Obama reverses Bush policies on emissions control

[Vendetta]

And really, Detroit doesn't even have to introduce hybrids to meet these requirements. They could just modify their existing vehicles to run with diesel engines from their European divisions to meet the standards.

Actually... no they can't. There's apparently some government standards that get in the way of mass adoption of diesel engines for cars (I confess I am not entirely conversant with all the details). But, again, I feel that if standards or regulations are not congruent with reality and/or causing more problems than they solve they should be changed

Even petrol engined European small cars would meet this MPG requirement with room to spare. A Ford Fiesta or Ka will get you around 48MPG average on a petrol engine (48.1 for the Fiesta, 47.9 for the Ka, which are generally around 35 city, 58 non city/highway). They're not even particularly high up the list for fuel economy.

Even family saloons like the Mondeo would squeak in at 38MPG average (for the 1.8l version, the 2.0 would be a little under for the petrol one).

So, y'know, it's not like Ford at least don't have the designs to do this, and have had for some time, they just don't have the factories set up to produce them in America, and it would probably take something drastic like temporary nationalisation to get that retooling done without the company having a fatal heart attack.

[K. A. Pital]

I've never heard of that in either economics or international relations.

Really? Well, in that case I think it's kinda hard to argue... I mean, that's a very basic concept. If one invents in machine tools while the other in labour-intensive, but technologically unsophisticated products, at the moment both have a comparative advantage in trading with each other; with the passage of time, one nation will end up industrialized, up to the rise of automated labour, whilst the other will be a shithole reliant on pure extensive growth; a growth that will eventually be limited by it's labour force size and the size of it's plantations.

I thought it's like Economics 101, capital-intensive industries and newer technologies are the key to economic supremacy; technological supremacy is a very important factor in economic supremacy.

But maybe I'm wrong. Maybe bunk finance ("new and promising financial products") and large-scale fraud ("respectable financial consulting") are the key to economic supremacy.

[Guardsman Bass]

I've never heard of that in either economics or international relations.

Really? Well, in that case I think it's kinda hard to argue... I mean, that's a very basic concept. If one invents in machine tools while the other in labour-intensive, but technologically unsophisticated products, at the moment both have a comparative advantage in trading with each other; with the passage of time, one nation will end up industrialized, up to the rise of automated labour, whilst the other will be a shithole reliant on pure extensive growth; a growth that will eventually be limited by it's labour force size and the size of it's plantations.

Does it go by another name? I googled it as well - these were the results. There were a few mentions on a Ricardian theory of constantly decreasing returns on additional units of a self-renewable resource, but that was it.

I thought it's like Economics 101, capital-intensive industries and newer technologies are the key to economic supremacy; technological supremacy is a very important factor in economic supremacy.

What I was taught was that it was productivity increases that are the key to economic supremacy. Technology is usually part of this. I've never heard it referred to as what you listed above, where it leads a labor-intensive trading partner to pure extensive growth (wouldn't that only be the case if the productivity of your labor didn't change?).

But in my defense, I never took Macro-Economics - only Micro-Economics.

But maybe I'm wrong. Maybe bunk finance ("new and promising financial products") and large-scale fraud ("respectable financial consulting") are the key to economic supremacy.

Increasing productivity is the key - considering that you grew up in the Soviet Union and then Russia, I imagine you'd appreciate that more than most. If I recall correctly, the Soviet Union had a great deal of extensive growth but a difficult time getting "intensive growth" (aka increasing productivity).

[K. A. Pital]

Does it go by another name?

Maybe. It has to do with Ricardo's theory of comparative advantage, applied on a long-term scale instead of a short-term or momentary scale. In the short or immediate term, "free trade" as per Ricardo, through the comparative advantage, grants maximal benefits to both nations. In the long term, one will rise and the other fall depending on the choice of their specialization.

Technology is usually part of this.

Not only is it a part, it's a hugely defining factor in long-term macroeconomics. In the short-term, one might argue that primitive and labour-intensive industries are just important as high-technological ones, because of comparative advantage. In the longer term, it will actually be harmful and result in a stall of technical progress.

If I recall correctly, the Soviet Union had a great deal of extensive growth but a difficult time getting "intensive growth" (aka increasing productivity).

At the time of the decline (1970-onwards), yes, pretty much so. It started with the technological decline though - and still the USSR managed far better than otherwise open to capital investment Third World nations despite being far more enclosed. The USSR's inability to produce newer technologies lead to a decline in productivity along with many factors, but technological decline was one of them.

I believe you would not object to the fact that industrialization has been historically shown to be the key to economic supremacy, prosperity and welfare of the citizens, and without investing in technology- and capital-intensive industries, it is simply impossible for this process to occur, which leaves a country in perpetual decline and poverty - despite it having a large labour-force, or lots of labour-intensive industries.

Seriously, have you seen a nation that has gotted dominant, economically, politically and socially, as well as in the international market, through primitive industries and technologies? Where?

[Guardsman Bass]

Does it go by another name?

Maybe. It has to do with Ricardo's theory of comparative advantage, applied on a long-term scale instead of a short-term or momentary scale. In the short or immediate term, "free trade" as per Ricardo, through the comparative advantage, grants maximal benefits to both nations. In the long term, one will rise and the other fall depending on the choice of their specialization.

I've never read of the long-term version, although I am familiar with Ricardo's Theory of Comparative Advantage.

Technology is usually part of this.

Not only is it a part, it's a hugely defining factor in long-term macroeconomics. In the short-term, one might argue that primitive and labour-intensive industries are just important as high-technological ones, because of comparative advantage. In the longer term, it will actually be harmful and result in a stall of technical progress.

As long as the technological advance leads to a productivity advance (plus, of course, all manner of new stuff, like better medicines, etc).

If I recall correctly, the Soviet Union had a great deal of extensive growth but a difficult time getting "intensive growth" (aka increasing productivity).

At the time of the decline (1970-onwards), yes, pretty much so. It started with the technological decline though - and still the USSR managed far better than otherwise open to capital investment Third World nations despite being far more enclosed. The USSR's inability to produce newer technologies lead to a decline in productivity along with many factors, but technological decline was one of them.

Do you have any theories on why that happened? The USSR didn't have nearly as much wealth and/or capital to throw around as the US, but science always seemed like it was a high priority with the Soviets.

I believe you would not object to the fact that industrialization has been historically shown to be the key to economic supremacy, prosperity and welfare of the citizens, and without investing in technology- and capital-intensive industries, it is simply impossible for this process to occur, which leaves a country in perpetual decline and poverty - despite it having a large labour-force, or lots of labour-intensive industries.

For the most part, yes. This applies especially to large countries with big populations - industrialization is a must. With small, low-populated countries, you almost have to specialize more and import a lot (Ma Deuce's economic nationalism would never be acceptable policy if you were, say, the President of Palau, or even Singapore), but you do need all the infrastructure (in the form of education, roads, relatively clean governance*, access to technology) in order to specialize in such a way.

Seriously, have you seen a nation that has gotted dominant, economically, politically and socially, as well as in the international market, through primitive industries and technologies? Where?

The Saudis got pretty powerful regionally when the US still largely owned and operated the Saudi oil business (this was before Aramco), but they also imported a lot of technology and weaponry during this period, so it may not count. For a world power, obviously a primitive nation can't become that powerful.

*When I say "relatively clean governance", I mean basically a place where you expect to get the regular services like electricity, heat, police, fire-fighting, and so forth without having to pay bribes you legally aren't required to pay. There's obviously still corruption, but it doesn't ooze into every corner of the government on every level.

[K. A. Pital]

Do you have any theories on why that happened? The USSR didn't have nearly as much wealth and/or capital to throw around as the US, but science always seemed like it was a high priority with the Soviets.

Certainly it did not have to with inability to industrialize or advance fundamental science. The first phase of industrialization brought the Soviet Union to comparable quality-of-life indicators with the First World nations; but it fell farther and farther behind as the decline set on.

The main problem was pushing the advances in fundamental science into daily advances during the Second and Third Wave of industrialization: Second Wave being automatization and the Third computerization. Little do people know, for example, that mobile telephones were invented in the USSR as well - only they did not propagate to the overall industry because the significance of this technology and it's ability to raise productivity was incorrectly judged. Same with a great many technologies which suffered as a result of political decisions. For example, take the modern plastic window packets which are used in construction and greatly improve the quality of homes. In the 1950s, the USSR developed such techniques; however, they were judged "excessive" and during a period of rejection of Stalin's architectural style, were swept under the rug - a case of taking the baby out with the water, so to say.

However, despite this:

There is a smaller gap between Industrialized nations (First and Second World) and a colossal gap between Industrialized nations and everyone below. Note that if we could plot some indicators, Eastern Europe and the CIS (former Soviet bloc) would be at Latin America level in 1900s. This stresses the importance of industrialization, or at least it's first phase.

With small, low-populated countries, you almost have to specialize more and import a lot

South Korea and Japan are both small, but "economic nationalism" was a key policy of their economic rise. In SK, it was obvious that through the chaebols the government controlled the capital flows, forcibly making Korean capitalists reinvest in Korean industries, not move this capital abroad and liquidate Korea's chance at development. This signifies the necessity of economic nationalism even if you "specialize", because at an early phase, protecting the non-competitive industries from a crashing blow from the competition is a must.

For a world power, obviously a primitive nation can't become that powerful.

Well, here's the obvious answer: you should exert a degree of control to maximize the investment in your capital-intensive, high-tech industries or you will never rise from the obsolete technical base. After the first phase of industrialization it's not as clear cut, but it's still very important to focus on industrial development as opposed to primitive industries.

[Broomstick]

How was it calculated? Does this 3 million job loss include the possibility of whole sale destruction of towns? Some towns in Michigan I would imagine are pretty wholely dependent on neighbouring factories to survive. Destruction of the factories will then lead to economic collapse of the towns.

We went through the "town is dependent on the factory and the factory just closed" with the textile industry in the past. Towns that happened to would experience a rapid drop in prosperity and population but seldome entirely disappeared. More commonly, they would attract another industry of some sort. If they were really smart they'd try to attract more than one, diversfying their economy. This transition did take time, however. Meanwhile there was real pain.

[Broomstick]

And really, Detroit doesn't even have to introduce hybrids to meet these requirements. They could just modify their existing vehicles to run with diesel engines from their European divisions to meet the standards.

Actually... no they can't. There's apparently some government standards that get in the way of mass adoption of diesel engines for cars (I confess I am not entirely conversant with all the details). But, again, I feel that if standards or regulations are not congruent with reality and/or causing more problems than they solve they should be changed

Even petrol engined European small cars would meet this MPG requirement with room to spare.

Go back and read what I WROTE, not what you imagined I said. NOWHERE did I mention whether diesels were capable of meeting MPG requirements, what I said was there are regulatory barriers to the engines which, if I recall, involve sulfur emissions and have nothing to do with MPG. If there is any sort of regulatory barrier to installing diesels into small cars it should be removed immediately. This is like the bullshit MPG calculations the EPA is doing - I swear, it looks like both these items were done to sabotage change and let the US auto makers trundle along without needing to make changes that a few years later their survival might depend on.

A similar problem exists with small airplanes - there are now diesel engines light enough and small enough to power small Cessnas and Pipers, which make up a significant part of our GA fleet. There are regulatory barriers which, while not insurmountable, almost double the cost of converting an existing plane to a diesel-powered one. I'd like to see those barriers removed or some sort of subsidy provided to owners who make the switch - not only do the diesels consume about half the fuel per hour as the traditional gasoline engine, but it would also mean those airplanes no longer burn leaded gasoline (aviation being the last place tetraethyl lead is permitted). This, to my mind, would be a win-win for everyone (and would make the EU engine manufacturers very happy to sell a few tens of thousands of these engines). But the damn paper crap stands in the way.

[Darth Wong]

Well, Mike, would you object to the companies coming under direct state-control so that their profit or lack thereof becomes irrelevant and they are devoted to using their cash flow to forced reinvestment in rapidly development new technologies in their fields and implementing them? Simultaneously maintaining the old industry for long enough to carry us over into the new one through state ownership and directed development, in short. It is of course even under Obama implausible because of the socialist overtones, but it is I think a reasonable response to your objections on the practicality of the shift.

I'm guessing that would work about as well as a nitro-glycerin filled water balloon throwing contest. Bringing in a bunch of bureaucrats to abruptly take over the management of a car company and completely overhaul it to an agenda laid down by politicians?

When you bring in new people from outside, they usually fuck up a whole lot of things in their attempts to A) prove their worth and B) remake the company in their own image. Adding these extra burdens would make that even worse.

The most logical solution is to gut the power of the unions, give the domestic car companies a lot of money to get them through the tough transition period while still being able to pay their employees and suppliers, and enact tough new environmental regulations which essentially force ALL auto manufacturers (both foreign and domestic) to start heavily redesigning their products. Otherwise, if you force the domestic auto manufacturers to make more environmentally benign products, consumers will simply buy foreign cars because despite their talk, when it comes time to pay money they don't really give a shit about the environment. The consumer market is essentially amoral and incredibly short-sighted, and as you've demonstrated yourself, they have no national loyalty to speak of when it comes to buying things.

[The Duchess of Zeon]

Well, you're quite right, and I should have included something to that effect; it would be unfair to refuse to level the playing field.

I suppose the alternative to nationalization would be special legislation to let Ford and GM take themselves off the stock market without changing the corporate structure, so that they're not subject to the pressures of Profit Now. Because certainly they should not be giving out any kind of money to their investors whatsoever while undergoing this reorganization, receiving only what they need to stay afloat (this is much easier with Chrysler, obviously). What would suitable legislaiton be? Obviously the complete shift of all the existing vehicles to new fuel or drive arrangements is required.

[phongn]

Well, both GM and Ford have suspended dividends for the time being, so they aren't handing out money to their investors. As for taking them off the market, I couldn't imagine kind of legislation could do that: how are you going to stop people from trading shares?

[Broomstick]

Well, both GM and Ford have suspended dividends for the time being, so they aren't handing out money to their investors. As for taking them off the market, I couldn't imagine kind of legislation could do that: how are you going to stop people from trading shares?

Companies have gone from public-traded back to wholly private - I am not sure of the details but I believe it involves buying back the stock from every single stockholder. In which case that might be doable right now given that the stock of these companies has fallen. No legislation required as far as I know, I think the rules/regulations are already in place to do this, just not used very often.

[phongn]

Well, both GM and Ford have suspended dividends for the time being, so they aren't handing out money to their investors. As for taking them off the market, I couldn't imagine kind of legislation could do that: how are you going to stop people from trading shares?

Companies have gone from public-traded back to wholly private - I am not sure of the details but I believe it involves buying back the stock from every single stockholder. In which case that might be doable right now given that the stock of these companies has fallen. No legislation required as far as I know, I think the rules/regulations are already in place to do this, just not used very often.

That's generally how it's done, yes. I had forgotten how far their share prices had dropped: GM's market cap is only $1.8bn and Ford's only 4.5bn!

[Master of Ossus]

@ Stas Bush, I've never heard that either. Are you talking about Solow growth model? That does show technological growth as a prime driver of economic growth since it directly impacts capital, but savings (when below K*) are another main driver, as are some other things.

[The Duchess of Zeon]

Does anyone agree that it would be worthwhile to give Ford and GM enough money to buy out their stockholders and go private?


One possibility might be for the government to buy out those stockholders and then redistribute the stock to the unionized workers, who would become the owners of the company on a private, non-traded level (essentially chartered workers' cooperatives, like the Mondragon Cooperative Federation in Spain--in fact, if this was done, I would suggest that we try to secure some high officials at Mondragon to come to take the senior positions at the reorganized GM and Ford), but only in exchange for their agreeing to reductions in pay and benefits.

Also we could eliminate their company-provided retirement benefits but compensate by removing them from Social Security and placing them into the Railroad Retirement Fund (it's a little known fact that Railroad industry workers don't have to pay into social security, but have their own retirement fund), which is much healthier and provides better payouts, with the profits of the company going into funding it, since the company's only shareholders now are the workers--who under the scheme of organization will never receive dividends and can never sell their stock (it just reverts back to the cooperative when they die). In short the companies are essentially organized to be non-profits, except with their mandate being to provide retirement benefits and health insurance (they can form their own joint health insurance corporation) for their employees. This would keep the workers of GM and Ford at nearly the same levels of prosperity, but also make their future prosperity entirely dependent on the continued functioning of the companies which they now own.

[Master of Ossus]

Does anyone agree that it would be worthwhile to give Ford and GM enough money to buy out their stockholders and go private?

How does that help? It just concentrates risk in an already-risky venture that's gone from being a AAA financial institution to scraping loans out of gutters.

One possibility might be for the government to buy out those stockholders and then redistribute the stock to the unionized workers, who would become the owners of the company on a private, non-traded level (essentially chartered workers' cooperatives, like the Mondragon Cooperative Federation in Spain--in fact, if this was done, I would suggest that we try to secure some high officials at Mondragon to come to take the senior positions at the reorganized GM and Ford), but only in exchange for their agreeing to reductions in pay and benefits.

Why would anyone want the government to do that? Then the government would just give away its equity share that it had achieved by buying all that stock and giving it to the workers. For what? So they can... reduce pay and benefits... in exchange for an equity share? Why should the government just enrich the workers like that? And what do all of the retired Auto workers get, under your scenario? They're the ones with the pension funds.

Also we could eliminate their company-provided retirement benefits but compensate by removing them from Social Security and placing them into the Railroad Retirement Fund (it's a little known fact that Railroad industry workers don't have to pay into social security, but have their own retirement fund), which is much healthier and provides better payouts, with the profits of the company going into funding it, since the company's only shareholders now are the workers--who under the scheme of organization will never receive dividends and can never sell their stock (it just reverts back to the cooperative when they die). In short the companies are essentially organized to be non-profits, except with their mandate being to provide retirement benefits and health insurance (they can form their own joint health insurance corporation) for their employees. This would keep the workers of GM and Ford at nearly the same levels of prosperity, but also make their future prosperity entirely dependent on the continued functioning of the companies which they now own.

First of all, Railroad workers pay into Social Security and get Social Security benefits just like everyone else--they just have an additional mandatory retirement fund on top of that. But moreover, why would the workers want this? They'd be even more invested in a deeply risky venture than they already are.

[The Duchess of Zeon]

How does that help? It just concentrates risk in an already-risky venture that's gone from being a AAA financial institution to scraping loans out of gutters.

Because it removes the need to deliver profits.

Why would anyone want the government to do that? Then the government would just give away its equity share that it had achieved by buying all that stock and giving it to the workers. For what? So they can... reduce pay and benefits... in exchange for an equity share? Why should the government just enrich the workers like that? And what do all of the retired Auto workers get, under your scenario? They're the ones with the pension funds.

They'd receive pension funds managed by the cooperative. The government would do it to avoid paying out to any of the investor class at all, and to establish the new cooperatives on firm footing with the same sort of integral business model as Mondragon has, for example, thereby eliminating the danger of having to deal with the workers. Remember that this is also being proposed for a democratic perspective, and the only reason the democrats are intervening to save GM and Ford is to protect the workers, so my proposal is based primarily around securing things for htem while still making the companies competitive. Mike says that foreign auto companies have about a $2,000.00 advantage per car due primarily to worker costs. Well, I'm looking at how to eliminate that. If the companies never have to pay dividends again and no longer need to negotiate with the unions, whose members are now responsible for the existence of the firms, I was hoping to save enough money (since the companies need never try to report a profit again), that they could simultaneously dump about another $2,000.00 per vehicle into the design and manufacture process without cutting benefits and pay to the workers to the point where they would be upset, which would infuriate a traditional democratic constituency.

First of all, Railroad workers pay into Social Security and get Social Security benefits just like everyone else--they just have an additional mandatory retirement fund on top of that. But moreover, why would the workers want this? They'd be even more invested in a deeply risky venture than they already are.

No, MOO, they do not pay into social security, and they do not get social security benefits--from their railroad employment. If they worked for other firms, yes, they get social security based on those credits, but not based on their railroad retirement, and it is a government fund.

As for why they'd want in on the risky venture? Because it's no longer a venture; it would now be a cooperative, and one that could pursue other interests as required to broaden its holdings. The key feature would be that they'd be expected to maintain a domestic auto industry, and that the cooperatives would never again yield a profit explicitly. Instead the industries would be devoted to one thing--providing healthcare, retirement, and other benefits to the cooperative workers. This frees them of most of the pressures of the modern investment system which is endlessly chasing profit instead of worried about the long-term sustainability of the company (now a cooperative), and lets the workers appoint directors and other personnel who will guide the cooperative with a view toward managing it such that, instead of living quarterly profits, it delivers on the goal of permanently providing health and retirement benefits to the workers.

The advantage to the government is that it doesn't have to pay out huge sums of money to deal with all of these people needing federal aid and/or unemployment.

[The Duchess of Zeon]

To provide more details on the organizational structure of the Mondragon, which went from 24 member-owners in 1954 to 20,000 in 1980:

Here's the source link.

The financial and organizational structure of these cooperatives is, in significant details, different from many of the less successful British and American attempts. The essential features of their system are as follows:

1) All employees and only employees are members, with a one person - one vote control of the Board of Directors (all of whom must also be worker-members).

2) The Board of Directors selects the top management, which then functions in a more or less conventional way. However, the general membership also independently elects a Watchdog Council to monitor the financial performance of the cooperative and a Social Council which deals with a wide range of personnel affairs and makes binding decisions on safety, pay scale, and social welfare.

3) All new worker-members must contribute (over two years) around $5000 to the capital of the cooperative. While this may seem like a large sum, it is still only about 10% of the capital cost of creating the new job, and it emphasizes the seriousness with which they take their role as owners as well as workers.

4) To insure a sense of equality and solidarity among all the worker-members, they restrict the range of highest pay to lowest pay to an effective ratio of 4.5 to 1. In practice this means that the lowest paid earn more than comparable workers in ordinary companies, while the executives earn less than their capitalist peers. Those managers who have grown up within the system seem to appreciate the non-monetary rewards, but this rule has so far prevented the establishment of a cooperative hospital. (The doctors aren't willing to lower their pay scale.)

5) Only part of the cooperative's earnings are paid out as immediate "wages", while the rest are retained in internal capital accounts that are assigned to each worker but available to them only when they retire. They have done this in a way that allows each worker to benefit from the equity value of his or her ownership, but does not threaten the integrity of the cooperative. Unlike ordinary corporate shares, these internal accounts cannot be sold and they carry no voting rights.

That would be the basic structure of the cooperatives I'd propose organizing out of the assets of Ford and GM respectively (and Chrysler if Cerberus wanted to sell out).

I'll note that they'd actually be Federations of Cooperatives, with each factory, plant, and other fixed division which can be separated from the others essentially organized as its own cooperative in the grand federation, to reduce the size of the cooperatives to the smallest size possible to make group management easier, as otherwise they'd get unwieldy.

[Master of Ossus]

How does that help? It just concentrates risk in an already-risky venture that's gone from being a AAA financial institution to scraping loans out of gutters.

Because it removes the need to deliver profits.

In no sense are Ford or GM delivering profits right now.

They'd receive pension funds managed by the cooperative. The government would do it to avoid paying out to any of the investor class at all, and to establish the new cooperatives on firm footing with the same sort of integral business model as Mondragon has, for example, thereby eliminating the danger of having to deal with the workers. Remember that this is also being proposed for a democratic perspective, and the only reason the democrats are intervening to save GM and Ford is to protect the workers, so my proposal is based primarily around securing things for htem while still making the companies competitive. Mike says that foreign auto companies have about a $2,000.00 advantage per car due primarily to worker costs. Well, I'm looking at how to eliminate that. If the companies never have to pay dividends again and no longer need to negotiate with the unions, whose members are now responsible for the existence of the firms, I was hoping to save enough money (since the companies need never try to report a profit again), that they could simultaneously dump about another $2,000.00 per vehicle into the design and manufacture process without cutting benefits and pay to the workers to the point where they would be upset, which would infuriate a traditional democratic constituency.

How can they pay workers comparable wages to what they're getting now if they're continuously losing money? You're not generating any additional revenues and the only way you're lowering costs is by eliminating the "need" to pay profits, which is nonsensical since Ford and GM are in no danger of providing any sort of stockholder dividend, now (indeed they are losing money--there are no profits to be delivered and there is a non-zero risk of a capital-call).

No, MOO, they do not pay into social security, and they do not get social security benefits--from their railroad employment. If they worked for other firms, yes, they get social security based on those credits, but not based on their railroad retirement, and it is a government fund.

Fair enough.

As for why they'd want in on the risky venture? Because it's no longer a venture; it would now be a cooperative, and one that could pursue other interests as required to broaden its holdings.

With what money? Moreover, just labeling something a "cooperative" does not mean that it's no longer risky. The "cooperative" would be hemorhaging money just like the current corporations are. Your plan does nothing to raise capital, does nothing to reduce costs below where they currently are and does nothing to raise revenues or sales. So basically you're making the employees "owners" of a venture that is continuously losing money. Why would they want this?

The key feature would be that they'd be expected to maintain a domestic auto industry, and that the cooperatives would never again yield a profit explicitly. Instead the industries would be devoted to one thing--providing healthcare, retirement, and other benefits to the cooperative workers. This frees them of most of the pressures of the modern investment system which is endlessly chasing profit instead of worried about the long-term sustainability of the company (now a cooperative), and lets the workers appoint directors and other personnel who will guide the cooperative with a view toward managing it such that, instead of living quarterly profits, it delivers on the goal of permanently providing health and retirement benefits to the workers.

But the "pressures of the modern investment system which is endlessly chasing profit" cost the company nothing as compared with the provision of healthcare, retirement, and other benefits to the cooperative workers--those are precisely the sources of cost-advantage that foreign automakers maintain currently.

The advantage to the government is that it doesn't have to pay out huge sums of money to deal with all of these people needing federal aid and/or unemployment.

No, it just has to buy Ford and GM and then hand them over to the workers. How is this advantageous?

[The Duchess of Zeon]

And note that these companies ARE of the same scale. The Mondragon employs 103,700 people throughout the world; Ford employs 245,000, and GM, 266,000. It's actually larger than Chrysler, which only has 58,000 employees.

MOO, to answer your latest post, it's advantageous because it establishes the corporations as self-governed workers' collectives which guarantees employment and prevents a major sector of the economy from collapsing. This is much preferable to the current model of giving them money which assumes that the companies ever can or should be profitable again. It's take a step away from the existing failed business model toward one which has proved to succeed even in the capitalist environment, and secures American heavy industry for any future needs.

As for how this would be accomplished and what the precise benefits to the ability of Ford and GM to break even would be?

1. The UAW could be eliminated entirely--the workers don't need it anymore, do they?
2. The shares would be given to the workers in exchange for the elimination of the UAW and all UAW-based regulations, in the future the workers would establish through the democratic processes of the cooperative the regulations they'd be working on, and there would be no unions, since in a cooperative they are unnecessary.
3. This lets us do a fresh start in terms of the costs of production, and it can now be clearly explained to the workers that since nobody is making money off this, this is exactly the sort of income and retirement they can afford to allow the companies to build competitive cars.
4. Political opposition to major federal government aid will be removed, because no rich kleptocrats will ever make a dime off the federal money being provided to the cooperatives to re-tool their factories.
5. The re-tooling of the factories will be possible without vast and byzantine meeting of union regulations which currently hamper and cripple GM and Ford and Chrysler, and can be done quickly with federal aid as the cooperatives are in the process of being organized to their new forms.

All of these would see an enormous and substantial reduction in costs related to the companies to bring them in line with the Japanese costs. In short the basic principle behind what I'm proposing is that they be reorganized to reduce costs should as to compete efficiently with the Japanese.... Except that they'd be worker-owned collectives, so instead of making profits for shareholders like the Japanese companies do, their profits would be folded entirely into worker healthcare and retirement funds.

Does that coherently explain what I'm driving at? The basic idea would be that the reorganization would save enough funds by allowing the elimination of worker interference while not harming the standards of living for the workers because all the profits subsequently realized by a Japanese manufacturing model would be devoted to providing healthcare and retirement rather than to the paying of dividends.

[Broomstick]

Does anyone agree that it would be worthwhile to give Ford and GM enough money to buy out their stockholders and go private?

I'm not sure if "worthwhile" is the word I'd use - I've made it clear that I am highly pessimistic about the US auto industry (though I'd be happy to wrong in this instance) but I think it's an interesting idea.

One possibility might be for the government to buy out those stockholders and then redistribute the stock to the unionized workers, who would become the owners of the company on a private, non-traded level

Just keep the damn union out of distributing shares - I don't trust the UAW leadership not to profit off this. It should go to the workers, not people who are professional union officials and nothing else.

(essentially chartered workers' cooperatives, like the Mondragon Cooperative Federation in Spain--in fact, if this was done, I would suggest that we try to secure some high officials at Mondragon to come to take the senior positions at the reorganized GM and Ford), but only in exchange for their agreeing to reductions in pay and benefits.

First of all, you don't want to replace ALL the "high officials" in the auto industry because you really do need to preserve industry-specific know-how - the trick is to distinguish useful exeuctives from parasite executives.

Also, the BIG pay/benefit cuts need to come from upper management FIRST, not the assembly-line workers. Leaders should LEAD, that is, they should go first with changes, not last. Lee Iacoco exemplified this by his $1 paycheck during Chrysler's bankruptcy/reorg a couple decades ago. Which is not to say Iacoco was a saint, or that he didn't still enjoy some perks of being CEO, but he really did forgo a salary during that time which made any request for lower-level workers to accept a cut much more likely and much more tolerable.

Also we could eliminate their company-provided retirement benefits but compensate by removing them from Social Security and placing them into the Railroad Retirement Fund

Why?

First of all, the railroad employees are going to scream bloody murder over that, and I don't blame them one bit. Why take a chance with a healthy retirement system? Second, how would that be substantially different than creating an "Auto Workers Retirement Fund"? Better yet, and AWRF could be extended to auto industry suppliers and other such businessness, hopefully creating a healthy retirement fund and taking some pressure off social security. Or better yet, just fucking FIX social security and take care of the damn problem for everyone!

(In case anyone has missed it, one key measure I support is to increase the retirement age to 70, or even higher, and encourage healthy middle-aged people to keep working which will solve a lot of the "problems" with SSI)

it's a little known fact that Railroad industry workers don't have to pay into social security, but have their own retirement fund

As demonstrated by MoO's ignorance on the matter - which, frankly, I find surprising in MoO, but there you go.

...since the company's only shareholders now are the workers--

I'd like to point out that such conversions are not always successful. It's a workable idea, but the outcome is far from gauranteed.

I would also like to point out that Ford is not in quite as bad of straits as GM or Chrysler - I'd suggest letting Chrysler die, trying such a reorg of GM, and leaving Ford be with a more traditional structure. That way you're not putting all your eggs in the same company struture basket. If it becomes obvious that the new structure is superior then convert Ford to it, if not, then maybe convert GM back if it's still a viable company. Otherwise, run the two systems in parallel - why not? For profit and non-profit companies can both be successful long-term.

If Ford is still viable as-is (and it's the one most likely to survive if nothing changes) then don't be too eager to fix it. Ford, after all, has been around since the early 1900's, surviving major wars, the Great Depression, and other vissitudes of history. The corporate culture may still be adaptable enough to weather this disaster as well. Diversity in business and manufacturing, as in genetics, is usually preferable to monoculture.

[Master of Ossus]

And note that these companies ARE of the same scale. The Mondragon employs 103,700 people throughout the world; Ford employs 245,000, and GM, 266,000. It's actually larger than Chrysler, which only has 58,000 employees.

And unlike Ford, GM, and Chrysler, Mondragon is a fundamentally profitable company. It just assigns those profits to workers instead of to an outside shareholder.

MOO, to answer your latest post, it's advantageous because it establishes the corporations as self-governed workers' collectives which guarantees employment and prevents a major sector of the economy from collapsing.

Until they go out of business. Your proposal does not reduce the costs of these companies; it does not add revenue.

This is much preferable to the current model of giving them money which assumes that the companies ever can or should be profitable again. It's take a step away from the existing failed business model toward one which has proved to succeed even in the capitalist environment, and secures American heavy industry for any future needs.

But the underlying company has to be profitable in the first place for such a cooperative to succeed. How can a cooperative Ford pay its workers on any sort of ongoing basis if it's losing money on each car sold?

As for how this would be accomplished and what the precise benefits to the ability of Ford and GM to break even would be?

1. The UAW could be eliminated entirely--the workers don't need it anymore, do they?

No, because you've just given the UAW the entire company.

2. The shares would be given to the workers in exchange for the elimination of the UAW and all UAW-based regulations, in the future the workers would establish through the democratic processes of the cooperative the regulations they'd be working on, and there would be no unions, since in a cooperative they are unnecessary.

Which the workers wouldn't be inclined to accept if it requires cut-backs in their current compensation. Indeed, assuming that the workers now have an equity share they're losing money because of the underlying lack of profitability in the company.

3. This lets us do a fresh start in terms of the costs of production, and it can now be clearly explained to the workers that since nobody is making money off this, this is exactly the sort of income and retirement they can afford to allow the companies to build competitive cars.

How does it lead to a fresh start in terms of the costs of production? Assuming that you retain something of the pension plans that are sinking these companies, then they still have all of the current costs.

4. Political opposition to major federal government aid will be removed, because no rich kleptocrats will ever make a dime off the federal money being provided to the cooperatives to re-tool their factories.

So... where is the money going to come from? From the workers? If so, why would they do it if they're actually going to get paid less?

5. The re-tooling of the factories will be possible without vast and byzantine meeting of union regulations which currently hamper and cripple GM and Ford and Chrysler, and can be done quickly with federal aid as the cooperatives are in the process of being organized to their new forms.

Oh, I see, so the government IS financing all of this.

All of these would see an enormous and substantial reduction in costs related to the companies to bring them in line with the Japanese costs.

You haven't cut any costs whatsoever unless you think the workers are just going to roll over and accept less compensation for the same work, much less "enormous and substantial reduction in costs."

In short the basic principle behind what I'm proposing is that they be reorganized to reduce costs should as to compete efficiently with the Japanese.... Except that they'd be worker-owned collectives, so instead of making profits for shareholders like the Japanese companies do, their profits would be folded entirely into worker healthcare and retirement funds.

With no source of outside financing from the sale of equity. Brilliant.

Does that coherently explain what I'm driving at? The basic idea would be that the reorganization would save enough funds by allowing the elimination of worker interference while not harming the standards of living for the workers because all the profits subsequently realized by a Japanese manufacturing model would be devoted to providing healthcare and retirement rather than to the paying of dividends.

Your plan achieves none of those ends.

[The Duchess of Zeon]

Just keep the damn union out of distributing shares - I don't trust the UAW leadership not to profit off this. It should go to the workers, not people who are professional union officials and nothing else.

As you see, integral to my proposals is the elimination of the UAW, since it's rendered unnecessary by such a reorganization, Broomstick.

First of all, you don't want to replace ALL the "high officials" in the auto industry because you really do need to preserve industry-specific know-how - the trick is to distinguish useful exeuctives from parasite executives.

Quite, I'm mostly referring to the top management, focused on revenue, that could be taken out back and shot and thus enrich the nation through the potting soil they'd produce more than they ever did in life.

Also, the BIG pay/benefit cuts need to come from upper management FIRST, not the assembly-line workers. Leaders should LEAD, that is, they should go first with changes, not last. Lee Iacoco exemplified this by his $1 paycheck during Chrysler's bankruptcy/reorg a couple decades ago. Which is not to say Iacoco was a saint, or that he didn't still enjoy some perks of being CEO, but he really did forgo a salary during that time which made any request for lower-level workers to accept a cut much more likely and much more tolerable.

The Mondragon model forbids any worker-owner, which includes the board of directors, from making more than 4.5 times the salary of the lowest-paid worker-owner. Larger salaries for some employees of the collective (the very top officers of the cooperative) who are appointed by the cooperative's board of directors, would have to sometimes be negotiated to secure the necessary talent at the top to handle the operations of the cooperative, but we can reasonably expect this would be much smaller than corporate salaries.

Why?

First of all, the railroad employees are going to scream bloody murder over that, and I don't blame them one bit. Why take a chance with a healthy retirement system? Second, how would that be substantially different than creating an "Auto Workers Retirement Fund"? Better yet, and AWRF could be extended to auto industry suppliers and other such businessness, hopefully creating a healthy retirement fund and taking some pressure off social security. Or better yet, just fucking FIX social security and take care of the damn problem for everyone!

(In case anyone has missed it, one key measure I support is to increase the retirement age to 70, or even higher, and encourage healthy middle-aged people to keep working which will solve a lot of the "problems" with SSI)

It was just one idea for how the retirement system could be organized. Since adding a half-mills into the RRF would probably attract a lot of protest, yeah, they could well just use their own retirement fund. But essentially it offers them better return on investment than Social Security, so they would have more incentive to accept reductions in pay and benefits, i.e., "see, you no longer have to pay social security tax that you'll never get back when you retire because it's failing, instead it's going into a new and healthy retirement fund!". Absent of social security reorganization, it would probably be a necessary component.

I'd like to point out that such conversions are not always successful. It's a workable idea, but the outcome is far from gauranteed.

Quite, but the Mondragon shows how it can be done.

I would also like to point out that Ford is not in quite as bad of straits as GM or Chrysler - I'd suggest letting Chrysler die, trying such a reorg of GM, and leaving Ford be with a more traditional structure. That way you're not putting all your eggs in the same company struture basket. If it becomes obvious that the new structure is superior then convert Ford to it, if not, then maybe convert GM back if it's still a viable company. Otherwise, run the two systems in parallel - why not? For profit and non-profit companies can both be successful long-term.

If Ford is still viable as-is (and it's the one most likely to survive if nothing changes) then don't be too eager to fix it. Ford, after all, has been around since the early 1900's, surviving major wars, the Great Depression, and other vissitudes of history. The corporate culture may still be adaptable enough to weather this disaster as well. Diversity in business and manufacturing, as in genetics, is usually preferable to monoculture.

I don't think we can afford to let any of the Big Three die and keep the other two viable because of the impact that would have on the suppliers, so how about we reorganize both Chrysler and GM in this fashion and then let Ford continue on?

[The Duchess of Zeon]

And unlike Ford, GM, and Chrysler, Mondragon is a fundamentally profitable company. It just assigns those profits to workers instead of to an outside shareholder.

It's not a company. The structure and methods of compensation are fundamentally different, and there is no payout from being a worker-owner, just guaranteed income and benefits.

Until they go out of business. Your proposal does not reduce the costs of these companies; it does not add revenue.

It does reduce the cost, when in combination with the billions of dollars of government investment that they're getting anyway, certainly, but the cooperative model is a vital part of that by allowing the reorganization of the model of labour.

But the underlying company has to be profitable in the first place for such a cooperative to succeed. How can a cooperative Ford pay its workers on any sort of ongoing basis if it's losing money on each car sold?

Because the reorganization would allow them to make a profit on those cars by completely restructuring how it manufactures vehicles.

No, because you've just given the UAW the entire company.

No, the UAW management and top Union representatives thereof would be explicitly excluded from this. The worker-owners would be the rank and file, and the entire hostile culture of the UAW would simply be locked out. The political capital to do this would in fact be one of the justifications of making the companies collectives. It can't be Union-busting if the workers are getting to own the companies, can it? So the unions are just outmoded and going the way of the dinosaur.

Which the workers wouldn't be inclined to accept if it requires cut-backs in their current compensation. Indeed, assuming that the workers now have an equity share they're losing money because of the underlying lack of profitability in the company.

And yet the objective proof is that when workers have an interest in their company they are willing to accept wage cuts. This has happened numerous times at the Mondragon over its history during economic downturns. What makes the workers in Detroit different from those in the Basque country, praytell? Anyway, since the alternative is that these companies go out of business and they all end up living in cardboard boxes next to fire barrels, what choice do they have? You're also looking at this from a flawed prospect, since they don't have an equity share--they can never cash it in or redeem it. They are just one worker, one-vote participators in the management of an organization which secures their wages and benefits through the offering of products to the general public .

How does it lead to a fresh start in terms of the costs of production? Assuming that you retain something of the pension plans that are sinking these companies, then they still have all of the current costs.

Because the social security taxes on all the workers will be diverted into the retirement fund, firstly; secondly, because the workers will be accepting pay cuts and reduction in pension payments, especially in the short term, in expectation of the future profitability of the company they now have a vested interest in maintaining, instead of a vested interest in being hostile to. And because all of the highly inefficient regulations foisted by the UAW on the corporations can now be removed.

So... where is the money going to come from? From the workers? If so, why would they do it if they're actually going to get paid less?

1. The federal government will have to provide billions in initial cash to unfuck the companies, but we're already giving them billions, so what's the big deal there? Especially since you think the companies are going to fail, so don't answer me with "they'll have to pay the government back someday", since you're on the record here as arguing that the workers would still be up shit-creek because the companies are going to fail. They're not going to magically stay in business because super randite capitalists are running them. So either they need further reorganization to avoid failure, at which point we might as well just give them the money if it saves the corporations, or they're just up shit creek without a paddle no matter what, and so's the economy. Do we not agree on this?

And yes, as the articles on Mondragon detail, the workers should expect to get paid less, just like the worker-owners of Mondragon have accepted pay cuts during hard times themselves. If they don't, they can take their cardboard boxes and burn barrels.

Oh, I see, so the government IS financing all of this.

Just like it's handing them cash now, which your expectation of the companies' failure means will never be repayed anyway.

You haven't cut any costs whatsoever unless you think the workers are just going to roll over and accept less compensation for the same work, much less "enormous and substantial reduction in costs."

And yes, they will do exactly that, though on the understanding that when the companies are profitable again, those profits will go toward funding the services they previously expected; in short, they are being asked to make sacrifices now to make the cooperatives permanently viable.

With no source of outside financing from the sale of equity. Brilliant

After the initial government funding for reorganization and restructuring they should be quite able to handle themselves without outside financing, just like Mondragon does. Mondragon clearly proves that companies even of the scale that have more than 100,000 workers can in fact successfully function without the sale of equity.

Your plan achieves none of those ends.

Yes it does, and I've coherently explained how it will. You just seem unwilling to accept the alternative to the capitalist model that the MCC stands as a proud example of.

[Broomstick]

MOO, to answer your latest post, it's advantageous because it establishes the corporations as self-governed workers' collectives which guarantees employment and prevents a major sector of the economy from collapsing.

I fail to see (and I think MoO may also fail to see) where converting these companies to "workers' collectives" (which terminology, I might add, sets off "THE COMMIES ARE COMING!!!" alarms in many Americans) in any way "guarantees" anything or prevents any sort of collapse. There is NO guarantee of anything we do at this point. Do the workers' have the ability to self-govern a corporation? Although we have seen parastie executives in recent years that add nothing to a company's health there really are executive skills necessary to running a company of this sort, just as proper accounting skills are necessary, and skilled labor are necessary. You must be careful to preserve useful executive and management just as you must be careful to preserve the skilled labor on the factory floor.

This is much preferable to the current model of giving them money which assumes that the companies ever can or should be profitable again.

I've worked most of my adult life for "non-profit" or "not-for-profit" companies. They still need to be in the black. Just breaking even is NOT good enough. The prime difference between a profit and a not-profit company is the not-profit recycles the profits back into the company and workers - they still need to have income exceed outgo, that is, see a profit. In other words, even not-for-profit companies still have to make a profit - what makes them different is what they do with their profits.

1. The UAW could be eliminated entirely--the workers don't need it anymore, do they?

There are cultural issues here - workers can and have "de-certified" their unions and given them up. Starbucks, for example, used to have a union but management won over the workers to the point that the workers themselves voted the union out. In fact, I'd say workers choosing to get rid of a union is a sign of really good management. The UAW exists in part because the workers don't trust management and there are real reasons for that distrust (there's also a shitload of historical baggage, too). The UAW arose because the workers did need the union at one point - you must convince the workers they no longer need it before you can get them to let go of it.

2. The shares would be given to the workers in exchange for the elimination of the UAW and all UAW-based regulations, in the future the workers would establish through the democratic processes of the cooperative the regulations they'd be working on, and there would be no unions, since in a cooperative they are unnecessary.

Do the workers really have the knowledge to set work regulations? Can they be objective enough when they need to be? Not all work regulations in the auto industry are set by the UAW, don't be too quite to get rid of some of them.

3. This lets us do a fresh start in terms of the costs of production, and it can now be clearly explained to the workers that since nobody is making money off this, this is exactly the sort of income and retirement they can afford to allow the companies to build competitive cars.

And if this venture does not succeed...? If your scheme fails (and it can fail) then your workers are NOTHING for retirement, neither pension nor healthcare nor anything else. You are asking the most vulnerable workers to bet their entire future on this scheme. If it doesn't work what the fuck are they (and you!) going to do? Say "sorry - too bad you're sick and starving"?

4. Political opposition to major federal government aid will be removed, because no rich kleptocrats will ever make a dime off the federal money being provided to the cooperatives to re-tool their factories.

Except, of course, for the influence of "rich kelptocrats" who want a slice of the pie, and those who will panic at the term "workers' collective", and those who fear this will not work and they will starve in old age, and so on and so on.

....their profits would be folded entirely into worker healthcare and retirement funds.

How about we just fucking nationalize healthcare like every other damn industrialized nation? How about we just fix social security so it functions as a national pension system? That would take the cost out of auto industry (which is what you really want) and spread the risk over the entire US population which means that even if the auto industry fails the workers will not freeze/starve to death in a gutter in old age?