Posts Tagged ‘Flint’

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download (1) The Democrat Who Cried Trump!

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Next week, after the Memorial Day recess, the entire House is expected to take up the bill, which last week was approved (by a vote of 29-10) within the House Natural Resources Committee, with support from the White House, to handle the Puerto Rico debt crisis.

The folks at the Wall Street Journal couldn’t be happier.

The bill offers debt relief to Puerto Rico in return for a mechanism to overrule the territory’s feckless current government and impose reform. The legislation explicitly pre-empts conflicting laws and regulations passed by the commonwealth. It also stipulates that legal challenges will be heard in federal rather than commonwealth court.

The key to the reform is a seven-person control board modeled after the board that pulled the District of Columbia out of a debt spiral in the 1990s. The President would select the board from nominations by the House Speaker (two), Senate Majority Leader (two), House Minority Leader (one) and Senate Minority Leader (one). The President has sole discretion to choose the seventh. The appointments must be made by Dec. 1, and the terms last three years, so the GOP majority’s choices will steer the board’s crucial early decisions. . .

After ensuring that financial audits and a fiscal plan have been completed, the board would propose a plan of adjustment that is fair and equitable. The legislation explicitly requires that the plan respect creditor priorities and liens and be “in the best interest of creditors.” So if Democrats later control the board, they couldn’t subordinate general obligation bondholders to pensioners.

As we know, similar programs elsewhere—in Europe (e.g., Greece) and in the United States (e.g., Detroit and Flint)—have proven disastrous, at least for the majority of the population. They have only helped the “vulture creditors,” who have already profited enormously from extending high-interest loans and purchasing tax-privileged bonds. In each case, the possibility of real debt relief was scuttled in favor of repaying the creditors and imposing the kinds of economic and political “reforms” elites both inside and outside have long wanted to implement.

Last August, Joseph Stiglitz and Mark Medish warned that Puerto Rico “can’t pay its debts today, and with short-term debt financing at the high interest rates demanded by creditors, it will be even less able to pay its debts tomorrow.” As for the United States, it needs to

take responsibility for its imperialist past and neocolonial present. Washington owes Puerto Ricans a future based on democratic legitimacy and a financially and socially viable development strategy—a development strategy that is more than a set of tax breaks for profitable U.S. corporations.

The new deal is exactly the opposite of taking that responsibility, since (as Erik Levitz [ht: sm] explains) it means establishing “a pseudo-colonial shadow government tasked with trading debt haircuts for austerity measures.”

It should come as no surprise, then, that Bernie Sanders, in the midst of his own presidential campaign, is strenuously campaigning against the bipartisan Puerto Rico deal.

In my view, we must never give an unelected control board the power to make life and death decisions for the people of Puerto Rico without any meaningful input from them at all. We must not balance Puerto Rico’s budget on the backs of children, senior citizens, the sick and the most vulnerable people in Puerto Rico.

Moreover, this legislation requires that any restructuring of Puerto Rico’s debt must be “in the best interests of creditors,” not in the best interests of the 3.5 million U.S. citizens living in Puerto Rico.

“Not in the best interests of 3.5 million U.S. citizens living in Puerto Rico”—who may soon find themselves in the same position as the citizens of Greece, Detroit, and Flint.

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That was Charles Wilson, the president of General Motors, during a Congressional hearing in 1953. Wilson had been asked whether there was any conflict between his job and becoming Secretary of Defense. His answer has since been shortened to “As goes GM, so goes America.”

In any case, GM is a perfect example of the argument I made the other day about capitalism and international trade.

The existence of low wages for American workers is both a condition and consequence of these trade agreements. It’s a condition to the extent that, with stagnant wages and slowly growing consumption, U.S. businesses often look abroad to sell the commodities they produce. And it’s a consequence in the sense that cheap imports and corporate decisions to relocate production abroad negatively affect the wages and working conditions of American workers.

So, there’s a real problem with international trade, which workers in Michigan and elsewhere have every right to be concerned about.

But the problem is not just with trade. It’s capitalism, too. Or, to put it differently, it’s capitalist trade that’s the problem.

That’s because capitalism means that capitalists get to appropriate the surplus and do with it what they want. They get to decide when and where commodities will be produced, and therefore when and where jobs will or will not be created. If that means offshoring production or purchasing inputs from producers in other countries in order to boost profits, they’ll do so. And workers in the United States will either lose their jobs or be forced to accept lower wages and fewer benefits in order to “compete” with the production of commodities elsewhere.

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It’s relatively easy to find out that GM retains the largest share in the U.S. auto market and that it had some 216 thousand employees in 2014. But how many of those vehicles are made by U.S. workers? That’s much harder to determine. I did manage to discover that the United Auto Workers represented just 48,513 GM workers in 2014 or just over 22 percent of the GM worldwide labor force.* The rest of the jobs have been outsourced—mostly to the Right to Work South and to Mexico and the rest of the world.

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Meanwhile, GM profits have been soaring but workers’ wages have been stagnant.

And that’s the case throughout the U.S. manufacturing sector. While so-called onshoring has been all the rage in recent years, workers’ wages have been flat.

these are not your father’s manufacturing jobs. Many of the companies are locating their new plants in right-to-work states where it’s less likely their workers will join a union, and the prevailing wages are far lower.

In fact, nationally, the average wages of production and non-supervisory employees in manufacturing are lower than they were in 1985, when adjusted for inflation. In September, those employees made an average $8.63 an hour, in 1982 to 1984 dollars, while they made an average of $8.80 an hour in 1985, according to the Bureau of Labor Statistics.

As readers know, I have no nostalgia for U.S. manufacturing. On top of that, I simply don’t expect manufacturing to experience any kind of resurgence in the United States, not when lower cost conditions exist elsewhere in Mexico and the rest of the world.

But it remains the case that international trade deals and capitalist control of the surplus have combined to boost corporate profits and to undermine, via job losses and downward pressure on wages, the condition of American manufacturing workers.

In other words, what has been good for GM and other large American corporations has been good for only a tiny slice of America at the very top, and vice versa.

Final note

As if to highlight the divergence in fortunes between GM and the rest of the country, we should remember that the corporation, which remains the biggest employer in Flint, Michigan, managed to switch its engine plant from Flint’s tainted water system to a fresh supply from neighboring Flint Township. As a result, the plant was able to sidestep a crisis that befell everyone else in the city—union workers, retirees, and the rest of the population—where GM was born more than a century ago.

*That figure is very close to Kristin Dziczek, Debra Menk, and Yen Chen’s estimate of 50,700 hourly and salaried employees at GM’s 40 manufacturing facilities in the United States in 2013.