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:[EMAIL PROTECTED] Behalf Of David B. Shemano Sent: 20 September 2005 20:53 To: [email protected] 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
