Monday, September 6, 2010

Labor Day, 2010: An Op-Ed Piece and a Book Review

It’s Labor Day. Time to do this – finally. Time to review Tom Geoghegan's book Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life. I don’t know why it has been so hard. I’ve had this book for a couple of months, and I’ve read it twice, the second time with pen in hand, liberally underlining and starring and making multiple arrows.

Okay, first things first: buy this book and read it. “Read, mark, and inwardly digest.”

Yes, the review is coming, but let’s set the stage first. As we all know, the U.S. economy is NOT doing well, and for many of us in the lower 90% of income and wealth, has not been doing very well for the last 30 years. So read Robert Reich’s op-ed piece before proceding:

"How to End the Great Recession"

Got that? Except for those at the very top, perhaps the top 10%, we’ve all been receiving less and less in real wages while working harder and harder for longer and longer even though our productivity has continued to rise. To make up, we’ve been borrowing, usually against the value of our homes which were continually rising. Then the bubble burst and home prices plummeted. Further, all that capital going to the top has not, for the most part, been reinvested in the United States. Somewhere along the line, it became possible, both legally and electronically, to invest from the U.S. anywhere in the world.

Enter Tom Geoghegan. Tom is a “labor side” labor lawyer from Chicago. He is Irish Catholic (if that weren’t obvious). He ran for Congress in 2009 as a progressive Democrat, trying to win Rahm Emmanuel’s former seat. He lost the primary. He has written other books, including Which Side are You On? Trying to be for Labor When It’s Flat on its Back.

But to the present book: between 1997 and 2009, Geoghegan took several trips to Europe, especially Germany. At some point, he lived in Germany for a few months, teaching an American Labor Law course at university. The book, reminiscent in some ways of James Joyce, intersperses fact with history, travelogue, anecdote. Part of the problem for me has been I frankly didn’t know where to begin in reviewing it. Geoghegan has obviously written this book in order to advocate something in which I am in complete agreement: the ways in which national economies in Europe are structured, and especially in Germany, have much to commend themselves to the United States, especially since the U.S. is in an economic crisis that shows no sign of getting better any time soon, especially for those of us at the bottom.

What to write about this book? What facts to convey?

- Germany, a major player on the world economic stage, is doing better than the United States economically by almost any measure, especially unemployment. Germany always runs a trade surplus. However, forall that, people work little overtime, retire on time or earlier, and get six weeks of vacation each year, not to mention multiple four-day weekends, many of them tied to the Christian calendar, even though few Germans are church-goers.

- The German economic system, featuring worker “co-determination” at both the highest and the lowest levels in large and not-so-large enterprises, was created in the aftermath of World War II by a coalition of predominantly Roman Catholic Christian Democrats (the center-right "pro business" party); American New Dealers, including high-ranking military figures such as General Dwight Eisenhower; and UK Labour Party people. Thus, Germany is where “the New Deal went to live.” At the top, half of the board of directors is elected by rank-and-file workers. At each worksite, a “works council”, also elected by the workers, has a decisive voice in day-to-day matters such as working hours, who gets promoted, how layoffs are handled, etc. Because of the need for consensus, companies may find it harder to make decisions, but once made, they are easier to implement. In the United States, decisions are usually made unilaterally in a top-down fashion, so they are easily made, but much harder to put into effect.

Union membership is high, up to 60% of workers, depending on the industry. Labor organizations, such as IG Metall, focus on big picture issues, for example negotiating wages and benefits with large scale associations of employers. Thus, enterprises within the same industry tend not to compete with each other on the basis of a race to the bottom with regard to labor costs.

- Geoghegan argues convincingly that the system works better than that found in the United States, not only for blue collar working class people, but also for those, say, at the 90th percentile of income. This is the case because, while taxes overall are a bit higher (approximately 40% in the United States vs. 50% in Europe), the services received in return, such as free college education, for example, far outweigh the additional taxes. In making this comparision, Geoghegan writes of the hypothetical American “Barbara” and the European “Isabell”, both of whom are colleged-educated executives. Geoghegan writes:

“Really, Isabel is better off as a consumer because (1) she pays higher taxes and (2) the state controls her spending. It’s because she pays more in taxes that Isabel can save. While this sound paradoxical, it’s obvious in a way. A European-type social democracy is really a form of guided spending. The state taxes Isabel and spends her tax money on what Isabel really needs. Barbara, by contrast, is pretty much on her own. Think of what the state ‘buys’ for Isabel:

Child care

The state buys for Isabel, in bulk, in the most efficient way. This leaves her plenty of money to spend on her own. Barbara can’t buy these things for herself as cheaply or as efficiently as the state can.”
This comparison harks back to a major point of this book:

“…in a sense, the more we [in the United States] spend, the less socialist we become. For whether it is health care or education, we use the private market to pay for the distribution of public goods. In other words, we pay socialist-type taxes so that the private insurance companies, drug companies, and yes, doctors can profiteer.”
-While American capital has been flying around the world and being invested in derivatives and subprime securitized mortages during a free-for-all that has cost, so far, at least one trillion of American taxpayer dollars to clean up and to keep us from falling off the economic abyss, a system of government-owned banks in Germany kept enough capital in Germany to keep the system going.

-Perhaps the most important point: as Europe unites in the European Union, Germans say that one of their biggest exports, in an economy that is export-driven, is their corporate and economic structure.

In the end, Geoghegan decides that he was, in fact, born on the right continent. If he had been European, all he could do, he says, is “play defense” when it comes to maintaining the European model. Geoghegan wants, he writes, to continue to "play offense" in recreating the American economic system. Personally, I’m not so sure. Being able to play defense would be nice for a while.

Also, I don't care if the preferred label is "socialism," "social democracy," "social capitalism," "European capitalism" or what-have-you. It works. It creates economic justice (remember the Roman Catholic Christian Democrats?), and we need a much greater measure of it here in the United States.

Did I tell you to buy and read the book? Buy and read the book!