The Crash of 2016

by Thom Hartmann

  Actually, Germany paid their autoworkers about $67 an hour (including wages and benefits). But the United States paid its average worker only $33 an hour (also including wages and benefits). On top of that, German car manufacturers were highly profitable, despite the comparatively large paychecks of their workers. BMW earned a before-tax profit of 3.8 billion euros, and Mercedes-Benz hauled in profits of 4.6 billion euros.

  So how did Germany just completely blow up the Royalist myth that car companies have to pay their workers less to be more profitable and manufacture more cars? How can Germany do the opposite: pay their workers more, be more profitable, and make more cars?

  The answer: democracy.

  First, Germans have completely democratized the auto plant by unionizing nearly every single autoworker in the country—under IG Metall, the German autoworkers union. With such a high union membership rate, autoworkers hold a lot of sway when they threaten to go on strike. That’s how workers have been able to keep wages high and working conditions satisfactory. But as Horst Mund, the head of the International Department of the German autoworkers union, pointed out, unions hardly ever go on strike in Germany, “because there is an elaborate system of conflict resolution that regularly is used to come to some sort of compromise that is acceptable to all parties.”

  One reason for the more collaborative relationship between CEOs and workers is that, unlike in the United States, unions aren’t under attack and there aren’t any “right to work for less” zones in Germany to which car manufacturers can flee so they can ignore the voice of organized labor.

  Another and perhaps more powerful reason is that there is a constitutional amendment in Germany that forces corporate executives to listen to labor unions. The Works Constitution Act requires every factory to set up a works council that gives representatives of the workers a seat at the table in every decision-making process at the factory. That is the democratization of capitalism, expanding the decision-making process to not just the corporate elite but the entirety of the company, from the bottom up.

  This, according to Mund, is the real reason why the autoworkers union has a loud voice in the German economy. Pointing to the adversarial relationship between employers and labor unions in America, Mund says, “The accusation that American unions are more radical and destructive… definitely has to do with the hostile environment in which the unions have to act. How can they be constructive and friendly if their asses are kicked all the time?” He goes on to say that without the Works Constitution Act in Germany, “employers would not talk to us either if they had the choice.”

  But intentions aside, the empowerment of labor unions in Germany and the democratization of the workplace through an enforced constitutional amendment has been an economic boon for Germany, as demonstrated by car sales, employee wages, and profitability.

  As Mund concludes, “We have strong unions, we have strong social security systems, we have high wages. So, if I believed what the neo-liberals are arguing, we would have to be bankrupt, but apparently this is not the case… the economy is working well in Germany.”

  So how do we democratize capital in the United States and give workers more of a say in how our economy is run? And why, if a $24 billion cooperative venture can be successfully established in the remote Basque region of northern Spain, can’t such a massive venture take hold here in the big cities of the world’s wealthiest nation?

  The Seeds

  Compared to the rest of the world, we’re falling behind.

  As Rebecca Kemble, the president of the US Federation of Worker Cooperatives, told me, “The US is probably the smallest and most insignificant part of this international movement.”

  But the seeds are there.

  Madison, Wisconsin, seems like any other midwestern town at first glance. It’s the state capital and a college town, so, having grown up in Lansing and East Lansing, Michigan, I figured it was pretty much like home.

  Until I got into the cab. A couple of times.

  The company is called Union Cab, and one of my drivers used to be a lawyer; another used to teach college. Another was a high school graduate who loved what he was doing and considered driving a cab an art form—he was also a pretty good tour guide! And these people had actually worked to get out of their old jobs and into driving a cab.

  Why is that? Why the heck would people leave seemingly very lucrative jobs to sit behind the wheel of a cab all day?

  So I asked the general manager, a guy named John McNamara, exactly what makes his cab company different from all the rest. The answer is that they all belonged to a cooperative.

  “The basic story,” he told me, “really goes back to the late sixties, with both the antiwar and the social justice and civil rights movements.” Cabdrivers were organizing into unions in response to the political climate of the day, but weren’t making any headway to better wages and working conditions with their bosses. When the unions went on strike, the owners just shut down the companies.

  After one strike in particular, and subsequent shutdown, in 1978 against the Checker Cab company, the drivers decided to give starting their own cooperative cab company a shot. “It was a lot of hard work, and the first winter was really bleak,” McNamara told me. But around the same time, the bus drivers union went on strike, and the fledgling co-op lent out a few cabs to the out-of-work bus drivers. “It really helped launch our company,” he said, and business has been good ever since.

  McNamara himself ditched going to graduate school in 1988 to join the Union Cab co-op. “I was bartending in a bar where a bunch of cabdrivers would stop by, and I heard about Union Cab. I wanted to see what it was like to work in a worker-owned company,” he told me. “It was a great fit with my worldview. To find a company whose culture and worldview matches my own, especially since I was coming from totally left of center, was really amazing—it was like being home.”

  When I visited in 2010, Union Cab had about 220 people working for it. That’s 180 drivers plus mechanics, a call-center staff, an IT department for dispatching, and an administrative staff. The entire operation runs a bit over $6 million a year. It’s the only cab company in the state that gives health insurance to its drivers, who are some of the best paid in the country.

  “We have drivers who’ve come to this company literally homeless and have managed to buy homes,” McNamara told me. “One of those homeless people is now driving a BMW… We’re head and shoulders above our competitors in how we treat our workers, and that translates into the service we give our customers.”

  I talked with one of the drivers, Fred Schepartz, about how Union Cab is different from the rest. “The industry as a whole is exploitative and corrupt, and it’s getting worse,” Fred said. “The cab industry in Milwaukee is more and more like a sweatshop, with a lot of immigrant drivers, who are more desperate than we are for work.”

  Unlike Union Cab, the rest of the cab industry isn’t set up for the drivers to make money; it’s set up for the owners to make money, Fred told me. He gave me an example of one of the other cab companies in town that uses the standard sole-proprietorship model, in which the owner is in the business of making as much money for himself as he can and he does it by exploiting the hard work of his drivers. He takes $1.50 off the top of every ride a driver does. He pays his drivers a commission, but that $1.50 is not commissionable. He presumably makes that choice because it makes his company more money.

  But at Union Cab, “You don’t have to work sixty or eighty hours like so many other cabdrivers have to do. You don’t leave work with your soul sucked out so badly that you can’t do anything else afterward,” Fred told me. “I get a fifty-two percent commission, I have health insurance, and my wife is on the policy and that’s literally been a lifesaver, as she’s had major and minor surgery over the past few years. Working in a workplace where every single person has a say and every single person is a vital piece of the whole company is a totally different experience.”

  With fewer hours and better
pay, most of the drivers at Union Cab can pursue their other interests. While working as a driver, Fred has published several short stories, with his first novel published four years ago entitled Vampire Cabby, about a 1,000-year-old vampire who loses his money in the stock market crash of ’87. At the time I talked to him, he was working on another book, “Solidarity Moon,” about a labor struggle on the first colony in a star system.

  “I ended up living it instead of writing about it,” he told me.

  “We have a number of musicians who have put together two-CD compilations of their music, we have artists, we have three published authors, so people are able to pursue other things in their lives because we do allow people to make enough in a normal forty-hour workweek that they can also do other things.”

  Unlike the big banks on Wall Street and the same transnational corporations that line Main Streets across America, Union Cab isn’t run by the profit motive. As John McNamara told me, “We don’t want a huge profit at the end of the year, because that means you didn’t pay your workers enough.”

  But can a company not exclusively motivated by profit be able to compete and do well in the market? Absolutely. Union Cab is the largest of the four cab companies in Madison; it has the largest fleet and the best service. It has an employee retention rate of 85 percent and most workers stay there beyond five years.

  In fact, Union isn’t alone. There are nine other successful cooperatives—from bakeries, to engineering companies, to pharmacies—within five miles of the state capital, employing over four hundred people and doing more than $30 million in business a year.204

  In fact, a lot of Americans have endorsed cooperatives in recent decades, thus laying the foundation for an entirely new economy to replace the one that will be in tatters following the Crash of 2016.

  We think that giant transnational energy corporations dominate the energy market, but in reality cooperatives do. More than nine hundred rural electric cooperatives deliver electricity to more than 42 million people in forty-seven states.

  There are roughly thirty thousand cooperatives in the United States, running 73,000 businesses and owning more than $3 trillion in assets. They bring in $500 billion in revenue and pay $25 billion in wages to 2 million workers in every sector of the economy.

  Despite falling behind the rest of the world, Rebecca told me, “It feels like we’re on the edge of a huge explosion in the sector, and we’re working to build the capacity to support that.”

  The crash will be the trigger.

  Chapter 16

  Epilogue—A Letter to My Great-Grandchildren

  The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.

  —President Franklin D. Roosevelt, 1937

  Second Inaugural Address

  In 2090, you live in an “interesting” time, much like the one I’m alive in right now and my children are experiencing with some ferocity.

  After the Progressive Revolution that followed the Crash of 2016, the conservative/neoliberal laissez-faire economics championed by Reagan, Greenspan, and Milton and Tom Friedman was so discredited that, like the last time it was discredited in 1929, it pretty much went underground. Ayn Rand and her bizarre writings were viewed as crackpot and ignored.

  The “Democratic Socialism”—which had already been largely adopted by Japan, South Korea, Australia/New Zealand, and many South and Central American countries by 2016—was finally accepted by Americans as the only viable way to have both a vibrant—and, perhaps most important, stable—economy and at the same time have an uncorrupted democratic form of governance.

  Semiprotectionist trade and manufacturing policies were adopted, energy independence was achieved during the first few decades after the crash, and taxes were raised on the Economic Royalists—and their behaviors in the political arena were restricted by constitutional amendment—so for another few generations (much like in the era of 1935–80) their ability to control governance was limited and their ability to crash the economy again was stopped.

  That lasted from roughly 2016 through about 2066—much like the fifty-year period after the crash of 1929.

  But then your generation’s Lewis Powell, Jude Wanniski, Milton Friedman, and—ultimately—Ronald Reagan emerged. Your generation’s very wealthy—your equivalent of our Koch brothers and Walton heirs—found people to draft policy papers, invent institutions, write novels, and busy themselves in the political arena.

  Your Federalist Party, which grew out of the ashes of our Republican Party after its internecine wars with its billionaire-funded Tea Party faction, began to convince people that the social safety net that had kept our nation stable and secure for two generations was a terrible thing. They argued that too much money was going to the lower rungs of society, particularly those they suggested oh-so-subtly were genetically and intellectually inferior. Those people should know their place, and it was ridiculous, they said in the 2060s, that everybody should enjoy basic levels of safety and security in society. After all, they said, without the threat of homelessness and illness, why would they ever bother to get out and work?

  Of course, what all that rhetoric hid was the Federalists’ efforts to shift wealth—and power, particularly political power—from the “rabble” (as Federalist John Adams called the working classes) to the Economic Royalists themselves. Steadily, steadily, through the 2070s and 2080s, they cut away at the social safety net. And just like Warren Harding in 1921 and Ronald Reagan in 1981, your Federalist politicians put in place policies—from huge tax cuts on the Economic Royalists to dilution of the anticorruption laws passed in 2016–17—that cut the economic and political power of average working people and shifted it to the corporate and inherited-wealth elite.

  If you’d looked back at our history, from the eras of the Cotton Kings in the 1850s to those of the Robber Barons of the 1900s, the Economic Royalists of the 1930s, and the Republicans of the 1980s, you’d have seen the beginnings of the process. The front men for the Economic Royalists—you call them the Federalists, we called them the Republicans, during Lincoln’s era he called them Secessionists—were busy as termites gnawing holes through the policies that had kept them in check for two generations.

  Through that third generation of the 2060s and 2070s, nobody much noticed, although the political rhetoric had taken on a harder edge. By the 2080s, they had pretty much seized control of most state and federal legislative and judicial bodies. And they had the economy roaring white-hot, making the top 1 percent richer than any kings of old, before the crash that happened in 2090.

  Learn from history.

  With the invention of the cotton gin and other steam-operated machinery, our economy in the American South had exploded in the 1840s and 1850s. Same with the banking industry in the American North. And then they all collapsed in the Great Crash of 1856, which led to the Civil War.

  While our economy had been largely based on slavery before the Civil War, we built our way out of it with the Industrial Revolution and the use of coal and oil for power instead of the muscles of slaves. But that, too, got taken over by the Economic Royalists in the 1920s, leading to the Great Crash of 1929.

  Out of the ashes of that crash, America was rebuilt by the New Deal, whose cornerstones were high tax rates on the Royalists, unions for the workers, and a well-informed electorate thanks to the Fairness Doctrine, which required radio and TV stations to give free time to political candidates. All three of those pillars began to disintegrate during the 1980s with Reagan, leading to a generation of “hot-bubble” economies, just like you were experiencing before your crash.

  After our Crash of 2016, we built our way back to prosperity by using alternative energies, building a national transportation and energy infrastructure, and stripping the Economic Royalists of their ability to pursue so-called “free trade” policies that not only decimated our nation but those we traded with as well. We shifted from Reagan’s laiss
ez-faire economics to the regulated economics of the Founders, of Lincoln, of FDR. And we built large community- and national-based cooperatives as alternatives to raw capitalism, with workers having ownership stakes in the businesses for which they worked.

  You, too, are now facing an economy in ruins and a world in turmoil. Climate change has altered the face and economy of every nation on the planet, and your generation of Economic Royalists figured out how to profit from it, watching the trends and carefully buying and selling lands and businesses as people were forced to move from areas where deserts were on the march into areas that had become more habitable than before. But they overreached, ended up owning too much in too few hands, and so—just like in all the cycles before, you and your children are paying for their greed.

  Learn from our mistakes, and from what we got right.

  You won’t have novel new power and economic stimulants such as steam, the way Lincoln’s generation did. You won’t have oil as a new resource, the way Teddy Roosevelt’s generation did. You won’t have unions, the way Eisenhower’s generation did. And you won’t have the explosion of an alternative-energy economy, the way my children’s generation did in the years after the Obama administration and the recovery from the Great Crash of 2016.

  But there will be something new in each of those areas.

  Looking forward from 2013, as I am now, I don’t know what it will be. But the one thing history—over ten thousand years of the history of civilization—tells us is that it will be something.

  Use it. But be very, very careful that, in doing so, you don’t hand your generation of Economic Royalists another tool they can use to once again rise up like lords and kings to take control. Keep it decentralized. As Thomas Jefferson urged at the founding of our nation, keep both power and economic strength local and broadly based. That will keep political power local and broadly based as well, which is the surest way to have stability going forward into the future.