Oh nooooooooo

Hostess Brands, the makers of Wonder Bread, Twinkies and Ding Dongs intends to go out of business because of a recent labor strike.

Hostess expected its Bakery, Confectionery, Tobacco Workers and Grain Millers International Union members to sign a concession-laden contract produced by a bankruptcy court, which its union members refused to do.

Soon, Americans will no longer have the opportunity to purchase unhealthy food with brand names that became pejorative words some used to describe persons they considered insubstantial and ridiculous.

China — a labor cost savings bonanza?

Not really, according to Yves Smith:

For some time, we’ve argued that outsourcing and offshoring were overdone. For manufactured goods, direct factory labor is typically only 10% to 15% of final product costs. Even if you get significant savings there, the offsets are increased shipping, inventory, and managerial/coordination costs (which serves as an excuse to transfer savings on factory workers to the top brass). In addition, extended supply chains also entail higher risks. I’ve had executives and senior managers in various industries tell me that there internal estimates of the savings from outsourcing weren’t compelling, but senior management went ahead on the (typically correct) assumption that investors would approve.

But even in the cases where the outsourcing cost savings were significant, the idea that American wages were way out of line with Chinese wages and the only future for American workers was grinding wages lower and lower to compete with China has been oversold. Various writers, including yours truly, pointed out that China’s wage advantage would not hold indefinitely even if it managed to keep its currency peg (which, separately, it hasn’t; the change to a currency basket has over time resulted in appreciation against the dollar).

The reason? China’s much higher inflation rate would over time reprice labor in nominal terms at home, which with a currency peg (or the current dirty float) would translate into real increases to foreign buyers. To put it more simply, double digit inflation over time would be tantamount to a currency revaluation.

Despite popular (and worse, pundit and media) perceptions otherwise, China no longer enjoys a labor cost advantage in many areas.

In fact, the United States has recently seen an increase in manufacturing investment. Why, then, do we so often hear American pundits attacking off shoring American capital when capital is now flowing back to the United States? The issue also has a political component:

Despite the fact that this trend is well under way, we’re certain to hear a steady diet of haranguing from neoliberal economists about how American workers have to suck it up and accept even lower wages. What’s driving falling real wages is poor domestic economic policies, namely, the mismanagement of the post crisis period. Japan warned the US early on that the biggest mistake it had made was not forcing its banks to recognize losses. But we ignored their lesson and are in the process of suffering what may turn out to be a lost decade. Time to blame the real perps, our bank enablers, rather than the poster bad guy, the Chinese wage slave.

Michał Kalecki expected blunders like this (.pdf) from the capitalists and their foot soldiers. We should never lose sight of the fact that capitalism is not an intrinsically rational economic system. The opposite is true.

The new austerity

Congressional Republicans have been working hard to cut SNAP funding (Food Stamps). As we know, Vice Presidential candidate Paul Ryan has worked very hard on this matter, having made his name nationally with his draconian budget proposal. While the Republican effort to cut Food Stamp funding is unsurprising, their effort remains disturbing nonetheless given the severity and length of the economic crisis which emerged in 2008 and given the looming food crisis. To be sure, the food crisis directly ahead of us will be a consequence of the 2012 drought. The existence of the drought belongs with the other effects produced by global warming, an issue on which the Republicans have an irrational position. As more Americans find themselves jobless or food-deprived and while the morbidity attributable to food-shortages will surely increase because of inflating food prices and food shortages, the Republican Party wants to intensify the deprivation many Americans will suffer by cutting Food Stamp funding.

What the Republican Party wants to impose on America is not a sound fiscal regime but an intense and risk-laden class war.

Reaching out and touching some people

Jesse Russell of the Workers Independent News service asks (h/t Corey Robin): “Is your lunch break your own or does the boss get to tell you what you can and can’t do during it?”

AT&T has an answer which it puts into practice. The corporate giant believes it has the property rights needed to control the actions of its workers even when those workers are on break:

AT&T technicians in Indiana have filed a lawsuit alleging that the company has put “heavy restrictions” on how they can spend their unpaid lunch breaks [emphasis added]. The complaint says that while employees can spend unpaid lunch breaks eating in company vehicles, they aren’t allowed to read newspapers, nap, use personal computers, or listen to portable music players, such as iPods. The company also restricts how far workers can go from a job site during their unpaid lunch breaks to less than one-half mile. The lawsuit alleges that the restrictions violate the Fair Labor Standards Act and create an atmosphere where workers instead feel obligated to work through their lunch break, but don’t get paid for that work. The objective of the lawsuit is to have AT&T’s unpaid lunch breaks ruled illegal.

This is what labor discipline looks like in a low-employment labor market.

Damn….

Wednesday was a very bad day for Mary Tolan and the company she runs, Accretive Health. Not only had the State of Minnesota taken action against Accretive Health, but:

Shares of Accretive Health plunged 42 percent, or $7.74, Wednesday to close at $10.75, as the scope and detail of the allegations became clear, a day after [Minnesota Attorney General Lori] Swanson’s office released a six-volume report on her investigation.

The Wall Street Journal reported that “An Accretive spokeswoman declined to comment on the company’s share price but said the company has ‘a great track record of helping hospitals enhance their quality of care.'” Only in a bizarro world would patient harassment count as an enhancement of care quality.

Accretive’s stock price trend is ominous:

Going down

The expectation driving this trend issues from the belief that litigation will compel Accretive Health to change its dubious business practices.

Need a job? Lack a soul?

Accretive Health has a position for you. The New York Times reports:

Hospital patients waiting in the emergency room or convalescing after surgery could find themselves confronted by an unexpected visitor: a debt collector at bedside.

Mary A. Tolan, Accretive Health CEO

One of the nation’s largest medical debt-collection companies is under fire in Minnesota for having placed its employees in emergency rooms and other departments at two hospitals and demanding that patients pay before receiving treatment, according to documents released Tuesday by the Minnesota attorney general. The documents say the company also used patient health records to wrangle for more money on overdue bills.

The company, Accretive Health, has contracts not only with the two hospitals cited in Minnesota but also with some of the largest hospital systems in the country, including Henry Ford Health System in Michigan and Intermountain Healthcare in Utah. Since January, it has faced a civil lawsuit filed by Attorney General Lori Swanson of Minnesota alleging that it violated state and federal debt-collection laws and patient privacy protections.

Shocking — that is, I find it shocking that Accretive’s morally dubious practices violate debt collection laws and privacy protections. These violations are contrary to the spirit of the times! I am sure that ALEC, with its deep and strong concern for protecting the rights of health care consumers to directly pay for their health care, will want to get these laws fixed as soon as possible.

Quote of the day

Economists Gérard Duménil and Dominique Lévy recently discussed the relationship between the various economicMargaret Thatcher and Ronald Reagan.classes, neoliberalism and the still tepid reindustrialization efforts seen in the West:

The processes of deindustrialization and reindustrialization should be seen as part of the neoliberal mechanism. Deindustrialization (the relocation of production) is the expression of a divergence between the interests of the dominant classes of a country, who benefit from the profits made by multinational corporations, and of the territorial economy of their country. The dominant classes care less about where their income is generated than about how much they make. In this respect, things have apparently been better managed in Germany but, as in the US, workers have paid a considerable price — except for the senior management of companies, whose complicity with business owners is a pillar of neoliberalism.

As long as the general neoliberal framework, with all its elements — the hegemony of the capitalist classes and financial institutions, the complicity of senior management, financialization and globalization — remains unchallenged by “financial repression”, of the kind that took place in the US during the postwar period, all attempts to fight the process of deindustrialization, no matter how successful, will continue to be retrograde. They undermine what remains of the social gains made in the preceding decades, without making any clear contribution to the re-establishment of growth and the rebuilding of employment.

Thus the inherent reasonableness of 99% claims made by the Occupy Movement.

Paul Krugman on ALEC

ALEC is the acronym of the American Legislative Exchange Council, a self-proclaimed non-partisan think tank which drafts legislation which is often made into law by the various states. For instance, ALEC wrote for and promoted the “kill at will” or “stand your ground” legislation that recently resulted in the Trayvon Martin killing. As a consequence of its efforts in this matter, ALEC has become a focal point for the Justice for Trayvon Martin movement. ALEC has earned this critical attention for the Martin killing and for much else, including Scott Walker‘s attack on the state of Wisconisn.

Krugman’s description of ALEC is both accurate and critical in intent:

What is ALEC? Despite claims that it’s nonpartisan, it’s very much a movement-conservative organization, funded by the usual suspects: the Kochs, Exxon Mobil, and so on. Unlike other such groups, however, it doesn’t just influence laws, it literally writes them, supplying fully drafted bills to state legislators. In Virginia, for example, more than 50 ALEC-written bills have been introduced, many almost word for word. And these bills often become law.

Many ALEC-drafted bills pursue standard conservative goals: union-busting, undermining environmental protection, tax breaks for corporations and the wealthy. ALEC seems, however, to have a special interest in privatization — that is, on turning the provision of public services, from schools to prisons, over to for-profit corporations. And some of the most prominent beneficiaries of privatization, such as the online education company K12 Inc. and the prison operator Corrections Corporation of America, are, not surprisingly, very much involved with the organization.

What this tells us, in turn, is that ALEC’s claim to stand for limited government and free markets is deeply misleading. To a large extent the organization seeks not limited government but privatized government, in which corporations get their profits from taxpayer dollars, dollars steered their way by friendly politicians. In short, ALEC isn’t so much about promoting free markets as it is about expanding crony capitalism.

ALEC — the well-funded defender and promoter of crony capitalism, desiccated democracy, political opacity and unaccountability as well as the socio-political environment which nurtures economic predation. In the last instance, it appears that Trayvon Martin was just unlucky prey for ALEC and some of its tools (George Zimmerman, the Florida state legislators linked to ALEC who passed
Florida’s Stand Your Ground law, etc.). But it is wise to keep one’s attention on the fact that Trayvon Martin was prey because the most Americans are prey.

Quote of the day

Trespassers will be dealt with roughly and thoroughly. This is one theme of an article written by John Feffer, a Co-Director of Foreign Policy in Focus, a section of the Institute for Policy Studies. Feffer begins by briefly recounting three acts of witless bloodshed:

The note left next to the bloodied body of Shaima Alawadi read “go back to your country, you terrorist.” Alawadi, who died on Saturday after being taken off life support, was an Iraqi-born mother of five living outside of San Diego. Someone had delivered a similar note to the family earlier in the month. It was likely the same person who returned with a tire iron and struck her repeatedly on the head. Alawadi had lived in the United States for 17 years. Several family members reportedly provided cultural training to U.S. soldiers deployed to the Middle East. In a very sad coda, Alawadi is indeed going back to her country — to be buried.

There were no notes that accompanied Trayvon Martin’s death at the end of February. But he was also killed for a perceived trespassing. An African-American teenager, Martin was guilty of “walking while black” as he carried iced tea and Skittles through the Florida community of Sanford. The self-appointed head of the community’s neighborhood watch, George Zimmerman, identified Martin as a threat. Zimmerman didn’t wait for the police to arrive. He chased after the young man and, in circumstances still very murky, shot him dead. Because of the “stand your ground” law that permits shooting in self-defense, the police did not arrest Zimmerman.

In the middle of March, Mohamed Merah went on a killing spree in Toulouse, France that left seven people dead. The victims were a rabbi, three Jewish children, and three French soldiers. Two of the soldiers were Muslim. Merah, who identified with Islamic extremism, specifically targeted Muslim soldiers for being “traitors.” The French-born Merah better fit the profile of a serial killer than a political extremist. But his Muslim victims are an important reminder that ordinary, everyday Muslims, even more so than Jews or Americans, figure as the most potent threats to the worldview promoted by al Qaeda and its ilk. The overwhelming majority of al Qaeda and Taliban victims are Muslims.

These deaths are, on the face of it, quite different: a hate crime, a serial killing, and an act of vigilantism. But underlying these three tragedies is a notion of violated borders, of trespass. The message behind all three is this: you should not be here, you are not one of us, and your death shall serve as a warning.

After recalling the bloodshed during the enclosure movement in early modern England, Feffer concludes with the following observations:

The European Union was supposed to be a borderless space. But the old dream of an ever more prosperous and economically equitable regional arrangement has come up hard against economic downturn and polarization. The United States was supposed to be a country without the class barriers of feudal Europe. But the old dream of a growing middle class and the relatively stable politics that accompany it cannot survive in the austerity liberalism and anti-government conservatism of the 21st century. When our notion of the common good, of commonwealth, begins to disintegrate, all that is left are tribes defending their turf, standing their ground, enclosing their land.

We are living now in a new world of enclosures. We are building our fences ever higher. We are patrolling our borders with ever more sophisticated weaponry. And we are punishing any and all who trespass. The victims of these recent killings are the collateral damage of these border wars.

Welcome one and all to the Balkans….

The Great Commoner

As we know, Mitt Romney wants to replace his $12 million mansion in La Jolla, CA with a new and bigger mansion. To this end, Romney hired a lobbyist to see that his will shall be done as intended. The proposed mansion has one feature which most homes lack: An elevator for cars!

This image is meant to be satire