Kochland Read online

  The presentation noted that Georgia-Pacific was more unsafe than Koch’s competitors. One internal chart showed that Georgia-Pacific’s safety metrics ranked in the bottom half of paper and pulp companies in the United Statets. Significantly, Georgia-Pacific ranked below its three major US competitors: Weyerhaeuser, International Paper, and Pratt Industries. The only companies that ranked below Georgia-Pacific were relatively obscure and sometimes small firms, such as Deltic Timber Corporation, Flambeau River Papers, and Turners Falls Paper.

  This chart was a challenge to Koch’s senior leadership. None of the companies that ranked ahead of Koch subscribed to Market-Based Management, yet they all did better than Koch. The numbers challenged the company’s orthodoxy.

  Koch’s response was to renew its commitment to Charles Koch’s philosophy and to reduce risk by “applying 5 MBM® dimensions throughout the organization.” The leadership team set out an ambitious goal. It sought to achieve “zero significant incidents” at Georgia-Pacific in the future. One chart showed a “Georgia-Pacific Safety Risk Glide Path” that would gradually reduce accidents to a level near zero by the year 2035. A different chart noted that every 10 percent decrease in serious incidents would yield between $5 million and $25 million for the company.

  Another chart, entitled “Georgia-Pacific 20 Year Bet,” was written in the classic style of Market-Based Management materials. It featured colored boxes connected by dark lines in a wheel-and-spoke formation. The box in the center said, “Critical Risk Focus Areas,” and the connected boxes listed various Georgia-Pacific operations and risk hazards like “Combustible Dust” and “Electrical Safe Work Practices.” (Electrical shocks had skyrocketed at Georgia Pacific, rising from one in 2010, to twenty-three in 2015, and to thirty-one in 2017.) The chart said that risk could be reduced by changing “hearts and minds” in the workforce. It said the company workers must change their mind-set and “Go from Have To—To Want To” in terms of staying safe. In spite of this approach, workplace accident rates continued to accelerate that year.

  * * *

  In past decades, worker safety was a top priority for labor union negotiators. Industrial accidents were a driving force behind unionization in the early years of the New Deal. By 2016, however, unions were so marginalized and overpowered that they were playing a defensive game, simply trying to hold on to what benefits they had left.

  This was the reality faced by the Dodger and the Hammer as they prepared to negotiate a new contract with Koch in 2016. Hammond knew that this would likely be the last contract he negotiated on behalf of the IBU, his last chance after nearly a decade to make things better.

  Before negotiations even began, Georgia-Pacific sent powerful and ominous signals to the IBU. In 2015, Koch Industries told the IBU that it was pulling Georgia-Pacific’s representatives off the board of trustees that oversaw both the IBU’s pension and the health care trust. It was common for companies to help oversee the funds, and Koch’s withdrawal seemed like the first step toward ending all support for the pension and health care plans.

  The Dodger was alarmed. “All the sudden, I’m thinking, Are they going to pull out of the health trust completely and shove this up our ass?” he said.

  The IBU team reached out to Jackie Steele, a labor relations expert at Georgia-Pacific who was their new negotiating partner. Steele sent a message: Georgia-Pacific might be able to let the workers keep their pension and health care, or it might be able to give them a raise. But it seemed impossible that the company could do both.

  Dodge and Hammond conveyed this message to the rank-and-file union members. The union members weren’t having it. They wanted to keep their benefits, and they needed to get a raise on top of it. The raises hadn’t been keeping up with the cost of living for years. “The guys want more, more, more, more,” Dodge said in exasperation. “They don’t know what you’ve got to go through!”

  The IBU members were not inclined to listen to Hammond and Dodge. In fact, they were not inclined to the listen to the union at all. This became painfully clear in early 2016, a presidential election year. The IBU and the Longshoremen unions endorsed the Democratic candidate Bernie Sanders. When Sanders lost his primary battle, unions across the country asked their members to switch their support to what they considered the next best thing: the Democratic nominee, Hillary Clinton. Many IBU warehouse workers, for the first time that anybody could remember, said they planned to vote against the wishes of union leadership. They wanted to vote for a Republican. And their grievances were about to be further enflamed.

  * * *

  Once again, the Dodger and the Hammer arrived at the Red Lion hotel to negotiate with Koch’s team. The IBU members took their assumed seats in the familiar conference room with the view of the river, just next door to the lavishly catered room where Koch’s team of negotiators sat staring at their laptops. It was like watching the same movie for the third time. At least this time around, the process was mercifully short.

  On the second day, they discussed the money. Dodge said that the IBU workers wanted to keep their IBU health care and their IBU pension. They also wanted annual raises to compensate them for roughly six years of stagnant pay.

  “I said, ‘Is there any chance on that, and what do you think?’ ” Dodge recalled. “Steele says: ‘Yeah, we may be able to work something out.’ ”

  Steele left the room. He returned with bad news. The company wasn’t going for it. If the IBU wanted to keep its pension and health care, then Georgia-Pacific would not offer them annual raises. The company would offer an annual bonus payment instead.

  Bonuses were anathema to workers because a bonus didn’t compound in value every year the same way that a wage hike did. Raises had been a ladder for middle-class prosperity for decades. But since the economic crash of 2008, US employers started to abandon annual wage increases. Even as recently as 1991, bonuses and temporary awards accounted for only 3.1 percent of all compensation paid by US companies. Annual wage hikes, by contrast, accounted for 5 percent of all compensation that year. This ratio had flipped by 2017, when bonuses accounted for 12.7 percent of compensation spending, and raises accounted for just 2.9 percent.

  The Dodger said he wasn’t having it. If he didn’t walk out of the Red Lion with a contract that promised annual raises, then his union members would vote down the contract.

  “Work with me, Jackie!” Dodge recalled saying.

  By the end of that day, the Dodger and the Hammer had relented. They agreed to the 2 percent raises for two of the years and $1,000 annual bonuses for the other two years of the contract. “The worst contracts I’ve ever negotiated—all of my G-P contracts,” Dodge said bitterly. “There’s no leverage. There’s no fucking leverage.”

  In all, the contract negotiation took less than a week of bargaining. Dodge told Jackie Steele that if Georgia-Pacific wanted the contract passed, then they should help him hold the vote as soon as possible. The company agreed to release its employees from work hours early so they could drive down to the union hall for the vote. “The only way I’m gonna pass this piece of shit is to have them all here,” Dodge said.

  * * *

  The IBU members filed into the big Longshoremen’s union hall, just downstairs from Hammond and Dodge’s office. Ballot boxes had also been prepared for the day’s vote. The workers gathered around a stage at the far end of the big room, a slightly elevated platform with an American flag and a podium that was emblazoned with the Longshoremen’s crest.

  Steve Hammond looked out over the crowd of workers, who were already grumbling. As he looked around the room, he saw symbols that reflected the power of organized labor. There was the big mural showing the labor strife and the solidarity of the old days. On another wall hung the banner of the Jack London poem “The Scab.” And next to that was a big glass display case full of old handheld cargo hooks. The place looked like a museum of union power. The totems, the banners, the mural. All of it had a tainted, aging quality. Like paper that was yellowi
ng.

  Word had spread through the crowd that they would not get annual raises. It was inconceivable, to many members, how something like this could have happened. Why were they paying union dues, if the contracts just seemed to get worse? Why were they constantly told that their warehouse performed far better than most warehouses in the Georgia-Pacific system, yet none of the improvements translated into a significant pay raise?

  Why hadn’t Hammond bargained harder? Why hadn’t Dodge bargained harder? Why couldn’t they ever seem to win?

  “Guys were pissed off. Guys in the warehouse were screaming bloody murder. And: ‘No way!’ ” Dodge said. “They got loud and vocal.”

  Steve Hammond took the stage. And, for the first time that anybody could ever recall, he completely lost his shit.

  Hammond upbraided the gathered union members. He scolded them. He insulted them. He told them, in so many words, that they had expected him and Dodge to do exactly the one thing that labor negotiators could not do: win a deal with their silver tongues.

  Union power came down to bargaining leverage, and the IBU had no leverage. The warehouse employees couldn’t afford to strike, and everybody knew it, including Koch Industries.

  David Franzen listened to the speech, slightly awed to see Hammond lose his temper. “He’s saying, ‘This is it guys. This is your best offer. You’re not going to strike anyway,’ ” Franzen recalled. “ ‘If you didn’t do it last time, what makes you think you’re going to do it this time? None of you guys did anything about it. We told you to get ready in four years, and you didn’t get ready.’ ”

  Then Hammond made the comment that everyone remembered for years: “You guys are nothing but a bunch of Trump lovers. Go ahead—vote for him,” Franzen recalled Hammond saying.

  Hammond was finished, and he got off the stage. Dodge didn’t quite know what to think. Hammond had actually turned into the Hammer, but against his own union members. “He basically told them off and told them: ‘Vote no on the fucking thing. Dodger and I will sit back down and talk some fucking more with them.’ ”

  The union members cast their vote in an election that felt like a foregone conclusion. The contract passed with over 65 percent of the vote. And that’s how Steve Hammond retired from the IBU.

  * * *

  Hammond sobered up after he retired in March of 2016. He spent months just sitting in his home, trying to process what had happened.

  Hammond didn’t have much to complain about, personally. He retired with his full pension—$3,000 a month—plus Social Security. His two daughters were grown and happy, and he visited with them frequently. He was remarried and happy. What made him sad was thinking of the IBU members he’d left behind. He had joined a raucous, militant union, and he had left a splintered, moribund union. And what he saw at the IBU seemed to be happening across the country.

  “I think that we kind of fucked ourselves, to tell you the truth,” Hammond said in his living room, near a big window that let in soft light and offered a view of imposing cedar trees and rolling green grass. “I think that our forefathers—just using that [warehouse] as an example—worked their asses off to get these great contracts and stuff. And then got these great jobs for their kids, and nephews, and little brothers, and stuff like that. And we had all this: Work forty hours a week. Work five days a week. If you worked Saturday and Sunday it was time and a half for Saturday and double time for Sunday. And all that great stuff, you know?

  “And we came in, us kids of theirs, and just pissed it away. We just took it all for granted that this was ours.”

  * * *

  During the final months of 2016, the members of the IBU turned their attention to another election, for president of the United States. The real estate magnate, reality television star, and Republican candidate Donald Trump campaigned tirelessly throughout the fall. He settled on a consistent theme: the election was rigged. It was controlled by dishonest forces that were allied against working families. And Hillary Clinton, “Crooked Hillary,” was the face of a thieving elite.

  This story line resonated with many IBU members, like David Franzen. For all his adult life, Franzen had been hitting the “Democrat” button when he voted, but his life did not seem to be improving in material ways. His union told him to vote for Hillary, and for the first time, he wasn’t going to listen.

  Trump’s candidacy was also disrupting Charles Koch’s plans. In April of 2015, Charles Koch had given a rare interview to USA Today to outline his political strategy for 2016. Koch planned to be more engaged than usual in Republican politics. His donor network would, for the first time, give money to influence the field of Republican primary candidates. The network planned to spend $900 million, an amount that rivaled the Republican National Committee’s spending. Roughly one-third would be donated directly to candidates, with the rest going toward “educational” efforts and other activities. Koch told USA Today that his network had selected five contenders who might win the money: Wisconsin’s governor, Scott Walker; Florida’s former governor Jeb Bush; and three US senators: the libertarian-leaning Rand Paul and conservatives Ted Cruz and Marco Rubio.

  Koch had carefully set up the game table. Then Trump came along and flipped it over. Over several months, Trump forced every candidate backed by Charles Koch out of the race. To everyone’s surprise, Donald Trump became the frontrunner. Rather than back a losing candidate, or risk failure if he confronted Trump directly, Koch retreated to the margins of political attention. On November 8, 2016, Donald Trump won the presidential election. His victory rested on Hillary Clinton’s collapse in a group of heavily unionized states that Democrats referred to as the “Blue Wall”: Michigan, Wisconsin, and Pennsylvania.

  In many ways, Donald Trump posed a greater political threat to Charles Koch’s political agenda than Barack Obama. Trump was not seeking to fight American conservatism as much as he sought to transform it from the inside. Charles Koch tried to bend the Republican party toward a libertarian view; now Donald Trump was bending it toward a nationalist, populist philosophy that Charles Koch found abhorrent. Trump’s policies aimed to benefit specific populations of Americans, rather than to solely limit government interventions in the marketplace.

  Shortly after Trump’s election, congressional Republicans scurried to reorient themselves around Trumpism. Many Congress members knew that Trump won their home districts with more votes than they had. They were not about to oppose him. If Donald Trump was president for eight years, it would almost certainly abolish Charles Koch’s political project. The Republican Party would be the party of Trump, not Hayek or von Mises. Koch Industries’ retreat from the 2016 election cycle had been well publicized, and members of the Trump administration were quick to point out that the Koch network’s political influence was diminishing, almost certainly for good.

  Charles Koch took a different point of view. He was conditioned to thrive in volatile environments. He thought about the long term, and tended to avoid the wall of noise and media controversy that emanated from the White House each day. Charles Koch worked on a longer political horizon and that gave him an advantage. He had spent more than forty years building a densely connected network of political operatives and institutions in the nation’s capital. Donald Trump had not.

  When Trump arrived in Washington, Charles Koch was ready.

  * * *

  I. Appending an R, for registered trademark, to MBM seems to be the preferred style for Koch Industries executives. Charles Koch used the abbreviation in his own writing, and it also appeared in internal memos.

  II. The “tail” of a paper roll is the last section of paper that flaps loose, like the outside tab of paper on a toilet paper roll.

  CHAPTER 24

  * * *

  Burning

  (2017–2018)

  Springtime came early to the nation’s capital in 2017. In early February, the air was unseasonably warm and the trees were starting to get their buds. Brightly colored flowers bloomed in Lafayette Squa
re park, just north of the White House, with early tulips pushing up from their beds and cherry trees frosting themselves with pink and white blossoms. In the suburbs, the forsythia exploded in vibrant yellow flowers and the redbud trees were covered in purple. The riotous colors of spring, usually celebrated in the capital city, were out of place and disquieting, like flashing signals on a dashboard. Across the country, springtime arrived weeks early, with the zone of blooming advancing farther north than usual. The election year of 2016 was the hottest year on Earth since reliable record keeping began around 1880. NASA compared Earth’s average surface temperatures against a period in the mid-1990s, and found the average temperature rose steadily each year. Sixteen of the seventeen warmest years on record occurred after 2001, peaking in 2016. Eight of twelve months in 2016 broke records as the hottest months ever recorded. Scientists at NASA did not dispute what caused the warming. It was “a change driven largely by increased carbon dioxide and other human-made emissions into the atmosphere,” the agency said. In the winter of 2017, carbon concentrations in the atmosphere reached 407 parts per million, far past the limit where most scientists considered radical climate change unavoidable.

  The political seasons in Washington, DC, were being disrupted as well. On January 20 Donald J. Trump stood on the grand dais in the shadow of the Capitol dome, put his hand on the Bible, and took the president’s oath. No candidate in US history had risen to the White House like the real estate mogul had done. He was backed by no party, supported by no discernable outside interests, and had no previous experience in government or military service. The usually stable networks of political influence were torn apart in 2017. No one knew who was in or out of Trump’s political circle. No one knew what he really wanted—what was hyperbole and what was an actual campaign platform. The lobbyists at Koch Companies Public Sector and other companies had adapted to political shocks before, but this time was different. The Trump administration saw itself as a revolutionary force, independent of both political parties. One person close to the administration, and who also had been close to the Koch’s political operations, said that the Trump administration viewed Washington, DC, as a chessboard on which three opponents were doing battle. One opponent (and the weakest) was the Democratic establishment: “Team D.” Another was the Republican establishment: “Team R.” Finally, there was the Trump administration, “Team T,” which planned to beat everyone else.