George Reisman
Capitalism.net
April 19, 2006

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This is a question that no one seems to be asking.  And so I’ve asked it.  And here, in essence, is what I think is the answer.  (The answer, of course, applies to Ford and Chrysler, as well as to General Motors.  I’ve singled out General Motors because it’s still the largest of the three and its problems are the most pronounced.)

1. The company would be without so-called Monday-morning automobiles.  That is, automobiles poorly made for no other reason than because they happened to be made on a day when too few workers showed up, or too few showed up sober, to do the jobs they were paid to do.  Without the UAW, General Motors would simply have fired such workers and replaced them with ones who would do the jobs they were paid to do.  And so, without the UAW, GM would have produced more reliable, higher quality cars, had a better reputation for quality, and correspondingly greater sales volume to go with it.  Why didn’t they do this?  Because with the UAW, such action by GM would merely have provoked work stoppages and strikes, with no prospect that the UAW would be displaced or that anything would be better after the strikes.  Federal Law, specifically, The National Labor Relations Act of 1935, long ago made it illegal for companies simply to get rid of unions.

2. Without the UAW, GM would have been free to produce in the most-efficient, lowest cost way and to introduce improvements in efficiency as rapidly as possible.  Sometimes this would have meant simply having one or two workers on the spot do a variety of simple jobs that needed doing, without having to call in half a dozen different workers each belonging to a different union job classification and having to pay that much more to get the job done.  At other times, it would have meant just going ahead and introducing an advance, such as the use of robots, without protracted negotiations with the UAW resulting in the need to create phony jobs for workers to do (and to be paid for doing) that were simply not necessary.

(Unbelievably, at its assembly plant in Oklahoma City, GM is actually obliged by its UAW contract to pay 2,300 workers full salary and benefits for doing absolutely nothing.  As The New York Times describes it, “Each day, workers report for duty at the plant and pass their time reading, watching television, playing dominoes or chatting.  Since G.M. shut down production there last month, these workers have entered the Jobs Bank, industry's best form of job insurance.  It pays idled workers a full salary and benefits even when there is no work for them to do.”)

3. Without the UAW, GM would have an average unit cost per automobile close to that of non-union Toyota.  Toyota makes a profit of about $2,000 per vehicle, while GM suffers a loss of about $1,200 per vehicle, a difference of $3,200 per unit.  And the far greater part of that difference is the result of nothing but GM’s being forced to deal with the UAW.  (Over a year ago, The Cincinnati Enquirer reported that “the United Auto Workers contract costs GM $2,500 for each car sold.”)

4. Without the UAW, the cost of employing a GM factory worker, including wages and fringes, would not be in excess of $72 per hour, which is where it is today, according to The Post-Crescent newspaper of Appleton, Wisconsin.

5. As a result of UAW coercion and extortion, GM has lost billions upon billions of dollars.  For 2005 alone, it reported a loss in excess of $10 billion.  Its bonds are now rated as “junk,” that is, below, investment grade.  Without the UAW, GM would not have lost these billions.

6. Without the UAW, GM would not now be in process of attempting to pay a ransom to its UAW workers of up to $140,000 per man, just to get them to quit and take their hands out of its pockets.  (It believes that $140,000 is less than what they will steal if they remain.)

7. Without the UAW, GM would not now have healthcare obligations that account for more than $1,600 of the cost of every vehicle it produces.

8. Without the UAW, GM would not now have pension obligations which, if entered on its balance sheet in accordance with the rule now being proposed by the Financial Accounting Standards Board, will leave it with a net worth of minus $16 billion.

What the UAW has done, on the foundation of coercive, interventionist labor legislation, is bring a once-great company to its knees.  It has done this by a process of forcing one obligation after another upon the company, while at the same time, through its work rules, featherbedding practices, hostility to labor-saving advances, and outlandish pay scales, doing practically everything in its power to make it impossible for the company to meet those obligations.

9. Without the UAW tens of thousands of workers—its own members—would not now be faced with the loss of pension and healthcare benefits that it is impossible for GM or any of the other auto companies to provide, and never was possible for them to provide.  The UAW, the whole labor-union movement, and the left-“liberal” intellectual establishment, which is their father and mother, are responsible for foisting on the public and on the average working man and woman a fantasy land of imaginary Demons (big business and the rich) and of saintly Good Fairies (politicians, government officials, and union leaders).  In this fantasy-land, the Good Fairies supposedly have the power to wring unlimited free benefits from the Demons.

Without the UAW and its fantasy-land mentality, autoworkers would have been motivated to save out of wages actually paid to them, and to provide for their future by means of by and large reasonable investments of those savings— investments with some measure of diversification.  Instead, like small children, lured by the prospect of free candy from a stranger, they have been led to a very bad end.  They thought they would receive endless free golden eggs from a goose they were doing everything possible to maim and finally kill, and now they’re about to learn that the eggs just aren’t there.

It’s very sad to watch an innocent human being suffer.  It’s dreadful to contemplate anyone’s life being ruined.  It’s dreadful to contemplate even an imbecile’s falling off a cliff or down a well.  But the union members, their union leaders, the politicians who catered to them, the journalists, the writers, and the professors who provided the intellectual and cultural environment in which this calamity could take place—none of them were imbeciles.  They all could have and should have known better.

What is happening is cruel justice, imposed by a reality that willfully ignorant people thought they could choose to ignore as long as it suited them:  the reality that prosperity comes from the making of goods, not the making of work; that it comes from the doing of work, not from the shirking of it; that it comes from machines and methods of production that save labor, not the combating of those machines and methods; that it comes from the earning and reinvestment of profits not from seizure of those profits for the benefit of idlers, who do all they can to prevent the profits from being earned in the first place.

10. In sum, without the UAW, General Motors would not be faced with extinction.  Instead, it would almost certainly be a vastly larger, far more prosperous company, producing more and better motor vehicles than ever before, at far lower costs of production and prices than it does today, and providing employment to hundreds of thousands more workers than it does today.

Few things are more obvious than that the role of the UAW in relation to General Motors has been that of a swarm of bloodsucking leeches, a swarm that will not stop until its prey exists no more.

It is difficult to believe that people who have been neither lobotomized nor castrated would not rise up and demand that these leeches finally be pulled off!

Perhaps the American people do not rise up, because they have never seen General Motors, or any other major American business, rise up and dare to assert the philosophical principle of private property rights and individual freedom and proceed to pull the leeches off in the name of that principle.

It is easy to say, and also largely true, that General Motors and American business in general have not behaved in this way for several generations because they no longer have any principles.  Indeed, they would project contempt at the very thought of acting on any kind of moral or political principle.

One of the ugliest consequences of the loss of economic freedom and respect for property rights is that it makes such spinelessness and gutlessness on the part of businessmen—such amorality—a requirement of succeeding in business.  Business today is conducted in the face of all pervasive government economic intervention.  There is rampant arbitrary and often unintelligible legislation.  There are dozens of regulatory agencies that combine the functions of judge, jury, and prosecutor in the enforcement of more than 75,000 pages of Federal regulations alone.  The tax code is arbitrary and frequently unintelligible.  Judicial protection of economic freedom has not existed since 1937, when the Supreme Court abandoned it, out of fear of being enlarged by Congress with new members sufficient to give a majority to the New Deal on all issues.  (Try to project the effect of a loss of judicial protection of the freedoms of press and speech on the nature of what would be published and spoken.)

Any business firm today that tried to make a principled stand on such a matter as throwing out a legally recognized labor union would have to do so in the knowledge that its action was a futile gesture that would serve only to cost it dearly.  And a corporation that did this would undoubtedly also be embroiled in endless lawsuits by many of its own stockholders blaming it for the losses the government imposed on it.

But none of this should stop anyone else from speaking up and making known his outrage at what the UAW has done to General Motors.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site http://www.capitalism.net/ is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.