The Three Faces of Unionism; H. Sennholz

Hans F. Sennholz The Three Faces of Unionism MYTHSsurround one of the most im portant yet least understood insti tutions of contemporary society-la bor unions. These myths persist, not only because the critics are weary of facing and exploding them again and again, but also because labor orga nizations have a vested interest in reinforcing them. The very existence of unions depends on the perpetua tion of the myths that comprise the labor union ideology. The core of the ideology is the no tion that the market order does not function fairly and equitably and that it victimizes working people. Adam Smith remarked that workers Dr. Hans Sennholz heads the Department of Econom ics at Grove City College in Pennsylvania. He is a noted writer and lecturer on economic, political and monetary affairs. 564 labor under a disadvantage in their dealings with wealthy employers. Jean-Baptiste Say, J. R. McCulloch, and John Stuart Mill echoed the no tion. Alfred Marshall confirmed it, as did A. C. Pigou and nearly all con temporary economists. They all com miserated with laboring people and, therefore, extolled the benefits of la bor organizations for the purpose of removing the disadvantage. They often stood shoulder to shoulder with socialistic writers who hailed labor organizations as ramparts against the evils of competition and as main springs of social justice.

The union ideology is as animate and alive today as it was at its be ginning. Most contemporary econo mists still cling to the age-old no tions of employer holding power and THE THREE FACES OF UNIONISM 565 labor inability to wait, or to some aged exploitation doctrine. But in contrast to yesteryear, unionism now is deeply entrenched in tradition, legislation and jurisdiction. Labor unions are well-organized and well-financed institutions that do everything in their power to pre serve their existence. To ensure their survival, yea, their growth and ex pansion, they pursue every feasible option along ideological, economic and political lines. Struggling val iantly for self-protection and self preservation, they have assumed ambidextrous features and faces, which may predominate differently over time, according to the strength and kind of resistance confronting union efforts. But regardless of the predominant face, the activities of labor unions are always directed to ward self-preservation by remaking the union environment, removing disabilities and extending the scope of union opportunity.

Inculcation and Indoctrination Labor organizations are among the most effective educational institu tions in all matters of economic and social thought. Well-financed, al ways activist, they engage in sys tematic propagation of economic doctrines reflecting union views and interests. They energetically work through all media of communication and impart their doctrines on all lev els of education. From coast to coast countless union organs make exten sive use of historical narratives that tell the union story, of foes and friends, of sacrifices and triumphs. They speak of the worker's noble struggle for recognition and status in the late nineteenth and early twentieth centuries, and of violent resistance by greedy managers and owners. When in desperation work ers resorted to strikes and boycotts, management fought back with lock outs, blacklists and strikebreakers. But in the end, so the unions report, justice prevailed and organized la bor became strong enough to bar gain on an equal basis with its evil adversaries and call a halt to labor exploitation.

The remarkable success of this union rendition of labor history is built precariously on several subtle and specious pieces of popular rea soning. Every union organization routinely builds on the fallacious no tion that labor conditions were de plorably poor in the past, but im proved materially when unions appeared on the scene. Union spokesmen routinely echo the prim itive syllogism that events coincid ing in time must also be related causally. They repeat ad nauseam that at the beginning of the labor movement more than a century ago, when few workers were organized, hours were long and wages were low. But the knights and heroes of labor confronted the exploiters and 566 THE FREEMAN September fought them to a halt. Union effort and sacrifice brought remarkable improvements. The advocates of government reg ulation of hours and wages usually draw a similar conclusion. Labor conditions were poor before govern ment intervention; they measurably improved since government passed minimum wage laws and forcibly limited the hours of labor. Conse quently, they confidently conclude, the intervention by wise legislators and civil servants materially raised the workers' level of living. Unfor tunately, neither the advocates of la bor legislation nor the proponents of union organization tell us how the improvement credit is to be divided and attributed.

If it were true that events coincid ing in time are, ipso facto, connected causally, we could also conclude that acid rain and water pollution in re cent years have visibly improved our levels of living, that the roar of jet engines has enhanced our environ ment, and the increase of heart dis ease and cancer has added to our quality of life. Of course, no rational observer would draw such a conclu sion. But we are urged to believe, and millions of people actually do be lieve, that labor unions and labor legislators did improve working and living conditions through strikes, threats of strikes, or legislative restrictions. It is self-evident to economists that labor's phenomenal progress re sulted from increased productivity, that is, from more output per man hour. Labor reaped great benefits as labor productivity rose due to in creased capital investment per worker. Better tools and equipment provided by investors caused output to double every twenty to thirty years. Moreover, inventors created new products and devised new tech niques while entrepreneurs made better use of existing capital as well as manpower. With the rise in the marginal productivity of labor, em ployer competition in the labor mar ket caused wage rates to rise and la bor conditions to improve.

Union Harm Workers themselves did not con tribute to the steady improvement in their working conditions unless they managed to save and invest in facilities of production. In fact, wher ever labor unions caused output to decline through strikes, inefficient work rules, labor agitation, or any other reason, they actually kept wage rates lower and working con ditions poorer than they otherwise would have been. The visible dete rioration of economic conditions in countries with powerful unions, e.g., Great Britain, illustrates the point. The remarkable sway of union ide ology rests on a logical error that confuses coincidence in time with causal relation. Throughout most of 1985 THE THREE FACES OF UNIONISM 567 union history the spokesmen of la bor' voicing crude versions of the exploitation doctrine, made their demands for more, more and ever more in exchange for ever less labor exertion. In most parts of the world laboring under stagnant eco nomic conditions, such demands would have been simply dismissed as sheer lunacy-the machination of madmen.

Entrepreneurs Raise Productivity In the capitalistic countries, how ever, entrepreneurs and capitalists in time succeeded in significantly raising labor productivity, thereby boosting wage rates and improving labor conditions. They actually de livered what unions were demand ing. But who was acclaimed as the great benefactor of labor? The agi tators proclaiming exploitation and profiteering, or the capitalists-en trepreneurs who were quietly build ing tools rather than consuming their incomes so that there should be more in the future? Unfortunately, public opinion was led to applaud the loud agitators and feature the union leaders. Labor leaders forever reinterpret labor history. They extol virtues and motives of the agitators of labor un rest such as in the case of the Great Railroad Strikes of 1877 when twenty people were killed in Pitts burgh. Rioting, looting and burning destroyed millions of dollars worth of railroad property. In the end, Fed eral troops had· to be used to sup press the disorder. Unions commem orate the Chicago Haymarket Riot of 1886 when a bomb was thrown killing one policeman and wounding many others. Seven perpetrators were arrested, four of whom were hanged. Unions treasure the mem ories of the Homestead Strike of 1892, the Pullman Strike of 1894, the Coal Strike of 1902, and the most bloody Colorado anthracite coal mine conflict leading to the "Ludlow Massacre" of April 20, 1914, when women and children burned to death. Unions cannot forget how slow state and local governments were in coming to the aid and sup port of labor, and how, in many cases, they actually thwarted the efforts of workers to gain their objectives.

Union thought deeply influences the tone and emphasis of economic writings. There are few textbooks in economics that do not laud the val iant efforts of labor organizations to ward improving labor conditions. There are few economic commentar ies that do not extol the virtues of labor unions. They pave the way for socialism; in fact, most labor unions actively proclaim, promote and dis seminate the doctrines of socialism. After all, it is difficult to censure the competitive system for its labor in equities without drawing the conclu sion that it should be abolished. But even where union leaders cast their 568 THE FREEMAN September lot with the market order, their tacit assumption of labor exploitation tends to pave the way for the com mand system. Economic Functions and Policies Labor leaders fervently dissemi nate crude notions of the labor the ory of value and the exploitation doc trine, which provide the raison d'etre of unionism. Witho:Jt union protec tion, we are told, most Americans would be lab~cing from dawn to dusk for pennip~~ an hour. Unions are said to hav~ ".'aised,and continue to raise, the wages of all workers through as sociation and collective bargaining, to have improved working condi tions and reduced daily chores and working hours. Because of their great faith in labor unions and labor objectives, the American people con tinue to endure destructive strikes and threats of strikes, tolerate union coercion and violence, suffer many inconveniences, and credit economic improvements to labor leaders. To many millions of Americans, mem bership in a labor union is an im portant social duty and the strike a noble task.

Unfortunately, the exploitation doctrine, wherever it serves as guidepost for human action, engen ders disaster. The labor legislation it breeds not only reduces labor pro ductivity and wage rates, but also sows discontent and social conflict. The minimum-wage legislation and other attempts at raising wage rates and fringe benefits above those de termined by the market, create un employment and depression, which in turn calls for ever more govern ment intervention. The labor unions it sponsors not only reduce labor ef ficiency through a multiplicity of work rules, cause maladjustment and unemployment, especially of ju nior members, but also reduce eco nomic service generally, which keeps levels of living lower than they oth erwise would be. The basic method of all unionism is restriction oflabor competition; the basic effect is unemployment. In an unhampered labor market without labor unions, wage rates and work ing conditions are determined by the productivity of labor, which, in final analysis, is the value ascribed to ser vices by consumers, clients and pa tients. Competition among employ ers, together with opportunities for self-employment, tend to lift the wage rate of every worker to this very level of productivity. If, for any reason, someone should earn less than his productivity rate, his em ployment would be highly profit able. He would become the object of employer bidding for labor, which would lift the price of his labor back to his productivity level. If, for any reason, he should demand more than his productivity rate and claim a share of capital or entrepreneurial income, he is a candidate for un1985 THE THREE FACES OF UNIONISM 569 employment. That business would be more productive without him.

Professional people, too, are sub ject to these principles of the market. Their incomes are determined by the val ue judgments of their customers, clients and patients who are the su preme directors of the production process. Surely, there is deplorable government intervention that makes matters worse. In the health care industry, government may sub sidize and regulate the industry through Medicare, Medicaid and other schemes, which make it vul nerable to politics. The industry must expand or contract, prosper or suffer, always readjusting to chang ing political fortunes. A labor union representing doctors would not im prove the situation; it, too, would reduce the quality and quantity of the service and provoke ugly confrontations. Restricting Entry Unions restrict competition in their part of the labor market in or der to raise the wage rates of their members. They are not concerned with outsiders whom they bar from access to union industries. Nor do they give much thought to their ju nior members who may lose their jobs as a result of union activity. But they are rather effective in their ef forts to raise the employment costs of senior members while inflicting grievous losses on junior members, outsiders, employers, and consum ers. Unions restrict the competition of outsiders whom they fight with every available method, even vio lence on the picket line. The ex eluded workers must seek other em ployment or remain unemployed.

Their fate is of no concern to the unions. When, many decades ago, unions were limited to a few industries only, the labor they cast out could find em ployment in other parts of the labor market that were still free. In them the supply of labor would rise, which would lower the wage rates of un organized workers. But with the spread of unionism throughout basic industries and the proliferation of labor legislation, e.g., minimum wage legislation, there is no escape for the victims. Unemployment has become a chronic mass phenomenon that is holding more than eight mil lion Americans in its grip. Unions favor collective bargaining which, in union terminology, means the substitution of a union's bar gaining for the bargaining of indi vidual workers. In reality, it is the bargaining of a select group that as serts the power of the picket line to keep all outsiders from bargaining. Collective bargaining, in this sense, means the denial of the right to bar gain by outsiders. When some union agents sit down to deal with an em ployer, other agents and members are guarding his gates and forcibly 570 THE FREEMAN September preventing outsiders from compet ing. The employer, fearing violence at his site and willful destruction of his property, may have no choice but to deal with the agents.

Bargaining By Coercion If union bargaining were truly col lective it would give a voice to all workers at the gate, including eager job seekers. In reality, it is confron tation at the point of a gun. The "right to strike," which is sacred to all unionists, is said to be a natural right to abstain from work. In real ity, it is the right to force other people to join the strike. It is the right to prevent willing and eager workers from taking the place of striking workers. During a recent strike by some 52,000 hospital workers against 30 New York City hospitals and 15 nursing homes, 1,199 workers were arrested or charged with serious strike-related offenses. (The New York Times, August 26, 1984, pp. 1, 47). If 1,199 workers were caught in the act and apprehended, it is likely that many more committed criminal offenses and escaped undetected and unmolested. Surely, the New York police, like any other police, are not likely to apprehend every scofflaw in the very act. Moreover, they cannot possibly prevent the violence or threats of violence against reluctant union members who would work rather than strike and against unemployed workers who would love to fill the open jobs. The potential vio lence committed against fellow workers and their property usually exceeds by far the destruction wrought on employer property. But in the case of hospital workers the greatest harm undoubtedly comes to the patients whose suffering is ag gravated by the wanton denial of care.

Labor unions are the product of the ever-changing labor ideology. From their modest beginning nearly two hundred years ago until this very day their words and actions are clearly discernible in the writings of the critics of the private property or der. At the beginning and well into the nineteenth century, however, the legal system remained free from la bor ideology, which permitted the courts to examine critically union organization and activity. Courts found that trade societies formed either to benefit their members at someone else's expense, or to work harm on workers who did not join the movement, were disturbing the peace and disrupting social cooperation. In an 1815 decision involving the shoemakers of Pittsburgh, the court ruled that union activity was harm ful not only to employers but also to the community at large. Under the influence of English common law, some judges even held that labor or ganizations, in denying basic rights 1985 THE THREE FACES OF UNIONISM 571 to outsiders and forcing other work ers to join every strike, were con spiracies prejudicial to the public in terest. But while the courts may have limited the effectiveness of early labor organizations, they did not prevent the continuation and ex pansion of the union movement. Af ter all, ideas control the world; they are mightier than the laws of poli ticians and the prohibitions of judges.

Political Reform Movement From the very beginning the union movement was also a political re form movement that sought to achieve by political force what it could not attain by economic force. Where trade unions proved power less in changing the laws and prin ciples of the market, their represen tatives were more successful in the halls of politics. As political reform ers they labored to introduce gov ernment intervention in the eco nomic and social order. Unionism is an offshoot of modern political and economic ideology; the country that pioneered modern po litical and economic thought, Great Britain, was also the first to give rise to unionism. It was primarily polit ical at its inception, a constituent of a popular reform movement that later took its name from a national charter, the Chartist movement. Concentrating on political demands, it advocated universal manhood suffrage, the ballot, equal districts for Parliamentary representation, an nual parliaments, the payment of members of the House, and the ab olition of property qualifications for membership in Parliament.

Some two million Chartists ex pected successful political action to lead also to economic changes, since political representation of the work ing classes would lead to measures favoring them. Chartist leaders usu ally urged peaceful methods, but their agitation aroused resentment and often encouraged violent action. Chartism did not bring the revolu tion its opponents had feared, but it did lead to political reforms and, above all, leave a foundation for fu ture labor movements. With the decline of the Chartist movement during the middle of the nineteenth century, British unions for a while concentrated on economic issues. Toward the end of the cen tury, however, they turned to politics once again as socialist ideas-al though non-Marxian-were swaying the movement. Their renewed inter est in politics brought forth the La bour Party, their primary political instrument. In Great Britain as in other countries following th~ British example, labor unions now are firmly affiliated with the Labour Party or the Social Democratic Party.

Union members may be required to pay "political levies" along with their union dues.

572 THE FREEMAN September On the European continent, union ism typically developed as part of a wider labor movement, with a Marx ian political party usually taking the lead. The party organization gener ally is the intellectual elite of the movement, affording guidance to and often assuming control of the unions. But political control tends to divide the movement, with different political parties establishing com petitive unions. The predominant current is socialistic although some unions are affiliated with Christian parties (mostly Roman Catholic), na tionalistic or democratic parties. A few communistic unions are associ ated with the party of Marx and Lenin. From Unionism Pure and Simple to Political Action The American labor movement, throughout most of its history, kept its distance from socialism and par tisan politics. It was "trade union ism pure and simple," with the sin gle purpose to engage in collective bargaining in order to raise wages and improve working conditions of union members. It tacitly assumed that, under capitalism, workers may prosper provided they are organized.

But the logic of its own ideological base, the labor theory of value and exploitation doctrine, gradually led it to the socialist philosophy that promises lasting relief to labor only by a radical reform of the system. Collective bargaining must take sec ond place to political action. Since the 1970s the American Fed eration of Labor and Congress of In dustrial Organizations (AFL-CIO) has become a prime supporter of sta tist remedies for economic problems, real and imagined. With many un ionized industries sinking into deep depression and membership unem ployment rising to fifty per cent or higher, the traditional instruments of union power, collective bargain ing and work stoppage, have lost most of their potency. In fact, they demonstrably make matters worse, causing industry to sink ever deeper and unemployment to rise ever fur ther. Of course, labor leaders would never admit any union responsibil ity; instead, they are quick to point at the administration in power as the maker of depression and unemploy ment. They become supporters of po litical action.

The AFL-CIO now supports the en actment of legislation that would protect unionized industries from foreign competition. It advocates such protectionist measures as do mestic-content laws and import quo tas, and opposes all efforts at low ering trade barriers on imports from developing countries. It calls for a tripartite National Industrial Policy Board, made up of representatives of organized labor, government and business, that would oversee the re construction of the nation's sick in1985 THE THREE FACES OF UNIONISM 573 dustries and decaying communities. Labor is backing legislation that would prohibit plant closings or at least make them prohibitively ex pensive, and would inject grants and subsidies into struggling, heavily unionized industries. Unlike the AFL-CIO of old, which had no intention of running the country, the new AFL-CIO acts as if its very survival depends on political action. This new perspective is mak ing labor unions a part of a larger, liberal-socialist movement for eco nomic, social and political reform. In the footsteps of the European move ment, the fiercely independent unions of old are turning into vocal institutions of ideological indoctri nation and party politics. But no matter what their strategy may be, the only way of obtaining higher wages, shorter hours, and better working conditions for all is, and al ways has been, to raise labor productivity. @ New!

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