Tuesday, December 16, 2008

The Decline of the Big Three

Michael Barone discusses Who Is at Fault for the Decline of the Big Three? in a column of same title.
Mickey Kaus, pretty much alone among the commentators I've been reading, indicts "Wagner Act unionism" for the decline and fall of the U.S. auto industry. The problem, he argues, is not just the high level of benefits that the United Auto Workers has secured for its members but the work rules—some 5,000 pages of them—it has imposed on the automakers. As Kaus points out, unionism as established by the Wagner Act is inherently adversarial. The union once certified as bargaining agent has a duty not only to negotiate wages and fringe benefits but also to negotiate work rules and to represent workers in constant disputes about work procedures.
The UAW also created a constituency within itself of retirees who have voting rights in union elections just as actual workers do, and there are now something like three times as many GM retirees as GM employees as voting members of the UAW. Retiree benefits account for the lion's share of the difference between GM's labor costs and the labor costs of foreign automakers in the United States.

General Motors in 1970 thought it could afford this. Didn't it "control" half the U.S. auto market? Couldn't it generate any level of demand it wanted through advertising? That's what as learned a sage as John Kenneth Galbraith had argued in his bestselling The New Industrial State, published in 1967. GM in 1970 didn't fear competition; its greatest fear was that the Justice Department would bring an antitrust case to break it up.

But of course it turned out that GM and Ford and Chrysler were in 1970 just on the verge of getting serious competition from foreign automakers.