Tag: Capitalism

JOURNALISM’S FUNERAL MARCH LED BY CORPORATE VULTURES

Eons ago, I covered the Minnesota Legislature for the St. Cloud Daily Times. It was approximately 1970, and I was paid $1.45 an hour, the then prevailing minimum wage. Thanks to my parents, I was able to pay for my Greyhound Bus trips to and from the Capitol in St. Paul. The newspaper had been in the hands of a local family for decades. The publisher was a miserly old Dickensian character who deeply resented having to shell out money for a news operation. One day, I was chatting with a coworker who sold ads for the paper when Scrooge staggered up to us, moderately anesthetized by a long martini lunch. He slapped the ad guy on the back and slurred, “asset”. He poked me in the chest and said, “liability”. That was pretty much his business plan.

Little did I know then that those were the good old days of journalism. Owning a newspaper was a license to print money. Advertisers had few viable alternatives for marketing their wares back then. The formula was simple: subscribers read the papers for the news and then stumbled onto the ads. The result was newspaper profit margins ranging from 30-something to 40-something percent. Scrooge wouldn’t pay my expenses to cover the legislature because that would diminish his profits. Besides, he knew he could get the work on the cheap because I wanted the experience and the story clips to get a better job on a larger paper. As a result of this capital-labor symbiosis, he got rich, I got hired by the St. Paul Pioneer Press, and more importantly, people in St. Cloud got to read about what their legislative representatives were up to.

Those days are so gone. The once idealistic, if naïve, illusion that for-profit journalism is a calling, a search for the truth, a check on those in power, has been brutally shattered by sheer, unbridled greed. It’s capitalism run amuck. Yes, the Internet knocked newspapers for a loop. Ad revenue plummeted. Pages, stories and jobs were eliminated. But for the most part, these media companies struggled to survive, to reinvent news delivery on multiple platforms, to find some way to make their product – journalism – relevant and vital.

Then the hedge funds took over. Newspapers across the country have been gobbled up by vulture capitalist companies for the sole purpose of sucking all remaining value out of them, and then letting these once vital community assets die or go bankrupt. Their business objective is the direct opposite of viability. They just want to pick the bones, sell off the real estate, fire upwards of 90 percent of the journalists. It’s the same thing that happened to Toys R Us. The gigantic toy retailer was hurting from online competition, but was still profitable when purchased by a vulture fund. Rather than scaling back and finding a way to keep the operation going, the new owner simply bled it until it was no more, at a significant profit for its shareholders. Since 2004, Julie Reynolds writes in the Nation, “speculators have brought and sucked dry an estimated 679 hometown newspapers that reached a combined audience of 12.8 million people.”

As tragic as the Toys R Us implosion was for the 31,000 workers who lost their jobs without a dime in severance pay, the dismantling of community newspapers moves the needle to an even higher level of evil. Consumers can still obtain their favorite Hasbro action figures. Former newspaper subscribers, however, have nowhere else to go to find out what is going on with their local school board, city council or municipal leaders.

When I worked for the St. Paul Pioneer Press in the 1970s and early 1980s, there were well over 200 journalists on staff. That number now stands at 25 and falling, thanks to its current owner, Alden Capital, a private equity firm that acquired Digital First Media (DFM), now the second largest newspaper company in the country. This outfit has zero interest in journalism. In fact, it makes money by dismantling whatever journalism was left. DFM is leaving its footprint of news annihilation across the land. Once clearly one of the ten best newspapers in the country, the San Jose Mercury News has gone from a news staff of 400 to 40. Denver once had 600 journalists reporting the news at two papers. Only one remains, The Post, and Alden, true to its 90 percent reduction rule, has taken the newsroom count to around 60. The same thing is happening all over, from the Orange County (CA) Register to the Boston Herald.

These newspapers are being gutted, drained of all remaining value. Despite the fact that Alden’s media properties are operating on profit margins as high as 20-some percent, there is no pretense of maintaining ongoing viability. The strategy is simply one of managing decimation in a way that maximizes profits until death arrives.

Think for a moment of all the local news stories that have mattered to us over the years: city building inspectors on the take; school administrators doctoring test scores, police corruption, school busses that fail safety inspections, sexual harassment at City Hall. The list is endless. Those are the stories that come from reporters sitting through endless meetings, cultivating sources, pouring through public records that ordinary citizens don’t have the time to look at.

Killing a newspaper is not like killing a toy store. “Democracy,” as the Washington Post motto has it, “dies in darkness.” It’s a death brought on not only by authoritarian tyrants, but also by the sheer immorality of unregulated capitalism. Life in a civilized society demands that we weigh conflicting rights and values in order to remain true to our core principles. Surely, there must be a way in which the interests of corporate billionaires can be tempered just enough to prevent the premeditated slaughter of the public’s right to know. We need to find that way before the darkness consumes us.

WHITE RAGE IS NO FIX FOR DEEP PROBLEMS OF THE WORKING CLASS

The angry white power movement that helped propel Donald Trump’s ascendancy from provocateur to president rests on one truth and two lies. The truth is that the so-called forgotten and downtrodden middle class really has been seriously harmed and ignored. These are the lies: its travail was caused by non-whites, and Trump will make everything better.

Over the past decade, the “American Dream” that many of us grew up on has faded slowly into oblivion. Gone is the social compact by which hard work – with or without a college degree – delivered the good life, complete with home ownership, medical insurance, a retirement plan, and a spouse able to stay home to raise the kids and manage the household. There is a trove of economic data that paints a dismally bleak picture for middle America. Real wages keep falling. Good jobs are disappearing. Hope has morphed into anger.

Of course, this dream was always a white thing, at least in terms of attainability. Statistically, far more Caucasians got there than racial minorities, or women not married to a man. That explains the results of a recent poll that showed white men are far more angry about their economic plight than blacks, Hispanics, Latinos or women of any race. This, despite the fact that women and minorities are still at an economic disadvantage compared to white males. The idyllic middle-class life was built with decent paychecks issued mainly to guys who were white. When the jobs fueling this lifestyle started to disappear, the dream faded, leaving a thick residue of anger in its wake.

And along came Trump, the pied piper for angry white men. He wowed them with a simple two-note tune: America is overrun by people who don’t look like us; and, we need to bring back all the good jobs we lost. Here he is, waxing polemically with one-eighth of a run-on sentence during the campaign: “We’re going to bring back our jobs, and we’re going to save our jobs, and people are going to have great jobs again. . .” Unsurprisingly, he won the votes of white males without a college degree by a margin of 49 percentage points. And it’s been a love-and-anger fest ever since.

Those white supremacists who marched in Charlottesville may have been on the fringes of this movement, but they voiced the fears of many in their demographic by chanting, “You will not replace us.” In 1980, whites were 80% of the U.S. population. They are now at 63%, heading to under 50% by 2043. Of course, there is not a scintilla of economic evidence linking white economic malaise to an increase in diversity. But anger always breathes better with a bogeyman, particularly in authoritarian politics.

Still, Trump was on to something that most politicians ignored. The middle class’ economic pain was much more than aftershocks of the Great Recession. The lost jobs aren’t coming back. We are in the throes of a massive structural change, marked by an obscene income disparity, and a growing inability of ordinary folks to support themselves. The situation has gotten so bad that, for the first time in decades, the life expectancy of middle aged white Americans has started to drop. Earlier this year, Princeton University researchers attributed the trend to what they called “deaths of despair”. They identified four causes: stress of economic struggles, suicides, alcohol and drug overdoses.

Unfortunately for Trump’s base – and the rest of America – anger alone will not restore middle class vitality and viability, particularly misplaced anger. Nonwhites, whose economic woes are far worse than those of their Caucasian counterparts, are not to blame. Neither are trade agreements or globalization. Sure, NAFTA wreaked some havoc on our jobs, but that was more than 20 years ago. Most of that work is now performed by robots or other nonhuman technological processes.

Two Ball State professors examined manufacturing job losses between 2000 and 2010. They found that 13% were lost due to trade agreements and 87% through automation. The Bureau of Labor Statistics reports that the high-paying manufacturing sector accounted for 34.4% of the country’s jobs in 2000, but only 8.7% in 2015. Despite the dramatic loss of manufacturing jobs, productivity has remained relatively constant. That’s because more stuff gets made with fewer workers. The Brookings Institute says it now takes only six workers to generate $1 million in manufacturing output. The same level in 1980 would have taken 25 workers.

Simply put, the problem facing America’s working class is pervasive and systemic. The inertia of uncontrolled technology is redefining the world of work, and eliminating millions of good jobs. Tragically, nobody is doing anything about it. Plenty of people are thinking about it – economists, academicians, think tanks. Fixes like massive worker retraining, job creation, technology regulation and a guaranteed annual income are out there. But they haven’t gone beyond the pondering stage because most of our elected office holders have lacked the courage to seriously tackle this issue.

And that gave Trump an opening. Long fueled by anger himself, the Donald opportunistically saw what others wouldn’t: millions of outraged and forgotten people, fed up with negative balances and surrounded by folks who weren’t like them. Nobody seemed to give a damn about their plight. Then along came the star of “The Apprentice”, every bit as worked up, bitter and belligerent toward the ruling class as they were. Why wouldn’t they drink the Kool Aid?

Meanwhile, deaths of despair are now baked into the American Dream. Trump’s promise to bring all the great jobs back was nothing more than slick Willy Loman bravado. However, there is still time to rewrite the next act of this play. Are you listening, Democrats? It’s time to fill the Republican void with a smart, effective, Ted Kennedy-like program that will save the middle class. Mocking Trump’s failures is not sufficient. What we need is a sound legislative plan, an all-out campaign to replace despair with hope.

LET’S GUARANTEE AN ANNUAL INCOME FOR EVERY AMERICAN

Here is a radical notion that deserves serious attention: guarantee every adult citizen an annual income for life. This socialist-sounding plan has not exactly received a Palm Sunday reception from the mainstream political class. There are encouraging signs, however, that it will eventually reach the table of public policy, as soon as we admit that there is no magic bullet of a jobs program that will cure the cancer of income disparity.

As noted here earlier this week, our country’s employment problem is chronic and structural. It’s not about a lack of jobs; it’s about jobs that don’t pay enough to support the middle class. That’s why, according to the Federal Reserve Bank of New York, nearly half of recent college graduates are underemployed in jobs not requiring a degree and not paying much above minimum wage. A jobs program will do little to resolve this dilemma. Technology now allows companies to produce products and services with far fewer workers than in the past. Since capitalism is all about maximizing return on investment, this trend is not only unstoppable, it’s growth is a certainty.

The basic concept of a guaranteed annual income, or GAI, is simple. People would get a monthly allotment from the federal government, just like Social Security except that the payments start at 21 instead of 62. Like any public policy, the meat and the meaning of the program lie in the details. For example, some conservatives, including the American Enterprise Institute’s Charles Murray, have proposed replacing entitlements like Social Security and Medicare with a GAI starting on a citizen’s 21st birthday. Murray’s proposal, recently laid out in the Wall Street Journal, would give everyone $13,000 a year. They could earn up to $30,000 annually without a reduction in their GAI payments. That benefit would then be incrementally reduced until it reached $6,500 a year at the point of someone having an annual pay rate of $60,000 or more. Murray’s scheme would also eliminate every current social welfare program, including food stamps, housing subsidies and Medicaid, in exchange for lifetime cash payments.

As you might have guessed, the math of Murray’s plan is not all that progressive. The trade-off for a GAI, namely the elimination of every entitlement and welfare program, is a net loss for the middle class. A good counterproposal from the left might be to keep all current programs in place and give everyone making less than $60,000 a year an annual payment of, say, $30,000. And then look for middle ground. The significance of Murry’s piece in the Journal is that a leading thinker on the right acknowledged a truth still denied by most elected leaders, namely that our world has changed so much because of technology that we can no longer cling to the work ethic that has driven economic thought for the past 200 years. Wrote Murray, ”. . .it will need to be possible, within a few decades, for a life well lived in the U.S. not to involve a job as traditionally defined.”

That is precisely the lens we need to be looking through in search of a long-term solution to our employment problem. The concept of a GAI is not new. It was a popular issue in the early 1970s, supported by Democratic presidential candidate George McGovern and, to a limited extent the guy who beat him, Richard Nixon. The hurdle it could never clear was that such payments would be an incentive not to work and, therefore, an impairment to the country’s productivity. We are in a different place now. Productivity can be achieved by robots and software programs. Why not raise taxes on the billionaire investors profiting from this new paradigm and return a dividend of sorts in the form of a GAI to the folks adversely impacted by the change?

As radical as it may sound, it is not terribly different in form or substance from the ad hoc corporate socialism doled out under our current system. Existing federal welfare payments are making it possible for large corporations to employ low wage workers with no benefits. In just one example, identified by Forbes, Walmart employees receive $6.2 billion a year in federal public assistance through food stamps, Medicaid and subsidized housing. This is precisely the same policy transaction incorporated in the GAI; low-paid workers subsidized through federal funds. It’s a win for the worker, the employer and the economy.

It’s also the same concept used by Donald Trump and Mike Pence in persuading Indiana’s Carrier Corporation not to move 800 jobs to Mexico. In exchange for keeping those jobs in Indiana, Carrier got $7 million in tax credits and other incentives, another form of a government employment subsidy, and quite an expensive one at that. The epilogue of that story, by the way, shows how badly we need a comprehensive solution to this problem. Part of the agreement was that Carrier would invest another $16 million in its Indiana plant, supposedly earnest money showing its commitment to American jobs. A few days ago, company executives said a portion of that investment will be used to automate the plant so that more jobs can be eliminated.

Structural problems need structural solutions, not sloppy patchwork fixes. It’s time for policy makers to accept the fact that employment alone is no longer a sufficient engine to drive our economy. It’s also time for all of us to rethink just what it means to lead a good life, recognizing that self-worth is not tied to a paycheck. The most direct route to that destination is a guaranteed annual income.

THE EMPLOYMENT PROBLEM: IT’S ABOUT THE PAY, NOT THE NUMBER OF JOBS

My New Year’s wish for serious policy makers is that they abandon the illusion that the economic problems of the middle class can be fixed by the right jobs program. The simple truth is that technology has wiped out millions of good-paying jobs, and millions more are on the chopping block. Most are not coming back, and those that do will be at a much lower pay rate. The result has been a severe widening of the income gap between workers and investors, between capital and labor. In the space that follows, I will outline the current employment problem and show how it resulted from deep structural economic changes, as opposed to cyclical alterations that might well be modified by a federal job creation effort. Later this week, I will take up the matter of what to do about it.

Our elected leaders are still in deep denial over the seismic structural shift that has profoundly altered the nature of employment in this country. In their view, the job market took a severe jolt from the 2008 recession and a couple bad trade agreements. They see that unemployment is down now and pretend that everything will be fine once we bring those lost jobs back to our shores. As hopeful as the premise is, there is absolutely no evidence to support it.

The Wall Street Journal reported Sunday that manufacturing output is now close to the prerecession level, but 1.5 million factory jobs appear to be lost for good. Compounding the problem is the fact that a large number of the jobs that did come back pay significantly less than they once did. As the Journal put it, automation technology now allows manufacturers to “function, and even thrive with fewer employees than ever before.”

Here is just one example of how this playing out, as reported by the Los Angeles Times: A Michigan company called Ranir moved its electric toothbrush manufacturing plant to China. A few years later, in an attempt to lower labor costs even further, it retuned one-fifth of that production to Grand Rapids. This is precisely the kind of move that Donald Trump has made the cornerstone of his job creation pledge in his effort to make America Great Again. In fact, Ranir is cranking out 13,000 American made toothbrush heads a day for Wal-Mart and other retailers. The work, however, entails only four actual humans whose jobs involve monitoring the computers that control the robots that are doing the actual work. This is the new industrial food chain: from well-paid American workers, to low-paid Chinese workers, to no-pay robots. Clearly, the days of $25-an-hour manufacturing jobs as a mainstay of our economy have ended. The plants may return from off-shore, but the jobs aren’t coming with them.

The nation’s 1.7 million truck drivers, many making $70,000 a year or more with full medical benefits, will likely be the next large group to be replaced by technology. In another decade, perhaps sooner, the trucking industry is banking on having employee-free fleets of driverless vehicles. High on the Bureau of Labor Statistics’ list of jobs endangered by technology is that of mail carrier, once a highly sought lifetime guarantee of economic security. Also vulnerable, says the BLS, are radio announcers and disc jockeys who are being replaced by automated playlists. Same goes for newspaper reporters, a job class already reduced by more than 30% due to the product’s digital platform. The BLS sees further reductions as a result of the ability of computers to generate stories, a process currently in limited use by the Associated Press. Even insurance underwriters are going the way of the dinosaur, replaced by software programs. These, and many more good middle class jobs like them, are heading for extinction, with no apparent successor in sight.

What does that mean for our economy? Try wrapping your head around this statistic: The average annual pre-tax salary for the bottom half of American workers (by income) is $16,197. That’s only $1,000 a year above what a teenager working 40 hours a week at McDonalds makes, based on the current federal minimum wage of $7.25 an hour. In other words, our problem is not an absence of jobs; it’s the lack of jobs that pay well. Unrestrained, free market capitalism has run amok. Corporations are making gigantic profits with minimal labor costs, thanks to mechanized, non-human production.

Statistically, we are now approaching full employment. Yet, the average worker on the bottom half of the income range is paid close to the poverty level, an amount almost identical to what it was 40 years ago. Meanwhile, those in the top 10% of that pay range saw their income increase by 231% over the same period. There isn’t a jobs program proposed by Donald Trump or anyone else that even pretends to close that gap. On Wednesday, I will discuss a potential solution for this dilemma. Please stay tuned.

A RED PARACHUTE MADE OF GOLD

Golden parachutes are back in the news these days, and as ever before, getting the black eyes they so richly deserve. Fox News Chairman Roger Ailes quickly bit the dust after long-time anchor Gretchen Carlson brought sexual harassment charges against him. She settled for $20 million while Ailes walked away in shame and disgrace – and with an exit package of $40 million. Only through Alice’s looking glass would Fox’s “fair and balanced” world give the harasser twice as much as the harassee. Former United Airlines CEO Jeff Smisek was fired last year and left with close to $37 million. Then there is Carrie Tolstedt, Wells Fargo’s vice president for sales, who was all set to parachute out of the fraudulent bank account scandal her division created with a $124 million package.

Those examples were noted in a recent Harvard Business Review piece characterizing the emerging trend of using such compensation packages to rid corporate suites of scandalized executives. That, says HBR, was never the purpose of a golden parachute. Instead, it argues, these payout packages originated in the 1970s to protect executives from being fired in corporate takeovers, not to enrich CEOs who were either dismissed for poor performance or just wanted to walk away with a bundle of cash.

What neither the fallen chieftains of capitalism nor the Harvard Business School may know is that the underpinnings of these enormous exit packages can be traced to the teachings of Karl Marx and the Communist Party. A golden parachute is severance pay on steroids. Severance is a common term in our lexicon now. It means paying workers who are laid off or bought out when a company reduces its workforce. Back in the early 1930s, however, such a practice was unheard of in this country. Severance pay originated in the newspaper industry in 1933 and quickly spread to other employment sectors. I learned all this during my career as a negotiator for The NewsGuild-CWA, the union that represents newspaper workers, among others. Here’s the quick story:

The Guild was organized in 1933 by a group of reporters and editors led by a then-prominent New York columnist, Heywood Broun. The newspaper industry was facing a recession back then and publishers were getting rid of journalists left and right. So the immediate burning issue was that dedicated, hardworking employees should not be summarily fired without some sort of compensation for their years of service, a.k.a., severance pay. Many newspaper owners agreed, and before the first comprehensive contract was negotiated, a number of papers entered into interim agreements with the Guild providing for severance pay based on length of service for laid off workers.

Those were the seeds of the golden parachutes. Because Broun and his Guild colleagues, detached journalists that they were, had little aptitude or patience for the nitty-gritty of union building, they hired a number of young, passionate organizers from the American Communist Party. It was a pragmatic, not ideological, move. The Commies knew how to organize and they helped set up local unions at newspapers throughout the country. Once the national union was up and running, the Guild, like many unions in the 1950s, got rid of the reds. But not before they had an opportunity to inject a little Marxism into the newspaper contracts.

That meant that those early severance pay agreements dealing with layoffs evolved into a system in which employees built equity in their jobs with each passing year, equity that would be liquidated when they left the company through a severance payment based on years of service. The formula in most contracts called for two weeks’ pay for each year and it was paid regardless of how the employment ended, whether by resignation, retirement, disciplinary discharge or layoff. In the event of death, the benefit was paid to the employee’s estate. The principle of severance pay was not a cushion against unemployment. It was a recognition of the Marxist concept that workers have a property right in their jobs, based on their contributions of labor. Severance was the means of cashing in that ownership stake.

Various national labor publications in the 1930s took note of this unique provision in newly negotiated newspaper contracts and the concept quickly spread. As the years passed, however, the benefit lost much of its leftist luster. When pension plans were negotiated into subsequent contracts, severance pay was scaled back so that it was paid only on dismissal or layoff. But the culture had been changed. There was an accepted practice that employees should get something more than a handshake or a kick in the rear end when walking out the door. That DNA then wildly mutated into parachutes made of gold now carrying disgraced corporate fat cats out of their executive suites. Somewhere Karl Marx is shedding a tear and insisting that this is not what he had in mind.

WELLS FARGO CEO: THE MINIONS DID IT

Anyone who really hates banks has got to love Wells Fargo CEO John Stumpf. The guy went public today for the first time since his company was accused of major shenanigans. He made Old Man Potter, the villain banker from “It’s a Wonderful Life” look like a good Samaritan. Wells Fargo was fined $185 million last week after it was caught creating more than 2 million bogus accounts without customer consent.

After several days of silence, the bank’s boss told the Wall Street Journal that neither the company’s culture or values were to blame. No, not at all. The dirty rotten scoundrels were the miscreant employees who dared to sully the Wells Fargo brand by their corrupt actions. He wants the world to know that the bad apples were immediately fired. All 5,300 of them. That’s right: thousands of low level employees somehow simultaneously created more than 2 million fake accounts, presumably in the dark of night without anyone at an executive level being any the wiser.

With a straight face, Stumpf broke all corporate records for throwing the most employees under the bus at one time. Additional busses had to be summoned. “I wish it would be zero,” the CEO told the Journal, “but if they’re not going to do the thing that we ask them to do – put customers first, honor our vision and values – I don’t want them here. I really don’t.”

And just what, pray tell, would the Wells Fargo vision and values entail? According to a lawsuit filed by the City of Los Angeles, the bank imposed a goal on its employees of selling at least eight financial products to each customer, calling it the “Gr-eight Initiative.” The suit says district managers monitored employee progress toward the goal so closely that they reviewed their performance with them four times a day, at 11 a.m., 1 p.m., 3 p.m. and 5 p.m. “The sales pressure from management was unbearable”, a former employee told CNN. Jobs were on the line.

The lofty sounding term, “goal” is a euphemism in most sales environments, meaning that those who don’t meet the goal are fired. To keep their jobs, 5,300 employees created phony credit card and other accounts for customers who never authorized them or knew they existed. This cross-sell campaign was so successful for Wells Fargo that its executive vice president for sales, Carrie Tolstedt, made $9 million in total pay last year, a reward, according to CNN, for “continued growth in primary checking customers” and other metrics. She is scheduled to retire at the end of the year with a $124 million package. The fact that Tolstedt’s performance came, at least in part, on the backs of the 5,300 discharged minions who phonied up all those accounts apparently squares just fine with Wells Fargo’s “vision and values”.

The company paid the regulatory fine without admitting or denying guilt. Even banks, of course, are entitled to mount a defense while maintaining the presumption of innocence. On the other hand, if I were a juror, and applying common sense to these facts, there is no way I could find that 5,300 employees independently came up with the same scam at the same time, allowing a totally innocent corporate management to benefit, right up until they were caught. There is but one guilty party in this caper and that is the Wells Fargo vision and values that pushed employees to reach a goal at any cost.