The facts cited in the article show that in "socialist" Europe, where unions are much stronger and governments bigger, mass transit is less expensive to build and more efficient to operate. How do you explain that?
You can't make that argument. The environments are very different.
It's like trying to build a Silicon Valley somewhere outside of Silicon Valley. The environment is different. Some have tried, but it is hard or nearly impossible.
Unions in the US are a cancer that is killing this country. I don't know what the solutions is. I, for one, avoid buying any products that come from unionized work forces whenever I can. Sometimes there are no choices. I have to drive on the roads as they exist, for example, but, as much as it hurts me, you will not find me buying an American car.
As far as I can tell, you didn't provide an argument here, merely reasserted "unions in the US are a cancer".
In particular, we're looking to understand why transit construction is so much more expensive in the United States than Europe or Asia. You posit that it's due to unions. But this can't be the explanation, at least not without something more, because many of the countries with cheaper transit construction costs have stronger unions and higher levels of unionization. So your explanation doesn't have much going for it, at least as it stands. Is there some reason American unions are particularly cancerous in comparison to French, German, or Scandinavian unions, all of which are stronger than American unions? If so, what can we do to move American unions more in the direction of German unions? Perhaps strengthen labor laws and increase rates of unionization, to aim towards a more consensus-based and less adversarial framework?
If I were hazarding an explanation, however, I'd guess something to do with the U.S.'s court-based regulatory framework and federalist style of government, that dumps everything into agency decisions and lawsuits, and has that all happen at multiple levels. When Denmark approved a new Copenhagen metro line, the details were negotiated for some time (including with the unions). One the plans were agreed on, the project was wrapped into a law passed through the national parliament, which authorized the construction. It was then, by statute, definitionally legal in all aspects (unless it somehow contradicted the constitution). It was impossible to sue over the construction, because the metro-construction plan was itself written into the law, superseding any laws that might otherwise conflict. By contrast, in the U.S., new metro lines have to go through a series of agencies at many levels of government (local/regional/state/federal), and can be challenged on the basis of any number of existing laws.
The difference is that SV is one of a kind. Instead, government technical agencies and unions are almost everywhere, so making comparisons looks very fair to me.
And that's not to say that unions are always "good". I for example have many misgivings about unions here in Italy, but saying that all problems come from them is just trying to find a scapegoat imho.
Union membership in the US is very very low and accounts for ~7% of the private workforce and only ~11% overall. Finland, for comparison, has ~70% union membership, and also tops the rankings for education, among other things.
Convincing low waged people that the unions are in some way anti-american is just pure evil genius and took an amazing amount of chutzpa by the politicians who claim to represent them.
Yes, but what percent of workers in the public sector are unionized? The answer is 37%, and I would guess that their hourly pay [all compensation included] is significantly higher than their non union counterparts, and the quality of work is much lower. That is the argument being made.
There are apparently ~120 million people employed in the US and under 8 million of them are both unionised and in the public sector. So they are doing pretty well if they are causing so much trouble, considering there really isn't all that many of them.
One of the groups with the highest union membership in the public sector in the US, is the fire department. So if the argument about union members is right, then presumably the fire departments are full of some of the laziest low quality workers around, and you should be able to map union membership by the length of time that the cities are just left to burn.
They might be very different. But given that only 11% of workers are unionised, I fail to see how they can hold a lot of blame for the collapse of the US economy, which seems largely driven by a horrendous Total Debt/GDP ratio, massive regulatory capture across pretty much all sectors and blatantly fraudulent accounting in the financial sector.
...blatantly fraudulent accounting in the financial sector.
Could you explain this claim, possibly providing some citations?
I'm unaware of fraud playing any significant role in the recently ended recession. Regulatory capture, maybe - the regulators certainly gave frannie/realtors/construction/homeowners whatever they wanted. A speculative bubble also played a major role. But fraud? Could you explain this claim?
You could call it willful ignorance due to the massive profits that were being made, I don't know if that constitutes fraud. I interned at Citi in 06 as a quant/trader, and as we were being taught these things, it was pretty clear to the interns that you couldn't assume independence in the case of something like the home mortgage market - they're at least correlated by the performance of the wider economy, and an assumption of independence was at the core of why CMOs were supposed to work. When we asked about this, the answer we were given was that historically, home prices had never declined over the entire US, on average, and let's move on.
I personally think it was fraudulent/criminally negligent. The fraud was them making these things out of garbage and claiming to customers that they were AAA in aggregate when they had good reason to believe that they were not.
Who was defrauded? Note that "AAA" has a well defined meaning, namely whatever independent ratings agencies says it means. Banks didn't lie about this.
They also didn't lie about the fact that if house prices went down, purchasers of CMOs would probably lose money. The purchasers made the same assumptions about house prices never going down that banks and regulators made, but how is that fraud?
Are the banks now responsible for convincing institutional investors, hedge funds and other banks not to make the same assumptions they themselves make?
Hang on. I know that I am just a hobby economist and that whether I am right or wrong, I have no direct experience of the internals of what was going on, beyond having some family and friends working in those areas.
Ericd on the other hand is saying that he interned as a quant/trader at Citi and has direct personal experience of what was going on and that in his professional opinion it was probably fraudulent.
Unless you can start to demonstrate some profound level of insight or experience of the situation being discussed here, I don't think you are likely to get all that far in trying to rubbish someone who was directly involved in it.
To my understanding, it was fraud, because the organisations involved were not blind to the fraud lower down the chain, and were directly profiting from this fraud by helping package it for them and then sell it on to people who were unaware.
Is like saying that a professional fence isn't responsible for the fact that the goods they sell are stolen.
I didn't "rubbish" anyone. Nor did I even dispute any facts.
I'm simply asking Ericd to describe the specific mechanics of fraud. The only factual claim he made was that assumptions were made (hint: they always are), and in his opinion this constitutes fraud.
I'm just asking for more detail. Specifically, who was lied to? What action did they take as a result of the lie? What did they lose as a result of that action?
You know, standard questions about how a fraud might actually work.
I had a long explanation typed up, but a pretty direct analogy will probably work better. If a baby formula manufacturer includes melamine in baby formula (happened with Chinese baby formula a couple years back), but is able to get the FDA to rate it safe, it's not just the FDA's failure - the manufacturer has the best information about what's going into the formula, the regulator has much less, and the buyer has next to nothing to go on, except for a little blurb about how it was made.
Many of the banks have claimed that since the regulators rated these things well, why should they be held accountable? The buyer is supposed to be educated if they're playing in this league, caveat emptor (this is a pervasive attitude in banks). I think that's bullshit, because when the banks securitize this stuff, they're abstracting away the underlying layers, and it's effectively closed source. But people seem to have bought into it.
To answer your questions, pension funds and others poured hundreds of billions into CDOs as a result (many legally wouldn't have been able to unless the banks got them to AAA). A huge percentage of these assets lost a huge amount of value. One of the net results was an extremely large wealth transfer from pension funds and governments to bank employees.
It was ratings agencies that declared them AAA, not banks.
You skipped over one of the important questions - who was lied to, and about what?
As for the "closed source" nature of CDOs, it's irrelevant. I've read a few CDO prospectuses. They all are pretty clear about the fact that the purchaser is taking out a long position on housing. If you lost money on securitized debt, it's because the instruments behaved exactly as they were supposed to: housing goes up and you win, housing goes down and you lose.
CDOs are also explicitly not closed source - the purchaser gets a detailed listing of every single item it's value is derived from and the exact set of rules that will be applied to determine who gets a payout.
The ratings agencies declared them as AAA after bankers designed them specifically to be AAA, it's not like that just happened by chance. That was the main goal of the CMO - to create a product with the risk of a Treasury but with a better interest rate.
After that, the salespeople sold them as AAA. That implies to the person buying that it's extremely unlikely to default, generally less than 1% risk. Given that the bankers structuring these had very good reason to suspect that that wasn't true, I'd say that counts as a lie. You're making it sound as though this was supposed to be a risky bet, and that the pension funds simply lost the bet. That's not at all what AAA means. Funds were sold exploding lemons by people who should have known and probably did know that they were lemons.
For CDOs based on other, well understood securities, you're right. In the case of CMOs, most of them did not contain more than cursory information about the underlying mortgages, if that.
If you're looking for a specific instance of a lie, as in Person X told Person Y XYZ, I don't have that for you, and if I did, I wouldn't share it with you. But based on how these things work, there's little doubt in my mind that these things were knowingly misrepresented by a large number of people, which I believe is the definition of fraud.
> Finland, for comparison, has ~70% union membership, and also tops the rankings for education
I love how these nonsensical connections are made: "Schools are better in Finland because it has 70% union membership". Right. If only it were that simple.
Unionism isn't responsible for the high quality of schooling in Finland, that is largely down to focusing on an egalitarian school system. Excellence was the rather nice consequence of doing this, rather than being the stated aim.
The point I was making is that high union membership has not hindered this, given the results.
There is no comparison of labor costs in the article. I suspect a union worker in New York City makes more money than most European government employees.
