Good morning and welcome back to Bygone Relics, I’m C Thomas Printer. Let me tell you a little story that was made into one of the saddest movies of all-time. In 1930, the great Australian racehorse Phar Lap had won 7 straight races going into the Melbourne Cup. The big red horse won “the race that stops the nation” as it is called and provided hope and inspiration to scores of Australians suffering from the world-wide depression of the time. It was like Sea Biscuit before Sea Biscuit. The horse was magnificent and because the economy was difficult, the horse ran and won a lot of races afterward. In fact the great horse won 14 of the next 15 races it entered before the 1931 Melbourne Cup. It was a heavy favorite and the racing commission didn’t like seeing such little betting action because the odds of Phar Lap winning were so good. They had been gradually adding more and more weight to the saddle of the jockey in a hope to make the races more competitive, but only once did Phar Lap lose and that was by a head. Since their biggest race needed to be very profitable in the Great Depression, they did the unthinkable in the 1931 Melbourne Cup, they loaded Phar Lap down with 10 stone 10 lbs or 150 lbs. Not even the great American champion Secretariat ever carried as much weight topping out at 145lbs. The great horse Phar Lap finished in 8th place proving once again that weight is what broke the bridge, stopped the train, and beat Phar Lap, not another horse. The American economy was once Phar Lap, but over time has been weighted down with costly labor, regulations, and government. This weight is what will stop the once seemingly unbeatable American economy.
I don’t believe in unions or strikes because they run counter to productivity which is what makes America great. I believe in entrepreneurs. I believe in doing things more efficiently and better than the next person, and I believe in competition. However, unions go way back in American history, and we have seen unions strengthen and strike before and it is always when the country is struggling because that is when the workers will listen to their unions. When they are struggling, not when they are doing well. In the Great Depression there were 27,000 work stoppages and 172 million labor days lost and 90 deaths due to strikes. We just passed 4 million labor days lost for this year as there is the Hollywood SAG-AFTRA strike, the UAW strike, and now Kaiser Permanente says they will strike in October with 75,000 workers if their demands aren’t met. We are having a labor vs management moment right now.
As a reference point, the average price paid for a new car is $45,935 up from $34,278 from before Covid in February 2020. That is 32% higher in 3 years…So when the government tells us inflation isn’t a problem, I don’t know what the hell they are talking about. Some of this is wealthy people buying new electric vehicles which are very expensive, but automobiles have so much technology in them that they are just expensive even for the base package. Combine this with far higher financing costs and many Americans are simply out of the market for a new car because they can’t afford it. If you have a good union job and can’t afford a new car, then I would be unhappy as well. Housing prices are taking 40% of your paycheck in either a mortgage payment or higher rents, the government is taking a sizable amount between federal, state and city taxes. That just doesn’t leave enough in the budget for a new car.
So while I don’t believe in unions, I understand the plight of the American worker especially when the executives give themselves ridiculous compensation packages like we discussed last week. The packages are based on stock options which they can manipulate by offering more debt and buying back stock forcing the stock higher even though it hadn’t gone to their strike price yet. That company debt is getting expensive and showing how short-sighted and selfish those executives were. Labor is right to push back, and that is the natural ebb and flow of cycles over time. Executives get greedy and labor has to remind them that they are important too. No workers were striking Henry Ford when he doubled their pay and gave them an extra day off. That is because Ford acted in both of their interests. If current executives did that, there would be a lot fewer labor disputes. Speaking of that, let’s look at our history.
Labor union strength reached its zenith during the 1970’s with 21 million members, again when workers were struggling against the backdrop of inflation, and it coincided with the beginning of the end of the American manufacturing advantage. But the union members as a % of American workers has been declining since the 1950’s. Largely because American companies realize that union strikes, regulations, and leadership are not aligned with the goal of the company which is to be more efficient and competitive and ultimately more profitable. Unions are designed to maximize the profitability of the union leadership and the union members while also bargaining for safety and workplace improvements. These are competing interests. This friction has happened before.
Unions in America were a carryover from the European unions and in 1866 in Baltimore, Maryland the National Labor Union was founded. Organized labor was organized and during this time of industrialization in America it came to be a constant conflict for large corporations and was often dealt with violently and at great risk to their members. Henry Ford changed a lot of the rancor toward ownership with his welfare capitalism that we discussed last week. He made his employees partners in creating a new industry and a new efficient process for building cars. This gradually led to a decline in the popularity in unions during the 1920s. However when things grew difficult during the deflationary 1930s, the unions fought back. What made this interesting was the alternative- unemployment rates were over 20% at that time and yet workers wanted to strike and miss work and risk being replaced. The mental control that the union leaders had over their members had to have been quite strong. There were lumber strikes in the Pacific northwest, cigar strikes in Tampa Bay, food workers, textile workers, and even a pecan sheller’s strike in San Antonio. The great textile strikes included over 400,000 workers and another one of the more meaningful strikes was the 1935 West Coast waterfront strike when the longshoreman stopped trade from San Francisco to Seattle Washington. These strikes often faced strikers versus the police or even the states’ national guard. 18 deaths in the textile strike and at least 9 deaths in the waterfront strike captured the desperate times of the era.
Many strikes failed in large part because the businesses were struggling so bad that they couldn’t afford to pay any more. Many businesses filed for bankruptcy anyway. This created desperation among unions and workers and eventually the government got involved when as part of Roosevelt’s “New Deal” the National Labor Relations Board was set up as part of the Wagner Act of 1935. This allowed workers to unionize, engage in collective bargaining and prohibited a ban on unions. The American companies had government regulation that told them how they could run their business with regard to labor. The United Autoworkers (UAW) was formed in 1935 and quickly went after GM, the largest automobile manufacturer. The Flint sit-down strike changed the labor world as the UAW won concessions, after a violent bloody struggle, where the employees occupied the plant and didn’t allow management or anyone else in the building. GM workers got a 5% raise and the ability to talk about unions during lunchtime and quickly all autoworkers in Michigan were joining unions whereas just one generation before companies like Ford were seeing them as partners and providing for them in kind. President Roosevelt didn’t interfere and wanted GM to recognize the union to continue because the government wanted the big business owners to have less influence on their workers like Henry Ford had provided and more reliance on government like the other new deal programs. Roosevelt realized that by giving things to citizens: jobs, unions, and regulations protecting them from future harm that he could get their vote and that’s how he got elected 4 times. Politicians have benefitted by claiming to support unions, but they know it isn’t helping the US. Unions have been on the decline for decades and we have seen the manufacturing base leave this country and now we might finally see its heartbeat, the automobile manufacturing go the way of textiles, steel, cotton, tobacco, and coal.
This period was the first time when the federal government asserted its ability to go beyond its Constitutional mandate. The federal government had traditionally only spent more than it received in taxes during times of war. Remember also that for the first 100 years of our country, there was no income tax, that began in 1913, no Federal Reserve that started in 1913, OSHA didn’t start until 1971, and even corporations weren’t taxed until 1909. Their spending, the government, forced us off the gold standard and to fiat money and now we have $33T in debt and climbing. Now the federal government was going to add the regulations of labor unions and companies not being able to determine how they wanted to run their businesses in the 1930s. Remember, Ford grew his business and the middle class was invented because of his decisions. This was real prosperity, American prosperity. But a generation later, the government had now thrown a wedge between efficiency and getting votes from allowing workers to determine the fate of entrepreneurs.
For the last 100 years, the very backbone of the American system, the entrepreneur has been losing a war, a war against productivity. This country was a country made up of entrepreneurs, capitalists, and businesses free to invent and earn. The government has slowly added weight ever since, and a country of free men have become a country of men dependent on the government. A country in which a man could support a large and growing family with a wife that wasn’t in the labor force. Now with the wife working families are barely making ends meet. A country of little government interference to now governments are choosing what industries will be allowed to succeed like coal, natural gas and energy vs EVs and green new deals. This country that was the “shining city on the hill” and admired by the entire world has seen its leaders become some of the richest people in America. They allow the rich to not pay taxes and overtax the working man and sell out its citizens for campaign contributions while enriching themselves and their rich cronies by peddling favors. They tax corporations and then they turn around and tax the citizens on their dividends and capital gains along with all the other taxes they are paying. Last week Ford CEO Jim Farley said that acquiescing to the union demands would bankrupt his company within two years. You might be right Jim, just like strikes caused bankruptcies in the 1930s, but Jim you make 281 times what your beginning workers make and you make a very poor martyr, but I am still on the side of business. But you are in the influence business Jim, trading favors with government instead of doing what’s right for your employees. But, if you start bankrupting these companies, to whom are the people going to turn for survival. The government and that’s ultimately what the people in power want: power.
I believe that Charlie Harper said it best in Two and a Half Men “There’s this enormous pressure on your chest, like a big animal like a possum or raccoon is sitting on it, and you can’t catch your breath.” That is what happens when you load weight onto an economy. That’s what happened to Phar Lap when the racing commission saddled him with too much weight. The seemingly invincible became very average. That is what has happened to the American economy. Labor unions work against a free market economy and are a weight, regulations are a weight, and the biggest weight of all is the weight of the government because they are responsible for it all.
Last Monday the US national debt hit $33 trillion. We hit $32 trillion on June 16. We have added $125 billion in 9 days. The current rate of interest that we are paying on the debt has went from 1.56% in January of 2022 to 2.92% last month. Currently, the interest owed is $963 billion dollars a year and rising quickly. We have carried the weight of unions making labor inefficient for decades, regulations making companies unproductive for decades, and government interfering with the very reason for starting this country: a land of limited government, a place where a man’s actions and efforts could be rewarded, and a place where the world turned to in a time of need. The world is now looking to Brics to replace us and that should tell us all we need to know about how average this weight has forced us to become.
Sincerely Yours,
C Thomas Printer
On this date in history…957 years ago to be exact, the Norman conquest began.
The sun is always directly above the equator on the spring and fall equinox as its direct rays travel from the Tropic of Capricorn to the Tropic of Cancer while earth continues on its rotational journey around the sun. Summer is over people.
Also born on this date…Samuel Adams, a founding father of this country. Before he began his political career he tried to go into a number of professions, but each failed due to his involvement in politics. Oil and water friends…oil and water.
US National Debt just crossed $33T.
American labor strikes during the Great Depression.
The Birth of Government Spending