California governor Gavin Newsom signed the bill into law on October 2, allowing city and county governments to set up publicly owned banks to accept tax and other revenue and fund infrastructure and other programs with lower costs than those offered by commercial banks.
North Dakota’s bank is 100 years old, and this Vox story tells its story and how that is influencing California.
Les Leopold turned his recent testimony about corporate tax subsidies in New Jersey into an op-ed in the Newark Star Ledger. You can read it here.
RUNAWAY INEQUALITY—This is the most pressing issue that affects all working people and the poor. After World War II the US emerged as a super power because its economy built up a strong middle class. The system at that time saw the height of union involvement so workers could negotiate with business for improved wages and benefits. Government regulated businesses, banks and Wall Street. Corporations and the wealthy paid their fair share of taxes. Wages and productivity went up together, side by side. During those years, workers did a little better each year with raising wages and government programs began to reduce poverty.
But in the early 70’s, both political parties were sold on a new economic system. They were encouraged to do away with many regulations and cut taxes for corporations and the very rich. It doesn’t matter if you call it neoliberalism, the Better Business Model, or “Trickle Down Economics”. It has not worked for the benefit of workers in 40 years and it will never work. Money is not trickling down, it is gushing up and the inequality has become so bad that just 3 individuals at the top now have as much accumulated wealth as the entire bottom half. Shameful!
Runaway Inequality is a problem that will not correct itself without working people making some political changes while we still have a chance. The Southeastern NC Central Labor Council and the Alliance for Economic Justice is available to provide workshops or hour long presentations on this evil cancer in our economic system. Don’t be bedazzled by wedge issues. This is the most significant problem affecting all of us.
The SENC-CLC recently co-sponsored a series of presentations by Les Leopold across North Carolina. If you missed these presentations Southeastern NC Central Labor Council along with The Alliance for Economic Justice, The NC Alliance of Retired Americans and the NC NAACP are committed to making sure your group is supplied with a presentation and information on Runaway Inequality. While on his NC book tour Les Leopold met with Rev. Dr. T. Anthony Spearman, President of the NC NAACP. The NC NAACP is now a part of the outreach on Runaway Inequality and showed their commitment to this issue by purchasing 6,000 volumes of Runaway Inequality.
On Tuesday 11 June 19 President Harton will travel to Salisbury to deliver a presentation on “RUNAWAY INEQUALITY” to AFGE Local 1738 members.
If your local or group would like a presentation on Runaway Inequality or a workshop please contact:
Herb Harton — maguspics@aol.com — (910) 791-3643—(910) 620-1629 or George Vlasits — gvlasits@gmail.com (910) 465-8871
Lordstown is the poster child for modern financialized capitalism and runaway inequality
By Les Leopold
The vacant Lordstown General Motors facility is a frightening sight—6.2 million square feet of modern industrial might spread over 900 acres doing absolutely nothing except depressing the regional economy and the spirits of northeast Ohio. Just a few months ago it produced the Chevy Cruze and provided thousands of good paying industrial jobs with excellent benefits. Now it’s gone, and unless the Democrats have something meaningful to say about it, they too may be gone.
Lordstown is the poster child for modern financialized capitalism and runaway inequality. It symbolizes the kind of system in which the super-rich reap the rewards and the rest of us pay the price.
This new version of capitalism burst onto the scene when Wall Street deregulation took hold in the early 1980s, but it really came into full view when Wall Street’s insatiable greed took down the economy in 2007. The financial crash put GM on life support, and it quickly became crystal clear that textbook capitalism was a fiction.
Under the supposed rules of free markets, the corporations that cannot compete successfully should perish—what Schumpeter called creative destruction. In 2007, most of Wall Street’s big banks—as well as GM—would have gone down, but their size and the centrality of these mammoth institutions meant that their rapid demise (without government intervention) would crater the entire economy. They were, instead, the beneficiaries of taxpayer bailouts.
The mythical capitalism of creative destruction is long gone. There are new rules for financialized capitalism. One demands that we the taxpayers must bail out both the biggest Wall Street banks and the largest corporations, like GM, because they are far too big to fail. It’s the ultimate blackmail. Either we pay or we are all economically devastated.
A second new rule of the new capitalism dictates that not only must we bail them out, but we are not permitted to ask for anything substantial in return.
Unlike private investors, who provide capital to distressed companies, we taxpayers do not get any ownership rights with our investment, nor do we get a high rate of return on our money if things go well. We also do not have a say in how the bailed out enterprises do business, nor are we able to remove their predatory executives (and jail the ones who broke the law). In exchange for our financial guarantees, we are not permitted to demand that a corporation like GM keep its jobs in the U.S., nor may we insist that they refrain from giving future revenues via stock buybacks to their super-rich investors (who would have earned nothing without our largess). These bailed-out entities are instead returned to their private owners as soon as possible so that they can again be run by and for the wealthy.
What did GM do after we bailed them out?
As soon as GM could amass a sizable profit it engineered a $5 billion stock buyback to enrich their top officers and hedge fund investors. The pressure for the stock buybacks came from none other than Harry J. Wilson, a former member of the Obama bailout team. On our dime he had learned all there was to know about GM, which he then put to work to enrich himself. He formed an investment group of hedge funds to buy up GM shares and, when they had sufficient control, demanded the massive stock buyback. He prevailed and walked off with tens of millions of dollars. The financial strip-mining of GM workers and the communities so dependent on the company could then proceed in earnest.
Today, GM is a private enterprise constrained only by its union contracts. Its primary goal is to generate as much cash flow as possible in order to dole out more stock buybacks to enrich super-wealthy elites and its top officers, who are paid through stock incentives. That cash comes from slashing U.S. jobs and outsourcing as much production as possible to low wage areas around the world.
These corporate executives made a cold-blooded decision that the Chevy Cruze, although profitable, would not generate as much profit as SUVs and trucks. So they shut down Lordstown entirely, along with several other U.S. facilities.
There was an alternative. They could have put the new Chevy Blazer into these idle facilities, but they instead decided that more cash for stock buybacks could be generated by assembling the Blazer in Mexico.
What is the Democratic Party’s response?
For nearly a generation, the corporate wing of the Democratic Party has aided and abetted this financial strip-mining. Starting with Bill Clinton they have led the charge to deregulate Wall Street and promote trade deals that make it easier and easier to shift production abroad. They poured and drank the Wall Street Kool-Aid, which claimed that the rise of financialized capitalism would bring riches to us all. Instead, manufacturing collapsed, the average worker wage stalled and the CEO/worker wage gap rose from 45 to 1 in 1970 to an obscene 800 to 1 today.
Some liberal Democrats just throw up their hands and say there’s nothing much that can be done about all of this. Globalization is here to stay, they say, and automation is killing these jobs anyway, so the best we can do is provide retraining and cash subsidies for those who have been left behind.
Other liberals worry that if we try to keep these jobs in the U.S. we will be taking jobs away from poorer workers in less developed nations. They seem to believe that financialized capitalism is some kind of philanthropic organization designed to uplift the poor, rather than a machine designed to enrich elites.
Still others argue that we should not cater at all to these manufacturing workers, who are largely white males (though, actually less so each year). Instead they argue that Democrats should worry about women, people of color and the LGBTQ communities who will never work in the declining manufacturing sector.
Warning: Any candidate arguing anything like the above positions should stay clear of Lordstown.
The Fatalistic Fallacy
What unites these positions is an erroneous dogma. The decline of manufacturing in the U.S. is not an inevitable product of the global economy, no matter how often that false narrative is repeated by politicians and pundits. Germany, for example, is far more dependent on global trade than the U.S. and it has as least as much automation. Nevertheless, manufacturing in Germany is nearly twice as large a percentage of their economy—20.66 percent as of 2016 compared to only 11.6 percent for the U.S economy. And German workers earn more. The total compensation for a German manufacturing worker is $43.18 per hour versus $39.03 in the U.S.
Manufacturing jobs declined in the U.S. because both political parties joined hands in facilitating Wall Street deregulation, tax cuts on corporate and financial elites, and anti-worker trade deals that make it easier and easier to ship jobs abroad.
Do progressive Democrats have a plan?
It’s not easy to come up with a fix for Lordstown, Carrier and thousands of other profitable facilities that have been shuttered. To do so requires changing the most fundamental rules of financialized capitalism, something that only Bernie Sanders has so far addressed. Let’s think back to how it might work in the case of GM.
It’s 2007 and GM is on life support. The government offers a $50 billion bailout. In exchange, however, “We the People” then set terms for this bailout:
In effect this would be saying that any too-big-to-fail corporation that is bailed out becomes a joint enterprise among key stakeholders. In the case of banks, they would become public banks like the Bank of North Dakota.
Such terms would have stopped the closing of Lordstown and many other GM facilities. Writ large they would dramatically increase the production of decent paying jobs all over the U.S and reduce some of the financial strip-mining that produces runaway inequality.
Anything short of this—like praying another company will take over these mammoth facilities—will seem hollow to those who have been crushed by the strip mining process.
The choice is clear: Either we have the courage to interfere with financialized capitalism or we will once again abandon these workers to demagogues like Trump.
Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.
