Yesterday's News

The big news in Australia today was the announcement by Employment Minister Eric Abetz that the government would "intervene" in a case where Toyota auto workers were forbidden by their unions to vote on an agreement involving their company. As it happened, I was in the audience of about 200 people when Abetz made the announcement, having been shanghaied along to the talk by a friend.

Abetz said, "It is deeply troubling that the employees' right to vote on proposed variations has been frustrated. Once again we have union bosses dictating the terms without hearing from the actual employees. It is clearly in the public interest that the workers be allowed to vote on Toyota's proposed variations and determine their own destiny."

Hence the as yet unspecified intervention which is big news down under, though probably no one else will have heard of it.

It immediately brought to my mind the recent dispute at Boeing where the local union voted to accept the company's terms in order to keep the jobs in Seattle, though I wonder whether any one else at Abetz's talk thought of it. Union factions subsequently argued that pressure had been brought upon them to agree to Boeing's terms. Others thought the ballot itself was conducted unfairly because some workers were on vacation.

When union members narrowly voted to approve the contract that freezes Machinists’ pensions but assures the 777X will be built here rather than in a nonunion state, “The International got the result they wanted,” said Redrup.

Many union members — particularly the more experienced, older workers — had added a couple personal days to Boeing’s winter break and were still on vacation Jan. 3.

“If the vote had happened on the 5th or 6th, the outcome would have been totally different,” Redrup said.

The core of active opposition to the contract did come from a cadre of older Machinists. Many younger members are less active in the union, and some expressed more concern about future job prospects than retaining their retirement pensions.

These charges were dismissed as ridiculous by other factions in the union. The Seattle Times described the fault line as between older workers seeking to protect their pensions under the agreement versus the younger set who simply wanted to keep their jobs. That seemed to capture Abetz's talk in miniature. It began as a survey of what he called the "Thirty Years War" in Australian industrial relations. In it Abetz traced, with personal anecdotes, the path from the old confrontational days to an apparent modus vivendi in the early 1990s between what he called a Labor Party with a modicum of economic literacy and their conservative political counterparts.

But this Golden Age did not last, Abetz said, as he launched upon a detailed description of the concessions and giveaways recent Labor governments had embarked upon. He characterized the late ministers as having transformed themselves into "Santa Claus" and "Santa's Little Helpers" for the union. And he traced their downward path from there until the electorate returned Abetz's more conservative party to power.

One member of the audience asked whether a return to the days of compromise were at all possible. To which Abetz replied, 'why not? If it were possible once, it would be possible again.' He added however that it would only be possible when companies found the will to stand up for their own legitimate rights and workers realized that they could not finance pay hikes by borrowing on the wages of future generations.

While Abetz's arguments were forceful and contained much to recommend them, I could not help thinking that the relative balance in industrial relations was less a function of rational political leadership than the consequence of lagged feedback.

Lagged feedback occurs when actions are based on the last period's inputs. Say you are flying an airplane and you push the yoke forward. At first nothing happens, so you push it forward some more. But then the response catches up and you've found that the plane is nosing over faster than you wanted. You have just been a victim of lagged feedback. This idea is captured by the adage that "generals are always fighting the last war". They are acting on the last period's information, shooting at where the target was rather than where it is now.

That may partially explain why older Boeing workers, formed in a more favorable business climate, think they can safely push Boeing to the wall, in contrast to younger workers who are mortally afraid that Boeing may go bust or move to another state. They may inhabit the same shop floor but they live in different mindsets. It's possible today's union leaders attitudes were formed in the good times while the younger workers live in a world where the bad times have come.

Recent polls taken by the Washington Post show that between 60 and 70 percent of Americans feel the country is on the wrong track. This stands in stark contrast to an opinion piece in the New York Times which declares that things have never been better. The NYT writes, "President Obama will pronounce on the state of the union for the fifth time on Tuesday, and never during his time in office has the state of the economy been better — yet rarely has he gotten such low marks from the public for his handling of it."

The Washington Post survey and the NYT articles were written within days of each other yet they might be describing two totally universes. Well the calendar might indicate a single date but to examine mentalities you have engage in some form of time travel.

One way to handle control lags is to make only the minimal assumptions about the future; to regard the act of prediction as a risk factor in its own right.  This goes against the bureaucratic grain. Bureaucrats love the idea of the "plan". Joseph Stalin introduced the idea of the "Five Year Plan", in the apparent belief that a stable planning horizon would facilitate his actions. They produced the contrary result. These were perfect examples of prediction-induced risk.

The first Five Year Plan (1928-1932) was declared completed a year early and the second Five Year Plan (1933-1937) was launched with equally disastrous results. A third Five Year began in 1938, but was interrupted by World War II in 1941.

While all of these plans were unmitigated disasters, Stalin’s policy forbidding any negative publicity led the full consequences of these upheavals to remain hidden for decades. To many who were not directly impacted, the Five Year Plans appeared to exemplify Stalin's proactive leadership.

Worse, the mere fact of the Plan's existence made it necessary to pretend it was succeeding.  And yet we are as enamored of Plans as ever. The more long-term they are the better planners we account ourselves to be.

In that case perhaps Abetz's memory of a golden age of compromise was right after all. Nothing went "according to plan" for either the conservative or the labor leaders of the early 1990s. They just made the best of things. One of the least appreciated benefits of localized, individualized solutions is that they mitigate the control lag effect. There is less likelihood of one set of people living in the remembered "best of times" while another live in the actual "worst of times". But I doubt that many pundits will see it that way. For them it will be a case of class warfare as usual. The term itself is redolent of 19th century connotations. But then, while we live in the 21st century, the great majority of our political and intellectual leaders still live in a mental world some hundreds of years old.

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