Tag Archives: labor unions

Illegal Organizations Operate Legally, But Why?

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

I wish to lay out some hypothetical arguments to consider before identifying my point in making them—please don’t jump ahead.

  • Let’s imagine that Walmart, K-Mart, Kohl’s, et al. decided they weren’t making enough profit. The companies met and agreed to hike their prices by 10% across the board to address the issue. If they unite together, they can all raise their prices equally, make more money, and the consumer is left no choice but to pay the increased costs. It’s a genius idea for the stores of course, but there is one problem. There’s a name for such shenanigans—it’s called collusion. It is highly illegal because it violates the competitive principle of free-market capitalism.
  • In the world of contract law, in order for a contract to be valid, it must have a quid pro quo. Meaning that if I write a contract that simply said I’d give you a million dollars with nothing in the contract I get in return, that contract is unenforceable—a contract must be beneficial to both parties. Why? Because there’s no logical reason for a person to sign a contract where only the other party benefits. It either implies something illegal that is unwritten,  or someone who is mentally disadvantaged in such a way that they cannot fully understand what they are agreeing to.
  • Standard Oil Common Stock
    Standard Oil Common Stock

    In the 1800’s, as Standard Oil rose to be arguably the most powerful company the world has ever seen, they kept buying up all the smaller oil companies who dared compete with them, making it so no one could get oil unless they got it from Standard. As a result, Standard could charge whatever they wanted, they could treat employees like dirt, and they didn’t have to concern themselves with the quality of their product. Why? Because there was no competition for consumers or employees to force Standard to be better. This is called a monopoly, and is also highly illegal—now. Mostly because of Standard Oil.

  • If I owned an automotive chassis manufacturing business but needed to find an engine builder to help me produce a car I want to bring to market, I would meet with several and begin to work on deciding who best suits my needs. After picking a few who show promise, I’d choose the one I liked best from the group and enter into contract negotiations with them. If none of them were to my liking, no contract would be agreed upon. I’d be back to square one and they’d be out of a job, but at least neither of us entered into an agreement we didn’t want—that’s how contract negotiations work. But more importantly, the option for both parties to walk away is the one and only thing that ensures contract negotiations are fair and mutually beneficial.
  • John Gotti - Famous Racketeer
    John Gotti – Famous Racketeer

    In an illegal tactic known as a protection racket, if I were to say, “You pay me to protect your business or else…” you would either do it, or you risk me destroying your business’ property or physically attacking you. It’s a tactic made famous by organized crime. Such a contract would be a contract signed under duress, also highly illegal and unenforceable. It is similar to the quid pro quo issue, but the people doing the threatening present the act of not harming you as the thing they are giving you in return.

So now that we’ve covered these tactics, why do I mention all of them? Because labor unions violate each one.

How is this possible?

Government officials over time, courting the unions and the powers they possess to help them get elected, have carved out laws to allow these otherwise illegal practices to be employed by unions. In doing so, it gives the impression they are helping the populace, even though the large majority of Americans are actually non-union.

There was a quid pro quo here, but it wasn’t between the unions and the employers who have a contract with each other, it was between the unions and the politicians. The people and the employers merely got the shaft.Bribe

So how do they violate these rules?

Collusion, protection racket, and contracts signed under duress: Union employees unite together to force employers to pay them more instead of competing with each other in a free employment market. They don’t ask for a raise on their individual merits, they demand them as a collective “or else.”

No quid pro quo: They force companies to sign contracts that are beneficial to the union at the detriment of the employer. They insinuate that their quid pro quo is that they provide a good work force to the employer, but if you asked any employer if they wanted a union versus a non-union workforce off the record, I defy you to find employers who would prefer union-workers. Let there be no doubt that if any unionized business was given the option to get out of a union contract and peacefully hire a new non-union workforce, they’d do it without hesitation. The idea that unions provide a service to the employer is a myth perpetuated by unions to overcome the fact that there is not a proper quid pro quo in their contracts. There is no logical argument one can make whereby a contract between an employer and a labor union is mutually beneficial.

Monopoly: No business or employee gets to choose between which union it deals with, nor are there multiple unions competing with each other in an industry. The applicable union a business is compelled to do business with merely dictate they are the ones to be dealt with whether you like it or not. In non-right to work states, they don’t even have a choice as to whether or not to participate as a condition of employment.

Contracts signed under duress: A business owner has no option to just walk away. This is called union-busting, and there are actually laws to prevent it, which effectively strong-arm business into making a deal by legislative force, also a form of duress. Union workers don’t just threaten to quit and find employment elsewhere if their demands aren’t met, they stand outside your business and prevent, deter, and/or interfere with customers and other workers from going in and doing business there. It’s not a Let’s-Do-Business-Together contract, it’s a Do-Business-With-Us-Or-Else contact. 

The list of companies that were made healthier and more profitable by the addition of a unionized work force is so minimal as to be non-existent. Much like socialism, it’s sold as a system designed to serve the greater good, but also much like socialism, I have yet to see an effective example where the greater good has truly been served. Until labor unions are forced to operate under the same rules as everyone else, they continue to be illegal enterprises only made legal by selective legislation—our economy will suffer until American’s elect honorable politicians who care more about the moral high ground than election results and put an end to this.

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Can I be GM’s new CEO?

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

In 2009, a very bad thing happened. GM went from being General Motors, a privately held and operated corporation, to General Motors, a majority-share government-owned corporation. After a Chapter 11 filing, in order to save a company deemed too big to fail, the government bought out 864 million shares of the available 1.4 billion. While it was not a hostile state takeover that would make Fidel Castro proud, let’s look at some of the highlights here.General Motors

  • In 2008, GM began losing money, partly due to a crippled economy. However, this could have been managed if not for unreasonable and unwavering demands from the UAW. GM executives at the time, headed by then CEO Rick Wagoner, had decided that bankruptcy would likely be the solution. This would allow GM to terminate and renegotiate new, more manageable union contracts, enabling GM to survive into 2009 and beyond.
  • December 19th 2008: Then President George W. Bush approved TARP which in total, gave $17.4 billion to General Motors and Chrysler in an effort to prevent such a bankruptcy.
  • February of 2009: GM makes it known that the bailouts had not solved their solvency issues and bankruptcy still seems to be the most likely option.
  • March 29, 2009: In a deal we will likely never know the details of, current president Barack Obama ousters CEO Rick Wagoner in hopes of preventing a bankruptcy that would ultimately harm the UAW. It was stated that Wagoner “agreed to step down,” which we all know is code for “He was offered something to step down and shut up so that we didn’t have to fire him publicly and have him tell people what actually happened.” There can be no doubt Wagoner did not want to step down, he was turning GM around. Obama then replaces him with Fritz Henderson.
  • July 2009: Federal government buys a controlling interest in the new General Motors after bankruptcy.
  • November 2010, Government sells approximately 358 million of its 864 million shares back to private investors, thus relinquishing a controlling interest, but losing $11 billion dollars of taxpayer money doing so.

    Rick Wagoner
    Rick Wagoner

I understand that Bush and Obama felt GM was too big to fail, and certainly had GM closed its doors, it could have seriously hurt the American economy. But no one was proposing that, nor even reasonably insinuating it would happen. The intent was to reorganize and draft more manageable UAW contracts, not close the doors.

As this debate raged on, I watched a labor union rep say in an interview that GM’s issues had nothing to do with labor unions; that it was purely about the economy. Interesting argument since the facts were that non-union automakers, with significantly lower labor costs, while hurting from the economy, were still quite solvent. Such lies and/or delusions are quite common among the UAW ranks.

In a properly free market, as GM sales were down, GM should have had the flexibility to cut staff, lessen benefit expenditures, reduce hours, or whatever it took in order to insure the solvency of their organization; something labor unions simply won’t allow. The idea that the UAW weren’t contributing to the problem is absurd.

However, the UAW isn’t the only villain. Since Obama is a friend to the unions, he felt it was his duty to intervene and protect them as best he could from the bankruptcy Wagoner would have negotiated. So Rick Wagoner was forcibly removed from office so that Obama could bring in new CEO Fritz Henderson; one who would manage such a bankruptcy if it occurred, in such a way as to benefit the UAW the greatest.

Fritz Henderson
Fritz Henderson

The problem? Any contract GM signs should be done with the best interests of GM in mind, period. The UAW conversely should negotiate the best deal for themselves. But when both sides are working for the betterment of one side over the other, that’s not a negotiation, that’s corruption.

And so it was, the UAW got a fully loaded Cadillac, and the taxpayers and General Motors got a driveshaft in the rear entrance. You can read about this UAW inspired, Obama approved corruption here.

So the money Bush approved in order to prevent bankruptcy was a waste. It obviously didn’t work; GM filed for bankruptcy anyway. The sale of GM stock later by the government, another big loss. Whether we lose on what we still own—only time will tell.

In my opinion, the problems don’t end there though.

President Obama knows that the people frown on government directing a private company, but he’s not exactly known for his humility. He has demonstrated he will do what he desires to do, then figure out a way to present it to the American people in such a way that they’ll accept something they would otherwise not support.

So a man who has zero private sector experience, zero automotive experience, zero management experience, and zero business administration experience decided that in an ultimate show of hubris, he somehow knew what was better for America’s largest corporation than its current CEO who had a significant amount of experience in all the aforementioned areas.

Barack Obama
Barack Obama

Imagine if Obama decided he could perform surgery better than a practicing physician who may have just lost a patient. Then he gives medical advice to this doctor’s patients contrary to what the doctor prescribed. Whether the doctor is sub-par or not, Obama would have absolutely no business doing this—it would be a serious breech of ethics.

As a person who spent over 20 years of my professional life involved in both the sales and service management of new and used automobiles, I literally have infinitely more experience in this arena than Obama. Anything times zero is infinity before you accuse me of hyperbole. The only difference? I’m smart and humble enough to know that I’m not qualified to run General Motors.

When Dr Rand Paul weighs in on medical issues, he knows what he’s talking about. When Obama weighs in on legal issues, he knows what he’s talking about, even if he’s not a practicing lawyer. But nothing qualified him to make a single decision regarding the management of General Motors.

We expect our presidents to be strong, confident, even a little arrogant on occasion. Maybe it’s the same phenomenon of implied danger that drives good people to date bad people. But if America is to have an effective leader, that person should have the humility to understand their duties are to protect our rights, not drive a market which has a nearly infinite greater wealth of experience than any one person could have.

This boondoggle cost us taxpayers billions, and we are no better for it. Much like the false belief that Roosevelt saved the American economy after the great depression, Obama didn’t save the auto industry either.

The president represents the state, and state-run markets are never good—there’s more than enough history in this world to know free-markets are always better. If GM manages to achieve success again, it will be despite Obama and the UAW, not because of it.

Sources:

http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization

http://www.treasury.gov/press-center/press-releases/Pages/tg959.aspx

http://autos.yahoo.com/blogs/motoramic/march-29-president-obama-fires-ceo-general-motors-132056452.html

http://online.wsj.com/article/SB123836090755767077.html

The Won and Done Act

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

If you’ve read any of my posts, you know I love blue sky thinking. Coming up with new and innovative ideas that while may at first seem radical, are founded in logic and reason.

So with that in mind, I propose the Won and Done Act; and no, it’s not a typo.

The Won and Done Act I am proposing is legislation that would force government agencies to decrease in size and scope through time.

One of the problems is that like any group of employees, because they like a steady paycheck, they work hard at justifying remaining on the payroll—sometimes long after they’ve accomplished their mission. As a result, instead of agencies closing down after they’ve succeeded, or at least shrinking into a maintenance role, they continue to expand endlessly; competing for taxpayer dollars instead of showing concern for how that money is spent and what liberties are being taken away from the people paying for it.

EPA-LogoA most egregious example is the EPA. Before you think I am saying we should abolish the EPA altogether, I promise I am not that radical. Our government has a duty to protect us from anyone who threatens our rights. The EPA provides a very valuable service in this vein, because for example, we can’t just allow corporations to dump toxic waste into the river after all.

However, even though the EPA has largely thwarted America’s worst polluters and achieved their goals, they continue to grow like the Blob, and are equally terrifying. For instance, they raise Corporate Average Fuel Economy (CAFE) standards for the automotive industry in an attempt to decrease fossil fuel usage when the free market should be the only thing influencing this—then require components to reduce emissions that negatively impact fuel mileage. On top of that, NHTSA continually adds regulations which require components that also add weight. Physics dictates more weight results in more energy needed to propel it.

So in case you missed that nuance, the EPA mandates greater fuel mileage on new cars, then NHTSA and the EPA mandate weight adding and efficiency reducing components which ultimately reduce the overall fuel mileage. It’s like requiring someone to eat a dozen donuts then requiring they lose more weight. General-Motors_11There is little wonder GM had to be bailed out and file for bankruptcy with Uncle Sam leaning on them like that.

So here’s the concept of my Won and Done Act:

If I begrudgingly accept non life-saving government agencies, all  such government agencies should have a stated and specific goal as well as a time limit to achieve that goal. All such government positions should be temporary whenever possible.

Once an agency’s goal has been achieved or the allotted time has expired, the agency may not reinvent itself, redesign itself, or search for new ways to keep relevant unless otherwise voted and approved by the legislature or the people. If their mission is WON, then they are DONE. If they cannot complete their mission, then the mission is aborted. We must incentivize elected officials to eliminate jobs wherever possible.

No government agency should be allowed to add staff or regulations at their own discretion either. Instead, let’s create incentives for them to literally work themselves out of a job. Here are a couple of ways to accomplish this:

  • Implement a completion bonus for achieving their goal, so that when their job is eliminated, they get a reasonable bonus to allow them time to find new employment, and if they find one quickly, the bonus is just money in the bank.
  • Implement a bonus for self-elimination. If an employee can make a case that his/her job has become unnecessary, they could apply with management to eliminate their own position. We would assume they would already have another job waiting in the wings and just take the bonus.
  • Provide bonuses for management to reduce staff where possible, although this one should also include a bonus for the eliminated.

One shining example of this ideal is the US Military. United States MilitaryYou find that this sentiment is quite prevalent there. In times of conflict, people step up to do their civic duty, then once the mission is accomplished, a few will reenlist to keep the peace, but the rest return to civilian life.

So then why doesn’t the rest of government have that same mindset? There are a number of factors. The military isn’t unionized first and foremost, and the military isn’t notoriously a cushy job either. The military is run quite strictly, it’s full of men and women with courage and conviction, they are very goal oriented, and they generally signed up for the honor of serving, not because it’s a gravy job. When’s the last time you felt that sense of diligence from the people giving you your driver’s license exam?

Government service is supposed to be an honor, not a career you do until you retire. As long as they are unionized, with greater than private sector wages and benefits, they will continue to grow as more and more people fight to take advantage of those massive benefits. These incentives for government to expand must be stopped if we care about liberty and freedom.

So while my Won and Done Act may not be 100% practical, it could at least start a discussion that changes the mentality of government leaders making the decisions about how agencies operate.

Getting rid of labor unions seems like a pipe dream as well, but with successful reforms in Wisconsin, and right-to-work legislation passing in Michigan and elsewhere, we’re at least headed in the right direction. But sadly, there is currently no incentive for government agencies to work themselves out of a job, so they just keep growing. Don’t believe me? The president is touting out job growth, but he’s not so forthcoming about the fact that 73% of that growth is in government.

Labor Unions: Quality and Legality Run Amok

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

When I entered the work force, I attained a job at a local GM dealer washing cars. By law, dealers are privately owned entities, so while we sold GM products, we were not owned or operated by General Motors Corporation. I worked there for five years, learning all I could about the business, striving to earn raises and promotions that might come my way.

In previous years, GM factories had created a group of stand-by employees to their labor pool. It consisted of workers that were hired to sit idly in an office for a shift in case subs were needed for normal laborers who missed work or had to leave unexpectedly.General Motors

This might seem frivolous to pay people whom often did nothing, but at the time, factories were running at full capacity. GM determined that as people missed work, the costs of having stand-bys compared to the cost of assembly slow-downs if they didn’t have stand-bys made fiscal sense.

Eventually, the quality of the overseas competition caught up to the domestic trio of Ford, Chrysler, and GM, and demand for domestic autos waned. As a result, GM had no need for such extra workers; they needed more money to build a better product by cutting that staff to free up money for research and development. However, because of the United Auto Workers’ contracts and their unwillingness for concessions for the good of the company, GM was required to keep them on staff for a period of time. So GM opted to send them as helpers to the dealers and give us some free “labor”. The hope being that their assistance help cut costs for the dealers, who then might invest in more product.

Photo: Sheldon Dick, Strikers guarding window entrance to Fisher body plant #3, Flint, Michigan - via Library of Congress
Photo: Sheldon Dick, Strikers guarding window entrance to Fisher body plant #3, Flint, Michigan – via Library of Congress

The observant of you will notice I put quotation marks around labor. Let me explain. The “labor” we were provided took a 10-minute break every hour, moved at a snail’s pace, and he couldn’t even spell quality, nevertheless deliver it.

One day we had 24 cars to clean that came back from auction. The day we were to do this, I did 21 of them in the time he did the other three. Knowing that he was making well over twice my pay, I was furious. I asked if this was how he always worked. He didn’t seem to understand the meaning of the question, for indeed, it was his normal work ethic. He was twice my size, so I let it go.

For the record, I fully understand one instance doesn’t constitute a pattern, but almost all my subsequent encounters with unions have been equally disturbing, leading me to believe that I cannot argue in any way, that they provide superior labor to their employers, a claim that unions often try to make.

While the quality of their labor is sub-par compared to their non-union counterparts, the issue that truly troubles me, are the laws they’re allowed to break, specifically because legislators have carved out exceptions for them in the law.

I only have a layman’s understanding of law, but here are what I believe to be, some reasonable questions:

  • If I take the financial risk to start a company and grow it into a large corporation, what right does someone I hire have to tell me what I will or won’t do for them? I’m the one that took the financial risk; I own it, and it’s my property. If I choose to hire someone, shouldn’t I have the right to determine how they work and how they are compensated?
  • Monopolies are illegal. Yet, if I go to work for GM, I can only join the UAW, there’s no other union I can choose. This is true for all unionized businesses as far as I know and even true for most unions in an industry. So is this not a monopoly?
  • Some states have right to work laws, but in others, if you go to work for a company whose labor force is unionized, they don’t have a choice. They must join the union. How can a union legally force me to join them? What’s next? If I buy a house next to a golf club, I will legally be forced to become a member there as well?
  • People say that the unions “negotiate” with the employers. But is is an actual negotiation? In a normal negotiation, if the two parties cannot agree to a mutually beneficial deal, they will decide not to do business together. However, if a company doesn’t like the deal the union is offering, the law says they legally can’t just walk away; they call that “union-busting,” a practice that can sometimes be illegal. In a normal free market capitalist environment, I would choose to do business with someone if I saw value in doing so. But with unions, I’m not REALLY given a choice.
  • The documentary “Waiting for Superman,” pointed out that one out of every 57 doctors loses their license to practice; one out of every 97 lawyers loses their license; but union teachers lose their job one out of every 1000. The private sector averages around 3 out of 20 as a whole. Unless one is attempting to argue that teachers are universally 10-20 times better at what they do than everyone else, this is clearly an indication that unions are preventing proper turnover that weeds out under-performing employees. It’s not important though, they’re only teaching YOUR children.


The fact is that there is likely no organization that would choose to do business with unions if they weren’t forced to and likely none that have benefited financially from that relationship. In a free country, it should be their right to do business with whomever they want. If unions offered a valuable product, people would gladly do business with them. So the idea that we have laws forcing people to join is contradictory to a capitalist system. Let them compete in a free market like everyone else under the same laws as everyone else so that they can evolve like everyone else. Enough is enough with allowing them to infect and destroy the wallet of American businesses and our government.