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Tuesday, September 26, 2023

The Fundamental Problem with Unions According to Leonard Read

Understanding the argument for voluntary arrangements with regard to beans helps us understand the same argument for voluntary labor market arrangements.

Image Credit: Janno Nivergall - Pixabay

Leonard Read, founder of the Foundation for Economic Education, was totally committed to the proposition that liberty, and the private property that enabled it, is more moral and more productive than any alternative means upon which to organize society. Given that labor services are one area in which a great many infringements on our self-ownership are imposed, Read focused a good deal of attention there.

Labor unions were lauded quite a bit this past Labor Day (see, for instance, the first ever Treasury Department “study” claiming to demonstrate how beneficial they are, primarily by ignoring a cornucopia of evidence and abusive powers that did not fit that mold). In contrast to such rhetoric, Read employed an analogy to beans to evaluate such abuses. In Chapters 10 (“Getting to know beans”) and 11 (“Games we play with labor”) of his 1970 book Talking to Myself, he first illustrated that labor services were not “different” than beans or any other commodity in any way that justifies overriding free labor markets, despite how commonly it is done. He then played on the expression “you don’t know beans” to argue that those who promoted such “special” exceptions for labor didn’t understand, or didn’t care about, liberty.

In “Getting to know beans,” Read began with how labor unions, despite being obvious restraints on trade, were exempted from antitrust laws that apply to every other area of commerce. Labor was simply asserted to not be a commodity.

If we knew beans…we would know that labor is a commodity…[But according to the 1914 Clayton Antitrust Act] “The labor of a human being is not a commodity or article of commerce.”

If labor is not a commodity, then the argument seems to be its price (wage) ought not to be determined by competitive forces of supply and demand in an open market.

This, however, confuses laborers with labor services.

A laborer…is not a commodity…But the labor or work of a human being…is a commodity. About this there should be no argument among those who respect the dignity of every man and would have him free to buy and sell in the open market.

So why are the principles of liberty that should be applied to labor services no different than those applicable to beans or any other commodity?

We quite properly regard a bag of beans as a commodity. But what is a bag of beans, really?…a manifestation of numerous forms of labor applied to the good earth.

Labor, thus, is a commodity precisely as is the bag of beans.

All except socialist planners will agree that a bag of beans should go to market and find its price at whatever level free and willing exchange dictates. But very few in today’s world… agree that a laborer’s labor should find its price in this manner.

In other words, understanding the argument for voluntary arrangements with regard to beans helps us understand the same argument for voluntary labor market arrangements. In both cases, increasing the attractiveness of what one offers toward meeting others’ needs, without violating anyone else’s rights, is the means to advancing producers’ interests by advancing those of their customers.

These confusions as to the nature of labor lead to mischief when we institutionalize the confusions…Instead of a concentration on the improvement of labor and its market attractiveness, the movement is toward monopoly, a forming of cartels.

[But] there isn’t a single [person] who really believes that a laborer should be paid more for his labor than a free and unfettered market has to offer…if we test their beliefs by their actions.

Everyone…shops around for bargains…[essentially] attempting to buy labor as cheaply as he possibly can, for that can of beans is but the manifestation of countless labor bits applied to the bounties of the good earth.

Were the actions of these people consistent with their pronouncements backed by coercion, they would…insist on paying more for labor than the free market offers.

It is human nature and common sense for every bidder to buy services [directly or as embodied as goods] as cheaply as he can….and the competitive bidding for [workers’] scarce and valuable resource is the only way in the world for the laborer to obtain the full value for his services and fully enjoy the manifold blessings of freedom.

Then, in “Games we play with labor,” Read connects understanding how labor should be treated like beans—i.e., in free markets—to the fact that respecting owners’ private property rights in individuals’ labor services is perhaps even more important than it is for other goods and services.

If anything can be earmarked as one’s own…labor according to the laborer’s choice is it; nothing is more surely private property.

Labor…is the human asset from which all other assets flow.

Thus, labor according to the laborer’s choice is asset number one and should, perforce, rank number one in…protection. But does it? Indeed not!

That your labor is yours is flagrantly denied.

Whoever you are, you advance your own interest and the interest of others better when investing your labor according to your lights.

That, then, is connected to unions’ denial of workers’ ownership of their labor services.

Divestment…is played on an enormous scale…in the case of organized labor. As with all cartels, the labor union today is really a branch of the Federal government, for its many special privileges are government grants…to act coercively.

The principled role of government is to secure each person’s right to life—labor being an extension of life. This to say…government’s function is to protect private property…to secure labor against expropriation by any person or organization.

Plainly, the Federal government has…reversed its position…in the place of securing labor…substituting an unprincipled for a principled role.

How does this play out?

Labor unions have a standard formula. First, the government grants special privileges and immunities. Then workers in various trades are organized…and each union hierarchy, after winning an election, speaks authoritatively for all members—even for the minority…This is euphemistically referred to as “collective bargaining.”

The unions bargain for—demand—above-market wages, more and more fringe benefits (which are really wages), and fewer hours of work. When the union side of the “bargain” is not acceded to…force or threat of force is employed to keep others from taking the jobs the strikers have “vacated.” This coercive tactic—the strike—rather than economic reasoning, is the language they use to persuade.

These…union members exert less, not more, labor—and for more money. If they get more [purchasing power], someone else must get less—be divested of a portion of his income or property. So it is that non-union workers are, in one way or another, divested of a portion of their earnings to make up the union members’ “gains.”

When some forcibly take a disproportionate share of the pie for themselves, there are only smaller pieces for the others.

Leonard Read argued that when we fail to see that the same property rights and freedom principles apply to labor services as to the goods that we seek to purchase, we prove we either don’t know beans about those principles or we are willing to override them to advance our own interests at their expense. Such government-sponsored abuse not only abandons citizens’ desires for mutual protection, it becomes the primary means of violating those desires. And unlike the many ways Americans’ “union man” president is trying to dramatically increase the abuses unions can impose on workers, dressed up as some sort of boon to society, Read saw that the appropriate response was instead to undo the special privileges that enabled such abuses, which would advance our general welfare rather than advancing the welfare of some by harming others equally entitled to protection.

As government policies seem to be moving rapidly away from Leonard Read’s insights, it is worth focusing our attention more seriously on them.

Talking to Myself is available for free on FEE’s website.

  • Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network.

    In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).