All Commentary
Monday, February 1, 1988

Howard Dickmans Industrial Democracy in America

Mr. Bidinotto is a free-lance writer in New Castle, Pennsylvania.

Of the enduring myths of economic history, few have hung on as tenaciously as the necessity and desirability of labor unions. Consider a recent editorial in my hometown newspaper, typical of the conventional wisdom;

“While unions today have a somewhat tarnished reputation, most historians generally concede that they played a key role in American economic and social advancement. Unions fought for higher wages and improved benefits for workers, allowing them to participate in the American dream. More money also meant workers could purchase more goods, fueling a consumer economy.

“Without unions and their system of collective bargaining, the U.S. could have lapsed into labor chaos and class warfare. These conditions in other countries led to the establishment of communist-inspired revolutions.” (The New Castle (Pa.) News, August 14, 1987)

The editorial is correct about one thing. Today, there is general agreement (even from many on the political right) that, while unions may be too powerful, back in the days of “total laissez faire” they were a necessary counterweight to the unchecked power of “robber baron” employers. Unions are widely credited with raising the standard of living for millions of workers; with introducing democracy into the workplace; with protecting helpless laborers from being devoured by rapacious businessmen and blind market forces.

Until now, there has been scant literature presenting a systematic, comprehensive challenge to these claims. But some years ago, eminent labor economist Sylvester Petro suggested a project to Howard Dickman. American trade unionism—especially its economic and intellectual rationales—deserved a dissection comparable to Ludwig von Mises’ analysis in Socialism.

What were the ideas, the intellectual influences, that shaped today’s labor policies? What popular myths and misconceptions gave rise to those ideas? When did they begin—and where have they led us?

Petro obviously had great confidence in his young listener. Dr. Dickman was then only in his mid-twenties; and his specialty was corporate, not labor, history. But he had an impressive familiarity with the theory and history of the free society, and the diligent temperament of a true scholar. He accepted the commission and went to work.

It would be ten years before the results of his labors were published. Now, readers can see for themselves that Petro’s trust was not misplaced, with the appearance of Industrial Democracy in America: Ideological Origins of National Labor Relations Policy (La Salle, Illinois: Open Court, 1987, $32.95 cloth, $16.95 paper).

Dickman’s book is a true landmark—a grand synthesis of history and analysis, an extraordinary intellectual account of trade unionism and collective bargaining. In its breathtaking scholarship alone, it rivals or surpasses such standard works as Milton Derber’s The American Idea of Industrial Democracy and such impressive general intellectual surveys as Sidney Fine’s Laissez Faire and the General Welfare State or Arthur Ekirch’s Decline of American Liberalism. And among the distinguished works written by pro-capitalist scholars, it compares with Dominick Armentano’s Antitrust and Monopoly, Robert Hessen’s In Defense of the Corporation, and Thomas Sowell’s Marxism—except that it is far more ambitious, in aims and execution.

Building on the premise that ideas are the tidal forces underlying the course of events, the author explicitly avoids a mere “blow-by-blow history of the organized labor movement in America.” Rather, he examines the pedigree of “industrial democracy” as a concept, focusing on the thinkers and theories which made unions and strikes possible. Quoting Friedrich Hayek, Dickman makes clear that his aim is to examine ideas which “often have crept in almost unnoticed and have achieved their dominance without serious examination       “

There are several things unique about Dickman’s treatment of labor history. First, his own philosophical and economic framework is explicitly laissez-faire capitalism, building on the ideas of Ludwig von Mises, Ayn Rand, W. H. Hurt, Sylvester Petro, and Friedrich Hayek. This allows him to place labor relations policies within the much broader context of the general rise of anti-capitalistic, anti-competi-tive doctrines and institutions. And unlike others who have plowed the same field, Dickman begins not in Civil War America, but as far back as fourteenth-century Europe, “in order to track down the intellectual sources of industrial democratic thought to their wellsprings.”

From this unusual theoretical and historical vantage point, Industrial Democracy in America offers withering refutations of the historic, empirical, moral, legal, and economic arguments for compulsory collective bar gaining. The result is a comprehensive case against coercive unionism unprecedented in scope, rigor, and persuasiveness.

For example, Dickman challenges the historical claims typified by the newspaper editorial cited earlier. As he summarized for this writer:

“It is not true that unions were indispensable, that without unions workers would never rise. It is not true in history that most industrial violence was the fault of employers. And it is not true that unions were fighting for the working class.” TO refute these contentions, he traces the history of unions back to the medieval guild system.

The arguments offered for medieval guilds were strikingly similar to those put forth today for labor unions. “The guild monopoly was rationalized as necessary to protect the unsuspecting public from shoddy goods and unscrupulous artisans, on the theory that unrestricted competition would force producers and traders to cut corners to seize one another’s business and exploit the hapless consumer,” Dickman observes. “Guilds also existed to protect the social and economic status of merchants and craftsmen—probably their true raison d’ être. In a society which valued security over liberty, the guildsmen were entitled to a customary, secure position in the social order, a property in their job or way of life.”

“Owning” One’s Job

This premise of a property right to one’s occupation led inevitably to hostility toward free market competition, and ultimately to violence. Dickman cites accounts of fourteenth-cen-tury merchants waylaid for underselling competitors; of guild members hiring thugs to murder non-members who refused to be bound by guild rates; of frequent “bloody battles for the monopoly of work in a particular town,” as one historian put it. The premise of a proprietary interest in one’s job also led to the rewriting of history. Employers are typically portrayed as initiating industrial violence by depriving workers of their “rightful” jobs or wages while workers merely “fought back” for what was “theirs.”

Besides corrupt “rights” theories, economic arguments were advanced to buttress the pro-union position. There was the argument (endorsed by Adam Smith) that workers must be at a disadvantage when bargaining with employers; that labor was the cause and measure of all economic value (Smith’s “labor theory of value”); that laborers should get “the full product of their labor”; that business recessions occur when workers are not compensated enough to “buy back what they produce”; etc.

Dickman raises and challenges each of these contentions on economic grounds, displaying a formidable grasp of free market theory. Take just one example—the notion of the “competitive disadvantage” of workers bargaining with employers.

This remains a central pillar of the case for labor unions. Even Adam Smith argued that it “is not . . . difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms.” While in “the long-ran the workman may be as necessary to his master as his master is to him, . . . the necessity is not so immediate.” Dickman observes that such passages by capitalism’s founding father “constituted an important legacy to the radical socialist and syndicalist critics of capitalism—who purported to demonstrate that employers kept wages at subsistence . . . .”

But are workers, in fact, at a true disadvantage? Due to the mobility of capital, Dickman notes, “an above- normal profit due to a below-normal wage rate creates a competitive imbalance which employers will exploit by bidding wages up.” He quotes economist J. R. McCulloch, who pointed out that “a discrepancy of this kind could not be of long continuance. Additional capital would immediately begin to be attracted to the department where wages were low and profits high; and its owners would be obliged, in order to obtain labourers, to offer them higher wages. It is clear therefore, that if wages be unduly reduced in any branch of industry, they will be raised to their proper level without any effort on the part of the workmen, by the competition of the capitalists.”

Dickman also rigorously examines the even more basic collectivist moral premises upon which such economic theories frequently rest. He points out, for example, that Adam Smith’s well-known advocacy of self- interest, natural rights, and laissez faire was qualified and ambiguous; that Smith himself embodied the conflict between the premises of individual fights and social utilitarianism.

“The wise and virtuous man,” wrote Smith,”is at all times willing that his own private interest should be sacrificed to the public interest of his own particular order or society . . . [and] that the interest of this order or society should be sacrificed to the greater interest of the state or sovereignty of which it is only a subordinate part . . . [and] that all those inferior interests should be sacrificed to the greater interest of the universe . . . .”

Similarly, John Stuart Mill’s commitment to individual rights had a utilitarian escape clause. “All persons,” said Mill, “are deemed to have a right to equality of treatment, except when some recognised social expediency requires the reverse.”

It is impossible to discern any basic moral distinction between these two statements, and such anti- individualistic slogans as, “Ask not what your country can do for you; ask what you can do for your country”—or, “From each according to his ability, to each according to his needs.” Because such collectivist philosophical premises were shared even by capitalism’s most prominent defenders, they have remained largely unchallenged to this day. Dickman painstakingly isolates and dissects each of these in turn, as he traces their historical progression through academia, popular opinion and, eventually, into the law itself.

Of course, these isolated empirical, economic, and philosophical premises slowly congealed into full-blown theories, which Dickman broadly categorizes as “socialism” and “pluralism.” The heart of the book traces the origins, implications, and consequences of these two schools, both of which profoundly shaped the American union movement.

Socialism and Pluralism

These competing collectivist theories proposed differing forms of industrial organization. Under socialism, all the means of production would be under the exclusive control of society, via the central government. Most American unionists, such as Samuel Gompers, did not buy the socialist call for abolition of private property; they feared (correctly, as modern history has shown) that the socialist state can be as repressive of labor as of business. However, they did swallow much of the socialist critique of the competitive marketplace, particularly socialist theories of unemployment and class conflict, and its moral attack on the profit motive.

Competing with the socialists were the so-called pluralists, who were equally hostile to individual rights, but were suspicious of centralized state power. Their solution was to favor the “rights” of groups. “Pluralism . . . was a vision of industrial democracy that amounted to what we might dub ‘private government’—to a system in which the state would delegate to private social groups the traditionally sovereign legislative power to make rules for all individuals similarly situated in the economy—rules that overrode their contractual liberty,” Dickman explains.

Pluralism cut across the left-right spectrum. In its right-wing, or corporativist form, society “would be reorganized into compulsory economic groups that would conduct economic affairs under the supervision of the state—that is, some kind of tripartite entente of government, business, and labor unions.” (This, of course, was the form of collectivism that eventually led to fascism, and to modern industrial policy proposals.) “On the left, pluralism sought to eliminate the capitalist class and parcel out control of the economy between guilds or syndicates of workers and the state.” (This syndicalist or guild socialist approach led to the contemporary movement for “decentralized, participatory democracy,” in both the economy and society.)

One of the book’s mere peripheral triumphs is its unmasking the facade of collectivist benevolence. Before the advent of modern public relations techniques, socialists and syndicalists were more forthcoming about their nature and aims.

Thus early German socialist Johann Gottlieb Fichte spelled out the state’s ascetic expectations of the individual. “He who thinks at all of his own person and personal gratification, and desires any kind of life or being, or any joy of life, except in the Race and for the Race,” he wrote, is “at bottom, only a mean, base, and therefore unhappy man.”

French syndicalist Louis Blanc added: “If you are twice as strong as your neighbor it is a proof that nature has destined you to bear a double burden . . . . Weakness is the creditor of strength; ignorance of learning.” (Today, John Rawls says the same things, much more opaquely.)

Nor were such sentiments foreign to our shores. American socialist Edward Bellamy, in his famous utopian novel Looking Backward, proposed dealing decisively with any laborer shirking his work duties: “. . . the discipline of the industrial army is far too strict to allow anything whatever of the sort. A man able to do duty, and persistently refusing, is sentenced to solitary imprisonment on bread and water till he consents.”

These few samples from among many Dickman has unearthed suggest something of the animating spirit of modern collectivism, of which the labor movement has played a key part. It is a measure of the richness of his scholarship that these quotations are drawn not from the text, but from his exhaustively detailed footnotes, which are an education in themselves.

An Anti-Empirical Approach

Dickman’s methodological approach is as refreshingly unfashionable as are his conclusions. Because he takes ideas seriously, his approach is strongly anti-empirical—if we take “empirical” to mean dwelling on the concrete details of historical events. But if “empiricism” is simply taken to mean exhaustive scholarship, no one can fault him on that score.

Inevitably, his deliberate decision not to wallow in journalistic minutia affects the narrative, sometimes in startling ways. For instance, the book concludes with the effects of the National Labor Relations Act (Wagner Act) of 1935, essentially ignoring subsequent developments. That is because Dickman regards the Wagner Act as an ideological “watershed in American life,” which not only “drastically altered the legal framework of the market economy in America,” but also “transformed the very meaning of unionism and collective bargaining as they have hitherto been known.”

Later efforts to mitigate its onerous consequences—e, g., the Taft-Hartley Act (1947) and the Landrum-Griffin Act (1959)—were largely cosmetic, he maintains. The ideological war which he chronicles really ended with Wagner. It is that law’s basic premises which still dominate conventional thinking on labor unions, and have a continuing impact in such areas as civil rights policies and affirmative action regulations governing the workplace.

The decision not to bring the account “up to date” then, is in keeping with his thematic intent, his focus on ideas—even though it is a decision which more conventional empiricists may criticize. But in any event, Dickman succeeds brilliantly in showing how abstract theories become embodied in the concrete reality of human actions, institutions and, eventually, laws. To supplement his analysis, he appends the text of thirteen pivotal pieces of Western labor legislation, from the Ordinance of Labourers of 1349, to the Wagner Act of 1935. (The Fascist Labor Charter of 1927 is also reprinted, for its unnerving similarities to American labor legislation.) The reader can see for himself the ultimate destination of “mere” theories.

Free market advocates have always been long on theory, but too often short on scholarship. Dickman’s formidable work (complete with 158 pages of appendices, footnotes, and index) shows the powerful persuasiveness of a union of the two approaches. Industrial Democracy in America is a revolutionary contribution to the literature of industrial relations. Its long-term effects cannot yet be gauged; but for our time, Howard Dickman has provided scholars and thinking laymen with a brilliant interpretive alternative to popular interventionist mythology. And he has exposed, with thundering finality, the fascistic portents inherent in “our quasi-syndicalist system of industrial democracy.”