Running In The Deep – A Tale of Two Cities

One Worker One Vote BlogTwo of the hardest lessons to assimilate leading up to America’s 2012 national elections include the unchallenged devastation from extreme weather fall-out and credible domestic job creation economics by fully globalized industries such as automotive production. The first lesson is being re-learned in excruciating real-time (160 lives lost, $60 billion in damages, and counting) by the country’s powered-out, Northeast coastal populations. Today’s “Weather Security” imperatives are rechanneling yesterday’s “climate change” impasse like an action verb overshadows a noun.

In New York, the city that truly has it all with increasing frequency between reoccurring extreme weather and financial sector meltdown tsunamis, Governor Andrew Cuomo’s prophetic quip that “we have a 100-year flood every two years now” can apply both to Mother Nature and to Wall Street. Mayor Bloomberg’s recent presidential campaign endorsement represents the first and foremost “weather security” candidate pick of the 2012 election cycle.

Forget about the partisan politics, ideological polarization and vested interests distorting America’s climate change debate; hard, cold and wet reality has a way of realigning the national conversation, transforming ranting monologues into chastened dialogues.Weather Security – 62 million Americans who live in large East & West coastal cities plus flood insurance and reinsurance companies who cover them, the construction trades who rebuild them and the politicians who lead them are learning something vital and searing from the Sandy “flood-mare.”

Newly etched in our political coastal survival DNA is the realization that post-mega storm rehabilitation depends in large part on bipartisan political leadership. Equally significant, pre-mega storm investments that greatly enhance survivable regional productivity and life-saving effectiveness can only incur through visionary large-scale innovative precautions based on a bipartisan political and scientific consensus such as new approaches both to massive water inflows and access to clean and fresh water supplies, and shore-threatened energy, communications and transportation infrastructure.

Nicholas D. Kristoff’s New York Times piece, “Will Climate Get Some Respect Now?” forewarns that, “Rising seas create a higher baseline for future storm surges. The New York City Panel on Climate Change has projected that coastal waters may rise by two feet by 2050 and four feet by the end of the century.” Whether climate change is man-made or not, weather security may soon equal national security and energy security in terms of budgetary allocations, scientific and technological focus. New York City is the noisy canary in our all-American deep water mine or graveyard depending on our choices.

The second lesson is centered on Toledo, Ohio – a city that actually makes more automotive components than Detroit (separated by a one-hour highway drive) although the latter assembles more finished cars. The Romney campaign’s controversial Toledo-centric “Jeep Jobs to China” television ads, radio spots and public supporting statements elicited rapid condemnation by both GM and Chrysler, and once again has placed the economic rationale for outsourcing jobs and industrial capacity squarely back into the public square.

The North American car industry claims that successful global industry practices dictate building cars in local markets for reasons of branding, supply chain and transportation costs, and prevailing national content provisions. The real question is how do originating economies that include domestic workers, managers, supply chain providers, customers, stakeholders and shareholders clearly and directly benefit from profitable overseas global production facilities? Is this a classic zero-sum or win-win scenario? An industrially ravaged city like Toledo may be forgiven for being susceptible to the suggestion, however false in this particular case, that one more factory in China means one less locally having witnessed factories with good family and community sustaining, middle class jobs exported in favor of global labor arbitraging by vulture, ex-territorial hedge and private equity funds over the past three decades.

With GM’s and Chrysler’s sales, domestic investments and personnel recruitment numbers increasing, it’s hard to argue that the post bail-out report card for the U.S. automotive industry doesn’t represent a win-win for both the U.S. government and American industry that also includes foreign car manufacturers who have chosen to locate domestic facilities mainly in the U.S. Southeast and who have benefitted from the rising, rescued supply chain tide. To wit, Chrysler’s management recently announced 1,100 new jobs in Toledo to produce a new generation of Jeep models.

Not only do major automotive manufacturers “build in the markets in which we sell” but also profits are repatriated. The question this political season, “Would there be more domestic profits and more domestic job creation if cars were exported instead of produced overseas?” deserves an honest bumper-sticker answer. The answer can be found, perhaps, in the marked philosophical differences underling motive and impact between financially engineered models focusing on global labor arbitraging as the primary path to returning wealth to shareholders and industrial investing models focusing on capturing market share to drive company performance lines upward for stakeholders and shareholders when both classes don’t necessarily comingle.

In fact, the strongest possible way to square this circle is to equate stakeholder and shareholder interests, practices, values, and how both rewards and risks are shared. Perhaps the world’s strongest and most successful industrial proponent of this next generation, enlightened approach to democratically profitable capitalism is Mondragon, Spain’s tenth largest multinational dedicated to the production of consumer and equipment goods including a major automotive component manufacturing division, under a globally recognized and imitated “one worker, one vote,” equal ownership cooperative constitution.

With Mondragon’s origins committed to domestic job creation through the sovereignty of labor over capital with the latter viewed as a means but not an end, the group’s internationalization process struggled more than most of its competitors over how to grow globally and (directly relevant to Toledo, Ohio) follow the leading automotive sector brands into overseas markets without sacrificing domestic capability and jobs. In a technical paper presented to the London School of Economics last July by Mondragon International’s President, Josu Ugarte, metrics prove Mondragon has been successful in avoiding “a productive displacement, which would imply the destruction of jobs in the parent companies.” Even more revelatory, Mondragon’s ownership culture and participatory practices have resulted in “multi-located” industrial cooperatives both increasing and upgrading domestic employment as well as profits.

Instead of the stale, vicious circle, zero-sum questions framing the U.S. debate over outsourcing and its first cousin, off-shoring, Mondragon’s worker-owners determine how and where global supply chain production can best serve both stakeholders and shareholders, these being one and the same. It turns out that the purest expression of profitable capitalism for the greatest number of participants is when investors, managers and workers are indivisible in terms of shared risks and rewards.

This new industrial ownership ecosystem is knocking on Toledo, Ohio’s door within a morally appealing context that makes classic business sense. Mondragon proves that automotive sector globalization can go beyond the impoverishing practice of global labor arbitraging and instead through “one worker, one vote” participatory ownership deploy more intelligently, creatively and efficiently as a strategic tool to optimize high production cycles, reduce production costs, reinvigorate stagnating employment due to recessionary down-cycles, and engender product diversification.

More important, and with the caveat that Mondragon’s worker-owners are the first to state their model is not perfect, an increased global geographical production reach that comes with a liberating philosophy put into practice achieves quite the opposite of what high impact social media and communication companies like Apple support through China’s Foxconn industrial concentration camps. When domestic stakeholders become shareholders, these Dante Inferno contradictions between the ends and the means will fade like yesterday’s flooded streets as economic interests and natural, unalienable human rights become more aligned.

OWOVblogarchiveThis article first appeared on Michael Peck’s original One Worker One Vote blog which has been moved and archived here.