Gladwell on GM, Ireland, Bethlehem Steel, Walter Reuther and pensions September 6, 2006Posted by Tom in Opinion, Workforce.
The New Yorker graces us with an outstanding column by Malcom Gladwell (author of The Tipping Point: How Little Things Can Make a Big Difference and Blink: The Power of Thinking Without Thinking – buy both of these books!) on the subject of pensions and how the American corporate pension system has crippled companies like General Motors. He then juxtaposes the GM nightmare against the country of Ireland and Bethlehem Steel, both of which took different courses to arrive at more solid fiscal footing.
I found most interesting the role of labor in this article, which presents a wonderful historical perspective. The UAW representative in Toledo and UAW chief Walter Reuther both had alternative visions for pensions. Those notions may finally be taking hold:
[Bethlehem Steel owner Wilbur] Ross isn’t a fan of old-style pensions, because they make it impossible to run a company efficiently. “When a company gets in trouble and restructures,” he said, those underfunded pension funds “will eat it alive.” And how much sense does employer-provided health insurance make? Bethlehem made promises to its employees, years ago, to give them medical insurance in exchange for their labor, and when the company ran into trouble those promises simply evaporated. “Every country against which we compete has universal health care,” he said. “That means we probably face a fifteen-per-cent cost disadvantage versus foreigners for no other reason than historical accident. . . . The randomness of our system is just not going to work.” [Emphasis added]
This is what Walter Reuther believed. … It has taken half a century, but the world may finally be catching up with Walter Reuther.
Pay close attention to the comments I highlighted from Wilbur Ross. This man is a private investor, not a union boss. He can see the challenges of the American social welfare net when it comes to global competitiveness and economic development. Why can’t our nation’s leaders?
Regardless, great article. Gladwell is a gifted author.