Market Value

by digby

Dean Baker makes an excellent observation in light of the Chrysler bailout that really should be emphasized. He notes that one of the obvious advantages conferred on the company by being owned by Fiat is that the top executives and designers will be European and will, therefore, save the company a boatload of money. See, they don't pay the ridiculous compensation that American masters of the universe seem to believe is their God-ordained right. And as he explains, this should be an object lesson for the American worker:

Trade agreements like NAFTA were explicitly designed to remove any barrier that made it difficult to export manufacturing goods to the United States, thereby placing US manufacturing workers directly in competition with their much lower paid counterparts in the developing world. Most of these restrictions had nothing to do with tariffs. Instead the key issues were rules protecting investment in the developing world along with limits on the ability of the US to exclude imports through safety or environmental regulations.

There has never been any similar effort to eliminate the barriers that prevent professionals from the developing world from coming to the United States and competing directly with their US counterparts as doctors or lawyers or in other highly paid professions.

The economists and the media somehow failed to notice that professionals were intentionally sheltered from international competition and instead just trumpeted them as the winners in the global economy. We were just treated to a beautiful example of this double standard when the media and the economists got all huffy about the "buy America" provision in the stimulus bill that might have protected a few manufacturing jobs in steel and other industries.

While this provision was roundly condemned and eventually watered down, the buy America provision in the Treasury's latest bank bailout bill went completely unnoticed. This provision requires that any investment manager taking part in the program be headquartered in the United States. Even though the argument against protectionism in financial services is identical to the argument against protectionism in steel, no one bothered to make the argument when Wall Street was the beneficiary of protectionism.

The end result of this protectionism for those at the top is a bloated overpaid sector of top managers, which is what we saw at Chrysler. If we compare wages for assembly-line workers in Europe and the United States, there would not be much difference between the pay of UAW members and their counterparts in Europe. However, there would be a very large difference between the multi-million dollar pay packages of the top executives at the US companies and their European counterparts. The pay gaps persist among the more highly paid engineers and management personnel.

Therefore, it was only logical that a bailout of Chrysler would seek to take advantage of the lower cost management and design skills available at a European car company like Fiat. In Chrysler, as in other companies, the high pay packages for these people are like an anchor dragging them down in international competition. If the US is to be competitive in the 21st century, we must either bring the pay of those at the top back down to earth or we should look to follow the lead of Chrysler and contract out for these services.

And the most ironic thing about this is the fact that these American executives keep threatening to leave the country to take jobs elsewhere, as if they can actually make more money overseas. Running a company into the ground and nearly destroying an industry wouldn't normally be considered a resume builder, but in America, the corporate narcissists and their friends in politics seem to want us to believe that this wrecking crew is so in demand that we must continue to pay them obscene compensation and beg them to keep destroying things on our behalf. They claim to live and die by the free market so maybe we should tell them to let the market decide this one too. Somehow, I doubt they will be too enthusiastic.

*In a similar vein, I've been meaning to recommend this article from Sunday's NY Times about what it's like for an American to live in that socialist hellhole, Holland. The Dutch, of course, are the people who pretty much invented international commerce and banking and have deal making in their DNA, so it's not like they don't believe in capitalism. But they have learned something that Americans continue to resist at our peril (and which David Brooks, of all people, seems to want the conservatives to adopt. Weird.) The nature of their land forced them to create a mutually beneficial system of collaboration. It turns out they aren't "socialists" at all, even in the sort of soft sense -- or, at least, their system predates socialism. It's very interesting.