Re: Neoclassical bizarreness!!!

[Marvin Gandall <marvgandall@xxxxxxxxxxxx>]

Daniel Davies said:


> I have some sympathy with David's point of view here; there is nothing in
> particular wrong with bankruptcy.  On the other hand, the massive,
> systematic use of bankruptcy in the airline industry as a normal part of
> financial operations rather than an extreme measure, does surely indicate
> some underlying problem.  It's rather like insurance claims (in fact you
> can
> model the use of bankruptcy protection as a form of insurance) - insurance
> claims are a normal part of the efficient running of a capitalist system
> but
> if you've got a small group of claimants making big claims every year then
> something is up.
>
> best
> dd
>
> -----Original Message-----
> From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of David B.
> Shemano
> Sent: 20 September 2005 20:53
> To: PEN-L@xxxxxxxxxxxxxxxx
> Subject: Re: Neoclassical bizarreness!!!
>
>
> Did someone mention my name?
>
> I agree that the article was quite good.  However, I did not follow why
> the
> story supports the notion that deregulation did (does) not work.  Why is
> bankruptcy evidence of systemic failure?  Why should the shareholders of
> airlines, as opposed to any other industry, be guaranteed a rate of
> return?
> Why should the employees of airlines, as opposed to any other industry, be
> guaranteed employment and a specific level of wages and benefits?
> > >
-----------------------
Something is up, as Daniel Davies says. The airlines are losing money, and
bankruptcy in these cases is seen as a cheap and easy way of drastically
slashing their present and future labour costs by having the bankruptcy
judges, pressured by the companies and their creditors, strip employee
collective agreements at the same time company pension obligations are
transferred to the Pension Benefits Guaranty Corporation. It is a raw means
of shifting responsibility for corporate failures from the directors and
shareholders and lenders - where it belongs - to the workers and the
taxpayers.

Employee standards are generally set in conformity with labour markets in
the normal course of collective bargaining, and I don't think the use of the
bankruptcy system to circumvent this process accords with libertarian
theory. Even where there is no demonstrable need to declare bankruptcy, the
airlines use the threat of court-imposed rollbacks to pry concessions out of
their unions. Sometimes, as at Northwest, they overreach, and force a strike
on an isolated union like the Aircraft Mechanics Fraternal Association which
decides in desperation it may as well take its chances in bankruptcy court.
But meanwhile the other unions have gotten the message, and will almost
certainly accept the concessions being demanded. The tactic was pioneered in
the steel industry, and it could well spread to others besides the airlines.
Maybe it already has, and I haven't yet read about it.

MG