How the Spiral Spins

This article is reprinted by permission from Newsweek, August 31, 1959. Mr. Hazlitt wrote the column during the recent steel strike, but the ideas will apply equally well to any sub­sequent acts of union coercion.

For years we have been talking about the inflationary wage-price spiral. But Washington (by which is meant both the majority in Congress and officials in the Ad­ministration) talks about it for the most part as if it were some dreadful visitation from without, some uncontrollable act of nature, rather than something brought about by its own policies.

Let us see just how those poli­cies, over the last 25 years, have produced the wage-price spiral. First of all, under a series of laws beginning most notably with the Norris-La Guardia Act of 1932, followed by the Wagner Act and by its later modification, the Taft-Hartley Act, we decided that labor troubles developed chiefly because there was not enough unionization and because unions were not strong enough.

Therefore, we in effect put the federal government into the union-organizing business. We compelled employers to deal exclusively with the unions thus quasi-officially set up, regardless of how unreason­able the demands of these unions might turn out to be. Though il­legalizing all efforts to deny em­ployment to workers who joined unions, we explicitly legalized ar­rangements to deny employment to workers who did not join unions.

The Right To Coerce

But worst of all, we gave to the unions and union members a privi­lege not granted to any other as­sociations or individuals—the power of private coercion and in­timidation. By the Norris-La Guardia Act we in effect pre­vented either employers or non­union employees from going to the federal courts for immediate re­lief from irreparable injury. We refuse, contrary to legal practice in every other field, to hold a union liable for the acts of its agents. We tolerate mass picketing, which is intimidating and coercive, pre­venting employers from offering to other workers the jobs abandoned by strikers, and preventing other workers from applying for such jobs. And then we are astonished and indignant when these special privileges, against which we pro­vide no effective legal protection, are “abused.”

The inevitable result of these laws is that we have built up huge unions with the power to bring basic national industries to a halt overnight. And when they have done this, we can think of no way of getting an industry started again except by giving in to the demands of the union leaders who have called the strike.

This accounts for the upward push on money wage-rates. But it does not account for the inflation­ary spiral. The effect of pushing wage-rates above the level of mar­ginal labor productivity, taken by itself, would simply be to create unemployment. But as F. A. Hayek has put it: “Since it has become the generally accepted doctrine that it is the duty of the monetary authorities to provide enough credit to secure full employment, whatever the wage level, and this duty has in fact been imposed upon the monetary authorities by statute, the power of the unions to push up money wages cannot but lead to continuous, progressive in­flation.”

Not Facing the Issue

Soon or late our federal law­makers and administrators must face up to the labor-union-boss dic­tatorship and the wage-price spiral that their own laws and actions have created. But they refuse to do this when each new crisis arises. When a nationwide steel strike is prolonged they become panicky. They seek to settle it by the only means that seem possible to them—by giving in once more to union demands, by granting still another wage increase and setting off a new upward wage-price spiral.

Senators demand the President appoint a “fact-finding” board to “recommend,” i.e., to impose, in effect, compulsory arbitration that would compel the employers to grant another increase to employ­ees who (at $3.10 an hour, com­pared with average factory earn­ings of $2.23 an hour) are already among the highest paid workers in the country.

Thus one government interven­tion begets a further government intervention. Because government has failed in its primary task—that of preventing private coer­cion—senators ask, in effect, for price and wage-fixing; and we are driven toward totalitarian con­trols.