Conflicts of interest

James Joyner points us to this bit of union badness from Mickey Kaus:

I knew they’d find a way to punish Ford: The new UAW contract with Ford apparently does not give America’s surviving non-bankrupt automaker parity with GM and Chrysler, reports Bloomberg: “The plan doesn’t include cuts to retiree benefits, such as vision coverage, that were granted to GM and Chrysler.” Rather, the pain seems even more concentrated on future hires (if there are any) than with the GM/Chrysler deals. … TTAC wonders whether the UAW had an extra incentive to resist giving concessions that might make Ford more successful now that the union owns a large chunk of its main domestic competitors. [emphases original]

Yes, now you have the UAW and the government as stakeholders in GM and Chrysler, while members of the UAW work for Ford.  This certainly seems like an awkward situation.  Writes Joyner:

It is, to say the least, problematic for a labor union to own competing firms.  But to the degree that the conflict of interest hurts Ford’s UAW employees, they could presumably divest and start a new union.

The real issue is the antecedent to this situation:  The federal government picking winners and losers between firms.  The federal taxpayer bailed out two of the Big 3 and now has powerful incentive to assure the success of those two companies at the expense of the third.  Not only is Ford much less likely to get government contracts now but they’re much more likely to come under higher regulatory scrutiny.  That they also have a more hostile union — one that no longer ultimately needs them to stay in business — is mere icing on the cake.

Picking favorites is key here.  This is what happens when the government intervenes in the markets to the advantage of specific corporations or special interests.  Unlike a stimulus check cut for every American to spend as they please, this sort of bailout rewards failing companies and punishes the one US automaker that was actually not in trouble.  Intentions aside, this seems pretty antithetical to capitalism and fairness and how we ought to be running our economy.

Now walk over to health care for a moment.  We hear a lot about insurance companies – and sure, they’ll make out pretty good under the new legislation, since it doesn’t require them to really compete any more than they do today – but what about Big Pharma?  And we know that the big unions are opposing any move to wrest health insurance from employers – even though liberals and conservatives alike think that’s the only way to really reform our muddled system.  So we can rest assured that the unions will be winners, too.   So let’s see, that’s Big Pharma, Big Insurance, and Big Labor in the Winners Column.

Who should we put in the Losers Column?

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19 thoughts on “Conflicts of interest

  1. Well one snarky and true response would be that the gov should just stop picking favorites and just build roads (since that is not in any way picking a favorite).

    I’m curious how this works in other countries where unions/labor have a voice/part ownership in the company. Anybody have knowledge on this?????

    More snark: Gee I guess The American People will be the poor suffering losers when everybody(almost) suffers from the scourge of having health insurance.

    I think it would be great to break the excessive power of many special interests (whatever the hell they are) but that is a bit of different subject from whether we let the auto industries keep dying or die real fast, or how to fix health insurance.

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  2. Snarking and snitting aside, this isn’t a good situation. I am not saying that all unions are evil or something but this particular arrangement doesn’t look kocher. You don’t have to be a right winger to see something wrong with this mess.

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    • Well I’m unclear on why there should be parity in the contract between the three automakers. And if Ford is in the best shape why should workers have to make the same concessions as at the companies that are in worse shape?

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      • How do you suppose companies should operate, greginak? If three local restaurants in town are all competing, and two are doing badly because they provide crappy service and crappy food, and so outside chains are beating them up in sales, but that third local place is doing great, then should the local city council go in and give the crappy restaurants a bunch of money so that – despite their crappy service and crappy food – they can still compete with the third place that actually did its job? Is that good for people at the third restaurant or for people who pay taxes or for people who dine at these restaurants? Who are the winners in this situation? And now imagine that there is a food-service-workers-union which is spread across all three restaurants, only the two crappy ones are owned partly by this union. Do you start to see how this severely distorts the playing field? How the owners of the two crappy restaurants are mandating that the good restaurant actually pay higher operating costs while at the same time the crappy restaurants receive government help?

        Does this make any sense at all???

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        • I’m not actually sure about this situation although I can see the conflict of interest angle. I believe it is a good thing for workers to own a stake in the places they work. Certainly Google and Microsoft employees who own stock are happy with that, although they don’t have the sort of voice a union does.

          In general I just don’t see anyway the government/people isn’t involved with picking winners at some, even subtle level. Any law or regulation can be seen as picking a winner or tilting the scales.

          Oh I should have added that considering my general level of respect of mickey kaus I have been wondering if there is more to this story. Kaus’ assertions that this was revenge at Ford don’t move me all that much.

          So I get the conflict of interest, but I still think it is easy to say let them all fail or market forces or creative destruction, or whatever other popular phrases but doesn’t touch the human cost of letting them fall. I am no fan of the car companies but letting them fall would have been a disaster for many people and served as another anchor on the economy. This may be bad but not bailing them out would have been worse.

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          • I’m not actually sure about this situation although I can see the conflict of interest angle. I believe it is a good thing for workers to own a stake in the places they work. Certainly Google and Microsoft employees who own stock are happy with that, although they don’t have the sort of voice a union does.

            It’s a very good thing to have worker-ownership if that’s the model you’re going for. But it’s weird to have the union own part of a competitor. That’s the difference. If there was a programmer’s union that covered Microsoft and Google, for instance, and the union was part-owner of Google, and could dictate terms for workers at Microsoft, that would be a conflict of interest. If workers at either of those companies simply owned stock in the company, that would not be a conflict of interest.

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          • This isn’t a question of bailout/not bail out. It’s a question of whether it’s a good idea to give UAW the inclination and ability to cause another car company to fail and require a bailout (or require us to eat the disruption if it isn’t bailed out).

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      • To put it simply, Greg, unions are supposed to represent the interests of the workers in the company first and then the interests of the company itself second (because lets face it, no company, no union or workers). The UAW, now the owner of Fords’ competitors, is now serving the interests of three entities; the employees the company and now the company’s competitors and it’s fair to question what order it’s serving them in. It is not fair to the employees of Ford and it’s not fair to Ford itself for this situation to stand. It’s also corrosive to the union. I mean if we want to see unionism prosper in this country it would behoove us to encourage them to not behave like rent seeking oligarchs.

        “And if Ford is in the best shape why should workers have to make the same concessions as at the companies that are in worse shape?”
        Can we please please please not forget that the only reason GM and Chrysler even exist now is that we bailed them out at great public expense? (Yes yes we bailed out Wall street too and that mess makes me start wanting to yell “Hang em all” like Bob Cheeks after two many glasses of sherry) And also that it is not Ford that drove the other two out of business.

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    • North, dude, you mean BO and the commie-dems f*ucked up? NOOOOOOOO! Hey, it’s just a little socialism, I mean you guys are whining like my union bros will have to give a pic of BO the one hand salute while shouting, “yooo, yooo, yoooo!” North, the gummint is our friend, its teats feed us, its free oil warms us….”love me, love me, love me, I’m a liburallllllll!”

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  3. Intentions aside, this seems pretty antithetical to capitalism and fairness and how we ought to be running our economy.

    Maybe I’m living in a different country than you are, but I’ve never seen a politician do something that didn’t help one group of people over another. The version of Capitalism that has been practiced in America for decades has nothing to do with fairness or how we should be running our economy.

    In the scheme of things, the auto companies got a few tens of billions of dollars. The financial industry got almost a thousand billion. As long as we’re talking about “fairness” and “how we should be running our economy”, let’s include the broader concept of “Too Big to Fail” and not just focus on the unions.

    And, if we’re really going to have this discussion, then we need to set the wayback machine to before the bailouts happened and talk about what “should have been done”.

    [snark]
    For me, I would have allowed the financial world collapse completely, recruited like-minded young American patriots, hidden in the wilderness, and performed guerilla strikes against the occupying Soviet army. Wolverines!!!!11!1!
    [/snark]

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    • Yes John, the financial sector got more and there’re elements of that mess that reeks to high heaven too. But just because that’s a sty doesn’t excuse the mess with the unions. To paraphrase Freddie just because it’s immoral and stupid there doesn’t make it any less immoral and stupid here. And worse, here in the auto industry we’re essentially setting up a situation where the last surviving car manufacturer is being set up to fail. Is that what we want? Really? Really??!?

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      • Your comment seems to assume that I do not think the auto bailout was a bad idea and/or that I am excusing the mess with the unions. I do think the auto bailout was a bad idea and I am not excusing the mess with the unions.

        What I am saying is that discussions of the auto bailout eventually center on the concept of “Too Big to Fail”. So, let’s cut to the chase: Let’s talk about “Too Big to Fail” and “what should have been done” so that we didn’t have this mess with the unions.

        Please don’t put words in my mouth than then attack me with hyperbole.

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