Friday, February 24, 2012

The Real Problem with Unions: Not Enough Expertise, Discipline, Nerve and Organization

Doug Henwood:

Obviously the bankers have the advantage in a debt crisis; they hold the key to the release of the next post-crisis round of finance. Anyone who wants to borrow again, and that includes nearly everyone, must go along. But that’s not their only advantage. The sources of their power were cited by Jac Friedgut of Citibank (ibid., p. 192):

We [the banks] had two advantages [over the unions]…. One is that since we were dealing on our home turf in terms of finances, we knew basically what we were talking about, and we knew and had a better idea what it takes to reopen the market or sell this bond or that bond…. The second advantage is that we do have a certain noblesse oblige or tight and firm discipline. So that we could marshal our forces, and when we spoke to the city or the unions we could speak as one voice…. Once a certain basic process has been established that’s an environment in which our intellectual leadership…can be tolerated or recognized…we’re able to get things effected.

It’s plain from Friedgut’s remarkably candid language that to counter this, one needs expertise, discipline, and the nerve and organization to challenge the “intellectual leadership” of such supremely self-interested parties. According to the union boss Victor Gotbaum (in an interview with Robert Fitch, which Fitch relayed to me), the unions’ main expert at the time, Jack Bigel, didn’t understand the budgetary issues at all, and deferred to Rohatyn, whom he trusted to do the right thing. For the services rendered to municipal labor, the once-Communist Bigel was paid some $750,000 a year, enough to buy himself a posh Fifth Avenue duplex (Zweig 1996). Gotbaum became a close friend of Felix Rohatyn. Politically, the unions were weak, divided, self-protective, unimaginative, and with no political ties to ordinary New Yorkers. It’s easy to see why the bankers won.

What was at stake in New York was no mere bond market concern. In a classic 1976 New York Times op-ed piece, L.D. Solomon, then publisher of New York Affairs, wrote: “Whether or not the promises…of the 1960’s can be rolled back…without violent social upheaval is being tested in New York City…. If New York is able to offer reduced social services without civil disorder, it will prove that it can be done in the most difficult environment in the nation.” Thankfully, Solomon concluded, “the poor have a great capcity for hardship” (quoted in Henwood 1991).

Behind a “fiscal crisis” lurked an entire class agenda, and one that has been quite successfully prosecuted in subsequent crises for the next two decades. But since these are fought on the bankers’ terrain, using their language, they instantly win the political advantage, as nonbankers retreat in confusion, despair, or boredom in the face of all those damned numbers.

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