What to Do with Detroit?

Automakers this week went before Congress to try to convince them that they needed a $25 billion bailout to avoid a massive disaster that would result in the loss of millions of American jobs.  Congress remained unmoved.  Congress gave the executives of these companies a little under two weeks to come up with a plan for the proposed bailout that would inspire confidence that the money they’d receive would be used properly.  We’ll see if the executives are up to the task.

There are a lot of different viewpoints about how best to handle this situation.  There’s the approach advocated by free-marketers that say that letting Detroit automakers fail is the best thing for the economy.  Jim Lindgren at The Volokh Conspiracy takes this approach, as does David Yermack at the Wall Street Journal.   Their basic contention is that the economic resources tied up in the American auto industry are being inefficiently used and have been since the 1970s.  They contend that letting these companies fail, while initially painful, would free up those resources to be used by more efficient firms in profitable industries.  This would create more jobs long term.  These arguments make intuitive sense.  However, there is a major problem with them.  We as a nation are already faced with the worst economic conditions since the Great Depression.  Allowing the Big 3 to fail would result in the loss of MILLIONS of jobs.  Those millions of jobless people aren’t all going to be able to jump into new careers.  Many will need to be re-trained and most companies aren’t hiring right now because of the current economic conditions.  This solution doesn’t seem tenable given today’s economic realities.

Then there’s the solution offered by Robert Reich, an economic adviser to President-elect Obama.  He suggests allowing the Big 3 to reorganize with a bailout, but as a condition of the bailout, the Big 3’s executives, creditors, and shareholders take losses equivalent to what they would suffer under Chapter 11 and that the United Auto Workers take wage and benefit cuts.  The bailout and savings from the aforementioned conditions, he argues, would allow them to retool their production process towards the more fuel efficient cars that are in high demand and are produced cheaper and better by their competitors from Japan (Honda and Toyota).  Todd Zywicki at The Volokh Conspiracy advocates a similar approach, although he argues for an actual Chapter 11 filing and reorganization, and would only allow government funds to be made available after a good-faith effort was made to try to secure private debtor in possession (DIP) financing.


Published in: on November 21, 2008 at 3:01 pm Comments Off on What to Do with Detroit?

Slavery, Globalization, and Orange Juice

Recently, I came across an article in The Week magazine excerpting a new book by John Bowe entitled Nobodies: Modern American Slave Labor and the Dark Side of the Global Economy. In this particular excerpt, Bowe, a journalist by trade, describes what amounts to modern-day slavery in the orange groves of Immokalee, Florida. Outlawed by the Thirteenth Amendment some 140 years ago, involuntary servitude or forced labor is still alive and well – and being litigated in the federal courts. In 2002, a Florida district court convicted Ramiro Ramos, his brother, and their cousin of enslaving approximately 700 undocumented Mexican workers. Ramos, known to the workers as El Diablo (the devil), and the other defendants threatened to beat and kill the migrant workers if they tried to leave without paying alleged debts. The Ramos case is just one of a number of slavery cases cropping up in recent years in the United States. Though Bowe gives other equally appalling accounts of forced labor in his book, he confines his discussion to the U.S., choosing not to venture very far onto the world stage where forced labor is undoubtedly more commonplace, and more widely-known to be commonplace.

At first glance, Bowe’s allegory seems to achieve its stated purpose – to expose one aspect of the dark underbelly of globalization. Arguably, a byproduct of globalization is forced labor, and from both an economic and a moral perspective, the practice is abhorrent. However, it is unclear from my initial reading whether Bowe challenges globalization on a larger scale. Tying this incident into a larger argument against globalization seems problematic at best.

For clues, one can look to another excerpt on Bowe’s website, where he references the problem of illegal immigration as creating a feeding ground for exploitation (thereby suggesting that opening up the borders would help alleviate the conditions described in his book). However, Bowe also quotes the Immokalee workers union in a different portion of the book, making the interesting point that focusing on illegal immigration is a “short-term view” of the problem of enslavement, and that the agricultural sphere’s skill in sidestepping the labor rules imposed on other industries in the U.S. suggests a different kind of problem very specific to farmworkers. At the same time, in an interview with USA Today, he seems to suggest that there’s something problematic about the notion of a global economy itself.


Published in: on October 10, 2007 at 3:35 pm Comments (2)

Personnel Fouls

If you watch ESPN, then you’ve seen the news that the New York Knicks organization was found liable for sexual harassment and must pay ex-executive Anucha Browne Sanders $11.6 million in damages and lost salary. Not to downplay the seriousness of this incident, but that’s roughly the equivalent of one year of Chauncey Billups’ services at point guard and that makes for an interesting numeric juxtaposition and commentary on the surreal salaries of the NBA. The maximum salary in the WNBA is $100,000, which is worth mentioning in an article about sexual harassment and unfair treatment of women in corporate settings.

The crude details of the case included testimony about Isiah Thomas’ racial litmus test for when to refer to a woman as a *ehem* “b-word” and the graphic portrayal of a strip club encounter between a NY Knicks intern and star guard Stephon Marbury. The facts of the case are shocking, yet serve as another reminder that we still live in a society where there is rampant workplace discrimination. (more…)

Published in: on October 3, 2007 at 8:25 pm Comments (2)

The Employee Free Choice Act

This week, the Senate will vote on the Employee Free Choice Act, a bill that would allow employees the opportunity to organize with less interference from management.  The ACS national blog provides some useful commentary, as well as an analysis of the way in which labor law currently stacks the deck against unionization.

Published in: on June 20, 2007 at 12:49 pm Comments Off on The Employee Free Choice Act