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: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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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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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...
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.
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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.
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A very handy piece of knowledge to have when needing rope or cordage.
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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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