance of larger domestic corporations and insist that smaller employers provide steady if modest real wage gains annually. The outcome is steadily rising real wages apace with productivity gains, no job offshoring, greater workforce participation than in the US and more security for life’s challenges via quality and affordable health care, education, child care and retirement. It is why their households suffer fewer pathologies such as addiction or suicides than the economically beset and shrinking American middle class. Indeed, as documented by OECD data, America has come to most resemble Turkey or Uruguay on important economic measures such as income disparities or the small size of its middle class.
The election outcome is not a panacea for middle- and working-class Americans seeking higher wages. Trumponics will mimic Reaganomics, with the Republican Party agenda of higher profits, tax cuts for the most cosseted, wage suppression, indifference to budget deficits and deregulation de rigueur. President Reagan nearly tripled America’s national debt, for instance, and Trump may well match that. Federal anti-poverty health care and food programs will likely devolve to become state-administered grants, worsening the plight of America’s poorest. And a new Supreme Court justice or two will ensure that body remains in the hands of steadfast economic Darwinians.
Donald Trump campaigned to drain the swamp of pay-to-play Washington politics. And Trump campaigners like former Republican Senator Trent Lott – a powerful lobbyist – are eager to help: “He is going to need some people to help guide him through the swamp – and how do you get in and how you get out? We are prepared to help do that.”
The one inescapable, absolutely ineluctable reality is that wage stagnation can only be ended by reforms to American corporate governance. Token proposals (domestic content regulations, wage subsidies) may be introduced. But Republicans will assuredly reject the necessary systemic reorientation of American executive suites that is viewed with great hostility by their affluent donor class.
This easily predicted stasis is an opportunity for Democrats. The election results obviously require them to advocate for a new American wage bargain more alluring than their tepid agenda now centered on minimum wages, paid family leave, speedier unionization elections, overtime pay, Independent Contractor reforms and the like. It requires a centerpiece able to capture the imagination of America’s middle and working classes.
That centerpiece should be co-determination – reforming corporate boards of directors to make them amenable to sharing productivity gains with both shareholders and employees. Prime Minister Theresa May will unveil a co-determination proposal shortly for British enterprises and the American Democratic Party should do no less. As evidenced by Germany and many of its neighbors, co-determination has proven over decades to be the globe’s most powerful and dynamic technique for enabling the middle class to realize a portion of the gains from growth without endangering international economic competitiveness.
That success makes it the prescription of choice for a Democratic Party eager to be recast as genuine enablers of the middle and working classes, a role they have bungled since Ronald Reagan.
About George Tyler
George Tyler began his career working in the United States Congress as an economic adviser to Senators Hubert H. Humphrey of Minnesota and Lloyd M. Bentsen of Texas and as Senior Economist on the Congressional Joint Economic Committee. Appointed by President Clinton as a Deputy Treasury Assistant Secretary in 1993, George worked closely with international financial institutions and in 1995 became a senior official at the World Bank. George is the author of ‘What Went Wrong: How the 1% Hijacked the American Middle Class… And What Other Nations Got Right.‘
MY COMMENT: SOMEBODY WHO REALLY, R-E-A-L-L-Y GOT IT RIGHT!
Denis (oh, that’s me :-]), here’s how we can do it (cut-and-paste):
First 100 days progressive states agenda
None of this below has ever been vetted by the courts — but no time like now to start — the workability seems very compelling.
First, (progressive) states can add to federal protections like the minimum wage or safety regulations. Don’t know why they could not add to labor organizing protections.
LEGAL dissection: Suppose that the opposite of today there were no federal setup for establishing a collective bargaining unit — people in the free market established their units ad hoc when and where they were able. Suppose that unlike today that federal law made interfering with establishing a collective bargaining unit a crime. [This reverse combination might do more for labor than today’s actual situation — but I digress.]
Examples of federal fed and state parallel statutes: bank robbery, RICO (33 states), etc. If there were no organizing setup to PREEMPT, there would be no question states could make union busting a crime. With today’s fed set up I would still think it perfectly obvious that states merely protecting that setup is not preempting.
Now we add the CONSTITUTIONAL dissection: Given the established First Amendment right to organize (commercial association), the fed cannot setup an exclusive path to collective bargaining if said path is in a permanent blocked condition.
The process of labor organizing is by definition adversarial situation where history in the US (recent decades at least) shows unchecked market power — MONOPSONY! — all on one side.
6% union density in private industry — and it wouldn’t even be 6% if they had to start from scratch today — 6% union density (and dropping) is all proof anybody should ever need that the road to collective bargaining is permanently blocked.
Put at its simplest: the fed cannot preempt something with nothing — not with a fundamental constitutional right at stake. This should make the open path to states criminalizing union busting doubly unduckable.
Logically IF THE FED CANNOT PREEMPT SOMETHING WITH NOTHING — if it’s difficult to get people to think that any radically new way of doing things is possible — logically: states should be able to erect their own labor union certification setup UNTIL THE FED REFORMS.
What I’d like to see at the state and eventually federal level is mandated certification elections on a finding of union busting. Simpler, more streamlined than using up law enforcement resources, no businesspersons go to jail (big business more pin-downable than small, just like with discrimination statutes).
In Wisconsin the Republicans force recertification of public employee unions every year — with 51% of membership required, not just voters. So what’s so alien about forcing a certification election with reasonable cause?
Interestingly, California (and maybe others, I don’t know) have a separate union certification setup for farm workers only. This is done on the strength of FDR telling Congress that it did not apply to farm workers, probably just to get it through.
6% union density is like 20/10 blood pressure — it starves every other healthy economic and political process. I am sure that all these stories we see about big pharma making drugs so expensive nobody can use them (think Sovaldi which could eliminate Hep C overnight for the cost of half a billion dollars manufacturing, but Gilead wants 300 billion!), for profit colleges (Trump), trillion in student loans, etc., would never have gotten so bad in the first place if there were anybody minding the store.
David Broder, late dean of the Washington press corps said that when he came to DC fifty years earlier the lobbyists were all union — the economic cops on the blocks.
10,000 gun homicides in US — 8,000 gang related. Ever want to stop the shooting in Chicago, $400 jobs will have to start paying $800 AGAIN (my old taxi job, supermarkets — be nice if regional airline pilots didn’t have to take food stamps, answer to the latter is centralized bargaining, look it up). Meantime 100,000 out of my guesstimate 200,000 Chicago gang age males are in street gangs to try to make a living. Only unions will stop the shooting — absolutely no other way.
Want to ruin Donald’s day — in case that’s the only thing that matters to you: actually help poor blacks (who did not vote against) and blue collar whites (who did vote for) — unlike O and the Clintons who never did anything for either of them; not enough to make their lives promising again anyway.
LABOR UNIONS ARE THEIR ONLY WAY BACK — AND THE POWER WILL BE ALL THEIRS TO DO IT.
Nobody can stop the march of collective bargaining once progressive states wake up and realize they — not only — can but — only they can — restore healthy labor union density to our undernourished, moribund democratic process.
PS. Don’t be daunted if Repubs force right-to-work nationally. In the German labor market, the platinum standard of labor effectiveness, I don’t believe there is a single majority union — mostly “freeloaders” — but mostly collectively bargained — that’s the difference.
BUT THE MULTI-LANE, REALISTIC LABOR ORGANIZING ROAD IS THE LAST THING ACADEMIC PROGRESSIVES — INCLUDING BERNIE AND WARREN — EVER SUGGEST TO TRAVEL. WHAT’S WRONG?
Ending Trump’s Conflict of Interest Problem in Three Easy Steps
Published: 22 November 2016
Many of us have been raising the issue that Donald Trump is apparently prepared to defy well-established precedent and continue to maintain his business empire even as he serves as president. For the last fifty years presidents have put their assets in a blind trust so that there would not be a question as to whether they were working to fatten their own pockets or for what they considered the good of the country. This also prevents the most blatant forms of bribery by those seeking to curry the president’s favor.
It is hard to see any reason that Donald Trump should not be held to the same rules, as argued by Jeff Hauser at CEPR’s Revolving Door Project. But some have made the argument that, given his extensive holdings, it would be almost impossible to sell them off in the two months remaining until he takes office. This means that he could not avoid the problem of making decisions that will have a direct impact on his business interests.
Actually it is not hard to find a way around this problem:
1) Donald Trump arranges to hire three auditors from an independent accounting firm. Each one does an independent assessment of Trump’s holdings and assigns it a value.
2) The middle assessment becomes a benchmark. Donald Trump buys an insurance policy that will guarantee him that he will get this amount of money when all assets are sold. If the total take is less than the benchmark, he collects on the insurance policy. Any money received in excess of the benchmark goes to a charity of Trump’s choosing (not the Trump Foundation).
3) All the proceeds from the sales are placed in a blind trust.
There you have it, three easy steps that Donald Trump could take if he wanted to end the conflicts of interest he now faces. It doesn’t seem likely that he will go this route on his own, the question is whether anyone (i.e. Republicans) will force him.
That’s Ayn Rand’s RATIONALIZED self interest. Anyone can rationalize self interest (never say selfish).
meanwhile we ought not to be counting on any sudden burst of rational or altruistic behavior (as some Randians point out “altruistic behavior” feels good, therefore it is really “selfish.” And of course we no longer need any words to distinguish between the two.
We do, did, have a government that counted on “checks and balances” to limit the amount to which one faction’s rationalized self interest would make all the rules for the rest of us.
and there is this…i’ve been looking for a place to say it: Ayn Rand’s Atlas Shrugged has a main character, “John Galt”, who invents a new steel and becomes disgusted when bridge engineers are too conservative (not politically) to take advantage of its superior strength in designing bridges.
Now Galt is fictional but there was a person in real history who designed bridges taking advantage of the strength of a then new material. The material was iron, the designer was Thomas Paine, who also invented the idea of social security and wrote Common Sense which had something to do with winning the American revolution. Then he wrote Age of Reason, which pointed out the sins of the churches, got called an atheist and got himself despised and forgotten by the people whose revolution he helped (significantly).
Having lost all his friends, he was unable to capitalize on his invention, though others did, some of whom gave him credit.
But I don’t think ol’ Tom had it in him to make it as a capitalist.
It’s unlikely Ayn Rand ever heard of Paine’s iron bridge; it would have been interesting to hear her rationalizations if she had.
Too me the answer is simple as the difference between crony capitalism and capitalism. One says unlimited size and the other limits size; which insures competition so that the free market system functions.
You cannot put limits on technology growth. Therefore we must and unions must begin tom take a serious look at what is being called universal basic income. E Musk over at Tesla recognizes the problem and has bean floating the idea. I read more about it from Catherine Clifford at CNBC “Make It”. Also Martin Ford writes about it in his book “Rise of the Robots”…The unions will have to learn to bargain for this…
“The unions will have to learn to bargain for this”
Ryan; you have to have more than 6% (and going down?) unions in private enterprise first so there’s someone to bargain. See Above — it could be oh, so easy; at least in progressive states to start with (roughly, any state not not right-to-work?).
Get German level and thoroughness union density and we may not need to worry about basic income. I think that’s what most of the people who dumped their votes on Trump really want, fair paid work. When they realize they cannot count on the right anymore than the left, then, maybe they will realize they can only count on themselves — which means organizing unions.
Happy Thanksgiving everyone!
but us turkeys are looking a little nervous.
Second coRev’s sentiment!
“You cannot put limits on technology growth.”
It’s about limiting the market influence one company may have in the market place. Technology is controled by patients.
May all have a great day with their families.