Will all of America go on strike?
If you think supply chain issues, empty shelves in stores, and higher inflation are issues now, wait a few weeks; they are likely to get worse. And this is not the result of hurricanes, the pandemic, or other acts of nature. It is all due to the political incompetence that begins in the Oval Office.
This is one of the main reasons why the shortage of products, from fruits and vegetables to gasoline to toys for Christmas, will go from a headache to a crisis.
We are now witnessing the end of four decades of industrial peace in America. Two leading companies, Kellogg’s and John Deere, face strikes with thousands of workers leaving work. The United Auto Workers strike against John Deere was the first labor unrest in the large Illinois factory since the mid-1980s. The last Kellogg went on a work stoppage in 1972.
We already have nearly 11 million unfilled jobs thanks to super generous social benefits. The shortage of dockers, truckers and factory workers is pushing for higher inflation due to shortages. Now, if thousands more workers in critical industries go on strike, havoc could prevail.
Worker shortages only give unions more leverage to quit work and get higher wages and benefits. John Deere workers have shied away from a proposed 5% increase – and not without reason. With inflation close to 6%, a 5% increase could mean a loss of real income for basic workers.
Here is the vicious cycle that we might face in due course. Inflation means higher prices in stores, which means workers want higher wages, which means companies have higher costs, which means companies have to raise their prices even more. And the process repeats. Inflation of 6% could snowball and reach 8-10% inflation by the end of the year. Ouch.
History proves that mismanagement of the money supply and a depreciating dollar causes seizures in the labor market. EJ Antoni, an economist at the Texas Public Policy Foundation, recently released the figures. Annual inflation reached 7.9% in 1951 and a record 470 strikes took place the following year. In the late 1960s, inflation reached 5.4% and the number of strikes exceeded 400 in a single year.
But as price volatility moderated from the Ronald Reagan years, so did the strikes. A stable dollar that was “as good as gold” retained its value and allowed workers and management to enter into mutually acceptable contracts on wage increases.
From 1947 to 1982, a period of many strikes, inflation rose and fell wildly, with the annual rate varying up to 8.7 percentage points in a single year and having a range of 14.5 percentage points from from -1% to 13.5%.
Suddenly, it feels like you’re in a “Back to the Future” sequel with Michael J. Fox. Rising prices and a slowing economy – the worst of all worlds.
I predict there will be a lot more strikes in the coming months. Unions are flexing their muscles in part because they have Joe Biden in the White House kneeling in front of union bosses who have spent hundreds of millions of dollars on his campaign. Reagan illegally fired striking air traffic controllers in 1981. Does anyone think Biden would ever have the strength to do it?
Bottlenecks are now strangling a supply chain that was once the hallmark of American economic efficiency at every turn. It just gets worse and worse, and the unions and their grassroots employees who are paying higher bills are not happy. They shouldn’t be either.
History shows that strikes are a form of mutually assured destruction. Both parties are generally long-term losers from work stoppages – and America too.
The best way for Washington to ensure long-term gains for workers, unionized or not, is to control inflation, which is a de facto payroll tax. It would help if Congress stopped and refrained from spending and borrowing billions of dollars that we don’t have, as it could trigger even faster inflation.
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