The Questionable Authority

Unions are a free-market solution

Like most people who pay attention to the news, I’ve been treated to several weeks of Republicans using the Detroit bailout as an excuse to bash unions. Like a broken record, it was easy to ignore for a while, but the repetitive droning of discredited canards (like $70/hr wages) is getting more and more and more annoying.

And it’s particularly annoying because the vast bulk of the union-bashing is coming from the alleged free-market conservatives. What the hell is so conservative about beating up on unions, anyway. Unions are the quintessential model of a market based solution to a problem. The management and the money people might not like them, but that alone doesn’t mean they’re not a market solution – unless the real criteria for “free-market” is “stuff that makes people who already have money happier”.

Yes, I’m serious. Let’s take a minute or two to think about what unions actually are, and what they do.

At its most fundamental, a union is nothing more or less than a group of people who have figured out that if they act together to place limits on the supply of their own labor, the businesses that have a demand for that labor will need to pay more. Unions are basically employee-owned businesses that sell labor. Like any good business, they try to both encourage demand and control the supply.

At this point, I can see the objections coming. How, I’m sure someone is going to demand ask, can I claim that unions are really a free-market enterprise if employees can be forced to join in order to work in a given location. And if I really believe that the unions are free-market, why am I opposed to the so-called “right-to-work” laws?

Right now, there are laws on the books that actually restrict the ability of the union to operate in a free-market environment. Under American labor laws, if a union is present in a workplace, it must represent all the employees regardless of whether or not they are union members. The “right-to-work” laws that states are allowed to pass under Taft-Hartley state that employees cannot be forced to pay dues or fees to a union as a condition of employment.

This combination of laws effectively creates a situation where the unions are forced, by law, to provide services to people, while simultaneously barring the unions from demanding payment for those services. That not a set of free-market laws. That’s a set of laws that are what Ed Brayton calls “Tonya Harding laws”. Businesses couldn’t get around unions when there was a level playing field, so they got the government to pass laws that un-leveled the field.

Keep that in mind the next time you’re listening to massive pricks flamming jackasses good conservative legislators like Jim DeMint and Richard Shelby pontificating about how the unions are hurting Detroit, and why the Big Three need to look at “right-to-free-ride-work” states like theirs for the solution.

Comments

  1. #1 Greg Laden
    December 10, 2008

    “The banks hold the wealth of the elite, the Unions hold the wealth of the workers.” … according to some guy on the radio.

  2. #2 Schmeer
    December 10, 2008

    I agree that a union is a free market solution. However, I don’t like unions very much because of my experience with them.
    On my first day at my current job I was forced to pick one of three choices before doing anything else:
    a) I will join the union.
    b) I will not join the union but will pay union dues.
    c) I quit.

    The union I chose to join had not been very productive for several years, and while they were collecting dues from thousands of members they had not gotten any of them a raise in quite a while. They are a little more helpful now, but I still resent the fact that I was never given a real choice to join or not.

    I never realized that there may be a law that forces the union to represent me even if I don’t join. Looks like I have a little research to do.

  3. #3 BaldApe
    December 10, 2008

    Unions need to be able to show workers that there is an advantage to joining the union. They need to provide protection/ benefits that justify the dues. “Right to work” laws undermine that need.

    OTOH, without laws that protect organizers, employers like Walmart can effectively prevent unions from organizing. The last 30 years have shown what happens when the government fails in its role in enforcing labor laws. Workers get a smaller and smaller share of the wealth they create. When they get paid little enough, the only way they can buy is on credit. Then the economic geniuses call it a credit crunch. It’s really a payroll crunch.

    But one of the biggest ways unions shoot themselves in the foot is by insisting on taking political positions that have nothing to do with worker protection. When unions tell their members whom to vote for, they alienate them. I suspect they would do better to emulate the restricted acticism of churches- promote causes, but refrain from endorsing candidates.

    But just out of curiosity, are cartels part of a “free market” too?

  4. #4 D. C. Sessions
    December 10, 2008

    Calling unions “free market,” when they’re basically (as you point out) a mechanism for artificially restricting the supply of a good, is straining the term.

    However, it’s no less inappropriate than the capital side claiming that the oligopolies and monopolies they represent are “free market” entities.

    In the Adam Smith model where the number of market actors is large enough that small-angle approximations work then unions would not be necessary and indeed might be harmful to the operation of a free market. That’s certainly not the case for Detroit, though, so the attempt to apply the “free market” standard to labor but not capital is a great example of dishonest argumentation.

  5. #5 Mike
    December 10, 2008

    So what IS the solution to our approaching nonexistant manufacturing? Creating unions in Asia is long term. Starving factory workers in order to compete with Asian poverty doesn’t look like much of an option. Working smarter and cheaper is a nice concept, but… I’m confused by why I’m not hearing anything about tariffs, especially now. They used to work.

  6. #6 natural cynic
    December 10, 2008

    Mike:

    I’m confused by why I’m not hearing anything about tariffs, especially now. They used to work.

    They do work – but only for the limited number of workers and companies that they are designed to protect, giving an advantage to them and a disadvantage to everything else. Tariffs to favor a product and the workers that produce that product, but artificially raise the cost of the product – protecting inefficiencies in the production of said product and harming consumers by adding to the cost. Tariffs also invite retaliation by other countries that produce said product, harming the competition for other products that the country that initiated the tariff. Essentially, they they show government favoritism and everyone else by favoring one industry. On a global scale, the macro effects reduce overall trade which reduces wealth creation.

    Unfortunately, the only “fair” way to even out the playing field in producing one product is to raise the wage and environmental costs in the country that undercuts prices of the product – a difficult thing to do.

  7. #7 D. C. Sessions
    December 10, 2008

    So what IS the solution to our approaching nonexistant manufacturing?

    Devaluing the dollar until trade balances will do a great deal in that direction.

    One of the bright spots in our current world financial situation is that this seems to be happening as foreign central banks back away from treating the USA as the ultimate vault.

  8. #8 Jim Thomerson
    December 10, 2008

    I have a vague understanding that one of the causes of the great depression of the ’30’s was our imposition of protectionist tarrifs. Are the causes of the great depression well agreed on among economists?

  9. #9 Derrick Reeves
    December 11, 2008

    At its most fundamental, a union is nothing more or less than a group of people who have figured out that if they act together to place limits on the supply of their own labor, the businesses that have a demand for that labor will need to pay more. Unions are basically employee-owned businesses that sell labor. Like any good business, they try to both encourage demand and control the supply.

    This is quite a good analysis. It raises a very important question: why would anyone who self-describes as being on the left go in to bat for labour-selling businesses? Before returning to that, there are a couple of factual points to address.

    It can be misleading to suggest that unions are “employee-owned”, depending on the particular union. For a big union the owners are better identified as the professional union bureaucrats that derive their income from the labour of others. For example, Gettelfinger could rightly be called one of the owners of the UAW.

    Further, the description of good business starts too far up. A good business will aim to turn a profit by any means possible. This is, literally, the bottom line. Last year, the UAW diversified into financial speculation by presiding over give-backs to the Big Three in return for control over the multi-billion dollar Voluntary Employees Benificiary Association fund (a fund that has been founded on large numbers of shares in… the Big Three).

    So, to address the point raised in the public debate, Conservatives are hostile to the unions only to the extent that these businesses traditionally fund liberals and steer their “members” into voting for them. Free market ideology has very little to do with it.

    To answer the question I proposed earlier: the individual reasons will vary. However, as far as “left” parties are concerned, the simple explanation is an economic one. The “lefts” run advertising and lobbying campaigns for the unions and receive payment for services rendered.

    It is not in the interests of workers anywhere to nourish such parasites. If working people are to pursue their own interests, as distinct from those of capitalists large and small, then they will need a different kind of organisation.

  10. #10 Paul
    December 11, 2008

    An excellent post – linked to me by http://aberdeenuniversitylabourclub.blogspot.com/ in Scotland, who clearly have a feel for good US blogs.

    Your post puts me in mind of something Karl Polyani wrote way back in 1944 (‘The Great Transformation’, before neo-liberal ‘ideals’ had swept the world, a time when our Karl must have thought that another more progressive ideology might hold sway for the next half century.

    It’s best summed up in David Harvey’s excellent ‘A Brief History of Neoliberalism':

    ‘There are, he noted, two kinds of freedom, one good and one bad. Among the latter he listed “the freedom to exploit one’s fellows, or the freedom to make inordinate gains without commensurate services to the community, the freedom to keep technological inventions from being use for public benefit, or the freedom to profit from public calamities secretly engineered for private advantage.”

    But, Polyani continued, “the market economy under which those freedoms throve also produced freedoms we prize highly. Freedom of conscience, freedom of speech, freedom of meeting, freedom of association, freedom to choose one’s job.”‘

    These latter are essential freedoms which have been impinged upon by neoliberalism (incl. Thatcherism here and Reaganism in the US, and David Harvey in his book shows very well how this was done by co-opting the meaning of ‘freedom’, indeed ‘freemarket’, for the use of the capitalist elite only.

    Time to reclaim the term.

  11. #11 Neil B ?
    December 11, 2008

    Paul, could you explain a bit more of how neolibs co-opted freedom for the elite?

    BTW, for those who link unions aren’t “free market” because they are a sort of “trust” formation for the sellers of labor: the definition of “free market” is treacherous because at heart it is supposed to be based on whether arrived at freely (versus government mandate), but what if something freely arrived at goes against the “interests” of the free market (i.e., trust formation)? That’s one of the inherent contradictions of free-market/capitalism, the free choices contain some seeds of their own destruction even before the government gets involved. (Well, actually the government was already involved through the money system, the laws setting the background, even who owned what to start with, but I digress….)

    tyrannogenius

  12. #12 Klem
    December 12, 2008

    Unions are also good for scientists! In European countries unions negotiate wages, provide free legal aid, save up money for strikes, provide leadership training, etc. See for example the Norwegian Association of Researchers. (Link is to English page, but Google Translate is excellent.) Is there anything like this in the US?

  13. #13 Dave
    July 6, 2010

    “At its most fundamental, a union is nothing more or less than a group of people who have figured out that if they act together to place limits on the supply of their own labor, the businesses that have a demand for that labor will need to pay more.”

    Haha. You have just described why this IS NOT an instrument of the free market. This is a constraint on the free market because it is artificially puts a control on labor. The free market has no constraints on supply or demand and is consumer driven, not employee driven.

    Try reading Mises, Bastiat, Hazlett, Adam Smith, etc. You clearly don’t understand anything about free market capitalism or economics in general.

    Unions were an incredibly insane idea and very Marxist. While things like workers safety needed to addressed, having state protected unions was a giant mistake for a solution to the problem. We now have agencies such as OSHA to do what people wanted unions to do.

  14. #14 fsds
    July 10, 2010

    Actually labor unions are quite part of the free market. Workers chose to sell their labor to corporations at agreed upon prices in order to receive a portion of the income earned from their work. By making unions illegal you interfere with the free market by putting artificial price controls on for sale labor. That would essentially be socialism for businesses. Simply put if businesses would like to pay for and employ labor, employees should have the ability to set minimum demands in the free market for their services. Without employees there can be no production and as a result there can be no consumption of the fruits of production. The free market constantly and historically puts constraints on production when it refuses to reinvest the profits into new production and instead shifts it to non-industry related speculation which leads to mis-allocations and business cycles..

    Amusing how you put Smith and Bastiat in the same category of the cranks Hazlett and mises. Bastiat being a classical liberal was opposed to a bill in the French legislative assembly that would have banned voluntary labor unions. Mises and Hazlett are not liberals by any means or in any sense of the original word. You pseudo-free marketeering “libertarians” cannot even define liberal. They are “libertarians” in the sense that they support arbitrary socialism for certain sectors of the economy (such as the military and police), which ironically enough are equally susceptible to the conditions of malinvestment. Case in point, the military industrial complex has been the leading cause of US fiscal deficits for the past 40 years. At some point when the debt burden becomes too high and the interest becomes too costly the government will be forced to cutback leading to unemployment and revealing the excess capacity of military hardware manufacturing.

    It is clear that it is you who doesn’t understand the free market and instead you are nothing more than a statist. What classical liberals meant by the “free market” was a market that was free from economic rent, i.e costs not directly related to production of a good such as interest payments, real estate rent, royalties, etc. Adam Smith himself stated that if there should be tax it should be on property since it is not conducive to the production process or the utilization of capital. Completely contrary to the sacred arbitrary property rights that the state grants which Mises states should be tax free and instead tax should be shifted off onto earned income from capital investment and consumption, which actually penalizes capitalism.

    Now you’re simply stating pure opinion which is in clear contradiction of historical facts. The AFL since its beginnings has always been very hostile to communism. As for Mises he was against such government interference, regulations, and workers’ regulations in his idea of a “Free market”.

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