businessmen Archives — Laissez FaireLaissez Faire

I never cease to be shocked over how people who I meet on a regular basis are held back by regulations. For instance, I was having a nice conversation with a cab driver who was transporting me to my home after a business trip. He recently came to the country from Africa and he was ecstatic to be living here, especially in beautiful Southern California.

Naturally, I was curious to learn about the different kinds of regulations that taxi drivers must comply with. In California, my driver explained, cab drivers who have a local-government-issued permit to pick up passengers in one city are not necessarily permitted to make pickups in a neighboring city.

“How does this impact you?” I asked him.

He indicated that he often picks up passengers from John Wayne Airport in the city of Santa Ana, where he is licensed, and takes them to Disneyland. But since Disneyland is in the neighboring city of Anaheim, he is legally forbidden to pick up passengers there and take them back to the airport. Instead, he is forced to drive back to the airport without a passenger, wasting his time and costing him a potential fare.

Of course, he could try to jump through the regulatory hoops to get a permit from the city of Anaheim as well. But this requires money, time, and a lot of paperwork. And even if he tries, the city of Anaheim might not give him a permit anyway, because they may want to cap the number of cab drivers who are allowed to operate in their city, just as some other cities do.

This is yet another example of the often unseen aspect of the regulatory state: an imbroglio of rules that make it more cumbersome for decent, hardworking people to earn a living.

(This is cross-posted from Voices for Reason.)

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If you want to imagine the potential hazards of the United Auto Workers unionizing foreign automakers’ factories in the American south, consider the following episode from the history of General Motors. It provides a glimpse of how bad things can get in a Wagner Act world where businesses are forced to deal with unions. (I am drawing my information from Paul Ingrassia’s Crash Course: The American Automobile Industry’s Road From Glory to Disaster.)

In early June 1998, then-current UAW-GM working arrangements allowed GM employees to go home once they met their daily production quotas. But employees at GM’s two Flint, Michigan, body plants were regularly meeting these quotas after four to five hours worth of work, and then heading home with a full eight hours’ worth of pay. If GM wanted employees to work in the afternoon, it needed to pay overtime. If GM wanted to stay competitive with its non-unionized Japanese rivals, then this kind of institutionalized inefficiency needed to go.

GM executives anticipated that directly fighting UAW representatives to end this long-standing practice would be too costly. So they instead relocated some of the Flint stamping equipment to other facilities where it could be used for eight hours worth of daily production. Equipment reallocation is commonly done at GM and at other large manufacturers. But, in this case, the UAW leadership perceived this move as a direct threat to their cushy working arrangement and more broadly feared what such a move could mean for job security down the line.

So they launched a strike.

Within one week, 9,200 GM employees walked out of two metal-processing plants in Flint. By abandoning their paid posts, these striking employees stopped production of vital car body parts. This sent shockwaves throughout GM’s entire supply chain, halting production at many assembly plants that depended on body parts produced at Flint. As a result, the strike idled 175,000 GM workers and tens of thousands more at plants owned by other companies that supplied parts for GM.

The strike was devastating. It lasted fifty-four days and cost GM roughly $2.2 billion. By one reckoning, because of the strike, the entire industrial production of the United States dropped by 1 percent for the month of June, the sharpest monthly decrease in five years. For GM, this was the costliest strike that they suffered in twenty-eight years. Once the strike ended, GM reluctantly returned the equipment to the Flint metal-stamping plant. While this happened in broad daylight, UAW members stood by cheering for what was basically a celebration of willful inefficiency.

Events like the 1998 GM strike remind us about the dangers of laws that force businesses to deal with unions.

(This is cross-posted from Voices for Reason.)

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Our latest Forbes column tells the story of Andrew Carnegie’s rise. Personally, I think it’s one of the best pieces we’ve written:

Long after he had established himself as one of America’s leading businessmen, as well as history’s greatest steelmaker, Andrew Carnegie reflected that “We all live in the richest and freest country in the world, where no man is limited except by his own mental attitude and his own desires.”

At the time—a decade or so before the First World War—Carnegie’s attitude was nearly universal. In America, anyone could carve out a better life for himself if he worked hard. Today, Carnegie’s attitude is considered almost quaint.

Opportunity? Why, opportunity is a rare thing, and those Americans not lucky enough to be born with it should be given it at other people’s expense. Whether it’s an education, a job, a house, or a grant, opportunity is seen as something that others have to provide you with. If you don’t succeed, it’s not because you failed to capitalize on plentiful opportunities. It’s because you just weren’t one of the fortunate few.

Whole thing here.

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