The fall of the midwest economic model

Adversarial unionism is one reason the Midwest slumped. It turns out that the 1970 assembly line, with union shop stewards always poised to shut it down, was not the highest stage of human economic development. When you make labor more expensive, you create incentives to invent new machines and create new jobs elsewhere. Foreign auto manufacturers built plants in a South recently freed from state-imposed racial segregation. With no adversarial unions, management and labor could collaborate and achieve quality levels the Big Three took decades to match.

One thing that those romantic about Midwestern farms and factories tend to forget is that people hated working in those unionized factories, just as the young Harry Truman hated working on his father’s farm. That’s why the UAW negotiated “30 and out”—retirement after 30 years—with GM in 1970. With workers retiring well before Medicare age, the next union demand was the billions in retiree health-care benefits that more than anything else bankrupted the Big Three.

Michigan is an extreme example of what has afflicted the industrial Midwest. Big corporations were replaced by big government as the leading employer, and public-employee unions replaced industrial unions as the chief financiers of the Democratic Party. In effect, public-employee unions have been a mechanism by which taxpayer money, in the form of union dues, permanently finances a lobby with a vested interest in higher spending and less accountability. It’s a lobby that’s benefited from the Democratic Party loyalties of black voters, of Latinos in Chicago (the only large Hispanic presence in the Midwest) and of culturally liberal suburbanites.