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May 26, 2005

Fun Fact of the Day

There was a time in this country when corporations sought not to cut and run from pension plans, shift health costs onto employees, and shortchange their workers. Indeed, their was a time when companies sought to invest in their workforces, under the assumption that their workforces would respond in kind. This comes from page 23 Of Robert Collins' More:

The relationship between General Motors and the United Automobile Workers exemplified the new turn in class relations. General Motors had embarked on a massive $2.5 billion post-war expansion program designed to boost production by more than 50 percent over prewar levels, building new plants in California, Texas, Ohio, and New York and increasing its blue-collar workforce by 25 percent. To safeguard this expansion, GM needed stability and predictability. On the other side, the UAW wanted higher pay, better benefits, and relief from the press of post-war inflation. In 1948, GM and the UAW agreed on a contract incorporation both a quarterly cost-of-living adjustment (COLA) tied to changes in the consumer price index and an "annual improvement factor" (AIF) wage increase based on the increase in GM productivity. Two years later, the auto giant and the trend-setting union expanded the agreement in an unprecedented five-year contract -- the so-called Treaty of Detroit -- that sweetened the COLA and AIF provisions of the earlier deal, guaranteed workers a 20 percent increase in their standard of living over the life of the contract, and committed GM to provide a corporate pension and underwrite half the cost of a new health insurance plan.

My how far we've fallen.

May 26, 2005 in Big Business, Labor | Permalink

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Weren't the good old days great? Ezra Klein thinks so: There was a time in this country when corporations sought not to cut and run from pension plans, shift health costs onto employees, and shortchange their workers. Indeed, their was... [Read More]

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Comments

We have fallen in corporate insight on how to build a strong company based on successful outcomes for their workers.

The US manufacturing companies reacted to world competition by seeing US workers (and their benefits) as the enemy instead of insisting that the price for US free trade should be safeguards that truly raised the working conditions of rapidly industrializing third-world countries so that the benefits of trade were not put upon the shoulders of US workers almost exclusively. The corporations bet on control of the US government to protect them as they moved jobs abroad. They got that support, but they have lost their own war since they are now failing to compete effectively in the US market, putting aside world markets. They misread their own long-term self-interest by pushing US workers off a sinking ship for short-term gains. So fuck um! Let them itch and suffer in their own beds now full of pests.

The country that was the arsenal of the world and the greatest industrial force in history in WWII and post-war is now paying for the short-sighted actions of these corporate actors who were driven only by next quarter's or next year's profits. Now that the profits are going or gone - along with the labor unions that helped make them successful - it is worth remembering how they brought US down.

Posted by: JimPortlandOR | May 26, 2005 5:40:22 PM

It's not a matter of corporate insight, it's a matter of competition. Strong companies with large worker-protection programs only worked when there was a convention against price competition, and when the market was more-or-less an oligopoly. Globalization has undermined that world and made our economy look much more like the classical, pre-WW2, economy.

The companies are simply responding to the changed economic situation. Beating up on their leadership isn't going to solve the problem; our energies should be directed to finding a way to encourage the economy *away* from the classical model of competition.

Posted by: aphrael | May 26, 2005 5:44:34 PM

I seem to recall that the two of the three greatest current competitors to the U.S. car industry weren't doing so well in 1948; and the third was about to plunge into war.

Posted by: Ugh | May 26, 2005 7:13:22 PM

GM owes untold billions on retirement health care benefits. They would certainly like to shift this liability onto the backs of the American tax payer. My neighbor is retired from GM and her benefits are much better than my own Mother's. GM never considered that health benefits would be expensive when they signed those contracts in the past.

Posted by: Ron Greiner | May 26, 2005 7:25:11 PM

Ugh is right, GM had far less competition in 1948 than it does to day.

The proper analogue, then, to GM of the ealry Cold War Era is not the GM of today, but Microsoft or Google. Both companies pay around 75% of industry average (which is above the median salary to begin with), offer zero-deductible health care with no cost sharing (!), subsidize your gym membership, pay for you to get a group of co-workers together to join a softball league, etc. Both are the epicenter of lots of innovation. And both face minimal competition.

Posted by: Electoral Math | May 26, 2005 8:50:44 PM

Consider the Social Security dilemma--people are living longer and there's fewer workers to pay for the program. Maybe these cushy pensions are unrealistic. There's only so much money to go around, unless your Microsoft or Google.

Posted by: Steve Mudge | May 26, 2005 11:08:12 PM

It's called fordism, and what we are seeing now is a Republican attempt to destroy its legacy. The United fiasco is a prime example: get a republican judge to relieve a big corporation of commitments to its workers. The Republicans think the business model of helping workers so that they can in turn become consumers of your product has run its course. This is just a part of their over-arching attempt to break the back of the progressive movement of yesteryear and today. (What right-wing conspiracy?)

Posted by: Tony | May 27, 2005 12:15:58 AM

The real problem in America today is that there is not a proper alignment between financial collectives (Corporations) and Labor Collectives (Unions) for the purpose of wage bargaining.

In 1776, most persons earned their living through contractual relations between individuals bargaining on fairly even playing fields. In 1776 freedom was fairness. After 1862 and the invention of the modern corporation, the idea that freedom was fairness increasingly became incongruent. The playing field for wage bargaining was no longer level. The Gilded Age (aka Robber Baron Age) was know for concentration of wealth and wide spread squalor - this condition ultimately sowed the seeds for Liberalism near global collapse in the first half of the 20th century.

Solving the imbalance became crucial to the survival of the liberal democratic system.

The answer to collective ownership problem was collective bargaining. This was greeted with hostility by the ancester to today's Neocon who liked the lopsided arrangement.

The problem with Industry unions in the United States is that they were now bigger than their cross table bargaining partner. The UAW had membership spread across several auto companies. This was true in many industries. The result was entire industries lost their competitiveness and entrepreneurialness because of industry pattern bargaining. The union impossed like work rules, wages and benefits across entire industries. This left little room for innovation in management techniques. In the case of the Steel industry, the entire industry bargained together in a collusive manner that created a Steel oligarchy and uncompetitive companies with ossified structures.

Japan however followed a different model. Company Unions. One Company, One Union. Tethered to this was high levels of job tennureship. This combination results in Companies thinking differently about their workers and workers thinking differently about competition. It also forces the Corporation to be more accountable to the employees - and as it turns out, in all but one aspect (mergers and consolidations) Employees are better proxies for shareholders than directors (who tend to be proxies for Management) - and this in turn makes Corporations better stewarts to their communities and a whole host of other stakeholders.

The one company, one union arrangement is a more proper alignment of power. Japanese industry, under this model, was less prone to consolidation. A nation with half the U.S. population and one tenth the road surface had three times as many car companies. With so many companies in a market competition was fearce. When the Japanese model collided with the American Model begining in the 1960s, with electronics, the Japanese cleaned America's clock. Since the 1970s Japanese car companies have set the standard of competitiveness and have held American Companies to the mat for 25 years.

A reasonable response to the Japanese challenge to American industry would have been to acknowledge the superiority of their model and adapted to it. When American companies began to prove uncompetitive to the Japanese companies American's immediately blamed the unions. But instead of fixing unions to look more like those in Japan, we simply have followed a route of throwing unions out. The result is that we are backing back into the Guilded Age.

One final note about GM. Peter Drucker recommended in the 1950s that GM be broken up, that it was too big. However the Eisenhower administration could not be brought on to do that. During those years GM turned its organization into a giant hair ball - in an effort to prevent it from being broken up (if you bought a pontiac it could have been assembled, not by Pontiac, but by the Assembly Division (GMAD) or Fisher Body Division. By the 1960s Breaking up GM was an impossibility. But one can imagine that had GM been broken up into 5 car companies, Ford into two we would have those seven, plus chrysler and AMC. Thats nine car companies. If, on top of that, they would have been company unions, you would have seen an immense degree of competitiveness and the whole convulsion over Japaenese industry impact on America, its wealth and distribution of wealth would be entirely different.

Simple concept: One Company, One Union. It represents the proper alignment of bargaining power.

For starters, I would certainly like to see it at Walmart.

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