So Long, Schumpeter

Perhaps no destruction would be as creative as that of American automakers with their cancerous union contracts. Over at Carpe Diem, Mark Perry has a telling graph of the labor costs of the big 3 American automakers:

Ordinarily, troubled firms would cut back on labor costs. They can't.

One might think that unions have the incentive to make concessions to keep their host firm in business rather than risk the jobs of their members. However, the potential of a government bailout to feed off of is an infinitely preferable alternative that involves no sacrifice. The automakers will join the ignoble ranks of unionized firms kept alive by tax dollars, incapable of producing goods for which consumers will pay above cost.

The auto industry is frozen in time. New, innovative competitors will be kept out of the market by competition from tax-funded dinosaurs. Car companies have become an expensive, politically connected welfare agency for UAW employees.

With the Democratic Party's pro-union agenda, look for GM-efficiency and Detroit aesthetics coming soon to a corner of the nation near you.

Rent-seeking is a depressing phenomenon to watch in action.

Share this

Good, union bastards should

Good, union bastards should go hungry. Crooks.

"So long"? Hardly.

You say, "so long, Schumpeter," but this mess is more or less exactly what Schumpeter predicted -- that as people become prosperous, they become stupid and sentimental about bailing out others' risks and so undermine the very ideas that made them prosperous in the first place?

"Creative destruction," in Schumpeter's view, was just a phase that societies went through; it was inherently unstable because it created social surpluses that would inevitably be spent on corporatism, bailouts, and the elevation of a political class of socialist intellectuals; in the end, creative destruction would creatively destroy itself. This, it seems to me, is exactly what is happening.

So instead of "so long, Schumpeter," we should recognize that it's been Schumpeter's party all along and, far from being over, it has only just barely begun. There's a long night ahead of drinking our way from state capitalism to social democracy, just like it said on the invitations.

Envy?

No sympathy for the poor slobs with $28.48 total compensation? Living on $15/hour pay?

In the bad old days the shop rate was about twice the hourly pay. What is it now?

What is the labor cost per vehicle for the big three and the Japanese outfits?

Why , for equivalent vehicles, do big three cars cost less? One can get an American car cheaper than a Toyota.