Hostess: Postmortem

Holman Jenkins and discrete members of Group Lumaj spend the Thanksgiving Day memorial reading over the bankruptcy filings of Hostess.  Why?  Because media refuses to do it own job.  Why discern the truth when a comfortable fallacy will do?  Let’s set the record straight.

Bankruptcy is a paper death.  The underlying assets live on.  So whose to blame here?  Clearly the AFL-CIO’s Bakery, Confectionary, Tobacco Workers & Grain Millers International Union are the culprits.  Let’s lay it out.

The teamsters reluctantly agreed to givebacks to finance the latest turnaround attempt at helping a faltering company.  When the bakers rejected any concessions they went on strike, despite being informed that to do so would liquidate the company and the lost of nearly 20,000 jobs.  What did the strikers learn?  They learned that the imperatives of the Union are not aligned with growth.  The details simply come down to completely inefficient distribution operations that ultimately leave Hostess unable to open new markets or move other Hostess delights from production to store shelf efficiently.

The extremely high cost inefficient distribution system means that products don’t make money because new lines never get opened.  New customers and new venues are forfeited.  The very imperatives that derive growth are at loggerheads with the bakers union.  So rather than throw more money down a rat hole that isn’t working, the management thought it better to scrap what they have and hope to start over with product lines that already sell matched to efficient delivery systems.

Hostess has already spent nearly 12 years in bankruptcy court, so this isn’t there first rodeo.

Where does this leave the giant confectionary?  As of this writing, the wrangling is about the positioning of teamsters as another round of rebirth on paper begins.

Come to think of it, the reality of brow beating your opponent into submission to gain political advantage has a long reign in the Middle East as well as the political culture of Washington.

We already know that the Hostess story can end, albeit well or ugly.  But end it will.  We can’t say that about the federal govmint and its unfunded liabilities.  When payrolls and pensions cannot be met and the American citizen taps out, all the lobbying in the world and rhetorical gifts from the Supreme Court wont’ be enough to keep the Union afloat.

The Twinkie bakers chose a winter of despair, while teachers and pubic union workers purchased another season of false hope at the expense of the American citizen.  Absent a reign of terror or complete collapse, the mounting tax and debt burden suggests that the days of public-sector bliss are numbered.

The infinite taxing power of the govmint will be tested by the political resolve of the citizenry. Remember Margaret Thatcher, “Socialism fails when you run out of other people’s money.”

Game on.

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About William Holland

Systematic Theologian/International Relations
This entry was posted in Economics and tagged . Bookmark the permalink.

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