Thursday, 2 June 2011

Ramamritham goes to the US

Guess which country is this ? The decision on where a company should locate a new factory is made by the unions and the government. The company, which thought it could decide for itself,  is rapped on the knuckles for presuming this right. Where could this be in this day and age - North Korea ? Zimbabwe ? Libya ? Alas, none of these. It is actually the US of A.

The company in question is Boeing. For long it has had factories in the Pacific NorthWest - in the states of Washington and Oregon. It now needs additional manufacturing capacity for making the Dreamliner - the new 787  series that is being launched worldwide.  It set up an additional factory in South Carolina. The unions representing the Washington and Oregon plant workers filed a complaint with the National Labour Relations Board (NLRB). The NLRB upheld the complaint - Boeing was wrong to open a factory in South Carolina !!

The case boggles the mind. Boeing did not shut down any factory or lay off any workers. On the contrary it actually increased its workers at the Northwest factories to run it to full capacity. But instead of building a new factory there, it built it in South Carolina. It could have very well built it in the Northwest. But its problem was that every three years or so the workers there were going on strike and this was severely impacting the company.  The unions complained, and the NLRB upheld this complaint, that "Boeing's actions were motivated by a desire to retailiate for past strikes and chill future strike activity" !

Underneath it all is the big fight between organised labour and business in America. The case of the autoworkers in Detroit is well known. The undercurrent is also the competition between "union shop" states and the "right to work" states. In some states in the US, company workers are forced to join the established unions and pay membership fees by law. Washington and Oregon fall in this category. In other states, workers cannot be forced by unions to become members. South Carolina falls in this group. No prizes for why Boeing, or for that matter, any company, wants to site factories in states like South Carolina.

This being America, Boeing is going to the courts. Lawyers on both sides are rubbing their hands in glee.

A larger trend in America (and more so in Europe) is the rapid expansion of the license raj. Governments and petty bureaucrats are increasingly coming in the way of business, in a manner reminiscent of Ramamritham of India. The Economist in two recent articles has actually used the term "license raj" - you can read them here and here and they make wonderful reading if you are interested in the antics of Ramamritham's ilk.

Ramamritham's counterpart in the UK is called Sir Humphrey Appleby. I now have to invent a name for his American cousin !!


Viji said...

We can now proudly say that India's contribution to the world economy - License Raj !!!
This looks like a sequel to the previous post - law is looking beyond facts into the so called desires of the corporate and their unstated intentions. It appears that the likes of Ramamirthams are spreading across the globe and we are mute spectators to the drama. Wish we can do something. Guidance pls.
ps - South Carolina is such a beautiful State. Just came back from SC last weekend.

Sandhya Sriram said...

Is it any different from many other things that are happening in the US

You can read it here

and here...

and here....

and here....

and here....

and so on....

what we are essentially trying to say is that they can strangle businesses which ever way you want to.

But thats intrinsic to the "Culture" of that part of world.

I can only draw parallel to multinational business houses.

big business houses can go over board on anything and get away with it with a justification. it is good in way cos that establishes how essential sometimes it is to go overboard on things beyond costs. but when they grow so big with it that it starts strangling them, they start shedding weight and its the most painful weight shed.

The emergence of D & E markets and the way they have slapped US & A on cost incompetitiveness is a clear indicator of this.not that the underlying value is wrong, but it is channelised wrongly.

They better evolve and come out of it fast :-)

RamMmm said...

:-) More than the 'license raj' in the US, I am wowed at Sandhya's indexing of your past articles and quoting from them. Hat tip Ma'am. :-D

Just thinking, why is it that the US is always the bellwether, for the good or the bad. :)

gils said...

wow..sandhya madam...indigoite bloga manapaada paguthia vacihrukeengala!!!! avaralaye ivlo prompta quote paniruka mudinjirukuma therila :) kalakiteenga..mathabadi...unions against business...hmmmm...they are necessary evil...necessary...but still evil @ times

Ramesh said...

@Viji - Yes they are there everywhere and constrict economic activity with their pettiness. Oh yes - its a nice part of America, except that getting to Greenville from anywhere looks like an expedition !!

@Sandhya - Wow !! Super wow !! men to the hat tip from RamMmm. Come to think of it, Indians shouldn't complain too much - even in the US there's plenty of it.

@RamMmm - The US is indeed very special. Despite all the criticisms, it is the bellweather. It is the standard to compare too. Hat tipped (along with a full bow to Mme Sandhya.

Ramesh said...

@Gils - Wow Sandhya madam indeed. No gils - unions are not evil. I have seen so man acts of exploitation against workers to accept that. The problem is that in that relationship, when one side gets too much power, they often do crazy things like this one.

Niraj Dhupia said...

i guess it is same in UK, unions are becoming increasingly painful..they keep the system, government and public at ransom by striking every now and it tubes, flights, postal deliveries and what not..
i think the idea for unions was to protect workers against any kind of exploitation, but looks like they are in the business now just to exploit others...

Anonymous said...

While Boeing tries to get away from the strikes of the Oregon/Washington workers, they are losing on the competency of the skilled labour there which would have developed overs years, I guess.
For a new product, this experience may be very valuable.
They should try to come to some common grounds with them rather than move away to SC.
SC no doubt is a beautiful place...

Btw, how about ' Uncle Sam" for the equivalent US name?

Anonymous said...

I would love an explanation on "Ramamritham", I've seen the name referenced here several times, but I haven't a clue what it is in reference to. Closest I can come up with through googling is the Dravidian Movement?

With regards to Boeing's situation and the labor v big business fight going on in the states right now it is an issue of extremes. Unions had been gradually losing popularity and power, and were starting to be seen as no longer needed until big business started using that atmosphere and the emergence of right to work laws to introduce some extreme policies, especially with regards to benefits. Policies such as refusing to insure workers who refused to live specific lifestyles even when not at work:

I believe it was you who made the excellent point in the past that when government tries to dictate what people should eat it is the equivalent of living under Taliban rule. Well working for a lot of US companies is becoming like working for the Taliban.

On the other side, labor unions promote a culture of incompetence and protect its dues paying members regardless of how poorly they perform. The Boeing case illustrates another major drawback to unions, when they essentially hold companies hostage and force them to look overseas.

It's much like everything else in America. There are two sides, the extremity at either side is heinous, but somehow we find ways to meet near the middle where the best results always reside. Working 12 hour days, child labor, 6 day work weeks, no health insurance, no vacation time... These were normal working conditions here before labor unions.

Despite their many drawbacks, I'm glad to see unions coming back into favor. it allows for a system of checks and balances, that keeps us where we need to be. Even though it can get ugly at times for companies like Boeing and for firefighters in Wisconsin.

Ramesh said...

@Niraj - The problem with unions is that they protect the few who are "inside" to the detriment of those who are "outside". I have not seen one demand from any union that the company should recruit 1000 employees more, to give the unemployed a chance.

@Hema - Yes, they may lose the value of experience. but what do they do if every three years the workers go on a crippling strike. Better to build that experience elsewhere.

Ramesh said...

@Hopfrog - A superb and wonderful balanced comment. I read it, as I would read a lovely post.

Apologies on the Ramamritham metaphor. Its a very Indian name and I simply concocted it out of the thin air to stand for the petty , pedantic bureaucrat who pokes his nose everywhere and frames illogical rules and procedures. Its just a name I imagined. No literary precedent !!

Your point about extremism on both sides is truly a global problem , but it is now very visible in America. There needs to be a balance to everything and some degree of moderation is essential for a civilised existence. You bring our perfectly the danger of no unionism as well as the danger of hyper unionism. Very very true. God save us from both the rabid right and the loony left !

Ramesh said...

@Hopfrog - I introduced Ramamritham in this post of mine some months ago.

zeno said...

After reading @Hopfrog's comment, When i googled for Ramamritham, the seventh result was this

Ramesh said...

@zeno - Kirthi Ramamritham, who occupies 1 to 6 is going to lynch me some day.

Anonymous said...

@Ramesh and zeno, ROFL, that explains why most of my Google searches pointed to this site!

I also forget to mention my own personal pet peeve with unions, but you did so in your comment here Ramesh. The protection of the inside while the outside gets treated as a hostile force. Unions certainly have the right to go on strike, but I get sickened when they harass picket line crossers. They have the right to go in and do the jobs that union workers refuse to do. There is no entitlement in a market economy.

Vishal said...

Wow, this is one post where the word "wow" has been used so frequently in the comments section. Indeed wow. Each one of comment was so interesting to read.

Unions were designed for good, and like many other things which were and are being designed for good became a pain in hindsight. Thanks to Ramamritham antics! (I should better watch out before using the word Ramamritham) :)

God save the earth.

Ramesh said...

@Vishal - Unions still do good. As always when the balance of power gets tilted beyond an extreme, its is often to the detriment of all.

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