Mitt Romney says, “Let Detroit Go Bankrupt.” In a New York Times article he gives his view of what, after bankruptcy, a reconstituted automobile industry should look like.

Romney says of American auto makers, “First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.”

Romney wants to downgrade the wages and benefits of workers, and claims that Walter Reuther, former head of UAW, once said to his father, George, “Getting more and more pay for less and less work is a dead-end street.”  And Mitt Romney proclaims, “You don’t have to look far for industries with unions that went down that road.”

But I would bet there is a second part to Reuther’s statement that Romney left out:  Getting less and less pay for more and more work is also a dead-end street.

Romney, in his editorial, fails to show any understanding of how much the auto industry has changed.  This report says:  “Union auto workers have already taken substantial hits on pay and benefits. For example, contracts negotiated in 2007 slashed wages for new workers by 50%. In addition, new workers will not be guaranteed any retiree health care benefits, and will not participate in the traditional defined-benefit pension plan. On top of that, the UAW agreed that the responsibility for health care benefits for existing retirees would be transferred from the auto companies to an independent trust, called a Voluntary Employee Benefits Association. Analysts now believe that the labor cost gap between the Detroit-based auto companies and the foreign transplants will be largely or completely eliminated by the end of the current contracts.”

Getting less and less pay for more and more productivity is not fair.  In Reuther’s time, each decade brought astounding new leaps in productivity to the auto industry.  Fewer and fewer man-hours were needed to build more and more valuable cars.  Reuther wanted his union members to share in the profit caused by increases in productivity.

How should productivity gains be shared is a huge question.  This article says, “While productivity is up nearly 20% since 2000, the real median hourly wage is up 3% overall and 1% for men, with none of this growth occurring over the three-and-a-half years since 2003. At the top of the wage scale—at the 95th percentile—real wages are up 9%.Real Wages Fail to Match a Rise in Productivity.”

And that article was printed in 2006.  The numbers would be even more dramatic now.  Since 2006, there have been enormous increases in wealth for the top 1% and even more dramatic increased in the top one-tenth of 1% of incomes.  The new wealth that has been created has not been shared.

A famous book, published in 1967 was Herman Kahn’s The Year 2000.  Kahn prophesied great leaps in productivity so that by 2000 we’d enjoy increased prosperty and, in addition, a 30-hour workweek, with 13 weeks of vacation per year, would be the norm. Kahn speculated how excess leisure time might be used.

Kahn got it right about a fantastic increase in productivity.  But his prophecy of universally shared prosperity was wrong.  Our democratic and free market system has failed to create a system where prosperity caused by increased productivity is reasonably shared.

An effective democracy would organize itself so that as the society’s wealth increases, all of its citizens benefit.  Our democracy is not working as it should.  At one time strong unions helped our democracy to be strong.  Romney and his friends may glory is the destruction of the unions, but they offer no vision by which average people have the opportunity to proper, they offer no vision as to how the increasing prosperity and productivity of this country can best be shared.

In the wake of yesterday’s decision to bail out Citigroup, Robert Reich questions the reasoning that puts such emphasis on saving banks, but so little on saving automobile manufacturers.  Reich says, “Citigroup is not much different from General Motors. It’s a company that once made lots of money but, through a series of management blunders, is now losing money big time. Citi’s shareholders and creditors are taking a beating, just like the shareholders and creditors of GM.”

Reich says there is not a good reason why banks should be saved and auto makers not saved.  Reich says, “In fact, there may be more reason to do the reverse. GM has a far greater impact on jobs and communities. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples that of Citi. And the potential social costs of GM’s demise, or even major shrinkage, is much larger than Citi’s — including everything from unemployment insurance to lost tax revenues to families suddenly without health insurance to entire communities whose infrastructure and housing may become nearly worthless. I’m not arguing that GM should be bailed out; as I’ve noted elsewhere, GM’s creditors, shareholders, executives, and workers should have to make substantial sacrifices before taxpayers should be expected to sacrifice as well.”

Excerpts from Reich’s article:

• The current panic on Wall Street is not a “run” in this sense. It has almost nothing to do with banks’ roles as financial intermediaries. It’s a run on the shares of Wall Street banks, not a run on the pool of savings they oversee. The mutual funds, pension funds, and deposits they hold are perfectly safe. Before the asset bubbles burst, financial institutions were generating whopping profits, so naturally they attracted many investors and creditors. After the burst, the profits disappeared and their share prices plunged. These days, you’d be hard pressed to find many people who want to invest in or lend to financial institutions. So what? If you’re looking to make wise investment choices, Investing Tips for UK Residents can help you navigate the complex landscape of stocks, bonds, and other opportunities.
• Citi is about to be bailed out while GM is allowed to languish. That’s because Wall Street’s self-serving view of the unique role of financial institutions is mirrored in the two agencies that run the American economy — the Treasury and the Fed. Their job, as they see it, is to keep the financial economy “sound,” by which they mean keeping Wall Street’s own investors and creditors reasonably happy.
• Because the public doesn’t understand the intricacies of finance, it’s easily persuaded that this is definition of “soundness” is the same as keeping savings flowing to the banks so that the banks can lend to them to Main Street. That’s why the public and its representatives have committed $700 billion of taxpayer money to Wall Street and another $500 to $600 billion of subsidized loans to the Street from the Fed — bailing out the investors and creditors of every major bank, including , any moment, Citi — only to discover, at the end of this frantic and unbelievably expensive exercise, that American jobs and communities are more endangered than they were at the start.