an unanticipated consequence of
Jack M. Balkin
Jack Balkin: jackbalkin at yahoo.com
Bruce Ackerman bruce.ackerman at yale.edu
Ian Ayres ian.ayres at yale.edu
Mary Dudziak mary.l.dudziak at emory.edu
Joey Fishkin joey.fishkin at gmail.com
Heather Gerken heather.gerken at yale.edu
Abbe Gluck abbe.gluck at yale.edu
Mark Graber mgraber at law.umaryland.edu
Stephen Griffin sgriffin at tulane.edu
Bernard Harcourt harcourt at uchicago.edu
Scott Horton shorto at law.columbia.edu
Andrew Koppelman akoppelman at law.northwestern.edu
Marty Lederman msl46 at law.georgetown.edu
Sanford Levinson slevinson at law.utexas.edu
David Luban david.luban at gmail.com
Gerard Magliocca gmaglioc at iupui.edu
Jason Mazzone mazzonej at illinois.edu
Linda McClain lmcclain at bu.edu
John Mikhail mikhail at law.georgetown.edu
Frank Pasquale pasquale.frank at gmail.com
Nate Persily npersily at gmail.com
Michael Stokes Paulsen michaelstokespaulsen at gmail.com
Deborah Pearlstein dpearlst at princeton.edu
Rick Pildes rick.pildes at nyu.edu
Richard Primus raprimus at umich.edu
K. Sabeel Rahmansabeel.rahman at brooklaw.edu
Alice Ristroph alice.ristroph at shu.edu
Neil Siegel siegel at law.duke.edu
Brian Tamanaha btamanaha at wulaw.wustl.edu
Mark Tushnet mtushnet at law.harvard.edu
Adam Winkler winkler at ucla.edu
Learning from German Finance and Corporate Governance
The president recently cajoled business leaders at the U.S. Chamber of Commerce to create more jobs. As Harold Meyerson shows in a recent piece in The American Prospect, that's not likely to do much to relieve long-term trends toward U.S. decline:
When he was CEO of General Electric, in 1998, Jack Welch pithily summarized his vision for corporate America: "Ideally, you'd have every plant you own on a barge to move with currencies and changes in the economy." . . . . As corporate profits skyrocket, even as the economy remains stalled in a deep recession, Americans confront a grim new reality: Our corporations don't need us anymore.
A 2008 survey of 1,600 companies conducted by Duke University's Fuqua School of Business and the Conference Board (a group of leading corporations) found that 53 percent had an offshoring strategy -- up from just 22 percent in 2005. "Very few" companies, the survey concluded, "plan to relocate activities back to the United States." . . .
The high level of joblessness has obscured another troubling story: the declining incomes of the employed. The median annual wage of American workers declined by $159 in 2009 from the previous year, to a mere $26,261 (that means half of all employed American workers make even less than that). The hourly wage for new hires in manufacturing plants, both union and nonunion, today is roughly $15 -- about half of what it was just a few years ago. . . .We are, in effect, trading good jobs for lower-paying jobs.
Meyerson brings the lessons of comparativism in health care to the labor field. Just as we learned that the US's perverse combination of excess costs and deprivation of insurance was an outlier, so too are these scorched earth employment figures:
Between 2008 and 2009, the U.S. GDP dropped 2.4 percent, compared to 2.6 percent in France and roughly 5 percent in Germany, Japan, and Britain. But U.S. unemployment has increased by approximately 5 percentage points since 2007, compared to an increase of just 1 point in France and Japan and 2 in Britain. In Germany, unemployment has actually dropped a point since the downturn began and now stands a full 2 points lower than ours.
Meyerson has previously written about the German advantage here, and extends the argument in this piece. The bottom line: look at corporate governance and the banking system.
Germany is an export giant while the U.S. is the colossus of imports. . . . German multinationals have their own affiliates overseas, but they have also maintained robust, high-quality production at home. Siemens, which is more or less the German equivalent of General Electric, has hundreds of thousands of employees who work abroad, but it recently announced a deal with its major union, IG Metall, that included a pledge not to make any unilateral reductions in its 128,000-employee German workforce. . . .
These domestic employee-retention pacts are an outgrowth of Germany's more consensual, stakeholder version of capitalism. German workers' organizations have a far greater say than American workers do in the conduct of their employers. By law, employees in large companies get the same number of seats on corporate boards that management does. . . .
The German experience also shows that the structure of finance can have a profound effect on the retention of manufacturing. An entire stratum of German banking, municipally owned savings banks, provides the funds that enable the nation's prosperous, largely family-owned midsized manufacturers, the Mittelstand, to upgrade themselves into export dynamos. About two-thirds of Germany's small and midsized businesses get their loans from these banks, which shun capital markets and are restricted to doing business in their own towns. "Over the past decade, banking largely became a self-fulfilling activity," says Patrick Steinpass, the chief economist of the national organization of savings banks. "But our banks are restricted to doing business in their regions; they have to concentrate on the real economy."