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Thursday, April 21, 2011

Wisconsin Labor Brouhaha

Wisconsin’s been through quite a row. The new governor, elected without the support of most government-employee unions, proposed to cut back the scope of collective bargaining for most state workers. Gov. Scott Walker says the budget measure is needed to save money as well as government jobs for the debt-ridden state.

Is the governor’s proposal really an assault on human rights, as advocates of the Wisconsin state employees allege? (Their raucous protests at the state capitol were compared to rebellions in the Middle East.)

A few basics: In a freed market—meaning no privileges, no bailouts, no legal barriers to competition (domestic or foreign), no patents, no protected banking cartel, no regulatory impediments to self-employment, no vast tracts of government-held land—workers would be free to form voluntary associations called unions and business owners would be free to deal with them or not. If not, workers would be free to use nonviolent methods to gain recognition for their unions, including strike threats, boycotts, and sympathy strikes, as well as lesser measures. Violence by any party against any peaceful person would be illegitimate. Freedom of association would be complete, and coerced association would be beyond the pale.

Under such circumstances, everyone’s demands would be tempered by two powerful factors: freedom and competition. Pay workers too little, and they would be bid away by rivals or take up self-employment. Pay them too much, and rivals would attract customers with lower prices. Demand too high a wage, and risk losing out to someone else willing to work for less. Market rivalry would protect everyone from abuse, which is why competition—endless hosannas to it notwithstanding—is usually the target of government intervention.

Regarding government workers, it is a grave mistake to treat so-called public employment like other employment. Governments are monopolies that get their revenue by force, not through voluntary exchange. Thus they don’t face the market test of free competition, and they lack key price information with which to engage in economic calculation. The consequences of this difference are considerable.

As Freeman columnist Charles Baird notes, when government negotiates terms with employees, the parties are coconspirators in the looting of captive taxpayers. (Government employees aren’t taxpayers; they are tax-consumers.) Fundamentally they are not rivals but rather accomplices with a harmony of interests contrary to those of the taxpayers. This is aggravated by the fact that those unions are powerful political actors and rich sources of campaign contributions (the ultimate source of which is the taxpayers) and manpower. A politician negotiating with a government union whose election support he seeks is unlikely to have the taxpayers’ interest uppermost in mind.

Would the working conditions of state workers become intolerable if their unions were restricted? Not likely. But if they did, would it really be so bad if state governments had trouble finding employees?

So, does this mean that free-market advocates should side with the governor of Wisconsin? Actually, no.

State governments are in trouble because they spent profligately when revenues were rolling in and now can’t meet the pension and other obligations they’ve imposed on the taxpayers. As a result, they face a crisis of legitimacy. Some governors realize this and are trying to save the discredited system by trimming spending (for now) and making political hay by resisting the unions. The fiscal hawks even tout cutbacks as ways to produce more revenue in the future. Rarely do you hear a governor call for the shedding and demonopolization of functions like education. So this is largely a fight over how to preserve and divide the tax spoils.

* * *

What’s the Federal Reserve up to? The business news is abuzz with insider lingo like QE2, but what does it all mean? Ivan Pongracic, Jr., has been keeping close watch on what we like to call the Bureau of Counterfeiting.

Many people think the Fed is a private bank owned by the country’s bankers, who use it to profit off the American people. Hold on, Warren Gibson says. The Fed is bad enough without making up stories about it.

Imagine an honest child running a lemonade stand. Now imagine a bully who’s constantly proclaiming his good intentions as he puts the screws to the first child. Roger Koopman thinks this describes much of the U.S. economy.

Believing that government can manage an economy is like believing in leprechauns and unicorns, yet despite overwhelming evidence, people continue to do it. James Payne tries to figure out why.

Adam Smith is famous for his “invisible hand” metaphor, but he mentions it only once in each of his books—strangely, right about in the middle of each. Is there any significance to this? Mark Skousen thinks so.

Egyptians drove a dictator from power last winter, inspiring oppressed people throughout the Middle East and North Africa. What accounts for the sudden uprising after 30 years of subjugation? Nouh El Harmouzi traces its roots.

China is growing economically but not politically. The economy has been liberalized, but the country is still in the grip of a central government run by the Chinese Communist Party. James Dorn discusses China’s future in light of this contradiction.

When world trade revived after the fall of the Roman Empire, merchants from diverse cultures and countries needed a common legal system to peacefully resolve their contract disputes. What did they do? They generated their own—without government. Peter Leeson and Daniel Smith analyze the Law Merchant.

No one wants tainted food, but what’s the best way to prevent it: competition or government regulation? Speaking from experience, Paul Schwennesen makes the case for competition.

A lawsuit against Walmart could dramatically and unreasonably expand the number of class-action suits unless reversed by the U.S. Supreme Court. Wendy McElroy has the details.

Our columnists provide a cornucopia of keen insights. Lawrence Reed elaborates the benefits of competition. Donald Boudreaux debunks vulgar Keynesianism. Thomas Szasz undermines the psychiatric explanation for the attempted murder of a congresswoman. Burton Folsom, Jr., reviews the history of the income tax. John Stossel celebrates spontaneous order. Walter Williams scrutinizes poverty. And Aeon Skoble, reading the claim that war and taxes make America great, protests, “It Just Ain’t So!”

Our reviewers report on books covering the financial crisis, traffic jams, secular religions, and regulation.

—Sheldon Richman
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  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.