Don’t Overlook This

This is your must read of the day. I quote a portion of it, but really, read all of it. It’s by George Will:

During his first term, the most remarkable run of wealth creation in the history of this or any other nation began. Arguably, it began with a seemingly unrelated event in the first year of his first term.

In 1981, when the nation’s air-traffic controllers threatened to do what the law forbade them to do—strike—Reagan warned that if they did they would be fired. When they struck in August, Reagan announced that the strikers would be terminated in two days. By firing the controllers, Reagan, the only union man—he had been head of the Screen Actors Guild—ever to be president, destroyed a union, the Professional Air Traffic Controllers Organization (PATCO). This has often, and not incorrectly, been called a defining episode of the Reagan presidency because it notified foreign leaders, not least those of the Soviet Union, that he said what he meant and meant what he said.

But now, more than two astonishing decades on, it also is reasonable to conclude that Reagan’s fracas with the controllers had huge economic consequences, domestic and foreign. It altered basic attitudes about relations between business and labor in ways that quickly redounded to the benefit of the nation, and not least the benefit of American workers. It produced a cultural shift, a new sense of what can be appropriate in business management: layoffs can be justifiable even when a company is profitable, if the layoffs will improve productivity and profitability. Within a few years, both AT&T and Procter Gamble, although quite profitable at the time, implemented large layoffs, without arousing significant protests.

Reagan’s action against the air-traffic controllers came on the eve of the explosive growth of information technologies, and some astute people, including Alan Greenspan, believe that Reagan’s action facilitated that growth.

Since 1981, labor in America has prospered because it is less protected. In theory, it might seem that since the showdown with PATCO, business’s informal protocol about layoffs must have resulted in rising unemployment. The reverse has happened. In the post-PATCO climate of business operations, employers have been more inclined to hire because they know that if the hiring proves to be improvident, those hired can be discharged. The propensity to hire has risen much more than the propensity to fire. In all of America’s post-Civil War era of industrialization, unemployment has never been as low for as long as it has generally been in the years since the extraordinary expansion that began during Reagan’s first term.

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Erick Erickson

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