Another depressing Labor Day

Labor Day is an annual reminder in USA of how little power unions actually have.  Part of this is due to the historical reality that labor has often been powerless—think about slavery as a good example.  Stealing people's labor is at least as old as recorded history and since those who are having their labor stolen occasionally object, much of the cultural and police power in societies has been used to repress the slaves and protect the various methods of theft.  As a result, Labor shows up at the social conflict over economics severely hobbled.

So while it is easy to forgive the various Labor movements of history for being clueless or inept, there are two modern-day examples of Labor bungling that are actually quite unforgivable:

1) The teacher's unions and their protection of rank incompetence.  Historically, one of the primary strategies of unions (and their guild predecessors) was to obtain and maintain a monopoly on skills.  For example, a union construction crew might cost more per day, but because they were better at what they did, the total job would cost less because there were fewer foul-ups and delays.  Teacher's unions, on the other hand, employ the language and strategies of a skills monopoly while creating schools so bad, they are literally an embarrassment to the rest of the educated world.  In doing so, teacher's unions have helped ruin the reputation of all unions.

2) The decision by union pension funds to participate in leveraged buyouts and other examples of union-busting.  When I first started to write about the strategies that the Producing Classes could employ to get a better economic deal in the 1980s, it dawned on me that IF unions used the power they potentially had as owners of capital through their pension funds, they could replace the old-fashioned strikes with proxy battles.  Well, that did not happen.  Instead, union pension funds joined forces with the likes of Mitt Romney and Bain Capital.  Matt Taibbi absolutely blasted the Mittster, Bain, and private equity in Rolling Stone the other day and was taken to task for it by those who noted (correctly) that private equity could not have existed without the support of union pensions.  (See also: The Predator Class nominates one of its own)

Taibbi took the time to answer one important (criticism) on his blog today. A reader e-mailed him saying that he has misunderstood the private equity industry — "There is a reason why many of PE's biggest investors are unions and pension funds . . . who have benefitted more than once from private equity deals," the reader wrote.

Here's part of Taibbi's response (from Rolling Stone's Taibblog):

This is a valid point. It is true, many of the biggest investors in private equity deals are pension funds and workers' unions. I think this is unfortunate, and I know for a fact that many union leaders discourage unions from investing in private equity takeovers. But it's an undeniable fact that unions and pension funds do sometimes make money on private equity deals.

But what people need to understand about private equity firms like Bain is that they are not in the business of turning around companies and creating jobs. The unions and pension funds that invested in those deals did not do so to rescue companies.

If you invest in a Bain or a Carlyle or a KKR takeover deal, you’re not betting on the future success of whatever company they took over. You're betting on the ability of those firms to make money on the deal, which may – or, just as importantly, may not – involve turning the target company around. more

As someone who believes that unions are an economic necessity, I am furious at what they have become.  Yet I hesitate to criticize them because I also know they have powerful enemies who need no help from me.  Even so, by now there should be a pretty good set of plans for exercising the power they do have.  And in that set of plans should be two VERY important rules: One, you never use union power to protect shoddiness or incompetence; and Two, you never, EVER, give money to folks who promise to pay you back with the proceeds from piracy.

If unions do not represent the interests of the Producing Classes, they are actually worse than useless.  And one of the primary reasons they fail at representation is that they stopped teaching the Producer-Predator class analysis invented by their great grandparents.  They can't fight the good fight because they no longer seem to remember what the fight is about.

So to my grandfather who was such a loyal union man, I say thanks for all that you taught me from beyond the grave by revealing your reading habits through my mother.  Happy Labor Day!  These are dark days for Labor but we Producers STILL have the better arguments for how an economy should be organized.  This could be an interesting Fall because the debate over finance / pirate capitalism will form the background for a Presidential election.  It is TIME to seize the intellectual high ground again!