Steve Reads

(__Attention conservation notice__: 1600 words — honestly, I don’t try to write this much; it just comes out — on the second book I’ve read by the labor lawyer and one-time Congressional candidate Tom Geoghegan. You can’t go wrong with that guy.)

The short way to summarize this book is “Tom Geoghegan [‘the names pronounced gay-gun, which suggests a talent for coalition building‘] goes to Germany and gets his labor-lawyer mind blown.” Germany sounds like heaven for workers: lots of vacation, lots of manufacturing jobs (precision-made German products are still the envy of the world), health insurance for everyone (of course), free education, etc., etc.

The thing you have to remember about Geoghegan, going into this book, is how monumentally sad he is about the state of U.S. labor, without being a wimp about it. Anyone who’s read his earlier [book: Which Side Are You On?: Trying to Be for Labor When It’s Flat on Its Back] — and everyone really, really needs to read that book — already knows this. Geoghegan’s been working as a labor lawyer for probably 30 or 40 years, at various times for the Mine Workers and the Teamsters. He seems to have known forever that labor is doomed, doomed, doomed, but unlike virtually all of us he’s continued to fight for it. He’s probably foregone a few million dollars in income by now, all so that he could fight for what he believes in. When Rahm Emanuel vacated his seat as the Congressman from Illinois’ fifth district, Geoghegan jumped into the race and became the darling of liberals everywhere. Sadly, he lost out to someone who will surely not fight for regular people nearly as much as he would have.

Now take this guy and bring him to Germany: unions cover a sizable fraction of the population, and there are works councils complementing the unions. The German welfare state has been in the making since Bismarck, with a sizable kick from the American New Dealers who ordered German companies to make nice with labor after World War II. It’s a labor lawyer’s dream.

Geoghegan stumbles through this dream with a mix of awe, confusion, and disbelief. Surely this can’t work. Surely this is going to be replaced soon enough by American-style capitalism, where few people trust that they’ll have jobs when they wake up the next morning. Because Americans absolutely lack job security, they work longer hours every year: you don’t want to be the guy who leaves at 6pm when all your coworkers are burning the midnight oil. If you get fired, there are plenty of people pounding at the gates to take your job. This leads to a very predictable downward spiral: we all work more just to avoid losing our jobs (not to mention raises, of which there are none).

A natural way out of this is some sort of coordination: either the union, or the government, or whoever, tells your company that it can’t make people work more than, say, 40 hours a week. This *would* be natural in a country other than the United States, where the default stance favors the company. If you want to give it theoretical justification, it goes something like this:

* Companies whose workers are covered by unions are less productive than non-unionized ones, essentially because unions are a form of monopoly of the labor force.
* In a free market, competitors will come in and produce the same goods for less money.
* Ergo, in a free market, unions will eventually disappear.

This does lead one to ask why places like the [newspaper: Wall Street Journal] turn this from a descriptive to a normative claim: not only *will* the free market kill unions, but the government should do all it can to bust up unions. There are many questions one could ask here — for instance, why workers shouldn’t be able to engage in whatever kind of voluntary organization they want — but we’ll set those aside for now.

What I want to get at here is that, in the U.S., we start our economic discussions at the individual-laborer or individual-firm level. We focus on individual widgets, and the most efficient production thereof. We focus on individual economic transactions, executed atomically. And the only way that we allow people to interact in a market is by way of price signaling: prices go up in the market for some good — let’s say steel — and everyone downstream from that good reacts appropriately: producing fewer cars, producing cars with marginally more plastic, etc.

There are problems with this model, which I’ve been writing about for quite a while (see Bowles and Stiglitz, say). But my point is more about the way we discuss these things: the U.S., no matter the state of the economic frontiers, starts with this particular atomic view of economics.

The Germans apparently start from entirely the opposite side of things, with an entirely different set of givens. For instance, suppose you know that you won’t be fired for a long while. This is going to lead to a much different world than the American one, where (as Geoghegan notes) we change jobs six times, on average, by age 30. Think of how much more willing we’d be to invest in skills and really view our companies as our partners.

Or, to really blow your mind, how about this: half of the membership in German boards of directors is named by the employees. Geoghegan gives the example of a Barnes & Noble: half of the directors of B&N, in Germany, would be named by its minimum-wage clerks. Consider the wide-ranging effects this would have, both on the way the company is run and on the very meaning of the word “democracy.” You’d have a say in how your work is run. Considering that half of your waking hours, or more, are spent at your job, any full-throated democracy should democratically control the workplace.

Thinking about economics in this broader way — over decades, over scores of products, over the entire cycle of education-employment-retirement — is just not something that the American economic discourse is ready to do. Every discussion essentially has to start with atomic transactions carried out by atomic laborers and signaling to one another only by means of prices.

In consequence, Germany blew Geoghegan’s mind just as much as it would have blown mine. Actually, I think maybe Geoghegan was faking it a bit, for the sake of his audience, in the same way that the fine folks at Planet Money do a lot of the time: He asks, “Now wait a second: you’re telling me that you could rise up from being a bookstore clerk to being on the *board of directors?*” just so that his interviewee can cast a genial smile upon him and say that verily, it is so.

Geoghegan casts himself as the naïf, wandering about in a perpetual daze. It’s absolutely charming. And his writing here carries the same folksy attitude that charmed everyone in [book: Which Side Are You On?]. He’s just a friend of yours, walking with you around Germany and asking everyone if he’s really stumbled into the dream world that he thinks he has.

Of course he wants to bring some of that world back to the U.S., but right now a true U.S. social democracy can only be described as a pipe dream. Lots of us (though not, I wager, Geoghegan) dreamed that Obama would bring New Deal version 2 to the U.S. after what looked like Great Depression version 2: the banks only continued to exist because the U.S. taxpayer paid for them to live, and a Democrat convincingly trounced the crotchety representative of the ruling party. Two years later, we ended up with sort-of-universal health insurance that hopefully won’t be revoked by the time it’s supposed to kick in, and the banks are more powerful than ever.

Actually, there’s another good example of where economics needs to consider the larger picture: we had a great chance to weaken the banks’ *political* power, and we didn’t take it. Banks have always been a special kind of entity, because (not to sound like too much of an idiot) that’s where the money comes from; no other industry can say that, and it gives banks a special role in the economy that no one else can claim. It also gives them *political* power that no one else has. For a short time, we had the power to neuter them politically and cut them down to size, thereby weakening their control of our leaders and making future bailouts less likely. But this entire line of thought doesn’t make sense unless you can picture companies in the context of an economy overseen by a government, and unless you can picture money as a special kind of thing that’s different from any other kind of commodity. (It wasn’t until Keynes, in the 1930s after economics had been around for two centuries, that the discipline started treating money as altogether different from wheat or rice.)

So it doesn’t look very likely that the U.S. will resemble Germany anytime soon. The best Geoghegan can hope for is that the rest of the European Union will follow Germany’s social-democratic lead. Maybe, if that happens, our closest industrial competitors will finally push us in the right direction.

There’s no one you want on your side more than Tom Geoghegan to understand this world. He’s funny, he’s smart, his ethics are on the side of the angels, and he’s been fighting for you for a long, long time.