Saturday, January 3, 2009

The Role of the Unions in the Latest Economic Disaster

There is a link to "The Becker-Posner Blog" on my list of favorite blogs. Gary Becker won the 1992 Nobel Prize in Economics, and Richard Posner has been a judge on the United States 7th Circuit Court of Appeal since 1981. The two co-write a blog that addresses the US economy from their legal and economic points of view.

Their latest blog entry (click on the title of this post) addresses the problems facing GM, Chrysler, and Ford, in their attempts to remain viable companies while being saddled with the problems created by the United Auto Workers. As one who left Michigan in 1969, at age 24, I relate to the permeating effects of the UAW on the Big Three automakers in Michigan's economy.

As Judge Posner observes, the collaborative efforts of the Big Three and the UAW over several decades have placed the car companies in an untenable position vis-a-vis the union. For 30 years, the offshore car companies have built plants in the American South, with the cooperation of those State's legislatures, from which they have been eating the Big Three's lunch. Unless something dramatic happens -- and soon -- we will be witnessing the failure of all three domestic car companies (and the $15-$20 billion the Feds are giving to them). The Big Three have to ring the bankruptcy bell and shed their UAW blanket -- rather than allow Asia to take over America's auto sales. Just as the airlines did after 9/11, the car companies need to reorganize and shed their UAW contracts.

Note added January 4, 2009. There is an opinion piece, on pp. 9-10 of the Week in Review section, in today's New York Times titled "The End of the Financial World as we Know it." It does a nice job of deconstructing the ongoing bailout of investment banks that are "too big to fail," arguing that the Feds are just pouring that money down the drain. It's well worth reading, and the New York Times website allows you to read it for free.

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