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Volkswagen Gets a Lesson about American Exceptionalism

by | February 18th, 2014 | 10:40 am
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As analyzed by Seymour Martin Lipset and other scholars, the United States has the unusual distinction of being the most advanced industrial society in the world while never having had a forceful socialist party. Its labor movement is also weaker than that in other industrialized nations. When workers at Volkswagen’s plant in Tennessee rejected a move to join the United Auto Workers (UAW), they illustrated this exceptionalist American sentiment.

The vote defeated the UAW’s first attempt to unionize a foreign car plant located outside Detroit in traditionally antiunion “right-to-work” states in the Midwest and South. The rejection came in spite of the fact that Volkswagen remained neutral and even allowed the UAW to campaign on the plant premises. Volkswagen had concluded that plant unionization was legally required for it to establish a so-called Works Council comprising worker representatives and management at its plant. Works Councils are standard at Volkswagen’s many other plants around the world (except in China), and part of long-standing collaborative worker-management relations practiced in Germany.

The irony, as noted by many commentators, is that advocates of foreign investment in the US were among those opposed to Volkswagen transplanting its successful high-wage and high-productivity production platform from Germany to a low-wage American Southern manufacturing sector.

Several factors played a role in this outcome.

First, it is an age-old Marxist gripe that workers suffer from false consciousness and often vote against their economic interests. Whether workers did so in Tennessee is not straightforward. By the standards of the American south, Volkswagen workers have enjoyed high wages and benefits, which they might have feared were at risk if the UAW came in and upset the status quo. If so, the problem illustrates a classic free-rider problem for the UAW, as would-be members may have felt that paying union dues was not worth it because they already enjoyed good work circumstances at Volkswagen.

The IG Metall union in Volkswagen’s native Germany has criticized the practice of “underpaying” American workers, so Volkswagen’s workers in Tennessee may be free-riding on their unionized German colleagues. But the demand by IG Metall for good wages for American workers is in its self-interest, which is to discourage Volkswagen management from setting up low-wage operations in the United States to avoid costly wages in Germany.

Second, outside groups, especially Republican politicians, opposed the unionization effort and threatened to withdraw state tax credits if workers voted yes. They argued that broader reputational and business risks for Tennessee as a low-cost destination were at stake, as if the UAW and labor unions were a virus that might spread. The GOP sees unions in general as a threat, not least because unions are a major source of independent funding for Democratic candidates. Republicans see unions the same as Democrats see the Koch brothers and other outside funders.

But such a blanket antiunion position seems close-minded for the supposed party of business. Volkswagen has found that involving workers raises productivity. For the GOP to argue that one of the most successful car companies in the world does not know how to run its business reflects arrogance and ignorance. To oppose encroachment by a successful foreign business model globally reliant on high wages and collaborative worker relations seems at odds with attempts to enhance the plight of American workers.

The vote, in the end, raises serious questions for the American industrial labor movement and the UAW in particular. Local political hostility plays a part, but the vote reflected a lack of confidence by Tennessee workers in the UAW. Perhaps some workers were turned off by organized labor’s closeness to the Democratic Party and some value issues like guns and abortion. In that sense, the defeat illustrates the broader political and regional polarization of American society, with the UAW essentially viewed in Tennessee as a “foreign entity” from Detroit. Generally German IG Metall workers would not, for instance, want to be represented by the much more militant French CGT union either.

The UAW remains scarred by its legacy of feather-bedding practices in Detroit, like the GM Jobs Bank, which paid unionized workers even if they had no work to do. These practices were eliminated once the company needed a government bailout. Now, to attract new members in new parts of the country, the UAW needs to present itself as more than just another special interest group protecting the benefits of insiders. Becoming recognized as guardians of both workers’ incomes and companies’ productivity—in the mold of Germany’s pragmatic IG Metall—will not be easy. A successful American industrial union that can appeal to new members must also focus as much on life-long learning and skills upgrading opportunities for new members as it does on maintaining decades-old pensions and healthcare benefits for its union veterans.

Perhaps an entirely new local union established in Tennessee would be more attractive to workers there. If Volkswagen still wants to establish a “Works Council” at its plant, as appears likely, they may end up engineering a more decentralized and pragmatic American labor movement. The Volkswagen vote, in the end, illustrates how all sides must evolve, if America’s manufacturing sector is to learn from the success of a more inclusive and German version of capitalism.