US Corporations – Page 7 – The Wrongologist

Workin’ in a Coal Mine

American Experience ran a documentary called “The Mine Wars” on January 26th. It told the story of West Virginia coal miners’ battle against mine owners at the start of the 20th century.

Few know that the WV mine workers struggle against the mine owners led to the largest armed insurrection after the Civil War and turned parts of West Virginia into a war zone that required federal troops to pacify.

The battle started in 1920 with a shootout in Matewan, WV. It was triggered by a plan by the United Mine Workers (UMW) to organize Mingo County, where Matewan is located, and the thuggish reaction by mine owners. There is a fine movie that documents this, “Matewan”, by John Sayles.

The town’s union-sympathizing Police Chief Sid Hatfield confronted a group of private detectives from the Baldwin-Felts company who were hired by the coal mine owners. The detectives had come to Matewan to evict the families of unionized miners. The “Battle” of Matewan left seven Baldwin-Felts men dead, along with the mayor and two townspeople.

Some background: Workers were paid based on the weight of the coal they mined. Each car brought from the mines theoretically held a specific amount of coal (2,000 pounds). However, cars were altered by owners to hold more coal than the specified amount, so miners would be paid for 2,000 pounds when they actually had brought in 2,500. In addition, workers were docked pay if rock was mixed in with the coal. Miners mostly lived in company-owned homes, and were forced to shop at company-owned stores.

The UMW started organizing and striking in WV in 1912. When the strikes began, the mine owners used hired guns to inflict plenty of violence on miners and their families.

There is a sordid history of similar efforts throughout the US. Check out the Ludlow Massacre in 1914.

But before WWI, the UMW was unsuccessful in changing working conditions or wages for miners. The US entry into WWI in 1917 sparked a boom in demand for coal, also bringing increasing wages. After the War, demand for coal fell, and so did miners’ wages.

At that time, the largest non-unionized coal region in the eastern US were WV’s Logan and Mingo counties, and the UMW made them a top priority. Mine owners in Logan bought off the Logan County Sheriff Don Chafin to keep the union out of the county. In 1921, after increasingly violent confrontations with the owners and their hired guns, miners moved to fight back.

In August, approximately 5,000 armed union men entered Logan County. Logan city was protected by a natural barrier, Blair Mountain. Chafin’s forces took positions at the top of Blair Mountain, while the miners assembled near the bottom of the mountain. There were skirmishes and deaths. On September 1, President Harding sent in federal troops to break up the battle, and the miners soon surrendered to the feds.

By 1924, UMW membership in the state had dropped by about 50% of its total in 1921.

Mine owners also engaged in a PR campaign that portrayed the UMW as “Bolsheviks”. The Red Scare in 1919-1920 was based on fears that the labor movement would lead to radical political agitation, or would spread communism and anarchism within the country. This sense of paranoia was driven in part by the mining companies.

Does any of this sound familiar? How many red scare equivalents have we had in the last 100 years?

Corporations have always been at war with workers. Here’s the real question: Is it possible for capitalism, by its very nature, NOT to incite a constant battle between the .01% and everyone else?

Probably not. Class is a feature of capitalism, so it follows that class conflict will always be part of capitalist economies. We may find ways to mitigate the effects of that conflict, but it will always be a struggle to do so.

At the same time, we see every day that the interests of private capital are not aligned with the needs of society as a whole. We re-learn these lessons because our public institutions periodically get co-opted by capital. Until private capital’s stranglehold over our political process is ended, it will always try to rig the system.

The miners’ struggle in West Virginia was not just a backwoods conflict. The WV experience has direct relevance to today’s American economy, to today’s capitalists, and to the state of labor in America today.

What happened in West Virginia is an object lesson for what all of America might look like with unfettered corporatism.

Take a look and listen to Lee Dorsey’s 1966 hit “Workin in Coal Mine” written by the late, great Alan Toussaint:

For those who read the Wrongologist in email, you can view the video here.

Pacific Gas Gooses Prices: Why?

Pacific Gas and Electric is America’s largest electric utility and the second largest gas utility measured by number of customers. You may remember that their gas pipeline exploded in 2010 in San Bruno CA, just south of San Francisco, killing 8, injuring 66, and burning down 38 homes. The legal fallout is still in the courts, with the trial scheduled to begin on March 8 in US District Court in San Francisco.

PG&E announced a price increase on December 30, when few would be paying attention. SF Gate carried the customer-friendly part of the announcement:

We want our customers and their families to know that we are here to help them make smart energy choices and save money whenever possible…

That’s corporate-speak for turn down the heater, put on another fleece, buy more efficient appliances, and find subsidies available to low-income households.

The increase was effective two days later, on January 1st. It will hike natural gas rates for the average residential customer by 4.0% and electricity rates by a stunning 8.5%, for a combined rate increase of 7%, the steepest since 2006.

Utilities raise prices all the time. But maybe a few things about PG&E’s price increase are worth a look:

• Natural gas prices have fallen steadily since 2008, much of the power PG&E distributes is generated by natural gas. In fact, in its third quarter financial statement, PG&E says its cost of electricity over the first nine months of 2015 dropped 8.8% year-over-year, and its cost of natural gas plunged 36%.
• The California Public Utilities Commission (PUC) agreed in 2014 to let PG&E collect an extra $2.37 billion in revenue from its customers over three years, through the end of 2016. The additional money will pay for maintenance and upgrades to PG&E’s sprawling electricity grid and natural gas pipeline network.
• PG&E pays quarterly dividends of $0.455 per common share. With 489 million shares outstanding, dividends for a year would amount to $890 million.So for the three-year period in question (2014-2016), this amounts to about $2.7 billion, which would have paid for the maintenance and upgrades of its system.

There’s more: In September, PG&E asked the PUC for another $2.7 billion in revenue increases for the three-year period of 2017-2019. That particular amount of money would be used ostensibly to prepare for natural disasters. But, as Wolf Richter reports, over the same period, PG&E would pay out another $2.7 billion in dividends.

The PUC, already under federal grand-jury investigation for its ties to PG&E about the San Bruno disaster, hasn’t voted on this increase. If PG&E had a real regulator, it would be forced to pay for maintenance and upgrades with funds it sourced from something other than rate increases. Particularly when its fuel costs are plunging, and it’s paying out an $890 million annual dividend.

PG&E’s is following the “maximize profits and shareholder value” dictates of a modern market-driven corporation. But in the case of private utilities, the state regulator is supposed to review rate applications and ensure the company is not reaping excessive profits and is charging fair prices.

That the CA PUC allowed these price increases perhaps demonstrates incompetence, or excessive favoritism. Help may be on the way: SF Gate reports that Gov. Jerry Brown shook up the five-member utilities commission, nominating one of his former top advisers, Michael Picker, to be its new president. He also nominated Liane Randolph from the state’s Natural Resources Agency to join the commission. So, perhaps the back-room deals are over, but Californians will have to wait and see.

Capitalism, like any game, needs referees who are beyond influence. The clear operating strategy of the “free market capitalists” is to have regulators of all stripes squeezed by lower funding and by packing the regulatory boards with industry insiders. Far too many of the referees (regulatory agencies) are insiders in the industry game.

Maybe there is help on the way in California. If not, maybe it’s time to put a few corporate heads up on pikes in the California sun!

Monday Wake Up Call – November 30, 2015

Today’s wake up is for the American worker. While you were sleeping, corporate executives were piecing together an economy and associated tax regulations that allowed them to become America’s oligarchs.

The Center for Effective Government just came out with a study of CEO retirement funds. You already know the conclusion, but you didn’t know the facts:

• The 100 largest CEO retirement funds are worth a combined $4.9 billion. That’s equal to the entire retirement account savings of 47 million American families
• Nearly half of all working age Americans have no access to a retirement plan. The median balance in a 401(k) plan at the end of 2013 was $18,433, enough to generate a monthly retirement check of $104.

In addition, 73% of Fortune 500 firms have also set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans have through their employers. But average workers face limits on how much pre-tax income they can invest each year in similar plans, while the plans the F500 provides to their top executives do not. They are free to shelter unlimited amounts of compensation in their retirement funds where their money can grow tax-free, until retirement.

But for the average employee? The GAO says that 29% of workers approaching retirement (aged 50-65) do not have pension or retirement savings in a 401(k) or IRA. While according to a study by the Schwartz Center at the New School, 55% of those aged 50-64 will be forced to rely solely on Social Security (which averages $1,233 a month).

The current rules mean that if CEO’s slash worker retirement benefits, they can boost corporate profits and thereby, stock prices. And since much of executive compensation is tied to the company’s stock price, these rules (and company practice) create a powerful incentive for CEO’s to choose their pocketbooks over those of their employees.

We are talking about market power. The CEO’s and their firms have little to fear from Mr. Market. In turn the rising wealth at the top buys growing political influence, through campaign contributions, lobbying, and the rewards of the revolving door between government jobs and those in the private sector. Political influence in turn is used to write the rules of the game—the tax laws we are speaking of here, antitrust laws, deregulation, union-busting—all in a way that reinforces income concentration.

The result is a feedback loop between political power and market power that created, and now maintains, a vicious circle of oligarchy.

Well, time to wake up from a snooze that allowed our politicians and the largest corporations and their CEOs to turn our country and economy into their private sandbox.

To help with today’s wake-up, here is Rage Against the Machine, the gone but not forgotten band, with Zach de la Rocha on vocals and the superb Tom Morello on guitar. They are performing “No Shelter”, written in 1998:

https://www.youtube.com/watch?v=6NEoesmnYU4

Sample Lyrics:
Empty ya pockets son, they got you thinkin’ that
What ya need is what they selling
Make you think that buying is rebelling
From the theaters to malls on every shore
Tha thin line between entertainment and war

Chained to the dream they got ya searchin’ for
Tha thin line between entertainment and war

There be no shelter here
Tha front line is everywhere
There be no shelter here
Tha front line is everywhere

American eyes, American eyes
View the world from American eyes
Bury the past, rob us blind
And leave nothing behind

Just stare
Just stare
Relive the nightmare

Those who read the Wrongologist in email can view the video here.

Soon, Antibiotics Won’t Work

It’s estimated that more people will die from bacterial infections than from cancer by 2050. Two disparate factors are driving this. First, scientists in China say they’ve identified a gene that makes common, dangerous bacteria resistant to “last-resort” antibiotics called polymyxins. The mutated gene, called mcr-1, was found in the Enterobacteriaceae germ in both pigs and people in South China, according to a report published in The Lancet.

Study author Jian-Hua Liu, a professor at South China Agricultural University in Guangzhou, China, said:

The polymyxins (colistin and polymyxin B) were the last class of antibiotics in which resistance was incapable of spreading from cell to cell…

The new gene was found on mobile forms of DNA that are easily copied and transferred between different bacteria. According to the researchers, this suggests a much greater potential for the gene to spread and diversify in different types of bacteria.

Liu went on to say that the discovery points to the emergence of a gene which can create multidrug resistance that:

is readily passed between common bacteria, including E. coli and the Klebsiella pneumoniae germ, which can cause deadly pneumonias or bloodstream infections.

We have all heard that extensive use of antibiotics in agriculture may contribute to this resistance gene. Liu’s team said that pigs were more likely than people to have bacteria with mcr-1 gene-related colistin resistance. That suggests that the resistance originated in animals and then spread to people.

The discovery bodes ill for public health worldwide. Timothy Walsh, Professor at the University of Cardiff in Wales, told BBC News: (emphasis by the Wrongologist)

All the key players are now in place to make the post-antibiotic world a reality. If MCR-1 becomes global, which is a case of when not if, and the gene aligns itself with other antibiotic resistance genes, which is inevitable, then we will have very likely reached the start of the post-antibiotic era.

According to the Review on Antimicrobial Resistance, drug-resistant infections could kill an extra 10 million people across the world every year by 2050 if new antibiotics are not found. That’s 350 million people lost. By 2050, this could cost the world around $100 trillion in lost output: That’s more than the size of the current world economy, and roughly equivalent to the world losing the output of the UK economy every year, for 35 years. Here is a graphic representation of the scale of the problem:

The second factor driving this disaster is our Bad Corporate Citizens. There are two classes of these bad actors. The food conglomerates that feed antibiotics to animals raised for meat, so that pig farmers can make more profit, and the Big Pharma companies that spend their intellectual calories on corporate inversions (such as Pfizer is doing in its merger with Allergan) rather than on antibiotic research. As David Cox reports about drug company research:

They’re happy to sell existing antibiotics, but they’re not interested in researching and developing new ones.

Professor William Fenical at the Scripps Institute of Oceanography in San Diego discovered a new antibiotic capable of attacking the bacteria MRSA, a hospital superbug. However, most large pharmaceutical companies abandoned their antibiotic programs by 1995. And even though we know that animals raised with no antibiotics are less likely to contain drug-resistant bacteria than those routinely given antibiotics, about 80% percent of antibiotics sold in the US are given to animals raised for food production.

So, we have a perfect storm brewing: To enhance corporate profits, we give antibiotics to animals, weakening the value of those antibiotics in controlling human disease. And we look the other way when the big drug companies use innovation to avoid taxes, while saying that research into new antibiotics is “too risky” for their shareholders.

Again, the strategy of big business is “privatize the gains, socialize the losses.” And maybe when you get sick, the doctor will only be able to prescribe you a pork chop.

The world needs a new capitalism. Mr. Market isn’t going to fix this.

The Republican “Free Stuff” Meme

At the last Republican presidential debate, Chris Christie (R-NJ) characterized the Democratic candidates’ debate as:

A parade of, ‘I’ll give you this for free; I’ll give you that for free’.

Senator Marco Rubio said: (brackets by the Wrongologist)

It [the first Democratic debate] was basically a…debate about who was going to give away the most free stuff: Free college education, free college education for people illegally in this country, free health care, free everything.

Jeb Bush says that black voters should back him, since his:

…message is one of hope and aspiration, not one of division and get in line and we’ll take care of you with free stuff…

For the record, Medicare, Medicaid, Social Security, and unemployment have dedicated tax revenue streams. If we back out those funded benefits, all other elements of the so-called social safety net “free stuff” adds up to ~$405 billion, a fraction of the $1.2 trillion in “unfunded” Federal entitlements, and most of the rest goes to top income earners.

So, what do Republicans mean when they say “Free Stuff”? From Jared Bernstein:

There are at least three definitions of “free stuff.” The broadest would simply include all government benefits. A narrower version might apply only when people receive more in benefits than they pay in taxes. A third might refer to any net gain relative to the status quo.

Under any of these definitions, the Republican claims are misleading: they attack help for people who need it, while implicitly condoning tax subsidies for the wealthy. What the Republicans want us to focus on are public education, Medicaid, and direct cash assistance to the poor, but the government provides other subsidies, some of which the GOP seems perfectly happy to keep in place.

For example, Rubio and Bush want to cut capital gains taxes below the current level (Rubio would completely abolish them). But today’s reduced cap gains rate already provides a significant benefit to people who invest in assets (i.e., the wealthy). Then there are things like regressive housing tax breaks, about 70% of which go to those in the top 20%. In addition, 68% of the tax benefits for retirement savings and 64% of subsidies for individual retirement accounts (IRAs) accrue to the top 20%.

Can it be that government benefits for poor people are “free stuff”, while benefits for the wealthy are not?

Maybe Christie, Rubio, and Bush subscribe to the second definition described above: It’s “free stuff” if you receive more in benefits than you pay in taxes, but not if you pay more in taxes than you receive in benefits.

The third way to think about “free stuff” mirrors the most accepted concept of “free”. Bernstein asks:

Suppose, for example, that you opened your email today to find an unexpected $100 Amazon gift card. No matter how much money you had spent or planned to spend at Amazon, you would call this “free” money. Or imagine that you go out to dinner at a restaurant and a waiter decides to “comp” your dessert. Regardless of the overall price of your meal, you would likely consider that dessert item to be “free.”

Under this definition, “free stuff” from the government would be new benefits or reduced taxes relative to one’s current situation. Since the Christie, Rubio, and Bush tax plans all contain massive tax cuts, they would give away huge amounts of foregone tax revenue as “free stuff,” and unlike the “free stuff” proposed by the Democratic candidates – the GOP “free stuff” would go to their very wealthy patrons.

From the carried interest loophole, to drug patent law, to defense industry markups, to sweetheart deals for the oil industry, the total “free stuff” for the 1% dwarfs that available to the rest of us. Yet, the nattering nabobs of trickledown continue to target removing the scraps doled out to the 99%.

Social stability is the reason the rich should not begrudge the support given to those that are less fortunate in our society. The rich have the most to lose should the vast majority decide they have suffered enough, and we see an “off with their heads” moment.

Extra money in the hands of the 1% or the .01% just creates bidding wars for penthouse apartments that the 2% can no longer afford.

You Say You Want a Revolution

The Nation describes Bernie Sanders’s “Political Revolution”: (emphasis by the Wrongologist)

When Sanders speaks of that political revolution, he is asking Americans—especially younger Americans like the crowds of Iowans in their teens and twenties who packed the Sanders bleachers in Des Moines’ Hy-Vee Hall for the Jefferson-Jackson dinner—to believe that electoral politics might actually change something. Sanders knows that won’t happen unless people who are frustrated and disengaged and disenchanted see him as a candidate who is distinctly different from the rest.

For Sanders, “Political Revolution” means a protracted, grassroots effort to fix a broken political, economic and social system. He says it will take millions of people to get involved and then stay mobilized after the election to bring about a political revolution.

That’s what Bernie Sanders’s campaign is all about.

So, if you agree that our politics is broken, shouldn’t we actually be working to fix the underlying problems? Without something that looks like a “political revolution”, fixing these problems is difficult if not highly unlikely. Consider the following:

• Capitalism as an economic engine has created unheard of levels of wealth, but since the 1980s, that wealth only accrued to those at the very top.
• Democracy is in trouble, because Capitalism needs a plutocratic system of government to operate.
• Democracy gets in Capitalism’s way because the interests of the people are not congruent with the interests of the corporations. They are often in direct competition.
• In order for corporations to keep their preferred position in this conflict of ideas, the voice of the people must be weaker than the voice of the corporations. Hence, Shelby County vs. Holder, Citizens United and the soon-to-be decided Evenwel v. Abbott.

Democrats say “vote for us because we’re not as crazy as the Republicans” (even though they actually support the same corporate interests). The Dems will also offer you a few social policy crumbs that you should enjoy on your way to becoming the big losers in our latest Gilded Age. And those crumbs will expire when Republicans control all three branches of government.

The last political revolution began when Ronald Reagan was elected in 1980. That revolution has continued through two Democratic and two Republican administrations, for more than 35 years.

• It resulted in higher taxes for the middle classes which paid for lower taxes on the wealthy.
• It reversed progress toward voting rights, racial equality and equal rights for women, progress that was made in the 1960s and 1970s
• It has prevented universal health insurance.
• It led to increased terrorism and endless war.

So, it’s been a wild success! And it’s still going strong under its second Democratic president.

Bernie’s “political revolution” is to attempt to turn Democrats back to being the party of the people, to give Capitalism a conscience. The theory goes, if Democrats embraced Bernie’s point of view, people will vote in large numbers. If they vote in large numbers, change will come.

This is the fight Bernie is leading.

But Bernie has no real chance at the nomination, and if he got it, there is a high probability he’d lose the general election in a blow-out. And since he’s not doing the things he needs to build a constituency in Congress, or it other down-ticket races, his populism is unlikely to translate into a movement. America has to hit rock bottom for that to happen, and we’re not there yet.

OTOH, Hillary doesn’t seem to have a plan to win the House or Senate in 2016 either.

But the fact that it is unlikely that he can win doesn’t mean that Bernie and his supporters shouldn’t fight for his policies. He has already forced Hillary to recant a few illiberal positions. And his pursuit of right-leaning white working class voters could help forge a new populist coalition down the road. Poor white folks have been clinging to the GOP for the past forty-odd years, and they are still poor, and getting poorer.

They might be willing to embrace his populist economic message even while they hold their noses when they hear his social justice views.

So, when you hear about Sanders’ political revolution, it doesn’t sound so much like a revolution as a return to policies that had been in place for much of the 20th century, those policies that began during the FDR era.

What Sanders describes is a political restoration, not a revolution.

Little that he proposes is radical from the point of view of where the country was in the 1970s.

Back before the Regan revolution began.

The “System” of Prisons

Politicians throw the term “reform” around all the time, and it usually means nothing. One problem that most agree requires reform is the US prison system. VICE did a fantastic job with their report, “Fixing the System,” which aired on HBO, about America’s broken criminal justice system. You can see it on YouTube:

https://www.youtube.com/watch?v=oTL_3WL5gfw

Those who read the Wrongologist in email can see the video here.

In July, VICE followed Mr. Obama to the El Reno Correctional Institution in El Reno, Oklahoma, and recorded the first time a presently serving president sat down with a bunch of inmates at a prison. He talked about their families, how they got into crime, why they copped a plea, what kind of businesses they’d like to start, how they might get financing to start those businesses, what kind of responsibilities they have as parents and to their communities, the reasons for and against the War on Drugs, and the impact of the cycle of mass incarceration on communities of color.

Perhaps a little background. The US has 2.2 million prison inmates. China is second with 1.5 million, and Russia third with 874,000. According to PrisonPolicy.org, The US incarcerates 716 people for every 100,000 residents, more than any other country. And Vox reports that 16 US states have more people in prisons than in college housing!

The HBO show says that this era of mass incarceration came about due to the war on drugs which focused on crack cocaine, meaning that many nonviolent people of color wound up in prison. Next, mandatory-minimum sentencing laws led to a throw-away-the-key culture, with long, destructive prison terms.

Well, leave it to David Brooks to take exception yesterday to the common view that prison reform would be a net positive for American society:

The drug war is not even close to being the primary driver behind the sharp rise in incarceration. About 90% of America’s prisoners are held in state institutions. Only 17% of these inmates are in for a drug-related offense, or less than one in five.

See what he did there? Brooks reframed the discussion to state prisons. Sadly, on the federal level, 48% were in prison for drug crimes, according to Department of Justice statistics. Brooks also misunderstands that the Federal sentencing minimums do not necessarily apply in state courts. He is incorrect that states hold 90% of prisoners. They hold 64%, or 1.4 million of the 2.2 million prisoners. They do hold the vast majority of violent offenders, with 725,000 (53%) jailed for violent offenses. Brooks wanders around and at the end, lands in his typically happy place:

Lifting the spirits of inmates, as described in the outstanding Atlantic online video “Angola for Life,” can also help. But the fundamental situation won’t be altered without a comprehensive surge, unless we flood the zone with economic, familial, psychological and social repair.

Well, Mr. Brooks, if you wanted to make sure that nothing changed, you would recommend waiting for an entire cluster of problems to be addressed, not one of which is remotely likely to happen. He doesn’t support any solutions. And he studiously avoids the stacked deck that makes the prison population so black.

He also missed the other elephant in the room. You can’t escape the parallel between mass incarceration and the growth of for-profit prisons. These corporations have contracts that require that cities and states provide them sufficient prisoners to meet an agreed number, or pay the prison in cash.

This incentivizes putting people behind bars, and should have nothing to do with free market capitalism. This is a policy error that must be corrected.

Two final points:

• Crime flourishes in areas where economic abandonment has produced poor schools and poor prospects. Yet Brooks has argued in the past that the minimum wage should not be raised, that welfare is wasted on moochers, and that the social safety net is too expensive to maintain.
• The plea-bargain system is another culprit. Somewhere in the 1970s, prosecutors figured out an easier way. Threaten an accused with massive charges and punishments, and then propose a plea bargain to a lesser charge. Because people are risk-averse, and/or do not have the money to hire the lawyers to fight the worst charges, they accept the plea bargain and end up in jail, without a trial. This is why it’s always important (if you can do so) to get in contact with a firm such as Mark Rees Law and similar alternatives to ensure you get a fair trial when it comes to your court date.

Conservatives like to cite the number of one-parent households and how the lack of both parents around makes it more likely that a child from a poor area will become a criminal. Mr. Brooks seems to think that releasing non-violent drug offenders from prison will not have much effect on society. But many prisoners are parents.

How many children could have a parent back with them, and maybe avoid incarceration themselves?

See the documentary. Reform the system!

Union-Busting at Pantex

Never heard of Pantex? It is the nation’s only nuclear weapons plant. The full name of the company is Consolidated Nuclear Security (CNS) Pantex. CNS is a combination of a who’s who of major defense contractors, including Lockheed Martin, Bechtel, and Booz Allen Hamilton. CNS took over Pantex in March, 2014.

The company assembles, disassembles, and tests nuclear weapon components for the US military. They also manage the storage and surveillance of plutonium pits. (Plutonium Pits? In Texas?)

Pantex is a union shop, and on August 29, more than 1,100 workers went on strike over CNS Pantex’ demand for health care concessions. CNS is also seeking the elimination of defined benefit pensions for new union members. In a statement, Council President Clarence Rashada said:

Wages are not the issue. Benefits, sick leave, medical coverage, prescription drugs, those are the issues.

Since work at Pantex involves exposure to dangerous chemicals and substances, the union is pushing back hard against CNS who is also seeking to shift greater health care costs onto its retirees.

The strike is the first in 45 years at Pantex, and it comes 18 months after CNS took over.

Let’s remember that Texas is a right-to-work state, so the union left one entry gate to Pantex free of picketers to allow managers and other employees to enter the plant without any commotion.

This is right up Scott Walker’s alley. The union-busting Republican governor of Wisconsin is on the campaign trail talking about preventing federal workers from collectively bargaining, creating a national right-to-work law and eliminating the National Labor Relations Board (NLRB).

And the Pantex union-busting is abetted by the Department of Energy (DOE). The union blames the DOE, arguing that a DOE rule capping worker benefits has put CNS and Pantex employees in untenable positions. By rule, CNS can’t offer employee benefits that would exceed the industry average by 5%. However, the industry baseline also includes manufacturers of cell phones and car parts, so the DOE is comparing labor costs on consumer goods and nuclear weapons, probably an Apple™ to warheads comparison.

Effectively shutting down Pantex over a labor rule that only affects 10% of DOE contractors also speaks volumes about leadership and priorities at the National Nuclear Security Administration (NNSA), which supervises Pantex and CNS.

The Project on Government Oversight (POGO) reports that in the run-up to the government’s award of the Pantex contract to CNS, CNS claimed it could save taxpayers over $3 billion by cutting redundancies and consolidating management, but NNSA never validated the claim. POGO quotes from a GAO report about the NNSA’s evaluation of the CNS bid:

Did not clearly or completely describe expected benefits and costs…lacked key analyses and assumptions for cost savings estimates…[and] was also missing a description of the unquantified benefits CNS management might or might not offer.

So, maybe it’s a matter of “screw the government” by contractors big and experienced enough to know better. POGO says a series of recent reports have found that NNSA is skimping on upkeep for old buildings, using obsolete fire safety equipment at weapons sites, and relying on broken security sensors to protect uranium stockpiles.

CNS also runs the Y-12 facility at Oak Ridge TN, former home of the Manhattan Project. Y-12’s primary mission today is providing secure storage of nuclear material for both the US and other governments. The Bulletin of Atomic Scientists calls Y-12 a “Poster child for a dysfunctional nuclear weapons complex”, noting that although Y-12 has not produced weapons for 25 years, its annual budgets have increased by nearly 50% since 1997, to more than $1 billion a year.

POGO reported that the NNSA spent $50 million on new security systems at Y-12 but couldn’t find a way to get security guards and security sensors working in sync. The overhaul was a result of a July 2012 incident in which a then-82-year-old nun and two others broke into Y-12 to protest the production of nuclear weapons. They made it into the building where most of the US stockpile of highly enriched uranium is stored. The DOE Inspector General found:

Troubling displays of ineptitude in responding to alarms, failures to maintain critical security equipment, over reliance on compensatory measures, misunderstanding of security protocols, poor communications, and weaknesses in contract and resource management.

Follow-on security tests found that the guard force at Y-12 was cheating on evaluations.

You would think that if there’s one place where this cutting corners on safety and security would not be tolerated, it’s with nuclear weapons. CNS has demonstrated in its Y-12 and Pantex situations that competent nuclear weapons handling and security at nuclear weapons facilities should be governmental functions.

They are far too important to be left to a private contractor’s business decision.

Socializing The Losses: Part Infinity

The Wrongologist often writes about privatizing profits and socializing losses, a system where businesses and individuals can benefit from the profits earned by their business, while the public gets stuck with the consequences, the long-term bill. Governments all over America play into this, from doing deals to bring or keep jobs in the state, to underwriting the costs of sports areas, to building infrastructure when a new business comes to town.

Here is another object lesson in socializing the losses. Some towns in North Dakota (ND) are beginning to worry about the debt that they have incurred to build infrastructure to support the boom in shale oil production.

Oil Price reports that oil production in ND exploded in the past five years to well over a million barrels/day, making North Dakota the second largest oil producing state in the country. The likely fallout from the recent fall in oil prices may have serious financial side effects for ND’s towns.

Consider Williston, ND, a town in the center of the shale oil patch that finds itself planning for the worst. The town is deciding how to cope with $300 million in debt, money it borrowed to build infrastructure to meet the rapid growth of people and equipment working in the oil patch. That meant building new roads, schools, and a water-treatment plant, all of which were paid for by the city. The debt was expected to be repaid from increased sales and real estate taxes that suddenly may not be flowing into local and state coffers.

Williams County Commissioner Dan Kalil told NPR that he fears the town has overreached and won’t recover quickly, as global demand for oil is expected to grow slowly over the next few years, and shale oil prices may not bounce back to the mid-2014 levels. He may be correct. Production is down about 5% from its all-time high of 1.2 million barrels per day in December 2014. But more declines are expected with drillers pulling rigs and crews from the field. Rig counts in ND have fallen to 76, far below the 130 that state officials believe is needed to keep production flat.

And ND is experiencing the negative side effects of an oil boom. The huge increase in drilling brought a wave of cash and people to once sleepy towns, fueling a boom not only in oil, but also in crime, prostitution, and drug trafficking. Consider that Williston went from a population of 14,000 in the 2010 census to an estimated 24,000 in 2014.

On June 3rd, the US DOJ, in conjunction with ND’s Attorney General, announced the creation of a “strike force” that would target organized crime in the state. The effort is a direct response to the rise in crime in the shale oil field towns in ND and Montana, which has been fueled by:

Dramatic influxes in the population as well as serious crimes, including the importation of pure methamphetamine from Mexico and multi-million dollar fraud and environmental crimes.

Too many people, too much money, too little economic security in the local economy. The weak oil players pull out, and the debt, crime and now unemployment, remain. And the towns and state government have to sweep up after the companies go.

That’s not all. The boom/bust cycle makes estimating the future population of Williston difficult. How many kids and spouses of oil field workers will settle permanently in the area? Does the school district build, or stand pat? Will more classrooms be paid for by more taxes, or will they be a money loser? In a boom, most oil field workers are temporary; towns need permanent residents in order to build schools.

Even if a semblance of the oil boom returns, and Williston attracts more workers who come to stay, Dan Kalil fears another boom would mean even more people, traffic and crime.

So, who pays? The taxpayers. The people who don’t pull out when the companies leave. The people who stay have to cover the hole in the budget, and tolerate fewer services when the money guys hit the road. Williston isn’t Detroit, but in both cases, the little people are left holding the bag.

Once again, a town makes a long-term investment, hoping for a return down the road in the form of increased sales taxes and property tax revenues. They sacrifice quality of life, looking for a return in the form of more and better jobs, and better house values. They pay higher prices for most things.

On the other hand, Williston’s Walmart is hiring at $17/hour.

But when you think about it, that is now a subsistence wage in Williston.

Technology Isn’t Creating Enough Middle Class Jobs

Yesterday we talked about how America is losing middle class jobs to technical outsourcing on our way to becoming a land of spreadsheets and flags. Today, let’s discuss another aspect of that; how technology continues to cost more and more mid-skilled jobs. We usually think of technology as a great panacea, making most of our processes more efficient. In fact, many of us can look back on the “sneakernet” of the 1980s and feel good about how far we’ve come with technology.

But technology has also reduced the number of middle class workers required, at a time when American wages are stagnant and benefits are falling for the remaining available jobs.

The meme used to be that if technology replaced workers, new jobs came along and net-net, more people were employed. Although things weren’t that simple, by 1900 if you were displaced, you could get another job because 99% of all jobs were still done only by humans.

Today corporations tell us that the knowledge economy can take as many workers as we can create, and since we can’t create them fast enough, technology firms need more of the H-1B visas we discussed yesterday. This is false. Facebook is touted as a prime player in the knowledge economy, but it only employs 5,800 to service 1 billion customers! Twitter has 400 million total users. It has 2,300 employees.

What is the value of Facebook and Twitter to the jobs economy? These are two of our very “best” success stories, and they only employ 8,100 workers. They have had a huge impact on society, but the total jobs they have created are only a rounding error in our economy.

Much of what we want to buy is produced in factories increasingly run with robots, and maintained and operated by small cadres of engineers. Increased sales of iPhones only add a few sales jobs at $12/hour in the US and not many new factory jobs in China. Also, keep in mind that globally, some 3 billion people are looking for work and the vast majority are willing to work for less than the average American.

We all know that technology is costing jobs, and by some estimates it could cost half of all current jobs in the next 20 years. So, we can expect an ever-greater number of unemployed chasing an ever-shrinking number of jobs that can’t be eliminated or simplified by technology. Thus, the prognosis for many medium and some higher-skilled workers appears grim. With this being said, technology is benefiting a lot of businesses and the way they operate. You’ll get a better understanding of it just by reading these Quotes about AI. Seeing as technology doesn’t look like it is going anywhere anytime soon, we might as well use it to our advantage in a business.

The oligarchs have seen these forecasts. That may explain their unwillingness to do anything serious to create effective jobs programs here at home. They don’t need to do anything, because there is a (virtually) infinite supply of skilled and unskilled workers in the overpopulated third world.

The issue is not technology, or robots, or restoring our manufacturing base. Nor is the issue better skills, or technology or outsourcing. We have too many people chasing too few good jobs.

Incomes will continue to stagnate, because automation does not threaten unskilled jobs. This is sometimes called “Moravec’s Paradox”, which says that, contrary to traditional assumptions, high-level reasoning requires relatively little computation, but low-level sensorimotor skills require enormous computational resources. The “Roomba” robotic vacuum cleaner is, despite years of development, just an expensive toy. It has had zero impact on the market for janitors and maids, yet, wages for American janitors and maids have fallen because of competition from the currently unemployed and newly arrived immigrants. While the Roomba aims to be a forward-looking cleaning solution, it still cannot compete with the manual vacuum cleaners, like Bissell’s, that still prove to be the preferred choice despite innovative attempts to move towards automation. See this link for Bissell vacuum cleaners – https://www.bissell.com/vacuums/upright-vacuum-cleaners/

If we forecast continuing technology breakthroughs (and we should), and combine that with the 3 billion people currently looking for work globally, we have to conclude that the planet is overpopulated if the goal is a growing global middle class.

This is why the quest for better technology has become the enemy of sustaining middle class growth in the developed world.

The Wrongologist

Geopolitics, Power and Political Economy

Category: US Corporations