Quotulatiousness

August 20, 2014

New report calls for Ontario to break up the LCBO

Filed under: Business, Cancon, Economics, Wine — Tags: , , , , , — Nicholas Russon @ 13:33

In the Toronto Star, Richard Brennan reports on a new study by the C.D. Howe Institute calling for the province to join the modern era:

The “quasi-monopoly” LCBO and The Beer Store have hosed Ontario consumers long enough, a C.D. Howe Institute report says.

The right-wing think tank said the Ontario government should strip them both of their almost exclusive right to sell beer, wine and spirits, suggesting the report proves that opening up to alcohol sales to competition will mean lower prices.

“The lack of competition in Ontario’s system for alcoholic beverage retailing causes higher prices for consumers and foregone government revenue,” states the 30-page report, Uncorking a Strange Brew: The Need for More Competition in Ontario’s Alcoholic Beverage Retailing System, to be released publicly Wednesday.

The report includes tables comparing Ontario beer prices to other provinces with greater private sector involvement, particularly with Quebec, where a case of 24 domestic beers can be as much as $10 cheaper and even more for imported brands.

Since 1927, when the Liquor Control Act was passed, the Liquor Control Board of Ontario and the privately owned Brewers Warehousing Company Limited have had a stranglehold on alcohol sale in the province.

“The Beer Store’s quasi-monopoly of beer retailing is … an anachronism,” the report says, referring to the foreign-owned private retailer that is protected by provincial legislation.

Britain’s railway system under private and public ownership

Filed under: Britain, Economics, Railways — Tags: , — Nicholas Russon @ 08:13

At the Adam Smith Institute blog, Ben Southwood asks the question “What would we consider a successful railway system?”

Under many measures, the railways have performed remarkably since privatisation. It is not surprising that the British public would nevertheless like to renationalise them, given how ignorant we know they are, but it’s at least slightly surprising that large sections of the intelligentsia seem to agree.

Last year I wrote a very short piece on the issue, pointing out the basic facts: the UK has had two eras of private railways, both extremely successful, and a long period of extremely unsuccessful state control. Franchising probably isn’t the ideal way of running the rail system privately, but it seems like even a relatively bad private system outperforms the state.

British railway passengers 1830-2010

Short history: approximately free market in rail until 1913, built mainly with private capital. Government control/direction during the war. Government decides the railways aren’t making enough profit in 1923 and reorganises them into bigger regional monopolies. These aren’t very successful (in a very difficult macro environment) so it nationalises them — along with everything else — in the late 1940s.

By the 1960s the government runs railways into the ground to the point it essentially needs to destroy or mothball half the network. Government re-privatises the railways in 1995 — at this point passenger journeys have reached half the level they were at in 1913. Within 15 years they’ve made back the ground lost in the previous eighty.

August 18, 2014

Worstall confirms that “the UK would lose 3 million jobs in the year it left the European Union”

Filed under: Britain, Business, Economics, Europe — Tags: , , — Nicholas Russon @ 09:15

There you go … proof positive that the UK cannot possibly, under any circumstances, leave the European Union. Except for the fact that the UK would lose 3 million jobs in the year even if it stayed with the EU, because that’s how many jobs it normally loses in a year:

UK Would Not Lose 3 Million Jobs If It Left The European Union

Well, of course, the UK would lose 3 million jobs in the year it left the European Union because the UK loses 3 million jobs each and every year. Roughly 10% of all jobs are destroyed in a year and the economy, generally, tends to create 3 million jobs a year as well. But that’s not the point at contention here which is the oft repeated claim that because we left the EU then therefore the UK economy would suddenly be bereft of 3 million jobs, that 10% of the workforce. And sadly this claim is a common one and it just goes to show that there’s lies, damned lies and then there’s politics.

The way we’re supposed to understand the contention is that there’s three million who make their living making things that are then exported to our partners in the European Union. And we’re then to make the leap to the idea that if we did leave the EU then absolutely none of those jobs would exist: leaving the EU would be the same as never exporting another thing to the EU. This is of course entirely nonsense as any even random reading of our mutual histories would indicate: what became the UK has been exporting to the Continent ever since there’s actually been the technology to facilitate trade. Further too: there have been finds in shipwrecks in the Eastern Mediterranean of Cornish tin dating from 1,000 BC, so it’s not just bloodthirsty and drunken louts that we’ve been exporting all these years.

August 8, 2014

Revisiting the economic brain-fart that was “Cash for Clunkers”

Filed under: Economics, Government, USA — Tags: , , , — Nicholas Russon @ 07:44

If you listen to big government fans, you’ll often hear how much better it is for the economy for the government to spend money — much better than letting the taxpayers spend that money themselves — because the government is able to get a much higher “multiple” for every dollar that it spends. The “Cash for Clunkers” story may support that theory, but only if you reverse the sign: the program may have been more economically helpful to the auto makers and the taxpayers if they’d just piled up a few billion bank notes and set them on fire. The program ran for two months, and the government doled out $3 billion in subsidies to new car buyers (their old cars were destroyed). The new car owners benefitted, although it seems to merely have brought forward intended new car purchases in most cases, and the auto makers seemed to benefit by moving out a lot of unsold inventory.

However, a new National Bureau of Economic Research working paper shows that the program actually ended up costing the auto makers between $2.6 and $4 billion. Coyote Blog quotes the WSJ‘s summary:

The irony is that the goals were to help Detroit through the recession by subsidizing sales and to please the green lobby by putting more fuel-efficient cars on the road. By pulling forward purchases that consumers would make later anyway, the Obama Administration also hoped to add to GDP. Christina Romer, then chair of the Council of Economic Advisers, called Cash for Clunkers “very nearly the best possible countercyclical fiscal policy in an economy suffering from temporarily low aggregate demand.”

The A&M economists had the elegant idea of comparing the buying behavior of Texas drivers who owned cars that barely qualified for cash (those that got 18 miles per gallon of gas or less) and those that barely did not (19 mph). Using state DMV sales records, this counterfactual allowed them to isolate the effects of the Cash for Clunkers incentives and show what would have happened without the program.

The two groups were equally likely to purchase a new vehicle over the nine month period that started with Cash for Clunkers, so the subsidy did not create any extra auto business. But in order to meet the fuel efficiency mandate, consumers who got the subsidy were induced to purchase smaller vehicle models with less horsepower that cost on average $2,500 to $3,000 less than those bought by their ineligible peers. The clunkers bought more Corollas, and everybody else more Chevys.

Extrapolated nationally, auto revenues may have plunged by more than what the government spent. And any environmental benefits cannot be justified under the federal social cost of carbon estimate of $33 a ton. Prior research from 2009 and 2013 has shown that the program cost between $237 and $288 a carbon ton.

By taking all those used cars off the road and destroying them, the program also created a nasty price spike in the used car market (which hurt the poor almost exclusively). As P.J. O’Rourke said:

… cash for clunkers was just sinful. You’re taking a bunch of perfectly good vehicles, inexpensive vehicles that could be used by people without much in the way of material means, and crushing them. If someone took a valuable resource — something that could really be useful to people — and destroyed it, they’d be in jail if they were private citizens.

Steve Chapman probably put it best back in 2009, “Cash for Clunkers has been a thrilling moment for advocates of expanded government, who say it proves what we can accomplish when our leaders put their minds to it. They are absolutely right. The program proves the federal government is unsurpassed at two things: dispersing money and destroying things.”

August 7, 2014

Streetcars – trying to use 19th century technology for 21st century problems

Filed under: Economics, Railways, USA — Tags: , — Nicholas Russon @ 07:13

In addition to my already admitted train fetish, I’m also a low-key fan of the streetcar. Some of that, I’m sure, is that a streetcar is really just a one-car passenger train on a short journey with frequent stops. But I recognize that streetcars and trams are not a realistic solution to urban transit needs today … unlike far too many city and regional transportation planners. The Economist has a short explainer this week, backup up this argument:

Streetcars — otherwise known as trolleys or trams — had their golden age around 100 years ago, carrying urban workers to nascent suburbs around Europe and America. But commuters had little love for these rickety, crowded electric trains, and by 1910 many were abandoning them for the convenience of cars or buses. Streetcars have been making a comeback, however, with new lines rumbling to life in at least 16 American cities, and dozens more in the works. Tucson, Arizona, inaugurated its new streetcar service in late July, and streetcar operators in Washington, DC, begin training this week—the city’s much-delayed service is expected to start later this year. But for all their nostalgic charm, streetcars are also increasingly controversial: a number of cities, such as San Antonio, Texas, are now rethinking their plans, complaining of high costs and limited public support. Critics grumble that streetcars gobble up scarce transit funds for a slow, silly service used mainly by tourists.

[...]

Streetcars are also incredibly expensive to build and maintain, with huge up-front capital costs in laying down rails and buying cars. Tucson’s project ultimately cost nearly $200m and opened years late, in part because the city needed to clear utilities from under the tracks, install overhead electrical connections and repave much of the four-mile route. A 3.6-mile line in Cincinnati, Ohio, now under construction is expected to cost at least $133m. Federal grants have gone some way to help pay for these projects, but cash spent on streetcars displaces spending on other, more cost-effective forms of public transport like buses, which offer cheaper and more-efficient service but are considerably less sexy. The capital cost per mile of a streetcar is between $30m and $75m, while a rapid bus service costs anywhere between $3m and $30m, according to the American Public Transportation Association.

All this investment might make some sense if streetcars offered an efficient way to move people around. But here, too, the evidence is flimsy. Riders — and especially tourists — may find streetcars less intimidating than buses, but these vehicles tend to offer slow journeys across walkable distances. European tramlines tend to be fairly long and isolated from other traffic, which ensures a swifter journey. But in America streetcars travel shorter distances along rails that mix with other traffic, so streetcars invariably inch along. And while these tracks may be reassuring to developers, they make it impossible to navigate busy streets: buses can ride around obstacles but trams must stay put and wait. Indeed, their slow speeds and frequent stops mean they often add to congestion. This may not bother tourists keen on a novelty ride, but it is no solution to America’s public transport problems.

If you want to include light or heavy rail in your city’s public transit network, it has to be either grade-separated from cars and pedestrians or it needs to be buried underground or raised in the air: mixing streetcars with cars and trucks — even if you manage to rebrand them with a more modern-sounding moniker — worsens traffic, creates unhappy interactions between the rail and non-rail vehicles, costs vast amounts of money, and rarely draws enough passenger traffic to come close to breaking even. I’m no fan of buses, but in almost every case, the economic case for buses is far more sound than the case for streetcars.

August 6, 2014

Atlas Shrugged was not an instruction manual”

Filed under: Business, Economics, Government, USA — Tags: , , — Nicholas Russon @ 08:34

Oh, my. A few corporations are using the “corporate inversion” tactic to get out from underneath punitive taxes and the reaction is to talk about making it harder to escape? Tamara K. explains why this is breathtakingly dumb:

Dude, one of the complaints that nuanced cosmopolitan liberals have with Ayn Rand is that her villains are cartoonish caricatures, and here you go popping out an editorial that could have been written by Wesley Mouch. Tone-deafness on this scale is positively breathtaking. Atlas Shrugged was not an instruction manual, you knob.

I suspect more corporations have been considering the pro and con to corporate inversion recently … and the hysterical reaction to the few that have already taken place may trigger a rush to the exits. Nice work, guys!

August 3, 2014

NLRB decision would “stick a fork in the franchise model”

Filed under: Business, Economics, USA — Tags: , — Nicholas Russon @ 10:08

In Forbes, Tim Worstall explains why the recent decision by the US government’s National Labour Relations Board could destroy the franchising business model widely used by fast food chains:

The National Labor Relations Board (NLRB) made a very strange decision last week to rule that McDonald’s the corporation, was a joint employer of the staff in the franchised restaurants. It was, of course, at the urging of those labour activists who would like to union organise in the sector. Dealing with one national company is obviously going to be easier than dealing with thousands of independent business owners. There’s a number of problems with this decision ranging from the way that it overturns what has long thought to be settled law, to it obviating already signed contracts but perhaps the greatest problem is that it calls into question the entire validity of the franchise system.

[...]

The franchisor though gets paid a percentage of pure sales: what the labour costs at the franchises is is no skin off their nose at all. So they’ll not control it. The only major input that the franchisee can control in order to determine profitability would now become, at best, a join venture and we’ve different incentives for each side of the bargain. That’s just not going to work well. I don’t think that Pudzer is being alarmist in stating that this ruling would stick a fork into the franchise model as a whole. You simply can’t have such a system where the franchisees don’t control any of their inputs.

Of course, it’s still open to someone to argue that the franchise system shouldn’t actually exist, that it would be a good thing if everyone were either a truly independent organisation or part of a large and centrally managed group. But if that is the argument that’s being made, or will be made, then it’s a large enough change that it really needs to happen through political means, not administrative law. That means that if Congress wants to change the rules in this manner then that’s up to Congress. But it really shouldn’t be done by the decision of an administrative agency.

August 2, 2014

Explaining free market exchange in real-world terms

Filed under: Economics, Liberty — Tags: — Nicholas Russon @ 11:17

A lovely little bit of explanation (that doesn’t require you to already have Econ 101 on your transcript):

“What are you looking at? Oh, Craigslist. My brother uses that all the time. Crazy, he should get a job”

“What does he do”

“Oh, he buys phones and stuff like that, jailbreaks them, then sells them for a lot more. He’ll buy a phone for $150 and sell it for $400.”

“Sounds like he’s doing pretty well”

“I suppose, but he’s always driving all over to buy stuff”

“Ok. How long do you suppose it takes him to pick one up and get home? Hour and a half? How long to jailbreak it? Lets say 30 minutes, although I bet it a lot less if he has the machine or program or whatever you use. You just told me he made $250 bucks on that one phone he sold. Dude, that’s $125/hour! That’s a pretty good income. That’s the how the free market works. People buy stuff they can sell to make money.”

“I sold an old car to Crazy Rays (Crazy Rays is a pick n pull junkyard) for $500. I bet they sold 2-3 grand worth of parts off of it.”

“How much work would it have been for you to part it out and sell the parts yourself?”

“Too much”

“And you’d rather have the $500 than your old beater, right?”

“Damn straight”

“See, that’s the beauty of the free market! Nobody loses!”

“What do you mean”

“Look, they don’t teach this in school anymore, but think about it for a sec. You hear all this crap about evil corporations and price gouging and that kind of shit. In a free market, that’s all crap. Nobody voluntarily makes a deal that’s bad for them. You’d rather have the $500 than your old car. Win. Crazy Rays would rather have your old car than the $500. Win. Who loses?”

“Nobody”

“Who wins?”

“Both of us”

“And that’s why the free market works.”

*clink beers*

July 30, 2014

QotD: Balancing the budget

Filed under: Economics, Government, Politics, Quotations — Tags: , — Nicholas Russon @ 00:01

… it sounds like a sober and centrist position. I mean who believes in deficit financing? Well everybody but you’re not suppose to admit it out loud. Like dwarf porn. Many watch but few will say so. What it means in practice is one of two things. If an actual conservative uses the term it means that the public service is getting taken to the tool shed. There being few actual conservatives in politics what it usually means is that we’ll keep spending until someone makes us stop.

That’s when the bond market vigilantes step in. Then everyone blames the bond market for ending the party. The kind politician would love, absolutely love, to spend more money on “X” but those evil Gordon Gekko types won’t let him. In truth the bond market traders are no more responsible for a government going broke than a doctor is responsible for giving an alcoholic DT.

The state, observed Bastiat so many years ago, is the great fiction by which everyone tries to live at the expense of everyone else. Politics is the lie that this can go on indefinitely. Voters complain about the low levels of honesty in politics. But a dishonest political class is the product of a dishonest electorate. If people want something for nothing, they’ll get the lying louses they deserve. Fool me once, shame on you. Fool me a hundred years in a row and the shame is very much on the ordinary bitchin’ voter.

Richard Anderson, “Transparent Lies”, The Gods of the Copybook Headings, 2014-07-28.

July 29, 2014

Australia’s bitter experience with carbon mitigation

Filed under: Economics, Environment, Government — Tags: , , — Nicholas Russon @ 06:47

Shikha Dalmia looks at Australia’s recently abandoned carbon tax scheme:

Environmentalists had a global meltdown last week after Australia scrapped its carbon tax. They denounced the move as “retrograde” and “environmental vandalism.”

They can fume all they want, but Australia’s action, combined with Europe’s floundering cap-and-trade program, signals that “mitigation” strategies — curbing greenhouse gases by putting economies on an energy diet — are not winning or workable.

Australia leapfrogged from being an environmental laggard (initially refusing to even sign the Kyoto Protocol) to a leader when its Green Party-backed Labor prime minister imposed a tax two years ago. It required Australia’s utilities and industries to pay $23 per ton of greenhouse gas emissions.

But the tax was an instant debacle.

Australia has the highest per capita carbon dioxide emission in the world and the main reason is that it’s even more coal-dependent than America. Coal supplies 75 percent of its energy needs (compared to 42 percent in America). But contrary to green expectations, the tax didn’t prompt companies to rush toward renewable sources, because they are far costlier.

Rather, utilities passed their costs to households — whose energy bills soared by 20 percent in the first year. Other industries that face hyper-competitive environment such as airlines suffered massive losses. (Virgin Australia alone reported $27 million in losses in just six months.) The tax also made Australian exports globally uncompetitive, deepening the country’s recession.

This spawned a backlash that brought down the Labor government and catapulted into office the Liberal Party’s Tony Abbott, who made a “blood promise” to ditch the tax, which he did promptly once elected, despite warnings that Aussie lowlands are more vulnerable to rising sea levels and other dire consequences of global warming than other countries.

July 24, 2014

QotD: The Law of Triviality

Filed under: Economics, Government, Humour, Quotations — Tags: , — Nicholas Russon @ 00:01

People who understand high finance are of two kinds: those who have vast fortunes of their own and those who have nothing at all. To the actual millionaire a million dollars is something real and comprehensible. To the applied mathematician and the lecturer in economics (assuming both to be practically starving) a million dollars is at least as real as a thousand, they having never possessed either sum. But the world is full of people who fall between these two categories, knowing nothing of millions but well accustomed to think in thousands, and it is of these that finance committees are mostly comprised. The result is a phenomenon that has often been observed but never yet investigated. It might be termed the Law of Triviality. Briefly stated, it means that the time spent on any item of the agenda will be in inverse proportion to the sum involved.

C. Northcote Parkinson, “High Finance, Or The Point Of Vanishing Interest”, Parkinson’s Law (and other studies in administration), 1957.

July 22, 2014

The Erie Canal and the canal boom it created

Filed under: Economics, History, USA — Tags: , , — Nicholas Russon @ 08:13

Last week, Chris Edwards posted a short article at the Cato@Liberty blog, discussing the long history of government malinvestment in infrastructure projects:

Most politicians are optimistic about the government’s ability to intervene and solve problems. That’s one reason why they run for office. Neocons, for example, have excessive faith that foreign intervention can fix the world, while liberals embrace the misguided idea that subsidies and regulations can boost the economy.

The Erie Canal was a misleading outlier: it was a major infrastructure project that actually succeeded in turning a profit, and it set off a string of copycat government initiatives … most of which quickly turned into expensive mistakes for state governments:

Chapter 3 of the book [Uncle Sam Can’t Count by Burton and Anita Folsom]looks at the orgy of state government canal building from the 1820s to the 1840s. Here is the basic story:

  • New York State funds construction of the Erie Canal, which opens in 1825.
  • The Erie Canal is a big success, which spurs canal fever across the nation and encourages other state governments to hand out subsidies. Government canal schemes are launched in Michigan, Pennsylvania, Ohio, Indiana, Maryland, and Illinois. There is particular excitement about subsidized “internal improvements” among Whig politicians, including Abraham Lincoln.
  • However, politicians overestimate the demand for canals in their states and underestimate the costs and difficulty of construction. They do not recognize that the Erie Canal is uniquely practical and economic as it traverses relatively flat land and connects the Great Lakes with the Atlantic.
  • Some of the state-sponsored canals are huge boondoggles and are abandoned. And other than the Erie Canal, all of the state canals sustain heavy losses, including other subsidized canals in New York.
  • After the failures, numerous states privatize their infrastructure and change their constitutions to prevent politicians from wasting further money on such schemes.

July 17, 2014

Mussolini would recognize (and approve of) “economic patriotism”

Filed under: Economics, Government, History, USA — Tags: , , , , — Nicholas Russon @ 07:58

Kevin Williamson isn’t a fan of the recent upsurge in usage of the term “economic patriotism”, both for practical and historical reasons:

“Economic patriotism” and its kissing cousin, economic nationalism, are ideas with a fairly stinky history, having been a mainstay of fascist rhetoric during the heyday of Franklin D. Roosevelt’s favorite “admirable Italian gentleman.” My colleague Jonah Goldberg has labored mightily in the task of illustrating the similarities between old-school fascist thinking and modern progressive thinking on matters political and social, but it is on economic questions that contemporary Democrats and vintage fascists are remarkably alike. In fact, their approaches are for all intents and purposes identical: As most economic historians agree, neither the Italian fascists nor the German national-socialists nor any similar movement of great significance had anything that could be described as a coherent economic philosophy. The Italian fascists put forward a number of different and incompatible economic theories during their reign, and the Third Reich, under the influence of Adolf Hitler’s heroic conception of history, mostly subordinated economic questions as such to purportedly grander concerns involving destiny and other abstractions.

Which is to say, what the economic nationalism of Benito Mussolini most has in common with the prattling and blockheaded talk of “economic patriotism” coming out of the mealy mouths of 21st-century Democrats is the habit of subordinating everything to immediate political concerns. In this context, “patriotism” doesn’t mean doing what’s best for your country — it means doing what is best for the Obama administration and its congressional allies. This is where my fellow conservatives who write off Barack Obama as a Marxist really get it wrong: He has no meaningful economic philosophy whatsoever. Marxism might be a moral step backward for Barack Obama, but it would be an intellectual step up in the sense that it at least represents a coherent worldview. (“At least it’s an ethos.”) In years of listening to Barack Obama’s speeches, I’ve never detected any evidence that he understands, or even has any interest in, economic questions as such. He is simply a keen political calculator. The conflation of the national interest — “patriotism” — with the interest of the party or the supreme leader is too familiar a demagogic technique to require much explication.

That’s the Washington way: Create stupid financial incentives, complain when people respond to them — and then declare that conformity with your political agenda is identical to patriotism. The production values may be Hollywood slick, but this is just another third-rate sequel: Banana Republic: The Tax Code Strikes Back.

Except the tax code is not striking back. Democrats complain about it, but they rarely if ever try to do anything about the industry handouts and sweetheart deals enshrined therein — given that they wrote so many of them, why would they?

July 15, 2014

The economic side of Net Neutrality

Filed under: Business, Economics, Technology — Tags: , , , , — Nicholas Russon @ 07:41

In Forbes, Tim Worstall ignores the slogans to follow the money in the Net Neutrality argument:

The FCC is having a busy time of it as their cogitations into the rules about net neutrality become the second most commented upon in the organisation’s history (second only to Janet Jackson’s nip-slip which gives us a good idea of the priorities of the citizenry). The various internet content giants, the Googles, Facebooks and so on of this world, are arguing very loudly that strict net neutrality should be the standard. We could, of course attribute this to all in those organisations being fully up with the hippy dippy idea that information just wants to be free. Apart from the obvious point that Zuckerberg, for one, is a little too young to have absorbed that along with the patchouli oil we’d probably do better to examine the underlying economics of what’s going on to work out why people are taking the positions they are.

Boiling “net neutrality” down to its essence the argument is about whether the people who own the connections to the customer, the broadband and mobile airtime providers, can treat different internet traffic differently. Should we force them to be neutral (thus the “neutrality” part) and treat all traffic exactly the same? Or should they be allowed to speed up some traffic, slow down other, in order to prioritise certain services over others?

We can (and many do) argue that we the consumers are paying for this bandwidth so it’s up to us to decide and we might well decide that they cannot. Others might (and they do) argue that certain services require very much more of that bandwidth than others, further, require a much higher level of service, and it would be economically efficient to charge for that greater volume and quality. For example, none of us would mind all that much if there was a random second or two delay in the arrival of a gmail message but we’d be very annoyed if there were random such delays in the arrival of a YouTube packet. Netflix would be almost unusable if streaming were subject to such delays. So it might indeed make sense to prioritise such traffic and slow down other to make room for it.

You can balance these arguments as you wish: there’s not really a “correct” answer to this, it’s a matter of opinion. But why are the content giants all arguing for net neutrality? What’s their reasoning?

As you’d expect, it all comes down to the money. Who pays more for what under a truly “neutral” model and who pays more under other models. The big players want to funnel off as much of the available profit to themselves as possible, while others would prefer the big players reduced to the status of regulated water company: carrying all traffic at the same rate (which then allows the profits to go to other players).

July 14, 2014

When unions took over the public sector

Filed under: Bureaucracy, Business, Economics, Government, USA — Tags: , , , , — Nicholas Russon @ 09:09

Dmitri Melhorn says the union movement is missing an opportunity to be more relevant in the private sector, because public sector unions don’t help poorer workers (because public sector union members are middle class professionals, not working class):

Progressive hostility to [Harris v. Quinn], however, is shortsighted. Harris and decisions like it have the potential to revitalize progressive politics by restoring the relevance and political potency that labor held in the early-to-mid-20th century. The great labor leaders of that era — AFL-CIO President George Meany, President Franklin D. Roosevelt, and the like — agreed with the majority in Harris: it was both impractical and inadvisable to afford public employees compulsory collective bargaining rights.

Roosevelt said that collective bargaining and public workers’ right to strike would be “unthinkable and intolerable.” Meany said it would be “impossible.” In the view of these leaders, civil service laws from the Progressive Era of the 1890s to 1920s had made government jobs good and safe. Labor and progressives, therefore, needed to focus on blue-collar workers’ need to fight collectively for basic safety, dignity and living wages. Through this focus, the United States saw historic gains in the well-being of workers and the country’s middle class.

That labor heyday lasted through the 1950s, but starting in the late 1960s labor lost ground. Public-sector unions grew rapidly, but private-sector unions shrank. By 2012, public-sector workers had union membership rates more than five times higher than rates among private-sector workers.

Essentially, the public-sector unions sucked up all the oxygen. Talented labor organizers opted to work with government workers: their members were relatively prosperous and well connected, so they were easy and lucrative to organize. As explained in Jake Rosenfeld’s book What Unions No Longer Do from earlier this year, this shift to public-sector unions meant that unions no longer fought primarily for the working poor. Instead, much of their muscle was devoted to improving the status of middle-class professionals.

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