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Monday, November 17, 2008

Sticker Shock Doctrine

by digby

Jane Hamsher has an informative and interesting post up today about the proposed GM bailout. It's a complicated issue, but in the final analysis, Krugman simplifies it significantly for me merely by pointing to the big picture:

Under current circumstances, however, a default by GM would probably mean loss of ability to pay suppliers, which would mean liquidation — and that, in turn, would mean wiping out probably well over a million jobs at the worst possible moment.

You simply can't wipe out a million jobs or more as we are just going into a terrible worldwide recession. It's like telling someone they have to go on a diet when they are in the middle of a heart attack. There has to be a bailout.

But there is something else going on, which I mentioned last week in this post --- the Republicans' reflexive political response is to take the opportunity to break the unions and it's a smart move on their part. Shock Doctrine all the way.

This is why you see this (from Marcy Wheeler):

I wanted to draw your attention to two statements about an auto bailout to show where this is going to go ideologically. First, Richard Shelby:

The financial straits that the Big Three find themselves is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force. The financial situation facing the Big Three is not a national problem, but their problem. I do not support the use of U.S taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes. [my emphasis]

Note his emphasis on "competitive" structures of doing business--and paying labor.

What Shelby doesn't mention, of course, is that Alabama is a right to work state. Shelby also doesn't mention that Alabama is home to Honda, Toyota, Hyundai, and Mercedes plants. Shelby also doesn't reveal that many of the cars those manufacturers make in Alabama, without unions, are precisely the kind of behemoths critics attack Detroit for making--only these have foreign nameplates: M-Class SUV, GL-Class SUV (a new model), Pilot SUV, Santa Fe SUV, plus engines for Tacoma and Tundra pick-ups and Sequoia SUVs.

In other words, Shelby isn't opposed to car companies that are stupidly committing and recommitting to SUVs. Rather, he's just opposed to car companies that make SUVs with union labor.

She adds in this post:

John Boehner: Boehner opposes the bailout, claiming the plan doesn't move the auto industry back towards competitiveness. I assume this is code for "free me of the UAW," since many of Ohio's workers are union auto employees.

Jim Cooper: Democratic Blue Dog Congressman from TN opposes the bailout, calling for conditions on it. TN is another state with auto manufacturing--both the old Saturn plant and Nissan and Volkswagen plants.

John Kyl: In addition to Richard Shelby, Kyl was the other Republican attacking a bailout yesterday. Kyl, of course, is the second-ranking Republican in Senate leadership after Mitch McConnell. I take his appearance on the Sunday shows to be a bit of a surrogate for McConnell, who doesn't want to take the lead on opposing a bailout, though that's just gut feel.

McConnell has some political conflict, what with a bunch of auto plants in his state. And, in my view, the Republicans are making themselves a regional power for decades if they decide to run with the Deep South Republican Rump leadership on this. But I don't think they can help themselves. Breaking unions is in their DNA -- if they get the opportunity they will do it.

That's all political positioning. Judging from the gasbags today, the right has actually accepted that Chapter 11 will result in catastrophic national economic consequences. So, they are likely to support some kind of bailout. The negotiating point will be the breaking of the unions.

I think Tom Friedman probably set the parameters in his column last week. The Democrats, the unions and the executives are equally responsible for the problem and as punishment, the Democrats should be vilified, the executives should take their golden parachutes and spend some time at their vacation homes before landing new jobs and the unions should be punished by ceasing to exist and leaving their members to fend for themselves in a terrible economy. After all, it's really their fault the Big Three are failing, right?

Uhm ,no. Here's Kathy G on whether or not those fat, lazy, spoiled union members really are less productive:

I've written about this before, but I'm doing it here again, because the wingnuts really need to put an end to this irresponsible bullshit, and pronto. Repeat after me: unions do not cause lower productivity.

The latest conservative to lie about this is Soren Dayton (who, last I heard, was "suspended" from the McCain campaign for peddling a sleazy, racially charged anti-Obama video). In a recent post about "card check," aka the Employee Free Choice Act (a proposed law that will make it easier to organize a union -- see here for more), Dayton wrote:

The unions and their lackies in the Democratic party are intent on a path that will destroy our productivity for a significant period of time.

Um, not hardly. Even if you didn't know what the economic literature says about this topic, if you stop to consider that the postwar era saw the record high union density in this country as well as unprecedented economic growth and productivity gains, it might give you pause. Indeed, Ezra made just this argument recently.

But actually, there have been some good studies looking at the impact of unions on productivity. Overall, the empirical findings have been mixed. About as many studies show a positive impact on productivity as show a negative impact, and in any case the effects that are found tend to be small. Which is why, for example, economist Barry T. Hirsch, in a survey of the literature on this topic (it's in chapter 7 of this excellent book), recently wrote that "[t]he empirical evidence does not allow one to infer a precise estimate of the average union productivity effect, but my assessment of existing evidence is that the average union effect is very close to zero, and as likely to be somewhat negative as somewhat positive."

And, in the big scheme things, I think we can all agree that well paid, secure employees make for a stable society. The problem with the Big Three has far less to do with their employees than it does with their management --- and a capitalistic ethos that requires a myopic obsession with quarterly profits over long term investment. The union members just make the cars they're told to make. It's not their fault if Americans insisted on buying behemoth gas guzzlers and the auto executives insisted on giving them to them knowing full well a day of reckoning was coming.

Update: Kevin Drum
, commenting on another (very interesting) question also observes that union busting in in the conservative DNA. It's a defining characteristic.