Les Leopold Archive

GM Lordstown workers rally outside the GM Lordstown plant on March 6, 2019 in Lordstown, Ohio. (Photo: Jeff Swensen/Getty Images)

The vacant Lordstown General Motors facility is a frightening sight—6.2 million square feet of modern industrial might spread over 900 acres doing absolutely nothing except depressing the regional economy and the spirits of northeast Ohio. Just a few months ago it produced the Chevy Cruze and provided thousands of good paying industrial jobs with excellent benefits. Now it's gone, and unless the Democrats have something meaningful to say about it, they too may be gone.

Lordstown is the poster child for modern financialized capitalism and runaway inequality. It symbolizes the kind of system in which the super-rich reap the rewards and the rest of us pay the price.

This new version of capitalism burst onto the scene when Wall Street deregulation took hold in the early 1980s, but it really came into full view when Wall Street's insatiable greed took down the economy in 2007. The financial crash put GM on life support, and it quickly became crystal clear that textbook capitalism was a fiction.

Under the supposed rules of free-markets, the corporations that cannot compete successfully should perish—what Schumpeter called creative destruction. In 2007, most of Wall Street's big banks—as well as GM—would have gone down, but their size and the centrality of these mammoth institutions meant that their rapid demise (without government intervention) would crater the entire economy. They were, instead, the beneficiaries of taxpayer bailouts.

The mythical capitalism of creative destruction is long gone. There are new rules for financialized capitalism. One demands that we the taxpayers must bailout both the biggest Wall Street banks and the largest corporations, like GM, because they are far too big to fail. It's the ultimate blackmail. Either we pay or we are all economically devastated.

A second new rule of the new capitalism dictates that not only must we bail them out, but we are not permitted to ask for anything substantial in return.

Unlike private investors who provide capital to distressed companies, we taxpayers do not get any ownership rights with our investment, nor do we get a high rate of return on our money. We also do not have a say in how the bailout enterprises do business, nor are we able to remove the predatory executives (and jail the ones who broke the law.) In exchange for our financial guarantees, we are not permitted to demand that a corporation like GM must keep its jobs in the U.S., nor may we insist that they refrain from giving future revenues via stock buybacks to their super-rich investors (who would have earned nothing without our largess). Instead these bailed-out entities are returned to their private owners as soon as possible so that they can again be run by and for the wealthy.

As Trump slashes and burns his way through environmental regulations, including the Paris Accord, he continues to bet that political polarization will work in his favor. Not only are his anti-scientific, anti-environmentalist positions firing up some within his base, but those positions are driving a deep wedge within organized labor.  And unbeknownst to many environmental activists, they are being counted on to help drive that wedge even deeper.

Trump already has in his pocket most of the construction trades union leaders whose members are likely to benefit from infrastructure projects – whether fossil fuel pipelines or new airports or ...... paving over the Atlantic. His ballyhooed support of coal extraction  has considerable support from miners and many utility workers as well.

But the real coup will come if Trump can tear apart alliances between the more progressive unions and the environmental community. Trump hopes to neutralize the larger Democratic-leaning unions, including those representing oil refinery workers and other industrial workers.  That includes the United Steelworkers, a union that has supported environmental policies like the federal Clean Air Act and California’s Global Warming Solutions Act, and has a long history of fighting with the oil industry – not just over wages and benefits but also over health, safety and the environment. 

Donald J. Trump believes he can bully and bribe companies into keeping jobs in America. Shortly after his election, he "persuaded" Carrier, an Indianapolis division of United Technologies, to refrain from exporting 700 jobs to Mexico. Meanwhile, Rexnord, a maker of bearings and ball bearings also in Indianapolis, announced its decision to move 300 jobs to Monterrey, Mexico. Trump, of course, expected that after a tweet or two, Rexnord, a tiny company, would quickly capitulate. Not happening. 

The most powerful man in the world is getting a rude awakening about corporate power. Rexnord is thumbing its nose at the president by actually moving every one of those jobs...and the bully-in-chief can't stop them. Why is that?

1. Trump is trumped by financial strip-mining.

Rexnord is moving for obvious reasons: The new Mexican workers will make $3 an hour while the Indianapolis workers make $25 an hour. But the real motivation for moving stems from Wall Street's favorite pastime—stripping a company of its wealth through stock buybacks.

To please demanding financiers, Rexnord, in 2015, agreed to buy back $300 million of its own stock. By going into the market to buy its own shares, the price of the stock rises, thereby enriching these hedge fund investors virtually overnight. (Nineteen hedge funds hold about $200 million in Rexnord stock.) The stocks rise because 1) the act of buying large amounts of them in the open market bids up their price; and 2) the company's total earnings are now spread over fewer shares.

History warns us to be very, very careful when using the phrase “white working class.” The reason has nothing to do with political correctness. Rather, it concerns the changing historical definitions of who is “white.”

Eduardo Porter in the New York Times, uses this construction to ask, “Did the white working class vote its economic interests?” He claims that current data shows white people losing out to blacks and Hispanics in getting their fair share of the new jobs created since 2007:

Despite accounting for less than 15 percent of the labor force, Hispanics got more than half of the net additional jobs. Blacks and Asians also gained millions more jobs than they lost. But whites, who account for 78 percent of the labor force, lost more than 700,000 net jobs over the nine years.

Porter further argues this is happening because blacks and Hispanics live mostly in the thriving urban areas while most white people live in declining rural areas.

Only 472 counties voted for Hillary Clinton on Election Day. But ....they account for 64 percent of the nation’s economic activity. The 2,584 counties where Mr. Trump won, by contrast, generated only 36 percent of America’s prosperity.

Porter therefore believes that the white working class flocked to Trump as a way to protest their economic decline.

Increasing debt and runaway inequality are of a piece. That's because debt at compound interest rates is extremely powerful. Borrow a little today, and in time, you could be destitute. To get a feel for its power, imagine you borrowed just one nickel at 5% interest when Christ was born. You would now owe the tidy sum of $225,438,991,066,856,000,000,000,000,000,000,000,000,000—more money than ever existed in the history of the world. Which is to say, those who wield the power of debt, wields enormous economic power.

In our society we've given that power to private financial corporations, and they've done a masterful job in pushing us to the brink of debt peonage. The problem extends far beyond the much ballyhooed federal government debt. The power of debt extends to nearly every aspect of modern life. Our homes, schools, roads, bridges, highways, utilities, corporations and virtually every product and good produced and sold depend on debt. By some estimates as much as 30 cents of every dollar we spend goes to cover interest payments on the debt accrued to make all that we buy. (For example, of the $6,536.7 billion in private enterprise income in 2012, 36.8% went to interest payments.)

The verdict is in: The typical American is even poorer than his or her equivalent in Greece. The median Australian is four times wealthier. The Canadians are twice as wealthy. To be sure, we continue to lead the world in billionaires (571 in 2014, with China a distant second at 190). But after 30 years financial deregulation and attacks on employee rights, we rank 26th in median wealth (defined as all assets owned -- banks accounts, investments, homes, cares, etc., minus all debts owed for the person precisely on the middle rung of the wealth ladder).

It's not an accident:

During the Cold War, our working class was the envy of the world. We argued that our free-enterprise system, not communism, created the best conditions for a rising standard of living for all. Indeed, there was much to boast about. Real wages were increasing year after year. American workers were free to go on strike and did. And most importantly, the children of working people could climb the economic ladder -- upward mobility was real.

On one level the story is simple: racism. Too many police officers fear people of color in the neighborhoods they patrol, and are likely to over-react with force during encounters. The local courts also engage in discrimination by failing to indict the killers, even when captured on video, as in the brutal police slaying of Eric Garner in Staten Island, NY. Both the policing and the court system obviously reflect the polarization of our communities, and our inability to escape the legacy of slavery, more than 150 years after emancipation.

But racism only accounts for part of the story. We also must understand how judicial racism and even police violence are deeply connected to the financialization of the economy and runaway inequality.

The American people have spoken. But what did we really say about inequality?

At first glance, it seems that extreme inequality mattered little to the majority of voters who put pro-business candidates into office. After all, the Republicans, along with far too many Democrats, are certain to cater to their Wall Street/CEO donors. Do Americans really want an ever rising gap between the super-rich and the rest of us?

A important study ("How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay") by Sorapop Kiatpongsan and Michael I. Norton provides insight on why Americans aren't more upset about rising inequality: It shows we are clueless about how bad it really is. Their analysis of a 2009 international survey of 55,187 people from 40 countries, found that when it comes to understanding the severity of inequality, we're the most clueless of all.

In Denmark, fast food workers make $20 an hour plus benefits, and the corporations that employ them are still profitable. Why there and not here?

The answer is simple and painful: wage theft. In America, corporations are systematically stealing our wages. Virtually everyone in the bottom 95% of the income distribution now suffers from wage theft, including you!

It starts at the bottom. Many undocumented immigrant day labors survive by standing on street corners and selling their labor to drive-by construction and landscaping contractors. Unfortunately, far too many contractors refuse to pay after the work is done. And this is something nearly every day-laborer experiences.

America is the richest country on Earth. We have the most millionaires, the most billionaires, and our wealthiest citizens have garnered more of the planet's riches than any other group in the world. We even have hedge fund managers who make in one hour as much as the average family makes in 21 years!  

This opulence is supposed to trickle down to the rest of us, improving the lives of everyday Americans. At least that's what free-market cheerleaders repeatedly promise us.

Unfortunately, it's a lie, one of the biggest ever perpetrated on the American people.