Life in Smugtown, USA

Rochester, New York – it was the last stop before arriving here in Los Angeles in 1981 or so. The change was an expected cultural shift – no more snow and no more snow tires of course, and in that first rental place in Manhattan Beach the Pacific was right down the street, with the beach babes, and you could see Malibu far off across the bay, and Hollywood was kind of up the street, even if a ten mile drive away. The well-used red Italian convertible seemed like the right touch, even if it was a sorry excuse for reliable transportation. The head gasket blew out one starry night with the young Parker sisters on board – visiting from Rochester. But there was a way to be cool and easy about that. It was LA and it was the beach and Steely Dan was singing away about life out here. You deal with it and order another round of margaritas. It’s easy to fall into LA – pop culture trains you for it.

But Rochester hadn’t been that bad. In the seventies Kodak was thriving – that was before digital cameras – and out east, on the other side of Irondequoit Bay, Xerox was going great guns. Harris Seed and Bausch & Lomb and all the rest were doing just fine. There was prosperity in the air. The University of Rochester and its Simon School of Business were first rate – and still are – and the Eastman School of Music was, and still is, a national treasure. Sure the place was flat and cold, but folks were satisfied. Maybe they were too satisfied. There was that book about the place, Smugtown USA – and it was kind of like that. And the locals got the joke, as there was the Smugtown Stompers – the local Dixieland outfit. Some say that back then Rochester had the highest per capita consumption of scotch in the world. That’s apocryphal of course, but it fits. Scotch is the drink for the self-satisfied. And the autumns were glorious – apple orchards everywhere, and hot cider. That’s what you would expect, up north of the Finger Lakes and far from Manhattan, which is what most people think is New York. It isn’t.

Maybe Rochester is what Sarah Palin and that crowd would call the Real America. But they have a suburb named Greece, with its Greece-Athena High School. That’s not very American sounding, but the Algonquin and Iroquois who were there first didn’t get to name the place either. And of course it doesn’t matter. There are no woods and no holly here in Hollywood.

But it all went sour. In 2010 Forbes rated Rochester as the third best place to raise a family – if you have a job. Kodak may not survive. Xerox was founded there but moved away. Heck, Western Union was founded there and moved away. French’s (mustard) and Gannett (USA Today) and Champion (spark plugs) were founded there and moved away. There’s a pattern here. It seems everyone took the last train for the coast.

And things are not happy there, particularly in the apple business. There’s apple pie and motherhood and all that, but there’s also Mott’s, also out east, on the other side of Irondequoit Bay, in Williamson. There the workers have been on strike since May 23 – but Emma Goldman lived and worked in Rochester for several years, championing the cause of labor in Rochester sweatshops, so there’s precedent.

But this one is not nice at all. See Steven Greenhouse’s New York Times article on workers at a Mott’s plan resisting demands for wage reductions:

“It’s disgusting, honestly, that they want to take things away from the people who made them profitable,” said Ms. Muoio (pronounced MOY-oh), a $19-an-hour machine operator who has worked at the plant 15 years.

The company that owns Mott’s, the beverage conglomerate Dr Pepper Snapple Group, counters that the Mott’s workers are overpaid compared with other production workers in the Rochester area, where blue-collar unemployment is high after years of layoffs at employers like Xerox and Kodak.

Chris Barnes, a company spokesman, said Dr Pepper Snapple was seeking a $1.50-an-hour wage cut, a pension freeze and other concessions to bring the plant’s costs in line with “local and industry standards.”

The company, which has 50 brands including 7Up and Hawaiian Punch, reported net income of $555 million in 2009, compared with a loss of $312 million the previous year. Its 2009 sales were $5.5 billion, down 3 percent.

Matthew Yglesias comments here:

The problem here is that both sides are right. Thanks to economic developments unrelated to the juice industry, there is high unemployment in the United States of America and especially high unemployment in the Rochester area where major employers Kodak and Xerox have been hurt by technological shifts. The result is that exactly as Dr Pepper Snapple says, the full employment wage for the area has gone down and thus in some sense wages at the plant “should” decline. Conversely, as the union observes, Dr Pepper Snapple is a profitable firm even under current conditions and operating the plant at the current wage level is a profitable undertaking.

There’s a lot of economic surplus to be had in operating this plant, it’s currently divided between the workers and the owners, and the workers quite reasonably don’t feel like giving it all to the owners for no reason. So now we’re in a classic bargaining standoff where there are a whole range of outcomes that would be better for both sides than a continued strike but precisely for that reason neither side wants to give in.

But the Times article points out the symbolic nature of all this:

Rebecca Givan, a professor of industrial relations at Cornell, said the strike has taken on broader symbolism. “The union wants to tap into the public backlash against perceived corporate greed,” she said. “The company wants to emphasize the depressed local labor market.”

Yep, times are tough, and everyone needs to cut back. And those who make a ton of money point to that, to cut back wages, to comparable level – bring wages down to the lowest level rather than business as usual, and pocket the difference.

And there are other layers to this:

The strike has become so important because of the prominence of the brands and because of its unusual nature: a highly profitable company is taking the rare and bold step of demanding large-scale concessions.

Unlike previous battles, where American manufacturers have often sought to cut labor costs by threatening to close plants or move operations to the South or overseas, Dr Pepper Snapple is not making such threats.

For unions across the country, the stakes are high because if the Mott’s workers lose this showdown, it could prompt other profitable companies to push for major labor concessions.

It’s hard to put this nicely. They’re screwing the workers to boost profits, because they can. And this could set a precedent:

“Companies have asked for concessions throughout the history of the labor movement because they’ve faced hard times and needed help to survive,” said Stuart Applebaum, president of the Retail, Wholesale and Department Store Union, which represents the Mott’s workers. “Dr Pepper Snapple is different. They don’t even show the respect to lie to us. They just came in and said, ‘We have no financial need for this, but we just want it anyway because we figure we can get away with it.'”

So, negotiations have not been held since May, and Dr Pepper Snapple says it has no intention of resuming them at all, they just continue to operate the plant using replacement workers and say that production of apple juice and apple sauce is growing each day. Union officials say production is one-third of what it was before the walkout. It’s not pretty. The region’s apple growers are in a panic.

And it heats up:

Dr Pepper Snapple, based in Plano, Tex., has sought to win public support by running full-page ads in Rochester’s main newspaper. One recent ad said, “Mott’s pays more. Would you walk away from a manufacturing job that paid you as much as 50 percent more than you could make elsewhere? That’s what union workers did at Mott’s.” (The company said that it had offered not to cut wages if the workers ratified its offer by April 15.)

The workers, meanwhile, are incensed that the company is demanding givebacks when it posted record profits last year and increased its dividend by 67 percent in May.

“Corporate America is making tons of money – this company is a good example of that,” said Mike LeBerth, president of the union local representing the strikers. “So why do they want to drive down our wages and hurt our community? This whole economy is driven by consumer spending, so how are we supposed to keep the economy going when they take away money from the people who are doing the spending?”

This has thus turned into the supply-side folks versus the demand side folks in a clash of economic theories.

Dr Pepper Snapple has vigorously defended its stance. “The union contends that a profitable company shouldn’t seek concessions from its workers,” the company said in a statement. “This argument ignores the fact that as a public company, Dr Pepper Snapple Group has a fiduciary responsibility to operate in the best interests of all its constituents, recognizing that a profitable business attracts investment, generates jobs and builds communities.”

This all sounds so familiar. Dr Pepper Snapple is towing the Republican line – let the rich thrive, absolve them from taxes, free them from regulation, as doing that attracts investment, generates jobs and builds communities. And if the working folks, the little people, don’t agree to pay cuts – and tighten their belts in tough times – to keep the rich getting even richer – all is lost. It’s for the greater good, after all.

And this has gone national – you’ll see more of this strike in the news.

And there’s a reason for that. This one strike encapsulates the whole national argument of what should be done to pull us out of the worst economic collapse since the great depression. You keep people reasonably well paid so they buy stuff – you assure demand, maybe by propping up GM or Chrysler or whatever – or you make sure only the rich get even richer, as rich as possible, no matter what harm to workers, so the rich invest lots, which will create jobs – you assure supply. In broader terms, you stimulate the economy, even by going into debt to create government jobs repairing roads and bridges and sewer systems, or wind turbines, or you launch a program of total austerity, shutting things down as much as you can, to reduce or eliminate the deficit – as a big deficit scares away people who would buy government bonds. You direct money to private parties in the private sector. When they’re fat and happy the nation thrives. It’s austerity for everyone else, for the greater good. The government must stop spending.

It seems a bit absurd. But the Republicans have blocked aid to the 9/11 first responders now dying from what they breathed in that day, and blocked government loans to small businesses, and tried to block extended funding for the long-term unemployed, and aid to the states to make sure three or four hundred thousand teachers and police and firefighters aren’t laid off. They won a few of those battles, always saying austerity is what is called for now. Blocking all spending to help folks is just too bad, but that’s not the government’s job. You don’t want to discourage investment by the rich, who might not buy the government bonds and might not so feel flush enough to open a new widget plant just for the heck of it. People understand that. They will accept unemployment and poverty. They know some things are more important than their own little problems.

The line is that Americans are worried sick about the growing federal deficit, far more worried about that than about having a job. The polling data indicate something else – it’s the opposite. But if they say it’s true, then it must be true. It’s one of those things where reality has a liberal bias. And the Mott’s workers should be more worried about Motts being able to make even more money that they do now than about their small and insignificant jobs. They will agree to the pay cuts, for the greater good – that would be a corporation so rich it attracts even more investors, and maybe has the funds to open new plants in Sri Lanka or one of the minor islands in the Marianas.

But they didn’t agree to the pay cuts. They’re not dumb. This is nuts.

And we have a test case. It seems that austerity in Greece – the country, not the suburb of Rochester with its Greece-Athena High school – is leading to Civil War, not a good economy, or so reports Der Spiegel:

This dire prognosis comes even despite Athens’ massive efforts to sort out the country’s finances. The government’s draconian austerity measures have managed to reduce the country’s budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country’s economy. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise. The country’s gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.

That’s curious. Greece tried the Republican Herbert Hoover supply-side austerity fix, and it didn’t’ work:

The entire country is in the grip of a depression. Everything seems to be going downhill. The spiral is continuing unabated, and there is no clear way out. The worse part, however, is the fact that hardly anyone still hopes that things will improve one day.

Unemployment is at seventy percent in some areas of Greece. Sales figures have dropped off the charts across the nation and seventeen percent of the shops in Athens alone have gone bankrupt. New and massive layoffs are coming next month, and the government fears future unrest. Der Spiegel quotes one shipbuilder – “If you take away my family’s bread, I’ll take you down. The government needs to know that.”

But that’s what the Republicans and all the folks on Fox News are always complaining about – class warfare. Everyone is always picking on the rich. See Fox New personality Laura Ingraham:

First they came for the rich. And I did not speak out because I was not rich. Then they came for the property owners, and I did not speak out because I did not own property. Then they came for the right to bear arms, and I did not speak out because I was not armed. Then they came for me and denied me my medical care, and there was no one left to speak for me.

Yep, it’s the Holocaust all over again. No one stood up for the Jews. Now no one will stand up for the rich. And why won’t the workers at Mott’s, just east of Rochester, do the right thing and stand up for the rich? Isn’t that the same sort of class warfare too?

And there’s a variation on all this austerity stuff. Sharron Angle, the Republican running for Senate in Nevada – and, along with Sarah Plain, seemingly considered by the folks on that side one of the deepest thinkers of this new century – is interesting in this exchange:

Q. Did Keynesian economics, the stimulus spending, work in the Depression of the ’30s?

A. No. And I think history has really proven that to be true. Most economists agree that the thing that really worked, which is a sad commentary, is the war.

See Matthew Yglesias:

And she’s right. Stimulus spending during the 1930s had little positive impact on the economy since there was in fact very little stimulus spending during the 1930s. Expansionary monetary policy moves made a great deal of difference in FDR’s first term, but then contractionary fiscal and monetary measures undertaken in 1937 prompted a new recession. Shortly thereafter, World War II revived the economy. But as Steve Benen says “The war was a shot in the economy’s arm because of all the spending.”

The war is a textbook example of how deficit spending by the government can boost the economy by mobilizing real resources for some public purpose.

Benen actually says more:

Now, it’s no longer unusual for right-wing voices to insist that the New Deal didn’t work. It’s an absurd position, belied by reality, but it’s hardly shocking anymore. Republicans went through a period in which they moved away from Hoover and accepted much of the FDR legacy – just ask Ike – but those days are over, and Hoover is back en vogue amongst 21st century Republicans. It’s crazy, but it’s true.

But it’s that other part of the answer that I found confusing. The Depression ended once and for all, thanks to World War II. That’s not an unreasonable assessment. But what does Angle think that means, exactly. In the first breath, she argued that Keynesian economics and stimulus spending were discredited. In the second breath, she argued that WWII boosted the economy.

But the first thought doesn’t match the second. The war was a shot in the economy’s arm because of all the spending. The government generated manufacturing on a scale unseen in American history, which put people back to work, got factories humming, etc. If Angle realizes the war improved the economy, how, exactly, does she think that happened?

Yglesias:

Now obviously it would be morally wrong to revive the economy over the next two years via a deficit-financed effort to destroy Germany and Japan. But the point is that if we use deficit spending to target and mobilize idle resources, the economy will grow. What’s more, if we target those resources and mobilize them to do something useful we’ll reap substantial benefits.

But none of this helps the workers at Mott’s, out there east of Rochester. They’ve been told their wages and benefits will be cut severely for the greater good, for the corporation’s amazing continuing growth in pure profit.

Ah, there’s a reason people leave Rochester. But in the end it doesn’t help. Listen to the Republicans telling us we all must sacrifice for the rich. Everywhere is Smugtown USA now.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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3 Responses to Life in Smugtown, USA

  1. Milton Roberts says:

    As a native Rochesterian, and not to sound smug, I do need to correct you- Champion (spark plugs) is not a Rochester company. Champion Products, the apparel company was based in Rochester on Monroe Avenue in the town of Pittsford (where Wegmans Food Markets’ flagship store is now located) before being sold to Sara Lee Corporation in 1989. Prior to Nike, Under Armour, Reebok, etc., Champion outfitted every NFL team and most major college football programs. BTW- Ragu spaghetti sauce was started in Rochester too and moved away!

  2. Nice essay–thanks!

    –Charlie in Rochester

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