The union "movement" in this nation took a big fat movement of the bowel style yesterday when by refusing further concessions to a company already attempting to reorganize in bankruptcy they led it to make the decision to shut down.
Hostess, the maker of Ding-Dongs, Fruit Pies and the veritable Twinkie, the inanimate star of the movie Zombieland, is no more.
Thus we see another example of the markets at work, although I'm sure the "Capitalist Pig!" scream will be heard across the land by many a leftist this weekend.
The truth of course is that by shutting down those "Capitalist Pigs" make no more money either. This is the nature of a bilateral "gun to the head" sort of negotiation; if you push two hard and either party shoots, both lose.
There comes a time, however, when that's the right choice -- when the position labor has placed management in becomes untenable, especially when it comes to benefits. The underlying pressures are not, in the main, wages per-se -- they're the forward liabilities of retirement in pensions and particularly health care.
There are many who claim that these benefits were negotiated years or even decades before and are "inviolate." But that's not really true, because they were negotiated for in bad faith. The very people who engaged in those negotiations also have been part and parcel of the national "credo" of more for less, of leverage abuse, of government largesse and deficit, of monopoly and abuse of privilege that have driven the cost of those pensions to the moon.
It is one thing to negotiate a health care package for retirement that is expected to cost the firm $1,000 a year at the time you negotiate it. It is quite another to then take public policy advocacy positions that drive the cost to $10,000 or even $20,000 years later while claiming that you're still entitled to the original benefit -- not the original price of the benefit.
One is just. The other is fraud.
But since there is no means of separating the two when the public policy implications blow back on manufacturers like Hostess the result is that unions must face their own culpability (and accept the damage) in the outcome they advocated for and now are receiving, or they will be seeing many more Hostess-style results.
The worst offenders in this regard are the public-sector unions, who invariably advocate for political candidates and positions that intentionally drive this deficit spending and leverage expansion -- but then argue they should be exempt from its consequence.
Sorry folks, life doesn't work that way, as over 18,000 formerly-employed people just found out.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.