And Now, Let Us Eat Cake

According to legend, in 1788, just a year before the onset of the French Revolution and but a mere five before she’d lose her head completely, Marie Antoinette responded to the news that French peasants were out of bread: “Let them eat cake.”

In reality, the phrase in French was “Qu’ils mangent de la brioche”–more accurately translated as “Let them eat brioche,” a different confection fortified with butter and eggs–and the historical evidence argues decidedly against the Queen’s having ever said it.

Credible accounts depict Louis XVI’s wife as a woman who was neither as callous nor ignorant as the statement implies, who was in fact a generous patroness of charity moved by the plight of the poor in the run-up to the events that ended her life.

But my purpose here is not to conduct a seminar on historical accuracy. Rather, I bring it up to illustrate how popular understanding of events transpiring today can often be unhinged from reality itself.

Last Friday, news hit that Hostess Brands, the nation’s #2 bread baker and a company with more than $2.5 billion in annual revenues–makers of iconic American foodstuffs including Twinkies snack cakes and Wonder Bread–would ask a federal bankruptcy court for permission to close its operations. The company filed for bankruptcy a second time this past January, after a previous trip to bankruptcy court in 2004. It emerged from restructuring in 2009 after a four-and-a-half year process, controlled by hedge funds Silver Point Capital and Monarch Alternative Capital.

Two or three generations of commentators took to the Internet, decrying the imminent disappearance of the only food product ever to spare a man from the Electric Chair. Uncounted tweets lamented the denouement of one of the more widely lampooned products in American history.

And nearly everyone blamed Union Labor.

After a generation-long war on pensions and unions and middle-class wages in the United States, a war famously inaugurated by Ronald Reagan’s shot across the bow that destroyed the Air Traffic Controllers union in 1981, common wisdom now takes as a given that it’s unreasonable for union members to receive the pay and benefits they negotiate and work for–when those things conflict with executive salary expectations or the Return on Investment demanded by investors.

In the end, the story at Hostess was complex. Severe operating and financial challenges left investors and workers at odds over competing visions of the company’s future. But the popular imagination–and the 24 hour news cycle–don’t do complex. The easiest take on Hostess’ demise was to blame crazy union members who refused to accept another round of wage and benefit cuts and dared investors to shutter operations instead.

One had to search for criticism of Monarch and Silver Point’s role in the debacle. Few people raised eyebrows over news that, as the company prepared to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other executives at the struggling company received pay increases of up to 80 percent.

Not until Sunday could one read commentary questioning management’s myopia or blaming that for steering the 80 year-old company into the new millennium, where demand for natural products and healthy snacks has been on the rise for at least the past 2 decades, which would necessarily imperil the viability of a product line featuring ingredients made up largely of various chemicals in powder form.

And now the Bankruptcy court has ordered the company and its holdout union back to the bargaining table. For all the sturm und drang ginned up over the past several days, Twinkies may yet live up to the legend and never go away. Hostess Brands is probably too big–and its hedge fund investors probably too over-committed–for the eventual solution to look like the one arrived at by the owner of Bob’s Red Mill Natural Foods, but even if the workers don’t end up controlling the company, that won’t be the unions’ fault either.


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