Creative destruction

December 28, 1993|By James P. Pinkerton

PRESIDENT Clinton's intervention in the American Airlines strike was popular with the traveling public and even more popular with the flight attendants' union. However, what Mr. Clinton tossed to organized labor is a mere chicken neck compared to the rich rack of ribs he is sliding toward the federal bureaucracy.

As he shoved NAFTA down the gullet of the AFL-CIO, Mr. Clinton kept repeating his prescription for American economic health: We must "compete, not retreat." He's right -- the whole country needs stern economic medicine: less waste, more productivity.

But a new pattern of political favoritism is emerging: While Dr. Clinton administers cod liver oil to both managers and workers in the private sector, he hands out lollipops to the public sector.

Consider: Immediately after the NAFTA vote, the White House went to the barricades against the bipartisan deficit reduction plan sponsored by Reps. Tim Penny, D-Minn., and John Kasich, R-Ohio. The administration used familiar scare rhetoric to defeat the Penny-Kasich legislation. What was the fuss about? Over the next five years, as federal spending is slated to grow by a quarter, Penny-Kasich would have shaved a whopping 1 percent from the overall total.

Meanwhile, Bob Crandall must be thinking that he went into the wrong line of work. The CEO of American Airlines thought the '80s would go on forever, so he overspent. As a result, American's costs and revenues are grossly out of kilter. It's almost as if Mr. Crandall thought he was in Washington!

American has lost more than $1 billion in the last three years. That's about how much the feds overspend every day. If only American Airlines could be like American government. Then Mr. Crandall could rename those losses "deficit spending," and Mr. Clinton would rush to his defense.

After American's latest fiasco, Mr. Crandall deserves to be packed off into retirement, undoubtedly with millions in golden parachute money that he doesn't deserve. We should save our sympathy for American's flight attendants, who average $23,000 year.

This is the market at work. The economist Joseph Schumpeter called it "creative destruction" -- new industries undreamed of just a few years ago sprout up between the bones of the old. This evolutionary efflorescence is certain to accelerate in the wake of NAFTA. Three years from now, we'll have more exports and more wealth, but fewer blue-collar workers, and probably fewer airline employees.

Mr. Clinton talks a good global game. He says, "We must make change our friend." Yet he is not willing to introduce all sectors of American society to the bracing rigors of competition.

Who gets dunked in the rushing water and who gets to stay high and dry says much about Mr. Clinton's new political coalition.

The unfashionable blue-collar unions, representing people who never graduated from college, let alone Yale Law School, are now in a race down the economic rapids with the Mexicans and everyone else with a paddle. But the newer white-collar unions, composed of teachers and technocrats, will cheer them on from bleachers on the banks of the Potomac. If the NEA, AFSCME and the Kennedy School class of '93 are happy with NAFTA, it's because they know that their friend Bill Clinton will never permit anyone else to compete for their jobs, no matter how badly they perform.

The split inside labor is the same as the divide in the country: between those who can use political tools -- from subsidies to civil service -- to insulate themselves from the world marketplace, and those who have to work for a living.

James P. Pinkerton, based in Washington, is a senior fellow at the Manhattan Institute.

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