All Commentary
Thursday, October 1, 1987

Do Unions Have a Death Wish?

Dr. Rydenfelt is a professor of economics at the University of Lund in Sweden.

Hans Vaihinger, known for his “as-if” philosophy, stated that researchers and philosophers sometimes have to work with “crazy” assumptions. Thus, Copernicus assumed that the earth is a sphere, although almost everyone living at the time was convinced that the world is flat. In a similar fashion, Sigmund Freud concluded that the behavior of certain people could be explained only by assuming that they have a death wish, contrary to the common assumption of a general instinct for self-preservation.

In recent years, many labor unions have behaved in a manner which can only be described as self-destructive. Can it be that unions, which have attained special privileges through the political process, are abusing their privileges to the point that they are destroying the public confidence and legislative support which have been the source of their power?

Let us consider three episodes of union behavior which seem to exhibit a death wish.

Unions and the Swedish Shipping Industry

According to the American economist, Mancur Olson (The Rise and Decline of Nations, 1982), powerful organizations in unholy alliances with strong governments have been the primary cause of the economic stagnation which has gripped the Western World during the last fifteen years. There is no better example than the strangulation of Swedish shipping.

Since the mid-1970s, shippers all over the world have suffered from an overcapacity which has idled vessels and depressed shipping rates. If the market had been allowed to adjust, overproduction would have been eliminated quickly. In free markets private firms have to adapt supply to demand, because overproduction means losses. But the unions were able to extort large subsidies from the different Swedish governments—socialist as well as non-socialist—to preserve employment in the shipyards. Of course, they realized that production had to be cut, but they hoped that those burdens would be borne by other nations.

As orders for Swedish ships declined, more and more state subsidies were granted. Orders that didn’t cover half the building costs were accepted, and finally, ships were produced without any orders at all. Despite the huge subsidies, all Swedish shipyards eventually had to be shut down.

With other countries subsidizing their own ship-building industries, the oversupply of ships grew worse. Freight rates plunged and the Swedish shipping industry called upon Swedish maritime unions to cooperate in cutting costs. The unions, however, with support from the Swedish government, were able to block meaningful cuts.

The ship owners soon realized that sailing under so-called convenience flags (Liberia, Panama, etc.) was their only hope for survival. The Swedish sailors were offered the same net wages, after taxes, that they would have received in ships under Swedish flags. However, they would have lost their government-guaranteed privileges—minimum crews, extra holidays, etc.—losses they refused to accept. Instead, they extorted from the government another privilege, a law prohibiting ships owned by Swedes to sail under convenience flags.

The only resource for the ship owners, threatened by bankruptcy, was a gradual sale of their ships to companies in other countries—a forced sale in a depressed market. The Swedish merchant marine, which ten years ago measured 13 million deadweight-tons, is now reduced to 2.5 million tons.

In Human Action (1949) Ludwig von Mises maintains that government-granted special privileges, designed to favor certain groups, often wind up hurting the groups they are supposed to help. The Swedish regulations which prohibited Swedish ships from sailing under convenience flags are an obvious example. Designed to aid the Swedish maritime unions, they combined with other regulations to destroy the very jobs they were supposed to save. The unions, who agitated for these regulations, acted in a manner which is perhaps best characterized as displaying an economic death wish.

Unions and the British Printing Industry

The British printing industry offers another example of the self-destructive behavior of unions in defending the privileges of their members. The printers always were an aristocracy among workers, so well organized and prepared to fight for their interests that the employers were forced to buy production peace at very high prices.

Their unions fought a last and bitter battle for their privileges in 1986-1987—privileges in cluding automatic life tenure, job-assignment rights, and wage scales higher than those for most reporters. The basic issue was the introduction of labor-saving technology. The printers refused to use the new technology, and claimed the exclusive right to continue to work with the outdated technology that had granted them a key position in the newspaper industry.

The outcome of the fight meant life or death for several large British newspapers, that had suffered losses for many years and were near bankruptcy. The new technology was their only chance for survival.

After years of vain negotiations, Rupert Murdoch, who published four large newspapers, had to sidestep the unions. At Wapping in the harbor district of eastern London he had a new printing office built, and in January 1986 he moved with his newspaper production (34 million copies a week) from Fleet Street to Wapping. At the same time he fired 5,500 striking print workers, whom he replaced with workers from the less militant electricians’ union. The printers had been offered a generous economic package, which they refused to accept. The chairman of their union federation, Brenda Dean, realized that this offer was their last chance for an acceptable agreement, but a majority of union hawks chose to continue to strike.

British union members have always had the special privilege—unlike other citizens—to apply physical force against non-strikers and other adversaries in labor conflicts. Although not formally legal, the right functioned in practice as a legal right, accepted by the police and the courts. Of course, this was a very remarkable privilege, fully comparable to the privileges of the old European nobility.

The Thatcher government, however, abolished this privilege by means of laws prohibiting all physical force in labor conflicts—“violent picketing” included. According to union tradition, strike-breakers are to be treated like outlaws without legal rights. But only in fascist states can such legal discrimination exist. In a law-governed society all citizens should be protected by law.

When the fired printers—in spite of the new laws—attacked non-strikers as well as the Wapping office, the government ordered police to stop the attacks. The conflict, including a siege of the Wapping office, continued for more than a year. With empty strike funds and threatened with high compensation claims against law-breaking members, the printers and their union had to surrender unconditionally in February 1987.

Unions and The British Mining Industry

Still another illustration of union behavior patterns can be found in the strike of 120,000 British coal miners—out of a total number of 180,000—between March 1984 and March 1985. The strikers did not fight for higher wages. Their strike was a last desperate effort to stop the gradual closing down of the coal mining industry. At the nationalization in 1947, roughly 1,000 mines were being worked, a number that had shrunk to 170 by 1984. Simultaneously, the number of miners had decreased from 600,000 to 180,000.

The principal cause of the decline was the emergence of oil as a cheaper and better substitute for coal. When the British government tried to slow the substitution of oil for coal in industry by means of tariffs, taxes, and prohibitions on oil, energy prices in British industry rose above the prices in competing countries. This had a devastating impact on Britain’s ability to compete.

The mines that remained open were sustaining heavy losses which had to be made up by massive subsidies. But the striking miners insisted that mine closings be stopped and current production levels maintained. What they sought, in fact, were new privileges at the expense of the coal industry and the British taxpayers.

When the striking British miners, after a year-long conflict, abandoned their strike in March 1985, this was perhaps the greatest union defeat in British history. This defeat together with the defeat of the printers in February 1987 meant, in fact, a turn of the tide. The British union movement may never recover.

With strong organizations and government-granted privileges, the unions in their heydays had functioned like power blocs—states within states. But power leads to abuse, and the more power the more abuse. As a general rule, the privileged classes indulge in wishful thinking and interpret their acts of abuse as wise and just policies. But more and more people have been shocked by the union abuse of power. And in a democratic society, the turn of public opinion is bound to have consequences.