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Although it bodes ill for our future, the following from Michael Pento is as succinct summary of our Fed’s recent actions as one could want:

It now appears that the United States has finally succeeded in its efforts to destroy confidence in the US dollar. Given the currency’s reserve status, its ubiquity in financial markets, and the economic power and political position of the United States, this was no easy task.

However, to get the job done Washington chose the right man: Federal Reserve chairman Ben Bernanke. Thanks to Bernanke’s Herculean efforts, investors across the globe have now been fully weaned from their infantile belief that the US dollar will remain the ultimate safe haven currency.

The proof of Ben’s success can be seen in comparing how the foreign exchange markets reacted to the recent crisis in the Middle East with how they reacted to the financial crisis of 2008. Three years ago, investors looking for safety abandoned their foreign currency positions and piled into the US dollar (the market for US Treasury bonds in particular). As a result of these fund flows, the US dollar surged 20% from August to November 2008.

However, during this latest round of global destabilization the dollar experienced no such rally. In fact, the greenback has shed about 5% of its value since the Tunisia revolution began in December of 2010.

The reason should be clear; the Fed has placed international investors on notice that it will unleash even greater doses of dollar debasement at the first whiff of additional economic weakness, deflation threat, or dollar appreciation.

The Christian men’s ministries leader Patrick Morley likes to say that no one plans to fail.  And that’s true here too.  Obviously Bernanke’s objectives are to inflate our outsized debt into a repayable sum, to cheapen our exports so that we can reverse our balance of payments, and to reduce our standard of living so that we consume less (that comes from his boss, a goal of the left since the 1960’s at least).  And to do all of this so that, when all comes to pass, they have plausible deniability for how it came to pass.

But the success of this agenda is failure.  The Chinese for their part will finally be forced to allow the yuan to appreciate, but in the long run they’ll benefit too.  Americans just haven’t figured out what you become when you lose your credibility because they don’t know what that’s about on a national scale, but we’re just about to find out.

In view of the massive demonstrations in America’s Heartland, and especially Michelle Rhee’s CNN article about breaking the iron grip of seniority on teacher hiring and retention, I’d like to repost this 2006 piece (which I wrote while on a superintendent search committee) on the role of the trade union in public education.

No discussion of American state education would be complete without placing the role of the National Education Association (NEA) and its affiliates at the centre of the conversation, even though most discussions don’t. The organisation’s political activities are well known and documented, but our main purpose is to focus on the NEA as a trade union, because our own labour relations experience suggests that one will learn a good deal more about them in this way.

Trade unions and the labour movement in general have always loomed large for me. Our family business was unionised for most of its incorporated existence, both in Chicago and in Chattanooga. I have sat across the table from both shop stewards and representatives from the local (and a federal mediator at one point) through three contract cycles and a good number of grievances as well, some of which went to arbitration.

But growing up in a world where the “dictatorship of the proletariat” seemed headed for triumph put special focus on the activities of organised working people. Reading works such as Émile Zola’s Germinal (and later Mao Dun’s Midnight) gave the impression of a militant labour force, prepared to use violence to get their way. Such presentations both inspired fear and to some extent romanticised trade unions.

The one and only strike against our family business took place before I came back full time, but I was in town to witness it. To see it was a shocking experience; instead of full picket lines and vandalised cars and property, what I saw was lawn chairs, makeshift awnings and barbecue pits, a pattern pretty typical with strikes in our area, at least. They didn’t even stand up with their signs! Such a sight was deceiving to some degree, because inducing the workforce to decertify the union was beyond our grasp, as is the case in many other companies.

The ostensible purpose of a trade union is to secure higher wages/benefits and better working conditions for their members. To a large extent unions have thrown away the latter through their political activities, something that has cost unions in the long run. But anyone who has dealt with a trade union will tell you that it is very difficult to “buy” one out through higher wages. The reason for this goes to the heart of the “non-economic” rationale of American trade unions. Beyond more money, there are two related reasons why organised American workers stick with trade unions.

The first is to eliminate “employment at will” from the workplace. In an “employment at will” situation, an employer can terminate an employee without cause. Getting rid of this is an obvious protection for the employees, and the trade union enforces this through the grievance process.

An important corollary to this is that no “self-respecting” (to use a favourite expression) union will voluntarily concede any form of merit in promotion and compensation in the workplace. This is shocking on its face, but the union’s logic behind this is simple: any form of merit contains subjective judgement of employee performance, and this leads in turn to favouritism. In addition to producing an unhappy workforce (and one vulnerable to being organised,) consistent favouritism and “politics” in promotion and compensation will kill a private company through degraded performance. In government situations, however, favouritism and politics are very much evident in the process, and the government is insulated from the effects of this by its coercive powers of taxation. This is the central reason why public sector unions are the largest constituent of trade unions in the US today: public employees are (or at least feel) more vulnerable to favouritism, and this in turn is a stronger motivation to organisation.

Unions, left to themselves, will always favour seniority and classification/job description as the method of choice in promotion and compensation. Over time, this turns the union into an advocate for its members with the higher seniority at the expense of those with less. This trend tends to run unions down as it becomes difficult to attract younger workers into the union.

We would be remiss if we did not mention some of the mitigating factors to this picture. Police and fire fighters, for example, will think long and hard if going strictly on seniority leads to having a partner who will let you down when life and death are on the table. Construction trade unions mitigate this through their worker training programs which seek to add the value of their members to their employers. (Their employment situation tends to be more unstable than other industries due to the cyclic nature of construction.) We simply want to identify the ideal goal of the unions and its rationale, all other things being equal.

The second goal is related to the first: the union wants to control the workplace, or the “shop floor” as we say in manufacturing. Doing so makes enforcement of the first goal considerably simpler. This is also designed to insulate the workforce from changes induced by the employer, which unions generally assume to the inimical to the interest of the membership. It is generally done through classification/job description and workplace rules.

With this goal the NEA has succeeded more than any other trade union in American history. To begin with they have not only organised the workers (teachers) but the “management” (principals and superintendents) as well. This is why, for example, the Tennessee Education Association lists on their website the salaries of not only the teachers but the principals and superintendents as well; they want to show how far these people have come with the union and to inspire them to go further. Experience teaches that union sympathies in supervision will always weaken management’s position vis a vis the union; having the membership this far up the hierarchy only accentuates this.

The NEA has been working on this a long time:

quote:

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In his Anti-Intellectualism in American Life, Richard Hofstadter shows that the abandonment of this philosophy (that education was to train the mind) and the substitution of a very different set of guiding principles (early in the nineteen-hundreds) coincided with a change in the leadership of the N.E.A. In the eighteen-nineties, college presidents and professors and headmasters of the élite private academies had more or less dominated the N.E.A. committees. But by the end of the eighteen-nineties the accelerating growth of the high-school population had brought the number of high-school teachers and administrators to a critical mass. Following the example of the university professors, the teachers organised their own, subject-related associations; they formed their own teacher-training colleges outside the regular university systems; and they took control of the secondary-school associations that existed. By 1910, the teachers and administrators had taken over the N.E.A. from the professors. The chairman of the 1893 Committee of Ten was, for example, Charles William Eliot, the President of Harvard; the chairmen of the later committees were, typically, teachers at manual training high schools. (Frances FitzGerald, America Revised New York: Vintage Books, 1980, pp. 170-171)

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This quote—hardly from a right-wing partisan—shows that the NEA has not only managed to implant its membership from classroom to central office, but also has been able to establish its primacy in the educational (and ultimately the certification) process of state school teachers. This is why we consistently refer to the whole system of state school educators as a “closed circle,” one that not even university academics who are not “in the loop” themselves can penetrate.

All of this leads us to the obvious conclusion that no solution to the weaknesses of American state schools can take place without the involvement and cooperation of the trade union. The NEA is simply too well positioned in the system to be ignored or marginalised. This leads us to two important observations which will serve as our conclusions.

The first is that “workarounds” are only palliative in nature. This is based on experience as much as anything, but should be evident from the basic “union principles” outlined above. Magnet and charter schools (especially the latter) are not just for students with special interests and talents; they serve to upgrade merit in the teacher system. This is why the NEA and its affiliates oppose charter schools. Unfortunately workarounds like these will eventually be absorbed into the general system, and we will be “back to square one” in a few years.

The second is that the NEA needs to come to grips with the fact that it is facing a challenge as significant as their manufacturing counterparts faced with foreign competition. Although there is little danger that Americans will turn to foreign schools to educate their children, the long-term effects of inadequately prepared students will lead to the progress of other countries at the expense of the US. This will in turn lead to a lowering of our standard of living, which will reduce the effects of the hard-won gains of the trade union at the bargaining table.

The challenge is on the table. Will the NEA and other educational trade unions rise to the challenge? Their answer affects all of us. But the most important move is ultimately theirs.