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If Unions Are Breaking Automakers, Why Are BMW and Mercedes So Rich?

Photo by Ben / Flickr.

When the financial crisis of 2008 sent U.S. automakers to the precipice of failure, conservatives, notably Mitt Romney, urged the Obama administration to let the car companies go bankrupt. Neoconservatives blamed “high wages” paid to unionized autoworkers for the inability of GM, Ford, and Chrysler to compete. In his book The Crash of 2016, author Thom Hartmann points out a flaw in the argument that high wages to American workers are the problem. He says:

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Actually, Germany paid their autoworkers about $67 an hour (including wages and benefits). But the United States paid its average worker only $33 an hour (also including wages and benefits). On top of that, German car manufacturers were highly profitable, despite the comparatively large paychecks of their workers. BMW earned a before-tax profit of 3.8 billion euros, and Mercedes-Benz hauled in profits of 4.6 billion euros.

So how did Germany just completely blow up the myth that car companies have to pay their workers less to be more profitable and manufacture more cars? How can Germany do the opposite: pay their workers more, be more profitable, and make more cars?

The answer: democracy.

First, Germans have completely democratized the auto plant by unionizing nearly every single autoworker in the country—under IG Metall, the German autoworkers union. With such a high union membership rate, autoworkers hold a lot of sway when they threaten to go on strike. That’s how workers have been able to keep wages high and working conditions satisfactory. But as Horst Mund, the head of the International Department of the German autoworkers union, pointed out, unions hardly ever go on strike in Germany “because there is an elaborate system of conflict resolution that regularly is used to come to the sort of compromise that is acceptable to all parties.”

How did Germany just completely blow up the myth that car companies have to pay their workers less to be more profitable and manufacture more cars?

One reason for the more collaborative relationship between CEOs and workers is that, unlike in the United States, unions aren’t under attack and there aren’t any “right to work for less” zones in Germany to which car manufacturers can flee so they can ignore the voice of organized labor.

Another and perhaps more powerful reason is that there is a constitutional amendment in Germany that forces corporate executives to listen to labor unions. The Works Constitution Act requires every factory to set up a works council that gives representatives of the workers a seat at the table in every decision-making process at the factory. That is the democratization of capitalism, expanding the decision-making process to not just the corporate elite but the entirety of the company, from the bottom up.

This, according to Mund, is the real reason why the autoworkers union has a loud voice in the German economy. Pointing to the adversarial relationship between employers and labor unions in America, Mund says, “The accusation that American unions are more radical and destructive … definitely has to do with the hostile environment in which the unions have to act. How can they be constructive and friendly if their asses are kicked all the time?” He goes on to say that without the Works Constitution Act in Germany, “employers would not talk to us either if they had the choice.”

But intentions aside, the empowerment of labor unions in Germany and the democratization of the workplace through an enforced constitutional amendment have been an economic boon for Germany, as demonstrated by car sales, employee wages, and profitability.

As Mund concludes, “We have strong unions, we have strong social security systems, we have high wages. So, if I believed what the neo-liberals are arguing, we would have to be bankrupt, but apparently this is not the case…the economy is working well in Germany.”

So how do we democratize capital in the United States and give workers more of a say in how our economy is run?

Thom Hartmann wrote this article for The End of Poverty, the Fall 2014 issue of YES! Magazine. Thom is a writer, activist, and talk show host. This column is an excerpt from his latest book, The Crash of 2016: The Plot to Destroy America—and What We Can Do to Stop It (Twelve Books, 2013). Used with permission of the publisher.

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Categories: Economics

4 Ways to Raise Livestock Without Chemicals

Chris Martenson - August 28, 2014 - 08:21

4 great tips to keep livestock off the chemical pharmaceuticals and have them on natural methods for preventing and treating common ailments.

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Categories: Economics

Daily Digest 8/28 - Dethrone 'King Dollar', Does Dirt Make You Happy?

Chris Martenson - August 28, 2014 - 07:27
  • Dethrone 'King Dollar'
  • Who's In The Office? The American Workday In One Graph
  • Finitude is the human condition and our days on this earth are numbered, in one chart
  • Yazidis still stranded on Mount Sinjar: 'We need weapons now more than food or water'
  • Free Mailbox Stickers Signify Goods Residents Are Willing to Lend Neighbors
  • Alaska Is A Petrol State
  • New Technology Could End The Debate Over Pipeline Safety
  • Does Dirt Make You Happy?

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Categories: Economics

I Blame The Central Banks

Chris Martenson - August 27, 2014 - 17:17

The current bubble in financial assets -- in both equities and bonds of all grades and quality -- raging in every major market across the globe is no accident.

It's a deliberate creation. An intentional result of policy.

Therefore, when it bursts, we shouldn't regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of our terribly shortsighted decision-making and defective logic.

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Categories: Economics

Something Very Wicked This Way Comes

Chris Martenson - August 27, 2014 - 17:17
Executive Summary
  • How sovereign debt is becoming larger and more mis-priced each year
  • Why corporate borrowing is accelerating, but only being used for non-productive means
  • Junk bonds have never been priced so low (ever), indicating a complete denial of risk
  • Today's record bond prices are supported by near-historic low (i.e. extremely tenuous) levels of volume
  • Why, mathematically, nearly no-one will be able to exit unscathed when this overinflated market rolls over

If you have not yet read Is Part 1: I Blame The Central Banks available free to all readers, please click here to read it first.

Italy: Insanity On Display

Let’s look at one of the sovereign entities that has piled on the debt to staggering levels. In this case: Italy.

This can serve as a template for understanding the rest of the insanity that exists in the global sovereign bond market.

The rules for lending to a nation should be roughly the same as lending to an individual. You’ve got some measure of the country's credit-worthiness that needs to be taken into account, plus an assessment of its income.

After all, the future principal and interest payments have to come from future income. If there’s too much debt compared to income, then there’s an increasing risk that the debt servicing payments not only will not be made, but cannot be made.

Italy’s sovereign debt has been expanding enormously as the government borrows and spends. Its national debt finally cleared more than $2 trillion euros early in 2014:

Italy's public debt hits record 2.1072 trillion euros

Apr 14, 2014

(ANSAmed) - ROME, APRIL 14 - Italy's massive public debt hit a record 2.1072 trillion euros in February, the central bank reported Monday. The amount was up 17.5 billion euros since January, the Bank of Italy said.

The European Commission has criticized Italy's 2014 budget for not doing enough to bring down debt, around 132% of gross domestic product (GDP).

As a result it has put Italy under "specific monitoring" over its "excessive macroeconomic imbalances", which include high debt and poor competitiveness, as part of an in-depth review.


Italy raked up significant debt at a far faster rate than its underlying economy was growing, leading to a steadily rising debt-to-GDP ratio as seen in this next chart...

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Categories: Economics

The 10 Mistakes of Raising Chickens

Chris Martenson - August 27, 2014 - 15:07

Raising chickens can be a very rewarding process. Besides providing you with fresh eggs, it can also be a teaching resource for your children and a way for you to become self-sufficient.

However, there are a few mistakes that people make when they first start raising chickens. Check out this list below and add your mistakes at the bottom to help others learn.

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Categories: Economics

New Wiki Will Help You Grow a Better Garden

Shareable Magazine - August 27, 2014 - 08:31

Top image: Rory Aronson at TEDx UCLA. Article cross-posted from

Categories: Economics

16 Worker Coops Redefining the Cooperative Movement

Shareable Magazine - August 27, 2014 - 08:19

The worker cooperative movement has hit a new stride. Re-emerging in the 1960s, cooperatives tend to elicit thoughts of natural food stores and specialty bookshops but the movement has grown to include tech companies, coworking spaces, international businesses, large factories and much more.

Categories: Economics

Why Trails Are America’s New Town Squares

Shareable Magazine - August 27, 2014 - 07:50

Top image: The Midtown Greenway in Minneapolis. Photo credit: Micah Taylor under a Creative Commons license. Article cross-posted from On the Commons.

Americans are people on the go!

Categories: Economics

Daily Digest 8/27 - Fukushima Groundwater Operation Ineffective, Healthcare Premiums Expected To Rise

Chris Martenson - August 27, 2014 - 06:58
  • Fukushima groundwater bypass operation ineffective: Tepco
  • Thyroid cancer diagnosed in 104 young people in Fukushima
  • China Will Need Stimulus to Hit 7.5% Growth Target, KC Fed Paper Says
  • Putin Warns on Ukraine Pursuing Closer Ties With West
  • Argentine black-market peso falls to new low despite rate rise
  • Arizona's Obamacare health plan premiums expected to rise
  • Health care costs will spike for Birmingham retirees unless council acts Tuesday
  • Affordable Care Act drafting error could strip health care subsidy from thousands in Wisconsin
  • White House Won't Comment On Burger King-Tim Hortons Deal
  • Euro zone yields turn negative on Draghi hopes

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Categories: Economics

Teaching Survival Skills to Children

Chris Martenson - August 26, 2014 - 13:30

Some great activities and lessons to teach children that will support better situational awareness and survival skills.  Provide them with the mental tools to keep them safer and more resilient in difficult situations.

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Categories: Economics

Portland’s Collaborative Ethos Shines at Recent PDX Skillshare

Shareable Magazine - August 26, 2014 - 07:13

Portland, Oregon, a city known for having a strong D.I.Y. ethos, is no stranger to collaborative, D.I.T. (do it together) culture either. Case in point: the recent PDX Skillshare. Supported in part with a grant from Shareable, the event brought people together to exchange skills and information about martial arts, screen printing, meal planning and preparation, beekeeping, business networking, clawhammer banjo playing, and much more.

Categories: Economics

Daily Digest 8/26 - The Fed Is Not As Powerful As We Think, U.S. Housing Bull Market Over?

Chris Martenson - August 26, 2014 - 05:48
  • Generation Later, Poor Are Still Rare at Elite Colleges 
  • The Fed Is Not As Powerful As We Think
  • U.S. Housing Bull Market Over? House Prices Trend Forecast Current State
  • Blackouts in Egypt Prompt Accusations
  • Uncertainty for Workers Losing Jobs at Atlantic City Casinos
  • The Aftershocks
  • Emission-free Hydrogen May Now Be Truly Emission-free
  • 7 Seriously Farmed Bugs

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Categories: Economics

The Trouble With Natural Gas

Chris Martenson - August 25, 2014 - 17:56

One of the areas where there's an overblown amount of overtly politicized and outrageously propagandized information is shale natural gas (NG).

The US, for obvious geopolitical reasons, would love to supply Europe with NG and cut out Russia. But as we'll soon see, the basic facts just don't back up that desire just yet.

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Categories: Economics

Daily Digest 8/25 - Extremes Are The Enemy, Solar-Powered Commuter Pods In Development

Chris Martenson - August 25, 2014 - 07:44
  • Why You Should Take a Week-Long Break From All Screens
  • Want Milk or Toilet Paper? The Venezuelan Government Wants Your Fingerprints
  • Sales of New U.S. Homes Unexpectedly Fall to Four-Month Low
  • New Jersey Is Testing Solar-Power Commuter Pods
  • Dash of Salt Does No Harm. Extremes Are the Enemy
  • California High-Speed Rail—More Questions and Concerns
  • U.S. Warms To Clean Energy
  • Methane Is Discovered Seeping From Seafloor Off East Coast, Scientists Say

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Categories: Economics

Who Gets to Decide What a City Can Do with Broadband Internet?

Shareable Magazine - August 25, 2014 - 06:35

Top image from Free Press Pics under a Creative Commons licenseArticle cross-posted from On the Commons.

Categories: Economics

Lacy Hunt: The World Economy's Terminal Case of Debt Sclerosis

Chris Martenson - August 24, 2014 - 08:54

Never before has the developed world carried this much debt. Never before have the central banks of those same countries expanded their balance sheets so much. Never before has so much sovereign debt been outright monetized. Never before have major financial institutions been officially designated as “too big to fail” and thereby been granted special license to assume gigantic risks.

Dr. Lacy Hunt, economist and current executive vice president of Hoisington Investment Management Company, expects the macroeconomic situation to get worse from here:

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Categories: Economics

Daily Digest 8/24 - Iceland Volcano Begins Erupting, Is Corruption Constitutional?

Chris Martenson - August 24, 2014 - 07:30
  • The Crooked And The Dead
  • When ‘shoot for the stars’ no longer applies
  • Iceland Volcano Begins Erupting, Sparking Red Alert
  • Iceland Backtracks on Volcano Eruption as Quakes Intensify
  • In Eastern Ukraine, Rebel Mockery Amid Independence Celebration
  • In Washington, Second Thoughts on Arming Police
  • Where The Five-Day Workweek Came From
  • Activism And Integrity

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Categories: Economics