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  • John Kenneth Galbraith’s Ghost Stole My Last Twinkie

    Posted by Shannon Love on November 19th, 2012 (All posts by )

    Unfunded and seriously underfunded pensions are wrecking company after company (and local government after local government.) The Hostess Company, the company who made the iconic Twinkie and other baked treats, was brought down by unfunded pension obligations [h/t Instapundit] forced on the company by years of strikes and labor negotiations going back to before the 1950s. As matters stand now, everybody, both the venture capitalist who tried to save the company and the unionized workers, will lose their shirts. At best the union members will get to see a fraction of their pensions because the rest of us will have to pony up through the Federal government that “insures” the pensions.

    All this raises the question of why the unions ever believed it a good idea to put all their pension eggs in one company basket. It seems stupid on its face not to significantly diversify. Everybody else does so, even the super wealthy. Why didn’t the unions think they needed to diversify?

    They didn’t think it necessary because of a theory of corporations advanced by most left leaning Americans in the mid-20th century but best personified by economist and political theorist John Kenneth Galbraith. Galbraith looked around at the business world of 1940s, 50s and 60s and concluded that corporations had so much “power” that they could effectively set prices and maintain themselves forever. In short, Galbraith argued that corporations were eternal and would never really go out of business. At worst they would merge or buy each other out. The concept of the eternal corporation not only fully justified big compulsory unions and a big invasive government to act as “countervailing forces”  but it also meant that corporations could payout almost any level of wages, benefits and pensions and do so indefinitely. Galbraith gave the unions the pretext they needed to demand high future pensions while remaining calmly assured the companies would always be able to payout.

    Sounds silly today, but Galbraith was writing in the 60s at the peak of American corporatism. There was only one phone company nationwide and all power was provided by non-competing public utilities. Every transportation industry was strictly regulated and competition was minimal.  Tariffs were still high and the lion’s share of American industrial might was concentrated in the states bordering the Great Lakes all of whom had compulsory union laws.  American industry had little foreign competition. It took until well past 1965 for the rest of the industrial world to fully recover from WWII. Circa 1955, the US was still producing nearly 50% of the GNP for the entire planet.

    The freakish conditions of the post-WWII era lured Galbraith and others to make the mistake of believing that the conditions of the span from 1945-1965 would be the conditions going forward forever. (That is a surprisingly common mistake in the history of economics.) It seemed perfectly plausible to those who had never built a business from the bottom up that big corporations would always be profitable and always be able to force consumers to pay whatever pensions the unions demanded.

    Galbraith et al made a lot of mistakes but the fatal one lay in not understanding that the profit margins in any industry decline as the technology the industry provides matures. Far from being immortal and omnipotent organizations capable of setting prices and paying out any pensions forever, companies were destined to decline in profitability over the course of decades and destined to be far less capable of paying out pensions and other labor costs. Companies can only maintain high margins by constantly shifting their core business as the old business matures. Few companies can do so and no highly unionized business can. Even if they did, they would have to alter the composition of their workforce so the union members wouldn’t benefit.

    When the unions bought Galbraith’s rationalization, they doomed their pensions. A union worker who started making steel or cars in 1960 was working for a much higher margin business than that same business by the time he retired in 2005. Even if none of the other major changes of the last 50 years e.g. return of foreign competition, energy crisis, containerized shipping etc, the pension levels set in 1960-65 were doomed to fail eventually as the companies margins naturally shrank and shrank.

    When packaged food, especially baked goods, were a new technology in the 1950s, Hostess made good money. Today, such technology is not only old hat, but actively scorned. Today, the high margin foods are resource intensive “all natural” foods with the Twinkie sneered at by elitists as symbols of plebeian gluttony. Hostess was left with a commodity product with thin margins that had to pay for high pensions the unions forced on the company back in its glory days.

    The primary fatal flaw in political decision making is that it separates the decision makers from consequences of their decisions not only financially but in space and time as well. Countries are such massive systems that the consequences of bad decisions don’t necessarily manifest until decades later, long after the decision makers have left office, public life or life itself. All too often, those not even born when the decision was made must bear the greatest portion of the cost.

    John Kenneth Galbraith and the rest of his generation have almost entirely passed out of the world but their flawed ideas continue to haunt us decades later. Galbraith never paid for the consequences of his errors financially or otherwise and neither did anyone else who embraced and enacted Galbraith’s ideas 40-50 years ago. Across America, the more unionized a region, the worse its current economy and the worse its economic prospects. The massive institutional inertia of unions, the Democrats and a vast body of labor law means that John Kenneth Galbraith’s wraith is still sucking the life out company after company and union after union.

    The dead hand of the past just swiped the last Twinkie.

     

    31 Responses to “John Kenneth Galbraith’s Ghost Stole My Last Twinkie”

    1. Mike K Says:

      From the Wiki article on Galbraith’ book:

      The Affluent Society is a 1958 book by Harvard economist John Kenneth Galbraith. The book sought to clearly outline the manner in which the post-World War II America was becoming wealthy in the private sector but remained poor in the public sector, lacking social and physical infrastructure, and perpetuating income disparities. The book sparked much public discussion at the time, and it is widely remembered for Galbraith’s popularizing of the term “conventional wisdom”.

      Many of the same ideas were later expanded and refined in Galbraith’s 1967 book, The New Industrial State.

      Former U.S. Secretary of Labor Robert Reich called it his favorite on the subject of economics.[1] The Modern Library placed the book at #46 on its top 100 non-fiction books of the 20th century.[2]

    2. Joe Citizen Says:

      Except that the Twinkie ain’t dead…LINK

    3. veryretired Says:

      This mindset occurs regularly in our history. In the 19th century, it was directed at railroads, which were considered so powerful and coercive that major state action was necessary to save the common man from the terrible corporate pirates. A few decades later, we were subsidizing them to keep them from closing.

      At about the same time as the book you’re discussing, I can remember the regular articles in the media by academics and activists about the insurmountable power of the big auto companies over the car market, especially GM. 20 years later, they were struggling against competition from the Japanese and German, and the bailouts began.

      Statists are always searching for some new reason to justify expanding the power of the state, and will happily make one up if there isn’t anything actually there.

      Oddly enough, they never find a point at which the state should pull back, except for the various sex/gender based crusades, and then their answer is still programs to solve some historical grievance. The anti-bullying campaign is the latest ludicris example. Next year it will be some other newly discovered crisis.

      The economic fantasies of those who believe that jobs appear in nature like trees or flowers, and merely need to be harvested by anyone who wants one, is a marvel to behold.

    4. Mike Doughty Says:

      Having spent most of my working life in Labor Relations, dealing with Unions, I can say that in my opinion the Unions really believe that the main purpose of corporations is to provide jobs for the Union’s members. The basic economic ignorance of the Unions and their members is hard to believe, especially for engineers, accountants and others who attempt to make data-based decisions. Also, in the past, Management often bought into positions like Galbraith’s and allowed themselves to just kick the can down the road, leaving the reckoning for others to worry about….kinda like Congress.

    5. Bill Brandt Says:

      Unions have made a shambles of West Virginia – and company after company moved out. They hollowed out GM and Chrysler – and the irony is that they could not see it – probably more accurately did not want to see it – insisting on short term gains.

    6. phwest Says:

      Interestingly, the main alternative for worker pension management has been to have the pensions managed by the union, particularly in heavily unionized trades that lack large corporate employers. That hasn’t worked out very well either.

      The one thing left unsaid here is that there are two big problems with pensions (any pension really). First is the obvious question of cost and proper management. The cost issue is really just a subset of the overall problem of unions claiming a high enough fraction of a company’s revenues as to make ongoing investment unviable. It really doesn’t matter if the extraction is in pay or benefits. And from a simple management perspective corporate pension plans are well run in general, certainly compared to government and union plans.

      But defined benefit pension are disappearing now for union and non-union workers, and the big reason has been the changes in life expectancy. You can accumulate enough cash to cover a 5 year retirement at 50% of your previous pay by saving 6.25% of your pay for 40 years (simple savings, not investment). Try to extend that to a 20 year retirement and the cost goes up to 25%, which is simply unworkable for most people (that is, they’d rather have at least some of that in their current pay). Most classic pensions also included medical, which has exploded since the 50s. The baby boom was able to keep plans afloat through the early stages of the change in life expectancy (massive growth in the economy and contributing workforce), but once that started to taper off it became very clear that retiring at 65 could only be funded with the aid of investment returns, and that risk ultimately has to be born by the pensioner.

      Another way of thinking of it is that a pension used to be an asset worth maybe $200k (current $) at median income. That could be managed with a one size fits all pension plan. A similar pension now would be worth $1MM or more – that is too large an asset to leave to a generic plan. After all, what sense does it make for someone with a family history of late-50s heart attacks to be saving a million dollars for a retirement that will likely never happen? Or someone who is perfectly willing to work into their 70s to save 20-25% of their income to retire at 65? There is simply too large a portion of the population who have no interest in cutting their standard of living 20% or more to properly fund a 20 year retirement.

    7. phwest Says:

      BTW – the distinction between savings and investment is an important one, and often ignored. Savings means low-risk preservation of princple first. That is what a pension is supposed to be, particularly since the pensioner has no control over the handling of the money. Save $1 now so I can spend the equivalent after I retire. As a result the ratio between working years and retired years sets the savings rate required – 40 years working 5 retired means $1 a year in savings is $8 a year in retirement. 40/20 means it is only worth $2.

      Even if the economy looked like the 50s, that reality would have forced changes in pensions eventually.

    8. phwest Says:

      One note on the Hostess pensions – these are not “Hostess” pensions, but Multi-Employer pensions (MEPPs) that are a particularly disasterous relic of the 50s. These are functionally union plans, set up so that employees can change companies and remain in the same plan. As the industry shrank and firms went bankrupt, the remaining companies had to pick up more of the funding. Hostess was making contributiions to 40 of them until August 2011 – at $100 million a year for their 18,000 employees – $11,000 per worker in the company (don’t know the covered worker count) where workers are making something on the order of $40k/year, and some fraction of this is covering payments to retired workers from OTHER companies. No wonder things reached an impass – this is probably one of those cases where the set of mutually acceptable outcomes is NULL.

    9. Michael Kennedy Says:

      Many years ago, when I was president of the county medical society, we used to have an annual board retreat where we would invite some interesting people to spend a long weekend with us at our expense to talk about issues and the future. The state medical society did the same thing and one year we had Jesse Unruh a big figure in California politics, as a guest. He was in his last illness and was philosophical. Great session.

      Anyway, one year the county board had a guy from the culinary workers union who managed their health plan. He was a very impressive guy. Some union people are dunces and thugs, like Yokich and they destroyed the unions, but there were some smart people in unions and I wonder why they couldn’t do a better job. Even the German unions screwed up the unification with East Germany so maybe the union mentality is universal.

      As a doctor, one reason for having a defined benefit plan was so we could put away as much money as possible. Nobody expected to collect that pension and they were right. The dollar is now worth about a tenth of what it was when I started to fund my pension.

    10. Shannon Love Says:

      Michael Kennedy,

      Even the German unions screwed up the unification with East Germany so maybe the union mentality is universal.,/i>

      The fundamental cognitive problem with unions is that unions focus entirely on take, take, take. Their external and internal dialog is virtually exclusively about how abused and cheated they are and how they always have the right to take more and more from their customers while giving less and less in return. Such a mentality dooms any company or industry it controls.

      The mythology of corporate power to set prices is key to rationalizing their taking. In their fantasy world, their money doesn’t come from the customers who choose to buy the company’s products, but from some mysterious Scrooge McDuck vault that the company keeps hidden somewhere. Unions will back away from taking usually only when it far to late and they have already killed the goose that laid the golden egg.

      Unions don’t encourage their members to think about improving productivity and providing their terminal customers better value, they encourage their members to think about ways to decrease productivity, thereby increasing headcount and union membership. The worst strikes in American history e.g. the 1959 steel strike, where about blocking productivity enhancing modernizations. Unions have repeatedly proven that they will rather kill a company or even industry than support increased productivity. In the modern world, static productivity is death for a business.

      No matter how intelligent a union member or official might be, they can’t be in the union unless they adopt the taking the mentality and believe that fair wages and fair working conditions can only be taken or seized through implicit or explicit violent coercion. Once you stop thinking about your income as resulting from trading with employers and customers and start believing its about taking by violence, the free-market will push you out. If your terminal customers aren’t forced to buy your product by the government, they won’t if you don’t deliver good value. Unions are expressly designed around delivering inferior and ever decreasing value so they are always doomed.

    11. Shannon Love Says:

      Joe Citizen Says:

      Except that the Twinkie ain’t dead

      Your kidding right? Care to put any money on that? Oh, I have no doubt that the Tinkie, as a brand and intellectual property will be sold off to pay debts and will return in some form, but the Hostess Twinkie is dead as a doornail for the reasons I outlined above.

      The lenders and investors who rescued the company back in 2005 were all connected Democrats e.g. Dick Gephart, who thought they could use their pro-union credit to make the union see reality. They failed because unions are based on an economic fallacy and as such fundamentally unsustainable.

      Hostess’ only chance for survival is to accelerate along the natural margin curve and improve productivity while cutting cost. That means that the workers will have to work for a free-market wage for whatever people who buy Twinkies are willing to pay for Twinkies. That means they will have accept that some of them will have to find other jobs as time goes by. That means they will have to accept that Hostess can’t payout arbitrary pensions forever. Since accepting all that defeats the entire point of union, they won’t do so.

      The history of the last 60 years has been one of employers telling unions that increasing labor cost, frozen productivity, excessive regulation, lawsuit lottery etc are raising cost that customers won’t pay. In industry after industry, unions and Democrats ignored the warnings until unionized industry after unionized industry died in union states.

      All the while, right up to this day, the unions and their enablers refuse to accept any responsibility and instead keep demanding that they be given more and more from the infinite pot of leprechaun gold Galbraith said existed.

      Hostess’ workforce is dominated by compulsory unions so Hostess is doomed. As I noted above they always were.

      Think about it this way: Why would anyone pay hundreds of millions of dollars just to acquire a $2 billion dollar pension obligation? Even if they do save the company today, highly unlikely, would you put any of your own money into the company? No? Then why would you expect anyone else to?

    12. Joe Citizen Says:

      ” In their fantasy world, their money doesn’t come from the customers who choose to buy the company’s products, but from some mysterious Scrooge McDuck vault that the company keeps hidden somewhere.”

      As always, Shannon can be counted on to reduce the topic to a comic-book level. And to inject great energy / aggression into his assertions. That pretty much sums up his style.

      Unions negotiate contracts with companies, just as suppliers and other service providers negotiate contracts with companies. Both parties to a contract are responsible for its details, by definition. Pensions and health benefits were proposed as often by the companies as by the unions. To the extent that the schemes were unsustainable, that fact was not forseen by either side.

      I have long believed that tying health benefits and pensions to one’s employment was a bad idea, but it was an idea that was pushed primarily by conservatives and businesses themselves and has survived as much through general inertia as any other reason. A single-payer health care system, for example, would make businesses more competitive globally, and would free up workers to survive layoffs, or to more freely move to better jobs or to even start their own businesses. But opposition to this comes most strongly from the very people who are trashing the existing system as well.

      I don’t understand what the great attraction here is to dealing with so many issues with this active hostility toward so many of your fellow citizens. The general tone is simplistic, one-sided, accusatory, and mocking. With no interest in exploring why exactly situations arose as they did, what were the real alternatives available at the time, and what are the principles and interests that have some legitimacy, even if they are not the ones that motivate you the most. A minimal sense of respect for ideas that are not your own. But we don’t get any of that in these discussions. Its just red meat for an ever-shrinking base of people who seem so proud of their own nastiness and misanthropy.

    13. dearieme Says:

      Galbraith was a lousy economist but a very gifted economic journalist – see his book on The Great Crash for instance.

    14. renminbi Says:

      ” Its just red meat for an ever-shrinking base of people who seem so proud of their own nastiness and misanthropy.”

      If you want to see “… nastiness and misanthropy” look at the comments on left wing blog sites and you will see nastiness in its purest form and devoid of any serious argument. You don’t see anything remotely near that on this site. Or else view,if you have a strong stomach, MSNBC or The View.

    15. Michael Kennedy Says:

      “The fundamental cognitive problem with unions is that unions focus entirely on take, take, take. Their external and internal dialog is virtually exclusively about how abused and cheated they are and how they always have the right to take more and more from their customers while giving less and less in return. Such a mentality dooms any company or industry it controls. ”

      Something like this may well have been the driving force behind their insistence that East and West Germany had to have identical currency values. I thought that East Germany would be a great place to invest as they could be a low cost version of the German talent for engineering and technology as their infrastructure caught up. After ten years or so, they really would be equal and the transition offered a great opportunity. I actually invested a fair amount of money in ADRs of German basic infrastructure companies.

      I was wrong. The unions insisted that the east had to be on an exact par with the west immediately. This cost Germany billions of Marks and it cost me a few thousands. Worse, it talked me out of some investments in the US as the stock market took off after the GOP took Congress in 1994. Germany has recovered but it was costly at the time and set them back for what could have been a time of great prosperity, especially in the east.

    16. Bill Brandt Says:

      MK – I always wonder what was the impetus for that – when the wall came down, West Germany was flooded with East Germans trying to find work – because most of their factories had shut down. All because of an insistence of parity with the Marks. The western joke was that it was a mistake bringing down the wall.

      The East Germans turned in their worthless marks and got West German marks – and after being starved for basic things we take for granted went out and bought Audis, BMWs, VWs….

      After the war they took over what was left of the factories – the Walther factory – maker of pistols, started turning out Russian variants – the Leitz factory turned out decent, but not up to Leica or Japanese standards – cameras – which would have found a market if there wasn’t parity.

      I went to Dresden in 1992 – the wall had been down for 2.something years – I could not get a hotel room in the city – flooded with western businessmen. Ended up staying with a family who had a farm up in the surrounding hills –

      There were stranded Soviet soldiers whose govt could not afford to bring them back.

      Those were strange times.

    17. david foster Says:

      I had a German colleague whose father had been a painting contractor…he said when the Wall came down, he hired several people from the former East Germany, but none of them lasted…said the problem was that they were actually expected to WORK when they were at work, and that was considered pretty brutal…

    18. IGotBupkis, Legally Defined Cyberbully in All 57 States Says:

      }}} Except that the Twinkie ain’t dead…

      It is to anyone that expected to make money off of it via the Hostess corporation.

      Another flaw is the failure to grasp that, just as Agricultural margins shrank substantially with time, so, too, have Industrial margins. Other than high-labor niche products (ginseng, “natural” foods, Manolo Blahniks, etc.), there isn’t a lot of money to be made in either growing things or making things.

      Today, if you want to Make Big Money, you’re generally much better off putting your efforts into IP & Services. This is because we’ve transitioned from the “post-Industrial” economy (“post-” == “what follows but we have no idea what it is”) into an IP & Services Economy.

      Look at many of the new billionaires of the last 40 years… Bill Gates, Warren Buffet, Sam Walton, Larry Ellison, Jeff Bezos, Elon Musk… All involved in some way with Services and IP — even Buffet and Walton: Buffet by providing top-flight venture capital services and Walton by redefining the way stores select and sell products.

      This is why I laugh at people who worry about offshoring and “jobs going overseas” — Big Money isn’t in making things — China gets 6% of the retail list price of an iPhone or iPod for making the thing in your hand — It’s in having created the knowledge of HOW to make the things, along with what makes them work (i.e., programming, etc.)

    19. Bill Waddell Says:

      Unions and pensions were a problem at Hostess but not the biggest one, inspite of the PR spin. In fact, total hourlay labor costs at Hostess were only about 15% of their total costs. They wanted a 27-32% reduction, making it about 4.5% reduction in their overall costs.

      56% of their costs went to distribution, overheads and admin-type costs. Throughout the industry they were known to have a costly, slow and cumbersom distribution scheme. To think that they could not have found a few percent there is ridiculous.

      Their spiel also, for reasons only they can explain, ignored the affect of the sugar tariff. Since 1937 the US has prtected the Florida sugar interests. nprocessed sugar goes for about 19 cents a pound on the global market, while US companies pay about 37 cents. That added $4 million a year for the premium just to make Twinkies. Add in the rest of the Hostess product lineup and the sugar subsidy was quite significant.

      In spite of all of that, Bimbo, Pepperidge Farms, the Little Debbies people and the other Hostess competitors are all at least partially unionized – and profitable.

      The unions did their damage but in the final analysis it is hard to ascribe the failure of Hostess to anything but dismal management.

    20. Bill Brandt Says:

      David – I think for a long time there was a lot of resentment of the Easterners – yes, they weren’t used to working –

      On the Twinkies I have heard this evening that Hostess will dissolve – and a Mexican company that owns Sara Lee will probably buy the Twinkie -

    21. Shannon Love Says:

      Joe Citizen,

      As always, Shannon can be counted on to reduce the topic to a comic-book level. And to inject great energy / aggression into his assertions. That pretty much sums up his style.

      The Scrooge McDuck fallacy is very real. In almost any discussion or thread about wages or taxes you will see several people assert some claim that companies or the rich can pay any burden because “they’ve always got money.”

      Unions negotiate contracts with companies, just as suppliers and other service providers negotiate contracts with companies. Both parties to a contract are responsible for its details, by definition.

      You are living in a fantasy world.

      (1) Closed shop unions, the ones demanded by Democrats, are compulsory. People are forced to join the union if they want a job, forced to pay union dues and thereby forced to donate a secret amount to Democratic party. The biggest unions have refused to obey federal law and supreme court rulings from the 70s requiring them to tell their members how their dues are spent and allowing individuals to opt out of all union dues not spent on collective bargaining. Forcing people to join unions if they want to work is just wrong. No individual has a right to tell another when and how they earn their living.

      (2) Unions don’t negotiate just like any other suppliers or vendors unless you mean those suppliers and vendors who possess a legal monopoly that the company must by law purchase from. Oh wait, that’s actually very illegal for anyone except unions to do. Not even the utility company has that kind of power. The same union represents workers across all competing businesses in an industry. By design there are no competing unions trying to bid for labor monopoly for a particular

      (3) Unlike other vendors, unions we historically are granted the right to shut companies down as long as they wish have even endangered the entire national economy e.g. the 1959 Steel strike. Unions have destroyed small companies just to show they could. Until Reagan and the labor reforms of the 80s, unions had cart blanch to be as stupid as they want.

      Pensions and health benefits were proposed as often by the companies as by the unions.

      Heh, no. Why would a company willingly chain themselves to providing a specific payout 20-40 years down the line? It makes no economic sense. Companies were willing to manage an investment pool of union money that would payout by performance but they fought bitterly against defined benefit pensions for obvious reason. Even the unions only went for defined benefit pensions after they forced the rest of us to secure their pensions with tax money if the companies failed. That raises another question. Why is the union’s pensions secured at least in part by the tax payer but my bank savings or 401K isn’t?

      I have long believed that tying health benefits and pensions to one’s employment was a bad idea, but it was an idea that was pushed primarily by conservatives and businesses themselves and has survived as much through general inertia as any other reason.

      Wrong, tying health benefits to employment came about owing to wage and price controls during WWII. Benefits after the time were so small as to be unregulated so the unions forced companies to slip them pay raises discussed as medical benefits. Later the unions would push through tax breaks for employer health care benefits, then all union, so that the rest of us would have to subsidize the union’s health care cost. Telling, the union and Democrats blocked all attempts to extend tax deductions for medical expenses to the individual or self-employed. That would have put the unions on the same level as everyone else and that couldn’t be allowed.

      A single-payer health care system, for example, would make businesses more competitive globally,

      Only by saving money by letting people die. Look at the major disease survial rates in Europe compared to America e.g. in America the five year survival rate for treated prostate cancer is 100% while in the U.K. it’s 81%. That’s 5,400 Britains dead every year who woudl have lived in America. Extend that death rate across most major disease groups and you’ve got tens of thousand unnecessary deaths a year. I would be cheaper in live to just fight wars for economic competativeness. (I know you won’t believe me but look it up yourself on the U.K.s own national health service sites.)

      Niether is the U.K. or most other European countries more competitive than the US.

      …and would free up workers to survive layoffs, or to more freely move to better jobs or to even start their own businesses

      Yeah, because when you look at nations with socialized medicine, you see a lot economic dynamism, class mobility and entrepreneur. Hell, even Canada is worse off in those regards than the US. In reality, socialized medicine makes people so dependent on the Leftwing parties and so terrified dying from losing their medical care that they let the Left parties trash the economy and individuals freedoms. Even if that is not the mechanism, states with socialized medicine have much higher structural unemployment, larger, wealthier and more permenant mega corporations, a distinct lack of mid-sized businesses and nearly zero entrepreneurship compared to America.

      I could go on. You need to make decisions based on emperical fact and stop being lured off into unicorn land with pretty speeches. Every system has trade offs and cost. You can have a medical system that is cheap, life saving and innovative. Pick any two. Socialized medicine is sold as being a perfect solution to all problem with no tradeoffs. That alone makes it a fantasy.

      But opposition to this comes most strongly from the very people who are trashing the existing system as well.

      Virtually all the problems with our contemporary system come from it being 47% socialized already with massive disruptive regulation in the remaining 53%. It’s an old story. Leftists decry that the free-market has failed and push through some government regulation to fix the failure. The regulation produces distortions and expenses down the road which the Leftists then blame…. on the free market and say more regulation will fix the problem. Our current health care cost are caused by the unfair tax breaks combined with Leftists interventions that raise cost for everybody.

      I don’t understand what the great attraction here is to dealing with so many issues with this active hostility toward so many of your fellow citizens.

      I don’t know, maybe because half of my fellow citizens base their politics on using the violence based power of the state to strip away my freedom of choice in every single area of life except sex. As I noted before, the only medical freedom the Democrats recognize is the right to an abortion. Anything else, and your body is state property. Democrats believe they have the right to force you into unions and collect a tithe on your wages whether you are a democrat of note.

      The Left and the Democrats are at war with the American people. Everything they recommend not related to sex is about regulating and controlling the people. Every “protection” somehow strips away an individual choice. They can’t even extend freedom, like gay rights without turning it into loss of rights by others in the form of anti-discrimination laws in private transactions. Don’t think a bunch of neo-nazis would make good tenants? Touch you don’t have the freedom to make that decision anymore because your to morally inferior. Your leftists better will make it for you but you will have to eat the cost with the nazis trash the place.

      I could go on. You live in a fanatsy world generated by uncritacly believing every little self-interested story Leftists spin. You will cheerfully sigh away every non-sexual freedom you have all the believing that you still free.

      The general tone is simplistic, one-sided, accusatory, and mocking.

      Right this from the side tha accusses everone on the other side of kinds of moral failing, racism, greed, religous zelotry and a willingess or even desire to let the poor starve in the streets. Do you listen to the day-to-day dialog of the left at all.

      For that matter, do you listen to your own smug and dismissive tone? Stop living in your little fantasy world and look at what leftists actually say and do. Don’t accept their own self-interested depictions of themselves so uncritically.

      With no interest in exploring why exactly situations arose as they did, what were the real alternatives available at the time, and what are the principles and interests that have some legitimacy, even if they are not the ones that motivate you the most.

      No, Joe, I do exactly that, I just don’t live in a simplistic fantasy world in which one side of the political debate is composed of greedy evil business people while the other side is composed by rational, altruistic leftist. It’s you that doesn’t see the complexities. If you did, you think it so trivial to centrally manage the health care for 320 million people. Your political beliefs are logically anchored on the idea that elites make better choices than individuals. That is not well thought out.

      It’s very clear that I know far more about the history and details of any subject on which we’ve conversed from the history of slavery, to the history of unions. It’s clear that I have gone out of my to find information not shoveled down my throat in school, by the mass media and even the entertainment industry. You by contrast are clearly just a passive consumer believing what education, media and leftwing political authority figures tell you. You think you don’t only because those same people tell you that you don’t.

      A minimal sense of respect for ideas that are not your own.

      I respect people not ideas. I was trained as a scientist and in the sciences, ideas exist to be destroyed. You test and prove an idea by attacking it and trying to destroy it. Any idea you accept that you haven’t attempted to destroy is just dogma. You should be able to tear apart your own ideas

      But we don’t get any of that in these discussions.

      I give you a lot of fodder for discussion but the problem is that you are so insular and ignorant of ideas outside of Leftism you don’t even know how to start the discussion. You don’t know the history of non-Western world so you can’t discuss the history of slavery or the sociopoliltical and economic conditions of golden age islam. You don’t under stand rights a property so you can’ discuss the effectiveness of emission credits. you don’t know about the history of unions or how the actually work economically or legally so you can’t discuss the in any other manner than the unions on self-serving tropes.

      Even now all the “discussion” you can offer is some world weary, more-in-sadness-than-in-anger attack on my intellect and morality. Look at all the detail and facts in the other comments. Why can’t you do that? Why can’t offer the defense of the unions that Bill Waddel did. I don’t agree with him but it is something substantial.

      Its just red meat for an ever-shrinking base of people who seem so proud of their own nastiness and misanthropy.

      I would just point out that your political goals is to violently control me via the mechanisms of the state. My political goal is to leave you alone. Who is nasty? Your party spreads the idea that America is divided into warring tribes who are constantly being attacked and cheated by their fellow citizens. So who is the misanthrope?

      Stop living in a fantasy world Joe. You need to get real.

    22. IGotBupkis, Legally Defined Cyberbully in All 57 States Says:

      }}} Why is the union’s pensions secured at least in part by the tax payer but my bank savings or 401K isn’t?

      Uhhhh, Shannon, doesn’t the FDIC do that? At least for some of your savings/401k? Not all, granted. I’m sure Joe is going to pounce on that.

      }}} For that matter, do you listen to your own smug and dismissive tone?

      LOL, of course he doesn’t. Parrots never listen to themselves.

      }}} Why can’t you do that? Why can’t offer the defense of the unions that Bill Waddel did. I don’t agree with him but it is something substantial.

      Exactly. The difference between discussion/argument and mere naysaying. Of course, the former requires one to be informed and to think critically. The latter merely requires knowing what the parrot points are by heart.

    23. renminbi Says:

      Thank-you Shannon for the effort you have put into this-sometimes trolls can be quite useful foils.

      Holman Jenkins Jr. has an interesting opinion in the WSJ today on the Hostess situation. It seems that what really put Hostess under was the stupidity of the Teamsters, who insisted on feather bedding rules. Interesting how our media are incapable of getting to the crux of the issue most of the time.

      See
      http://online.wsj.com/article/SB10001424127887324352004578130912150512612.html

      If anything needs fixing it is our incompetent news media which has enabled an incompetent and corrupt political class. Sorry I cannot offer a solution to this. If someone buys a shoddy car or toaster, or anything,the shoddiness becomes evident. Get shoddy information from the MSM and it is much less self evident,, even to someone who tries to keep informed.

    24. Bill Brandt Says:

      It goes beyond Hostess, Renminbi – the Longshoremen essentially were responsible for cre4ating container ships – and pretty much killed the port of San Francisco

      Astute comment on our MSM. The frustrating thing about this election – we are apparently living in a bubble – a very large bubble – but apparently the people who rely on voluminous reading and the Net for their news – eschewing Brian Williams – are still a minority – but a large minority.

    25. david foster Says:

      IGB…” Big Money isn’t in making things — China gets 6% of the retail list price of an iPhone or iPod for making the thing in your hand — It’s in having created the knowledge of HOW to make the things, along with what makes them work (i.e., programming, etc.)”

      The 6% number does not reflect the total cost of making an iPhone/iPod, but just the finally assembly done in China. The costs of making the CPU chip, the display, etc, are considerably greater.

      “The knowledge of HOW to make things” is inextricably tied in with the actual making of them. Manufacturers have always succeeded or failed based on their ability to develop and use such knowledge: The value of the Boulton & Watt steam-engine manufactory was based on the process knowledge contributed by Matthew Boulton as much as the design innovations contributed by James Watt. The Ford Motor Company succeeded very largely because of their knowledge of HOW to make things.

      See my post: “Protocols” and Wealth Creation:

      http://chicagoboyz.net/archives/11102.html

    26. david foster Says:

      Also….Myths of the Knowledge Society

      http://chicagoboyz.net/archives/10347.html

    27. Shannon Love Says:

      }} Why is the union’s pensions secured at least in part by the tax payer but my bank savings or 401K isn’t? Uhhhh, Shannon, doesn’t the FDIC do that? At least for some of your savings/401k? Not all, granted. I’m sure Joe is going to pounce on that.

      The FDIC insures accounts only up to $100,000. It is not retirement specific. Pensions are insured to IIRC, 80% and 100% in some cases. 401ks are not insured at all to my knowledge. My savings certainly aren’t insured against my own stupidity. If mishandle my savings or investments, tough luck. If a union destroys a company, even intentionally, the rest of us still pay most of their pensions.

      Union members are privileged citizens anyway you look at it. They granted monopoly rights illegal for everyone else. They benefit from tax deductions denied everyone else They can force people to join them unlike any other private organization. They are unaccountable to their own members, even the ones forced to join and pay. I could go on.

      Everything unions do is based on screwing over everyone else, starting with other workers, then their customers, then everyone else.

    28. Shannon Love Says:

      Bill Waddell,

      Unions and pensions were a problem at Hostess but not the biggest one, inspite of the PR spin. In fact, total hourlay labor costs at Hostess were only about 15% of their total costs. They wanted a 27-32% reduction, making it about 4.5% reduction in their overall costs.

      I rather doubt that the accounting of the labor cost at 15% of total includes the company’s pension obligations. The last rescuers bought control for 580 million which means the market cap must be around 1.2 billion. The pension obligation is $2 billion. For a company consistently loosing money, having outstanding debts greater than the value of the company is the very definition of being way in the hole. Even if we assume that $2 billion is stretched out over 20 years, that’s 180 million a year, 10% of the company’s value, each year.

      Throughout the industry they were known to have a costly, slow and cumbersom distribution scheme. To think that they could not have found a few percent there is ridiculous.

      The distribution scheme appears to be forced on them by Teamster work rules. From Remembi’s link above:

      Under the latest turnaround plan, the sticking point was Hostess’s distribution operations, source of the Hostess horror stories filling the media. Union-imposed work rules stopped drivers from helping to load their trucks. A separate worker, arriving at the store in a separate vehicle, had to be employed to shift goods from a storage area to a retailer’s shelf. Wonder Bread and Twinkies couldn’t ride on the same truck.

      Work rules are far more destructive than high wages because they prevent the company from experimenting and adapting. The company can pay higher wages if it can increase productivity but if the ability to organize its work is taken away from management by the union, what can they do?

      I also have to wonder if managers don’t just give up after a while. How many times do you have to hear, “It’s a good idea but the union rules won’t allow us to try it,” before you just give up. A company so restricted won’t be able recruit or retain innovative talent either. In the end, a company hemmed in by union work rules will evolve a passive and plodding management culture. Even if you got rid of the union work rules, you’d probably have to fire three quarters of the managers just to have a chance at reforming.

      Their spiel also, for reasons only they can explain, ignored the affect of the sugar tariff.

      The sugar tariff is a monstrosity that does nothing but transfer wealth from American consumers to sugar growers here in America. There’s no need for it and like all agricultural subsidies, 80% of the money goes to the richest 5% of growers. However, the subsidy affects all sugar consuming companies equally so it won’t have much effect on Hostess specifically either good or bad.

      <i.In spite of all of that, Bimbo, Pepperidge Farms, the Little Debbies people and the other Hostess competitors are all at least partially unionized – and profitable.

      Little Debbie is very weakly unionized and has no Teamsters. Neither does Bimbo. I don’t know about Pepperidge farms. Bimbo is a relatively young company (as a big company) is has far lower pension cost in general.

      The real killer here is that pension payouts raise customer prices without providing any customer value. That makes them significant waste under the tenants of Lean. It’s also a waste that no one in company can mitigate.

      The unions did their damage but in the final analysis it is hard to ascribe the failure of Hostess to anything but dismal management.

      The past and current management of Hostess may well have been inept. However, that doesn’t mitigate the damage done by unions in anyway. True, a brilliantly led company might be able to absorb the increase cost and interference cause by unions but we can’t expect every company to be exceptional.

      An exceptional company is like a Coast Guard rescue swimmer. You can strap an extra 30lbs/14kg to one of those guys, throw them in the deep end and they will come out fine. Do that to an average person with just average swimming skills and they will likely drown. You’re always going to have a lot of companies in the bottom half of the distribution for whom the weight of unions pushes them under.

      Also, as I noted above, unions can actually make management inept by punishing rule breaking innovators. Unions create a selection pressure that favors unimaginative, time servers in management. After a company has been unionized for a decade or more, I doubt it’s very competent or imaginative. When the union slaps on another weight, the inept management can’t figure out how to swim to compensate and the company drowns.

    29. Frankly Says:

      This seems appropriate:

      “It’s an interesting evolutionary strategy. Some animals rely on speed, others stealth. Human leftists appear to have developed a streamlined method of wearing down the opposition by constant and unremitting non-sequiturs, lies, and otherwise nonsensical splattered rage and confusion. Combined with an almost complete immunity to facts, reason and logic, this strategy is amazingly successful and only tempered by their complete inability to actually accomplish anything productive in the medium or long terms. Too bad politics is a short-term game, ’cause otherwise the strategy would surely burn itself out, and save countless lost hairs, ulcers, and stress-related cardiovascular problems.In other words, you can’t argue with a troll, because the troll isn’t arguing with you.”

      - Merovign, posting on Protein Wisdom

    30. Shannon Love Says:

      Frankly,

      I think Merovign made the mistake of thinking that Leftists are arguing in the context of the real world. They don’t. They inhabit a narrative, a story. It’s like their play a bizarre version of a Massively Multi-player Online Game like World of Warcaft. There are a lot of “facts” in the narrative of World of Warcraft, they just don’t have any relevance to real world. Leftists create immersive narratives of startling complexity and then live in them decades. When the game is no fun, they chunk the narrative, start another and pretend the old narrative never existed.

    31. grey eagle Says:

      Shannon Love Says:
      November 21st, 2012 at 1:12 am

      Very nicely and very politely and very patiently written. Very informative. Thank you. I hope the Citizen decides to study more history and less philosophy.

      The day may come when the rain falls up.