Sunday, October 24, 2010

If We Nationalized Exxon

... we could see scenes like this in our future:


Ignore the "Those crazy Frenchies are striking again" meme and consider this: every time they nationalize an industry, its problems become political, not economic. That is, there is an upper limit on what unions working for a private firm can demand because they don't want to bankrupt the company. When you work for a government that can print money, that limit is practically unimaginable.

The reason the French are striking against the plan to raise the retirement age from 60 to 62 is not because they're crazy, it's because they're supported by the entire nation of France and they can legitimately claim that their pensions amount to only a few Euros a week for each citizen. Surely you can afford that, can't you?

2 comments:

Dean said...

KT, I know I am going to butcher the terminology here but there is the economic concept of diffuse collection/targeted benefit to be considered.

The French workers may easily be able to get away with that argument if the percentage of nationalized/unionized workers stays relatively low.

However, as more and more industries becomes nationalized, more and more people will be granted those benefits eventually leading to unsustainable collections.

K T Cat said...

Dean, you're absolutely right. What I was struggling to say was that when you nationalize the industry, pay or fringe benefits for the employees of that industry become political decisions, not economic ones. From the employees' point of view, you can't justify wage or benefits cuts nearly as easily since they can always be paid by the entire population instead of just a single firm.