With the government-mandated bankruptcy of one of the largest, longest-lived, and, until recently, most profitable manufacturers in the world, the takeover of the U.S. economy by the same East Coast forces that destroyed it is now complete.
The speed with which GM spiraled into insolvency was breath taking. Less than 18 months ago, just as the horrifying effects of Wall Street’s malfeasance were becoming clear, GM was profitably selling SUVs, making money for its shareholders and paying big ticket CEOs far more than they were worth, just like Wall Street.
Suddenly the rules changed. In a spectacular reversal, GM was deceptively accused of failing to sell what consumers wanted to buy, of being out of touch and out of date, of having too many built in personnel costs which made them unable to compete with foreign auto makers whose short history in the U.S. left them free of pension liabilities.
The piling on was not done by vaudeville comedians as we might have expected. No, in a priceless ironic twist, the proximate cause of their downward spiral was the economic wreckage brought about by their accusers: Wall Street and Congress.
Bankruptcy was immediately proposed as an option because, Wall Street-Washington decided, it was the only way to scrap the gains unions had made for pensioners, employees and their families and millions of others around the world.
No one said the words ‘unions busting’ right out loud. They tidied up their intent by calling it a problem of ‘legacy costs’, giving an antiseptic feel to creating poverty by fiat.
The most viscerally determined for a GM bankruptcy were senators from the anti-union south states who had been instrumental in subsidizing the establishment of foreign auto manufacturing in their own states.
When the Wall Street cabal was put in charge of dismantling the giant, pensioners and health care benefits were automatically toast, as were suppliers, many dealerships, all factory workers, and hundreds of thousands of families. The successful, final sell out of middle class laborers was heralded by the new, rock bottom wage agreement struck with the crushed UAW which brought American auto workers in line with the low pay of foreign competitors.
Thanks to Wall Street and their elected enablers, the American manufacturing sector and its middle class wages have evaporated, almost as though they never existed.
No one has to be a fan of GM to understand that it was part of the last of the once-dominant American industrial sphere; to understand the importance of manufacturing to a healthy economy; or to understand that the real loser is the middle class which now has millions fewer jobs and livable incomes which are not coming back any time soon.
The American middle class was essentially created by automotive unions and the reluctant Big Three beginning in the late 1930s and continuing into the 1950s. Everyone, on all continents, wanted the hard won wages and benefits the unions had wrested from the mighty industrialists and, to a large extent, they got it.
The middle class, which took root in all the western industrialized nations, was one of America’s most successful exports. People all over the world had the money to buy American clothing, German cars or French champagne.
Every country used trade barriers in the form of import taxes to maintain a level playing field for its middle class and to protect national prosperity.
The formula worked well for 50 years until the marauders in charge of the free for all known as American capitalism found a way to take it all. Not satisfied with great wealth, they wanted humongous wealth, sort of a corner on the wealth market.
At the top of their hate list, always and forever, were unions.
The campaign to destroy unions and usurp middle class prosperity started in earnest in the 1990s when Clinton’s White House pushed successfully for the passage of NAFTA, which was quickly followed by other free trade agreements.
Free trade meant that factory jobs could be outsourced around the globe to places with negligible labor costs and unprotected workers. And then, voila! those cheap foreign made goods could be re-imported to the U.S. duty free.
The uneven playing field became the law of the land.
CEOs pocketed the profits cheap foreign labor provided and CEO pay went through the roof. The penalty for dismantling a once vibrant industrial base was gone, replaced by unimaginable riches for those at the tippy top of the income pyramid.
American workers didn’t fare as well. No longer in a position to bargain with management for the cost of their labor, they accepted whatever they were given and were happy just to have a job. Earnings stagnated, inflation climbed, purchasing power eroded.
Cheap imported goods, an economy awash in credit, and declining real wages paved the way to disaster for millions of Americans struggling to cope with economic factors beyond their control.
Both unions and the middle class were headed for the trash bin of history with the full knowledge and consent of the governing class.
Workers in other parts of the world were equally vulnerable. Beginning in the late 1990s, factories and employees were discarded with reckless abandon in country after country, as capital moved to the next hot spot of minuscule wages and nonexistent worker protections, first Mexico, then Thailand or Vietnam or China.
In the U.S., each announcement of a factory closing, jettisoned employees, or increased outsourcing was met with a rise in the Dow Jones, accurately reflecting the hostility of capitalists for the worker.
As Wall Street revels in its taxpayer financed wealth bubble, foreclosures on Main Street escalate; reports of stress-induced suicides, homicides, child abuse and domestic violence increase; families move in together and try to make cramped living conditions work; tent cities sprout everywhere.
Millions have made their first ever trek to the unemployment office; seen their possibility of retirement vanish with their 401Ks; taken a pay and benefit cut; or were jolted with the realization that they and their families no longer had health insurance.
But a worse catastrophe may be in hiding in the shadows.
On Wednesday, June 4, in front of a congressional committee, Federal Reserve Chairman Ben Bernanke went public with the plan he had held close to the vest since his endorsement of the trillion dollar taxpayer giveaway to his Wall Street friends. He says the U.S. must “maintain the confidence of the fiscal markets”, i.e., protect the interests of the Wall Street thugs and the banks-too-big-to-fail by imposing austerity measures on the U.S. population. He wants major cuts in all public spending, including Medicare, Social Security, unemployment benefits, education and health care.
With the big manufacturers facing bankruptcy and the Bernanke, Geithner and Obama triumvirate feeling the need to shred the safety net, it’s conceivable that the middle class slide will not end simply in a lower standard of living, but in poverty and civil unrest.