Every Once and a While It’s Incredibly Easy to See Behind the Veil

January 29th, 2014 at 1:14 pm

This AMs NYT has a piece about a fascinating development in Tennessee, where management in a privately owned auto company, a VW plant in Chattanooga, appears to be working cooperatively with the UAW to organize the plant.  So, what’s the problem?

I’ve written about this before, but the wrinkle is that “outside agitators” [my words, not the NYTs] are trying to block the union, which is pitting them against both sides—union and management, since the latter thinks organizing the workforce would be helpful.

The business community reacted with…dismay when several Volkswagen officials from Germany visited the plant and hinted that it would be good to have a labor union because that would help establish a German-style works council. Such councils, comprising managers and representatives of white-collar and blue-collar workers, seek to foster collaboration within a factory as they forge policies on plant rules, work hours, vacations and other matters.

It’s a great example of just how thin much conservative support is for “free markets.”  A private firm believes it is in its self-interest not to block the union, and in fact appears to welcome the opportunity to for cooperative “works councils.”

Unlike most companies that confront unionization efforts, Volkswagen — facing a drive by the United Automobile Workers — has not mounted a vigorous campaign to beat back the union; instead VW officials have hinted they might even prefer having a union.

So you have politicians, including the state’s governor and TN senator Bob Corker, along with conservative activist Grover Norquist, trying to block VW management from working with the union.

The anti-U.A.W. forces are making themselves heard, warning that if the U.A.W. succeeds here, that will lend momentum to unionize two other prestigious German-owned plants: the Mercedes-Benz plant in Alabama and the BMW plant in South Carolina.

Now, that may be a legitimate concern for these politicians, but these are private decisions by private actors.  As my colleague Dean Baker likes to say in these cases, “Let’s be good, neoclassical economists here” and let market actors join into partnerships they believe to be in their economic interest.

I doubt the outside opposition to management’s support of the union is a surprise to most readers, but it struck me as a classic example of how terribly thin this “free market” ideology really is when it takes its alleged supporters to places they don’t want to go.

The moral of the story: there’s no “free market.”  It doesn’t exist outside of beginner textbooks.  Instead, there’s a vast array of market arrangements wherein private and public forces interact in ways that create winners and losers.  The winners tend to like things the way they are and will yell “free markets!” when challenged.  But they don’t really mean it.

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20 comments in reply to "Every Once and a While It’s Incredibly Easy to See Behind the Veil"

  1. Brett says:

    Wouldn’t technically more freedom of association allow the workers and Volkswagen to set up Works Councils without running the risk of getting fined over it? I don’t really understand the whole “no company unions” thing – if the workers have to vote on a union anyways, then they could always go for an outside union at contract time instead of the one they’ve got.


  2. James O'Donnell says:

    Mr. Bernstein, you’re mistaken here. Tennessee is a “right to work” state, and UAW involvement in that plant will likely reduce or eliminate opportunities for non-union workers. As a veteran of multiple European run companies, my experience is that “works councils” which are mandated by law in most EU countries harm productivity and cause stagnation. Moreover, while German management may be at peace with their own works councils, they have managed to eke out a slim profit margin in spite of the councils in a country where workers have, for lack of a better term, a “German work ethic”. That may not be the case in Smyrna, TN.

    It is also worth pointing out that (largely because of the restrictions imposed by work councils and German labor laws) Volkswagen led the charge in outsourcing the bulk of it’s US and European manufacturing operations to Mexico, South America and Asia.


    • Jared Bernstein says:

      You may be right. But my point is that if you support “free markets” then you must allow firms to internally negotiate any way they see fit, within the law, of course.


    • Flex says:

      Mr O’Donnell, I see you make several (dubious) claims without providing evidence.

      First; that because of UAW involvement in the plant, non-union employees will not be hired (a more succinct way to say “eliminate opportunities”). Since this is expressly prohibited by federal law (since 1947, so you should be aware of it by now), I wouldn’t mind seeing your justification for this point.

      Second; you suggest that the workers in Smyrna, TN are not as dedicated as workers in Germany. Do you have any evidence for this? It sounds like the usual management vs. worker mentality which plagues US businesses.

      Third, you claim that the VW’s outsourcing was (mainly) because of the restrictions imposed by work councils and German labor laws. Which is not my understanding of the reasons VW chose to outsource, so I wouldn’t mind a source on this claim either.

      As a 20-year veteran of the automotive industry, and at times working closely with our German counterparts, my own experience is that American workers are just as competent and motivated as German workers and that outsourcing is not driven by labor relations but by profit seeking.

      Further, even if all your claims are true, why shouldn’t VW be allowed to choose to negotiate with the UAW? If this puts VW at a competitive disadvantage then the invisible-hand of the free market will sort it all out.


  3. Robert Buttons says:

    “It’s a great example of just how thin much conservative support is for “free markets.””

    Depends on how one defines “free markets” and conservatives”. The free market economists I read have no problem with unions, as long as government does not have its thumb on the labor side of the scale


    • Mark Jamison says:

      “The free market economists I read have no problem with unions, as long as government does not have its thumb on the labor side of the scale”

      Do those same economists also avoid keeping the thumb off the scale for corporations and capital? Taft-Hartley, right to work laws, and a number of other provisions in current law tend to favor capital over labor.
      The thing is that government always has its thumb on someone’s side of the scale, it’s the nature of rule-making and rule-making is a necessary element of markets.


      • Robert Buttons says:

        Fortunately, I have staked out a position that avoids the dual strawman argument of the left “Your laws are too favorable to business” and the right “Your laws are too favorable to labor”. I believe all govt interference in marketplace is harmful.


        • johnw says:

          The statement “all govt interference in the marketplace is harmful” would make sense of markets could exist without the rule of law to enforce property rights and contracts. A market is not a state of nature, it is a social institution that depends on a social contract to exist. Without the rule of law, you don’t have markets, you have banditry.


  4. Larry Signor says:

    “The moral of the story: there’s no “free market.” It doesn’t exist outside of beginner textbooks.”. Thank you, Jared. Most of us know the moral of the story, we’ve been waiting for the Pros to catch up.


  5. Mike R. says:

    I worked for a German chemical company, mostly in the states but spent a short time in Europe. At our facility in the northeast our employees were unionized as were the employees at our German sites and over time our U.S. folks adopted many of the cooperative features of the German works councils. The benefits were striking; large increases in productivity, many of the old “work rules” were abandoned without conflict and management / labor relations were vastly improved. As a manger I found that working with a union was not a problem at all, I knew who to take any concerns to and there was contract that clearly defined the responsibilities of the union membership.
    Sadly, for me, the story doesn’t have a happy ending as our plant was shut down due to excess capacity in the European plants, our products were re-sourced to Europe and the majority of our workforce was let go. It is much simpler to shut down a facility in the U.S., not so easy in much of Europe where employees benefit from a much higher level of protection from job cuts.


  6. save_the_rustbelt says:

    The UAW is not just any union, they have quite a reputation (now slightly tempered after the humbling of the Detroit 3 and the UAW) for militancy, anti-productivity measures and carrying a bad attitude toward management.

    This is why the transplant auto makers avoided Michigan and northern Ohio.

    This is why Tennessee wants no part of the UAW.


    • e a greer says:

      Where exactly, are you getting this information?I’ve been a UAW member since 1976,and I don’t recall the aforementioned accusations ever being made.Militant?In what country was that taking place?I think it’s easy to assume things about organizations you know nothing about.Labor needs to have a voice-or is the current state of our economy just fine with you?


  7. Stuhlmann says:

    One thing I don’t understand is why VW thinks that its US workers need to unionize in order for its US factories to set up works councils. In Germany companies above a certain size are required to have works councils, even if the workers aren’t union members. The employees, union and non-union alike, elect their works council members. Works council members do not have to be union members.


  8. Dave says:

    “Free Market” is something almost single-handedly created out of thin air by the Koch Brothers, disseminated through hired hands over the decades since David Koch lost the VP race. And we’re getting close to the point where 10,000,000 points of light are about to squish all of the little Kochroaches using their 20,000,000 feet.


  9. bakho says:

    A plant with no union can be a plant where local management tolerates zero criticism, even if it is constructive.
    OSHA does not not have enough inspectors. At least with a union, workers can report hazards. Smart mangers will take them seriously if they want to avoid injuries, lawsuits and corporate black eye. Unions can serve as a check against corrupt local management that may try to look good saving money by not fixing things.

    I can see why VW in Tennessee would want to have checks and back-channel reporting to monitor the hillbillies and rednecks that work as front line managers.
    -jonny bakho


  10. smith says:

    A very damming piece about the Trans-Pacific Partnership, which is a NAFTA like free trade agreement appeared in the Times today. The president promoted this in his state of the union. One can only imagine the twists and turns a Clinton campaign would make on this issue. One twist in the debate is the “fast-track” provision which essentially makes an end-run around the constitutional requirement for treaties to pass by 2/3 vote, and has been around since the 1970s. Apparently congress (the far right and far left) is saying not so fast.
    http://www.nytimes.com/2014/01/30/opinion/obamas-free-trade-conundrum.html


  11. Jim says:

    Interesting in the comments how people assume stuff about companies and unions in general to provide ammunition for their anti-union comments and why this would be a “bad thing”. Yet VW, a world-wide company, making a profit and excellent cars, with experience running plants in a number of countries, wants to bring in the union. Let them do it and see how it works. Possibly the fear is, it will work just fine and undermine the anti-union forces of this country?


    • Jared Bernstein says:

      Agree! This isn’t about whether unions are great or awful. It’s about a private company making a decision that outsiders–especially those who profess to adhere to free markets–have no business blocking.


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