Saturday :: Aug 26, 2006

Chained Reaction


by pessimist

We live in a consumer society. What this means in simplistic Red State 'Mer'kin is that people have to be able to buy goods and services or the whole machine stops.

This desired condition of maintaining economic constancy is what inspired the creation of the quasi-religion, Consumerism, along with the various Temples of Consumerism, the one for the highborn - and the one for us mere mortals.

So what would prompt one of the highborn to commit the economic version of Lucifer challenging the Almighty? What temptation would be worth messing with an economy that already bestows wealth beyond most of the world's experience and comprehension?

Greed.

Ministers may preach about John Barleycorn, Nicotine, and the Temptations of Eve, but do they ever preach against greed? When was the last time Pat Robertson's 700 Club took on the Bible according to Gordon Gekko?

"The point is, ladies and gentleman, that greed -- for lack of a better word -- is GOOD.

Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA."

But the unasked question is - save it for whom?

That is the question the American worker should be asking, for Wall Street's character is seen as the epitome of the 1980's when so many of King George's current associates were rising into positions of influence and power. Wikipedia puts it like this:

Gekko's famous "Greed is good" speech was, to many, an excellent representation of the state of investment banking in the late 1980s. Gekko has since become a symbol of 1980s corporate greed. While the producers of the movie Wall Street clearly intended to portray this character as a villain, ironically enough, thanks to this movie, Gordon Gekko became a source of inspiration for countless number of investment bankers around the world. It has often been suggested that Wall Street turned out to be a most effective recruitment tool for the investment banking industry.

And who sits at the helm of the World Bank today but Paul Wolfowitz?

I rest my case.

Such people as would be enamored of the Gekko character and his philosophy have been riding high - tax 'relief', containment of employee political power, regulatory hamstringing, etc. - under George W. Bu$h. Everything is going their way, and there is nothing that the so-called opposition party can or will do about it, for they have become captive to the same economic forces as their counterparts across the aisle. They only hold their elective positions so that corporo-fascists like the fictional Gekko can hold up the current American political arrangements to the world as being the ultimate example of traditionally small-d democracy - so as not to reveal the one-party corporate protection racket it has instead become.

Under this one-party racket, the corporate executive is the equivalent of a demi-god residing on Olympus. His whims are all that matters, and the effects of those whims are meaningless, except as entertainment.

Let's use Ford as an example. Recently, Ford announced that the 30,000 job cuts forecast across the next five years may all come in the next twelve months. Current chairman Bill Ford has been attempting to use buyouts to reduce the workforce, but the shareholders are pushing for a merger with another company (a la Renault-Nissan's offer to GM) and will use that to cost Bill Ford his job.

That's what he gets for trying to do the right thing by the employees, huh? It's a little late!

One ex-employee with a grudge over his summary ouster as Bill Ford's predecessor is looking to take Jaguar and Land Rover away from Ford, and to save the Ford family's wealth would mean buying up all the outstanding Ford shares to block a move by the shareholders to meet that offer.

Frankly, it would serve them right to lose every dollar. They created that Frankenstein; let them deal with it.

It was cheapness on the automakers' part which set up the problems they now face in the first place. They offered the UAW company-paid medical benefits in lieu of raises because it would prove to be cheaper to cover the combined costs of employee health than it would to pay them enough money to cover those costs themselves. They offered company-paid pensions in lieu of raises because it would keep millions, if not billions, under company control - at least until significant numbers of employees began to retire, as they did in the 1980s.

These 'executives' forgot that their world isn't just made up of auto producers and auto consumers. Every benefit offered to autoworkers now provides employment to others who aren't directly employed by Ford. Medical care professionals were able to create good livings for themselves thanks to the automakers' shortsightedness, taking the employee health plans for so much that the HMO was created to limit the costs, and thus the profits to medical professionals, at a level already beyond that which the individual could take over from his employer. This alone has resulted in many leaving the profession because they could no longer make a living wage, but that is a topic for another post.

Similar situations arose from the retirees and the money they got from the automakers, for without a pension, many retirees would still instead be working to cover their living expenses.

So only NOW when their own largesse is threatened, do the execs at Ford realize that they screwed up repeatedly over the years. Only NOW do they see that the shortcuts they took years ago proved to be too costly and want to be allowed to abandon their contractual obligations (as the airlines were allowed to do last year).

So NOW they decide someone is going to pay for their sins - and that somebody is their employees. But again, they are taking a shortcut that will prove to be too costly - it could kill the Goose That Lays Their Golden Parachutes.

Ford - and rival GM - make most of their profits off SUVs and big pickup trucks. Most of these are bought, or more usually leased, by low-wage schlubs who work for companies like Ford's part supplier Visteon, whose 47,000 employees are looking at the possibility of making NO money because Ford is now buying from cheaper foreign suppliers.

But hear how Ford Execs howl when people buy cheaper foreign cars! Remember Lee Iacocca's dictum: "If you can find a better car - buy it!"

They are - in numbers large enough to threaten Ford's position in the industry.

But I digress.

These working-class folks take on the economic burden of such monsters precisely because they were getting paid enough through their auto industry jobs to do so. But that doesn't occur to Ford (or the other automakers) who feed Joe Sixpack's dominance fantasies in their commercials so that he will enslave himself to them for seven years or more just to experience the thrill of highway victory. It's the only way people like Joe get to feel like they are Olympian big shots in the world, even if it is only during the commute to their dying jobs by driving there in a Pavement Behemoth whose headlights can sear the paint off a Honda Civic at three car lengths.

So, in typical Corporate Me Generation fashion, these execs think they can escape unscathed by the consequences of their actions, especially if they can get someone else (it always used to be Corporate Daddy, but he's retired now) to pay the costs. Hence the focus on the worker.

But for each worker laid off, other workers are affected. In October 2003, Reynolds Tobacco laid off 2600 workers. Local businesses expected to lay off 3000 more workers, all due to reduced revenues from the town having fewer employed Reynolds workers.

In Ford's case, laying off the line worker who leased an F-150 affects the guy who owns the gas station who sold him gas, the burger-flipper who will no longer sell him burgers, and the medical receptionist who won't see him or his family members at her clinic. If this also happens to enough others, they themselves lose their jobs, as was the case in the article I quote in the paragraph above.

But the Wheel of Misfortune doesn't stop spinning. In addition to those secondary job losses, ford itself will be affected. The leased F-150 will be returned to the Ford dealer because laid off Joe Sixpack can't afford to keep it. The dealer loses out, because with thousands of others who once used good wages to pay premium prices to have these Highway Hogs returning them to their dealers for the same reasons Joe is, he can't ever sell it for what he himself owes to Ford on it. Ford is thus forced to conduct yet another round of layoffs to cover the costs of vehicles already built that can't be sold along with those already sold that can't be paid for.

There has to be another way to repair the problems of the decades of corporate executives' poor decision-making skills than to kill off the system which relies on them to be correct.

For a hint at what that process will require, we again turn to Wall Street and Gordon Gekko, who offered this observation:

Gekko's diatribe against corporate mismanagement is just as relevant in the 21st century as in the 1980s.

Gekko made the argument against well-entrenched corporate managers, saying they were taking advantage of shareholders.

He compared the role of early American business leaders like the Carnegies and Mellons who only managed businesses in which they had significant investments with that of well paid company senior executives who owned very little of a company's stock, and hence had little stake in the company's performance. He asserted to shareholders at a company meeting:

"You own the company. That's right -- you, the stockholder. And you are all being royally screwed over by these, these bureaucrats, with their luncheons, their hunting and fishing trips, their corporate jets and golden parachutes...

Teldar Paper has 33 different vice presidents, each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can't figure it out.

One thing I do know is that our paper company lost 110 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents."

Today, I ate in the family owned-and-operated Vallarta Restaurant in Fillmore, CA. The building is old, but solid. The family resemblances of the staff are unmistakable. But if everything the family has is tied up in a business they make thrive in a relitively poor farming town east of Ventura, CA, they will succeed through a lot of hard work and in providing a quality meal at an exceptional price.

Everything they serve is touched by a family member's hands. Can the same be said of Ford?

Nope!

In the movie Battle of the Bulge, Robert Shaw portrays a Panzer commander who tells his orderly that he must eat what his men eat so that he knows how far they can go before he must stop his offensive. Maybe this would be good advice for the corporate executives of America. They should try living on minimum-wage. They should know what it is like to have nothing to fall back on when the car breaks down, or one of the kids gets sick and the emergency room is the only place you have to go for treatment. They should have to know what it's like to have to walk to get around because you can't afford the cost of the bus, much less a taxi.

They would learn why they shouldn't rely upon sales of expensive toys for their profits.

New York Daily News staff writer Heidi Evans tried living on minimum wage for a week - and took her daughter along for the ride:

"I don't want to be a hobo," my 9-year-old daughter told me.

That was her reaction when she learned that the Daily News wanted us to experience and write about life on minimum wage - $5.15 an hour, or $206 before taxes for a 40-hour workweek in New York City.

Without knowing much, she intuitively was on to something that 700,000 working-poor New Yorkers know: It is impossible to live on $206 a week, or $892 a month — if you like living indoors, or want to put in a full day's work but can't afford to pay a baby-sitter from 3 to 6 p.m. during the school week.

With the state Legislature now about to take up the issue of raising New York's minimum wage from $5.15 an hour to $7.10, The News decided to see what it takes for a mother and child to live on $206 for the week, with a few caveats. I didn't get a job at McDonald's, and we didn't move out of our two-bedroom upper West Side apartment for a $686 two-bedroom apartment, which the federal government says is median rate in "Upper Manhattan." And while in principle I'd be eligible to get an apartment in public housing, the waiting list is years long. Same for city daycare and after-school programs.

People who labor for minimum wage — including fast-food restaurant workers, busboys, security guards, retail clerks - are living below the poverty line, which the government puts at $233 a week, or $12,116 for an adult with one child. You don't have to be Einstein to see instantly that trying to make ends meet on minimum wage is not about being a better budgeter. You can't squeeze something more from a dollar if you don't have the dollar in the first place.

When you do the math, you see that is no exaggeration.

For example, in order for me to work full-time, from 9 to 5, I need a baby-sitter to pick up my child from school at 3 p.m. and watch her for three hours until I get home at 6 p.m. At $10 an hour in Manhattan, that is $30 a day, $150 a week.

That leaves us with $56 in cash plus $46 in food stamps for the week.

You aren't going to buy a profitable Ford Expedition with that kind of income!

It gets worse.

Deduct another $17.50 toward a $70 monthly Metro pass, which leaves us with $38.50 for everything else. Laundry, phone and Con Ed bill, clothes, school supplies, haircuts and who knows what else I haven't even thought of.

Ms. Evans goes on to list in daily detail the travails of having to live on minimum wage, so I won't go into them here. But she does have a word of advice for those who think raising the minimum wage would be a bad thing:

[L]iving on $206 a week - minimum wage for 40 hours of work - was a sobering and enlightening experience. I recommend it to Gov. Pataki, Joe Bruno, Sheldon Silver and every politician in the state ...

Such would apply to corporate executives as well, which was the plot of Mel Brooks' Life Stinks, which while simplistic slapstick comedy, did feature a rich executive being put into Skid Row to survive as best he can using only his wits.

Such should be the fate of all execs whose businesses repeatedly layoff workers to correct for their incorrect decisions while they collect fat bonuses win, lose, or draw. Maybe then they might understand that people aren't toys to play with, or 'assets' to buy and sell (hire and fire) on whims, or that relying on specious sales forecasts and ad campaigns based only on their own experiences while in their sheltered little worlds is not the Golden Pathway to Prosperity.

If for some reason the American shareholders ever regain control over the Gekkos on their corporate boards, they should require that said execs draw no more than a certain percentage of their remuneration in cash - say an amount equal to four times that of their highest-paid hourly worker. In the case of Wal-Mart execs, that would still be equal to over $30 an hour - a good wage. It's about what the former United airline mechanics of Indianapolis made - when they were still employed.

All other executive pay would be in the form of a fixed number of shares of stock, to be issued weekly at the close of trading each and every Friday, valued at the average of the share prices as of the closing bells each day of the trading week.

Maybe then this Olympian demi-god corporate attitude would come to an end. Maybe then reality will again return to the boardroom, and the workers won't have to pay with their jobs, wages, and benefits for the errors of their employers. Maybe then, the American consumer can regain some of the ability to selectively purchase the things that make life easier or more pleasurable instead of always paying for the most critical emergency with money not yet earned.

Let's hope the shareholders do get off their own greedy Gekkos and get to work to save their economic system. It's more than we can expect out of the Congress - or the White House.

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pessimist :: 7:36 PM :: Comments (6) :: Digg It!