01 Mar 2009
Associate General Counsel, AFL-CIOby Roger ThompsonTopics:
Damon Silvers (MBA ’95) tried to put his whirlwind day on hold just long enough to answer my queries about labor’s wish list for the new Congress and his role as a member of the Congressional Oversight Panel appointed to monitor the $700 billion Troubled Asset Relief Program (TARP). It was a losing battle. Over the course of an hour, he fielded a half-dozen urgent calls from his staff regarding a draft version of a report on TARP expenditures due to Congress the next day (December 10).
Silvers’s formative experience with labor organizing came during his freshman year at Harvard, where he worked part-time in a student dining hall and took an interest in the workers’ ongoing contract negotiations. When he started wearing a union button to work, “it just changed the relationship I had with everybody,” he recalls. “The management was very concerned about any student support for the employees, and the employees themselves were thrilled.” Twenty-five years later, he frequently testifies before Congress on behalf of labor’s agenda. Between staff phone calls, an unflappable Silvers weighed in on a variety of topics.
Is Detroit any less deserving of a congressional bailout than Wall Street?
No. The reason Congress voted in October to allot $700 billion for financial institutions was the risk that multiple bankruptcies would place the economy in jeopardy. Let’s apply that reasoning to the automakers. They are at the top of an economic food chain representing a large part of what remains of the American industrial economy. Should these companies file for Chapter 11 and fail to get financing, there could be a loss of several million jobs.
But the threat is far worse than those numbers suggest. I was speaking with a leading Japanese economic policymaker in Europe last week, and he confirmed the Japanese auto industry’s belief that its supply chain in the United States would be disrupted should the three automakers fail. That’s because key suppliers are dependent on having a mix of orders from Japanese and American firms. They can’t survive just on Japanese orders, particularly now when everyone’s orders are contracting.
What are your chief concerns about how the Treasury Department under former Secretary Hank Paulson (MBA ’70) chose to allocate funds from the $700 billion bailout program?
We would like an explanation for the frequent changes in approach, and what changes or circumstances gave rise to those changes in approach. We do not assume that making changes in response to changing circumstances is a bad thing. But the frequency of changes suggests a lack of clarity about what it is that Treasury is doing. The panel is required to produce four reports for Congress, the last of which is due on March 11, 2009. Read the reports at www.cop.senate.gov/.
In addition to shoring up ailing banks, should TARP funds be used to help homeowners avoid default on their mortgages?
I believe that the foreclosure crisis and the failure to restructure home mortgages in a manner homeowners can afford is at the heart of our financial crisis. We have paid a terrible price for not addressing the foreclosure crisis at its inception, but it is never too late to start.
How can the new administration address labor’s concern about the economic stagnation of the middle class?
The labor movement supports the agenda that Barack Obama has skillfully outlined for revitalizing our economy and rebuilding the middle class.
First, we have to have a real economic recovery package that is focused not on tax cuts that vanish like the air, but on reinvesting in the underpinnings of our economy and laying the groundwork for long-term prosperity. That means investing in infrastructure, clean energy, and education.
We need to address the health-care crisis and end the shame of tens of millions of Americans without health insurance. Finally, we’ve completely gutted the right of workers to organize in the private sector, to be heard in the workplace, which is a fundamental human right. That needs to be restored. Not just because it’s a fundamental human right, but because it underpins a functional, advanced, affluent economy.
How has the current system thwarted union organizing?
A union election is supposed to be the expression of the employees’ desires to bargain collectively and choose their own representatives. Yet, the law allows employers to require employees to attend meetings in which employers get to lecture them as to why they shouldn’t unionize. The employer’s legal right to coercively interfere with employees’ choices is at work in a way that’s completely inappropriate.
The election process itself allows for long delays in litigation and uncertainty. I worked on an organizing campaign at a textile mill in the early 1990s in North Carolina. On election day, the employer went through the plant and randomly fired people but didn’t necessarily target union supporters. It was illegal, but the employer never had to pay any significant fines and bought eight years of delay and litigation. By the way, it seemed to me that company could have learned that tactic from Stalin. That’s how Stalin maintained fear in the Soviet Union. He wouldn’t just shoot his opponents; he’d shoot people randomly.
The whole point of employer responses to workers’ efforts to exercise their legal right to have a union is to create an atmosphere of fear and tension in the workplace. And that’s inappropriate. It shouldn’t be like that.
Business groups are already raising a war chest to campaign against the union-backed Employee Free Choice Act, which would bypass secret ballot elections and permit workers to unionize based on a majority signing a union pledge card. What’s wrong with secret ballot elections?
If the Employee Free Choice Act were passed, workers who want a secret ballot election can have one. It’s just that the employer doesn’t have the right to force one. The kind of secret ballot elections we’ve had in American workplaces have resembled the secret ballot elections that we saw in the Soviet Union, where elections were conducted in an environment in which it was not really possible for people to make a free choice.
What are the legislative prospects for the Employee Free Choice Act in the new Congress?
President Obama has said many times he supports the Employee Free Choice Act. It passed the House in March 2007, and I believe a majority of senators in this Congress have indicated their support. But I’m not foolish enough to predict the outcome of legislative matters in Washington.
Traditional defined-benefit pension plans have withered in part because they were expensive for employers to fund, and in part because they weren’t portable. Can traditional pension plans make a comeback?
Of course, the answer is yes. What is Social Security but a universal, portable defined-benefit plan? We need to separate the issue of paying for retirement from the issue of structuring how we do it.
The fundamental problem we have right now is that we are not paying for retirement. Too many American businesses have used the opportunity to abandon defined-benefit plans as a way of moving away from providing retirement security. Retirement contributions by employers went from 8–9 percent of payroll in the 1970s to 1–2 percent of payroll over the last ten years. If we’re not going to put real money into retirement security, then there is no structure and no investment genius that will save us from having poor old people.
We’ve scrimped on retirement funding because it’s a way of hiding the fact that we have stagnant and falling real wages. We maintain current incomes by gutting long-term savings. It’s the phenomenon of a society that eats its seed corn.
Is labor backing legislation that would restore defined-benefit pension plans?
The labor movement has asked Congress and the incoming administration to start to look at what needs to be done to refound retirement security for working Americans on a broad basis. This is not a 100-day project, but it shouldn’t be a 10-year project. The crisis here is extremely serious and just keeps creeping up on us.
Critics blame globalization for putting U.S. wages and benefits into a downward spiral. How do we reverse that trend?
The idea that we should disengage from the global economy is mistaken. And the idea that any serious person is advocating that is a mistake. The issue is, to paraphrase HBS professor Michael Porter, what’s our strategy?
We have to have a strategy as a nation, but not just any strategy. In 2007, 40 percent of the profits of American public corporations came from financial-service institutions. That number should have signaled that trouble was coming, just as the fact that in the United States consumer consumption has gone from 65 percent to 70 percent of GDP since 1970. The idea that the United States can maintain 300 million people in a broadly middle-class lifestyle based on an economy of financial services is a nonstarter. It is also a mistake to believe that high-end activities will naturally occur in the United States. We are not inherently smarter than other people around the world.
So what should be the U.S. strategy?
We have to figure out what our high value-added contribution to the world economy is, and we have to be serious about pursuing it. It’s my belief that we ought to be focused on taking advantage of our current relative strength in both finance and technology to focus on energy transformation. This is something that has to be done, and it positions us to do something on a very large scale. Retrofitting our commercial building stock, not to mention our residential building stock, will require millions of workers at a decent skill level. These are elements of a strategy. Will it work? I don’t know, but the idea that we can have broad-based national prosperity in a globalized world without a national strategy has proven to be deeply foolish.
Class of MBA 1995, Section G
Class of MBA 1970, Section G