Wages Are Rising in Europe. But Economists Are Puzzled.

In Europe, experts attribute the spike to an acute shortage of workers in countries like Germany, but there are many other theories.

.. Economists there offered numerous theories to explain the phenomenon. The decline of unions has taken away employees’ bargaining power, some said. Globalization, outsourcing, and the easy flow of money and information across borders have also forced workers in wealthy countries to compete with those in poorer ones.

.. Another suggestion is that the rise of companies like Apple, Google and Amazon as industry behemoths has concentrated power in fewer companies and squelched competition. And the so-called sharing economy, exemplified by Uber or Airbnb, has made many people into freelancers with few benefits.

.. In one much-discussed paper presented at Sintra, Uta Schönberg, a professor at University College London, compared data from Germany and France and came to the conclusion that low wage growth and rising inequality were a result of diminished bargaining power by workers.

Flat wage growth in Germany during the last two decades coincided with reforms that allowed companies to opt out of collective bargaining agreements, weakening union power.

In France, where union agreements applied to whole industries and were binding for companies, wages continued to climb and inequality was less pronounced.

.. But France paid a price. While unemployment fell below 4 percent in Germany, it remains above 9 percent in France. The implication is that companies may not hire as much if they are locked into union wage contracts.

.. This hidden reserve of workers is bigger than economists thought, Mr. Talavera said. But in Europe it appears to have finally been exhausted. “That is one of the reasons you haven’t seen wage growth picking up substantially,” he said.

How Dark Money, Gerrymandering And Democratic Complacency Altered Wisconsin Politics

.. Six years before Trump’s win, the state’s voters elected conservative populist Scott Walker governor. With the help of a Republican-controlled legislature, Walker waged an unprecedented assault on public employee unions in the state and later signed a right to work bill, which undermined private-sector unions.

.. he would go along to these small towns and speak to people about this danger of corporate influence on their lives.

DAVIES: And how far into the 20th century did this sort of progressive trend hold in Wisconsin? And I note that Senator Joe McCarthy – probably the most notorious anti-communist of the century – came from that state.

..  he undertook a pretty radical approach to dealing with public employee unions. What did he propose to do?

KAUFMAN: Well, he proposed to all but strip them of collective bargaining rights, which is their ability to speak as a collective voice around wages, benefits and other workplace concerns, workplace safety, basically, reducing their ability to act as a collective voice. He exempted the police and fire department unions. Some would say that cynically because some of these unions supported him.

..  Tim Cullen, a moderate Democratic state senator – he said, the one thing that was non-negotiable was the automatic dues checkoff.

..  He stoked resentment against the public workers. It was clear in his inaugural address in 2011. He said the public employees can no longer be the haves, and the taxpayers can no longer be the have nots. Privately, he even went further.

There’s a famous recording of him speaking to a billionaire donor where she says when will we become a completely red state? When will we become a right-to-work state? She conflated the two. And he answered, you know, have you seen what we’re going to do with the public employees? And then he went on. He said, you know, because you use divide and conquer. What he meant by that was he was going to first attack the public employees. And then several years later, he instituted a right-to-work law against the private sector employees. Now you have a state that went from 14 percent union density when he was elected to 8 percent.

.. in 2016, the presidential election arrives in Wisconsin, as it does in the rest of the country. The Democratic primary – Bernie Sanders beats Hillary Clinton by 13 points. Why did Hillary Clinton have trouble connecting to Democratic voters in Wisconsin?

.. she has never been a close ally of labor. Wisconsin progressives were deeply wounded by the attacks on labor. She was a former corporate board member of Walmart, a notoriously anti-union company. And she also supported for many, many years free trade agreements, like NAFTA and the China’s membership into the World Trade Organization, that have really impacted the industrial Midwest in such a profound way. People are aware that you can drive by a factory, and they’ll say, oh, this factory moved to Mexico and then went on to Vietnam. They are very keenly aware. Other factors played a role – automation and so on – but these agreements really impacted particularly the industrial Midwest – Michigan, Wisconsin, Ohio.

DAVIES: And particularly unionized workers, I think.

..  I think people forget that Donald Trump’s message during the campaign – he also twinned his message of resentment – racial resentment – with a defense of the welfare state. You can look at his speeches. He staged five huge rallies in Wisconsin. He almost always mentioned, we’ve got to protect Social Security and Medicare, and he railed against these free trade agreements. So there was a different kind of Republican message that resonated with a certain sector of the population enough to put him over the top, coupled with Hillary Clinton’s noncampaigning and non-effort in these places, and it really impacted the race.

.. There was frankly a weak Democratic opposition to his message, and there was a stoking of resentment in a time of economic insecurity. That is very powerful. And they weren’t – people weren’t being offered an alternative – a very compelling one anyway.

..  Another example is gerrymandering. In 2012 election, Wisconsin Democrats won an aggregate of almost 200,000 more votes than the Republicans, and yet they lost seats. That…

DAVIES: You’re talking about in the state legislature.

KAUFMAN: In the state legislature in the assembly, and that leads to demoralizing (laughter) of your party. I mean, it’s hard to get candidates to run when they know they’re going to be defeated if the district is just so heavily drawn to favor the Republicans where – and the Democratic seats are – you know, they’ll routinely win more than 70 percent of the vote. So they pack them in. And that case was, you know, brought to the U.S. Supreme Court. It’s the first partisan gerrymandering case to go to the Supreme Court in more than three decades because the federal court agreed with the plaintiffs – the Democrats – that their rights had been denied because it was so extreme.

There’s So Much You Don’t Know About Brett Kavanaugh

One proposal would limit justices to 18-year terms, which would create an opening on the court every two years, and reduce some of the political gamesmanship that surrounds open seats today. But any change to the justices’ tenure would require a constitutional amendment, and so is a longer debate for another day.

.. During the 2016 campaign, Mr. Trump publicized a list of possible Supreme Court nominees preapproved by the Federalist Society and the Heritage Foundation, another conservative group. It was scrubbed of any squishes along the lines of David Souter, Anthony Kennedy or even Chief Justice Roberts, all of whom have been deemed insufficiently committed to the cause for failing to vote in lock step with the radical right’s agenda. (Judge Kavanaugh was left off the original list but was added later.)

The Federalist Society claims to value the so-called strict construction of the Constitution, but this supposedly neutral mode of constitutional interpretation lines up suspiciously well with Republican policy preferences — say, gutting laws that protect voting rights, or opening the floodgates to unlimited political spending, or undermining women’s reproductive freedom, or destroying public-sector labor unions’ ability to stand up for the interests of workers.

.. Senate Democrats need to use the confirmation process to explain to Americans how their Constitution is about to be hijacked by a small group of conservative radicals well funded by ideological and corporate interests

.. We’re witnessing right now a global movement against the idea of liberal democracy and, in places like Hungary and Poland, its grounding in an independent judiciary. Mr. Trump and Senate Republicans appear happy to ride this wave to unlimited power. They will almost certainly win this latest battle, but it’s a victory that will come at great cost to the nation, and to the court’s remaining legitimacy.

.. Americans who care about the court’s future and its role in the American system of government need to turn to the political process to restore the protections the new majority will take away, and to create an environment where radical judges can’t be nominated or confirmed.

This is the fight of our lives. Here’s how we win it.

Senators such as Donnelly, Heitkamp and Manchin need to argue to those who are ambivalent about abortion, or even against it, that right-wing judges would sanction a plutocratic government with little capacity to defend their interests.

.. “The Supreme Court, in case after case, is freely imposing its own view of sound public policy — not constitutional law, but public policy,” Biden told me at the time. “What is at issue here is a question of power, whether power will be exercised by an insulated judiciary or by the elected representatives of the people.”

..  Biden acknowledged that the phrase “judicial activism” has “often been used by conservatives to criticize liberal judges.” But “the shoe is plainly on the other foot: It is now conservative judges who are supplanting the judgment of the people’s representatives and substituting their own.”

“The existing Court’s assault on voting rights, collective bargaining and religious liberty is awful enough — just imagine how bad working people will have it if another right-wing justice joins the Court.” He warned of the court “taking a vicious, anti-worker, anti-women, anti-LGBT, anti-civil rights turn.”

.. The future of abortion rights is central to the coming battle. But so are civil rights, corporate power and our democratic capacity to correct social injustices. Conservatives should not be allowed to distract attention from the aspects of their agenda that would horrify even many who voted for Donald Trump.

The Breakdown of the Capital-Labor Accord and Okun’s Law

we talk a lot about the “post-war capital-labor accord” and the golden age of the 1940s-1970s. In these years, inequality went down, unions flourished, civil rights laws were passed along with LBJ’s Great Society programs like Medicare, etc. Corporations saw themselves as not just profit-seeking nexuses-of-contracts but also as institutions with duties to their stakeholders – employees, local community organizations, etc.

.. Then everything went to hell in the 1970s. Oil shocks, poor economic performance, large increases in foreign competition, an overheated economy created by the meeting of increased social spending and increased military spending, all combined to create massive inflation and other sorts of economic upheaval.

.. union contracts were blamed for causing inflation and big business began to push for

regulatory changes (to fight the hated EPA and OSHA, along with unions) and increased layoffs.

Institutional investors, growing rapidly in size in part *because* of the prosperity of the “golden age” (e.g. the massive pension funds like CALPERS and TIAA-CREF), began to demand discipline from corporations unused to having to listen to anyone

.. Changes in financial regulations and institutions made possible the junk bond market and, in turn, a more active market for corporate control – suddenly, large firms that were used to making acquisitions became targets.

.. by the mid-1980s, the golden age had ended along with the capital-labor accord and something new had begun – perhaps we can call it the “neoliberal era

.. This era’s hallmarks include the dramatic decline in unions, massive increases in the share of wealth going to the top 1% and .1% (cf. Piketty and Saez), massive increases in the share of profits going to finance (cf. Krippner 2005), and an overall change in the way that corporations perceived themselves.

.. No longer institutions with obligations beyond profit-seeking, corporations became (thought of as) legal fictions that served the sole purpose of maximizing shareholder value

.. The old dominant strategy of firms was to “retain and reinvest”, the new mantra was to “downsize and distribute

.. The old model of the firm was GM – a massive, vertically integrated institution that dominated a market and did everything in-house. The new model was the “Original Equipment Manufacturer” (OEM), a firm like Nike that designs a product and markets it but outsources and off-shores as much of the actual producing, distributing, etc. The firm is now a brand, an identity demarcating a certain set of contracts, whose value is more about intangibles than men and machines.

.. Okun’s Law is an economic relationship between the magnitude of an economic downturn (in terms of real GDP) and increases in unemployment

..  if GDP (production and incomes, that is) rises or falls two percent due to the business cycle, the unemployment rate will rise or fall by one percent. The magnitude of swings in unemployment will always be half or nearly half the magnitude of swings in GDP.

.. The last downturns – 1991ish, 2001ish and the current moment – have all been characterized by “jobless recoveries” or, more broadly, much larger decreases and much smaller increases in unemployment than would be predicted by Okun’s law.

.. “businesses will tend to “hoard labor” in recessions, keeping useful workers around and on the payroll even when there is temporarily nothing for them to do”.

.. Manufacturing firms used to think that their most important asset was skilled workers. Hence they hung onto them, “hoarding labor” in recessions. And they especially did not want to let go of their prime productive asset when the recovery began. Skilled workers were the franchise. Now, by contrast, it looks as though firms think that their workers are much more disposable—that it’s their brands or their machines or their procedures and organizations that are key assets.

.. The 1980s saw a reordering of the world – a transition from a period governed by one set of rules that privileged the relationship between businesses and their employees to one that privileged (relatively speaking, in ideology anyway) shareholders.

.. What variables should we care about, if GDP seems to be connected less to welfare than it used to be?

.. the neoliberal period is marked by dramatic, mind-boggling increases in executive compensation without, as far as I know, any signs of better performance or increased shareholder value.

How to Steal the Populists’ Clothes

The continued electoral success of populists in Europe, Africa, Asia, Latin America, and in the United States shows that while their policy proposals may be fanciful, their mode of conducting politics is effective. To win at the ballot box, mainstream politicians should apply three lessons that populists have mastered.

.. Rather than complaining about populist successes, established political parties should take a page from the populist playbook. Three lessons, in particular, cry out for attention.

The first lesson is to connect to the people you wish to represent by learning about them and winning their trust.

.. The complacent assumption that people will always vote along party or class lines is obsolete.

.. After a decade of economic malaise, voters are skeptical of mainstream politicians who offer rote promises of growth and improved standards of living. In the eyes of disenchanted workers, those in power have simply been feathering their own nests. Even in many of the world’s strongest economies, workers are earning less in real terms than they did ten years ago.

.. the twin threats of automation and outsourcing have made employment more precarious, and sapped workers’ bargaining power.

.. Who is to blame for this state of affairs? Those who vote for populists clearly hold establishment politicians responsible

.. Contrary to popular belief, recent research finds that technology is not the primary driver of labor’s declining share of income. Rather, the worsening plight of workers is due to

  • lost bargaining power and union density,
  • welfare-state retrenchment,
  • offshoring, and the
  • growth of the financial sector as a share of the economy.

the effective tax rates “paid by the world’s 10 biggest public companies by market capitalization in each of nine sectors” have fallen by nearly one-third since 2000, from 34% to 24%.

since 2008, personal income-tax rates across all countries have increased by 6%, on average.

Against this backdrop, the emergence of populist parties and politicians should come as no surprise. When a majority of people becomes poorer, there will be stark consequences at the ballot box. And yet, in one country after another, the political establishment has been remarkably slow to recognize this.

.. Meanwhile, the populist presidential candidate, Jair Bolsonaro, proposes giving every Brazilian a gun so they can defend themselves. To the elites, this sounds (and is) preposterous. But for Brazilians who worry about their own safety, he is at least showing that he understands their top concern.

.. Before winning the French presidency and a parliamentary majority last year, Emmanuel Macron .. sent volunteers across the country to listen to voters’ concerns.

.. populists is to use simple, intuitive messaging to signal your goals. Yes, slogans like “I’ll protect your jobs” and “Make America great again” sound simplistic. But where are the sophisticated alternatives?

.. In the United Kingdom’s Brexit referendum, the Remain campaign, phlegmatically led by then-Prime Minister David Cameron’s government, argued that leaving the European Union would result in lower GDP, lost trade, and disruption to the financial sector.

.. Such arguments completely missed what concerned most voters. By contrast, the Brexiteers promised to “take back control” of the UK’s borders and claimed – falsely – that the National Health Service would enjoy a windfall of £350 million ($490 million) per week.

.. Academics, pundits, and political, business, and civil-society leaders have been far too slow to articulate new economic and social policies that have broad-based appeal.

.. it takes a commitment of time and energy to understand the plight of the electorate and to frame solutions in a clear, simple way.

.. The third lesson from the populist playbook is to be bold.

.. people are seeking a transformational vision of the future, not slight improvements. After 30 years of pragmatism and incremental change, it is time for a new tone.

.. Recall that in 1945, Winston Churchill, having delivered victory for Britain in World War II, lost the general election.

The winner, Clement Attlee, promised what was effectively a new social contract for war-weary Britons still living under rations. His government went on to provide free universal health care, unemployment insurance, pensions, decent housing, and secure jobs in nationalized industries. And all this was done with the national debt still at 250% of GDP.

Paul Krugman Explains Trade and Tariffs

There’s no way to bring back all those steel plants and steel jobs, even if we stopped all imports. Partly that’s because a modern economy doesn’t use that much steel, partly because we can produce steel using many fewer workers, partly because old-fashioned open-hearth plants have been replaced by mini-mills that use scrap metal and aren’t in the same places. So this is all a fantasy.

.. You may remember Bernie Sanders using Denmark as an example. It’s a good one: much better wages, a much stronger social safety net, a mostly unionized work force. But Denmark is as open to world trade as we are. It’s domestic policies — from taxing and spending decisions to pro-labor policies in the service sector — that make the difference. Universal health care and the right to organize matter a lot more for workers than trade policy.

.. Why does the president of the United States have the authority to make decisions (such as imposing tariffs) that have significant impacts on the economy, trade, relationships with allies, etc. — with impunity, and with no input from Congress? What path should Congress be taking to restrict his powers.— Ricky, Saint Paul, Minn.

PK: Actually, Congress voluntarily limited its own role, to protect itself from special-interest politics: it votes big trade deals up or down on a single vote, then stays out of it.

.. However, these powers aren’t supposed to be used arbitrarily: there’s supposed to be an independent study of the issue, and the president acts on the basis of that study. What’s happening with Trump is an abuse of the process: the Commerce Department came up with an obviously bogus national security rationale for tariffs Trump wanted to impose for other reasons.

So we have a process that gives presidents some discretion, for pretty good reasons — but one that assumes that said presidents will act honestly and responsibly. It falls apart when you’re dealing with someone like Trump.

.. PK: President Oprah Winfrey, or whoever, can undo these tariffs with a stroke of the pen. However, we might get into a full-scale trade war before that happens, and in any case the U.S. has already lost its reputation as a reliable negotiating partner.

.. PK: Basically, we have persistent trade deficits because we have low savings and remain an attractive place for foreigners to invest. And as a result, the U.S., which was a creditor country before we began running persistent deficits since 1980, is now a net debtor.

But you want to keep some perspective. Our “net international investment position” — overseas assets less liabilities — is about -45 percent of G.D.P., which isn’t that big a number, all things considered. For example, it’s less than 10 percent of our national wealth.

And the idea that this gives foreigners a lot of power over America has it backward. On the contrary, in a way it makes them our hostages: China has a lot of money tied up in America. Suppose they tried to pull it out: the worst that could happen would be a fall in the dollar, which would be good for U.S. manufacturing and inflict a capital loss on our creditors.

Lot of things worry me; our foreign debt, not so much.