.

Capitalism's legacy of misery and insecurity. An inefficient system

The near collapse and crisis the market brings every few years is not an accident, it is endemic to it and cannot be cured. Capitalism cannot be made nice.

Back in 1986 when a group of coupon clippers, Kohlberg Kravis Roberts, bought Safeway stores in a leveraged buyout, the New York Times wrote of these deals being all the fashion but untested as they were based on debt. At that time, KKR as the leveraged buyout firm was called, came under fire for eliminating jobs in the process.  The Union leadership vilified Safeway for selling stores to non-Union owners as it reduced its operations from 2,326 stores to 1161. 

The sale of Safeway's Dallas division stores to nonunion operators put the company in a spotlight it wanted to avoid. In a speech, the Rev. Jesse Jackson blasted the chain for eliminating 9,000 jobs.  The company realized it would be better to make some sort of deal, the deals the Union officialdom are so eager to make.  Safeway agreed to sell the remaining  stores to Union operators in return for pay cuts so they could compete with non-Union (sound familiar). The Union hierarchy is very easy to please.

This disastrous tactic of the UFCW leadership and the entire leadership of organized Labor designed to maintain dues revenue, has brought us to the point where grocery workers with 41 years of service here in California can earn the dizzying sum of $21 an hour.  New hires receive less pay and worse benefits than their co-workers creating all sorts of hostility and division within the workforce. What this collaboration with the bosses has meant for all workers is a declining standard of living and Union power in the workplace and society as a whole.

The bosses were quite pleased of course as it is profits that that matter to them,  ''The fact that Safeway is healthier is due in large part to the cooperation the unions have shown us,'' said Peter Magowan, Safeway CEO at the time.

George Roberts, a KKR partner had this to say:
''We gave them the courage and the discipline to do what needed to be done. ''When you clear away the brush, you release the growth potential of the remaining trees, that's really what happened at Safeway.''
Sounds like a scene from Being There, the Peter Sellers' last movie.

William J. Olwell, a UFCW official and director of collective bargaining added:  ''It's kind of like contracting a dread disease for which the cure is very, very painful, and you're never the same afterward, but you survive''.

Yes, we survive "brother" Olwell.  Or some of us do.  Susan Faludi wrote an excellent piece about the Safeway calamity pointing out that a few years later, KKR "...sold 10% of the company (but none of their own shares) back to the public---at a price that values their own collective stake at more than $800 million more than four times their cash investment."

Not bad, not bad at all.  But what was the consequence of this for workers?  Faludi shares some details: "Employees......have considerable less reasons to celebrate....63,000 managers and workers were cut loose from Safeway through store sales or layoffs." It's true that some were hired back by the new owners of sold stores but as she points out, "...at lower wages...".  The rest were unemployed or forced in to part time work. When you add on the stress this causes to our families and our communities, the illness, depression, domestic violence, it is economic terrorism---it is class war.

Faludi shares one of the more extreme tragedies of this class war, a story about James White, "..a Safeway trucker for nearly 30 years in Dallas."  White was still unemployed a year after the deal and "..marked the one year anniversary of his last shift at Safeway this way: First he told his wife he loved her, then he locked the bathroom door, loaded his 22-caliber hunting rifle and blew his brains out."  "Safeway was James's whole life" said his widow. * 

That's the market at work, it makes a man out of you. Makes you strong. And it's worth it isn't it? At least it is for the coupon clippers. From its start in 1976 through September 2004, KKR's profits stand at about  $34.7 billion according to CNN Money. June 2005.

Firms like KKR, Goldman Sachs, Buffet's Berkshire Hathaway or Romney's Bain Capital are composed of parasitic gangs that suck the life blood from society.  The production of human needs is the basis for life, without production, life cannot exist.  The capitalist mode of production where production occurs not for need, not for the creation of use values, but for profit, is the most brutal and the most destructive.  It destroys us as human beings and is on its way to destroying the planet making it uninhabitable along the way. It's progressive historic phase has passed. It can no longer take human society forward.

KKR along with Goldman Sachs and other bloodsuckers have their slimy little paws in all sorts of deals today.  They bought the Texas utility TXU five years ago and we can see how destructive and inefficient these activities are for humanity.  TXU produces an important social product, electricity.  The coupon clippers paid $43.2 billion for it, money borrowed from investors.  The deal is not making money for the investors as of yet due to what Business Week calls "the company's troubles".
But these private equity guys are raking it in.

For constructing the deal with this utility that should not be privately owned or managed,  the coupon clippers paid themselves $528 million in fees. Meanwhile, TXU has changed its name to Energy Future Holdings and is still massively in debt. "The company is technically insolvent" says Bloomberg with $52 billion in liabilities and $44 billion in assets.  Another group of social parasites, derivatives traders are betting that the company holding the debt will default within five years. No worries, taxpayers can always step to the plate on these matters.

Payments to the buyout firms so far include $300 million for their advice, yearly management fees of $171 million and $57 million for "consulting on debt deals".

This is an entity that produces energy for use in society.  "This is a utility, and its product is electricity that it sells to the public, but its really a debt house", says Tom Sanzillo the director for the Institute for Energy Economics and Financial Analysis.

This sort of activity is not production, it is gambling, it is crude exploitation of Labor and of the natural world.  It is criminal.

As workers, we are taught from birth that the owners of capital, the private sector are the creators of jobs.  That they take the risks.  But as I have repeatedly pointed out, most of society's important developments have come from public, not private funds and institutions.

We are not taught to think of capital, of money in the bank as our product.  But it is.  The capital that is used to employ Labor power and put it to use has its origin in past Labor power, the life activity of previous workers.  Sure, I can go mortgage my home which I partially own in conjunction with the bankers and if I have a job that pays anything decent borrow $50,000 and open a coffee shop and work for myself and maybe purchase the Labor power of a worker or two for $7.50 an hour. If it doesn't work out I can be homeless maybe or become a wage worker myself if I'm lucky. It's not likely I'll end up like Bill Gates.

But this capital is a collective product just like the billions that are borrowed to buy major corporations like Safeway that distributes food and other household products or utilities like TXU that provide us with a necessity like electricity. 

We must transform our thinking about this stuff called capital which consists of the surplus value created by human Labor power over time. It is ours, not "the banks" or bankers or hedge fund managers and other coupon clippers to allocate and use for further production. Contrary to all the propaganda, capitalism is an inefficient and wasteful system.  In the most successful and powerful capitalist economy in history it has never been able to provide the basic necessities for all and globally it has been a disaster. It has had its day as they say.

We are conditioned by their media, their schools, and their pulpits to think that workers can't govern society; that the capitalist mode of production, that they admit is flawed, is the end of civilization, the apex of human life and that there is no alternative.  That's what the feudal aristocracy said about their system and their rule. We are collective creatures and gregarious by nature, it is what helped us survive generations, long before the capitalist mode of production dominated. A democratic socialist society is not utopian, it is possible but more than that, it is a necessity if we want our children to live on a planet that can sustain productive human life in harmony with the natural world.

Society needs new managers.

Here are Some prominent coupon clippers of  various types.

Net worth:
Henry Kravis KKR : $4 billion           Leveraged buy outs
George Roberts KKR: $3.7 billion      Leveraged buy outs
Warren Buffet   $47 billion
Ronald Pearlman $12 billion   Leveraged buy outs
Carl Icahn    $14.8 billion Leveraged buy outs
John Paulson: $11 billion     Hedge fund manager
Koch Brothers $62 billion     diversified swindlers
Walton Family (Wal Mart) $105 billion   Idlers.
Source Forbes

* The Reckoning: Safeway LBO Yields Vast Profits but Exacts A Heavy Human Toll WSJ 5-16-1990 PDF

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Boards

More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something