I am not a supporter of unions. Let it be said up front.

The idea as I understand it is to counter some unacceptable anti-labor practices. I do not know that these really exist to the extent claimed, bur I find it easy to believe there is a solid core of truth to the alegation. There may be a number of good ideas on how to address these problems in the bill, I have not read it in it’s entirety.

But the ‘card check’ provision is just plain unacceptable. Even the bill’s supporters cannot deny that this system is built for abuse. As it stands now, if the union supporters come and harass or intimidate someone, that person can just sign the card to get them off their back, then vote against it when it comes time for the secret ballot. This provides a built-in protection against abuse by either the union (or management). Not perfect, but protection nonetheless. Removing what is in effect a confirmation vote allows them to focus on and bully the most vulnerable employees. I expect most union supporters are not the type to do bad stuff, but that is not to say none are. And it would not take many.

This bill seeks to fix one abuse by creating another. I cannot call this progress.

(It just occurred to me that it may be that the ‘card check’ part of the bill is just in there to distract from the rest. They drop it finally and the rest is passed as a ‘compromise’? That would be OK, as I said I have no doubt there are improvements needed.)

Is it the real reason congressional Republcans are against it? Don’t know, don’t really care. From a functional perspective, it simply doesn’t matter.

It’s a good reason. And they have committed to it so heavily at this point that if that provision is dropped their arguments against it will be gutted.

As I said elsewhere, even mindless obstructionism can be made to serve a purpose, if no better tool is at hand.

Jon:

Concentrated wealth is the core problem of our economy right now.

Concentrated wealth has always been a problem in history.

In fact concentrated wealth brought about the collapse of: Ancient Egypt’s New Kingdom, Rome, Pre-Islamic Mecca (Islam is, in part, a response to concentrated wealth), Byzantium (before Manzikurt), Medieval Japan, Hapsburg Spain, Bourbon France, Romanov Russia, Manchu China, Nationalist China, Coolidge/Hoover America and is the cause of the current economic meltdown. (The last two brought to you courtesy of the Republican Party).

Conversely, eras of broad distribution of wealth has created stability and almost all of history’s great golden ages – thats to say nothing of the squalor and suffering it saves millions of people, including your fellow citizens, from.

The difference between Mexico’s poverty and widespread squalor and America’s (former) prosperity was Roosevelt and the New Deal – we had Roosevelt, Mexico did not. Now we are on the road to Mexican poverty. Spain in the early 70s was the poor man of western Europe, but when they adopted liberal policies/social contract, once Franco died, as part of joining the European Union, it quicky joined the first world.

What you, or anyone else earns, is largely a question of your bargaining power. No where is that more true than the United States, whose only governing principle is ‘free contract’. Rich people know this, which is why they hate unions and why their wealth has grown over 500% during the Bush administration – and it’s why wages in the United States are roughly the same today as they were in 1973. No other country in the world, 1st, 2nd or 3rd world has purposely treated their working class like that – only the United States.

And because of that we are flirting with massive economic implosion.

If you don’t like Unions, then you have to come up with some other institutional arrangement to ensure that wealth is broadly distributed. In Japan they have ‘company unions’ (traditionally weak) that are augmented by widespread tenure. Japan has the broadest distribution of wealth, yet some of the most competitive industrial enterprises in the world.

The questions isn’t unions or no unions. It’s Unions or Something else, or widespread poverty.

Which do you want?

If you don’t want unions and you don’t want poverty, then you have to caugh up something else.

And if you want widespread poverty I suggest that you be the first to volunteer for it.

I do believe my last comment got dropped.

Tim:
It should be pointed out that when I say i do not support unions, I should more accurately say I do not like them. I do accept that they are sometimes needed.

I do agree that concentration of wealth in the US needs to addressed. I may well be the only libertarian you will ever speak to who supports progressive taxes. For different reasons mind you, but I would support a progressive tax that was specifically designed to place an upper limit on income. Look at the wiki entry for Wealth Condensation if you want to see pretty much my whole reasoning summarized.

I do not accept the popular notion that people get paid the same now as back x number of decades ago. The buying power is not the same. My middle class parents live in a friggin mini mansion, have four(?) cars, big screen TV’s, two brand new motorcycles in the last two years. All sorts of appliances that didn’t even exist back in the seventies, and on and on. They live like rich people did back then. I don’t care what someone’s cute little formula says the equivalent is.

You can ALWAYS say that things haven’t improved if you filter out all the ways they have.

I am largely uninterested in point comparisons between Japan and America. The cultural differences are so profound that applying any system from one to the other cannot be expected to yield the same results.

I am and remain unconvinced that you are correct about the causes of our current economic situation. Your explanation completely ignores the housing bubble at the foundation of the issue. Also, in the spirit of examples from history, I suggest you look at Sweden in the early 90’s. Very nearly the exact same crisis, under a government that even many Liberals would say was going too far.

Oh, I wasn’t thinkin’ you deleted it or nuthin’. Your comments thingy just doesn’t give much confirmation that the comment is submitted, so if it takes a while to show up I start to wonderin’ if I hit a wrong button or it got lost or sometni’.

No doubt I was a tad harsh. My appologies. The “you” I used was rhetorical.

The root cause of the subprime loan problem is the supply-side-saturation problem (i.e. wealth concentration).

You know that arguement: give the wealthy more money and they’ll build more factories. But if wages don’t go up with productivity then the economy becomes top heavy and you get deflationary recessions/depressions and stock market bubbles.

The problem happens like this: as money is moved to the ‘supply-side’ (ie. rich) concentrating wealth, demand, if it fails to keep up with productivity growth, becomes soft. The problem is, despite supply-side rhetoric, people won’t build factories if there is no demand for the factories products. Investors demand a reasonable return on investment (traditionally 4%). But because demand is increasingly soft in relation to supply, investors increasingly find it hard to get a reasonable rate of return investing in production. When some new area of the economy emerges, say technology, which brings with it its own latent demand, the supply side money floods that area creating bubbles.

That’s just one symptom of supply-side saturation.

They also start lending money directly to consumers. In the last 8 years the median wage has actually dropped. The median worker, trying to maintain his life style borrows money as a bridge until his earning power returns. If the bridge fails to make it to the other shore, in the aggregate, the median worker pulls down the financial sector with him.

Another symptom is the clamoring for deregulation. Unable to make money investing in traditional productive enterprises, the supply-side money starts demanding access to activities that they had been walled off from: loan sharking, pay day loans, subprime loans is just the kind of thing.

The fact is, if wages had kept up with growth in GNP (as it did from 1945 to 1973), investors would have found good returns investing in productive enterprises instead of gizmos, gimmicks, pawning houses and consumer loans.

Argument #2:

I find the old “what happens in Japan can’t happen anywhere else” is just a bunch of hog wash. If one society has a competitive advantage, or have come up with some novel ideas, you have to adapt to it. The Japanese “lean manufacturing” system emerged out of Japan’s unique cultural context, but it became “The Machine That Changed the World” and is practiced all around the world. The only real difference between Japan’s corporations, and I have studied them intensively in law school, is tenure (which creates employee primacy).

The basic behavioral differences between American and Japanese corporations can be whittled down to that. As it happens, While I was studying this phenomina, a minor controversy that got some unflattering ink in the local paper emerged at my law school. During interviews the Dean kept saying “we are consulting with the faculty on how to best handle this matter.” In other words, the tenured employees, were given primacy in how to handle the issue. (I should add that I also worked inside GM as a systems consultant during their hard battle years in the middle and late 1980s – when we were sending tons of people out to NUMMI in Fremont California to work at GMs joint venture with Toyota there – currently they build the Matrix and Vibe there).

Argument #3:

Concentrated wealth has always been a problem in economics. It happens automatically as successful people become more successful until they sort of corner the market on specie. This is especially true for a society based upon free contract. The problem is, as wealth concentrates, the playing field upon which bargaining arrangements takes place becomes increasingly uneven.

It’s my belief that the founding fathers recognized this and felt they felt they had found the answer for leveling the playing field in democracy. There goal, of course was to build a Calvinistic commonwealth (note, not ‘uncommon wealth’ mixed with common squalor) – a reliance upon free contract (how else to determine salvation) a big part was a loathing of inherited wealth (a collateral issue for this discussion – but inherited wealth discouraged people from living useful and thrifty lives and put others out side the inheritance chain at a bargaining disadvantage, and creating a head wind to Calvinistic salvation).

For the next 70 years they appeared to have found the solution. In 1860, as the Civil War was just getting started, the U.S. had the broadest distribution of wealth in the history of the world up to that time – even with 3 million people living in slavery. The war was started, obstensively, for the purpose of delivering those free contract rights to the remaining 3 million held in permanent servitude. Yet, 25 years after that war had ended in victory for that cause, the distribution of wealth was massively distorted, in what became known as the Gilded Age: massive concentrations of wealth, immense dispersion of squalor and manic depressive economic patterns.

Some where something went wrong. What the founding generation failed to anticipate was the invention of the limited liability corporation in 1862.

Corporations are ownership collectives. As a collective they have bargaining power advantage over individuals.

I don’t think that collective bargaining and unions are anti-libertarian – any more than corporations are anti-libertarian. The problem is getting the right balance to achieve a healthy, level playing field. One could argue that the bargaining power swayed away from corporations with the creation of modern industry-wide trade unions. Instead of an individual having to bargain with a collecitive corporation that is bigger than he, a corporation is bargaining with a union that is bigger than the corporation.

The Japanese solution is appealing because of the balance it arrives at. There are other models. The American model is unique. It needs to be modified. But I would say that corporations that don’t engage in international trade trade, the union model is a good fix, at least for now. Ultimately we need to move on to better models.

In regard to things improving since 1973. I understand your concern – but the models aren’t as flawed as you might first think. The increase in consumption has been brought about in part by increased hours in the work force. In 1973 many, if not most, families had only one bread winner. That cannot be said today. And not everything comes down to trinkets. If memory serves, my father made about$55,000 in 1977ish. My catholic high school tuition was around $700 – $800 a year. Today my high school charges at least ten or eleven times that. (By the way, my father was a superintendent at a large industrial firm in the midwest, had no college education – thanks to his salary – I am vastly better educated than my father, yet I can’t dream of making as much now as he did then, and if i do it’s under contract, with none of his stability).

From a family values/quality of life perspective, more trinkets is not necessarily better. My mother was easily available if there were problems. If one of her children needed specialized education or attention, she was able to quickly identify it and find a solution.

The fact that more trinkets are available doesn’t mean people shouldn’t have more bargaining power and earn a better wage. The GNP has gone up 150% in real terms, so I’ll split the difference – give the median worker a 75% raise. If the median worker achieved a 75% increase in pay, I can guarantee you that the value of homes would stop falling, the problems in the financial sector would stabilize, and things would be hunky dory.

The way to get there is through innovations in institutional arrangements. Looking at how things are done in Europe and Japan is a big first step. You may not think it’s actionable because the study of geography is not your academic strong point (geography = the study of how things vary over space, history = how they vary over time), but there are plenty of people out there who are capable. If you don’t learn what’s around the horizon and adapt proactively, you will be forced to later on under less optimal conditions. (my theory anyway)

I find your argument about the mortgage crisis decidedly unconvincing. You say that it is caused by supply side economics and then offer a theory that is only very tenuously connected.

Without any exception I can think of, bubbles are caused by demand. We very intentionally and explicitly pumped up the demand for housing by encouraging and to some extent effectively forcing (via the CRA) loans to people that we knew were going to have a high default rate. We used Fannie and Freddy to convince banks to go along with this. The banks effectively functioned as agents for Fannie and Freddie, so they begin to sell as many mortgages as possible. The balancing concern of whether or not they can repay the loans is gone. Increased demand increases prices, so people find that suddenly they have a lot of ‘equity’ in their house, so now they have ‘money’ to buy a bigger house. This drives up demand and prices for bigger houses, and house building ramps up across the board. This makes industries that supply housing take off, the economy starts going like gangbusters. It’s wonderful while it lasts.

The problem is that those houses that are suddenly worth twice what they were? They haven’t actually changed in any way. The whole thing is based on imaginary money. So you get a big pyramid scheme. Whoever gets in last gets hosed.

Any system based on unearned money will inevitably collapse. There are few truly unbreakable rules, but I think this may well be one. When and how the collapse occurs is just details.

Re : “what happens in Japan can’t happen anywhere else”. That ain’t what I said. I suggest you go back and look at what I actually said and compare the differences.
The differences between Japanese culture and how it pertains to business from an American perspective are rather more profound that you state. “Lean Manufacturing” as practiced in America bears little resemblance to the “Toyota Method” it is based on. Be careful about assuming what people do and do not know; I am intimately aquainted with both versions professionally, especially from a Quality Assurance perspective. I used this stuff for a living for half a decade. That I do not pretend to know everything should not be taken to mean that I know nothing.

I also suggest you look at the typical unemployent in Europe as compared to what we now consider a disaster in America. All systems have their costs and benefits.

To return to the original issue of unions, the reason I dislike them is that they change the fundamental relationship between employee and employer.

I view myself as essentially an independent contractor. My employer is my customer. If I wish to earn more money, I must provide greater value. If I feel that I am not receiving pay appropriate for the value I provide, I will go somewhere else. If they feel I am not providing value appropriate to my pay, they will replace me with someone else. The essential balance of value given for value received is maintained. This is at heart a cooperative system.

A union screws all of that up. Most of them work on a seniority system, so I cannot get paid more by working harder (or smarter). The union constantly tries to get more without providing more. If they are not providing value equal to what they are paid, the law prevents them from being replaced. This is at heart a combative system. Also, the union tendency to support workers right-or-wrong has some ugly results.

Where unions become necessary is when all the employers conspire together, or one employer is so large as to be able to dominate an area. Then the balance is destroyed anyways, so a union is better than nothing.

“Any system based on unearned money will inevitably collapse.

That IS my argument.

Wages have to go up with productivity – that is the source of stable demand.

If real wages were higher, demand would be higher. If demand were higher then prices would be higher. If tomorrow you give the median worker a 75% real wage increase, demand would increase — even for housing, perhaps providing a floor for some of those still collapsing markets.

In fact, my argument follows the history of what happened fairly closely. Demand was soft relative to supply at the end of the Clinton administration, and characteristically, we had a deflationary recession and a stock market bubble in technology because it was new and therefore had latent demand which therefore provided decent returns on investment. That attracted supply-side dollars to the issue like moths to a light bulb causing those stocks to be over valued. If aggregate demand were sufficient across society, and supply-side dollars less flush, the bubble wouldn’t have occurred.

You can’t use the housing market as an example because it was a result of deliberate policy decisions to substitute real, waged based demand, with cheap money from east Asian central banks. As Krugman says, the Bush administration replaced the tech bubble with a housing bubble. Those housing prices did not go up because peoples wages were going up. The demand was artificially created through a strange circumstance where the U.S. lowered the interest rate and value of its currency and yet East Asian banks bought as much U.S. debt as they could get.

Given the appearance of deflationary oriented recession and stock bubbles in January 2001, the signals were evident that the economy had passed ‘supply-side’ saturation point and policies with a demand-side bias were long over due and certainly called for. That’s not what Bush did though. Instead he doubled down on the supply-side, and at that point baked in the meltdown recession we currently have. The real question is why didn’t demand crater then, instead of in 2008?

Here’s the how and why: Bush was able to mask the deflation by devaluing the dollar (lowering interest rates) creating artificial inflation. He was able to then still borrow massive amounts of money from China. That cheap money stimulated demand, initially, by allowing people to refinance mortgages at lower rates, releasing purchasing power that manifested in increase demand – but not real demand from real growth in wages tied to increases in real productivity. The cheap money also stimulated the housing market, but in the end it was still demand created out of borrowed money.

The people who created the subprime loans and then bundled them with other loans weren’t the people buying the houses. The people who wanted the deregulation weren’t the people buying the houses. It was investors and people inside the industry.

Again, I maintain, that if wages increased with productivity real aggregate demand would have been sufficient to keep investors involved in productive and stable and unshady lending markets. The problem emerges when powerful people have money to invent but can’t get reasonable returns. They are going to demand reasonable returns. And because they are powerful, the rules will get bent until they are distorted. That is, basically, the history of what happened.

The problem of course was the Bush policies decisions. When you have stock bubbles and deflationary recessions (ie. too few dollars chasing too many products) then the supply-side bias policies have reached their limits and a set of demand side bias policies are called for. There simply no getting around that. Economics is dominated by the law of supply and demand. If you have supply-saturation, you have to shift to demand bias policies.

In regard to ‘lean manufacturing’ I too know what I am talking about. I worked inside GM when they were setting up the NUMMI factory joint venture with Toyota. I designed some of the first systems for supplying that plant from the Midwest. I was also involved with studies comparing their methods with GM’s working with outside consultants and with high level managers that did a tour of duty there. I still have a copy of Toyota’s productin manual from that plant. I worked on designing related systems for another decade after that – mostly materials management systems with other automotive companies.

I then went back to school and studied under one of the most distinguished professors of Japanese corporate law in the United States at a tier one university. I wrote a paper on the subject in a class I took from an Economic Historian who is also a Nobel laureate and got the highest mark possible. It’s not like I picked this up from popular mechanics or something like that. I’m involved in research right now on Corporate governance with some other Law professors on the subject.

What you are forgetting is that the “fundamental relationship between employees and employers” was distorted by the creation of the limited liability corporation. The system created by the founding fathers is based upon free contract negotiated on a level playing field between individuals. You may be an independent contractor, but when your employer is a corporation, it is not an individual but a collective. The bargaining process is thus distorted. The whole system was originally meant to be between two individuals contractors, not one individual on one side and a collective on the other.

The problem is the invention of the corporation.

The union is just the other side of the coin.

If a libertarian has a problem with unions, I have no problem with that, provided that they are consistent and have a problem with corporations.

However as a practical matter, getting rid of corporations would be throwing out the baby with the bath water.

Corporations are an organizational arrangement, that has to be balanced out by other organizational arrangements. Unions are one answer, but as I said, any arrangement that does the trick is fine with me.

As a result of all of this unions were created for the very purpose of distorting the relationship in order to give it more balance.

You want to believe that you get paid for your value. But in America, that is not how it works. You get paid based upon your bargaining power. CEO’s pay has gone up through the roof. Did their pay go up because they somehow acquired new value to give to their companies? In a word, no. Carly Fiorina (however you spell her name) lowers the value of Hewlett Packard by a third and walks away with a $30 million dollar severance package when she’s fired. That’s all about bargaining power, not value added.

If GNP has gone up 150% since 1973, and it has, then the median worker is obviously providing greater value. He’s not making more money because his bargaining power won’t let him.

Now I understand the idea that labor might not provide as much value as a tech worker and a dumb worker today is worth no more than a dumb worker in 1973, so why should he earn more. That’s an ethical problem for a certain epistemology. But that’s not the fundamental problem facing macro economics. The fundamental problem facing macro economics is how do you keep money from becoming too concentrated to the point were it brings civilization to the brink of an abyss, which is what happened beginning in 2008 and is still playing out. And again, the wage that gets paid out is based purely upon bargaining power. Now if you have a very rare tallent, that might give you great bargaining power. But if you are a CEO, and you drive the company into the ground, that’s not a spectacular tallent. If you get paid millions for doing it, it’s because you have bargaining power.

The fundamental problem is making sure that wealth is broadly distributed. And that means having a level playing field for bargaining contracts. Corporations distort that playing field. So the question is – how do you level the playing field for contract bargaining and still allow for corporations to exist?

You have to figure out that problem and back in a solution. The only requirement is that it works.

It’s more than bad economics to concentrate wealth. It also has morality problems: what Roosevelt called the problem of heedless self interest in his second inaugeral address. There’s also the morality problem of people living in squalor. Of course, if you are a Republican you might not see that as a morality problem.

Now I don’t believe that the comparison to Europe is apples to apples. First our stats are not accurate. As a rule of thumb it only counts those looking for work that haven’t rolled off unemployment, become discouraged or are vastly underemployed or doing temporary work. Recently I saw a PBS commentary that suggest the real unemployment rate in the U.S. is nearly double the one that’s used in the news.

In regard to the Europeans, the generous unemployment rates simply give added bargaining power to individuals. They can choose to be unemployed – so they don’t choose to engage in marginal employment activities. I don’t view that as horrific. It’s just a policy choice they’ve made. No doubt it has some unintended consequences, but its not destroying civilization the way our policies choices have nearly done.

Again you can get rid of the union, but you either have to replace it with something else, or get rid of the corporation, and bring things back to individuals bargaining and contracting with individuals as the founding generation envisioned it. At no place in your analysis do you address the distortion created by the corporation, only the distortion created by the union. And that my friend, is the tell of a Republican, not a libertarian.