Wednesday, October 18, 2006

Monopoly and Hypocrisy

After reading this list of charges against Brian McLaughlin, a Queens assemblyman and president of the New York City Central Labor Council, I'm sure many people will be calling for his head (myself included). McLaughlin is accused of:

  • stealing $95,000 from Little League baseball teams to pay his rent.
  • creating two no-show jobs on his legislative payroll and keeping part of one salary.
  • using his subordinates as “personal servants,” to take his dog to the veterinarian, hang Christmas lights, trap rodents in his basement and clean out his barn.
  • making an aide use his E-ZPass at tollbooths to make it appear that he had returned home from Albany later than he really had, allowing him to bill for daily allowances given to legislators.
  • using more than $330,000 from his re-election campaign funds to pay for personal expenses like a rehearsal dinner for his son’s wedding, renovation of his $760,000 house in Suffolk County near Long Island Sound, payment of his country club membership fees and the purchase and installation of a plasma television for a female friend.
  • using stolen money for an $80,000 Mercedes-Benz for his wife, marina fees, school tuition for one of his children, rent payments on his Albany residence and rent payments on his Queens residence.

If true, the only mysteries are how human DNA can be so configured to permit this stupidity and why it took so long to indict him.

Doing the math, the article reports that the total theft is $2.2 million over ten years in a union comprised of a million members. So that works out to 22 cents per member per year. Checking my own response to this, I got way more angry over it than I typically do to other economic crimes, like reports of CEO malfeasance, which often have much bigger financial impacts. So why am I so angry?

The union movement is predicated on protecting the rights of the downtrodden working class. It lobbies for special concessions from the rest of society--that we confer and protect the union's monopoly rents--on behalf a select group of people. And reports of corruption like this undermine that case, as McLaughlin would tell us that they are poor enough to need special protections from the rest of us but act in such a way that he believes they are not so poor that he cannot rip them off for his own financial gain.

The combination of state-sanctioned monopoly and hypocrisy is what set me off, well beyond the size of the actual crime.

9 comments:

Anonymous said...

"Doing the math, the article reports that the total theft is $2.2 million over ten years in a union comprised of a million members. So that works out to 22 cents per member per year."
That's $2.2 per member, unless the union has more than one million members.

Andrew Samwick said...

The calculation is per member per year, so $2.2/10 = 22 cents per member per year.

Anonymous said...

How many member are there in the little league baseball team that he stole $95,000 from? Is that part of the Union?

Vilĉjo BLANKA said...

And reports of corruption like this undermine that case, as McLaughlin would tell us that they are poor enough to need special protections from the rest of us but act in such a way that he believes they are not so poor that he cannot rip them off for his own financial gain. ... The combination of state-sanctioned monopoly and hypocrisy is what set me off, well beyond the size of the actual crime.

I'm sorry, but this is silly. One bad guy doesn't indict the entire labor movement, any more than Ken Lay indicts the entire capitalist world. He broke the law, and he needs to be punished for it. But his breaking the law has nothing to do with the members of the labor union, or with the notion of labor organizing. To belabor this with yet another example, if Mr. McLaughlin was a minister or rabbi, but stole from the congegation, you wouldn't say "Organized faith has monopoly rents on communing with the ineffable." Churches get special tax treatment and special zoning treatment, at least here in Massachusetts. But nobody suggests taxing churches when a clergyman molests a child or steals from the alter plate.

The mistake, though, is the last bit, the description of the union movement as "state-sponsored monopoly and hypocrisy". The Union movement began as a way for workers to organize to counterbalance the organized influence and power of management. Big unions are a result of bad management. If management allowed as how employees had a place at the table, and as how working people deserve to make a living, there would be no unions. But management decided early on that their employees are costs, just like the lights, or shovels, and that they should buy them from the lowest bidder. In the Soviet Union people used to say of the government "they pretend to pay us, and we pretend to work." Companies in the US should think about this. Low-pay paydays lead to low-work workdays.

I think this is just another example of capitalists hating the free market. You like the free market rhetorically, but when you have to compete for labor it makes you unhappy indeed.

Anonymous said...

The take-away word of the day is: vigilance
The take-away sentence: Do not trust the powerful for their very power may be their shield.

Consider also:
How did Mayor Giuliani come to have so much trust in Kerik?

Why did the Directors of United Health not know and control the policy for dating stock option grants?

Why have they now given a $5+ million PER YEAR for LIFE retirement to a CEO who has admited back-dating his own options which may cause a financial restatement of about $286 million?

Notes:
1. The UNH CEO has about $1.6 billion of outstanding options.
2. The UNH CEO has agreed to restate to strike price of the unexercised options to their proper price.
3. The practice of issuing back-dated option apparently ceased after Sarbanes-Oxley although options granted prior to S-Ox were expercised after 2002. Vigilance!

Anonymous said...

It is not about human stupidity -- but rather human greed. There is no upper bound on greed. The greedy are never satisfied because they will always want more. The stupid don't know it is happening to them. Besides, even if they did, by the time they pay there taxes and help their children grow up each year, McGlaughlin or his successor would have another year of greed firmly placed in his bank account. Also, what is a little league doing with so much money?

Bibamus said...

I have to agree with an earlier comment that this post goes in a weird direction, and that it is led there by a really perverse description of the American labor movement.

At least in the US, labor protections are ultimately grounded in the first ammendment right to free association. I really don't think it is correct to describe the right to organize unions as a 'special concession'. It would seem more correct to assert the opposite, really, that it is those who would oppose the right of workers to organize who are seeking special concessions from the workers.

None of which changes the fact, of course, that stealing money from Little League teams is really, really slimey.

Andrew Samwick said...

The right to organize is obviously not a concession. The state-conferred authority for such an organization to prevent an employer from transacting with other vendors is. It may be a concession that society is comfortable making, but it's still a concession.

VilĉjoBLANKA said...

The only employer I've ever heard of who is required to use union labor is maybe the government, and I'm not even sure I know of an instance of that. The state is more likely to make, and historically has in fact made, laws opposing labor organization, or else laws making labor organizing very difficult or impossible.