Tag Archives: Imported

Econ-Utopia: Steelworkers and Mondragon Collaborate!

Mondragon Steel
In a remarkable and historic move, the United Steel Workers union (USW) and Mondragon International[1] announced that they would be working together to establish Mondragon manufacturing cooperatives in the U.S. and Canada.[2] The Mondragon Cooperative Corporation (MCC) is the world’s largest industrial workers cooperative, located in the Basque region of Spain. It employs almost 100,000 workers in 260 cooperative enterprises that include manufacturing, a university, research and development, social security mutual, and retail shops. In 2008, MCC reached annual sales of more than 16 billion euros and is ranked as the top Basque business group, the seventh largest in Spain.

Inspiration

In the cooperative world, Mondragon, despite criticism of the compromises that it has made in the face of globalization, is still the gold standard of success and has inspired many other cooperative initiatives in other countries. In the U.S., for example, Cleveland’s $5.8 million Evergreen Laundry Cooperative start-up, the first in a network of local worker cooperatives, was inspired by the visit of a Cleveland delegation to Mondragon. The development of this cooperative network is envisioned as a way of creating jobs and revitalizing depressed neighborhoods of Cleveland.

In Chicago, the Austin Polytechnic Academy (APA), a public high school, follows in the footsteps of Mondragon. The first industrial cooperative of MCC was started fifty years ago by five graduates of a technical training school under the guidance of a visionary local priest, Father José Mar&iacutea Arizmendi, who continued to play a central role in the development of Mondragon until his death in 1976. Austin Polytech prepares its students, almost all of whom are from low-to-moderate income families in an African-American neighborhood, for jobs in Chicago’s high skilled industrial sector, and even more importantly, to become worker owners. Towards this end, they have brought in speakers from the Emilia-Romagna region of Italy, another hotbed of successful cooperatives, and a group of APA students are currently on a study tour in Mondragon.

In the Bay Area, the Arizmendi Association of Cooperatives takes its name from Mondragon’s visionary. It is a worker-owned network that provides assistance to new bakeries that are interested in following their successful cooperative business model. There are currently three Arizmendi Bakeries in addition to the original worker-owned Cheeseboard that provided the model and technical assistance for the Arizmendi Association.

New Frontier

It is clear that Mondragon is a source of inspiration for many other initiatives to build economic democracy. The collaboration with the United Steelworkers raises the potential to a whole new sphere of possibilities.

The USW-Mondragon collaboration grew out of a USW ‘green industrial revolution’ project that created a partnership with Gamesa, a Spanish wind turbine firm, to establish production in Pennsylvania by refitting shuttered steel plants. Gamesa is based near Mondragon and it wasn’t long before one thing led to another and the USW-Mondragon connection was made. Discussions and meetings followed over the course of the following year and culminated in this historic agreement to create worker cooperatives in the manufacturing sector, either through worker buy-outs or new start-ups. Other aims include integrating collective bargaining with the cooperative model and exploring co-investing through the USW backed Quebec Solidarity Fund and Mondragon’s Eroski Foundation.

The United Steelworkers (USW) is the largest industrial union in North America, representing 1.2 million members in a diverse range of industries. In a time where labor unions and worker cooperatives have drifted far away from their common roots—when worker cooperatives were seen by some unions as a way to eliminate the class struggle between owner and worker—it is enormously significant for a union of this weight and history to reforge those alliances. It is a signal to the labor union movement as well as the wider public that cooperatives are part of the solution, not some alien phenomenon from a parallel universe. USW spokesman, Rob Witherell said that the collaboration was not a hard sell. Most of their members had been unfamiliar with the concept of worker coops, but once it was explained, they easily ‘got it’ and were very interested. He believes that there is a great potential to expand this project, citing the Blue-Green Alliance, which was launched by the USW and the Sierra Club in 2006 and now numbers 8 million members, as an example of how these initiatives can catch fire.

We continue to see rising unemployment, stagnant wages, cuts in benefits, deteriorating workplace conditions and the hollowing out of our manufacturing sector. This announcement breathes hope of reviving our manufacturing base and rebuilding communities that have been devastated plant closings. Rising oil and transportation prices, combined with the falling dollar are creating the conditions for a manufacturing renaissance in the U.S.[3] Imagine if this renaissance could be infused with, as USW President Leo Gerard said, “Mondragon’s cooperative model with ‘one worker, one vote’ ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street.”

And when workers own and run the factories they work in, they’re not likely close up shop at the first sign of stress—in over fifty years of operation, Mondragon has only seen three of its cooperative enterprises fail. Imagine.

Notes:

1. Mondragon website: http://www.mondragon-corporation.com/language/en-US/ENG.aspx
2. The full text of the agreement is available at http://assets.usw.org/Releases/agree_usw_mondragon.pdf
3. “Can the U.S. Bring Jobs Back from China?” BusinessWeek, 6/19/08 http://www.businessweek.com/magazine/content/08_26/b4090038429655_page_3.htm

Abstract Labor: House Prices Won’t Be Rising for Long

[cross-posted]

James Hamilton, at Econbrowser, notes that he’s surprised by the 0.75% increase in average house prices (as measured by the S&P/Case-Shiller Index of twenty cities). He also says he’s skeptical because of the backlog of unsold homes, likely increases in foreclosures, and high, rising unemployment, especially since Calculated Risk is, too. I agree that there’s reason to be skeptical, especially since this rise in prices is likely to be a surge of people cashing in on the Obama stimulus package’s $8,000 tax credit for first-time home buyers, which expires this fall. If prices continue to rise beyond that critical point, I’d say my skepticism (and CR’s and Hamilton’s) are wrong.

Jobs Report + Stress Tests = More Zombie Banks

Zombie banks

Check out this entry from Calculated Risk if you’d like a shot of cold, hard reality about the value of the happy Stress Test predictions. So far, unemployment is exceeding the “more adverse” stress test scenario and already higher than the peak unemployment rate in the baseline scenario. That rough beast slouching towards Bethlehem not to be born, but to die, is Bank of America.

Calculated Risk: Employment Report: 539K Jobs Lost, 8.9% Unemployment Rate

CBO Director’s Testimony Ignores Most Obvious Use of Cap-and-Trade Revenues

Congressional Budget Office Director Douglas W. Elmendorf summarizes his testimony to Congress (there’s also a link to the pdf file of the full testimony). Unfortunately, the simplest way to ‘distribute the value of carbon allowances,’ to paraphrase Elmendorf, is not mentioned: dividing it up equally. The technical details (division!) have been dealt with before on this blog by Jonathan. Why would this obvious alternative be left out? My inner conspiracy theorist whispers that it’s left out to make giving away allowances the most politically viable alternative on the table. After all, why should all those poor folks benefit, when the rest of us have to shell out more at the pump?

Director’s Blog » Blog Archive » Testimony: The Distribution of Revenues from a Cap-and-Trade Program for Carbon Dioxide Emissions

Is the Fed powerless to stop inflation if the economy recovers?

Steve Matthews and Michael McKee at Bloomberg seem to think so. But a simple idea occurs to me: if the Fed is really worried that banks will cause inflation by drawing down reserves, can’t the Fed just raise the required reserve ratio (that’s the percentage of a bank’s deposits [your checking account, for example] that it is required to keep in it’s reserve account at the Fed)? This seems too simple. Am I missing something or are Bloomberg’s reporters?

A flawed second draft of history

In “A flawed first draft of history“, FT editor Lionel Barber gets history wrong (again). He claims the origins of the financial crisis were too hard to spot even for financial reporters, because they were to be found “in the credit markets, coverage of which in most news organizations counted as a backwater.” All those derivatives and such were the root of the problem. Actually, as some economists predicted,* the origins of the current crisis were to be found inthe bursting of a huge housing bubble (you may have heard of this). The Financial Times, on the other hand, believed Harvard economists who found that the growing number of households in the US meant that the increase in housing prices was warranted. Third time’s a charm!

* I predicted it, too, when I first heard that the Fed was raising interest rates again in 2004. Alas, I have no written proof.

Econ-Atrocity: On Worker Deaths

By Patrice Woeppel, Ed.D.
Author of Depraved Indifference: the Workers’ Compensation System

March 16, 2009

The Bureau of Labor Statistics (BLS) records 5,488 worker fatalities for 2007, the most recent year for which their data is completed. But the number of worker fatalities recorded by BLS is grossly under-reported.

Worker deaths from toxic exposures, other work illnesses are conservatively estimated by NIOSH and other researchers at 50,00 to 60,000 deaths each year, or ten times the number of fatalities from work injuries.[fn1] [fn2] [fn3] It is a disaster of monumental proportions that goes largely unrecorded. The United States has no comprehensive occupational health data collection system.

As we have lagged behind other nations in our lack of a national comprehensive medical and statistical database on occupational illnesses, occupational injuries; we have lagged behind in the research into the causes and consequences of occupational illnesses that would lead to improved diagnosis, treatment, prognosis, and ultimately prevention, of occupational toxic exposures and resultant diseases.

While the United States has set permissible exposure limits on less than 500 of the hundreds of thousands of chemicals in use in workplaces throughout our country, the EU regulates 30,000 chemicals utilized in their workplaces, and many that we allow here have been banned for years in the EU.[fn4] Even the small number of chemicals, upon which exposure limits have been set in the US, are grossly out of date based on more recent scientific data.

It is a major and costly health issue ““ costly in lives, and costly in dollars. The economic burden for occupational illness, injury and death in our country is an estimated $170 billion annually. It is an economic burden that falls mainly on families (44%) and on taxpayers (18%); with only 27%, on average, being paid by workers’ compensation.[fn5]

There has been very little general public awareness of this system that maims and kills with impunity. The time is long overdue to re-evaluate a structure that evolved over one hundred years ago; and which clearly doesn’t meet the needs of seriously injured, ill, or toxic chemical-exposed workers, or the families of workers who died from their work ““ a system that has fostered devastating and lasting damage to families, to communities, to our environment.

Increasingly as a nation, we have been all too willing to push corporate costs onto workers and taxpayers; and all too willing to cut protections for workers, communities.

Occupational illness deaths are now the eighth leading cause of death in the US, more than many of the diseases that receive far more government, public, and media attention.[fn6] We need to right this terrible, continuing American tragedy.

References:

1. Leigh, J. Paul; Markowitz, Steven; Fahs, Marianne; Landrigan, Philip. Costs of Occupational Injuries and Illnesses. University of Michigan Press, 2000.

2 U.S. House of Representatives. Hidden Tragedy: Underreporting of Workplace Injuries and Illnesses. A Majority Staff Report by the Committee on Education and Labor. Honorable George Miller, Chairman, June 2008.

3.Steenland, Kyle; Burnett, Carol; Lalich, Nina; et al.Dying for Work: The Magnitude of US Mortality From Selected Causes of Death Associated With Occupation, American Journal of Industrial Medicine, Vol 43, pp 461-482, 2003.

4. Regulation EC 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), http://eur-lex.europa.eu.

5. op. cit. Leigh, et al, 2000.

6. LaDou, J., M.D. Occupational and Environmental Medicine in the United State: A Proposal to Abolish Workers’ Compensation and Reestablish the Public Health Model, International Journal of Occupational and Environmental Medicine in the United States. 2006; 12 (2) 154-168; and US Department of Health and Human Services, National Center for Health Statistics, Centers for Disease Control and Prevention, National Vital Statistics System, National Vital Statistics Reports, Vol 53, Number 5. Deaths: Final Data for 2002, Table 10 and Worktable I, pp. 1585, 1634, 1662, 1703, 2220-2224, at cdc.gov/hchs/data/dvs/mortfinal2002_workipt2.pdf.

NPR = Not-news Public Radio?

[cross posted]
What gives with this morning’s NPR “Morning Edition” story about banks that are choosing to steer clear of TARP bailout money? Reporter Jim Zarroli mostly profiles the Johnson Financial Group, a bank that at first applied for $100 million, then decided not to take it after all once it learned the details of the the strings that come attached, saying that this bank is just one example of many that represent a “mini rebellion” against the TARP program. As the president of Johnson Financial Group says directly, and as Zarroli reiterates later in the story, Johnson didn’t need the money! Why in the hell would it be news–or be considered “rebellious”–that a healthy bank would not participate in a welfare program for the financial industry? Why is is conceivably news that TARP is designed to include incentives that encourage banks to pay back money they receive through the program quickly? Though undoubtedly flawed six ways to Sunday, the basic idea behind the TARP bailout is that it provides money to large banks that will otherwise go bankrupt or experience major disruptions–and spread those disruptions to other financial institutions, and through them the rest of the economy–and is designed so that the banks will eventually pay back the government (and so, you and me as taxpayers). Zarroli briefly quoted Rep. Barney Frank in defense of TARP and the strings that it attaches to its payouts, but 98% of the story is just bankers whining about either being forced to bank responsibly or whining about not having access to free taxpayer money, free even of the relatively mild strings that are part of TARP. I guess it needs repeating, though I wouldn’t have thought it necessary:

  1. TARP money should only be available to banks that actually need it to avoid major business disruptions. That a bank like Johnson, which is in good financial condition, is even allowed to apply for TARP funds is a flaw in TARP. The flaw is not that TARP’s strings cause Johnson to say “no thanks.”
  2. Banks that take TARP money not only are required, but by all rights should be required to pay back that money in full, and including interest payments to cover the risk that taxpayers are taking that not all TARP recipients will pay back in full after all is said and done. This is banking after all, right?
  3. Banks that take TARP money should pay back the money sooner rather than later. What’s the advantage to taxpayers for having the banks sit on the money longer than they need it?

No-strings-attached banking is what primed the financial bomb that has now exploded in our faces. Responsible banking practices are needed more then ever, and NPR’s promotion of irresponsible banking propaganda does not help.

How much would you pay to seem like just a regular guy?

How’s about $18 million? That’s what John J. Noffo Kahn, of Palm Beach, Florida, paid for a farm in Barnard, Vermont, to be used as a vacation home, and in the process shattering the previous record price for the sale of a residential property in the state (a mere $8 million).

Reports the Valley News (full article not online*):

The buyer […] said in an email that privacy and security were two reasons he purchased the property through [a limited liability company].

“One of the attractions, for me, to the area was that I thought (naively!) that I would be coming to a place where MONEY is not of the foremost importance to the members of the community. I was looking forward to a low-profile existence in which my wealth would not be what defined me to my neighbors,” wrote […] Noffo Kahn, who said he was not interested in having a story written about his new vacation home.

“Thanks for bursting my bubble on Vermont!” he added.

I hate to break it to you, John, but the traditional route to a low-profile existence is to spend less than $18 million for your vacation home.

There are a few things worth noting. First, in support of the friendly rivalry we Vermonters have going with our Granite State neighbors, Noffo Kahn’s complaint about his bubble being burst regarding his conception of Vermont, the Valley News is located in Lebanon, New Hampshire, so there’s some chance that his bubble might still be intact. Noffo Kahn’s new neighbors in Barnard probably will treat him with neighborly respect, though they have good reason to distrust multi-millionaire vacationers. That’s because the sellers of the farm, whose main domicile is in Texas, sued 14 fellow Barnard residents who were opposing the fact that they (the Texan owners) had closed off a trail through the property that had long been open to the community. Now, that wasn’t Noffo Kahn, and maybe he’s the kind of swell guy who doesn’t let his wealth define him, and instead defines himself as a good neighbor who respects something more in his fellow men and women than their own lack of wealth.

As for Noffo Kahn’s preference that the Valley News not write a story on the property sale:

After a reporter e-mailed back, making clear that the record-setting sale was a news-worthy event and asking for a chance to discuss the matter, Noffo Kahn, who had already expressed his “already dismal appraisal of today’s media,” wrote back.

“So typical!” he wrote. “You haven’t even the sensitivity to realize that writing a story about an $18 million property–when so many are suffering this Christmas–is a salt on their wounds!”

Let’s debate the question of news-worthiness for a moment. Con: Noffo Kahn is a person who buys things, just like everyone buys things, so why should he be made into a celebrity of sorts against his will when none of the rest of us have newspaper articles written about our purchases? I mean, would I want the whole world to know that I recently purchased not one but three copies of the amazingly cool book The Human-Powered Home, so that I can give the extras away as gifts to as-yet-unidentified friends? Oh the embarrassment! When will that darned media stop noticing that extreme economic inequality is damaging to the individual well-being of the vast majority of people, community and social cohesion, democratic governance, and the future habitability of the biosphere? (Ditto.) (Or more like, when will the media actually start noticing it and taking it seriously on a more than one-off basis?)

Pro: The habit of really, really rich people to pay extraordinary sums for the things they buy has a real effect on the lives of others, and just like it is news worthy to report on a leaking manure lagoon that threatens the health of downstream neighbors, it is news worthy to report on events that impact the economic lives of of “downstream” neighbors as well. Given the timing of the sale, this particular transaction probably won’t have the same effect on property values of neighbors as it would have if it had taken place a couple of years ago, but the principle remains the same. When you throw money around, it matters; there are unintended consequences, and while the Valley News story doesn’t attempt to perform a systems analysis on what all those consequences might be, at least they have alerted readers to the fact that something with reasonable potential to have broader consequences has happened.

And as for that “salt on their wounds” that Noffo Kahn is so worried about, perhaps at this Christmas time a better use of Noffo Kahn’s time would be turn that sensitivity question around and first remove the plank from his own eye.

[* Come on, Valley News, get with the program!]

Who will raising FDIC limits help?

UPDATE, below

The part of the new bailout bill that’s supposed to bring along the most formerly reluctant House members is to raise the coverage limit for Federal Deposit Insurance Corporation (FDIC) insured personal deposits (which includes savings and checking accounts, cds and money market accounts) from the current level of $100,000 to $250,000. Obama, McCain and the FDIC all approve. See this story, for instance. But who does this really affect? Using data from the 2004 Survey of Consumer Finances (the 2007 numbers aren’t yet available) and adding all covered accounts within households (note that this overstates coverage, since the insurance covers accounts not households) produces this table:

Number of Households Percentage of all Households
Less than $100,000 106,433,692 94.9%
Between $100,000 and $250,000 3,976,714 3.5%
More than $250,000 1,698,530 1.5%

That’s right, this plan will help to insure that 3.5% of households with deposits over $100,000, but not the 1.5% with deposits over $250,000. I guess they’re on their own. Actually, most people in both of these categories already keep multiple accounts, to stay under the insured limit, so it will help not that much. However, it does make it look like a “compromise was reached on an improved bill,” allowing representatives to say that they held out for their constituents while they’re campaigning over the next month.

You don’t suppose that’s the point, do you?

UPDATE:

meanwhile, FDIC is doing a fine job slowing down lending.

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