Monday, January 4, 2010

Words of Wisdom from Willie Brown.

Growing up in California, it's hard not to like Willie Brown, even if you don't really agree with his politics. The dapper, former Mayor of San Francisco always had a straight talking edge about how he stated things, and for a career politician, that's a rare and much appreciated attribute.

It looks like post politics, Willie has established himself as a on-line columnist at the San Francisco Gate, with a page called "Willie's Words." I was pleasantly shocked by some of the content and tone in Willie's latest column. He honestly dissects the unhealthy and unwarranted impact that state employee unions have on the state of California. He also subtly lambastes his own party for their dependence on the unions. It's refreshingly stark and honest. Here's some golden content from the post:

"The system was set up so politicians like me couldn't come in and fire the people (relatives) hired by the guy they beat and replace them with their own friends and relatives.

Over the years, however, the civil service system has changed from one that protects jobs to one that runs the show.

The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life.

But we politicians, pushed by our friends in labor, gradually expanded pay and benefits to private-sector levels while keeping the job protections and layering on incredibly generous retirement packages that pay ex-workers almost as much as current workers.

Talking about this is politically unpopular and potentially even career suicide for most officeholders. But at some point, someone is going to have to get honest about the fact that 80 percent of the state, county and city budget deficits are due to employee costs."

Those numbers suggesting that 80% of the budgetary deficits are sourced from employee costs are shocking, if true. It also amazed the werewolf how corporate honchos could have D&O suits brought against them for fiscal malfeasance that hurt shareholders, yet, the bozos who are managing the state in Sacramento and have committed heinous fiscal crimes themselves get a pass(sort of). Why are those righteous anti-corporate activists silent? California's looming financial implosion will likely disadvantage more people than any corporate meltdown could.

Given it's dismal fiscal state, and looming implosion, California serves as an important lesson for how not to govern and manage a large governmental enterprise. Despite being the model "blue-state" in the minds of many(mistakenly), and frankly, a great place to grow up, California is the textbook of dysfunction.

There are multiple perspectives to tackle pursuant to the aforementioned claim. California is infamous for its crappy tax regimes, hostility to large employers, poor litigation governance, strangely polarized electorate, high barriers to market entry, etc. However, the werewolf thinks the primary lesson at hand is how dangerous and poisonous the labor lobby and unions are to the long term fiscal health of any entity. The tolerance of unions, eventually leads to fiscal submissions to their demands. Their demands, always unreasonable, are sourced in leveraging their monopoly of the labor pool, and this in turn, over-prices the worth of what they bring in terms of value-add to any entity, be it government, business, or other. Self-interest is good. In many ways, unions are an example of the ugly manifestation self-interest. The problem occurs when self-interest is backed by the force of a monopoly. This is where all other stakeholders get bent over, and the paradigm gets screwed. In an earlier post, the werewolf noted how America's coolest CEO, John Mackey, of Whole Foods, suggested that unions are like herpes. The werewolf is beginning to think that Mr. Mackey was too generous, and the unions are starting to look more like the AIDS virus. They weaken and emaciate you until you are a shell of your former self, allowing for the weakest of ailments to eventually kill you. I think Mayor Brown is beginning to recognize that writing on the wall. Better late than never.


  1. So what's the endgame? A company--other than Fannie or Freddie--can go under. Creative destruction. What happens with CA?

  2. Bankruptcy and insolvency. No-one can afford to bail the state out. Strip it down to the baseboards, eliminate all pre-existing contracts(dare to dream, right?), and re-org the entire government from the bottom up. Over simplified, but if the whole thing goes kaput, it may be the only realistic option.