“Right to Work” vs “Competition”

After the Republican-controlled Michigan legislature passed two measures earlier in the day to ban unions from requiring workers to pay membership dues, that evening Gov. Rick Snyder (R) signed them into law, defending his move as one that would lead to “more jobs coming to Michigan.” [1]

Republicans and their supporters predicted that in an era of global competition the new laws will be a boon to economic growth.  They cited the need to compete with the other states with similar laws and especially with Indiana, the 23rd state to pass a similar law and that boarders Michigan.

Michigan State Senator John Proos (R):  “ …the reality is…that workers today are in a competitive environment. There’s no question about that… And it’s up to each of the states to put themselves in the very best position to grow jobs and to grow the economy and to allow our Michigan businesses to compete to keep, grow and bring in new jobs…” [2]

Contrary to predictions of more jobs and economic growth made by Governor Snyder and others, the new laws will likely lead to the further erosion of Michigan’s economy.

According to Michael Porter, one of the preeminent researchers in this field whose frameworks are the foundation for modern thinking about competition and strategy, most people tend to think about competition as a form of warfare, a zero-sum battle for dominance in which only the strongest prevail.  In Mr. Porter’s view, this is a deeply flawed and destructive way of thinking. Instead of competing ‘to be the best,’ competition should be to ‘be unique.’ It is about uniqueness in the value you create and how you create it.  Zero-sum competition is rightly depicted as a race to the bottom.  It feeds on imitation.  Pure cost advantages such as lower labor costs are relatively easy to imitate. In contrast, competing to be unique thrives on innovation and in the long run demands sustained and cumulative investment in sources of competitive advantage associated with more complex production. [3] [4]

In their recent book, “Why Nations Fail – The Origins of Power, Prosperity and Poverty,” Daron Acemoglu and James A. Robinson theorize “that while economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has.” [5]

They argue that an inclusive political system is necessary for an inclusive economic system; one that provides incentives for people to acquire skills, work , invest, and, most importantly, innovate.

People have few incentives to innovate in a so-called extractive economic system where the political and economic system exists for the benefit of the elite.  Consequently, although it may grow for a short while, extractive economic systems do not generate sustained growth.

Over the past 30 to 40 years the US changed from a more or less inclusive to an extractive economic system as the political system was manipulated so the majority of the country’s wealth flowed to its already richest people.   At the same time the United States’ competitive economic position steadily deteriorated. The passage of the ‘right to work’ laws in Michigan is the latest episode in this process. [6] [7] [8]

Along with other ‘right to work’ states, Michigan’s newly passed laws put it in a race to the bottom of the economic ladder and call into question the governor’s and legislature’s ability as stewards of Michigan’s economic resources to uphold their responsibilities to the people of the State of Michigan.

1.  “Michigan enacts right-to-work law, dealing blow to unions,”  by Michael A. Fletcher and Sean Sullivan, The Washington Post, Published: December 11.

2.  “Michigan ‘Right-to-Work’ Laws Spark Heated Debate on Role of Labor Unions,” by Gwen Ifil, PBS News Hour, Air date Dec. 10.

3.  “Understanding Michael Porter  – The Essential Guide to Competition and Strategy,” by Joan Magretta, HBR Press, 2012.

4.  “The Competitive Advantage of Nations,” by Michael E. Porter, The Free Press, 1990, 1998.

5.  “Why Nations Fail – The Origins of Power, Prosperity and Poverty,” by Daron Acemoglu and James Robinson, Crown Publishers, 2012.

6.  “Winner-Take-All Politics – How Washington Made the Rich Richer-And Turned Its Back on the Middle Class,” by Jacob S. Hacker and Paul Pierson, Simon & Schuster, 2010.

7.  “Billionaires Ball – Gluttony and Hubris in an Age of Epic Inequality,”, by Linda McQuaig and Neil Brooks, Beacon Press, 2012.

8.  “Plutocrates – The Rise of the New Global Super-Rich and the Fall of Everyone Else,” by Chrystia Freeland, The Penguin Press, 2012.

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About Freedom to...

Consultant helping people and employers in health care, education and government to see and understand how their organization works and how to change them to improve performance.
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