The US: Where Europe Comes to Slum

By Los Angeles Times | Editorial

15 May 11

Its leading companies are investing in the US because they can do things here they would never think of doing at home.

he newest slumlord in Los Angeles is a pillar of German capitalism. Earlier this month, the city attorney's office filed suit against Deutsche Bank, the world's fourth-largest bank, for letting many of the more than 2,000 L.A. homes it has foreclosed on descend into squalor and decay.

A yearlong city investigation of the properties on which Deutsche Bank foreclosed turned up tenants compelled to live in crumbling apartments the bank would not fix, houses taken over by gangs, faucets from which water either wouldn't flow or wouldn't stop, and the occasional unidentified dead body. Nothing, in other words, that would be allowed to happen to bank holdings in Frankfurt, the neat-as-a-pin German city that is home to Deutsche Bank and much of the rest of German finance.

Deutsche Bank responded to the suit by blaming the loan servicers that were supposed to have maintained the bank's properties. But City Atty. Carmen Trutanich insisted the blame belonged with the owner. "We are not going to allow them to play the shell and nut game," he said.

But slumming in America is fast becoming a business model for some of Europe's leading companies, and they often do things here they would never think of doing at home. These companies - not banks, primarily, but such gold-plated European manufacturers as BMW, Daimler, Volkswagen and Siemens, and retailers such as IKEA - increasingly come to America (the South particularly) because labor is cheap and workers have no rights. In their eyes, we're becoming the new China. Our labor costs may be a little higher, but we offer stronger intellectual property protections and far fewer strikes than our unruly Chinese comrades.

Don't take my word for it. Check out the study released this month by the Boston Consulting Group, which concludes that when you compare China's soaring wages and still-low levels of productivity with our stagnating wages and rising levels of productivity, the price advantage of manufacturing in China instead of the US will shrink to insignificance by 2015. Investment in the US, says the group, "will accelerate as it becomes one of the cheapest locations for manufacturing in the developed world."

Those investments are well underway. The auto companies of Europe and Japan have opened factories in the nonunion South over the last couple of decades. Not one of them has agreed to refrain from waging a union-busting campaign should their workers wish to organize. Their stance could not be more different from their attitude toward workers and unions in their home countries.

As a report released by Human Rights Watch late last year documents, companies that routinely welcome unions, pay middle-class wages and have workers' representatives on their corporate boards in Germany and Scandinavia have threatened their US-based employees with permanent replacement by other workers as the penalty for protesting wage cuts (that was the German manufacturer Robert Bosch), ordered workers to report on fellow workers' pro-union activities (that was T-Mobile, a subsidiary of Deutsche Telekom) and disciplined workers who couldn't show up for unscheduled weekend shifts announced on Friday night (that was IKEA, according to an L.A. Times story).

In Germany, Robert Bosch, according to Human Rights Watch, has never threatened a single worker with losing his job for protesting wage cuts, and Deutsche Telekom repeatedly touts its "social partnership" with its union. In Sweden, IKEA, like the vast majority of Swedish companies, is unionized and affords its workers a range of rights and benefits that are all but unimaginable to American retail workers.

German manufacturing workers, making the world's most sophisticated products and machinery, earn on average $1.50 for every dollar that American manufacturing workers make. (Despite that, because it's German policy to foster high-end manufacturing and highly skilled labor, Germany also has a huge trade surplus, while we have a mammoth trade deficit). In the new global pecking order, the decline of American unions and the steady downward mobility of American workers are making us the destination of choice when European companies want to get the job done on the cheap.

America as the beacon for the workers of the world? No more. If anything, our relationship with Europe has become a latter-day version of the one that characterized the years leading up to the Civil War, when our Southern states provided cheap, slave-produced cotton to the mills of Manchester. (That's why British and French business favored the Confederacy.) Once again, we're where Europe comes to slum - in the low-wage factories of the South and the run-down houses of South Los Angeles.

Harold Meyerson is editor at large of the American Prospect and an op-ed columnist for The Washington Post.