Hostess shutdown shows strength of market, not reason to bash unions

I found out Sunday night that the Hostess Brownie Bits — and a few other Hostess products — are still on the shelves of the Target near me. But the shelves for Hostess products was mostly empty. I couldn’t find a Twinkie anywhere. What’s really going on as these iconic brands disappear from our store shelves?

Since the company best known for making products such as Twinkies and Wonder Bread announced it was shutting down, I’ve heard two consistent narratives about it. One comes from conservatives and one comes from progressives on the left. I’d like to suggest that both narratives are overly simplistic.

For conservatives, the story of Hostess Brands is a narrative of evil unions destroying an otherwise-healthy company. For progressives, the story of the shutdown is valiant workers standing up against evil bosses in the name of fairness. I don’t think either side has the facts to really back up the story in just those terms.

Let me admit my bias right up front. I can’t stand unions. I wouldn’t be a member of a union. I think they tend to make companies function poorly, because they tend to infect the workers’ attitude with an us vs. them mentality. I still remember when my father worked for a coal mining company when I was in high school, and the miners would go on “wildcat strikes” on the first day of deer-hunting season or when they wanted a day off. They were lazy and had lousy attitudes, from what I could tell.

But I know just as well that management at most companies is just as messed up as the unions are on the other side. I’ve worked for a very few good managers. Most of the ones I’ve worked for left me feeling that he was even more incompetent than the previous one was. And sometimes it seemed as though incompetence was part of the job description for higher-level positions. The more out of touch a manager was, the more likely he was going to rise to the top. Not in every case, but it was true in far too many cases. Many of us live in companies run just like a Dilbert comic strip.

So here’s the thing. Hostess Brands might have been dealing with unreasonable unions, but it’s just as likely that it was a lousy, poorly managed company. That doesn’t make me like unions anymore, but it does say that there might very well have been a bunch of problems that contributed to the company falling apart.

As a matter of fact, if you look at the history of this company, it’s a history of mergers, spinoffs and bankruptcies. The more I read about the company, the more clear it is that it’s been mismanaged and have a confrontational labor culture. The rank-and-file workers were hearing rumors that there might be a buyer for the company, so they stuck it out in hopes of getting a better deal. When there wasn’t a better deal, they lost.

A St. Louis business columnist summarized the situation in a good piece over the weekend:

Some people are trying to assign white or black hats to the strikers in this saga, but neither variety of head wear really fits.

These aren’t noble workers who “have bravely taken a stand against the corporate race to the bottom,” as AFL-CIO President Richard Trumka said in a statement. Nor are they ungrateful louts who deserved to lose their jobs, as some right-wing commentators have implied.

They’re simply human beings who got caught in a conflict and couldn’t find a way out. For that failing, labor and management must share the blame.

Those who are trying to make this into a story about the terrible union aren’t telling the full story. This isn’t a matter of the wonderful, honorable producers shrugging and moving to Galt’s Gulch, because it was a company with a history of serious trouble. And the unions clearly were pushing for terms that the company couldn’t survive with, either. Both sides deserve some of the blame for killing the company.

But do you want to know the best part?

Those factories and those brands are going to be sold. The brands that are worth something will be picked up by other bakeries. (You’ll see Twinkies back on the shelves soon, under a new company’s ownership.) The factories that are good enough to be profitable will be bought by other companies. Some of the same workers who lost their jobs when Hostess closed down might very well be working in those factories making the same products before long — working for another company.

That’s the beauty of the free market. Austrian economist Joseph Schumpeter called this process “creative destruction.” It’s the process by which inefficient and badly run companies are run out of business. It’s not a bad thing to be mourned. It’s a great thing because it gets the deadwood out of the way.

Hostess Brands seems to have been deadwood. The union workers involved in the dispute likewise seem to have been deadwood. In a properly functioning market, they’re both tossed out of the way. Something new will take the place of this company — and that’s a very good thing.