Of Cars and Cupcakes
November 17, 2012
Apprentice Thomas
1
"Twinkies selling for $60 on EBay” was the headline. The maker of Wonder Bread that survived the Great Depression , is filing for liquidation. The company could not reach an agreement with the Baker and Candlestick Union-the Union said the company was mismanaged. Every time a company with union representation seeks bankruptcy, union leaders blame corporate mismanagement. I wonder-do the leaders say management made mistakes when a non union represented company bites the dust? Would unions have blamed whale oil companies and buggy whip manufacturers for management incompetence and greed? Probably...
From 1933 to around the new millenium, companies with union workers could afford higher payroll and pass the costs onto consumer. I can not say we are in a deflationary period, because no country in history without the gold standard suffers from decreasing prices. However, it seems companies can longer meet labor union demands, in other words, the chickens are coming home to roost. General Motors made money every year during the Depression of the 1930’s and Schulze Baking Company outlasted that depression, but they are now part of economic history. Unions can no longer receive the demands from companies they once did. Of course, local and state governments can afford unions longer and the Federal Government, with unlimited credit from the Federal Reserve, will be the last employee of unions.
It seems companies, for whatever reason(s), can not pass these costs onto consumers. I suspect this a a larger secular trend of an unknown nature that few people are aware of. Since the union leaders are unaware of this far reaching secular change, I can not blame them when their behavior of demanding increased wages and benefits for 70 years has always been met and now companies cannot meet these demands and remain a viable enterprise. In the 1950’s, increased benefits would be paid by more sales in the 1960’s. In the 1970’s, inflation allowed the companies to increase wages and benefits. There is one fatal flaw in this modus operandi, to wit, if fewer products are sold in the next decade or if the profit margins decline.
In the 21st century, GM saw both-fewer cars with negative margins and this forced GM into bankruptcy. The number of car buyers is less than the number of taxpayers, so unions will find a temporary lifeboat in state jobs. However, eventually the states will be unable to raise taxes and/or issue more debt to pay for these wage and benefit increases. The union leaders will cry “mismanagement” at the state’s failure to meet their demands-I doubt if they will say the state is also “greedy”, but anything is possible. The last bastion of a union presence will be the Federal Government with the cornucopia that is the private bank called the Federal Reserve. By law, it must loan to the Federal Government.
When the burden of organized labor on the Federal Government becomes too much to bear, we can reason that the United State (by this time the Federal Government will have taken over running the states) will be bailed out by the World. As we have learned, Gentle Reader, this country is too big to be allowed to fail.
From 1933 to around the new millenium, companies with union workers could afford higher payroll and pass the costs onto consumer. I can not say we are in a deflationary period, because no country in history without the gold standard suffers from decreasing prices. However, it seems companies can longer meet labor union demands, in other words, the chickens are coming home to roost. General Motors made money every year during the Depression of the 1930’s and Schulze Baking Company outlasted that depression, but they are now part of economic history. Unions can no longer receive the demands from companies they once did. Of course, local and state governments can afford unions longer and the Federal Government, with unlimited credit from the Federal Reserve, will be the last employee of unions.
It seems companies, for whatever reason(s), can not pass these costs onto consumers. I suspect this a a larger secular trend of an unknown nature that few people are aware of. Since the union leaders are unaware of this far reaching secular change, I can not blame them when their behavior of demanding increased wages and benefits for 70 years has always been met and now companies cannot meet these demands and remain a viable enterprise. In the 1950’s, increased benefits would be paid by more sales in the 1960’s. In the 1970’s, inflation allowed the companies to increase wages and benefits. There is one fatal flaw in this modus operandi, to wit, if fewer products are sold in the next decade or if the profit margins decline.
In the 21st century, GM saw both-fewer cars with negative margins and this forced GM into bankruptcy. The number of car buyers is less than the number of taxpayers, so unions will find a temporary lifeboat in state jobs. However, eventually the states will be unable to raise taxes and/or issue more debt to pay for these wage and benefit increases. The union leaders will cry “mismanagement” at the state’s failure to meet their demands-I doubt if they will say the state is also “greedy”, but anything is possible. The last bastion of a union presence will be the Federal Government with the cornucopia that is the private bank called the Federal Reserve. By law, it must loan to the Federal Government.
When the burden of organized labor on the Federal Government becomes too much to bear, we can reason that the United State (by this time the Federal Government will have taken over running the states) will be bailed out by the World. As we have learned, Gentle Reader, this country is too big to be allowed to fail.