United Airlines fired CEO Jeff Smisek because he launched a money-losing route from Newark to South Carolina. Why fly a money-losing plane? Because the route was a gift to the head of the Port Authority of New York and New Jersey, making it easier for him to reach his vacation home in Columbia. I’m appalled for a few reasons. First, I grew up vacationing on the Jersey Shore. Why did the NY/NJ Port Authority chief need South Carolina? What’s wrong with hopping the train down the coast to Bay Head, as my father did on so many evenings? But the scandal raises a bigger issue. In short, no single government official should ever grow so powerful that a private company feels the need to wheedle, canoodle, inveigle or bribe.
China shows that more power to the bureaucrats brings more danger and death to the workers. Although President Obama has gushed over China’s economy, and former union leader Andy Stern wrote an op-ed in the Wall Street Journal hailing “China’s Superior Economic Model,” Chinese firms that cozy up to the government by hiring former top government officials end up with more dead workers, fewer safety inspections, and lower rates of environmental fines. In a new study by Raymond Fisman of Columbia University and Yongxiang Wang of USC entitled “The Mortality Cost of Political Connections,” the authors could not find a single case of a major safety audit at a company that was closely connected to the Chinese government.
There’s another cost, too, beyond the corpses left behind by lax worker safety. I would add that in China, as well as in the U.S., bureaucratic bigwigs and their revolving doors are biased toward big companies and against smaller competitors. It’s much easier for HP to hire a former Senator than for your brother-in-law to hire a Senator to help his tech startup in his garage. Ask yourself this: Did United Airlines ever ask you whether you’d like a private flight to your favorite vacation destination? Heck, you’re lucky if you got a pack of pretzels.