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Thursday, December 18, 2008

The Republic Sit Down Strike: A Response to Joseph Slater

Returning the favor (although I go by Rick).

I certainly recognize - and even occasionally thrill to - the use of protest to achieve a desired political result. While the occupation of private property is always problematic, I would not have had the same reaction if the outcome was successful pressure placed on Republic or amendment of the WARN Act.

But I don't thrill to the notion of what was, in some ways, a secondary - if not "boycott" - action. As I understand it, BOA had nothing to do with whether Republic was evading the WARN Act or was just unable to comply with it. (If it did , we'd have another question.) Yet the political pressure was brought to bear - not on Republic - but on BOA and largely because it is participating in the ill advised TARF program and it's debtor is in the home town of the President-elect, who felt compelled to weigh in.  

The underlying principle here seems to be that if you can do what it takes to wrest cash from the Man in whatever guise he takes, it's all good. If your case is sympathetic, then we ought to be happy about whatever route you take to get over.

If you share the cosmology of Ratio Juris blogger Patrick O' Donnell, that makes sense to you and there is probably nothing I can say to persuade you. Patrick sees economic efficiency as some morally inferior alternative to whatever notion of justice that the community might prefer.

I am all for good renumeration for the families of what we might call "workers." Before I decamped for the academy, I was GC for a privately held firm that offered the same profit sharing formula to every full time employee (and had almost no part time workers). I was raised by  a unionized firefighter. You will never convince me that, whatever their flaws, that first responders are not the salt of the earth. I am so blessed  to have another Christmas (and I hope many more) with one of the best.

But here's the thing. Facts matter and, it seems to me, that free markets produce more wealth - for everyone - than unduly constricted ones. Ignoring that fact is not an act of moral superiority. It is not,as Patrick would have it, a bold claim for alternative values. If he doesn't believe me, he should come to Milwaukee and I'll take him around to some of the taverns in the neighborhood.

This doesn't mean that I endorse entirely unfettered markets, I am not a libertarian and consider myself more of a (kind of groovy) social conservative than an economic one (although by most commonly accepted taxonomies, I am both).

But fortuitous political pressure on a lender to do something that it would not have otherwise done is no cause for celebration. I have a hard time seeing who is served by that.




Posted by Richard Esenberg on December 18, 2008 at 01:37 AM | Permalink

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Joseph can be forgiven if he suspects he's being confused with Patrick.

Here's the thing: the Republic strike did nothing to "unduly constrict free markets," the financial free marketeers are responsible for any constriction of the marketplace that is now taking place. The freedom of markets is now and never has been absolute in any case. I did not argue for the undue constriction of free markets nor did the strike settlement in any way, shape or form result in same. While one may use the occasion to make a bold claim for values, they are only an alternative insofar as the status quo has served to obscure them, to ignore them, to do an end run around them, so they're not so radical after all: they just appear that way in the shadow of their neglect.

A better way to describe Patrick's position would be that economic efficiency does not always and everywhere coincide with the concerns of justice. In other words, on occasion the concerns of justice as fairness will trump the particular manifestation or consequence of what might otherwise be called a welfare maximizing policy. (I should note that the welfarist conception of efficiency invoked here is not the only possible one, as Sen reminds us, we can imagine 'different types of social welfare rules, which differ in the treatment of equity as well as efficiency, and also in their informational requirements.'). And what concerns justice is not simply "whatever notion of justice that the community might prefer," as that would make it rather subjective or arbitrary, and if Rawls remined us of anything, it's that the concerns of justice, or at least justice as fairness, have a more objective determination. Justice provides us with moral reasons for acting in a case when the marketplace's putative effiency has led to manifest injustice.On the other hand, what the community has come to prefer may exhibit the requisite moral reasons and at least an intuitive sense of the requirements of justice:

"Conventions...can create moral reasons for acting. Generally, local norms and conventions are created and sustained by behavior. They govern relationships among members of the community and provide agents who accept the norms from an internal point of view with reasons for acting in compliance with them. Though social norms, they may also be able to create *moral* obligations in those governed by them. Because conventional practices enable members of a community to coordinate, they proved benefits for everyone. The moral duty to comply derives from the prohibition against free riding on the compliance of others. Some might view the duty of compliance as grounded in the general duty of fair play. Conventions create expectations, both epistemic and normative. Typically, individuals rely on these expectations in formulating and pursuing their projects and plans. The importance of social norms and conventions to the pursuit of projects and plans can also ground an individual's moral responsibility to sustain the practice, to comply with its demands, and to repair one's failure to do so. The moral rights and created by conventional norms to act in accordance with them and to sustain them through other practices fall to all members of the community provided the norms are social norms or conventions in the appropriate sense, that is, provided the norms are accepted by the bulk of the population from an internal point of view."---Jules Coleman

Now it may so happen that in any given society moral beliefs independently inform both our notions of fairness and our social norms such that justice as fairness is not wholly dependent on the fact that it is expressed in and buttressed by our conventions and social norms. Justice as fairness addresses the unjust diminution in the individual welfare and well-being of the workers in this case in a manner that did not result in a significant diminution in the welfare or well-being of the members of the larger community. Fairness rules may serve to enhance or promote welfare when the results of welfare maximization or econonomic efficiencey are patently unfair. Indeed, they probably served to enhance well-being here insofar as they sustained a system of norms that provide legitimate epistemic and normative expectations about the behavior of others: "These expectations enable coordination and contribute to the ability of individuals to promote their own welfare by pursuing projects and plans of their own choosing within a stable framework." (Coleman) Justice as fairness, in this instance and in the end, makes everyone better off. The bank's loan here has not led to and I think with some confidence we can predict will not lead to, a new system of policies and legal practices that fetters free markets, so the specter that haunts you is simply a figment of your imagination, and not about those beloved facts that matter: nothing like trying to take the high ground by an embrace of facts, while accusing your interlocutor with having no concern for the facts that matter. In point of fact, your self-serving invocation of facts should be assessed in the light of four principles courtesy of A.E. Singer (and thanks to Hilary Putnam for the reminder):

1. Knowledge of facts presupposes knowledge of theories.
2. Knowledge of theories presupposes knowledge of facts.
3. Knowledge of facts presupposes knowledge of values.
4. Knowledge of values presupposes knowledge of facts.

In Iris Murdoch's words,

"The moral point is that ‘facts’ are set up as such by human (that is moral) agents. Much of our life is taken up by truth-seeking, imagining, questioning. We relate to facts through truth and truthfulness, and come to recognise and discover that there are different modes and levels of insight and understanding. In many familiar ways various values pervade and colour what we take to be the reality of our world; wherein we constantly evaluate our own values and those of others, and judge and determine forms of consciousness and modes of being."

Fairness and fairness theories are indeed concerned with welfare and well-being and it so happens that "efficiency" concerns may fall short according to the criteria of such fairness, even if it is possible that the neo-classical economic conception of efficiency will sometimes coincide with or not otherwise disturb our criteria for what counts as fair. Sometimes an obsessive compulsion to obey rules believed to bring about economic efficiency in general can be trumped in a local case without consequences for the value of the rules in the main or the universal case: this is one of those instances, or, put differently, everywhere and always maximizing "welfare" in the economist's sense may have deleterious consequences in a particular case, that is, results that are unpalatable give our commitment to justice as fairness, as Kimberly Ferzan has said, "morality is not mathematics." In any case, to cite one previous commenter: "Chase owns 40% (and are kicking in a portion of money towards the workers' claims), and other owners are reopening for business in Iowa. They should remain on the hook to repay it, and if their costs are lower at the new plant, they should be in a position to do so." Moreover, and with Joseph, "The workers were protesting that the employer did not pay benefits the workers felt they were owed under the WARN Act and under their union contract. When the employer argued it couldn’t pay these benefits because it didn’t get a loan, the workers then focused on the bank. That was smart, practically and politically. But the protest was first and foremost about rights the workers had or reasonably believed they should have under an employment law and their contract with their employer."

Posted by: Patrick S. O'Donnell | Dec 18, 2008 5:01:43 AM

Erratum: economic efficiency (5th para.)

Posted by: Patrick S. O'Donnell | Dec 18, 2008 5:49:36 AM

"Facts matter and, it seems to me, that free markets produce more wealth - for everyone - than unduly constricted ones." This is only a fact because the word "unduly" turns the sentence into a tautology. The degree to which markets should be regulated is a higly contested question, fraught with uncertainty, and undoubtedly context dependent. One might believe in free markets as a presumption - but the stronger that presumption, the more the belief looks like an article of religious faith. And the more so-called economic conservatism becomes indistinguishable in kind from social conservatism.

Posted by: Christian Turner | Dec 18, 2008 7:03:41 AM

Rick:

First, I'm delighted to be in a "X Responds to Y" academic debate. It's something I can now cross off my "to do" list for 2008.

Second, broadly, I am, and have always been, unclear as to how union activity violates "free market" principles. Unions are private actors who, through collective action, increase their economic bargaining power as workers -- not unlike how people who are employers increase their bargaining and related legal positions through forming corporations and acting politically. Indeed, one main thrust of labor law in this and every other industrialized democracy for many decades is that collective bargaining is a positive that helps even the playing field.

More specifically, you suggest this was fundamentally a secondary action because it was aimed mostly at the bank. I disagree with that characterization, because the main dispute was with the primary employer. As current 8(b)(4) [secondary activity] law recognizes, all primary labor activities have some secondary effects on other parties, but that itself does not make the activity illegal. Had Republic provided the rather minimal benefits the workers were requesting -- rights under the WARN Act and severance benefits under a labor contract Republic voluntarily entered into -- that would have been that. Republic begged off, claiming insolvency. Then the workers looked behind those claims. There were two issues there: the "run away shop" aspect of the case (which I note your posts have ignored) and the lack of a loan; and also the lack of credit from Republic.

The idea that *political* pressure brought on parties other than the primary employer should be considered improper secondary activity raises some pretty big First Amendment problems. For that and other reasons, this action didn't violate the NLRA. Beyond that, I'll note that the original NLRA had no bars on secondary activity at all; the labor laws of many other industrialized nations have no bars on secondary activity at all; and that, for what it's worth, I personally think that the secondary boycott bars of the NLRA that do exist are overly restrictive.

But most importantly, I still don't see this as an act primarily aimed at Republic. I don't think this is part of some big move to force banks, in general, to make loans to failing companies or otherwise "stick it to the man." It is better understood, I think, as a protest against the startlingly weak protections workers get when their plants close or are moved for real or -- perhaps as in this case -- feigned economic difficulties.

The bank made a convenient political target -- and I think the political point that Congress seems more intent on bailing out Wall Street execs than, say, auto workers is worth making. But just as I wouldn't over-read this event to auger a mass wave of worker militancy, I don't think you should over-read this event as disturbing attack on the "free market."

Posted by: Joseph Slater | Dec 18, 2008 9:43:10 AM

Joe

Happy to help. Now if I can just manage to get up early and watch the sun rise over Lake Michigan.

I understand that this is not a secondary boycott. I'm not a labor law guy but I would think that they would have to, say, picket BOA for that to be so. My argument was that this is an attempt to place pressure on someone who is uninvolved in the primary dispute.

Nor did I say that there ought to be some legal restriction on the ability of the Republic employees to do that. There should not be. My point is that its success is not something to be applauded.

I have two reasons for saying so. The first does flow from an assumption that we are best served when banks lend money to people who they believe can pay it back and not when they are pressured to act as a relief agency.

The second is that the success of this type of ad hoc pressure will always depend on whatever happenstance makes the workers or whomever is attempting to apply pressure the flavor of the day. While that is, to some extent, true of all political activity, when the result is a generally applicable policy (say a requirement that lenders hold back a reserve against WARN obligations - completely unworkable but it's just an example), then we have some measure of evenhandedness and not just a bank that throws away money that was supposed to be used to resuscitate dormant credit markets in order to curry political favor.

This is related to the current riot of bailouts but not in the way that you seem to see it. The need, in my view, is not to expand and equalize bailouts but to stop them. But that's another topic.

As for the runaway shop aspect, that is of more interst to someone who wants to critique WARN. If Republic can pay back its loan then it ought to have been able to meet its WARN obligations. Perhaps WARN is insufficiently robust to accomplish that, but that's a different point than the one that I was making.

Posted by: Richard Esenberg | Dec 18, 2008 10:32:28 AM

"'Facts matter and, it seems to me, that free markets produce more wealth - for everyone - than unduly constricted ones.' This is only a fact because the word "unduly" turns the sentence into a tautology."

No, it makes it a statement in need of further explication in the various contexts in which it might be applied. I suppose that if I were a radical libertarian (which, I agree, can resemble a religion), I wouldn't need to qualify it. But I'm not.

Posted by: Richard Esenberg | Dec 18, 2008 10:36:12 AM

Rick:

As to the "secondary" nature of the action, my point wasn't to get into the fine points of NLRA Sec. 8(b)(4) law (I'm taking a break from reading exams on that issue right now). Rather, I wanted to stress that ALL labor activities put some pressure on "secondary" parties: in strikes, unions are inevitably putting pressure on secondary folks including customers and suppliers of the struck store; and unions they can legally make appeals to the public (more secondary folks) to not patronize secondary employers. Agan, I'm not talking technical law here, I'm stressing the reality that all worker protests inevitably affect some secondary parties, and that fact in itself does not make the action illegal or, in my view, the proper subject of moral approbation. Of course, this type of secondary effect is especially likely when Employer X says, "gee, Union, I would love to live up to my legal and contractual obligations, but Party Y is keeping me from doing so."

I agree with you on two points. First, I agree that labor protests, like all political protests, depend on happenstance: the practical, economic, and political tools available. Were I you, I would take comfort in the fact that the next time workers protest that they aren't getting severance pay or WARN Act notice, it's unlikely there will a TARP bailout issue lurking in the background. Since I'm me, I take comfort in the fact that I think the workers got a just result in this case, because I think the WARN Act is too weak and that labor contract promises are too easily avoided by run-away shops and other real or feigned claims of economic woes.

Even more broadly, I agree with your characterization of our disagreement:

"The need, in my view, is not to expand and equalize bailouts but to stop them. But that's another topic."

You're right to suspect that I am, for example, in the camp favoring some sort of bridge-loan aid to Big Three auto makers. But that is a different issue, because again I predict that the act of the Republic workers is not going to spur a tidal wave of union protests designed to make private banks loan money to cover costs that either are or should be required to be paid by federal law or private contract.

Posted by: Joseph Slater | Dec 18, 2008 11:03:27 AM

I do not write to defend the "free market," but logic. The protests made a few arguments (explicitly and implicitly) that just do not work. First, activists singled out Bank of America for criticism. They followed the lead of the scandalous company owner (Richard Gillman) who blamed the bank for the company's problems. But Bank of America did not violate the workers' rights. Also, because the housing market has plunged more deeply than other parts of the economy, it does not take much to imagine that Republic is experiencing financial distress and can no longer service its debt. Accordingly, the company's problems, which relate to the broader economic slowdown, created difficulties for the workers, not a callous banking decision.

The workers' defenders also suggested that the purpose of the bailout was to make credit available for companies and individuals. Even assuming the accuracy of that statement, the bailout cannot mean that any bank that participates in the program MUST make credit available on demand or, even more narrowly, to any company that would violate the WARN Act without additional credit. Yet this was a basic assumption or stated position of many activists who supported the workers.

The most troubling aspect of this situation for me is that the battle of "good versus evil" scenario shifted scrutiny from two places that really needed attention: the company and the economic safety net. The company got a great deal from progressives. It discarded its unionized Chicago workers, purchased and consolidated operations with an Iowa company with a nonunion workforce, and escaped liability under the WARN Act because progressives defeated the evil bailed out bank. The company, however, received 10 million dollars in subsidies from the City of Chicago to expand its operations. The city hoped to recoup the investment through future taxes. Oh well.

Interestingly, the value of the owners' CONDO in Chicago exceeds the amount of money owed the workers under the Warn Act. Although the corporate veil prevents getting money from the owners personally, it seems fairer to twist liability rules to go after the company's owners rather than twisting them to force Bank of America to extend additional credit to the company.

Finally, the protests failed to scrutinize and demand a stronger economic safety net. Pretty soon, the workers will exhaust their two-months wages and benefits. Then, a lot of them will remain unemployed, lack health insurance, and probably not have many opportunities for new employment. But this issue is now "dead" because we have slain Bank of America. Local politicians have claimed "victory" and will have something to place in reelection advertisements. Jesse Jackson delivered 300 turkeys to the workforce and has moved on to other causes. Unfortunately, getting the workers (and similarly situated individuals) assistance beyond this sit-down action does not interest them, because it requires making tough choices and lobbying for more generalized benefits. Also, those types of legislative battles do not usually provide photo opportunities. Clinton's statement about campaigning in poetry, but governing in prose keeps rearing its accurate head.

PS: I have written on these issues. See http://dissentingjustice.blogspot.com/2008/12/made-in-iowa-did-company-in-chicago-sit.html

http://dissentingjustice.blogspot.com/2008/12/republic-windows-and-doors-received.html

http://dissentingjustice.blogspot.com/2008/12/laid-off-republic-windows-and-doors.html

Posted by: Darren Hutchinson | Dec 21, 2008 4:49:58 AM

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