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The Trouble with Unions

by Christopher Chantrill
August 14, 2005 at 2:48 pm

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THE AMERICAN labor union movement has split again. Led by Andy Stern, the leader of the Service Employees International Union (SEIU), a rump of private sector unions has split off from the AFL-CIO, the convocation of all American unions. Stern believes that in order to grow the union movement should put more energy and resources into organizing and less into politics. In response John Sweeney, leader of the AFL-CIO, responded with a call for the AFL-CIO to organize America’s great non-union corporations like “Wal-Mart, Comcast, Clear Channel and Toyota.”

The unions need to do something. Their private-sector membership has declined from 35 percent of the labor force in 1955 to about 8 percent today. But what should they do?

To answer that question we need to understand the history of organized labor, to understand why it flourished from the mid-nineteenth century to the mid-twentieth century, and why it has declined since then.

In the early nineteenth century labor unions were weak because the common law frowned upon any “combinations” in restraint of trade. But the spread of universal male suffrage in the United States began to whittle away at that legal disability, and by the 1840s in the United States working men had become a political force. Commonwealth v. Hunt established the right of workers in Massachusetts to combine in restraint of trade.

The legal gains didn’t help much at first because the severe business cycle of the era tended to wipe out unions during hard times. It was not till after the Civil War that things began to change. When the workers for the new railroads went on strike to protest wage cuts they discovered that they possessed a remarkable economic power. They controlled the heart that pumped the life-blood through the U.S. economy, and thus possessed the power to extract rent through the railroads from the American people. And from headline events like the Homestead steel strike and the Haymarket riots the union movement earned a public sympathy that pays dividends to this day.

In the 1930s John L. Lewis and Walter Reuther split off from the AFL and formed the CIO to put this two-pronged strategy to work on the great new engines of American prosperity, the auto industry and the steel industry. Because the U.S. market was somewhat isolated from the world economy, and the auto and steel companies were anyway the most advanced and efficient in the world, the CIO unions were able to demand and receive monopoly rents through their employers from the American people. Like the railroad strikes of the nineteenth century their strikes were experienced as national crises and the politicians encouraged, or “jaw-boned,” employers into meeting the demands of the workers. Thus did the unions grow to represent 35 percent of the private sector workforce.

But we who belong to the faith-based community that believes in economics understand that there was a problem with this happy setup. What would happen if competitors—say from Germany, from Japan, and even South Korea—arose to challenge, in price and quality, the products of the automobile cartel and the steel cartel? Our faith in economics tells us that the cartel would start to break up and lose the power to charge monopoly prices for its products and its labor. And so it did, although it took a little longer than might have been expected.

There was more. Workers began to understand that their real protection from the cold, cruel world of evil robber barons issued from the welfare state’s safety net and not from membership in a union. And the kinder, gentler business cycle of the last half-century has made people less fearful of economic ruin.

In response the labor movement expanded into an area of the economy where there still was an opportunity to extract monopoly rent: the government. While private sector union membership declined to 8 percent, public sector union membership grew to about the level that the private sector enjoyed fifty years ago. But the magic of monopoly is starting to affect the government sector: the unionized public-sector product is starting to feel as clunky and overpriced as the Detroit automobile of 1985.

The question organized labor faces is not who has the energy to organize the Wal-Marts and the Toyotas of the world. The question is whether the workers want to join a union, whether the targets have the market power to charge the American people monopoly rent for their workers, and whether Americans are ready to give up “Always Low Prices—Always.”

And think about the average tree-hugging liberal who rushed out to be the first in her yeasty Victorian neighborhood to drive a Toyota Prius with Hybrid Synergy Drive®. Suppose she and her friends at the book club just feel safer driving a non-union automobile?

Christopher Chantrill blogs at americanmanifestobook.blogspot.com.

Buy his Road to the Middle Class.

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Faith & Purpose

“When we began first to preach these things, the people appeared as awakened from the sleep of ages—they seemed to see for the first time that they were responsible beings...”
Finke, Stark, The Churching of America, 1776-1990

Mutual Aid

In 1911... at least nine million of the 12 million covered by national insurance were already members of voluntary sick pay schemes. A similar proportion were also eligible for medical care.
Green, Reinventing Civil Society

Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State

Living Under Law

Law being too tenuous to rely upon in [Ulster and the Scottish borderlands], people developed patterns of settling differences by personal fighting and family feuds.
Thomas Sowell, Conquests and Cultures

German Philosophy

The primary thing to keep in mind about German and Russian thought since 1800 is that it takes for granted that the Cartesian, Lockean or Humean scientific and philosophical conception of man and nature... has been shown by indisputable evidence to be inadequate. 
F.S.C. Northrop, The Meeting of East and West

Knowledge

Inquiry does not start unless there is a problem... It is the problem and its characteristics revealed by analysis which guides one first to the relevant facts and then, once the relevant facts are known, to the relevant hypotheses.
F.S.C. Northrop, The Logic of the Sciences and the Humanities

Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.”  —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison

Democratic Capitalism

I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism

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The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action

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[In the] higher Christian churches... they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm

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James M. Ault, Jr., Spirit and Flesh

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The recognition and integration of extralegal property rights [in the Homestead Act] was a key element in the United States becoming the most important market economy and producer of capital in the world.
Hernando de Soto, The Mystery of Capital

presented by Christopher Chantrill

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