Where Would General Motors Be Without the United Automobile Workers Union?
What the UAW has done, on the foundation of coercive, interventionist labor legislation, is bring a once-great company to its knees. It has done this by a process of forcing one obligation after another upon the company, while at the same time, through its work rules, featherbedding practices, hostility to labor-saving advances, and outlandish pay scales, doing practically everything in its power to make it impossible for the company to meet those obligations. FULL ARTICLE
Comments (85)
Interesting article.
Published: April 19, 2006 4:22 PM
Brilliant article.
The situation is similar in all countries where governments and labor unions have power to promote unlimited intervention on the companies.
How could one possibly open the eyes of those who still believe in this union fairy tale?
Facts aren't just enough?
RHU (from Brazil).
Published: April 19, 2006 4:49 PM
And the whole (government backed) union mess at G.M. (and many other companies) is justified as "in the interest of the workers". The "interest" of not having a job.
As you know, wages and conditions vastly improved over time in the United States long before unions or government regulations were important.
But some people were not happy with the rate of improvement - they wanted the quick fix of what H.W. Hutt used to call the "Strike Threat System".
Obstruction (known by the military term "picketing") made "legal". And companies forced to keep on union activists even if they did not want them employ them. As if an employer can not decide who to pay money to (i.e. as if union men have a RIGHT to other people's money).
The claim was that there would be higher wages and better conditions than the market would provide - and perhaps there were for a while (although if G.M. had been a more successful company wages and conditions would have been BETTER not WORSE that the union wages and conditions in the long term) - but now the chickens have come home to roost.
Published: April 19, 2006 5:15 PM
Bless you, Professor Reisman. GM should be in every high school, college and graduate textbook. It's a crying shame and no one seems to care.
Published: April 19, 2006 6:48 PM
Lucid comments about the consequences of private property rights violation . Just a few weeks ago the gang that is governing my country decided that 200.000 meat prouducers couldn´t export their production because all people have the right to consume meat at a "right price" (defined by the goverment of course). And what is worse all the media, almost all the politicians the mayority of businessmen and almos all the pseudo economist backed this suicidal behavior ... obviously ther are not meat producers
Published: April 19, 2006 7:03 PM
The essence of your essay is accurate however I am not required to purchase a GM automobile. I am REQUIRED to fund a like type of errant mamagement and derelicts entrenched within the goverment agencies that fain to serve me. Here I have no choice but to be plagued by mediocrity at best at a premium price: Why did you not target and annotate the fundimental problem?
Bill Dowis, Texas
Published: April 19, 2006 8:05 PM
General Motors is a mental construct - a legal fiction.
Published: April 19, 2006 8:24 PM
While I would like to be sympathetic to Prof. Reisman's complaints, they are one-sided and miss a bigger point: GM's problems are just as much a result of managerial incompetence as they are of workers seeking security through the UAW.
The fact of the matter is that GM (Ford and Chyrsler) mismanaged their labor relations, had too much hubris as to their ability to deal with foreign competition, and boxed themselves into a corner by signing costly and inflexible UAW contracts.
The desire by workers for such contracts is understandable, and come after a long history where management abused labor. In addition, management has continued to grossly overpay themselves at these firms and at other large corporations around the US. The Japanese have avoided these problems in a number of ways, stemming from their shared desire to rebuild post-war and from a shared perception of themselves as underdogs in the global market. As a result, labor relations have been much better: auto unions have been company-specific rather than industry unions and management has been much less greedy, so relations have been much less confrontational and as a result workers have proven much more willing to be flexible.
The big three underestimated the foreign threat and gave away too much by lockiong themselves into long-term pension and medical benefits. As the threat grew, US automakers became less entrpreneurial and more protectionist - relying less on their own efforts and more on rent-seeking, even while management has continued to pay itself well (and the Fords have continued to take dividends).
It is a sad tale of venality and destructive management-labor confrontation, for which management should face at least as much criticism as the UAW.
Published: April 19, 2006 9:35 PM
Mr.Reisman, Thank you for your GM article. This certainly brings home the intellect,beliefs& corruptness of the liberal/socialist thought& agenda in Gov't& business or anything they touch.In the US you have some chance of getting rid of them every 8 years.In Canada due to a corrupt voting system etc. we have had to put up with liberal/socialists--procommunist for 30 years
In your last election J.Kerry et al of the same UAWmind set almost won. Glad he lost.Wish you well.Write more. Regards GKSinclair
Published: April 19, 2006 10:34 PM
Please stop with the corporate boilerplate. GM does not operate in a free market. These workers are simply asking for equality under the law. This article is an apology for the capitalist class. You should be showing solidarity with these opressed workers, like Roderick Long did with the French rioters. It's no wonder that libertarians are viewed with suspicion by the working class. Libertarianism won't be a people's movement until stuff like this is shown to be the pure capitalist propoganda that it is.
Published: April 19, 2006 10:35 PM
TokyoTom,
As usual you miss the point in your haste to show how much more brilliant you are than everbody else.
It is true that the "Big Three" did make promises they could not keep.
However, although I don't have time to present the evidence right now, I would like to state that the "Big Three", once unionized, were put in a position where they had very little say in labor agreements because of pro-union leglislation. I know an owner of a medium sized firm who has told me numerous times that he fears unions, and does everything possible to avoid being unionized. Why? Because once a union has control of a bussiness, it loses considerable power in labor contract negotiations. This is partly why "GM (Ford and Chyrsler) mismanaged their labor relations" as you stated.
I will present the logic and evidence later.
By the way, did you read all of Reisman's article? In his concluding statements he does implicitly acknowledge that the blame does lie with GM (and American bussiness and people in general) for not taking a stand.
Also,considering management pay...Do you really believe that it is responsible for GM's __billion (I don't know the exact figure) dollar debt? Get real, even if the managers accepted no pay at all, GM would still be in the shape it's in today. Debt is inevitiable result when you lose money (in GM's case, $1,200), for each unit (vehicle) you sell.
Published: April 19, 2006 10:49 PM
"All concepts are "mental constructs." What they refer to, however, are real-life entities and actions, with life-and-death significance." - George Reisman [via email]
General Motors per se cannot act, nor is it a "real-life entity." Being a well advertised legal fiction, General Motors is a concept held by many people, but that doesn't somehow
imbue it with life and substance. Your problem here, as I see it, is to overlook the fact that people were buying stock in - and making contracts with - a mental construct.
Published: April 19, 2006 11:05 PM
Please explain why almost every nonunion salaried worker got (for a long while and still gets) roughly equivalent benefits including the idling, health-care, and retirement benefits. They aren't unionized. Yet gm gives them the same deal. Please also explain why Wall Street rewards such behavior, and why the shareholders and directors give big bucks for being the captain that ran the ship aground.
The UAW was and is at best simply another greedy brutish stakeholder, and if a non-union company was going out of business (as many in the south have) you can't complain about their workers. The investment houses and bankers want a fat pig that will pay on bonds. Shareholders want a fat pig that will meet the next quarter. The executive suite want a(nother) fat pig so they can get huge rewards regardless of performance. The middle managers want security. The salaried class want much the same.
There is also a simple fallacy throughout the article, that if the UAW didn't exist, then ONLY the single bad effect of having the UAW would be different. If the competitors were paying large retirement packages years ago, gm would need to increase wages or give something else to attract workers, or they would have gone bankrupt then. If blue collar workers didn't have good health coverage, we might be living under Hillarycare today. gm might have lost those billions in some other way (Ford managed to have problems with Palladium trading).
If Toyota came to the US in the '50s, they would have the identical problems. The Japanese had a lifetime employment culture that I think is strained if not broken - and they have national health-care. Comparing gm with its legacy v.s toyota which came into a greenfield is silly.
Not that I consider what the UAW does as good, but you can't blame them for every ill in the universe. There are and were union plants that succeeded, and nonunion plants and companies that failed.
Published: April 19, 2006 11:05 PM
Steve,
"Libertarianism won't be a people's movement until stuff like this is shown to be the pure capitalist propoganda that it is."
Please stop with the socialist propaganda. Are you really against capitalism? What a sad world it would be without tools, machines, etc. (CAPITAL).
"These workers are simply asking for equality under the law"???
Give me a break.
Published: April 19, 2006 11:51 PM
I've had a bit to do with the US car makers (unlike TokyoTom I visited the plants and undertook work for those companies).
Visiting the auto plants was a revelation, especially after seeing what the competition were like. Many automotive industry suppliers have known for years that GM, Ford and Chrysler (as it once was) were walking dead. Anyone with a little intelligence could understand that those companies were well into the process of going insolvent and also that the "workers" were living in a self-induced fantasy. As one GM manager repeated, "People have an almost unlimited capacity for self-deception" (he may as well have been repeating something the Matai used to say). When I asked him what the limitation was, he replied, "That's what they are all going to find out about. It's reality and it'll hurt'em bad. How I shall laugh when those slugs wake up to discover they have no retirement money, no medical cover, no savings and no job."
A lesson for one and all.
As far as management is concerned I knew several sound managers within GM but their hands were tied. They couldn't do much about the situation as it was cast in regulation. So they were stuck. Many of them left. Those that stayed on have become increasingly cynical about the whole enterprise. Some stayed in to get their payout (in cash). Others to get as much salary as they could while the going was good. None expect GM to survive as we now know it. None expect the "benefits" to continue and so they live by the mantra, "Save, save, save."
The ride is far from over. Where GM leads, Ford will follow. This will be a massive blow to the US manufacturing sector. Could be as serious as half a million jobs vapourised in the first six months of the collapse. Then will come the rattle through effect as OEMs and T-1 suppliers start letting staff go. Hopefully it will be the end of economically ignorant auto-workers and their union fuehrers.
UAW? Should be known as Uneducated Awful Wailers.
Sione
Published: April 19, 2006 11:59 PM
Terror = Unions
You know, i bet if the GM executives each took out a gun at shot down each union worker, they probably still be better off financially after all the lawsuits, imprisonments, and compensation to families, than what the UAW has done to them!
No equality before the law with unions, only the right to be a blood sucking parasite!
Published: April 20, 2006 12:35 AM
Bob, not sure what I did to particularly get your goat. I'm not brilliant and don't profess to be, and am happy to be enlightened as well as anyone else - sometimes a gentle nudge works, other times a 2x4!
Anyway, what point did I miss in my haste? Besides acknowledging Reisman's points, I simply pointed out that they were one-sided and I think miss the bigger picture (as George and tz also argue). You bring out a new and interesting point about how pro-union legislation tied management's hands. I think that there is something there, and would like to hear more.
Even with the rigidity provided by union contracts (and supporting legislation), we are talking about CONTRACTS that could have been renegotiated and changed to a substantial degree. That these changes were not implimented has much to do with the failures of GM's managment, which shares at least as much responsibility as the UAW for the controntational - as opposed to cooperative - relationship between them, and for what went into those contracts. Both sides left an awful lot on the table because of distrust and hostility. Management pay was a part of that; it did not bankrupt the company directly, but it set the tone for all negotiations - why should labor make concessions when managment is stuffing itself?
This, by the way, is a problem affecting many major US corporations, where management is ripping off shareholders because shareholders are too diffuse a group to constitute an effective check and the CEO frequently has the board in his pocket. (In some ways this resembles the relationship between taxpayers and government, and corporate rent-seekers; increasingly through gerrymandering representatives have put the voters in their pockets, and make it easier for them to extract payments from rent-seekers.)
In sum, GM management could have done a better job in handling the unions, for the benefit of both. Boeing is unionized, and they have done a much better job.
Tom
Published: April 20, 2006 4:41 AM
tz, you make good points, but let me disagree slightly about Toyota.
They certainly have the advantage of not having the same legacy costs, but besides that, even as the lifetime employment system is breaking down, there is still tremendous internal loyalty in the Japanese automakers, and there is not a large difference between worker and management pay. The sense of shared identity and objectives not only lowers costs but allows much more efficiency in implementing management decisions.
Sometimes managment breaks down, as in the case of Nissan, but with a change in leadership style (Carlos Ghosn), Nissan turned on a dime.
These firms are better managed and have better labor relations, and the market is rewarding these better and more efficient firms. It will be sad to see the native US industry go, but they have earned their fate (UAW, management and shareholders). There will be economic dislocations to be addressed, but isn't that what the market is all about?
Published: April 20, 2006 4:53 AM
I've worked in the Automotive industry and I don't carry any water for the UAW. Having said that, however, two other things must also be said. One, one of the big reasons for organized labor's power is that our elite managers, who really run the Fedrl govmint, have used this as a way to indirectly control unions and coopt any real power they might actually have. Second, not by any means all but certainly a majority of automotive managers are arrogant, loutish, incompetent, potty-mouthed, contemptible thugs; I can't imagine anyone who didn't need a salary working for any of them!
Published: April 20, 2006 7:01 AM
The disaster of government labor legislation and the union monsters that were created from it are what led to the bad management of these firms. The "arrogant" management is directly linked to the union philosophy.
I just wonder if the "too big to fail" bail out is coming. That would be doubly worse for this whole debacle.
Published: April 20, 2006 7:59 AM
The UAW, as potentially contemptible as it may be, is hardly the cause of all of GM's ills.
I'd posit that the DOT is a greater culprit in the destruction of American automobile manufacturing capability.
The DOT, by consistently increasing the barriers of entry into the post-WWII auto-manufacturing market, literally codified the Oligopoly we use to know as the "Big Three"....I'll leave the rest to History......
Published: April 20, 2006 8:19 AM
Of course the bail out is coming.
Published: April 20, 2006 8:31 AM
In my view, Professor Reisman has done another fine job.
As to the claim that labor and management share in the demise of GM, there is a critical difference. *The fundamental problem with unions is their employment of force.* Absent that method, there is no harm in collective bargaining or in any other practice of workers forming groups. Management on the other hand can be completely destructive, but they do not force people to work for them. It is true that in the past they used the force of government against their laborers. However, I am unaware of such practices today.
At any rate, the essential problem is not with labor or management, but with force, rather than free choice.
Published: April 20, 2006 8:39 AM
Unions are basically a variant of the insurgency - i.e. they fight 4th generation war and do it on the moral level. When a CEO rewards himself with billions for causing much misery by laying off workers to satisfy a corporate raider (which a truly free market wouldn't allow), the workers desire to strike back. (If there were financial problems, the CEO ought to be making less than the Union workers - if the company was doing OK, then it is almost always best to retain the employees).
I would note liberty can only win at the moral level, which is why I strongly object to suggesting success in the current malinvestment corporatism has anything to do with capitalism and free markets. Today's world is a game of cheaters, not competitors.
I've also noted that the Ancap protection agencies probably would include Unions - and worse than their present form since they can form an effective mob and there would be no authority to counter them.
I've also known noble union people who are also stuck much as the good managers. GM (and Ford) WANT everything regulated and by the book. They bought EDS, not some innovative company. Ties, not T-Shirts. Except that the wages and benefits would be much smaller, GM would likely institute an equally stultifying workrules. WW2 lobotomized business to think big and regulated and they never recovered. If the Union acts like a bunch of conscripts that lobbies congress for benefits and are told not to think, don't blame them. And when you get a bunch of them together (as opposed to the same demographic Toyota, etc. hire), don't expect them to act like innovators - at least on the job.
My point about Toyota was merely that conditions were different and all sides have to deal with things. And since WW2 made them reevaluate things (Deming evangelized over there, not here) they just looked for what worked under normal conditions.
I've even heard problems with Europe, e.g. where one supplier had a relative who made bad capacitors but they wouldn't change.
One other note is that before Roger Smith, and to some extent after, the UAW was worse or better depending on the carline. Cadillac union workers would take more pride just because "It's a Cadillac". When allowed to, the Union workers take pride in their products.
The Union would all but be broken if the management of the companies didn't act like feudal lords. GM won't explain to the UAW why they need to break a contract or get concessions - they want to be in charge. So why should the UAW treat hostility, or the kind of indifference one shows to a used kleenex as a reason to bargain? Even the Union isn't that stupid.
It is one of those codependent relationships where two people abuse each other, really hate it, but know no other way.
Published: April 20, 2006 8:42 AM
Here again is the semantic problem with force, coercion, and power.
Blackstone said that "A power over a man's resources is a power over his will." which I happen to agree with.
The fundamental problem with unions is their employment of force.
Because the rules are stacked by some so that employment of economic coercion is considered fair and employment of physical coercion is not. If you are against all coercion, and a person or business misuses their economic power, and you won't write legal rules to prevent such, then is there another alternative?
Unions are not considered brutish thugs for a reason - they are correctly perceived as being an insurgency (they have only improvised weapons and low intensity techniques available) against A MORE POWERFUL FOE. Read Van Creveld's works on 4th generation war.
Asking why the Iraqi insurgents don't give up IEDs and just march up in even ranks so our army can shoot them isthe same question as asking why Unions don't give up violence (some by government proxy) and just use the (coerced) market. They aren't totally frigging stupid! Please give them that much credit.
I feel free to be pro-market and say it ought not be interfered with, but I don't say it can't be or isn't abused nor every outcome "fair" - the race is not always to the swiftest. But we should work to fix problems in the least intrusive way.
And all power corrupts, not just the power of the sword. The power of the scales can be just as blinding.
Published: April 20, 2006 8:58 AM
An old-time labor lawyer (management side) told me he was continually rebuffed by his clients when he counseled them never to agree to a defined benefit pension plan. In the heyday of the merger-mad 1970's, management insisted that their reserves could earn more than enough to pay defined benefits. The unions, of course, agreed.
GM still pays .25/sh dividends. (As recently as 2004, I seem to recall their dividends were $2/sh.) I can't believe its creditors haven't put it into involuntary bankruptcy.
Published: April 20, 2006 8:59 AM
Dear Prof. Riesman,
Thank you for long overdue points raised by your article regarding the legalized extortion of politically privileged trade unionism and its effect on once thriving businesses (especially on their employees and customers) which are subject to it.
Unions, however, for all of their destructive power, are merely the symptoms of the long-festering and much deeper problems of an economy which is characterised as early as the mid 19th century as "The State being the fictitious entity by which everyone lives at everyone else's expense".
The UAW is clearly representative of a problem which has been endemic in our society since (at least) the 1930's and a major problem in Europe since the 19th century. Your article is to be warmly praised for discussing it from an independent and honest perspective. There are, however, closely related reasons for the
deplorable state of the automobile industry, which MUST be mentioned if these issues are to be addressed effectively.
One is that wage demands are pushed above market levels at least in part unions responding to try to compensate for the erosion of wages caused by taxation absorbing a large and growing percentage of workers' paychecks, especially when the taxes are directly withheld from the wages. Along with the corrosive effects of inflation, and attendant inevitable loss of their wage's remaining purchasing power, brought about by The politicans (and their favored corporations) spending money that was never there. Employees are thus forced on to a kind of treadmill where they had to make do with ever smaller actual wages, and long-term saving became almost impossible. The effect that this has on employee morale and labor relations is obvious. Taxes and inflation were, I suspect, a major source of inciting the excessive wage demands that union bosses, like any politicans, exploited to remain in power.
The other cause for the decline of America's manufacturing base is probably the veritable explosion of litigation. Everything is an issue no longer negotiated by customer and merchant, no longer by tenant and landlord, no longer by employer and employee, but by plaintiff and defendant, using government legislation, government courts, government rules of evidence and procedure and government judges, and argued over by ostensibly "private" lawyers, but even they are legally "officers of the court", i.e.political bureaucrats. The arbitary, unaccountable, and exceedingly expensive nature of this process is bound to destroy any industry, enterprise, and the standard of living of those connected with it in any way.
It might be wondered regarding the social, political, and economic environment described above, if unions (especially among those who are ignorant of economics) were mistakenly seen as a possible solution of the problems associated with worker impoverishment, rather than a big part of the problem.
The issues raised in this post are I think, also pertinent to the massive outsourcing of jobs along with the decline of America's manufacturing and industrial base.
Killing the goose that laid golden eggs!!
PEACE AND FREEDOM!!
David K.Meller
Published: April 20, 2006 9:05 AM
As bad as unions are, I think they are a consequence of bad management. I work at a place with a union, and when I started, I hated unions, thinking they were the sourse of all the problems. There is a disciplanary stream where you have to screw up about 8 times before you can be fired, and I originally felt workers were being given to much security against being fired.
The problem is that the definition of doing something worthy of discipline is so vague(the word resonable is used quite often) management can find almost any reason to say your at fault while allowing 50 other people to get away with much worse. It becomes a matter, not of your work methods but whether a particular manager likes you. Surprisingly if your attitude is NOT particulaly union friendly, management cracks down on you, either because it senses the union wont defend you, or it likes having only pro-union (and therefore unambitious workers, who wont move up and take their management jobs). Also, the management is made up of mostly former union workers who still have friends in the union they give preferential treatment to.
Its hardest on the workers at the bottom third of the senority list. They get about 4 dollars less than the top rate, and are timed according to standards which are extremly difficult to if not impossible to achieve. Of course you can always put in delay time, if you expierience actual delays(which stops your time)but again it has to be "reasonable". If they don't like you, better get used to working your but off, but if your the average foul-mouthed pro-union type, you make up a 100-200 minute delay at the end of the day and its accepted with no questions asked.
Yes you can work your ass off and get disciplined and even fired, while other workers on not timed jobs do nothing while standing around talking for hours with other workers as well as with members of management who don't seem to much care about the bad example they are setting. These same managers will blab for hours but then discipline you for stoping work 2 minutes before break, and do it with a strait face(I personally am not excusing stopping work 2 min early but at my workplace the norm is about 10 min early and were talking about 100 people).
I have been there 4 years and I realize blaming the union is pointless. Pro-union workers are always attracted to a certain environment. They have to go somewhere. While inteligent workers, the ones who would vote out the union, leave because they can't stand to work in a place like this. I am looking for another job but at the moment 20$ per hour to drive a forklift seems to be more then I can get elsewhere(I have cut my mortgage from 123 thousand to 68 in 3 years and want it as low as possible because I see a recesion coming)
Published: April 20, 2006 10:24 AM
Excellent article. Excellent comments, analyses and evaluations. Love reading it all.
Glad there are such smart people around.
I like to read the blog on such interesting articles to see what points or arguments may be brought up that I could have missed.
Of course Unions since their inception never worked [u]with[/u] management and that seems a foriegn concept to them. They appealed to and still work more closely with government, which provides them with their big stick.
The idea today seems to be to get as much out of the roast as possible with everyone playing their role in the preperation of the meal but not really too much concern for where the next meal comes form - but expecting it to always be provided.
In my view the workers, management, the corporation is a whole and everyone contributes to the whole. The Union of course is a foriegn body to the corporation and compels its members, especially at bargaining time, to think of themselves as Union members first, and their place of employment the real enemy and source of their inequities, responsible for all their shortcomings in life. Eventually, this becomes a hardened position within the company and co-operation and co-ordination are sacrificed resulting in inefficiency and the eventual demise of the job.
Austrian economists will probably agree with the statement that the least understood subject of the socialist is economics. Economic failure is almost a certainty wherever it appears and thus, the compulsively compassionate socialist is never left with a shortage of good deeds to be done.
Published: April 20, 2006 10:40 AM
What sort and amount of pension does Toyota have for its American work force and how much will the typical worker collect after 30 years employment?
Published: April 20, 2006 10:57 AM
Opportunistic politicians courted unions and did favours for unions for several decades after Roosevelt entered the White House. There were lots of votes to be had by currying favour with labour unions. WIthout opportunistic and vote-seeking politicians, it is unlikely that lbour unions would have been able to amass the kind of power they wield in certain unionised industries.
The British Motor Corporation (BMC) the built the Austin, Morris, MG, Wolseley and Riley automobiles became British Leyland Motor Holdings (added Rover, Triumph, Leyland (buses), Daimler (limos & buses), Bristol (buses and a sports car)) to the corporate fold. What exactly has become of Britain's largest employer of unionised labour and maker of sub-standard products? Where are they now? THEY NO LONGER EXIST !!!!!
Published: April 20, 2006 12:24 PM
Even with the incompetent management, GM would be in better shape today without union coercion. They might still have crappier cars than Toyota but they could sell them at a profit and keep growing their market (and hiring more workers).
Published: April 20, 2006 12:38 PM
If GM is made of matter, then Lincoln Electric is made of anti-matter. I hope someone like Prof. Reisman will write an article on this company.
Published: April 20, 2006 1:02 PM
Steve says;
"You should be showing solidarity with these op(p)ressed workers, like Roderick Long did with the French rioters."
The rioters, and Rod, had a point in that the "reforms" touted by the French government allow only YOUNG workers to be fired. Anyone who manages to dodge the axe for two years has a lifetime hammock no matter how incompetent or negligent they become.
The GM (and Ford)situation is totally different. Here, the management and the unions, together with the government, acted extremely irresponsibly, putting the company so far behind its obligations that it will never again have an operating profit. Double shame on the Ford family for taking a dividend - essentially it is government welfare once removed, since the PBGC will be picking up those obligations and loading them upon the backs of the taxpayers.
But be of good cheer- at this rate, the whole system will collapse soon. Viva liberty!
Published: April 20, 2006 1:57 PM
Billwald asks;
"What sort and amount of pension does Toyota have for its American work force and how much will the typical worker collect after 30 years employment?"
That's about a $4000 contribution per year. Compound that at 8% or so. It isn't a golden hammock, but it's substantial.
Published: April 20, 2006 2:12 PM
Where would GM be without the DOT and DOD? Or interstate highways? Or eminent domain?
- Josh
Published: April 20, 2006 3:25 PM
Allen --
The fundamental problem with unions is their employment of force.
Force, on its own, is not a problem, as it can have quite good and legitimate uses, namely for self-defense.
The problem with unions is that they use force in an aggressive manner, to compel others into entering contracts which they wouldn't enter into voluntarily.
That alone is sufficient to consider unions criminal.
tz --
I've also noted that the Ancap protection agencies probably would include Unions - and worse than their present form since they can form an effective mob and there would be no authority to counter them.
They are the authority now, effectively being a part of a government.
At least, under the AnCap system others will be free to defend themselves from the unions by force. If the government didn't prop the unions they'd be pretty much history by now.
Steve --
You should be showing solidarity with these opressed workers
Yep. Sure. Like bolsheviks did. Solidarity with mobs is never a good idea - as soon as they get power they proceed to destroy those who gave them power. Any would-be revolutionaire is well advised to read some history.
TokyoTom --
many major US corporations, where management is ripping off shareholders because shareholders are too diffuse a group to constitute an effective check and the CEO frequently has the board in his pocket.
This is pretty much a consequence of the estate taxes, which pretty much destroyed the institution of the multi-generational family business.
Published: April 20, 2006 4:26 PM
Vince: That's about a $4000 contribution per year. Compound that at 8% or so. It isn't a golden hammock, but it's substantial.
Then if you work there for 40 years, you are a millionaire on your $4000/year and 8% return without saving a dime out of your paycheck. 40 years is the difference between age 25 and 65, so I don't think that's a bad time frame.
My employer has a similar pension in addition to 401(k) contributions. I prefer an account with money in it and my name on it to a defined benefit plan. The annual contribution is less than $4000, but I'm only 24 and the plan goes by age and pay (and that's not my only savings).
Published: April 20, 2006 7:08 PM
The conflicts between giant corporations and big unions are all for show. Both factions owe their existence to and have their part to play in the heirarchial, dictated, and regimented (aka fascist) american/global economy. All such conflicts only serve to increase the power of the individuals at the very top of the pyramid, the politicians and their benefactors above them.
Neither factions are interested in laissez-faire ideas. The people in the middle of the food-chain (the corporate and labor union bosses) know that their positions of priviledge and power derive solely from the regimentation and control of the economy by the state. They are both benificators in the system and have every incentive to maintain it. The people at the bottom do not see the big picture and its ramifications and are thus catylized into two vehemently opposed groups that come to believe that their very existence is threatened by the other. This great fiction is thus perpetuated and the conflict intensified all to the benefit of the bosses on on both sides and even more so for their handlers higher on up the fascist food chain.
Anyone interested in the history and progression of the fascist consolidation of the American economy(on both the corporate and labor fronts) should check out Stromberg's fine work in The Role of State Monopoly Capitalism in the American Empire and Political Economy of Liberal Corporativism. Of course one should also see Rothbard's War Collectivism in World War I.
Published: April 20, 2006 7:20 PM
Don't blame the UAW, blame the real culprit, the owners. The owners accepted the conditions of the laborers and are now getting what they deserved. It is the management representing the owners that signed the deals. The smart owners well they sold out long ago. The dumb ones, well they are holding a dead stock waiting with a vain hope of it ressurecting.
Published: April 20, 2006 8:55 PM
TZ wrote:
I've also noted that the Ancap protection agencies probably would include Unions - and worse than their present form since they can form an effective mob and there would be no authority to counter them.
You mean unlike now??? Come on, tz: the first ally of unions is the authority.
Published: April 20, 2006 10:00 PM
George Reisman makes his case in a logical way, but he only uses facts that support his ideology. To place most of the blame for Big Auto's problems onto the unions is naive. Toyota looks after its workers as well as GM does, so the big difference is that Toyota and Honda re-invested their surplus cash into research while the Big Three spit out dividends, and thus created higher share values, stock option values, and bonuses for management. Whereas Toyota and Honda's goals were the building of good cars, the Big Three's management were more interested in lining their pockets, and this has resulted in a massive destruction of capital.
Published: April 20, 2006 11:56 PM
To my statement that "The fundamental problem with unions is their employment of force" tz responds that "Force, on its own, is not a problem, as it can have quite good and legitimate uses, namely for self-defense."
That is correct. The underlying problem is the "initiation of force", where self-defense is then called for. For those who believe in the free market, it is the initiators of force who undermine the economy (such as by government intervention), rather than force per se. At one time it was the employers who initiated force, which perhaps was the primary motive for establishing unions in the first place.
Published: April 21, 2006 7:48 AM
Excellent article, as usual, Mr. Reisman. Thank you!
Published: April 21, 2006 8:11 AM
"Big Three's management were more interested in lining their pockets, and this has resulted in a massive destruction of capital."
If this Oligopoly wasn't aided and abetted by the State, by DOT rules and regulations that effectively shut out new domestic competitors, the MGMT of saidsame wouldn't have had the opportunity to "line their pockets".
The whole MGMT v. Labor argument is more of the devisive artifice that passes for real debate in our current political sphere.
Published: April 21, 2006 9:34 AM
Vince: That's about a $4000 contribution per year. Compound that at 8% or so. It isn't a golden hammock, but it's substantial.
Thanks for the reply. 8% seems optimistic.
Published: April 21, 2006 11:38 AM
After having been an engineer at GM, all I can say is your analysis is absolutely spot on. I do think that in 1937 the UAW had its place and was needed, but it has long out lasted its usefulness. For example, when trying to plan for a new model, one UAW represented employee made it known that he did not work for GM, but the UAW. The UAW has been nothing but an obstruction to running the business in a cost effective way for GM.
Thanks for the article.
Published: April 21, 2006 12:43 PM
After having been an engineer at GM, all I can say is your analysis is absolutely spot on. I do think that in 1937 the UAW had its place and was needed, but it has long out lasted its usefulness. For example, when trying to plan for a new model, one UAW represented employee made it known that he did not work for GM, but the UAW. The UAW has been nothing but an obstruction to running the business in a cost effective way for GM.
Thanks for the article.
Published: April 21, 2006 12:45 PM
I'm afraid you are right, billwald, about 8% probably being optimistic under current conditions.
Published: April 21, 2006 12:48 PM
George Reisman says;
"the company would be without so-called Monday-morning automobiles. That is, automobiles poorly made for no other reason than because they happened to be made on a day when too few workers showed up, or too few showed up sober, to do the jobs they were paid to do."
I sold new cars for a few months back in the 80's. We received a new '90 Ford Mustang GT that had been special ordered for a customer (this was probably in January). "Monday-morning automobile" would not BEGIN to describe this travesty - more like a "post-Christmas-party automobile" - door frame seams that were not only not welded, they didn't even touch! The lower parts of the car were bare metal with the faintest coat of overspray (the Mustangs of the era were built at the Kansas City plant, which did not have a primer dip tank). I am sure more horrors lurked in the engine and drivetrain. Such appalling lack of quality should have killed off Ford, GM, and Chrysler a long time ago.
Published: April 21, 2006 1:02 PM
I said;
"The GM (and Ford)situation is totally different. Here, the management and the unions, together with the government, acted extremely irresponsibly, putting the company so far behind its obligations that it will never again have an operating profit."
Proof;
http://tinyurl.com/lxryh
NEW YORK (CNNMoney.com) - General Motors Corp. finally got some good financial news, posting an operating profit in the first quarter excluding all special items.
The embattled automaker reported that it earned $152 million, or 26 cents a share, excluding all special items in the period, such as a $1 billion pre-tax charge related to an agreement to change health care coverage for hourly retirees and their families.
Published: April 21, 2006 1:06 PM
I said;
"The GM (and Ford)situation is totally different. Here, the management and the unions, together with the government, acted extremely irresponsibly, putting the company so far behind its obligations that it will never again have an operating profit."
Proof - GM says that losing $948 million in the first quarter of 2006 is somehow an improvement over losing $998 million in all of 2005;
http://tinyurl.com/lxryh
NEW YORK (CNNMoney.com) - General Motors Corp. finally got some good financial news, posting an operating profit in the first quarter excluding all special items.
The embattled automaker reported that it earned $152 million, or 26 cents a share, excluding all special items in the period, such as a $1 billion pre-tax charge related to an agreement to change health care coverage for hourly retirees and their families.
This is beyond apple-polishing - this is full-blown dementia. If a company half of GM's political drag tried this kind of financial shenanigans, it would be in SarbOx prison this fast.
Published: April 21, 2006 1:10 PM
"It takes 5 years to build a car in the US from the big 3 from concept to showroom. Yet we won WWII in 4" - H. Ross Perot.
I think it was a combination of both Union and Management. Unions for fleecing GM. Therefore GM had less capital to reinvest in future cars like hybrids. GM for have white collar employees without forsight or vision to create cars people will want to buy.
If you really want a true insight into the automobile industry, read the following book "The Reckoning" by David Halberstam. Fascinating book about the entire auto industry from Henry Ford to rise of Japanese automakers to the crisis at Chrysler in the 1980's. You'll get a true understanding of the industry.
Published: April 21, 2006 7:29 PM
"It takes 5 years to build a car in the US from the big 3 from concept to showroom. Yet we won WWII in 4" - H. Ross Perot.
I think it was a combination of both Union and Management. Unions for fleecing GM. Therefore GM had less capital to reinvest in future cars like hybrids. GM for have white collar employees without forsight or vision to create cars people will want to buy.
If you really want a true insight into the automobile industry, read the following book "The Reckoning" by David Halberstam. Fascinating book about the entire auto industry from Henry Ford to rise of Japanese automakers to the crisis at Chrysler in the 1980's. You'll get a true understanding of the industry.
Published: April 21, 2006 7:31 PM
"The Reckoning" was indeed a good book - Halberstam picked a bad "good example" in Nissan, however, which went on to be bailed out by...Renault.
Published: April 21, 2006 10:26 PM
Ah, the glory days when von Mises gave Austria a free market system that efficiently saved the country along with the individual freedom of the people. To realize we do not have such a free system and society in America should sadden us.
If von Mises' system had won over Keynesian economic theory, what a wonderful result that would have been for America.
If you would substitute America for GM and our economic system for UAW in the article, this is where we will be before this century ends. Bankrupt with no futute to look forward to and no leadership in sight to bring us out of the morass.
Just now, we cannot even see that the social security system is beyond being broken but our wise elected ones choose to stonewall a cure for the problem. We cannot even protect ourselves properly what with government lawyers throwing up walls to keep our police services from talking to one another about our enemies. What folly.
I used to subscribe and donate to Foundation for Economic Education and wait at the mailbox for the monthly publications. But now the articles have become rigid as "educational publish or perish stuff often does", and one has to pay a dear price even to get the annual bound materials. Not worth it anymore, sad to say. So the foundation dedicated to von Mises bites the dust with a thud and score another win for socialism.
Published: April 22, 2006 10:51 AM
A great article Dr. Reisman! It deserves the widest distribution. Written with honesty. And with a passionate outrage at a sheer irrationality that indeed pervades our entire culture.
Published: April 22, 2006 12:59 PM
Companies came into being before Unions. Unions came into existence because of poor management. Poor management still exists in many U.S. Corporations because they put money before product! They are more interested in Stockholders and the next quarterly profits then they are product. Without an excellent product, sold at a resonable price with excellent customer service the company will suffer and so will their employess. If a company makes a good product, and treats their employess properly they will never have to worry about being Unionized. A good company to watch, and take lessons from on how to run a large Corporation is Woodward Governor. LeBaron Smith, retired Mechanical Engineer
Published: April 23, 2006 10:56 AM
"reasonable"? could this mean the same as "fair"?
Stockholders (who actually funded the company) own the company. They hire managers to run it. Managers attempt to maximize profit for the benefit of shareholders, if not then they are summarily dismissed. What does this have to do with unions? How do unions help managers maximize shareholder wealth?
Lincoln Electric is a good example of intelligent management and no unions. Also, the fact that auto companies are building factories in the South, away from union strongholds, and the fact that these auto makers are profitable show that unions are not needed. Those workers repeatedly refuse to unionize.
Published: April 23, 2006 12:05 PM
Bottomline: The overpaid UAW has forced the Big 3 to cheapen the quality of each and every part that when assembled produces a cheap quality vehicle. Sad, very sad indeed.
Published: April 23, 2006 8:59 PM
so you want us to all work at walmart wages? no health care, no vacation, no retirement? then only the bosses get that stuff.
GO TO HELL!!!!!!!!!!!!!!!!!!!!!!
Published: April 23, 2006 10:04 PM
Joe Someone:
It sounds like you are already there.
Published: April 24, 2006 1:10 PM
As far as I noticed nobody mentioned one of the most important aspects of this whole question: the fact that countries like China are already capable of producing goods of a quality similar to ours with much lower costs, namely labour costs. To remais competitive many western companies would have to impose on their workers conditions similar to those prevalent in China. Something workers are obviously not eager to accept. Truth is that we cannot afford a global economy until all parties have similar labour costs and labour laws. Until China, India, Brazil and others have reached our labour and environment standards, we must go back to a limited globalization, limited to those countries of similar level of development: USA, Europe, Japan. Together, those countries represent 1 billion people, more than enogh to sustain our economies for a long time. We should stop all trade with the rest of the world (sort of...), which would preserve our prosperity and allow other countries to move towards a higher level of development, free of our intervention. If we insist in keeping a global economy, many firms will go bankrupt, social benefits will disappear, millions will become unemployed, while big firms will simply move to Asia, Latin America or even Africa. Of course we have an energy problem, but nothing like being cut off from the cheaper oil sources to force us to put alternatives on line. But as long as big oil companies can profit from higher oil prices, there will be no alternative on the market. There are technical and cost problems with hydrogen as an alternative, but why is so little done to overcome them? Think about it.
Published: April 25, 2006 5:13 AM
We should stop all trade with the rest of the world (sort of...), which would preserve our prosperity
How, pray tell, does paying more for stuff preserve your prosperity? In fact, if that were true, you wouldn't need to stop all trade with the rest of the world: just toss most of your money in the sea each week and you'd soon be richer than Bill Gates!!
and allow other countries to move towards a higher level of development, free of our intervention.
Hmm. Well, I guess if paying more for stuff raises your prosperity, it makes sense that not buying from someone would raise his prosperity!
Published: April 25, 2006 6:07 AM
Peter,
I have encountered your objections more often.
First, our prosperity does not depend on the price of goods we buy, but on our ability to buy them. Goods are very cheap in Bangladesh, but people do not have the money to buy them, so there isn't much prosperity. Closing our borders to most foreign trade would preserve our capacity to enjoy a high standard of living - because it would preserve our jobs - even if everything (which would not necessarily be the case) was say 10% more expensive.
Second, third world countries do not become more prosperous if they have to buy most goods from us, while selling us only pineaples, bananas, coffee or tea. If they couldn't buy from us they would have to produce those goods themselves, which would be an essential step towards development.
You seem to think that what is good for GM is good for America... Forget it. GM - or any other large corporation - can get rich while you, and most Americans, get poorer. We have been brainwashed into thinking that free trade is a panacea for all economical evils. Forget it. Fair trade would be important, but free trade seldom is fair...
Published: April 25, 2006 8:18 AM
Albatroz;
You seem to be laboring under the misapprehension that we and they are participating in a system of free trade. It could not be further from the case. It is the current LACK of free trade that both makes goods unaffordable for poor coutries and drains jobs from richer ones. More strictures on trade will simply make things worse all around. If thatis what you want, then by all means advocate for "fair trade" or other such nonsense.
Published: April 25, 2006 10:54 AM
Vince,
Enlighten me: how would REAL free trade (whatever that is) enable people in poorer countries to have earnings high enough to afford consumer goods, and at the same time allow for jobs to be kept in the richer countries? Free trade rewards the more competitive economies and, to my knowledge, most less developed countries are not competitive. Those which are, as result of size, very low wages and lack of environmental laws, like China and India, will use free trade to take away jobs from the industrialized countries.
Published: April 25, 2006 1:16 PM
Albatroz,
You might spend some time perusing the resources of Mises.org to find the answers to your questions.
Published: April 25, 2006 1:56 PM
"so you want us to all work at walmart wages? no health care, no vacation, no retirement? then only the bosses get that stuff."
Posted by: Joe Someone at April 23, 2006 10:04 PM
Who here would care to wager the ol' Joe shops @ Wal-Mart?
btw, the response by "Sam" was poetic on multiple levels..
Published: April 25, 2006 2:07 PM
Yancey Ward,
I have spent the last few years looking for those nonexistent answers. Why don't you tell me what those answers are?... Or maybe you can't find them either...
Published: April 25, 2006 2:33 PM
Albatroz,
I have told you where to look. Why not do it?
Published: April 25, 2006 2:36 PM
Yancey Ward,
I see. You can't find them either... That's understandable, because there are no answers that fit your bible...
Published: April 25, 2006 2:44 PM
Albatroz,
Why don't you try here first? Now, do you want me to read some of it for you?
Your problem is that you think economic progress is a zero sum game.
Published: April 25, 2006 3:11 PM
Yancey Ward,
Let's go beyond the slogans.
In a free trade environment the more competent firms and the more competitive economies will prosper, the others will go under. If competent firms were evenly distributed, among all countries, all would benefit from free trade, and all would grow at comparable rates. However, we know that some countries have a much higher percentage of competitive firms than others, which means that they will grow at a higher rate than the less competitive countries. In fact, there is a real danger that the more efficient economies will completely stiffle the less competitive ones. If things are left to themselves, some countries will grow richer and others will grow poorer. Some of you people seem to think that poorer countries, having lower labour costs, will eventually become competitive, based on those lower costs. But you forget that lower labour qualifications - and much lower levels of investment - will more than offset the lower salaries, making it virtually impossible for those countries ever to become competitive. Those countries will be caught in a poverty trap from which they will never escape.
Now, if you take China and India, you will see two countries with such large domestic markets, and with such restrictive legislation, that they were able to atract colossal investments from foreign firms to tap those domestic markets. Those investments and a substantial number of highly qualified people enabled those countries to master state of the art technologies and to become suppliers of increasingly sophisticated goods. Little by little those countries became competitive in the world markets, and became capable of undercutting the prices of American and European firms, based on much lower labour costs. Contrarily to smaller less developed countries, China and India became winners in a free trade environment. Little by little American and European firms will either go out of business, or will move their production lines to China and India, or will try to squeeze labour costs in America and Europe to Chinese or Indian levels. In any case workers will get poorer, will loose their jobs, will consume less. Sooner or later this will generate a crisis situation.
Doing away with free trade except among countries of similar levels of development, would save jobs in the industrialized countries and would create conditions for industrialization of poorer countries. Both rich and poor countries would then be faced with more expensive goods. The industrialized countries because of higher production costs, and the poorer countries because of production inefficiencies. In the industrialized countries high revenues would make these increases in prices relatively harmless. In the poorer countries those inefficiencies would disappear over time.
Eventually, production costs would become more similar throughout the world, and we could revive free trade arrangements.
Your liberal fundamentalism will only ensure that most of us will loose. The only winners will be China and India, and those firms that moved their production lines to those countries.
Published: April 25, 2006 4:14 PM
re: Where Would General Motors Be Without the United Automobile Workers Union?
George Reisman is a complete idiot!
For one, the GM offer of "$140,000 per man, just to get them to quit" is not a fact!
Actual Fact: By accepting that amount, the worker gives up all of his health benefits, and after taxes receives about $88,380.00.
Example: Last year my insurance paid in excess of $72,000 for my spouses hip replacement surgery. I would have to be a complete fool to accept that $140,000.00 offer, and pay for my own family health insurance policy, or spend that money on some frivolous whim.
"Monday-morning automobiles" and them being "poorly made for no other reason than because they happened to be made on a day when too few workers showed up, or too few showed up sober, to do the jobs they were paid to do."
I don't know how long ago this may have been a problem within the automotive industry, or if this problem ever indeed existed, but there isn't any way that the above is true now, or has ever been true in general. There may have been some problematic employees over the years, but to put this kind of label on a group of people is absolute liable!
The quality of american made automobiles and trucks has improved dramatically over the years, and there are many safeguards in place to prevent any possible sabotage attempts, and most workers do exactly what they are paid to do, and are very proud of the work that they do!
Many labor union contracts, and not just the U.A.W. have a wage adjustment provision called the Cost-of-Living Adjustment (COLA) which makes hourly pay adjustments every quarter to
compensate for inflation. This alone is directly responsible for a huge percentage of wage increases since it was first established a long time ago. Even monthly Social Security payments for retirees have COLA. The Consumer Price Index
(CPI) directly affects the incomes of almost 80 million people as a result of statutory action alone. If your employer doesn't offer COLA, then you are most likely seriously underpaid. As an example; what would the current minimum wage be if COLA was applied over the years?
It is important to note that housing, utilities, education, taxes – are not included in the calculating the Consumer Price Index, and COLA adjustments.
If our President, Congress, and the Federal Reserve Board are directly responsible for formulating fiscal and monetary policies, then how can any labor union be held responsible, or for that matter made the scapegoat for current market conditions? An educated person would place the blame on government policy, and the bad decisions they made trying to keep inflation in check.
People seem to have forgot just how many industries and jobs were lost in this country since the early 70's. I remember a time when we produced such things as photographic cameras
and televisions, and even when we had a great steel industry. How much did environmental standards add to the cost of a product? How many times more are excutive salaries today as to what they were back then? How many times have you
heard of a ridiculously over paid executive managing their company to the brink of bankrupcy, and then being absurdly paid even more millions of dollars to leave?
I have never seen the price of an automobile lowered because of increases in worker productivity, or the increased use of automation such as robotics; but I have seen fewer workers.
The only thing the Free Trade agreements have accomplished is bringing up the standard of living for workers in other countries at our expense, and most importantly, jeopardizing the futures of our children and grand children.
Published: April 30, 2006 10:50 AM
My father has been preaching this concept for years. I thought it was probably true, but now I know it is!!!
When labor is making $70 per hour, that's just too much. No wonder GM is going under. Great article. Now the truth is finally being told.
Kevin
Published: May 4, 2006 5:54 AM
Will General Motors and Ford merge? It almost happened once, in 1908,
when J.P. Morgan tried to put together a deal between four major car
makers: Ford, Buick, Olds, and Briscoe-Maxwell. The secret meeting
between the heads of those companies is retold in an excerpt from the
new book, "Billy, Alfred, and General Motors," published by AMACOM, at
http://tinyurl.com/nqf2x
What's amazing is that all the parties agreed to the merger -- even
Henry Ford. It looked like a done deal, then suddenly fell apart. The
reasons are complex, involving the psychology of self-made men vs.
schooled managers, distributed vs. central control, and inventors vs.
the financiers they hate but can't grow without.
The book is written by National Book Award nominee William Pelfrey. A
veteran freelance journalist and GM insider, Pelfrey recreates the
events of that day using obscure newspaper accounts, personal
letters, and other previously unpublished documents.
Published: May 11, 2006 10:33 PM
It is very sad. That is why we have GM XEmployee. A free job posting board where hopefully unemployed autoworkers from any company can find the job they need.
Published: May 20, 2006 8:44 PM
Free trade, means a strong USA, reliable jobs and high wages
This might sound untrue if you consider, for example, that workers at General Motors these days are pressured with job cuts and reductions in wages and all those sad, but necessarily actions to become healthy and strong again. Partly the cause for this is free trade. At the same time Dell, HP, IBM, Apple, Microsoft and so on are doing very well, this also, partly, because of the same phenomenon, free trade.
When free trade is propagated, certain businesses and companies are not considered but what matters is “the whole picture” or the nation. Free trade makes the nation, for example, the USA more competitive and stronger. The stronger companies will dominate the economy and expand and make use of all that capital, labour and land that are otherwise used by the inefficient companies. Productivity increases and therefore also wages. Jobs are more reliable because employments are offered in competitive businesses.
Generally, though, unemployment will not increase or decrease. If for instance, the USA imposes tariffs on Chinese textiles, the Dollar will appreciate against the Chinese Yuan (the value of the Dollar will increase relatively to the Chinese Yuan). This depreciation (decrease in value) of the Chinese Yuan against the Dollar, in this example, is caused by a smaller demand for Chinese textiles and therefore a smaller demand for Americans to buy the Chinese Yuan. Because of this change in exchange rates, prices of goods from the USA to China will be generally higher and prices of goods from China will be generally lower (apart from textiles). As you can imagine, this will increase employment in the American textile sector, but decrease employment in other sectors. At the whole, unemployment will not change but trade between the regions will be lower. Specialization, competition and living standards in the USA will be hampered. The tariffs will only serve special interest that is the textile manufacturers and their employees.
Above explanation about exchange rates is an explanation of a so called “floating exchange rate” (as the Dollar is).
If you want to know more about floating exchange rates, go to;
http://www.hooverdigest.org/974/friedman.html
the outcome is that Americans can buy cheap goods with high wages and that the USA will be stronger than ever.
Björn Lundahl
Göteborg, Sweden
Published: October 12, 2006 2:56 PM
The Emperor's New Clothes
People are led to believe that trade restrictions between regions or countries “create jobs at home”, which they certainly do not. If people had the opposite belief that “free trade” between regions or countries “creates jobs at home”, that would also be an incorrect belief. Trade restrictions or free trade does not cause unemployment or cause employment in a region or country. Trade restrictions only lower the standard of living, hamper competition and restrict liberty. If for instance, the EU imposes tariffs on Chinese textiles, the Euro will appreciate against the Chinese Yuan (the value of the Euro will increase relatively to the Chinese Yuan). This depreciation (decrease in value) of the Chinese Yuan against the Euro, in this example, is caused by a smaller demand for Chinese textiles and therefore a smaller demand for Europeans to buy the Chinese Yuan. Because of this change in exchange rates, prices of goods from the EU to China will be generally higher and prices of goods from China will be generally lower (apart from textiles). As you can imagine, this will increase employment in the European textile sector, but decrease employment in other sectors. At the whole, unemployment will not change but trade between the regions will be lower. Specialization, competition and living standards in the EU region will be hampered. The tariffs will only serve special interest that is the textile manufacturers and their employees. Surely, we want our representatives to serve the common good and the common man and not special interests!
Someone might complain that the Chinese are intervening in the exchange markets to keep their currency artificially low and that they are not letting market forces to appreciate their currency, and therefore my statement about free trade, in this case, is not applicable. Free trade, someone might think, is presupposed by freely fluctuating currencies with no Government intervention (also called clean floating exchange rates). Certainly I do not want Governments to intervene in exchange markets, but actually it is the Chinese that are in this case the losers and we are the winners. We should be glad that China is suppressing the rise of its currency, and the Chinese people should be mad about it. When market prices indicate that, for example, a project is unprofitable; investors naturally stop investing in such a project. Otherwise, factors of production such as land, capital, and labour would be wasted. Every government manipulation of market prices is a step toward economic breakdown and chaos. Land, capital, and labour that are invested in the exporting business in China because of a suppressed currency, have changed the economic structure in China and are mal investments, unprofitable for the nation to undertake, and we are getting something free. We don't need to export anything to pay for this "extra importation of Chinese products”. To make my statement more obvious, we could consider that if the Chinese currency would be suppressed to no value at all (which would not be possible to realize), the Chinese would be working for nothing and we would get goods and services from China for free (which is, naturally unprofitable for China to undertake), then the market forces in the EU (if market forces would not be hindered by Governments) would reallocate land, capital and labour for other uses and to those fields which the Chinese are not able to compete (even if the Chinese were working and exporting to full capacity, that will not, by far, be enough to satisfy all our wants, in other words, their GNP is by far, too small). The increases in production which mentioned reallocation of recourses leads to are our extra bonus. We should applaud this and the Chinese people should revolt!
If you want to know more about floating exchange rates, go to; http://www.hooverdigest.org/974/friedman.html
Productivity and trade will flourish more intensively with one currency than with several different currencies, and even with one currency, market forces will smoothen out any imbalances between regions, cities or countries. We do not worry, for example, about the balance of payments between London and Manchester, Berlin and Munich, Paris and Bordeaux or Stockholm and Göteborg etc. If, for example, London exports more to Manchester than Manchester exports to London, the demand for goods and services will be greater in London relatively to their supply, and also relatively to the situation in Manchester. Because of this, prices will go up in London and therefore will exports from London to Manchester contract, as well as, imports from Manchester to London will expand. This happens all the time and we do not even know about it and therefore do not worry about it. Governments do create problems all the time.
If we really want increased competition, why not adopt free trade between nations. Why does the EU and the USA not follow that path? The reason is that they do not want increased competition.
For an example, I quote from answers.com;
“In the United States, the decade from the mid-1980s to the mid-1990s saw import quotas placed on textiles, agricultural products, automobiles, sugar, beef, bananas, and even underwear—among other things. In a single session of Congress in 1985, more than three hundred protectionist bills were introduced as U.S. industries began voicing concern over foreign competition”.
Go to;
http://www.answers.com/import+quotas?gwp=11&ver=2.0.1.458&method=3
Only Governments can be so silly to reject great offers and bargains. Individuals doing the same thing would be considered mad.
The essence with above statement is that Governments hinders competition, lower our standard of living, promote special interests and they make excuses for this with faulty theories and propaganda.
Björn Lundahl
Göteborg Sweden
Published: October 12, 2006 3:01 PM
This article was written by somebody who never worked for GM, not on the line anyway.
I did and therefore see this garbage for what it is, union bashing. And if the author wants to bash the union which represented me, in 1956 in Australia, that is fine with me as they were as corrupt as the US government now.
We worked like slaves and got not much more money. If you told somebody you worked for GM they regarded you as a mental retard. The only reason I worked there was because there were no jobs, the capitalist system looked after that.
Many times I drew the foreman's attention to defective parts only to be told to put them in anyway as it would be picked up by the quality inspectors. There were two of them and they drove the cars some 50 yards from the line to the outside. If the car made it that far it was 100%.
I was young and inquisitive and learned all the tasks on the line. This was a disaster. Every time someone left I had to do his job as well till the day came I had to stop the line to catch up. This was not as expected and I got called in the office where I was informed that if I could not do my job they would get someone else. I told this clown that this sounded like the only good idea he ever had. His jaw dropped. I went back but gave notice. I was threatened by the company and a corrupt union official that I would not get another job in Australia. What a bunch of idiots. And then they wonder why decent Japanese cars made such an impact.
A.H. van Herp
11 Vernon Ave.
Gorokan NSW 2262
Australia
0243921611
henkenm@tpg.com.au
Published: March 5, 2007 6:59 PM
Just more crap from an author who would lie, steal, and cheat workers of their pensions and benefits just as the auto manufacturers do. Erisa laws were passed to protect employees from unscrupulous companies that would close down just before workers became eligible for pensions. These same companies would open up a new business across the street just to avoid keeping promises they made to workers and their unions. Sure, promise to fund pension plans but don't contribute money during a time when the market would have immensely increased the amount enabling easy payment to those lucky enough to keep their job long enough to retire. Broken promises is all you hear from companies, and when it comes time to pay, they declare bankruptcy to avoid paying again. This is not a third world country yet, and there is no slave labor in America, is there? The executives of these companies and fascist tyranists like the author ought to be put in prison where Bubba can teach them a little of what it is like to be a blue collar worker with hard earned skills that aren't appreciated and who are constantly being taken advantage of.
Published: July 3, 2008 7:06 AM
John:
"Just more crap from an author who would lie, steal, and cheat workers of their pensions and benefits just as the auto manufacturers do."
I can see that you feel very passionately about this issue. While I share your anger at the injustice that regularly harms workers in the private sector, we differ in our analysis of the cause of that injustice.
Some people will claim that unions cause wages to rise, when the evidence seems to show the exact opposite cause and effect. I'm not going to say conclusively that there is a definite causation, but I think that the case seems to be logically sound. As wages rise, union membership increases. Workers realize that they can claim a bigger share of the increasing wealth by joining a union. The overall effect is that non-union workers receive a smaller increase in pay than they would have without the intervention of the union. This is analogous to the growth of government in response to increasing productivity from the private sector.
You need to realize that when someone attacks unions, it's not that they want people who benefit from unions to be worse off. It is simply that unions cause a large number of problems through restriction of freedoms, and that whatever purported benefit they offer is not justified, either from a natural rights or a utilitarian approach. Dr. Reisman is telling you that snake oil doesn't work, and you are angrily shouting back that he's a bastard for wanting to let sick people die.
"Erisa laws were passed to protect employees from unscrupulous companies that would close down just before workers became eligible for pensions."
That's what you have been led to believe. Complete disillusionment with government "protection" of rights is not something that happened to me overnight. It took repeated exposure and careful analysis of the claims of many different entities to bring me to the truth. It usually takes me about 1-2 minutes of searching to come up with a good exposition of the bad effects of a particular government regulation. Generally, 10-15 minutes more searching yields some non-committal and poorly reasoned arguments in favor of the regulation.
From this site:http://www.erisarights.com/infoerisa.htm
"ERISA is perhaps one of the biggest successful con jobs affecting the American working person since the end of the Great Depression. ERISA, in the guise of protecting the working person's rights, replaced all state laws that protected an employee's rights to benefits from an insurance company or employee trust. Under the laws of most states, a wrongful denial of benefits can result in a jury verdict awarding the employee the denied benefits, damages for emotional distress, and punitive damages. Under ERISA, there is no right to a jury trial, and the most that an employee who has wrongly denied benefits can receive is the denied benefits. What has an insurance company or employee benefit trust fund got to lose from denying benefit claims?"
George Reisman and others here argue on the side of freedom. Loss of freedom, even if it is from the "greedy" corporations, is a bad thing. Balance that with observation that there are a ton of regulations and restrictions that favor corporations and restrict competition. In essence, the whole thing is a mess, but trying to fix one intervention with another only makes matters worse. Better to work to repeal ALL restrictions on commerce.
Published: July 3, 2008 11:45 AM
Scott D:
You've done a good job of analyzing my previous emotional comment. A Union is rarely found in well managed companies. It is companies/corporations that pay their executives 7 figure salaries while pushing inhumane conditions on employees that cause employees to form their own unions. The principals of unionism are just and form the basis of workers rights such as an 8 hour day and 40 hour workweek. It is individuals that corrupt both companies and unions. I know few salaried employees that can say they only work 8 hours/day, and/or spend time at home/play with their children, raising their own family instead of letting the state do it for them. I agree with JK Sr. that the government also plays a role in the economy. When they use a substitution method to determine inflation, while printing money electronically at amazing rates, diluting the money supply and bankrupting America, they are to blame as well but then absolute power corrupts absolutely correct? Didn't JFK say "A rising tide lifts all boats"? Workers wages rise when they unionize which puts them in higher tax brackets so they pay more taxes. The benefits they desire may not be realized, but be sure that here in the Right to Work state I live in, that if a company treated its workers right there would be no union. I've talked with many salaried employees who know the Law (Dept. of Labor) guarantees them that travel during working hours is considered time worked which prevents companies from sending them on travel to.., work, travel back, and oh, time to go to work again, all in one day for one days pay and that comp time is paid "Dollar for Dollar, Hour for Hour" at the employees regular salary even though their company will tell them that for their weeks of hard work staying extra hours that they can take the afternoon off! Why no complaints? Because these workers feel the company will blackball them from the community making it impossible to work anywhere else so, they are silent.
Has your pension been cancelled, closed? Were you paid a "Fair Balance" by being given your contributions back while the company keeps all the interest? Courts have determined that pension money can be used by the company at any time for any purpose as long as the money is present when needed to cover current obligations. But what happens when the money is spent and the company declares bankruptcy? Maybe you have a 401k invested in the company stock which is devalued to pennies/share just before bankruptcy. So, Law or no Law people are cheated , promises are broken and the people know that cars don't build themselves, that Henry Ford himself couldn't build all them cars, and a union is a collective or workers negotiating for fairness in a corrupt world. The authors gripes about unions isn't new either, For example, the same has been said about railroad employees featherbedding a hundred years ago... more nonsense whipped up in Tafts time, for example didn't people lend GOLD to the railroads to build the transcontinental railroad only to be paid back in GREENBACKS? Was gold confiscated? Does fractional banking and the Federal Reserve create money out of thin air? Unions are created by messing with the masses!
Published: July 3, 2008 3:46 PM
Without the union, GM and the rest of the domestics.. would probably no longer be domestics, they would be paying a lot of mexicans, Chinese, and koreans to build for a fraction of the cost ...
Some production would remain in the us.. namely.. a body would be shipped to the usa and a chassis and they would snap them together in the USA ....
That jobs bank kept production in the USA. It also has probably kept this country from having worse economic downturns...
The big reason for the domestic threes troubles is that other companies from foreign countries come in here and don't pay anything into our social system ... they come here and rape and pillage.. no retirement and no retiree health care...no union... less pay and benefits...These people's social welfare costs all gets dumped on the american public to pay when the foreigners are done with them. they have also caused manufacturers to use temps instead of full time work that provides for stable households and families.
The quality of our automotive jobs has been drastically altered.. for the negative...
To me... having worse jobs.. worse pay and benefits is not a plus for this country...
The unions are a needed evil to balance the forces of corporate greed....
Published: July 29, 2008 12:17 PM