Tuesday, December 9, 2008

Going for Broke while Going Broke

As I see it, the most important thing about the current standoff at Republic Windows and Doors is that it has forced the media to address the current economic crisis from Main Street's point of view, rather than spending all of its time in the more comfortable corridors of power. Of course stories from Main Street are just as complicated as those from Wall Street, which means that the media "standard of simplicity" can often engender more confusion than understanding. In my own effort to tease out what is really going on, I decided to deconstruct the latest report on the BBC NEWS Web site in terms of both the sequencing and prioritizing of the events that have thus far occurred.

Thus, the heart of the story does not appear until the third paragraph of the BBC account:

About 200 workers have been occupying Republic Windows and Doors demanding severance pay since they were laid off with only three days notice.

This then raises the question of whether or not the occupation was justified. We have to read several paragraphs further to get the answer:

Workers said they were entitled to be given 60 days notice of the closure of the plant and demanded pay for that period as well as any unused vacation time.

In other words, while the BBC did not say this explicitly, this is a dispute over a contractual agreement. Management is clearly in a tight spot:

Republic Windows and Doors was a victim of the collapse in housebuilding in the US.

Nevertheless, labor is trying to abide by "rules of the game" that were mutually acceptable to management as well as labor. Why did it appear that management was breaking these rules?

At this point we have to recognize that this is not just a story about labor and management. It is also a story about management's finances, as embodied in the relationship between Republic and Bank of America. The BBC has given us a quotation reflecting the latter's point of view:

The bank said it was "reaching out to the management and ownership of the company to see what they can do to help resolve the issue".

The management side does not sound quite as beneficial:

It said it had given its bankers a plan for an orderly wind-down that would have led to an end to production in January 2009.

But it said that the bank had rejected permission to give vacation pay to its employees.

It told workers last week that Bank of America had shut off its line of credit and refused to allow further expenditures.

Thus, at least according the management, Bank of America, rather than management itself, was responsible for breaking the rules of the contract with labor. Furthermore, Bank of America could get away with breaking those rules because, at the end of the day, it controlled the flow of money into Republic.

Irreconcilable differences between labor and management are often resolved through the binding arbitration of a third party that both labor and management are willing to accept into the deliberation process. In this case, however, the obstacle is neither labor nor management but Bank of America. Thus, today the story has now introduced a different kind of third party, who may have an acceptable level of persuasive power over Bank of America; and this provided the actual lead for the report:

The governor of Illinois has threatened to stop doing business with Bank of America if it does not help laid-off workers occupying a Chicago factory.

Rod Blagojevich said the bank would lose out on hundreds of millions of dollars in fees and commission.

Governor Blagojevich has thus established himself as an advocate of his constituents, both labor and management, in trying to resolve a problem that has more to do with the Wall Street issues of Bank of America than with the Main Street issues of either the management or the workers at Republic. It will be interesting to see if the American media are as attentive to this new twist in the story as the BBC has been, since it is turning into a valuable case study of the consequences of a Federal Government so beholden to Wall Street that problems on Main Street are being exacerbated by what has been passed off as solutions to our economic problems.

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