Labor vs. Management
JULY 01, 1959 by WILLIAM H. PETERSON
Dr. Peterson is Associate Professor of Economics at
Among many illuminating concepts picked up in Professor Lewis H. Haney’s course at
But Professor Haney was not one to swallow the blithe division. He criticized, for example, the cavalier manner with which economists of the macro-economic school divide the "gross national product" into the "public sector" and the "private sector," and many other "sectors."
"False separatism," as an idea,kept popping into mind while reading Sylvester Petro’s masterful synthesis and analysis of the McClellan Committee labor-management hearings: Power Unlimited—The Corruption of Union Leadership (N.Y.: Ronald Press, 323 pp., $5.00). Professor Petro’s book describes in concrete and oftentimes shocking detail how unwilling employees are organized "from the top" by stranger picketing and secondary boycotts, how psychological warfare and blatant physical force are employed in "organizing campaigns," how violence and the threat of violence take place under the name of collective bargaining.
Why Resort to Force?
Why, why, Professor Petro’s reader is prone to ask as he reflects on page after page of the violence-strewn record of American trade unionism in the last generation. Why compulsion at all in the labor market place, if the market is but the peaceful process of buyers and sellers engaging in voluntary exchange of goods and services? The essence of the market is voluntarism, the exercise of free will, the social maximization of satisfactions, peacefully, practically spontaneously. A couple of boys swapping kites for yoyos constitutes a market. The swap is peaceful, and each boy is happier for the bargain. Contrast this with the animosity and vituperation that mar the organized labor market today.
So why the division, the separation—or to use a stronger word, the conflict—between buyers and sellers in the organized labor market? What is unique about this market as compared to the stock market, say, or the copper market, the clothespin market, the baby sitter market, or the Chinese laundry market? In virtually all markets, save for that of organized labor (and others where government intervention or price-fixing exists), exchanges proceed voluntarily and prices are freely established. No mass picketing, no shouts of "Scab!" no intimidation, no goon squads, no strikes, nobody parading up and down in front of Joe’s Butcher Shop saying Joe’s meat prices are too high or that Joe pays "starvation" rates for his beef and pork from the packer.
But, for some reason, sides are drawn between "labor" and "management" (or "capital") and hostilities begin. Is this a delayed realization of the Marxian interpretation of the class struggle? Or is it an implementation of "false separatism" that we see in the strained and oftentimes violent labor-management field?
Perhaps Professor Petro puts his finger on the real cause of the problem in the very title of his book, based as it is, on Lord Acton’s sage observation that "power tends to corrupt and absolute power corrupts absolutely." In his study, Professor Petro points out that government, both advertently and inadvertently, has armed organized labor with special privileges granted to no other branch of society. Organized labor has won enforced monopolies at the national level and tacit exemption from obedience to the laws of private property and persons at the local level.
Such unlimited power has led to the inevitable corruption of the leadership of organized labor, not all union leadership to be sure, but much, far too much, of it. This then—privileged unlimited power—is the reason why the McClellan Committee uncovered the wholesale invasion of gangsters, extortionists, racketeers, hoodlums—and in the words of Senator Curtis, "all sorts of bad actors"—in the trade union movement.
And yet, as Dr. Petro points out, the obvious target of corrupt union leadership, so eloquently criticized in the halls of Congress, is not the logical place to search for "labor reform." Attacks on thugs, racketeers, and power-hungry union leaders miss the real point, says Dr. Petro. The ousting of a Dave Beck leads, inevitably, to the Jimmy Hoffas, and so on ad infinitum.
"Why the Worst Get on Top"
Temptation to corruption is the thing to remove. Unlimited power must be withdrawn. Responsibility must be restored. Rights of person and property must be reestablished and protected. Create situations of power and privilege and in the scramble to occupy them the worst elements in society are bound to win—for the reasons advanced by F. A. Hayek in the celebrated chapter "Why the Worst Get on Top" in his The Road to Serfdom.
To be more specific, the trouble with American labor-management relations is the enforced monopoly granted labor under the Taft-Hartley Act and the Wagner Act. Under these laws, a company must deal with a government-certified union and no other. In short, there is no competition among unions. One, and only one, union is certified to "represent" the workers at a particular company. Thus, by law, the XYZ union is "the exclusive bargaining agent" for the workers at the ABC corporation.
To be sure, the workers are supposed to have "democratically" elected the XYZ union at an NLRB election. But this in no way lessens the existence of enforced monopoly. Moreover, as is abundantly evidenced in the McClellan hearings, much of what goes on in the name of democracy in trade unionism makes a mockery of the word. How democratic is it, for example, when a worker must join a union to get or hold a job, and is permitted to join only the certified union with which the law permits the employer to deal? This is what a union shop or a closed shop means.
Enforced monopoly, then, is the taproot of the American labor-management problem. The free market for the American workingman has largely been placed out-of-bounds, save for some 19 states which have enacted "right-to-work" laws. Compulsion has become the rule for organized labor, compulsion sanctioned and encouraged by the government, compulsion drafted into a trade union strategy which eliminates the free market. Writes Professor Petro in this regard:
"[ Unions ] must in the first place compel all employees to join the union; they must in the second place compel all the employees to participate in their strikes, picketing, and boycotts; and they must in the third place, after their monopolistic conduct has created unemployment by pushing wages above the free-market level, use violence and coercion to keep the unemployed from bidding for jobs at lower rates than the unions have fixed."
The Market Is Misunderstood
Still, the question arises as to why the government has legalized, overtly or covertly, this apparatus of compulsion, why it has in effect encouraged the sharp division, the wide separation, of partners in production into hostile groups. The answer is, mainly, that there is a widespread misunderstanding of the efficacy of the free market.
In the popular mind, unorganized employees are weak, employers strong, and so the lopsided bargaining scale must be balanced. On the surface, the premise appears true, although history, logic, and contemporary evidence do not support it. Who are the real employers: companies or consumers? A few minutes of straight thinking about the problem make it plain that it is consumers who really hire workers and pay their wages. Companies are merely the intermediaries, the hirelings of society, or what Haney called the "social paymasters." If a company ceases to produce the goods people want at prices they can afford to pay, it goes out of business. Consumers in effect hire (and fire) entrepreneurs and set wages, which originate solely from production.
Yet, who are the consumers? Everybody. And, in numbers, consumers are overwhelmingly workers. Therefore, ironically, strikes, violence, attacks on laborsaving equipment, and all other phases of compulsion are labor’s assaults on the income and wellbeing of labor—a nice case of social masochism.
. . . and Distrusted
In labor-management relations, the free market is, to put it mildly, distrusted, though not nearly so much on management’s side. The free market is even accused of depressing wages, which is anything but the truth. The truth is that unions, for all their vast power, are powerless to increase over-all wages. The truth is that over-all wages can rise only with the increase of capital investment, and then only if the increase of capital investment is greater than the growth of the labor force. Yet, such truths are unappreciated in the halls of government and in many other centers of influence—in most churches and schools, for example. Hence, the march of "false separatism"—wages vs. profits, labor vs. management, or, in Marxian terms,proletariat vs. bourgeoisie. Such induced hostility is misguided, misconstrued, and completely unwarranted.
As Sylvester Petro concludes in true libertarian spirit, only a return to the free market, to free and responsible trade unionism, can improve the situation.
A Corresponding Duty
William Graham Sumner, What Social Classes Owe to Each Other
There is a beautiful notion afloat in our literature and in the minds of our people that men are born to certain "natural rights." If that were true, there would be something on earth which was got for nothing, and this world would not be the place it is at all. The fact is, that there is no right whatever inherited by man which has not an equivalent and corresponding duty by the side of it, as the price of it. The rights, advantages, capital, knowledge, and all other goods which we inherit from past generations have been won by the struggles and sufferings of past generations; and the fact that the race lives, though men die, and that the race can by heredity accumulate within some cycle its victories over Nature, is one of the facts which make civilization possible. The struggles of the race as a whole produce the possessions of the race as a whole. Something for nothing is not to be found on earth.