9. Trade-Unionism and the "Public Sector"

9 Trade-Unionism and the ~~Public Sector" SYLVESTER PETRO For the United States, as for the world as a whole, the great issue of the twentieth century involves the role of the state in society. The fundamental alternatives are two: on the one hand, the totally empowered state, with socialism as the pure example; on the other, the strictly limited state, with laissez faire as the pure example. In the United States, this issue is more clearly drawn than in other countries of the Western world, for this country has a definite and increasingly articulate body of coher ent laissez-faire opinion. But here too the issue is usually drawn in terms· involving· something less than the polar extremes. Most commonly it is drawn between the ad hoc interventions of the uncertain welfare state and those who resist each new proposal for intervention on particular grounds rather than on the basis of general principle.

The fundamental issue has taken a new form in the current debate in the United States between those who contend that the "public sector" is being "starved" and those who resist proposals for increased government expenditure because they feel that the "private sector" is being aborted by excessive taxation and other forms of government intervention. Of all participants in this dispute, the leaders of the large trade-unions are perhaps in the most interesting and the most uncomfortable 185 186 The New Argument in Economics position. They are fundamentally a part of the "private sector," with the long-run prospects for trade-unions essentially depend ent upon the well-being of that sector. Yet they are politically and ideologically allied with the proponents of expansion of the "public sector"; moreover, they gain many short-run benefits from an active public sector. Long-run considerations tend to influence the conduct of only a relatively few persons-those with a high degree of courage and statesmanship, men of intelligence and imagination. Such men are not to be found among the leadership of the large trade unions in the United States. Many of those leaders adhere con sciously to the Keynesian dictum that "in the long run we shall all be dead." The less literate trade-union leaders, unacquainted with Keynes, nevertheless act in accordance with the dictum because it is natural to them to prize short-run gains. All trade union leaders are conscious that they, as individual persons, owe their present power and position largely to the kind of govern mental favoritism that they can expect only from those who favor expansion of the public sector.

Although such expansion will diminish the position of all private associations in the long run, including trade-unions, the present leadership of the large trade-unions without exception is allied with the statists. Occasionally one hears of a high trade union official who has praised the free-enterprise system. But this is only talk. No matter what form the ultimate issue may take in current events,-.federal intervention in education, in housing, in agriculture, in medicine, or in the regulatory areas-the leaders of the large trade-unions are always among the most vocal proponents of government expansion. As the most active lobby ists in the country today, their efforts are not confined to the merely vocal. Their political power and their political efforts are valued highly by the politicians they help, and dreaded profoundly by those they oppose. If statism ultimately destroys the free society, the present leaders of the large trade-unions will have played a part in the destruction. Their part will not, however, have been either fundamental or critical. While they sometimes set destructive Trade~Unionism and the "Public Sector" 187 measures in motion, they are more a product than a cause of the measures that tend to destroy personal freedom and to advance socialism. The basic challenge for the opponents of statism and socialism is posed, not by the present leadership of the large trade~unions, but by the ideas and the measures which have brought the public sector to its pre-eminent position in society, and which have, along the way to this end, ·also given to trade~unions temporary powers and privileges that they can not have at all in a coherently operated free society and that they cannot long retain in a system of totally empowered government.

A. Reflections on the Concepts Involved The dispute over public versus private spending presupposes that there is something that can be usefully defined as the "public sector" and something else that can be defined as a "private sector," distinct from the former. As a matter of fact, a sharp distinction between the two does exist-but only in the theory of laissez faire. Laissez-faire theory holds that the state's authority and responsibility extend only to keeping the peace-safeguarding domestic tranq uilli ty, providing for the common defense, and administering justice in private disputes among citizens. Here one finds a sharp distinction between the "public sector" and the "private," for all the rest belongs to the realm of free personal choice. The same is, of course, not true of socialism, or of the incipient socialism known as the welfare state. Under socialism the direc tion of society is determined by the governmen t, which has exclusive ownership and control of the means of production.

Some socialists insist that their system will promote civil liberties even more effectively than the theory of limited government does. But printing presses are means of production, and if the state owns and· controls all means of production, including printing presses,' how can one seriously contend that civil liberties will endure? No, there can be no "private sector"-as tradition defines the term-under socialism. There can only be a· public • 188 The New Argument in Economics sector, ,with all expenditure and all activity determined by or under the tutelage of the central bureaucracy. Current protagonists of the public sector in the United States commonly dissociate themselves from socialism. Professor Arthur Schlesinger, for example, has recently said that expansion of the public sector is today in fact the best method of avoiding full socialism. But this position, too, cannot be taken seriously. The welfare state is built around the assumption that it is the duty of government to take care of all serious matters that cannot be left to the "unreliable" and "unpredictable" operation of. the free market. Sometimes advocates of the welfare state declare that under their philosophy it is, the duty of government to do for people all those things which they cannot do for them selves, or which they cannot do as well as government can.

Fundamentally, there is only one function possible to govern ment that private persons cannot perform. That is the basic function that laissez faire allots to government: the function of keeping the peace by discouraging lawbreakers at home and invasion from abroad. Individual persons cannot do this; only the agency representing the full power of society can do it; and that agency is called government. Since proponents of the welfare state and other advocates of expansion of the public sector obviously reject this method of delimiting the function of govern ment, they must have something else in mind. In exploring their position, one discovers that however much they may dissociate themselves from full socialism, that system is the inevitable outcome of their program. This conclusion is rigorously compelled by the inner workings of the system known as the welfare state. If the government takes from A to increase the well-being or security of BJ A's ability to provide for himself is diminished. If the state could somehow draw to a sharp halt after aiding only B with A's resources,' A might still be able to provide for himself. He would not necessarily be forced to go to the state in his own turn for help. But both logic and experience establish that the state cannot come to a halt after aiding B. C and D and E and F and so on all feel that their claims are as exigent and as meritorious as B's. The farmers who insist on subTrade-Unionism and the "Public Sector" 189 sidies today contend that they are injured by the tariffs that protect manufacturers and the special privileges that the govern ment has given trade-unions. On the local level, those who play golf insist that the county government should provide public golf courses, since it provides so many· other public facilities.

Soon the bowlers and the ping-pong players will see the injustice of a system that taxes them to help the golfers. When the United States government assumed responsibility for the economic security of superannuated workers, it estab lished a premise and a precedent with implications that only full socialism can exhaust. Medical care for the aged cannot be neglected by a government that has assumed general responsibil ity for old-age security. If for the aged, why not. for the young? For after all, "a nation's future lies in its young people." With each advance along the frontiers of the welfare state, the private citizen's ability to take care of his own problems l diminishes, and his incentive to go to the government increases. The chief popularizer of "public sector" arguments, Professor J. K. Galbraith, has admitted that socialism and the welfare state provide no method of distinguishing between the "private"

and the "public" sectors. In The Affluent Society} he said: There will be a question as to what is the test of balance-at what point may we conclude that balance has been achieved in the satisfac tion of private' and public needs. The answer is that no test can be applied, for none exists.! Professor Galbraith goes on, however, to insist that "The present imbalance is clear," notwithstanding his admission that there is no test for detecting whether an imbalance exists. And then he proceeds to assert, despite the inheren t contradiction of his position: "The direction in which we move to correct matters is utterly plain." 2 Many have observed that in the last fifty years or so the percentage of national product spent by government has increased from less than ten to more than thirty. In view of this fact, disinterested persons might well take the position that, while 190 The New Argument in Economics Professor Galbraith is correct in detecting an imbalance, the imbalance is precisely the opposite of the one he identifies: that is, governme'nt is spending too great a portion of the national product, rather than too little, as Professor Galbraith suggests.

Be that as it may, Professor Galbraith's position amounts to a concession that the size and scope of the "public sector" are to be left to the exigencies of politics and to the judgment of those who advise the politically powerful. The long-term result of such a policy is clear. If the distinction between the private sector and the public sector is not defined in the sharp terms provided by laissez-faire theory, it must disappear entirely, until there is only the public sector of full socialism. Human needs and desires constitute a continuum. Once the state sets itself the task of serving those needs, there is no logical or practical place to stop. Furthermore, each new activity of the welfare state, benefiting some at the expense of others, creates an ineluctable force for more of the same kind of thing. The pro tag.. onists of the public sector, whether consciously or not, are moving toward a system that can tolerate no other sector. There will be a public sector, and that is all.

B. Trade-Unions in the Advanced Welfare State There is no place for free, autonomous, independent trade· unions in the society that contains only a public sector. On this, experience in the United States and other countries leaves little room for doubt. In joining forces with those who seek expansion of the public sector, the trade-union leaders are engaging in a self-destructive process. More markedly than any other private economic association, trade-unions are engaged in a blunt and naked pursuit of self-interest. Their conduct is, in fact, animated by a public-be damned attitude. Strikes have been timed more and more of recent years to impose a maximum of inconvenience to the pub lic. Strike records during time of war have been shameful, if not treasonous. So reserved a man as Senator John L. McClellan Trade-Unionism and the "Public Sector" 191 has recently referred to union practices at missile bases as "damnable."Attempts by government officials to induce modera tion in the . wage demands made by union officials have been met repeatedly with scorn and abuse.

This kind of selfishness will go unchecked by government only in a laissez-faire society, which depends upon competition to punish such arrogant stupidity. In the total state, whether of the socialist or advanced interventionist type, it will simply not be permitted. I t may be possible in the total state for trade-unions to have a formal existence, although even that is doubtful. What is not doubtful at all is that associations of wage earners will not be permitted to embarrass or hamper the planners of the total state by throwing cost and production schedules into confusion. When Peter Wiles wrote his interesting article, "Are Trade Unions Necessary?" (Encounter, September, 1956) he was operat ing within the assumptions of the British welfare state. There is nothing surprising, that being the case, in the fact that his answer was, "No." There is already plenty of evidence that free trade-unionism cannot survive advanced welfare-state conditions, even in the United States, where the political influence of the leaders of the large trade-unions is so great.

While trade-unions continue to be the beneficiaries of special legal privilege, the course of regulatory development over the last twenty years in the United States has all been in a single direction, even so far as trade-unions are concerned. Govern ments at all levels have limited more and more the kinds o£ action permitted to trade-unions. As early as 1940, some states began passing laws prohibiting to unions conduct that the com mon law would permit, such as stranger picketing and secondary boycotts. After the Second World War a number of states adopted statutes or constitutional amendments prohibiting the closed shop. The Taft-Hartley Act of 1947 was by no means the "slave labor law" that unions called it; nevertheless, it too constituted a genuine restriction of the scope of union. action. Between 1947 192 The New Argument in Economics and the present, the movement toward greater and greater re strictions upon unions has continued, culminating in the Landrum-Griffin Law of 1959. That law in some ways only made definite the restrictions that the Taft-Hartley Act had intended, but in other ways it introduced new types of regulation, as for example in defining relationships between unions and their members. Those union leaders who clamor for greater govern mental activity may not realize it, but the habit of governmental intervention that they encourage will necessarily affect their own operations.

They may hope that the advanced welfare state will intimately affect the operations of all other segments of society, while leaving them alone, but this is almost certainly doomed to frustration. Before the interventionist developments that began in the twenties and thirties of this century, injunctions were never issued against peaceful strikes for higher wages.3 In the last thirty years, however, such injunctions have become more and more frequent. Indeed, it is no longer clear that there is a basic right to strike, even in a peaceful way for legitimate objectives. The Taft-Hartley Act specifically empowers the federal courts to issue injunctions against all strikes imperiling the national health and safety, even though such strikes are carried on in a lawful way for lawful objectives. The Railway Labor Act severely limits the right to strike. Many states have laws prohibiting strikes by employees of public utilities. When railroad employees refused to terminate a strike despite exhorta tions from President Truman, he demanded from Congress a law drafting them into the military. His intention was to force the railroad employees to work because their strike interfered with the government's notion of the needs of the nation.

These examples have all been drawn from cases of private employment. When one turns to public employment, the point emerges much more clearly. The Taft-Hartley Act expressly prohibits strikes by public employees. Several states, including the advanced welfare state of New York, have similar, express prohibitions. Thus the Condon-Wadlin statute in New York contains the following language: Trade-Unionism and the "Public Sector" 193 It shall be unlawful for any public employees to strike or to engage in any attempt to change working conditions where such effort would interfere with the full and proper performance of their duties of em ployment. The Act applies to all employees of the state, cities, towns, villages, public schools, public or special districts, authorities, boards of commissions, and any other political or civil subdivision of the state. No person having authority or supervision over public em· ployees shall have power to authorize or consent to any strike.

Taking existing court decisions as a guide, one may conclude that the same rule will be applied even in states that do not have specific prohibitions of strikes by public employees. The courts in a number of states have ruled that strikes by civil servants of all kinds are unlawful even with no express statutory prohibition. Intelligent and responsible union leadership would presumably be informed of these developments, and being· informed, would tend to resist expansion of both the public sector and the habit of interventionist regulation. This expectation is strengthened when one considers the large stake that unions. have in a prosper ous and flourishing "private sector." C. The Trade-Union Stake in the Private Sector Of the total ,membership of the large trade-unions in the United States, well over ninety per cent is in private employment. Most of the large unions exclusively represent workers employed by private business. For the steelworkers, the automobile workers, the machinists, and any number of other union members, the health and prosperity of the "private sector" are really all that count.

This is true not only from the point of view of the working man as producer; it is equally true of the working man and his family as consumers. All the goods they consume and a large part of the services they use are produced and provided by private industry. Real wages are ultimately determined by productivity. As society advances technologically, productivity increases become 194 The New Argument in Economics almost exclusively a function of capital investment in ever more efficient factories and machinery. But capital accretions. and investments in a free-enterprise, private-property system will flourish only in an environment of strictly limited government. Heightened taxation and regulation, necessarily associated with expansion of the public sector, drastically restrict profits and therefore capital investment. Although the national product has grown over forty per cent in the last twelve years in the United States, profits after taxes remain the same today that they were ten years ago. Politicians today complain of the poor growth record of the economy in the last few years. Portents, for the future are even more ominous, if present taxes and regula tions continue. The long-run prospects for real wages are neces sarily the same.

While depressing profits, expansion of the public sector tends substantially to raise the prices of all goods and services, with devastating consequences for the union member as a consumer. The prodigious construction activities in the public sector roads, bridges, tunnels, schools, and other public buildings have pushed up prices significantly in the building and construc tion industry. The effect has been magnified by the notorious waste of both manpower and materials that all government construction entails. The costs of private housing have therefore risen greatly, so much so that the private part of the construction industry is in a depressed condition. Providing an excellent example of the self-energizing character of the "public sector," the high costs of housing directly attributable to government are seized upon as a justification for expansion of .government's role in the private housing field.

To some extent expansion of the public sector is financed by inflation rather than by taxation, but the effect on prices is similar in either case. Prices go up universally, and the union member is, of course, affected in largely the same way as all other consumers, although, if his union is powerful enough and unscrupulous enough to exact monopoly wages" he is not hurt as badly-at least, not in the short run-as those consumers who have more or less fixed incomes. Even for the beneficiary Trade-Unionism and the "Public Sector" 195 of monopoly wages, however, the inflationary consequences of expansion of the public sector are damaging. One often hears members of the steelworkers' union or of the construction unions complain about the high cost of repairs to their washing machines or television sets. At the same time their union leaders are insisting that the trouble with President John F. Kennedy's program is that it doesnot go far enough in expanding minimum wages and other governmental activities.

Expansion of the public sector in the long run depresses wages on the whole and raises prices on the whole. Yet union leaders are among the most active proponents of such expansion. Why? D. In Bondage to the Welfare State The leaders of the large trade-unions in the United States work against the long-run interests of both the membership and trade-unionism itself for three reasons. First, there is a strong socialist bias in the thinking of many union leaders, reinforced by an abysmal ignorance of the basic truths of political economy. Second, to many trade-unions, interventionism provides great opportunities for lucrative short-run returns. Third, the extreme power that many union leaders now possess stems from special governmental privileges that can be maintained only by alliance with advocates of the welfare state who either formally or infor mally exact cooperation as a condition of the maintenance or enlargement of the special privileges.

The socialist inclinations of a large number of important union leaders are a matter of public record and need little elaboration here. Men such as David Dubinsky, of the International Ladies Garment Workers' Union, and Walter Reuther, of the United Automobile Workers, seem to be animated by socialist principles and convictions. While they consider themselves deadly enemies of the Communists, the Communists do not consider them ene mies at all, but rather instruments in the inevitable socialist triumph. The United States Communist Party Convention had this to say of them: 196 The New Argument in Economzcs To a degree the cooperation of labor reformists [trade-union leaders who stand for capitalism and with no socialist background or tradi tions] , social reformists [those labor leaders like Dubinsky, Reuther, Randolph, et cetera, who have a socialist background], and bourgeois reformists [liberal wing of the Democratic Party] in such organizations as Americans for Democratic Action is, in the absence of a mass social democratic party in the United States, and under the conditions pre vailing in our country, perform~ng the function of social democracy." 4 The allegiance to the public sector of such men as Reuther and Dubinsky is perfectly natural. Their essential goal appears to be less the preservation of the free society and of such institu tions as free trade-unionism than the advancement of socialism; and they are quite right in judging that the quickest way to socialism in the Uni ted States is by means of an ever expanding public sector.

Men such as George Meany, president of the AFL-CIO, and James Hoffa, president of the Teamsters, are in a different and more complicated position. Both these men are probably sin cerely antisocialist, anticommunist; both probably feel a pre ponderant allegiance to the free-enterprise system and to trade unionism. Their alliance with interventionism is accounted for in part by economic illiteracy, in part by the short-run gains that interventionism promises, and in part by the realization that they must co-operate with interventionists if they wish to. retain the special privileges that law and inadequate law enforce ment now provide them. What is true of such men as Meany and Hoffa is probably also true of the vast majority of union leaders in the country ~ When men are unemployed, and especially when union mem bers are unem ployed, these union leaders never engage in a scholarly study of the basic causes of that unemployment. Least of all do they direct their attention to their own probably critical role in that unemployment. Publicly, at least, they deny that monopolistic wage levels are a cause of unemployment and of "distress areas." Moreover, no trade-union leader, to my knowl edge, has ever admitted, let alone suggested, that excessive taxa tion of businessmen may be a cause of unemployment.

Trade-Unionism and the "Public Sector" 197 Instead, their uniform reaction is to seek political aid. They petition the government to embark upon vast construction proj ects, to raise the minimum wage, to give help to distressed areas, to increase the level of unemployment compensation, to bar imports to competitive nations, to "buy American," or in a myriad of other ways to expand public spending or to increase governmental direction and control of the economy. The apparent effect in the short run is what interests them. Note that I have said the "apparent" short-run ·effect. I emphasize the point because most of the measures that such union leaders propose or support do not have any true value to working men even in the short run. If the government spends a billion dollars to bring industry to distressed areas in West Virginia and Tennessee, a harmful effect is felt immediately elsewhere in the economy. The billion dollars is taxed away from other citizens, for one thing; and the areas that do not receive govern mental assistance are competitively injured by the recipients of government aid. Steelworkers in Cleveland, in short, will be harmed by the aid that government gives to miners in West Virginia.· But the steelworkers themselves will not understand why they are on a short workweek; and David McDonald, presi dent of the Steelworkers, is not likely to tell them that his advocacy of expansion of the public sector is responsible, if indeed he understands that it is.

I have a strong suspicion that quite often union leaders feel obliged to support statist programs that they would rather op pose, except for their political indebtedness. After all, many union leaders are hardheaded men who know the facts of life. They observe at first hand the wastefulness of government ex penditures. They understand that, over the long run, employers can pay good wages only when they are making healthy profits. Their consistent endorsement of all statist adventures is, I believe, often traceable to the debt that they owe the inter ventionists. To a very considerable degree, the power and prestige ,enjoyed by union leaders today are consequences of the special privileges that government has given them. On the one hand, the law gives them special privileges of compulsion 198 The New Argument in Economics denied to all other private associations; in the nature of things an exact figure cannot be ascertained, but I feel sure that hun dreds of thousands of men belong to unions in the United States only because they have been forced to join if they wish to secureor to retain employment. On the other hand, the unions have benefited enormously from failures by government to en force the laws against violence in labor disputes.

If union leaders wish to preserve or to expand these special privileges, they must go along with the objectives of the statists in government. The construction-industry unions, through the intercession of Senator John F. Kennedy, secured special exemp tions from the regulations of the Landrum-Griffin Law. They are expecting still further special privileges in the current Congress. The price undoubtedly included acquiescence in the political plans of the politicians responsible for both the special privileges already granted and those expected in the future. Mr. Kennedy would scarcely promise to deliver the construc tion industry to the tender mercies of the construction unions without firm assurance from the leaders of those unions that they would support him politically. Supporting Mr. Kennedy politically necessarily involves supporting the statist measures that Mr. Kennedy and his principal advisers advocate. The garment-industry unions were the beneficiaries of even more egregious special privileges added to the Landrum-Griffin Law at the then Senator Kennedy's insistence. The socialist convic tions of the leaders of the garment-industry unions thus reflect themselves in two ways in the programs of the party presently in power. Not only do they coincide with the ideology prevailing in the present administration; there is also a political debt to pay.