What does a caterpillar do but slink away?

Do you remember the story about the lock-out of Electro Motive employees in London, Ontario? Well, the union stood firm, and we have a resolution. Unfortunately, that resolution is the shuttering of the plant, as Caterpillar (the owner of Electro Motive) moves the operations of the London plant to a new facility in Muncie, Indiana.

It’s a harsh move – harsher than their demand that employees take a 50% pay cut – but it can’t be that surprising, as Caterpillar held all the cards.

For my money, Andrew Coyne as provided the most honest and accurate assessment of the issue:

Force may be effective against a handful of frightened replacement workers. It is not so easily deployed against a determined multi-national company. As nasty as Caterpillar may be, the reality is that it has something the workers and the community want: investment capital, and the jobs that go with it. It does not, God knows, provide these out of the goodness of its heart. But neither can it be compelled to invest in a location if it does not find it in its interest to do so.

For that matter, it can’t be bribed into it, either: not for long. Much has been made of the “$5-million in tax breaks” the company received in the 2008 budget, and of the failure of the federal government to extract promises of job security in return. In point of fact, the sweetened writeoff went to the purchasers of locomotives, not the manufacturers, but never mind. If the only thing keeping jobs in a particular place are the subsidies attached, then the jobs will last only as long as the subsidies do. Moreover, so long as the jobs are effectively hostage to these negotiations, the terms of the ransom can only grow: witness the escalating demands of the auto industry over the years. In the end, the jobs are not saved, but only traded, since subsidy does not create jobs or investment but only diverts them, from other firms and sectors across the economy.