The Fix Was In!
Now we finally know for sure that things are not ok. So what now?
This is not a brief against change (though my conservative soul fears change). Economies change, and with change there are winners and losers. A century ago, some coach makers changed to making automobiles (GM’s Body by Fisher is one that did) most did not. But for change to be fair, it should be organic and random. What happened over the past three decades is not random. The men at the top knew what they wanted (which was a larger playing field to invest their cash) – they pushed for it, and we gave it to ‘em. For the rest of us, the vague promises we received amounted to nothing more than that something would turn up. Well, that something is in tatters.
Now it is the turn of white collar workers to learn the lesson previously force fed to factory workers. Remember factory workers? To all those who lost jobs making various products from kitchen appliances to steel plate, the promise was that our new customers in Mexico, China and India (among others) would present new economic opportunities that should replace much of what was lost as America transferred manufacturing overseas. Well, nothing turned up for factory workers, and I bet nothing will turn up now either for all the mortgage brokers and bankers who are now on the sidelines.
White collar workers were promised a safety net. As late as 20 years ago, most large employers offered health insurance and defined benefit pension plans. Although health insurance hangs on by the thread (a thread that they don’t offer to countless “consultants” ) – old style pensions have been largely replaced by 401 K plans. A few employers offer generous company matches – IBM for one, but for many, the match is no more than 3% – not an adequate pension contribution; and with the economy in tatters a few are canceling any match at all.
But there is a worse problem with 401Ks. Some employees, especially the younger ones, don’t contribute, so no match (IBM matches anyway – that’s the way to do it!). But worse, the investment risk moves from the employer, who has the advantage of being able to hire fund managers to invest its cash, to the employee – who, in most cases, hasn’t a clue about how to manage assets.
Even worse, some employers allow employees to invest in company stock. After the lesson of Enron, folks should have learned, but they didn’t! (When Enron went under, employees lost both their jobs, and 100% of the value of company stock).
The smart money never cared. They enjoyed the better stock price that would come if a business dumped risky long term obligations (like pensions). Turns out the smart money worked in the executive suite, or on Wall Street – and the heavy hitters made millions. And if we looked to our representatives for help, forget it. Many of our politicians get their campaign contributions not from their district, but from moneyed interests that pay them campaign cash in what is an unacknowledged quid pro quo. (No way to prove actual bribery, but everyone knows what is going on).
My point? Well, let’s stop listening to the smart money. They smile and nod and tell us it is all too complicated for us, but don’t worry, they know what’s best. But turns out, they only know what’s best for them.
What were we told?
Here are a few random phrases and buzz words.
These represented the good: Free Market, Open Markets, Free Trade, Finance, Monetary Policy, Corporate Free Speech, Greed is Good, International Trade, Globalization.
These represented what was old fashioned and bad: Protectionism, Oversight, Regulation, Industrial Policy, Unions.
Maybe we need to flip this around!
An afterword, today’s post is more of a rant that an ordered essay. As a rant, some of what I write is for rhetorical effect. I personally don’t like unions, and generally support free trade, but we need an honest reckoning about what we have done to ourselves. Try this example: the talking heads lament that Americans don’t study hard sciences and technology like the Asians do. But why would a bright American high school student select a field like mechanical engineering – if he or she had no promise of a career path (which was formerly in manufacturing). The bloviators have no answer.
