Flat White

Crony unionism, coming soon to a hole in the ground near you

15 January 2018

4:20 PM

15 January 2018

4:20 PM

I had a shock recently when I read an article in the New York Times that wasn’t critical of Donald Trump. Not only was it on a subject other than Trump but it was a great piece of investigative journalism of the calibre that was once the mainstay of western journalism. The article was about the enormously extravagant cost of a new subway tunnel named the East Side Access project, which currently sits at $US3.5 billion per track mile, compared to a global average of $US500 million for the same distance. A similar project currently underway in Paris, for example, is being constructed for one-sixth the cost. And this isn’t the only New York tunnel project that has overflowed its financial banks in recent years. Two other recent projects were also way over the global average.

The reason for the extraordinarily high cost is Crony Unionism. A problem as much to be feared by you and your tax burden as Crony Capitalism. The story continued:

The Times found that a host of factors have contributed to the transit authority’s exorbitant costs.

For years, The Times found, public officials have stood by as a small group of politically connected labour unions, construction companies and consulting firms have amassed large profits.

Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo and other politicians, have secured deals requiring underground construction work to be staffed by as many as four times more labourers than elsewhere in the world, documents show.

Construction companies, which have given millions of dollars in campaign donations in recent years, have increased their projected costs by up to 50 per cent when bidding for work from the M.T.A., contractors say.

Consulting firms, which have hired away scores of M.T.A. employees, have persuaded the authority to spend an unusual amount on design and management, statistics indicate. 

Public officials, mired in bureaucracy, have not acted to curb the costs. The M.T.A. has not adopted best practices nor worked to increase competition in contracting, and it almost never punishes vendors for spending too much or taking too long, according to the inspector general reports.

This should be of interest to anyone who is concerned about the government’s financial position and likes to see the public receive value for taxpayer’s dollars. The track record of Australian administrations generally in regards to these types of projects has not been stellar. Only last month the PM, who you’d think would have access to top-notch advice, told us that the Snowy 2.0 project would now cost up to $4.5 billion rather than the original $2 billion stated just a few months earlier.

This is of great importance, as Queensland Labor has just won government for four more years and they are committed to the Cross River Rail project that will build 10.2 km’s of rail line (of which 5.9 kilometres is a twin tunnel under the Brisbane River and CBD) for a current budget of $5.4 billion. The similarities between New York and Queensland are scary for any half-awake taxpayer.

Both have a construction union exercising high levels of control over the government. Both have a very high-value infrastructure project that will heavily involve the very same union in its construction. Both have unions donating very large amounts of money to the governments making decisions that benefit them. Also, there is a constrained pool of competitive tenders, and the methods of wage and conditions negotiations are opaque.

The notorious Construction, Forestry, Mining and Energy Union, which seems to spend as much time in courtrooms as it does on construction sites, is a massive financial supporter of the Palaszczuk Government.

No matter which company builds Cross River Rail, they will be dealing with the CFMEU and the CFMEU calls the shots in Queensland Labor. I predict that the costs for Cross River Rail will exceed current forecasts by at least 50 per cent and possibly double and that’s even with as many client costs as possible being hidden in a myriad of government departments (a famously useful trick used to hide government cost overruns).

According to reports from the Courier Mail, during the 2017 state election, the unions bankrolled the Labor campaign to the tune of $15,000 per day. All up, the unions handed Labor $1.49 million since 2015 and no one hands over that kind of money unless they expect a return on investment. On top of the direct funding, there is all the personal action unions can take to promote their cause through their own campaigning, none of which needs to be officially declared.

All of this is an astonishing amount of influence for organisations which only represent a fraction of the labour force. According to ABS statistics, only one in nine private sector workers is part of a union. In 1992, almost 40 per cent of workers belonged to a trade union, now it’s 15 per cent. Less than 10 per cent of construction workers actually belong to the CFMEU and would probably be less if they weren’t able to coerce membership, so it doesn’t even represent the industry as it claims.

In fact, the only union that actually seems to represent a significant portion of its members is the Public Sector Union at 39 per cent of the workforce, a huge concern as observed by Jordan J Ballor of the Acton Institute:

This adds an additional layer of concern to the larger problem of crony unionism. We in effect get government employees using government funds to campaign for the expansion of government.

The reason the public sector is more prone to unionism is because all you need to do is get your own candidates elected and then you can legislate whatever pay and conditions you like. The payback is enormous.

For the average Joe on the street, there’s no value in union membership because in most industries you can’t capture your employer and force them to give you what you want. People aren’t buying because there’s no value in it and if unionised workers did provide better value for money to employers, they’d be hiring them hand over fist and workers would be scrambling to join unions at every turn. The factual evidence on the ground shows this is clearly not the case.

There is value in it, however, if you can either control the employer (public sector unions, CFMEU, and so on) or the industry is a capital intensive, limited location operation such as ports or large construction sites. You don’t see much militant union stoppages in coffee shops (no picket line outside your local barista today?), supermarkets or house construction sites. This is because there are so many of them, the capital input is low and there are hundreds of alternatives if one isn’t available.

A subway tunnel under a CBD is a different proposition altogether. When you see someone digging in the ground, millions of dollars have already been spent and by the time the structural components are in place, the capital expenditure is enormous. If you can shut that down, as the CFMEU is able to do, you can cost the builder a fortune. Now put yourself in the place of the builder, knowing that the union demanding higher wages and conditions is also the organisation that controls the government, exactly how many options do you think you have?

It’s just easier to pay up the extortion money and live with the lawless environment.

You’ll be seeing a lot more of this is 2018 and beyond, especially if Bill Shorten becomes Prime Minister and the nation’s media doesn’t step up its game and start hammering Labor governments over this type of disgraceful behaviour. Our media really is an important lynchpin on this issue. If they don’t stop cosying up to Labor because they love their social policies, and do their job of exposing this taxpayer rort, we will continue our descent into banana republic territory.

The cost of construction projects will continue to rise, more funds will flow to unions that only represent themselves, donations will continue to flow to Labor and enable them to tighten their grip on power. The unions win and you pay.

As I wrote previously here, the Labor treasurer in the previous Parliament, Curtis Pitt, approved a dodgy deal for his railway union mates and misled Parliament over it, and is now set to become the new Speaker. So much for a government of integrity.

We wait here in the sunshine state to see how many more clouds need to gather over our heads before the people will say ‘enough Crony Unionism!’

The smoke is there and we need to expose the fire.

PS: For those who are interested in learning more about union funding, I highly recommend reading a report from the Institute of Public Affairs, Rivers of Gold: How the Trade Union Movement is Funded by Industry Super. In the report you will read that between 2013-14 and 2016-17, $18.5 million has flowed from industry superannuation funds, via directors fees to trade unions.

I also recommend reading a report from the Centre for Union Facts in the USA that tracks and documents the activities of unions. The report is particularly enlightening as it shows that Labour Unions have given $1.1 billion dollars to left-wing causes between 2010 and 2016, without prior approval of members and almost always favour the Democratic Party. You will see parallels to the Australian situation as you read through.

Stephen Cable writes at cablecritique.com and for Liberty Works.

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