How the UAW Pension Plan Represents the American Way (And Why It Fails)

In the United States, we are firm believers in letting the market out, and the automaker’s means of providing retirement and health benefits to its workers is a strong example of this. Where other countries have socialized health care and stronger retirement benefits, the United States has pushed for companies and individuals to assume this responsibility. Whether you believe the US is right or wrong in this stance doesn’t really matter at this point: the current automotive crisis highlights its failure.

It is often said of communism that, as a societal plan, it’s not half bad. In a perfect world, the utopia of communism would be just dandy. The unfortunate fact is that it doesn’t work in real life: human nature ensures a certain amount of greed will always prevent the ideal of communism from working.

In a similar way, capitalism is a double-edged sword that is currently striking at our own throats, but our current crisis hasn’t been caused solely by greed. Rather, the downfall of the automakers is due to globalization, and that the rest of the world simply doesn’t play by the same rules we do.

Within capitalism, a company’s primary objective is to make money and, if they have them, keep their stockholders happy. To a greater or lesser extent, it is every person for themselves, and that is why workers can gain an amount of power for themselves within capitalism: they have the same motivation and potentially the same bargaining power as the companies. Unions form, and a balance is struck between management and workers.

As we’re seeing in our auto industry, this has necessitated higher prices for our vehicles, but there was little option at the time. Public perception is just as important for selling goods as low price and decent quality (just look at the current battle between Target and Wal-Mart), so it was important that the automotive companies keep their workers happy, insured, and taken care of. Capitalism had struck a balance, and everyone was happy. The system had succeeded.

But half a century later we’re seeing the system crumble, and it’s because we’re not competitive enough. Foreign automakers, who do not support pensions or as much of the insurance costs for their workers, are able to sell vehicles for $4-6000 less than their American counterparts, and subsequently are weathering this financial crisis far better. It must be admitted that the Big Three’s addiction to SUVs didn’t help anything, but I doubt it would have made that big of a difference. The model itself is failing, regardless of the product. Capitalism’s means of long-term provision are flawed.

Socialism is something of a dirty word in some places in the United States, but in examining both the global market and our world neighbours, I believe that there are some aspects of our societal welfare that must be socialized. We simply cannot remain competitive economically if our companies must bear the cost of retirement and health benefits, and while such services would be a drain on the federal government, they can be restructured to cost less than they currently do. (The French universal health care system costs thousands of dollars less per person than the system used in the United States.)

There is no one ideal way to do business, and the United States has used hybrid models since its inception. If we allow our fear of socialism to prevent us from adapting to global economic realities, we will fall behind and more jobs, homes, and lives will be lost.