“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford in 1922
Good morning and welcome back to Bygone Relics, I’m C Thomas Printer and the reason we talked about Fordism last week is because he largely invented the urban middle working class in America. There was a middle class, but it was comprised of entrepreneurs. The butcher, the baker, the candlestick maker all owned small businesses and made money which was spent across the neighborhood. Now all of their money exits the neighborhood and belongs to the Walton family. But Ford allowed the skilled worker to join this middle class, a class that had enough money to spend some money on leisure and afford an automobile etc. but as we learned, that was due to productivity gains. Waltons pay their blue vests as little as possible and even lowered starting wages two weeks ago. Now Asian labor is way more productive than American companies, in fact the best thing an American company can do for their bottom line is move overseas. How do I know that, because its been happening for 40 years. Nike, Apple, the textile industry, steel manufacturing, just go down the line and the American worker can’t do it as well or as cheap as Asia. Our entire consumer economy depends on the government printing money and giving it to Americans to buy cheap shit at Wal-Mart made in China. That’s our economy.
But things are starting to change, and it is about damn time. The United Auto Workers union is striking the big 3 automakers Ford, GM, and Stellantis. What the hell is a Stellantis? The UAW have never striked against an industry before, it has always been one automaker at a time. This is the nuclear option. They are demanding 40% wage increases and a 32-work week. Does that sound like Fordism? You bet. Why are they doing that, because of the imbalance between worker/management compensation. Management has been paid in stock options now for years, and this has incentivized them to push up the stock price at all costs which is good for their direct compensation. According to ABC News, at GM, the median worker pay was $80,000 in 2022 which means it would take 362 years to equal CEO Mary Barra’s compensation for the year. At Ford, it would take 281 years, and at Stellantis it would take 365 years. Now compare that to 15 to 1 in 1965. You think the laborer feels left behind in today’s society? You betcha. If Henry Ford wants to make 362 times the rank-and-file worker, that is one thing. It was his idea, his capital, his neck on the line, and his company. This is management that gives themselves these raises for running the companies right into the ground or into bankruptcy like GM in 2008. They then demand government bailouts for being too big to fail while executives enrich themselves yet demand concessions from the unions like the end of the defined benefit pension plans.
Management is pushing back, Ford CEO Jim Farley said “If we signed up for the UAW request and instead of distributing $75,000 in profit sharing in the last 10 years, we would have gone bankrupt by now,” Farley said. “The average pay would be nearly $300,000 for a four-day work week. A fully tenured school teacher in the U.S. makes $66,000. Some of the military and firemen make $60,000. This is four or five or six times what they make. … You want us to choose bankruptcy over supporting our workers?” No Jim, I don’t think your workers should make 4-5 times a fireman, I think you shouldn’t make 281 times a worker. Your SVPs make too much, your VPs and Directors, and managers all probably make too much in comparison to the worker. They like most companies today have a top heavy compensation system.
Now I also see Farley’s point as well. The easy solution is to point one finger at Management and say you make too much which is probably true and there’s another finger and say unions have made Detroit unproductive and overpaid, and that might also be true. Consider this, Tesla doesn’t have unions and their average wage and benefits are $45/hour versus the Detroit companies’ unionized cost of $66. How can this be? What is the difference, the Tesla workers get stock options and aren’t unionized. Do you now see why Elon Musk has been in the news saying the Fed needs to pivot on interest rates? Tesla’s stock price which was over $400 per share in late 2021 is at $274 down 33%. The stock hit a low of $102 earlier this year. If I am a worker at Tesla and my options aren’t making me wealthy then I am going to call the unions and say how do I get some of that $66/hour money. That’s their current wage, and if the union gets their way the wage will be $136/hr. Do you really think Tesla is going to get away paying $45/hr when union wage is going to be 90-100-$125/hour? How about when they realize that Elon Musk’s Tesla compensation for 2021 would take them 18,000 years to earn? How, stock options. American management compensation is addicted to the stock market rising.
Now, Musk is the owner and it is his company so he deserves this, I just said this about Henry Ford so doesn’t it ring true for Musk. He founded the company, well he didn’t, he forced the original owner out and negotiated calling himself the founder, but he has been the driving force behind the company for certain. He deserves that money, well not so fast… He has been earning revenue by selling billions of dollars of tax credits to other companies and getting his sales prices’ reduced by government tax credits. Somebody buying a Tesla gets to pay Musk his asking price which goes to Musk and company and then they get to pay less tax at the end of the year which reduces their tax burden which shifts some of that burden to me. I don’t want a Tesla and I don’t want to pay more in tax because someone else wants one. When Tesla wants to build a new factory they play one state against the other to get tax credits and other concessions. This increases the tax burden on the worker in the state who does pay taxes. But more importantly this lack of tax revenue is causing governments to run deficits. The governments need money to pay for all the dumb things they spend money on. We have done that episode when we read about the foolish spending of the government in the Cares Act. This is how the gap between the haves and the have nots is getting wider and wider. The rich, management and companies avoid paying tax, and the workers are paying the tax. Gas tax, income tax, property tax, inflation tax, and the gap between tax revenues and government spending is getting wider and wider and this is unsustainable. This is how the national debt is adding $1 trillion in less than 3 months. California last year ran a $32 billion deficit yet in June they passed a $310 billion budget while extending lucrative tax breaks for the state’s iconic film and television industry.
The film and television industry? But C Thomas, isn’t Hollywood striking? Yes they are, the SAG-AFTRA strike (Screen Actors Guild-American Federation of Television and Radio Artists) are currently striking as well. This is the first time actors have initiated a labor dispute since 1980, which was when we last had what? Inflation. The cost of living tax which is affecting everybody that works for a living, but those lucrative tax breaks in the budget benefit two groups- the studios and the politicians that get donations from the big executives and their companies. So on Aug. 15, 2023 Lucasfilm announced it was shutting down its Singapore operations. This is where they outsourced some of their animated filmmaking to take advantage of cheaper overseas labor. It is being shut down due to the SAG-AFTRA strike. Lucasfilm was founded by George Lucas, net worth $5 billion and currently owned by Disney whose CEO Bob Iger, whose net worth was $350 million. The average hourly worker at Disney makes $19.41/hour. The discrepancy is everywhere, and you the listener need to be made aware of it, if we are to do something about it. I see why they are striking; I see why the autoworkers are striking, and I can see why Tesla workers are going to be unhappy in the future, but do I blame Musk or Lucas or Iger or the auto execs? Not really, they are only playing the game within the rules. My problem is with the rules.
Let’s make some new rules…Any company that exports jobs to Singapore to make animated films or automaker that opens plants right across the border in Mexico to make cars will have their management make no more than 5 times their average starting wage for an hourly worker. Done. Any company that takes tax credits and pays less taxes in a calendar year than their employees did will be forced to double their employees wages. Done. How about political candidates run without taking political party money so that the people can vote for them know that they haven’t been bought off by special interests? Done. C Thomas, stop it. You are being unreasonable. Ok, fair enough how about different rules for Congress? “Pass a law that anytime the deficit is more than 3% of GDP all sitting members of Congress are ineligible for reelection.” That is Warren Buffet solving the national deficit in 5 minutes. He goes on to say “Now you have the incentives in the right place right?…If you guys can’t get it done we will get some other guys to get it done.” This is what needs to happen. The rules of the game aren’t fair for the majority of the populace and when that happens it can lead to social breakdown or radical ideas. We have a country of laws that can be changed if we are educated voters and active citizens. We must demand better candidates because it is important to make the right changes. How can a country that prospered when Henry Ford doubled his worker’s way and shortened their workweek now have that same company say if we shorten their workweek and give them a 40% pay increase it will bankrupt the company? It is a game of incentives, and we must change the rules of the game. Next week we will look back to our history to see how the rules have gotten us here where management and the strikers might both be right. It is a microcosm of a much bigger problem…
“The United States is a republic, and a republic is a state in which the people are the boss, that means us. And if the big shots in Washington don’t do like we want, we don’t vote for them by golly no more.“ Nora Ericson in “Ranse” Stoddard’s one room schoolhouse in the movie The Man Who Shot Liberty Valance
Now if Mrs. Ericson can learn this lesson in an elementary Civics class in a one room schoolhouse, you would think that Americans would be able to learn this lesson when the entire population has a supercomputer in their pocket.
Sincerely Yours,
C Thomas Printer
On this date in history…169 years ago to be exact, British and French forces defeated the Russians at the Battle of Alma endangering the Russian position on the Crimean peninsula. It is funny how we still hear shots in the same spots yet it is just different faces in the same places.
Today’s thought experiment…where are the sun’s rays directly over with regard to the earth?
Also born on this date…Red Cloud, the great chief of the Oglala Sioux who was the last American Indian in the west to wage and win a war against the U.S. government. His clan lived in peace with the white settlers until the settlers discovered gold near the tribes’ land. The US Army started building forts across the Lakota territory and Red Cloud waged war on them and forced the US government to abandon its efforts and back down.