Rez O. Lewshun
Save the Profession
- Joined
- Jan 19, 2004
- Posts
- 13,422
Time to Re-Regulate the Airline Industry
By Joe Doniach,
The question is, are the American voters ready to jettison the notion that an unregulated free market is the best way to create wealth? There have been all sorts of myths propagated to sell it, beginning with the oft-misquoted eighteenth century Scots economist Adam Smith, who, despite his label as the father of “Free Market” economics, was in favor of progressive taxation, government regulation, government support of industries where necessary, and even retaliatory tariffs against unfair foreign competition. Not that I’m advocating raising taxes on the middle class, but, as an example of common misconceptions about Smith, in The Wealth of Nations, he wrote: “Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty.”
The free market, at least as it’s been applied in the last thirty years in the United States, has simply meant that capital is completely free to flow, as water seeks the lowest level, to wherever it has been able to generate the greatest return, without any restrictions to speak of. In practical terms this is what outsourcing is: Why pay for high-priced labor, such as union airline pilots, when you can get the same thing for one third the price elsewhere in the United States or one tenth the price overseas? The mere threat of outsourcing is enough to keep the rabble in line: Fly those ninety-seaters at low wages, or we’ll find someone to fly them for even lower wages!
FDR’s New Deal was an agreement between Capital and Labor: Capital agreed to give Labor a reasonable share of the wealth, and Labor agreed to restrictions on its ability to extract an excessive share of the wealth through unrestricted job actions. Under this entente cordiale, the American middle class grew and prospered, reaching its zenith in 1974, in terms of median wages, and the United States became more of an egalitarian society, relative to its past. However, although Deregulation eliminated the fetters on Capital, there hasn’t been a corresponding lessening of restrictions on Labor, and the United States is now one of the least egalitarian nations in the Western world, perhaps only exceeded by Britain.[3]
Although airline mergers may give a temporary advantage to the “legacy” airlines through pricing power, the mergers are akin to putting bandaids on a victim of massive internal hemorrhage, because the rules of the game have not changed. New entrants will start up, and the race to the bottom will continue, unless we put a stop to it. Of course, the devil is always in the details, and reinstituting some form of airline regulation is not going to be an easy matter to sell to Congress. However, we have to make the effort to put a stop to some of the worst excesses. Here are some of my ideas for legislation:
[1] Stiglitz, Joseph E., Freefall: America, Free Markets, and the Sinking of the World Economy, W.W. Norton, 2010
[2] Johnson, Simon, and Kwak, James, Thirteen Bankers: The Wall Street Takeover and the Next Financial Meltdown, Pantheon Books, 2010
[3] Wilkinson, Richard, and Pickett, Kate: The Spirit Level: Why Greater Equality Makes Societies Stronger. Bloomsbury Press, 2009.
By Joe Doniach,
“There’s a sucker born every minute.” —P. T. Barnum (attributed)
British Petroleum’s destruction of the Gulf of Mexico is the crowning glory of thirty years of the culture of deregulation, coming as it did on the heels of the worst financial disaster since the Great Depression. If there’s anyone left who still thinks that the “free market” canard is anything other than a means to rob the American public, then they surely can’t be an airline pilot—at least not an airline pilot who’s spent more than a few years in the game—because average airline pilot pay has declined 42% since the airline industry was deregulated in 1978.
It’s small comfort to know that we are not alone. Although the national wealth of the United States has doubled in the last thirty years (adjusted for inflation), median income has barely changed. In fact, inflation-adjusted median income has actually declined since 2000.[1] So where did all that money go? Not to you and me! Airline pilots, along with the rest of the middle class, are mostly struggling to hang on to what they’ve got: to keep living in their houses, to raise their families in some semblance of dignity, and to avoid going into the workhouse in old age.
From the Airline Deregulation Act, to getting rid of Glass-Steagal, to gutting Federal oversight of just about every industry, to the TARP, it’s time to acknowledge that the culture of deregulation has been an unmitigated disaster for the American people, and has simply resulted in an enormous transfer of wealth to the oligarchy that maintains political power by exercising its ever-increasing economic power, regardless of which party is in office.[2]The question is, are the American voters ready to jettison the notion that an unregulated free market is the best way to create wealth? There have been all sorts of myths propagated to sell it, beginning with the oft-misquoted eighteenth century Scots economist Adam Smith, who, despite his label as the father of “Free Market” economics, was in favor of progressive taxation, government regulation, government support of industries where necessary, and even retaliatory tariffs against unfair foreign competition. Not that I’m advocating raising taxes on the middle class, but, as an example of common misconceptions about Smith, in The Wealth of Nations, he wrote: “Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty.”
The free market, at least as it’s been applied in the last thirty years in the United States, has simply meant that capital is completely free to flow, as water seeks the lowest level, to wherever it has been able to generate the greatest return, without any restrictions to speak of. In practical terms this is what outsourcing is: Why pay for high-priced labor, such as union airline pilots, when you can get the same thing for one third the price elsewhere in the United States or one tenth the price overseas? The mere threat of outsourcing is enough to keep the rabble in line: Fly those ninety-seaters at low wages, or we’ll find someone to fly them for even lower wages!
FDR’s New Deal was an agreement between Capital and Labor: Capital agreed to give Labor a reasonable share of the wealth, and Labor agreed to restrictions on its ability to extract an excessive share of the wealth through unrestricted job actions. Under this entente cordiale, the American middle class grew and prospered, reaching its zenith in 1974, in terms of median wages, and the United States became more of an egalitarian society, relative to its past. However, although Deregulation eliminated the fetters on Capital, there hasn’t been a corresponding lessening of restrictions on Labor, and the United States is now one of the least egalitarian nations in the Western world, perhaps only exceeded by Britain.[3]
Although airline mergers may give a temporary advantage to the “legacy” airlines through pricing power, the mergers are akin to putting bandaids on a victim of massive internal hemorrhage, because the rules of the game have not changed. New entrants will start up, and the race to the bottom will continue, unless we put a stop to it. Of course, the devil is always in the details, and reinstituting some form of airline regulation is not going to be an easy matter to sell to Congress. However, we have to make the effort to put a stop to some of the worst excesses. Here are some of my ideas for legislation:
- It is imperative that Congress enact legislation that will eliminate the attractiveness of outsourcing, either by extending the financial liability of the subcontractors to the parent airline, or by requiring that all flights being operated under a particular airline “brand” be flown by pilots who are employed and trained by, and therefore the responsibility of, that airline. Even though the most successful of the LCCs (Southwest, for example) do not outsource their flying, we need to put an end to outsourcing as an attractive means to lower costs.
- We need to stop allowing any snake-oil salesman (Spirit Airlines, for example) with access to a little capital from pulling a few old planes out of the desert (or getting low- or no-cost leases from the aircraft manufacturers), hiring a bunch of new employees at rock-bottom wages, and starting up yet another airline that sets the pricing bar for all the other airlines. In my opinion the best way to accomplish this is to establish a new Civil Aeronautics Board that will have the power to determine not only whether a prospective new airline is sufficiently capitalized, but also whether it will meet real-world standards for safety and treatment of its employees. In other words, labor standards must be a factor in how an airline operates.
- We need to enact protections such as HR 4788, the Aviation Jobs Outsourcing Prevention Act, which requires airlines to have “metal in the market”, i.e. aircraft operated by the airline, in proportion to their share of the revenue in any code-sharing arrangement. Although this bill currently has 65 sponsors in the U.S. House of Representatives, to date no senator has introduced the same bill in the U.S. Senate.
- We need to put in place a genuine national pilot seniority list, to take away the threat of having to give more concessions or having to start over again at the bottom if management ineptitude destroys yet another airline.
- We need to put back into place defined benefit pensions, only this time owned by our union, so that management cannot use labor’s pension funds as a source of financing their incompetence.
[1] Stiglitz, Joseph E., Freefall: America, Free Markets, and the Sinking of the World Economy, W.W. Norton, 2010
[2] Johnson, Simon, and Kwak, James, Thirteen Bankers: The Wall Street Takeover and the Next Financial Meltdown, Pantheon Books, 2010
[3] Wilkinson, Richard, and Pickett, Kate: The Spirit Level: Why Greater Equality Makes Societies Stronger. Bloomsbury Press, 2009.
. I thought the majority of Spirit pilots voted in favor of their contract which was endorsed overwhelmingly by alpa? How much has pay risen for union secretaries over the same period of time?
