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Because They Can - Part 1

Posted by MacZad
Sep 29 2012

This is the first of a series of several that will focus on what happens when the "power pendulum" swings too far in any direction because the countervailing forces are weak. When it happens destabilizing excesses occur because the people with power exercise it - because they can. That pendulums can have big swings is undeniable, but things go better if the "power pendulum" swings don't depart too far from the golden mean. This post examines excessive union power in the middle of the 20th Century.

There is much said these days about the sad state of union power. Many lament the unions decline, and long for the "good old days" when the unions had real power. Well, they may have been the "good old days" for the middle class prospered, but the excessive power that unions exercised in that era was ultimately destabilizing and certainly contributed to the decline of American manufacturing.

The abuse of union power in the auto industry (with a focus on GM) is succinctly told by Megan McArdle in her Why Companies Fail article in the March 2012 issue of The Atlantic magazine.

Detroit labor relations have been a disaster ever since the early unionization drives, which were acrimonious and at times violent (at the infamous “Battle of the Overpass,” in 1937, a claque of Ford security guards attacked union agitators in front of an assembled press delegation). The result was a poisonous relationship; in many ways, GM workers were more a part of the United Auto Workers than of GM. Eventually, the union became a sort of shadow management that had to sign off on every production decision the company made, if it had any effect at all on workers.
This system actually worked during the boom years. Because GM’s competitors were unionized too, the UAW’s power kept wages more or less equal across the Big Three, and helped contain cost competition that might have led to price wars, undercutting margins. The UAW, meanwhile, never had to worry that an excessively rich compensation package would put the Big Three in jeopardy.
Conditions changed, but the union's thinking didn't. The union frequently behaved like a parasite that didn’t care whether it killed its host — calling strikes just as the company was trying to launch a pathbreaking small car; demanding that GM keep paying surplus workers nearly full salary indefinitely, even as market share declined. Rather than trying to change this dynamic, management caved, again and again — possibly, Ingrassia suggests, because any increase in wages would “trickle up,” as GM strove to maintain a pay differential between management and the hourly workers.

Don't get me wrong; I'm not anti union. This is just an example from the past showing how things end badly when the countervailing forces are impotent. In today's world Wall Street, corporate America, the NRA, the fundamentalist Christians, etc. are all exercising excessive power - because they can. These abuses of power are destabilizing and are having a negative effect on our national affairs. I've already mentioned some of their abuses in past posts, and I'll elaborate more in future posts in this series.

Categories: Miscellaneous