bailout

Here’s what Cas says in a comment on Robert Reich’s post, The Logic of Keynes in Today’s World.

I was thinking of a deeper problem that’s related to this. We hear a lot of talk about the class differences between the banking and auto bailouts. What that reveals is that there’s no sense of common destiny between different parts of the country. It’s true that working people need a functioning banking system, but it’s also true that bankers need a functioning manufacturing system. The banks have long operated as if the capital they play with has no relation to anything made in the real world. So when they’re in trouble, most Americans don’t care because the financial world is so apparently irrelevant to most of us. And the bankers don’t care about the rest of us because our fate is not clearly intertwined with theirs.

What we need is a new social compact that explicitly links us to a common fate. The first thing we do is index all executive salaries to the lowest wages in society. No executive should make more than X times the lowest employee of the company or any of its subcontractors and outsourcers. What’s more, executives as a class should get bonuses only in years where other workers as a class get proportional bonuses. As for capital, whenever government bails out private industry it should get common shares that in the long run are held 50/50 by workers and the public at large. That means that a fully “nationalized” company would be 1/3 private management, 1/3 workers, and 1/3 public control. Everyone would have a stake. Regardless of whether there is public control, companies should be required to give stock to employees above and beyond a liveable salary proportional to executive stock bonuses using the same X:1 ratio used for income.

With this arrangement, profits would go to everyone in profitable years. Losses would be shared. No one would get a bonus or bailout without everyone getting a bonus or a bailout. We would have a common interest, and there wouldn’t be fully isolated classes living in different conceptual worlds.

What’s good for GM should be what’s good for its workers, and what’s good for America. And what’s good for workers should be good for GM and America. And what’s good for the country should be what’s good for its workers and companies like GM.

This would also lead to a reconsideration of reforms such as single-payer health insurance. We’re all in this together, so we should all have access to quality health care instead of creating a two or three-tier system that in th end fails almost everybody.

Monday, 15 December, 2008