Do Unions Have a Death Wish? S. Rydenfelt

by Sven Rydenfelt H ans Vaihinger, known for his "as-if" philosophy, stated that researchers and philosophers sometimes have to work with "crazy" assumptions. Thus, Copernicus assumed that the earth is a sphere, although al most everyone living at the time was convinced that the world is flat. In a similar fashion, Sig mund Freud concluded that the behavior of cer tain people could be explained only by as suming that they have a death wish, contrary to the common assumption of a general instinct for self-preservation. In recent years, many labor unions have be haved in a manner which can only be described as self-destructive. Can it be that unions, which have attained special privileges through the po litical process, are abusing their privileges to the point that they are destroying the public confidence and legislative support which have been the source of their power? Let us consider three episodes of union be havior which seem to exhibit a death wish.

Unions and the Swedish Shipping Industry According to the American economist, Mancur Olson (The Rise and Decline of Na tions, 1982), powerful organizations in unholy alliances with strong governments have been the primary cause of the economic stagnation which has gripped the Western WorId during Dr. Rydenfelt is a professor of economics at the University of Lund in Sweden. the last fifteen years. There is no better ex ample than the strangulation of Swedish ship ping. Since the mid-1970s, shippers all over the world have suffered from an overcapacity which has idled vessels and depressed shipping rates. If the market had been allowed to adjust, overproduction would have been eliminated quickly. In free markets private firms have to adapt supply to demand, because overproduc tion means losses. But the unions were able to extort large subsidies from the different Swedish governments-socialist as well as nonsocialist-to preserve employment in the shipyards. Of course, they realized that produc tion had to be cut, but they hoped that those burdens would be borne by other nations.

As orders for Swedish ships declined, more and more state subsidies were granted. Orders that didn't cover half the building costs were accepted, and finally, ships were produced without any orders at all. Despite the huge sub sidies, all Swedish shipyards eventually had to be shut down. With other countries subsidizing their own shipbuilding industries, the oversupply of ships grew worse. Freight rates plunged and the Swedish shipping industry called upon Swedish maritime unions to cooperate in cutting costs. The unions, however, with support from the Swedish government, were able to block mean ingful cuts. The ship owners soon realized that sailing under so-called convenience flags (Liberia, 378 THE FREEMAN. OCTOBER 1987 Panama, etc.) was their only hope for survival. The Swedish sailors were offered the same net wages, after taxes, that they would have re ceived in ships under Swedish flags. However, they would have lost their government-guaran teed privileges-minimum crews, extra hol idays, etc.-losses they refused to accept. In stead, they extorted from the government an other privilege, a law prohibiting ships owned by Swedes to sail under convenience flags.

The only resource for the ship owners, threatened by bankruptcy, was a gradual sale of their ships to companies in other countries-a forced sale in a depressed market. The Swedish merchant marine, which ten years ago mea sured 13 million deadweight-tons, is now re duced to 2.5 million tons. In Human Action (1949) Ludwig von Mises maintains that government-granted special priv ileges, designed to favor certain groups, often wind up hurting the groups they are supposed to help. The Swedish regulations which prohib ited Swedish ships from sailing under conve nience flags are an obvious example. Designed to aid the Swedish maritime unions, they com bined with other regulations to destroy the very jobs they were supposed to save. The unions, who agitated for these regulations, acted in a manner which is perhaps best characterized as displaying an economic death wish. Unions and the British Printing Industry The British printing industry offers another example of the self-destructive behavior of unions in defending the privileges of their members. The printers always were an aristoc racy among workers, so well organized and prepared to fight for their interests that the em ployers were forced to buy production peace at very high prices.

Their unions fought a last and bitter battle for their privileges in 1986-1987- privileges in cluding automatic life tenure, job-assignment rights, and wage scales higher than those for most reporters. The basic issue was the intro duction of labor-saving technology. The printers refused to use the new technology, and claimed the exclusive right to continue to work with the outdated technology that had granted them a key position in the newspaper industry. The outcome of the fight meant life or death for several large British newspapers, that had suffered losses for many years and were near bankruptcy. The new technology was their only chance for survival. After years of vain negotiations, Rupert Murdoch, who published four large news papers, had to sidestep the unions. At Wapping in the harbor district of eastern London he had a new printing office built, and in January 1986 he moved with his newspaper production (34 million copies a week) from Fleet Street to Wapping. At the same time he fired 5,500 striking print workers, whom he replaced with workers from the less militant electricians' union. The printers had been offered a gen erous economic package, which they refused to accept. The chairman of their union federation, Brenda Dean, realized that this offer was their last chance for an acceptable agreement, but a majority of union hawks chose to continue to strike.

British union members have always had the special privilege-unlike other citizens-to apply physical force against non-strikers and other adversaries in labor conflicts. Although not formally legal, the right functioned in prac tice as a legal right, accepted by the police and the courts. Of course, this was a very remark able privilege, fully comparable to the privi leges of the old European nobility. The Thatcher government, however, abol ished this privilege by means of laws prohibit ing all physical force in labor conflicts-"vio lent picketing" included. According to union tradition, strike-breakers are to be treated like outlaws without legal rights. But only in fascist states can such legal discrimination exist. In a law-governed society all citizens should be protected by law. When the fired printers-in spite of the new laws-attacked non-strikers as well as the Wapping office, the government ordered police to stop the attacks. The conflict, including a siege of the Wappingoffice, continued for more than a year. With empty strike funds and threatened with high compensation claims against lawbreaking members, the printers and their union had to surrender unconditionally in February 1987.

Unions and The British Mining Industry Still another illustration of union behavior patterns can be found in the strike of 120,000 British coal miners-out of a total number of 180,000~between March 1984 and March 1985. The strikers did not fight for higher wages. Their strike was a last desperate effort to stop the gradual closing down of the coal mining industry. At the nationalization in 1947, roughly 1,000 mines were being worked, a number that had shrunk to 170 by 1984. Simul taneously, the number of miners had decreased from 600,000 to 180,000. The principal cause of the decline was the emergence of oil as a cheaper and better substi tute for coal. When the British government tried to slow the substitution of oil for coal in industry by means of tariffs, taxes, and prohibi tions on oil, energy prices in British industry rose above the prices in competing countries. This had a devastating impact on Britain's ability to compete.

The mines that remained open were sus taining heavy losses which had to be made up Not a Public Interest DO UNIONS HAVE A DEATH WISH? 379 by massive subsidies. But the striking miners insisted that mine closings be stopped and cur rent production levels maintained. What they sought, in fact, were new privileges at the ex pense of the coal industry and the British tax payers. When the striking British miners, after a year-long conflict, abandoned their strike in March 1985, this was perhaps the greatest union defeat in British history. This defeat to gether with the defeat of the printers in Feb ruary 1987 meant, in fact, a tum of the tide. The British union movement may never re cover. With strong organizations and government granted privileges, the unions in their heydays had functioned like power blocs-states within states. But power leads to abuse, and the more power the more abuse. As a general rule, the privileged classes indulge in wishful thinking and interpret their acts of abuse as wise and just policies. But more and more people have been shocked by the union abuse of power. And in a democractic society, the tum of public opinion is bound to have consequences. D IDEAS ON LIBERTY U nions have not achieved their present magnitude and power by merely achieving the right of association. They have become what they are largely in consequence of the grant, by legislation and jurisdiction, of unique privileges which no other associations or indi viduals enjoy. They are the one institution where government has signally failed in its first task, that of preventing coercion of men by other menand by coercion I do not mean primarily the coercion of employers but the coercion of workers by their fellow workers. It is only because of the coercive powers unions have been allowed to exercise over those willing to work at terms not approved by the union, that the latter has become able to exercise harmful coercion of the employer. All this has become possible because in the field of labor relations it has come to be accepted belief that the ends justify the means, and that, because of the public approval of the aims of union effort, they ought to be exempted from the ordinary rules of law. The whole modem development of unionism has been made possible mainly by the fact that public policy was guided by the belief that it was in the public interest that labor should be as comprehensively and completely organized as possible, and that in the pursuit of this aim the unions should be as little restricted as possible. This is certainly not a public interest.

-F. A. HAYEK, "Unions, Inflation, and Profit"