The Big Squeeze - Krugman - NY Times - Oct 17 2005

[Coastie for Truth]

In 1999 Delphi, the parts division of General Motors, was spun off as an independent company. Now Delphi has filed for bankruptcy. Its chief executive, Robert S. Miller, wants the company's workers to accept drastic wage cuts, from an average hourly wage rate of about $27 to as little as $10 an hour.

There are a lot of questions about how Delphi and the auto industry in general reached this point. Why were large severance packages given to Delphi executives even as the company demanded wage cuts? Why, when General Motors was profitable, did it pay big dividends but fail to put in enough money to secure its workers' pensions?

But Delphi's bankruptcy is a much bigger deal than your ordinary case of corporate failure and bad, self-dealing management. If Delphi slashes wages and defaults on its pension obligations, the rest of the auto industry may well be tempted - or forced - to do the same. And that will mark the end of the era in which ordinary working Americans could be part of the middle class.

Today, some of us like to stress the depressing effect of the dysfunctional American health care system on wages. A large part of the problem facing the auto industry and other employers that still provide good jobs is the cost of providing health insurance, both to their current employees and to retired workers.

The article brings back memories of growing up in a Monongahela Valley ("Steel Valley" - from Pittsburgh's South Side and Hazlewood down well into Washington County, PA) --->

Once upon a time, when we had strong unions and good public education and publiuc universities --- the American economy offered lots of good jobs - jobs that didn't make workers rich but did give them middle-class incomes. The best of these good jobs were at America's great manufacturing companies, autos and steel.

Krugman notes that it has been a generation since most American workers could count on sharing in the nation's economic growth. ... since the early 1970's the hourly wage of the typical worker has barely kept up with inflation.

Corporations are squeezing wages and benefits, saying that they have no choice in the face of global competition. With the Delphi bankruptcy, the big squeeze has reached the auto industry itself.

The curtain comes down on the world of my youth.

[papau]

1. How The Financial System Undermined Social Ideals

http://www.onpointradio.org/shows/2005/10/20051017_b_main.asp

Legendary capitalist John Bogle
Aired: Monday, October 17, 2005 11-12PM ET


By host Tom Ashbrook:

John Bogle is a lifelong Republican and as big as they come in American investing circles. Thirty years ago, Bogle founded the Vanguard Group, which is today the second-largest mutual fund firm in America. He led that firm until 1999. The investment world must wish he had gone into a quiet retirement but he hasn't.

Super-capitalist John Bogle is raising a sky-high alarm that American capitalism is in trouble. The system, he charges, has been hijacked by overpaid money managers and corporate executives who are massively lining their own pockets leaving the rest of the country to eat dust. He's worried about the future of the country itself.

Hear a conversation with rebel capitalist John Bogle on highway robbery in the U.S. economy.



· John Bogle. He pioneered index funds, which revolutionized investing by giving people low-cost options to enter the market. He has been a consistent critic of the mutual fund industry. His new book is "The Battle for the Soul of Capitalism: How The Financial System Undermined Social Ideals, Damaged Trust in the Markets, Robbed Investors of Trillions -- And What To Do About It."

[roseBudd]

2. It is the middle that makes up the bulk of the consumer class, no middle..

no market.

[papau]

3. Indded we end up with a gold and stone market - and little else -

if they do away with the middleclass.

[Paranoid Pessimist]

5. The last line of the column:

"America's working middle class has been eroding for a generation, and it may be about to wash away completely. Something must be done."

My question is: What?

[Hand]

4. Non-NYT link:

http://www.truthout.org/docs_2005/101705M.shtml

[Sacajawea]

6. Thanks for the link, Hand!

[depakid]

7. Sounds like Paul is finally getting a clue about globalization

All I have to say is that it's about fucking time....