All Commentary
Monday, June 1, 1970

A Reviewer’s Notebook – 1970/6

In the midst of postal strikes, teamsters’ stoppages, and predic­tions of upheavals in the auto workers’ union, it is reassuring to read Merryle Stanley Rukeyser’s Collective Bargaining: the Power to Destroy (Delacorte Press, $7.50). Mr. Rukeyser, a long-term student of the labor movement, has such a sublime trust in the mar­ket that he actually undermines the part of his title that speaks of “the power to destroy.” What he is saying is that sanity will pre­vail as long as the customer is the final arbiter of both wages and prices.

Before dealing with the good news in this book, however, the reviewer must admit that a lot of “ruin” can happen before sanity takes over. Mr. Rukeyser is quite aware that the unions, in putting their faith in Keynesian doctrinesthat lead to perpetual inflation, can hurt the customer badly be­fore he reacts. Mr. Rukeyser doesn’t think much of AFL-CIO boss George Meany’s “diversion­ary” attack on profits. The general labor animus against Lemuel Boul­ware’s efforts to inject some com­mon honesty into collective bar­gaining tactics bothers Mr. Ruck­eyser. But in the final analysis this is a supremely hopeful book. It sees prudence taking over in la­bor-management relations before there is any disastrous plunge over the precipice.

The sophisticated modern em­ployer, says Mr. Rukeyser, is no longer a labor-baiter intent upon “liquidating” the unions. The pru­dent employer, in his opinion, knows that he is only a middle­man who stands between the worker and the customer. The problem is always to reach a com­promise on wages that will not push costs so high that the cus­tomer will revolt. At the same time labor must be given the in­centive to reduce the unit cost of producing something that the cus­tomer will like. The far-seeing manager will try to remain just a bit ahead of the labor market rather than behind, for he knows that “lagard employers get the least productive workers.”

Man vs. Machine

Mr. Rukeyser realizes that am­bitious labor leaders, fighting to remain in control of their unions, will often press management too hard. In cases where the unions have monopoly power this could result in an industry pricing itself into bankruptcy. But instances of actual union monopoly are few and far between. The truth, says Mr. Rukeyser, is that the human worker is always in competition with machines. It is not “man hours” that provide an accurate measure of productivity; it is “man-tool hours.” When unions force costs up faster than produc­tivity rises, the whip is on man­agement to invest in the latest thing in automation. The superior tool cuts the unit cost of produc­tion by putting men out of work.

The tenure of employment, Mr. Rukeyser insists in several places in his book, depends on ratifica­tion by the customer of manage­ment’s judgment about working conditions. Mr. Rukeyser’s analy­sis follows the economics of Lud­wig von Mises. “The open market­place,” he says, “is a quasi-demo­cratic voting booth where con­sumer plebiscites continuously take place.”

It is Mr. Rukeyser’s hope that both management and labor in the future will concur in the desira­bility of establishing “conditions for optimum growth.” The union effort should be to “expertly de­termine what slice of the growth-income pie can go to employees without impairing expansion.” It follows from this that the unions should welcome what is now called “Boulwarism.”

End the Tomfoolery

As students of post-World War II labor-management history know, Lemuel Boulware of Gen­eral Electric flabbergasted the unions by advising management to “do right voluntarily.” The Boulware idea was to open up a continuing dialogue between rank and file union workers and a com­pany’s cost accountants and per­sonnel directors. Under “Boulwar­ism” information about a com­pany’s competitive position would be made available to the workers before negotiations. With everything on the table, a company would be able to make a “fair, firm” offer to the union. The offer would be subject to change in de­tail, but it would be up to the union negotiators to show where it would not be hurtful to the industry and to the workers themselves if any drastic alterations were accepted. There would be an end to flum­mery under the Boulware dispen­sation. No more phony preliminary offers, and no more phony de­mands, all pitched toward making the union negotiators look like in­dispensable supermen in the eyes of a hoodwinked rank and file after a compromise had been reached.

It is a sad commentary that the unions have never accepted Boul­warism. Still, Mr. Rukeyser puts his trust in the final triumph of the scientific approach. He doesn’t think that politicians in Washing­ton can be trusted to make real­istic economic decisions. Unions and management must come to ac­cept the “new ideals of collective consultation.” “Boulwarism,” per­haps under a different name, will become the general working practice.

David McDonald, former head of the United Steel Workers, was groping toward the Boulware con­cept when I. W. Abel defeated him for the presidency of the steel union. But, despite this setback the “innovation of all-year-round consultative machinery,” as a re­placement for “eleventh-hour crisis bargaining,” had growing support among the steelworkers. Former UN Ambassador Arthur Goldberg, once a prominent union attorney himself, brought forth the idea of a Human Relations Committee, which is “Boulwarism” with a union label cachet.

Harmony of Interests

Mr. Rukeyser knows that the Marxian idea of a perpetual class conflict dies hard. But he cites in­stances where Henry Carey’s “har­mony of the interests” has routed the Marxists. When the Federal Communications Commission was threatening an investigation of telephone rates, Joseph Beirne, the head of the AFL-CIO Bell Com­pany union, publicly accused the FCC staff of trying to punish the American Telephone and Tele­graph Company for success. Mr. Beirne made the point that the government was hoping to reward Western Union for being a less powerful competitor by making things difficult for the more effi­cient AT&T. The FCC had pro­posed to divest AT&T of its leased wire services and to turn these over exclusively to Western Union, which would have ended customers’ choice in TWX, or leased wire, services. The ridiculous thing about the whole busi­ness was that the FCC itself had approved the rates for the AT&T TWX services. If they were so low as to provide unfair competi­tion, it was the FCC’s own fault.

Mr. Rukeyser thinks it is up to the unions and management to make common and enlightened cause in fighting the drift to what he calls “American Falangism.” Falangism, of course, is what they have in Franco’s Spain, where the symbols of free enterprise are re­tained but the government makes the crucial economic decisions. When President Kennedy substi­tuted his judgment for that of the market in the steel price contro­versy of 1962, he was acting as a Falangist. The attempts to substi­tute compulsory restraints for free bargaining are also in the Falangist pattern. It is because of the menace to “both their houses” that labor and management have a common interest in moving toward “collective consultation” as a substitute for “primitive col­lective bargaining.” 

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.