Sunday, January 25, 2009

Permanent new home for Global Labor

I am now blogging at Stephen-Diamond.com, a new site I have launched to integrate my three separate blogs (Vallywood!, Global Labor and Politics, and Finance Capital) under one theme.

Join me there when you have a chance.

Friday, January 16, 2009

S.E.C. Nominee Makes all the Right Noises

Obama SEC nominee, Mary Schapiro, passed one test today: she knows how to handle herself in front of a Senate committee. Not a simple ordeal, as I found out myself at one point a few years ago in the heat of the debate about expensing stock options.

Schapiro even was sympathetic about reviving a pro-shareholder democracy reform that her predecessor, Chris Cox, killed. And she revived the SEC slogan, also killed off by Cox in rhetoric and reality, that the SEC is the investors' advocate, the principle that guided the SEC's New Deal architects like William O. Douglas.

But a Democratic controlled Senate hearing will be puppy chow compared to the Wall Street lobby buzz saw she is about to encounter. And her recent role as their friendly in house self-regulator (an oxymoron?) will not have prepared her overly well for the battles that lay ahead. 

S.E.C. Nominee Offers Plan for Tighter Regulation - NYTimes.com

Tuesday, January 13, 2009

Globalization in reverse? The China Price Hits Bottom

Brad Setser, partner to the better known Nouriel Roubini, notes that the hot money flow into China, to take advantage of an appreciating renminbi, is now moving into a sharp reversal.

This suggests a slow down in China. And it squares with my own pet hypothesis - that the current global financial meltdown is due to the fact that a bottom was reached in the "China Price" as Chinese workers started over the past few years to push back.

More on this later but here is a useful snippet from Setser:

Hot money is now flowing out of China. Here is one way of thinking of it:

The trade surplus should have produced a $115 billion increase in China’s foreign assets. FDI inflows and interest income should combine to produce another $30-40 billion. The fall in the reserve requirement should have added another $50-55 billion (if not more) to China’s reserves. Sum it up and China’s reserves would have increased by about $200 billion in the absence of hot money flows. Instead they went up by about $50 billion. That implies that money is now flowing out of China as fast as it flowed in during the first part of 2008.


If this trend continues it will not only undermine the claims for the permanency of financial globalization, but will radically alter labor politics in the US where protectionism is on the rise and, of course, could have a politically cataclysmic effect on Chinese politics.

Brad Setser: Follow the Money

Friday, January 09, 2009

Another "SEIU Official" Met with Blagojevich

Well, it turns out that SEIU President Andy Stern did meet with Illinois Governor Rod Blagojevich. The governor's calendar indicates a meeting with Stern the day before the Presidential election.

As this piece in the Wall Street Journal indicates, SEIU was deeply involved in one of their pay for play schemes with the Governor. Over the last decade SEIU has bought its way into a kind of "organizing" of large numbers of government employees and some who are not really workers at all but simply recipients of government aid.

SEIU President Stern has tried to portray this top down bureaucratic effort as the way forward for American labor. But SEIU refused to reveal the details of the relationship between SEIU and the Illinois governor when the crisis surfaced. 

This lack of transparency undermines labor's credibility when it is needed most. The latest revelation could also damage efforts now underway to re-unify the AFL-CIO and the breakaway union group Change To Win, that is led by Stern.

What is important about this latest revelation is that it makes clearer why the Governor could have been discussing with aides the possibility of a position with the Change To Win group in return for appointing Obama aide Valerie Jarrett to replace Obama in the US Senate.

Some in and around the labor movement, such as labor historian Nelson Lichtenstein of U.C. Santa Barbara, thought the idea that Blagojevich would get such a position ridiculous.

But I pointed out that the idea almost certainly did not originate with Blagojevich. Until now it was thought that the Governor had only met with Illinois SEIU official Tom Balanoff who would not have the clout to offer the Governor a position with Change To Win. Now that a connection with Stern has been made, however, the possibility that it was SEIU that discussed the Change To Win position with the Governor takes on added credibility.

The Governor himself was sceptical of the idea and lobbied instead for SEIU support for an appointment to head a non profit entity of some sort.

AP Exclusive: Calendar shows key Ill. gov meetings - Salon.com

Saturday, January 03, 2009

Fed induces crisis of legitimacy?

Stanford economist and former Fed member John Taylor nails the central dilemma presented by the Fed's aggressive intervention into the financial crisis: legitimation. 

The viability of capitalism, which generates volatility and inequality as a matter of course, depends heavily on the notion of "consent by the governed." Absent that revolution or chaos fill the vacuum. Taylor notes that the massive buy-in by the Fed has meant, whether intentional or not (certainly not), that the federal government is now making industrial policy choices. 

This is really no different than the "pick the winner" policies that are at the heart of the east Asian model. Thus, the Fed begs the question, who does the picking? 

Presumably the governed...but where are they in the process?

Fed has abandoned monetary policy, critic says
| Reuters

Saturday, December 20, 2008

Happy Holidays - See You in '09

GM in bankruptcy

This overview of the impact of a GM bankruptcy gives some insight into the complexity that all parties will face.

Left unclear is where the UAW negotiated VEBA debt stands. The VEBA was supposed to be bankruptcy remote but instead it is becoming an ATM for GM to help increase its leverage against creditors.

Of course, the UAW and GM failed to provide UAW workers any disclosure of the risk that bankruptcy entailed for the VEBA when GM workers needed that information - during the contract ratification vote.

GM in bankruptcy (The Deal Newsweekly)

Friday, December 19, 2008

Why the SEC Has Failed

Worth a read in light of current events.

The key point? The SEC has bragged for seventy years that it is, in the words of William O. Douglas, the "investor's advocate" but in fact it is not.  

Certainly no longer, if it ever was.

Instead of an insider like Mary Schapiro Obama should have appointed a Patrick Fitzgerald.

Why the SEC Has Failed

Forget Madoff, SEC Ignored GM/UAW Bailout Risk


Earlier this year, I filed a complaint with the Securities and Exchange Commission on behalf of autoworkers pointing out that GM and the UAW had failed utterly to warn GM employees of the risk of bankruptcy and its impact on the proposed VEBA health care plan.

The VEBA was supposed to be "bankruptcy remote" - secure against bankruptcy risk but it turns out that it is being used to help GM survive bankruptcy.

The SEC complaint was based on my research note, Proposed GM/UAW VEBA: House of Cards.

Sure enough GM is now, in essence, in bankruptcy.

And GM workers and retirees still do not know what will happen to their jobs, their pensions or their health insurance.

That is what the SEC exists for - to protect investors and GM sold the UAW a $4.5 billion convertible note without disclosing the risk of bankruptcy. If the UAW had understood what I laid out in the research note, they likely would have taken a different approach to bargaining last year.

Senator Corker, from Nissan, is proposing now that the cash flows into the VEBA be turned into even more worthless paper, GM stock. Of course, no evidence exists that existing GM bondholders will agree to this. In any case, the auto workers have ALREADY taken a huge hit - the convertible bond is now worth far less than its original face value.

Bankruptcy, whether prepackaged or not, whether or not with a bridge loan from the U.S. Government, is not the way to go. As I proposed in A Way Out for the Auto Industry the way forward is creation a new Public Trust Company that could issue long term low interest bonds to purchase the assets of the Big Three and manage them in the public interest.

Thursday, December 18, 2008

Solis for Labor: SEIU Gets Pay Off, Blago Under Arrest


SEIU Official (but not apparently that SEIU Official) Andy Stern is "thrilled" at the appointment of Cong. Hilda Solis of LA for Sec'y of Labor. Perhaps this appointment is the pay-off that the actual SEIU Official was discussing with Illinois Rod Blagojevich. If so, the good Governor from my home town must be royally peeved to be left out in the cold (or is that "on ice"?)

Given SEIU's heavy financial backing of Solis over the years in southern California that's no surprise. And given how quickly the SEIU website celebrated the moment, methinks they had advance notice from their friends in the Obama campaign.

That's Solis above speaking at an event organized by SEIU as part of their phony effort to organize workers at WalMart. SEIU later tried cutting a back room deal with WalMart that angered the other unions involved.

Of course, it is no surprise that Solis is an advocate for labor's top agenda item: the so-called Employee Free Choice Act, the attempt by desperate union officials to by pass democratic union elections as a short cut to unionization. 

If labor did not like the union election process, they should have listened to the ACLU when in the 1930s they pointed out that the Wagner Act would bog labor down in a bureaucratic nightmare.

Si, Se Puede?

But Solis' real claim to fame probably lies in her interest in immigration issues and that's likely why she and Andy Stern of SEIU are so cozy. SEIU has used a low wage immigrant organizing strategy over the last two decades. 

As detailed at some interesting posts at GangBox, a rank and file website run by a construction worker, SEIU was unable or unwilling to stop the shift in their industry from highly skilled service workers at apartment and office buildings when those buildings put in place modern HVAC equipment and displaced largely African American union members. This was part of the battle to defeat construction workers, too. 

Instead they began to orient towards much lower paid hispanic, largely immigrant janitors who were brought in to replace those displaced black workers through outsourcing and SEIU was willing to offer cut rate contracts to secure employer contracts for them.  

This sad defeat - where the wage rates were cut in half - was then rewritten as a great victory heralding the return of the heyday of the CIO by various academic apologists for Andy Stern and SEIU and Change To Win. 

In fact, the one real highlight of that latter day movement was Justice for Janitors which ran a social movement style campaign later made famous in a film starring Adrien Brody called Bread and Roses.  

The only problem? 

That rank and file energy led to an electoral takeover of SEIU Local 399 that upset the International so they put the local into trusteeship and then shoved LA's janitors into a new statewide local with janitors 500 miles away in the Bay Area under International-friendly management.

The academic and left allies of Stern and Sweeney (who was heading up SEIU during the Local 399 trusteeship) were strangely silent about that top down move.

[Details on the Local 399 tragedy are below in another selection from GangBox.]

There are two problems with this low wage strategy: 

  • one, workers in low profit margin service industries rarely become high wage workers and no matter how many of them one organizes they do not have the leverage to put pressure on the wider society for progressive political change; and 
  • two, much of the upswing in organizable low wage workers has been driven by a one time jump up in illegal immigration from Mexico due to NAFTA type restructuring there, but that trend is set to reverse now with a slowdown in the U.S. economy and then the immigration flow tends to reverse.

Of course, the big picture is that Solis will be a lightweight in this Administration, stuck overseeing the DOL bureaucracy while the big guns like Summers, Volker and Geithner continue the crushing restructuring that is killing the once proud American worker and their labor movement.


......The defeat of the building trades would have been bad enough if it had only been a loss for construction workers.

However it had a ripple effect that went across the entire American working class.

The weakening of the construction unions severely hurt the building maintenance trades as well.

Companies that had dispensed with contractors that used union construction labor certainly didn’t want to have union labor cleaning their offices either.

So they went on the offensive against their janitors, firemen, oilers and stationary engineers.

Hardest hit was the Service Employees International Union (”Building” was dropped from the name in 1968 - because by that point the vast majority of their members were hospital workers or civil service employees).

In pretty much every major city except for Philadelphia, Pittsburgh, Cleveland, Detroit, New York, Boston and Chicago’s Loop, SEIU janitors directly employed by building owners were laid off and replaced by non union minimum wage workers employed by cleaning contractors.

The pay drop was drastic - in Los Angeles, janitor wages fell overnight from $ 13/hr to minimum wage - $ 3.35 - with no pension or health insurance.

And even the cities that survived the unionbusting the union only remained in the downtown office buildings - the suburbs were as agressively deunionized as any other area.

And the downtown workers in those few highly unionized cities may have stayed union but, like every other janitor in America, they now worked for cleaning contractors, rather than directly for the owners of the buildings.

Like the new breed of construction contractors, these firms were almost always double breasted.

Unlike the construction contractors, many cleaning firms were national and even international in scope.

The biggest, Copenhagen, Denmark-based ISS, operated on 3 continents - 100% union back home in Copenhagen but agressively anti union everywhere else in the world.

But most of the cleaning contractors that came to dominate property services were US based firms like American Building Maintenance (ABM) and OneSource. They were very much double breasted - like ISS they were union in some areas, and ferociously scab in others, deending on the strength of a given area’s labor movement.

There was also an ugly racial aspect - many of the SEIU janitors were African American - most of their replacements were undocumented Latino immigrants.

The SEIU did nothing to resist the attack.

And they had their reasons.

After all, they were adding tens of thousands of hospital workers and civil servants every year, often organized thanks to backroom patronage deals with Democratic Party controlled local governments (which often involved Democratic Party controlled public worker company unions being absorbed into the SEIU as a body).

Those arraingements had made the SEIU the fastest growing union in America - from 480,000 in 1975 to over 688,000 a decade later, at a time when most American unions were rapidly shrinking.

In light of all that easy growth in the public sector, why on earth would the SEIU chiefs want to go to war with these agressive multinational cleaning contractors on behalf of a few thousand Black janitors?

It would be another decade before the SEIU leadership even so much as lifted a finger for the janitors.


....XI. “!Si, Se Puede!”

Meanwhile, out in California, the building trades were presented with yet another opportunity to reunionize the industry - this time, in the state’s Southland.

In the spring of 1990, Los Angeles local 399 of the Service Employees International Union launched an organizing drive among janitors working for ISS in the Century City office building complex.

This campaign was part of the “Justice 4 Janitors” project that the international leadership of the SEIU had launched 5 years earlier, to try and reunionize the office building janitors who’d been deunionized back in the late 1970’s.

Officially, the SEIU leaders never talked about that deunionization - or the ethnic cleansing replace-Black-Americans-with-Latino-immigrants aspects of it.

SEIU propaganda presented the industry as if it had never ever been unionized at all, like this was a first time organizing drive, rather than bringing the SEIU back to a business that had been union for over 50 years at the time the unions had been broken just 11 years earlier.

There were some other disturbing aspects - like the union’s very patronizing view of the janitors as victims, or the focus on getting white collar professionals to pity the janitors rather than trying to build solidarity with their fellow building workers, or the utter recklessness with which janitors were marched into a confrontation with the Los Angeles Police Department during a rally in a basement parking lot at Century City.

25 workers got hurt in that latter episode - including a pregnant janitor who was kicked in the stomach by an LAPD officer and lost her baby - and many arrested janitors got deported back to Mexico or Central America.

But, the strike was the first major building worker walkout in California in 20 years.

And they succeeded in getting a union contract at Century City and a number of other major office buildings in downtown LA.

A near minimum wage union contract that was almost $ 8/hr less than 1979 union scale - but a union contract nonetheless!

And it had caught the imagination of workers all over Southern California - and not just the White professionals and clericals that the SEIU wanted to pity the janitors, but the blue collar Latinos who had come to be a majority of LA’s private sector workforce in the previous decade.

Justice 4 Janitors also gave the American labor movement the opportunity to take advantage of the heroism, street smarts and activism skills of the many Salvadoran and Guatemalan communist political refugees among the janitors.

Incidentally, those aforementioned revolutionary Central Americans had tried to take their rightful place in local 399’s leadership after the strike. They, along with White, Black and Mexican American LA municipal worker activists in local 399, had run a slate of candidates in the local 399 executive board elections right after the strike.

That wasn’t part of the plan - janitors (and LA County clerical and service workers, for that matter) were supposed to be voiceless faceless victims, not active participants in the political life of their own union.

So, the SEIU international blocked the new local 399 officers from taking office, and the militant newly organized janitors were removed from local 399 and attached to local 1877, a local run by conservative Chicano officers and, more importantly, based 400 miles away from Los Angeles, up in San Jose (the better to keep LA janitors from participating in the political life of the local!)

Wednesday, December 17, 2008

Disaster at SEC set to continue with Obama appointment

Obama picks a Wall Street insider to head up the SEC. Not the type we need to clean up this troubled agency when Wall Street is in a crisis.

Obama to Name Schapiro SEC Chief - WSJ.com

Tuesday, December 16, 2008

Obama Pivots Right on Education With Duncan Nomination to Cabinet


Obama continues to disappoint his progressive backers with Cabinet appointments. 

Education Secretary-nominee Arne Duncan is seen by most as far more interested in privatization of schools than tackling the deep set social and economic context which creates the "achievement gap" in America. 

That context was tackled in the "bolder" approach articulated by the Economic Policy Institute several months ago in a blueprint that brought together a wide range of genuinely progressive thinkers on education policy.  Thankfully they left behind the race based social justice approaches of people like Bill Ayers and Linda Darling-Hammond who argue that apartheid reins in American schools and that slavery reparations should be paid in education.

Unfortunately, Obama refused to "catch the softball" that the center left EPI group threw him.

Obama may think Duncan can sell himself to the left when needed given his Quaker background and his early exposure to the Sue Duncan Children's Center - a "social justice" oriented after school reading program for a largely black and hispanic student group run since 1960 by Duncan's mother in Obama's now infamous south Chicago neighborhood.

Of course it does not hurt to be basketball buddies with one of Obama's main money men, John Rogers of Ariel Capital. Rogers actually touted Duncan's relationship to his mom's Children's Center. 

Rogers financed one of Duncan's first jobs out of Harvard before he was hired by the new CEO of the Chicago schools, Paul Vallas. He still serves on the board of directors of Rogers' Ariel Education Initiative.

Daley and Vallas were engaged in a war at the time with the local control/social justice agenda of Bill Ayers who had just secured $160 million in grants from the Annenberg Foundation to use to attack teachers and principals through Local School Councils. Ayers appointed the young Barack Obama as Chairman of this effort and handed out millions to his buddies in the education environment. Obama fended off opposition from other Annenberg board members like Arnold Weber, former President of Northwestern University, to the Ayers agenda, enabling Ayers to intervene directly in the governance structures of the Chicago schools.

Vallas and Daley, in turn, intervened to try to get Walter Annenberg to redirect the grant to Daley himself but to no avail. Daley went to Springfield and got the law changed to weaken the LSC's and install Vallas as CEO. Duncan replaced Vallas a few years later.

To provide some perspective from a veteran Chicago education unionist and activist on Duncan may be helpful. Here is how George Schmidt of Substance, an independent education newsletter, reacted to the news:

Arne Duncan's career has been in crony capitalism, Chicago style. Since he was appointed "CEO" of Chicago's public schools by Mayor Richard M. Daley in July 2001, he has been responsible for the greatest expansion of patronage hiring (generally, but not exclusively, at the central and "area" offices, but often as well in the schools) on the CPS payroll since the Great Depression (when the school system was controlled by politicians, leading to its near-demise in 1945). Duncan has also presided over more "no bid" contracts from contractors (for everything from buildings and computer hardward and software to charter schools) in the history of the City of Chicago abd its public schools.

Finally, and equally important, Arne Duncan has closed "failing schools" (dubiously defined by low test scores for one or two years, often because of special circumstances at the schools) in Chicago's African American community.

Since Duncan became CEO, he has eliminated 2,000 black teachers from Chicago's teaching force, undoing decades of desegregation and affirmative action in the name of "school reform."

Last year (2007-2008) Duncan began a program he called "Turnaround" (based on the corporate models) that was actually reconstitution. He fired most of the teachers and principals in six public schools (four elementary schools; two high schools). At each of those six schools, the majority of the teachers and principals were black.

Were Arne Duncan living and working in Mississippi in 1952, it would be easy for the USA to see what he is and has been up to in the service of corporate Chicago. Because he plays ball not only with Barack Obama but with Richard M. Daley and corporate Chicago, Chicago's white blindspot has ignored the fact that Duncan has gotten rid of more African American educators than most Mississippi and other southern governments during those dark days just before Brown v. Board of Education in 1954.

The reason why the American Federation of Teachers (AFT) can promote Duncan's candidacy is that seven years of turmoil within Chicago's union has left the union badly split (and weakened). Arne Duncan does not have the support of Chicago's teachers. He has the support of the president of the Chicago Teachers Union, Marilyn Stewart, who is in the midst of a purge of her own staff and elected administration. Stewart, a lame duck officer with no more chance of re-election than George W. Bush, is viewed by the majority of Chicago Teachers Union members as a traitor to her union and the teaching profession.

George N. Schmidt
Editor, Substance


It should be noted that Schmidt's concerns are generally different than those of the Ayers/Klonsky "social justice/small schools" crowd. Based on his own direct experience of those programs financed by the Chicago Annenberg Challenge led by Ayers and Obama in the mid-1990s Schmidt he called those efforts "teacher bashing."

In my view the Duncan's of the world and the Ayers/Klonky types have more in common than is sometimes clear. The "small schools" agenda pushed by the latter, for example, is consonant with the reform/choice agenda of the free market types at Hoover and Heritage. In fact, Heritage lauded the efforts of Obama and Ayers in the late 1980s when they joined forces against the black dominated teachers union to install local control watchdog groups. I discuss this in greater detail in earlier posts on this blog as well as in a longer essay called The Authoritarian Radicals.

Both of these wings have avoided the larger social and political context in order to attack teachers and principals inside what is sometimes called the "black box" of schools themselves. But ignoring the weight of experience (or mal-experience) that kids carry when they show up at school means ignoring the real problems. That was the main message of the Bold Approach of EPI.


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