Week in Review
First Wisconsin and Indiana and now Michigan. Something is happening in the Rust Belt states. These union strongholds appear to be going through a midlife crisis. The marriage between the unions and the people appears to be not as strong as it once was. As if the unions can’t satisfy the needs of the people anymore. Who are looking to get out of a failing marriage (see Snyder Wades Into Angry Debate Over Michigan Union Dues by Chris Christoff & Esme E. Deprez posted 12/12/2012 on Bloomberg).
Republican Governor Rick Snyder, who portrays himself as a pragmatic unifier, plunged Michigan into conflict by signing so-called right-to-work legislation.
Less than a week after Snyder ended his neutrality on the issue, lawmakers yesterday approved two bills that prohibit compulsory union dues for employees in organized workplaces. The governor signed them hours later.
“As a nonpolitician, I don’t respond to political pressure,” Snyder, 54, said at a Lansing news briefing. “I try to do what’s best for the citizens of Michigan.”
His decision to make Michigan the 24th right-to-work state in the U.S. made the self-described nerd and non-ideologue a new nemesis to Democrats and their union allies. Similar fights in Wisconsin and Indiana this year and last brought protesters into the streets, accusing Republicans of trying to gut labor’s power in its Midwestern stronghold…
About 17 percent of Michigan workers belong to unions, according to the U.S. Department of Labor. In the early 1960s, about 40 percent did…
Snyder said unions started the battle when they led an unsuccessful campaign to enshrine collective-bargaining rights in the Michigan constitution. The ballot proposal was defeated Nov. 6, despite a $23 million drive funded mostly by labor…
Supporters said the laws, which affect all government and private employees in organized workplaces except for police and firefighters, let workers withdraw support from unions they view as ineffective or politically unpalatable.
Then again, with only some 17% of the Michigan workforce unionized and an unemployment rate that was north of 10% for almost 3 of the past 4 years one can see why the people would want a divorce.
The interesting thing is that Michigan has a Republican legislature and a Republican governor yet this state voted for President Obama in 2012. How is that possible? How do you reject liberal policies at the state level and yet vote for them at the federal level? Rust Belt states Indiana, Michigan, Ohio, Pennsylvania and Wisconsin all have Republican legislatures AND Republican governors. And yet all but Indiana voted for President Obama, perhaps the most liberal president in U.S. history. How does the national election NOT reflect the state elections?
Union supporters in Michigan are saying Governor Snyder ran as a moderate and then bowed to big money on the Right. Of course that doesn’t explain the Republican legislature. It would appear there is a political realignment in the Rust Belt. Perhaps there will be a recall drive in Michigan. Like there was in Wisconsin. Of course, before the union spends another $20 million in a recall attempt they should note that Governor Walker won that recall election with a slightly larger margin than the election that brought him to office in the first place.
It could be that the people want jobs. And to get jobs they need businesses to come to Michigan. The Big Three (Ford, Chrysler and General Motors) have been in Michigan forever. They’ve been bastions of union power. But every new manufacturer since the Big Three chose to build in some state other than Michigan. Most of them locating in the Right to Work South. Something no doubt the people in the Rust Belt are tired of seeing. Especially when your state has an unemployment rate higher than the national average.
Tags: Big Three, Indiana, jobs, Michigan, political realignment, Republican, Republican governor, Republican legislature, Rick Snyder, Right to Work, Rust Belt, unemployment rate, union, Wisconsin
Rent-Seeking Captains of Industry and Commerce give Capitalism a Bad Name
Once upon a time you lived, worked and died all within a short walk from each other. In feudalism people owned land and lived well. The landed aristocracy. And other people (the peasants) worked the land. But did not live as well as those who owned it. For it was back-breaking work for long hours with no respite except in death. For those who worked the land belonged to the land. Just as the trees and fields and rivers did. Peasants belonged to the land and the land belonged to the landowner. The peasants couldn’t leave. And they couldn’t work hard to provide a better life for their children. For they were bond to the land as their patents were. With no choice but to work the land like their parents did.
This was how life was before we started to use power to make our work easier. We had long been using animal power to do things we didn’t have the strength or the endurance to do. Such as pulling a plow. Or a wagon full of goods. Or to travel great distances more quickly than we could by walking. Harnessing the power of moving water changed all of that. For a river moves constantly. And when you place a waterwheel in moving water you can convert the linear motion of the water into rotational motion. This rotational motion could turn a main shaft running though a factory. Belts and pulleys could transfer this power to workstations throughout the factory floor. And these powered workstations could do far more work than a person could. Lumberjacks could transport logs down a river to a lumber mill. Where a waterwheel could spin a saw that made lumber out of those logs at such a rate that great cities could arise around these mills. Cities with other factories powered by waterwheels. And homes.
So it’s no surprise that our early cities grew up on rivers. Both for water power. And the ability to use them to ship bulk goods. Ship transport. Something even animals weren’t good at. It is in these cities that wealth and political power grew. Centers of industry and commerce. Creating great wealth for those who controlled the resources that made all of that possible. So another aristocracy grew. Rent-seeking captains of industry and commerce. Who give capitalism a bad name. Who use their political power to maximize their profits. And buy favors from those in power to protect their particular interests. Such as using the power of government to create monopolies for themselves. But advancing technology made that harder to do. Especially the steam engine. And the railroad.
The Steel and Heavy Manufacturing Industries required a Massive Infrastructure and Regionally Located Raw Materials
Control of rivers, ports and harbors provided a great opportunity to amass wealth at other people’s expense. For when economic activity centered on water it made land around that water very valuable. Which concentrated wealth and power on the rivers. Until the steam engine replaced the waterwheel. And the railroad provided a way to transport people and goods inland. So not only did cities grow up along the waterways they grew up along the rail lines. Those controlling these resources still had great wealth and power. But they also offered competition. And more economic liberty. For while there can only be one Tennessee River flowing through Chattanooga, Tennessee, there can be more than one railroad running through Chattanooga. Which made Chattanooga an important city to hold during the American Civil War. For there was a great rail junction in that city. Giving anyone who controlled the city access to any part of the Confederacy.
While the steam engine and railroad allowed industries to grow anywhere in the country some industries still clustered in regional areas. Such as the steel industry. It required three ingredients to make steel. Iron ore, coke (coal cooked into hard charcoal briquettes) and limestone. To make steel you use 6 parts iron ore, 2 parts coke and 1 part limestone. Iron ore was plentiful around Lake Superior. Because it takes a lot of iron ore and a lot of iron ore is located around Lake Superior the steel makers built their mills long the Great Lakes. In Milwaukee. Chicago. Gary. Detroit. Toledo. Cleveland. Or in places like Pittsburgh where coal and iron ore deposits surround the city. These cities made up the Manufacturing Belt. Places with access to bulk ore shipping (on Great Lakes freighter or river barge). And where the steel mills arose so did heavy industry that built things from that steel. From structural steel. To automobiles.
For a while these new industries dominated the economic landscape. Big, heavy industries that couldn’t move. Concentrating money and political power. Giving rise to organized labor. Who took advantage of the fact that these heavy industries could not move. Negotiating lucrative union contracts. With generous pay and benefits. Raising the price of steel and the things we made from steel. Like automobiles. Making the rank and file like rent-seekers of old. Looking to personally benefit from their near-monopoly conditions. Like those early captains of industry and commerce. Life was good for awhile for the rank and file. Who lived very well. And better than most American workers. Thanks to those monopoly-like conditions in these steel and heavy manufacturing industries. Allowing them to charge high prices for their goods to pay for those generous pay and benefits. As there was no competition. For the steel and heavy manufacturing industries required a massive infrastructure and an abundant supply of regionally located raw materials, making it very difficult for a new competitor to open for business. At least, in the United States.
High Costs and Low Efficiencies have shuttered most of America’s Steel Making Past
Foreign competition changed all that. And large ocean-going ships. So new industries in other countries with lower labor costs could manufacture these goods and ship them to the United States. And did. Challenging the monopoly-like conditions of the rent-seeking steel and heavy manufacturing industries. So the rent-seekers turned to government for protection. And got it. Import tariffs. Which raised the price of those imported goods to the higher price level of the domestic goods. Which did two things. Insulated the domestic manufacturers from market pressures allowing them to continue with the status quo. And forced the foreign manufacturers to find less costly and more efficient ways to make their goods to counter those import tariffs.
So what happened? Technology advanced in these industries overseas while they stagnated in the US. The US didn’t invest in new technologies like they did in the previous century to find better ways to do things. Because they didn’t have to. While the foreign competitors worked harder to find better ways to do things. Because they had to. As they weren’t insulated from market forces. The Japanese invested in robotics. Transforming their auto industry. Improving quality and lowering costs. Making their cars as good if not better than the Americans did. And selling them at a competitive price even with those import protections. So what did these US actions to protect the domestic manufacturers do? Changed the Manufacturing Belt to the Rust Belt.
The big steel cities in America are no more. High costs and low efficiencies have shuttered most of America’s steel making past. Gone is the era of the sprawling steel mill. Today it’s the minimill and continuous casting. Small and efficient steel mills with small labor forces that can make small batches. Thanks to their electric arc furnaces that are easy to turn on and off. Unlike the big blast furnaces that took a while to reach operating temperatures and when they did they didn’t shut them down for years. Making it difficult to adjust to falling demand. Like the minimills could. Which helped save the steel industry by finally adopted technology that allowed it to sell at market prices. Making it harder for the rent-seekers these days. But better for consumers. Because of this relentless march of technology. That allows us to continuously find better ways to do things.
Tags: animal power, capitalism, captains of industry and commerce, coke, factory, find better ways to do things, generous pay and benefits, Great Lakes, heavy industry, industry and commerce, Iron ore, Lake Superior, Limestone, Manufacturing Belt, monopolies, rail lines, railroad, rent-seeking, rotational motion, Rust Belt, ship transport, steam engine, steel, steel industry, water power, waterwheel, wealth and power