Monday, December 15, 2008

Disdain for Factory Workers

William Kristol, who at times seems to look down on everybody, cautions both parties and the media about looking down at auto workers.
Today, G.M., Ford and Chrysler get no respect. Maybe they don’t deserve much. Detroit has many sins to answer for, and it’s been doing plenty of answering. But — and I say this as someone who grew up in non-car-driving family in New York and who is the furthest thing from an auto aficionado — there is a kind of undeserved disdain, even casual contempt, that seems to characterize the attitude of the political and media elites toward the American auto industry.
Was noblesse oblige a lesson taught at Irving Kristol's dinner table? Today, the wealthiest like to pretend that they were born with no advantage, that no serendipity, inheritance, and nepotism played no role in their success, and that if you are less fortunate it's an indictment of your lack of resolve.

By way of example, has Mitt Romney ever admitted the significance of his father's success and name to his own achievements, let alone acknowledged that he's the millionaire son of a millionaire in no small part due to the efforts of unionized auto workers? When he speaks of his father's blown opportunity to negotiate a new type of labor-management relationship with the UAW, could it be because George shared (perhaps inculcated) Mitt's contemptuousness of unions? Can you imagine candid admissions of how privileged childhoods and powerful parents paved a path to easy prominence from, say, Jonah Goldberg, George W. Bush, David Frum, John Podhoretz, Michael Reagan, Robert and Fred Kagan.... I'm not sure that Kristol has ever candidly acknowledged his own privilege, but this editorial suggests that he is aware of it. Sure, there's a cynical part of me that thinks he's advancing the political reality described by Dick Cheney - that causing the Big Three to fail will turn the Republican Party into the "Party of Hoover," and I'm not endorsing his simplistic analysis of the motivations of either party - but for now I'll give him the benefit of the doubt. Particularly given this:
Now there are other ways to explain the disparate treatment of G.M. and Citigroup. Finance is different from manufacturing, and banks from auto companies. It may be that the case for a huge bank bailout was strong, and that the case for a more modest auto package is not. Still, it seems to me true that the financial big shots haven’t been treated nearly as roughly in Congress or in the media as the auto executives, who have done nothing remotely as irresponsible as their Wall Street counterparts.
As you know, it's worse than that. Companies that would have collapsed in a free market are paying shareholder dividends, gargantuan salaries, and even larger "retention bonuses" (to workers who would otherwise... go where?) with taxpayer money.
Meanwhile, on the right, free-market analysts have explained that our regulatory scheme of fuel-efficiency standards is counterproductive. But despite the fact that the government is partly responsible for the Big Three’s problems, the right hasn’t really been stirred to enthusiastically promote a deregulatory agenda to help the auto companies. What excites it is mobilizing to oppose bailouts for unionized workers.
I have to take issue with that. Kristol's point might be stronger but for the fact that every major car company that is not failing is headquartered in a nation that imposes greater regulation, and in which tax policies have long created high gas prices. Congress has been complicit in preventing the regulations it passes from having teeth, such that the domestic auto makes were able to build huge gas guzzling fleets outside of the limits set by CAFE, but it now appears that had those regulations been more comprehensive, the Big Three would not have experienced their huge drop off in sales the second gas hit $4/gallon. If a regulatory lesson is to be learned, it's that Congress could have better shaped the product line of domestic manufacturers by raising gas taxes than through a body of complex, loophole ridden regulations.
Last week, Senate Republicans picked a fight with the U.A.W. on union pay scales — despite the fact that it’s the legacy benefits for retirees, not pay for current workers, that’s really hurting Detroit, and despite the additional fact that, in any case, labor amounts to only about 10 percent of the cost of a car. But the Republicans were fighting Big Labor! They were standing firm against bailouts! Some of the same conservatives who (correctly, in my view) made the case for $700 billion for Wall Street pitched a fit over $14 billion in loans for the automakers.
Whoah - Kristol's actually bringing facts into the debate. Is that allowed?

I personally don't think the case was made for the $700 billion financial industry bailout, save in the sense that "we don't know what will happen if we don't try to bail out the banks". Sure, you can get my support to build a $700 billion wall between myself and a freight train if I can't otherwise avoid being hit, but that leaves no time for serious reflection or evaluation of how that money is best spent. I'm not convinced at this point that we should continue to bail out financial institutions - they have not been responsible with the money that's been given to them, they're not using the injected liquidity to increase lending, and there does not appear to be any good reason why the government can't tell them, "You have time to put together Chapter 11 plans, so do that. If you're failing, come to us and we'll try to arrange for you to be taken over by a stable institution, or perhaps help ease you into that Chapter 11 reorganization."

The real issue is, should it be the role of government to bail out businesses? Should we (supposedly) champion free markets then declare, "That company is 'too big to fail'" the moment managerial incompetence threatens the viability of a large company, stepping in with a multi-billion dollar bailout? Kristol is right to question why self-professed conservatives are pitching a fit over a $14 billion bailout after signing on to a $700 billion bailout. But he errs in suggesting that it's the size that matters - that if you support the large, it follows that you should support the small. The fundamental question, if you actually believe in free markets, is whether you should bail out any companies at all. Had the managers of these financial giants seriously believed that Uncle Sam would tell them to go to bankruptcy court, at least some of them would probably have made better decisions. And it would be harder to feel sorry for those who didn't. (Assuming it's possible to feel sorry for them.) But back to Kristol's larger point:
Whichever party can liberate itself from its well-worn rut to propose policies that help both American businesses and workers has a great opportunity. That party’s leaders could begin by offering management and labor at the Big Three a little more sympathy, and heaping upon them a little less calumny.
Oh, I'm not sure how much sympathy they deserve, and I somehow doubt that Kristol is the hugging type. But some understanding?

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