The difference between the UAW and AIG


Why did the government require that automobile companies adjust their compensation contracts downward, but not AIG? The question has come up a lot. Ezra Klein says:

The reason for this is haste rather than malice: The AIG bailout was a rapid effort to avert economic collapse. It was meant to address insolvency, not labor costs.

I think that's true, but here's another question: Even if the government had all the time in the world, how on earth would it have negotiated labor costs with AIG? (Assuming that the contracts had already in place, as I believe they were when the first AIG bailout was announced.) AIG's financial products unit isn't unionized, so who would have done the collective bargaining?

I was talking about this issue earlier today with Matt Yglesias, and we agreed (at least I think we agreed) that there there would have been a collective action problem: It might be perfectly rational for AIG as a whole to adjust its compensation downward in exchange for bailout funds or the avoidance of public ire or whatever. But it would not be rational for each individual employee of AIG do reopen his or her contract. So how would the compensation adjustments have worked?

Jump to comments
Presented by

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
Get Today's Top Stories in Your Inbox (preview)

Social Security: The Greatest Government Policy of All Time?

It's the most effective anti-poverty program in U.S. history. So why do some people hate it?

Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus


Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.


Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.


Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.


Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.


The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air



More in Politics

Just In