http://www.statesman.com/life/content/life/stories/books/05/25/0525bizbooks.html
Roger Lowenstein's 'While America Aged' and Steven Greenhouse's 'The Big Squeeze' spell out how we got where we are and why it might get even worse
By Robert Elder
AMERICAN-STATESMAN STAFF
Sunday, May 25, 2008
Here are two vivid tales of financial mismanagement, greed, shortsightedness and self-interest that could well shake your faith in (1) your ability to retire with any sense of security and (2) your ability to hold onto a decent job until you make it to retirement or grim death claims you.
Ah, but these books are no downers. Roger Lowenstein's "While America Aged" and Steven Greenhouse's "The Big Squeeze" employ more than enough entertaining histories, stories and characters to qualify as summer reading (for wonks, but summer reading nonetheless).
Lowenstein, a contributing writer for The New York Times Magazine, recounted the meltdown of the Long Term Capital Management hedge fund — run by financial masterminds too smart to fail — in "When Genius Failed." His 13-year-old biography of Warren Buffett, recently reissued, is a masterpiece of explanatory journalism.
Here he tells the story of America's pension woes through three crises: the ballooning of General Motors Corp.'s welfare state; the New York City transit authority's ride to near-financial ruin; and the city of San Diego's corrupt slide to the edge of bankruptcy. They are different entities with different casts of characters, but the stories share a common theme — public officials, corporate chieftains and union bosses who all are tempted by pensions for the same reason that banks tempted Willie Sutton. It's where the money is.
In some respects, a pension is a better target than a bank; when it's raided, the ultimate damage often isn't known for decades.
In 1973, for instance, Rick Wagoner, the current CEO of General Motors, was a 20-year-old college student with zero interest in the auto industry. That year, his future employer and the United Auto Workers reached a monumental deal called "thirty and out" — a full pension for a worker who put in 30 years. An auto worker who joined GM a couple of years out of high school could retire at age 50 with full benefits, plus a little something extra — enhanced benefits until he or she was old enough to also collect Social Security.
As Lowenstein dryly notes, "Pensions have long lead times." The pension time bomb had exploded by the time Wagoner took over. GM today is in a ruinous state, and Delphi, the auto parts supplier it spun off as a separate company, is mired in bankruptcy proceedings. The GM worker, once the exemplar of employment and retirement security, is seeing huge cuts in both categories.
Big personalities run through "While America Aged." Walter Reuther, the legendary UAW president, helped win ever-higher pensions for auto workers with the grudging acquiescence of GM and other industry titans. The industry, fat with profits, needed to keep the assembly lines humming, and seemed to barely give a thought about the financial tsunami they were agreeing to.
But Reuther had the foresight to recognize that only the federal government could provide a true social safety net — a national pension and health-care system. President Harry Truman came close to proposing such a plan, but the auto industry fought the idea, preferring instead the piecemeal approach of funding its own pension plans. We know how well that has worked out.
Putting on the hurt
In "The Big Squeeze," New York Times reporter Greenhouse sees the implosion of GM as "a pivotal test of whether American manufacturing and the American middle class can survive in a globalized world."
General Motors is not a great test case; the automaker has inflicted plenty of wounds on itself over the past half-century. But the globalization argument works well for Greenhouse in the broader sense as he explores why some American workers are being hung out to dry by stagnant wages, diminished benefits and an ever-present threat of job loss.
"The Big Squeeze" contains chilling stuff: a FedEx contractor sent packing shortly after cancer surgery (her third bout with the disease); abuse of immigrant workers; sexual harassment; and creepy high-tech ways of invading worker privacy.
Some of the usual villains are here — Wal-Mart, apparently finding new ways to make its workers miserable, takes its lumps — but this isn't a one-note book of outrage. Greenhouse ties the wrenching personal stories to a deep and clear-eyed understanding of the American workforce and economic history.
And whatever long-term good is produced by globalization, Greenhouse make a pretty good case that so far it has dragged down U.S. wages and cost jobs. As he puts it, "Those whose services can be delivered over a wire are in danger," and that's a lot of people.
Then there's the impact of a new reckless age of global finance, where, Greenhouse writes, "on any given day, trillions of dollars are sloshing around the globe as investors maneuver to maximize the return on their money." In this environment, there is little regard for the welfare of workers, wherever they may be located.
Both writers offer prescriptions for change. Lowenstein says the age of private pensions is probably in irreversible decline but that public pensions can be saved. He recommends requiring that "every dollar of state and local pension benefits is funded as the benefit is accrued — not when the legislature or city council happens to feel like it."
Greenhouse recommends ambitious wage and retirement-security reforms, and a few changes that could be accomplished in relatively short order — better workforce training, more student financial aid, and cracking down on "wage theft" and other employer abuses.
Common-sense advice, to be sure. For anything to change, though, policymakers and the public must wake up to the deterioration of pensions and retiree health care and the stresses being layered on the American worker. These books are a great place to start. |
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