Union Monopoly vs. Capitalism

November 14, 1949

It was inevitable from the start that when the steel and coal strikes were settled it would be essentially on the union leaders’ terms. There may have been some doubt as to the exact amount by which they would force up labor costs, but there was never any doubt that would force them up.

Government mediators might hail the capitulation of Bethlehem Steel as a triumph for “voluntary procedures.” But when an employer makes such concessions only after his plants have been closed down for a month by a strike, after a Presidential board has put the heat on him by “recommending” just such concessions, and when experience suggests the possibility of government seizure, it becomes hard for most of us to distinguish between such “voluntary” concessions and concessions made under duress.

As a result of the unrestrained power of industrywide unions a new national pattern is being established under which employers will feel virtually compelled to add about 10 cents an hour to their wage costs.

This victory is likely to be a Pyrrhic one for labor itself. On top of the new minimum-wage boost, it will probably either bring about unemployment or force a further monetary inflation to make the higher labor costs payable. And even if that result doesn’t come right now, we may be sure the national union leaders will keep repeating the pattern until it does.

The dangers of industrywide bargaining have been forcibly pointed out in a pamphlet by Prof. Leo Wolman of Columbia.^* They are now further emphasized in a book by Prof. Charles E. Lindblom of Yale^†. It is Professor Lindblom’s startling thesis that “unionism is destroying the competitive price system.”

“The strike,” he points out, “paralyzes production, and it is dramatic. But the real labor problem is its aftermath. For if wage disputes call a halt to production temporarily, their settlement may disorganize it permanently. Unionism will destroy the price system by what it wins rather than by the struggle to win it. It sabotages the competitive order, not because the economy cannot weather the disturbance of work stoppages but because it cannot produce high output and employment at union-wage rates.”

What are we going to do about it? The first step is to get the public to recognize clearly the real nature of what is now happening. As Professor Wolman has summed it up, the industrywide unions “can today paralyze the economic life of the country or dictate the terms on which they refrain from doing so.” The next step is to stop appointing so-called “fact-finding” boards whose decisions are inevitably political and who impose something close to government wage fixing. And the next step is to take away from any union leader the arbitrary power to bring on the kind of nationwide crisis that creates a demand for direct government intervention.

The original Hartley bill, passed by the House in 1947 by a vote of 308 to 107, removed the compulsion on the employer to recognize and deal with industrywide unions. If a union leader represented the workers of one employer, for example, the Labor Board was not to certify him as eligible to represent the workers of any competing employer, unless each employer regularly employed less than 100 men and the competing plants were less than 50 miles apart. A similar provision failed in the Senate by only a single vote.

If Congress were now to pass such an amendment to the Wagner-Taft-Hartley act, it would not undo, of course, all the damage its bad legislation has done. But it would be an excellent beginning. If even this is not made, we cannot escape Professor Lindblom’s grim conclusion: “Union monopoly destroys the price system because it produces . . . waste, unemployment, inflation, or all combined . . . to a degree which the economy cannot survive.”

^* Industry-Wide Bargaining (63 pages, Foundation for Economic Education, Irvington, N. Y., 75 cents).

^†Unions and Capitalism (267 pages. Yale University Press, $3.75).