Here’s a little more about SF Pride at Work:

San Francisco Pride at Work is an organization of queers for economic and social justice. We are the LGBTQ arm of the labor movement, actively campaigning to protect workers’ rights to organize and defending queer justice in the workplace. Our group also organizes to build tenant power in San Francisco, to ward off the gentrification of queer neighborhoods and stop the displacement of communities. We participate in coalitions to resist attacks on immigrant communities in hopes that our city will one day be a safe place for all people, and we have also instigated groundbreaking protests for transgender rights. SF Pride at Work stands up for the rights of all workers, tenants, immigrants and queers in the spirit of the union movement’s historic motto: An Injury to One is An Injury to All.

Let me give you an all too typical example of how American management has contributed to the demise of our industrial competitiveness, namely, the former Mead Corporation paper mill in Escanaba, Michigan, which is now part of NewPage, owned by Cerberus.

The Escanaba mill makes coated paper. Coated paper is shiny paper, the sort you find in most magazines, catalogues, and art books. Coated paper is fussy to manufacture, which makes it daunting in a continuous process setting like a mill. In a highly-capital intensive continuous process business, downtime is hugely expensive.

In 1969, Mead added a #3 machine in Escanaba….

#3 machine was not operating at the expected efficiency level. Management nevertheless pressed forward with a further mill expansion in 1970-1971, of a kraft-recovery system. The best workers on the #1 machine were moved to the #3 machine which did not solve the problems on #3 and worsened the results of the #1 machine. It took an over two year turnaround effort to get the mill operations up to a good level of productivity.

By the mid 1970s, the Escanaba mill had gone from being the dog to the star…. The mill was recognized as one of the best coated paper makers in the US, and demanding publishers such as National Geographic, Smithsonian, and Playboy sought out its product…

Mead had had a series of record-breaking profit years, each higher than the last, yet sought to squeeze the unions in 1989.

The 1980s were the heyday for papermakers. By the later 1990s, Mead had started scrimping on shutdowns, which is when the plant’s equipment gets maintenance and repairs. Twice a year shutdowns were replaced by annual shutdowns.

In 2002, Mead merged with WestVaco to form MeadWestVaco. The shallow dot-bomb era recession led to further reductions in reinvestment. A $5 million shutdown budget for Escanaba was reduced to under $2 million, even as the departing Mead CEO received a $30+ million golden parachute.

Cerberus acquired the Escanaba mill along with four other MeadWestVaco mills in 2005, forming the company now known as NewPage. Cerberus set return on invested capital targets that were, to put it politely, audacious for the paper industry, which led it to scrimp even more on keeping the plant operations up to snuff…

[As the corporation continued to get into trouble, it shut down plants that were profitable but not wildly profitable rather than selling them off, often devastating the towns where the plants were located.] In Kimberly, NewPage refused to sell to two buyers and declined the support of the Governor to keep the plant open. “This is a case of a corporation taking a productive, profitable plant and closing it, and refusing to sell it to anyone else,” Andy Nirchl, president of the United Steel Workers local, said at the time.

It tried putting through a 60% price increase in 2009, and was forced to roll it most of the way back as its competitors implemented only modest price hikes. This took place when the standing of the mills was falling. Escanaba was shipping product that had breakage problems; its quality had gone from being among the best to middling to low. In 2010, NewPage has had three CEOs, including the notorious Bob Nardelli, who has been named one of the worst CEOs of the 2000s and the worst CEO of all time by CNBC.

Paper industry incumbents have not thought much of Cerberus’s management acumen… [Quoting one:] This entire mess was created, of course, by Cerberus mismanagement. They hired the wrong people, gave them impossible marching instructions, and have continue to play an expensive game of musical chairs at the highest levels of the company. The initial strategy of “pump and dump” didn’t work, and now Cerberus is relegated to actually operating a company. This is not their strength. But then, what is their strength?

Cerberus is negotiating a restructuring of the NewPage debt and may file for bankruptcy. The financiers will all get their cut and will move on to the next deal. Yet the workers at these mills and the communities they anchor, like Chillicothe, Ohio and Luke, Maryland (two other places I lived when I was growing up) will suffer the consequences of this rent extraction.

This isn’t to say that unions don’t make boneheaded mistakes. But even though they have control over only a handful of decisions that get made — and even though, as Yves points out, for “most manufactured goods, [labor costs are just] 11% to 15% of total product cost” — somehow it’s always their fault. But if the company is doing great? Then clearly it’s because of the brilliance of the CEO.

Right now, most state pension funds have very narrow mandates. If we are going to protect state pension funds in the future, we need to expand their mandate and turn them into the guardians of the middle class. I don’t know the nitty-gritty details of what is feasible, such as what we could change by ballot initiative in states like Wisconsin or Ohio. But before anybody worries about those details, first we need to decide what’s worth fighting for. Here’s my list:

1) Sheepdogs, not Sheep: To protect the middle class, state pension funds should act as Checks & Balances on Wall Street. We should create a national network of aggressive watchdogs like Amer Ahmad to sound the alarm. Because if predators like Lehman Brothers are trying to sell toxic assets in Ohio, you can bet their bonuses they’ll be trying the same scam on other states. State pension funds’ attitude should be like Danny Moses in Michael Lewis The Big Short:

When a Wall Street firm helped him get into a trade that seemed perfect in every way, he [usually] asked the salesman, “I appreciate this, but I just want to know one thing: How are you going to f**k me?”

And when a politician like Kasich shows up in sheep’s clothing at a state pension fund’s door, it shouldn’t take years & a lot of work for public to know what’s going on. That politician should expect their visit will get tweeted.

This national network shouldn’t just look out for state pension funds. It should also use its muscle to sound the alert whenever Wall Street is starting to do things – like, say, turn home mortgages into Russian roulette — that could seriously burn the middle class and/or blow up the entire economy.

2) Stack the Odds in Favor of the Good Guys : We might want to consider using state pension funds to help create more good jobs. For example, they could invest a not-too-risky portion of pension funds in creating long-term good jobs, such as working with other investors to create statewide Angel Investor funds that have been used successfully by states to support small businesses that are trying to scale up. We’d have to take a serious look at the risks involved – although they’re certainly not as bad as the risks pension funds took with folks like Lehman.

But there’s something else state pension funds could do that carries virtually no risk and could have a big payoff: pushing for changes in the rules that all of Wall Street operates by, to help Stack the Odds in favor of the Good Guys. They could fight for rules that encourage corporations to think in the long-term, push companies to try to create more jobs in the US, favor investing for the long term, etc. One state acting alone couldn’t do much good, but a national network of state pension funds working together – perhaps even with some private pension funds – could make a real difference.

Not only would this strategy help create good jobs, but it would also shore up state pension funds long-term financial health. Unlike a hedge fund, a state pension fund has a vested interest in making sure that its members do well in the many years before they have to retire. And unlike traditional funds, state pension funds care about how the state is doing. Strong state revenues = no pension shortfalls (assuming the funds also have the chops to smack down governors who try to pay less when times are good).

Ditto for housing bubbles that are inflated in part by Wall Street games around risky mortgages. Pension funds were burned by the financial products that were created from this Russian roulette. And when the bubble they helped inflate popped, helping to cause the worst economic plunge since the Great Depression, state pensions got burned once again as state government tax revenue tanked.

3) More Security for All : Republican governors thought now was the time to strike against public sector employees because there wasn’t much sympathy for them. It turned out they were wrong. The public is ready to cut state pension benefits but not get rid of them – or public unions. State pension funds may not be so lucky next time. If they’re going to survive, they need to start explicitly acting as a powerful voice for increasing the security of working families who don’t have state jobs. For example, the funds could fight to create new options for workers who aren’t public employees and who want to get out of the roulette game of 401(k)s, who want to save for the future and know they can count on being able to afford to retire.

4) Make Themselves More Accountable: The key to making all of this work is making it easy for state pension fund’s members and the rest of the public to hold state pension funds accountable. We need transparency to stop corruption. But even more importantly, we need it so we can act on the principle We Aren’t As Smart As We Think We Are. Given how complex the financial world is and how easily folks can be seduced by fast talking sales people from places like Lehman Brothers, pension fund managers can easily get themselves into trouble. We’ve got to create lots of feedback loops to catch them when they do.

For example, state pension funds could take advantage of the folks who already publicly analyze financial data for free — sophisticated finance blogs like Rortybomb, Felix Salmon, naked capitalism, The Baseline Scenario, etc. They could actively enlist these financial bloggers’ help, getting ideas from them about how to make it as easy as possible to get and analyze the pension data needed to keep a close eye on the funds and easily spot red flags.

All of these ideas could do a lot of good – and they’d certainly protect pensions a hell of a lot better than gutting public employees’ right to organize.

I’m no expert when it comes to the nitty-gritty details of how state pension funds operate or how, for example, ballot initiatives work in Wisconsin or Ohio. But what I do know is that if we don’t start asking questions about the role state pension funds should play in our economy and in rebuilding the middle class, if we keep treating decisions about pension funds as if they were mostly complex accounting & financial issues, state pensions are going to go the way of the dodo bird.

I’m glad they’re aggressively going for recalling these jokers. But I hope at some point, once the dust settles, they also start figuring out a strategy for going on the ideological offensive – and not just around winning back state workers’ rights to join a union.

Public workers have gotten an incredible amount of support from voters — the last few polls showed solid majorities against taking away state workers’ rights to organize – in large part because many folks see this as a symbol of the beating the middle class has been taking. But conservatives keep making inroads. “Why should public employees get ___ if you don’t?” has been selling pretty well. If public workers aren’t going to lose the war, they’ve got to pick some aggressive fights that help all working families.

Let me explain what I mean. Public sector unions already fight for lots of issues that don’t directly benefit their members. AFSCME, SEIU, and others were at the forefront of the drive for health care reform last year, and they’ve both strongly supported increasing the minimum wage. But now that conservatives have decided it’s time to stop chipping away at public sector unions and try to take them out, unions have got to fight back to create more power for all working families.

That means figuring out a Plan B on empowering folks to organize and join unions without getting fired (Plan A was the Employee Free Choice Act, which has no chance of getting past a filibuster in the forseeable future). For example, I bet some smart organizers could come up with a short list of issues you could run as state ballot initiatives in places like Ohio and Wisconsin that would make organizing easier.

Ditto for state pension funds – more on that on Monday.

And we oughta have at least one ballot initative in each of these and other states where unions are on the defensive in which we smack big corporations and the wealthy, either making them fork up more of their fair share to save libraries, school programs, firefighter jobs, etc. or putting the money into Infrastructure Banks that could help rebuild states and create good jobs.

Three initiatives – around the right to a voice on the job, retooling state pension funds to be a guardian of the middle class, and getting the rich to pay their fair share – plus recalls would give us plenty to organize our anger and outrage while also creating a clear contrast between what we stand for and what they stand for. If we do that, we’ve got a real chance to turn this war around and take back our country.

Once upon a time, there was a man named John Kasich. For many years he’d fought valiantly in the House of Representatives to protect defenseless big corporations. After he stepped down, he was rewarded for his efforts with positions on corporate boards, motivational speaker gigs at corporate events, Fox news punditzing, and a little job on Wall Street working for the Brothers Lehman as a Managing Director.

What did Kasich know about Wall Street? Aside from the fact that it was a great place to shake down for cash if you’re a politician, not very much. But that was OK. The Brothers Lehman didn’t want him for his financial prowess. They wanted him because he possessed a magic key called Access. And one of the shiny doors this key could open was to Ohio state pension funds.

In 2002, John Kasich arranged meetings between members of Lehman Brother’s private equity department and investment officials at two Ohio Pensions: the Ohio Police & Fire Pension (OP&F) and the Ohio Public Employees Retirement System (OPERS)….

John Kasich claimed he “never approached any other Ohio governmental entity about doing business with Lehman,” but new public records information indicates he pitched the State Teacher Retirement System (STRS) on using Lehman as a broker for a real estate investment sale….

One of the men Kasich introduced to Ohio pensions in 2002 was John Dwyer, a member of Lehman’s private equity team headed by Kevin Newman and James Swindell (who also met with the pensions). Public records requests indicate Dwyer continued to try to pitch the pensions for years after the initial meeting. On August 25, 2008 – 21 days before the Lehman bankruptcy – Dwyer tried to sell OPERS on investing in several funds managed by Lehman. Many of the products Dwyer tried to sell involved real estate assets, but standing out from the others was a product Dwyer was personally working on – Lehman’s Distressed Structured Credit Fund, which intended to invest heavily in collateralized loan obligations and collateralized debt obligations.

These toxic instruments are widely credited with bringing down Lehman in 2008, as they consistently downplayed the losses associated with their products.

How did Ohio’s pension funds fare at Lehman’s hands? Not well, says the Columbus Dispatch .

For a number of reasons, the funds could not or did not move quickly enough to sell off questionable assets. As a result, the treasurer’s office, which acts as custodian but does not invest pension monies, calculated that the funds had a combined $480 million loss in market value solely from Lehman investments.

Officials at the pension funds, in response to questions from The Dispatch, calculated direct losses at about $220 million. The difference between the two figures essentially represents the higher value the investments reached before plummeting when the markets fell in September 2008.

The rest of Ohio’s state government could’ve suffered even worse if not for speedy action by Ohio’s new state treasurer.

Shortly after arriving at the Ohio treasurer’s office in early 2008, Amer Ahmad discovered a ticking time bomb: $800 million in risky short-term investments, including some with Lehman Brothers. Fresh off 12 years working for two large Wall Street firms, the deputy state treasurer and chief financial officer immediately saw red flags.

In less than a week, the treasurer’s office, then headed by Richard Cordray, disposed of all assets that Ahmad considered toxic. “I made a choice that we should not be investing in these companies,” Ahmad said, “because in the world I just came from, everybody knew these companies were toxic assets.”

Even so, the Brothers Lehman kept knocking at his door.

In late July and early August 2008, Ahmad said he received calls from two senior management officials: Erin Callan, chief financial officer, and Paolo Tonucci, corporate treasurer. “They said, ‘Things are fine at Lehman Brothers. We would encourage you to buy our commercial paper and help us with the liquidity issues we have on Wall Street.’”

But Corday and Ahmad decided to “distance ourselves” from the commercial-paper holdings, Ahmad said. Ahmad said he found it “shocking” that such high-level officials would call to pitch investments to the state.

About six weeks later, Lehman Brothers announced it was filing for bankruptcy. It was the largest corporate bankruptcy in U.S. history. An examiner’s report said the firm masked $50 billion in debt.

The stories of Kasich’s newfound pals in Corporate America had happier endings, says the Dispatch, because Kasich did what he could to look out for them.

[According to Glenn H. Schiffman, who at the time ran Lehman's media-industry banking investment business,] Kasich had “board level and CEO relationships where he helped not only open the door for Lehman Brothers, but he also was a key member of the deal team providing advice.”… Schiffman said in a phone interview that one of Kasich’s strengths at Lehman was his credibility with CEOs: “Investment bankers sometimes can push clients to do deals. John was very different. He steered clients away from transactions that he felt didn’t make sense.”

But when it came to the good citizens of Ohio, Kasich steered them towards a very different fate.

John Kasich wasn’t just helpful in directly relieving Ohio pension funds of their money. As a Managing Director at Lehman Brothers, he was a bit player in the drama of the Wall Street fiasco that tanked pension fund stock market investments — and, as an added bonus, crushed the budgets of states like Ohio with a devastating recession and with plummeting property taxes due to the collapse of the Wall Street toxic fuel-injected housing bubble.

After Lehman Brothers was allowed to fail, the Powers That Be decided we had to bail out the rest of Wall Street and make taxpayers pick up the tab, devouring vast subsidies that could’ve been used instead to help devastated states like Ohio.

And then Kasich ran for governor, decrying the thousands of government regulations that were strangling poor defenseless businesses and wreaking havoc on the state of Ohio. He won — and hoped to live happily ever after.

The moral of this tale: it’s all the fault of greedy schoolteachers and firefighters. If they’d only chosen a more noble pursuit of a politician who cashes out or of a humble investment banker, we wouldn’t have to worry about shoring up their pension funds.

Up next week: how to use my framework to prevent state pension funds from suffering the same fate in the future.

PS According to Dean Baker’s calculations, state pension funds may be in better shape than we’ve been led to believe. Here’s the gory details.

“To our friends in Madison, Wisconsin:

We wish you could see firsthand the change we have made here. Justice is beautiful, but justice is never free.

The beauty in Tahrir Square you can have everywhere, on any corner, in your city, or in your heart. So hold on tightly and don’t let go, and breathe deep Wisconsin! Our good fortune is on the breeze, in the Midwest AND in the Middle East.

Breathe deep, Wisconsin…because justice is in the air! And may the spirit of Tahrir Square be in every beating heart in Madison today.”

You also might want to check out Tim McIlrath from Rise Against performing “Ohio.”

Only 5 states do not have collective bargaining for educators and have deemed it illegal. Those states and their ranking on ACT/SAT scores are as follows:

South Carolina – 50th
North Carolina – 49th
Georgia – 48th
Texas – 47th
Virginia – 44th

If you are wondering, Wisconsin, with its collective bargaining for teachers, is ranked 2nd in the country.

So much for the argument that collective bargaining hurts our kids.

Is it because collective bargaining is somehow less of a problem for public safety employees than for teachers? Because strikes by cops are less hazardous than strikes by teachers? Because public safety employees tend not to be hard bargainers anyway? Because public safety employees are poorly paid?

Or is it because teachers tend to vote pretty reliably for Democrats and public safety employees don’t? Bingo.

I don’t think that’s the main reason. Walker isn’t going after firefighters and cops because he doesn’t want a never-ending parade of videos like this:
You can get away with pushing teachers around; a lot of the public doesn’t have much respect for them. But cops and firefighters are a different story.

No one believed that our revolution could succeed against the strongest dictatorship in the region. But in 18 days the revolution achieved the victory of the people.

18 days??? The Egyptian revolution was such a blur — I spent most of the time holding my breath & praying that the incredibly heroic demonstrators wouldn’t be massacred — that it never registered just how phenomenally fast it happened.

In part that was because of factors beyond anyone’s control. But it was also because of the incredible unity & smart tactics displayed by all the groups and individuals involved, who brilliantly exploited an opening — and undoubtedly because of years of previous struggle by folks like Abbas. It was a truly remarkable display of what people can do when they stand & fight together for a just cause.

The poster in the background shows photographs of some of the recent young victims of the Mubarak government. The writing says they are among the martyrs of the 25 January Revolution.