By Les Leopold
Over the next two years 1,400 Carrier air conditioner workers will see their decent paying jobs migrate to Mexico. This highly profitable Indiana facility, represented by the United Steel Workers, will make even more money south of the border where workers earn less in one day than the Indiana employees make in one hour, according the New York Times. (A YouTube video of the heartbreaking plant closing announcement has nearly 4 million views.)
While Hillary Clinton remained silent on this impending catastrophe, Donald Trump turned this facility into the poster child for what’s wrong with U.S. trade policy. He pledged that if the plant moved, he would place a 35% tariff on all Carrier products imported from Mexico as well as a similar duty on the Mexican products of its parent company, United Technologies. Trump boasted he would make the company cry uncle: “I’ll get a call from the head of Carrier and he’ll say, ‘Mr. President, we’ve decided to stay in the United States. That’s what’s going to happen — 100%.”
Carrier became the 100% battering ram with which to pound Hillary Clinton and her embrace of NAFTA and other trade deals. In doing so, Trump snatched the plant closing issue away from the Democrats, something the party apparatchiks didn’t recognize until the Trump votes poured in from the Rust Belt.
“If progressives were well organized — a very big if to be sure — we should join with these workers (represented by the United Steelworkers) to build mass demonstrations at United Technologies headquarters, hedge funds offices and the White House. Such a series of protests would keep the Carrier shutdown on the front burner and provoke Trump to live up to his job promises.”
The Carrier case, however, was not just the usual media meme about Trump backing the less educated, white working class. In fact, the threatened Indianapolis plant is 50 percent African-American. Women make up half the workforce on the assembly lines and the facility also employs dozens of recent Burmese immigrants, well regarded by their co-workers. So making this facility great again actually means coming to the aid of America’s increasingly diverse labor force.
But Trump is stumbling into something far more problematic than trade deals. At the heart of this story is the financial strip-mining of America organized and led by Wall Street.
Why does United Technology want to move to Mexico?
Let’s round up the usual suspects: .
- They can’t turn a decent profit using unionized American workers? No. Carrier is the most profitable division of United Technologies.
- NAFTA caused this proposed move? Not likely. NATA is 22 years old, so unless United Technologies is the corporate Rip Van Winkle, they could have moved long ago.
- New technologies make the destruction of decent paying manufacturing jobs inevitable? Not at all. In this factory transplant, they are redeploying the same technologies already in use, machine by machine.
So if profits, trade and automation are not the driving forces, what is?
The major pressure to shift jobs abroad comes from the big hedge funds and private equity investors who have one goal only — to siphon as much wealth as possible out of companies like United Technologies. High profits, low profits, or no profits, they pressure company after company to squeeze their costs as much as possible so that there is more money available for the company to buy back its own shares. Why? Because stock buybacks immediately raise the share price and give the big hedge funds an instant windfall.
Before a 1982 SEC rule change — a major turning point in the disastrous deregulation of finance — massive stock buybacks were illegal because they were considered stock manipulation, and a major cause of the 1929 crash. Now, Wall Street extracts billions from this destructive activity. It’s what drives runaway inequality. (For the definitive account see Professor William Lazonick, “Profits Without Prosperity“ Harvard Business Review)
CEOs cherish this process because they now derive the majority of their compensation through stock incentives. So by acting as Wall Street shills, they drive up the price of stock and become richer and richer themselves.
In 1970, before stock buybacks became the norm, the pay gap between the top CEOs and the average worker was $45 to $1. Today it is an incomprehensible $844 to $1. (See Runaway Inequality) So there’s a co-dependency between the big hedge fund investors and the United Technologies CEO to move the Carrier facility, obtain more cash flow, and use it all to buy back more stock.
What proof do we have? Since 2006, United Technologies has spent over $25 billion on stock buybacks, amounting to over fifty percent of its net income. Last year, just before it announced the move to Mexico, the parent company instituted a $10 billion stock buyback and the stock price immediately jumped 5%. This means United Technologies used 131.4 percent of its net income to move money from the company to its major investors and top officers.
Gregory Hayes, United Technologies CEO, gets his share of the booty. Since 2012, he received $44,100,000 in total compensation, about half of which derives from stock incentives. Fifty-six top hedge funds have taken a stock position in the company to reap the bounty from these stock buybacks. (Many thanks to Matt Hopkins for this data.)
And so Trump bluffed his way into the soulless heart of an economy dominated by Wall Street. Does he have the guts to take on the fundamental evil of stock buybacks? Not unless he is forced to. It’s so much easier to blame Mexico and China.
Is Carrier a major opening for the Democratic Party?
Hillary Clinton’s benign neglect of these workers is symptomatic of the party’s ongoing romance with Wall Street elites — the source of so much of the party’s funding. These political leaders, their high level campaign officials and the party’s financial backers have never had it so good. They won’t suffer one iota from the loss of those 1,400 Carrier jobs. They won’t have to contemplate finding a replacement job at Wal-Mart for $13 an hour. They won’t have to worry about how to pay off their kids’ student loans. Instead, they will continue to enjoy the fruits of America’s wealth that is rapidly flowing to the top 1 percent.
Unless the party is captured by the Sanders forces, there will be little concerted action to outlaw stock buybacks. The establishment Democrats will do next to nothing about the never ending rip-off of the American people by Wall Street elites.
What Should Progressives Do?
Right now we are in the streets bearing witness to the threats posed by Trump to immigrants, people of color, Roe v Wade, LBGTQ rights, and the environment. These protests build a protective sense of community, a public space to share pain and anger, a place to shield each other against deportation and Trump vigilantes. But to date, these emotive and reactive responses provide no alternative path or program. Love trumps hate is no match for what will soon be jammed through Congress.
Moving from Trump, the person, to the Wall Street horrors that give us Trump.
The Carrier relocation offers new possibilities. It allows us to protest en mass about what Trump either does or does not do in behalf of working people. If progressives were well organized — a very big if to be sure — we should join with these workers (represented by the United Steelworkers) to build mass demonstrations at United Technologies headquarters, hedge funds offices and the White House. Such a series of protests would keep the Carrier shutdown on the front burner and provoke Trump to live up to his job promises. Imagine if Black Lives Matter, the Sierra Club, 350.org, the Moral Monday movement, the Sanders supporters, and other unions and church groups rallied around these at-risk workers. That would send a loud, clear message that the progressive movement for economic, environmental and social justice cares deeply about the plight of working people — black, white, Hispanic and immigrant alike.
Not only would it challenge Trump’s bluster, but it would create a litmus test for the Democratic Party. If we took to the streets for this kind of working class cause, the Democrats would finally be forced to decide whether they are, as economist James Galbraith put it, “the party of the predators or the prey.” The Democrats lost this election because they tried to be both. That’s why Hillary didn’t think twice about taking all that Wall Street cash for her inane private speeches. That’s why she could talk so glibly talk about “the deplorables” to a closed-door donor meeting. The Democratic elites were confident that they could build a new winning coalition of women, people of color, immigrants and upper income voters. They thought they didn’t really need the working people left behind by Wall Street’s financial strip-mining. They do now.
There are other critical political realities to consider. By not acting in behalf of these workers, we continue to cede the jobs terrain to Trump. If for some reason Carrier does not move, Trump will get all the credit — and justifiably so. But if our movement sustained the demand in a systematic way, the victory would be for all working people, not just Trump. We would become the movement for jobs and justice.
But wait, why fight to save these manufacturing jobs when the planet is heating up, black men are being slaughtered by the police, and millions of immigrants are about to be deported?
This is a time of reckoning for progressives. It is time to face up to the fact that we will win very little unless we recognize that working people of all shades must become a vital part of a common progressive movement. Their inclusion, however, requires that we climb out of our issue silos. We need to build a state, local and national progressive alliance that unites our specific issues. Bernie Sanders proved that such a common effort has enormous potential. He successfully made the case that the actions of the rapacious billionaire class unites us all as we struggle to reverse runaway inequality, eliminate discrimination, provide universal health care and free higher education, while also protecting the planet. We came together then around a broad social democratic platform. We need to do it again.
For starters, Sanders should deploy his prodigious list of small donors to raise substantial funds to build a national movement infrastructure. An opening campaign could focus on Carrier and highlight the evils of stock manipulation. Working people all over the country would take notice.
Yes, we are hurting. Yes, we are fearful. Yes, we are incredulous that the country we love could turn to a demagogue. But, we have just entered one of those rare historical moments when the poignant words of Joe Hill, the labor troubadour, again ring true. In a telegram written to the radical labor leader Bill Haywood, just before Hill was executed on trumped up charges 101 years ago, he wrote:
“Don’t waste anytime mourning: Organize!”