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February 15, 2014

Did Labor Cause Detroit's Demise

During the course of the U.A.W. trying to unionize a Volkswagen plant in Tennessee those opposed used an argument that the union caused the demise of Detroit. It was more than unions! Labor alone did not cause the collapse of Detroit. The American auto industry, including labor, contributed to its demise as did many other social/economic factors having nothing to do with the auto industry or labor. However, a big factor was the destruction of all exterior competition due to World War 11.

After the war the United States was the last industrialized nation standing. As a result of the industry consolidating and the U.A.W. effectively joining forces with the "big three" they could pass on increased labor costs to the consumer and absorb some of the cost by reducing the quality of the product produced. In other words, this oligopoly of an industry and its labor force controlled the market. There was no outside competition.

Before imports, they could raise prices and pass on some of the profits to union workers in the form of higher wages. Now they no longer can do that. The bad news for much of industry is oligarchs are taking over.

Today more industries are controlled by oligarchs that do not include unions. These oligarchs are not buying off the unions because world competition does not allow it. If Apple raised its prices on smart phones to pay their workers more they would lose business to Samsung in South Korea.

By "crushing" oligopolies now, the consumer would have more choices because of competition and labor would have higher wages because there would be more companies seeking to hire good workers.

The problem of competing against foreign labor would still exist, however it would be somewhat offset by technology, shipping costs, etc. It would also force shareholders at the domestic companies to put the squeeze on wages paid to their board members and senior executives in order to remain competitive.

Today the "Captains of Industry" are paid egregious compensation to maintain the companies monopolistic position in their respective industry. After enforcing anti-trust laws they will once again be paid to deliver the products and services the consumer wants and to run an efficient operation. The consumer will end up with better prices and service.

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