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Source link: http://archive.mises.org/4931/where-would-general-motors-be-without-the-united-automobile-workers-union/

Where Would General Motors Be Without the United Automobile Workers Union?

April 19, 2006 by

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

{ 85 comments }

Tracey Young April 19, 2006 at 4:22 pm

Interesting article.

rhu April 19, 2006 at 4:49 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).

Paul Marks April 19, 2006 at 5:15 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.

Happy-lee April 19, 2006 at 6:48 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.

Leandro (from Argentina) April 19, 2006 at 7:03 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

Bill Dowis April 19, 2006 at 8:05 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

George T. Kysor April 19, 2006 at 8:24 pm

General Motors is a mental construct – a legal fiction.

TokyoTom April 19, 2006 at 9:35 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.

gksinclair April 19, 2006 at 10:34 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

Steve April 19, 2006 at 10:35 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.

Bob April 19, 2006 at 10:49 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.

George T. Kysor April 19, 2006 at 11:05 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.

tz April 19, 2006 at 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.

cynical April 19, 2006 at 11:51 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.

Sione April 19, 2006 at 11:59 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

Som April 20, 2006 at 12:35 am

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!

TokyoTom April 20, 2006 at 4:41 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 2×4!

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

TokyoTom April 20, 2006 at 4:53 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?

latinae April 20, 2006 at 7:01 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!

RJL April 20, 2006 at 7:59 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.

M E Hoffer April 20, 2006 at 8:19 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……

louise April 20, 2006 at 8:31 am

Of course the bail out is coming.

Allen Weingarten April 20, 2006 at 8:39 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.

tz April 20, 2006 at 8:42 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.

tz April 20, 2006 at 8:58 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.

Reactionary April 20, 2006 at 8:59 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.

David K. Meller April 20, 2006 at 9:05 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

jay April 20, 2006 at 10:24 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)

Frank Z April 20, 2006 at 10:40 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.

billwald April 20, 2006 at 10:57 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?

Harry Valentine April 20, 2006 at 12:24 pm

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 !!!!!

Urbanitect April 20, 2006 at 12:38 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).

mikey April 20, 2006 at 1:02 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.

Vince Daliessio April 20, 2006 at 1:57 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!

Vince Daliessio April 20, 2006 at 2:12 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.

Wild Pegasus April 20, 2006 at 3:25 pm

Where would GM be without the DOT and DOD? Or interstate highways? Or eminent domain?

- Josh

averros April 20, 2006 at 4:26 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.

Albert Suckow April 20, 2006 at 7:08 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).

Brian Drum April 20, 2006 at 7:20 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.

William April 20, 2006 at 8:55 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.

Francisco Torres April 20, 2006 at 10:00 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.

Michel Morin April 20, 2006 at 11:56 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.

Allen Weingarten April 21, 2006 at 7:48 am

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.

Thomas J. Van Wyk April 21, 2006 at 8:11 am

Excellent article, as usual, Mr. Reisman. Thank you!

M E Hoffer April 21, 2006 at 9:34 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.

billwald April 21, 2006 at 11:38 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.

L A Pyle April 21, 2006 at 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.

L A Pyle April 21, 2006 at 12:45 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.

Vince Daliessio April 21, 2006 at 12:48 pm

I’m afraid you are right, billwald, about 8% probably being optimistic under current conditions.

Vince Daliessio April 21, 2006 at 1:02 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.

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