August 30, 2004


Caterpillar labor situation shows union's predicament: experts (JAN DENNIS, August 30, 2004, Chicago Sun-Times)

Twice in eight months, Caterpillar Inc. workers have crushed take-it-or-leave-it contract offers, then headed back to production lines instead of setting up picket lines.

With just one fleeting whiff of a strike so far, the on-the-job standoff is rare for Peoria-based Caterpillar and the United Auto Workers, who have agreed to only two contracts without a work stoppage in more than a half-century of bargaining.

Labor experts say the deadlock is rooted in a power shift that has given management the upper hand over the last quarter-century, as U.S. union membership waned and the 1981 firing of federal air traffic controllers emboldened companies to counter strikes with replacement workers.

Caterpillar is among just a handful of major companies that have flexed the newfound bargaining muscle, they say, foiling two strikes in the 1990s by using patchwork crews to maintain production and profits.

''The fact that talks have gone on this long is vivid evidence that union leaders understand their weakened position. Twenty-five years ago, the union would have gone on strike immediately,'' said Peter Feuille, head of the University of Illinois' Institute for Industrial and Labor Relations.

Folks generally understand the credit that the Fed (Paul Volcker) deserves for defeating inflation but don't give Ronald Reagan (and Margaret Thatcher) credit for their crushing of trade unionism. Where's inflation pressure going to come from when employees can't command ever higher salaries and, thanks to free trade, companies can't raise prices?

Posted by Orrin Judd at August 30, 2004 10:10 AM

Inflation isn't a pricing issue, it is a printing issue.

This doesn't mean you are necessarily wrong about inflation (that it isn't a problem), it means that oil, wage, and commodity rises that are functions of the market are not "inflationary" while rises that are a function of "too many dollars chasing too few goods" (the best defition of inflation you'll ever get) evidence of inflation.

We are currently in strange place (much like the late 1890s - as you point out)

Technology and innovation are booming just as 2.3 billion people are coming "on-line" for production and intellectual development. There is massive oversupply of almost everything. The massive printing of dollars is the only thing keeping world prices for almost everything from collapsing.

Any comments? That's how I see things.

Posted by: BB at August 30, 2004 12:03 PM

Being somewhat local, I can't say that the Caterpillar situation has any larger meaning nor that it was influenced by Reagan. Caterpillar management outplayed labor during the big strikes and labor has never recovered. Basically management demonstrated its ability to run the company for months (if not years) without labor at all. At that point, what leverage does labor have?

Posted by: Annoying Old Guy at August 30, 2004 2:58 PM

As Milton Friedman famously stated "inflation is always and everywhere a monetary phenomenon".

Posted by: carter at August 30, 2004 3:13 PM

Ricardo's Iron Law turns out not to be dead after all, then.

Posted by: Harry Eagar at August 31, 2004 1:44 AM

It's certainly alive for the unskilled.

Posted by: oj at August 31, 2004 7:21 AM

Not too many unskilled workers at Caterpillar

Posted by: Harry Eagar at August 31, 2004 2:56 PM