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Unions are Not Capitalism

Unions are Not Capitalism
Profile photo of James E. Miller

scabLabor unions are a dying breed. According to the Pew Research Center, union membership in America “is at its lowest level since the Great Depression.” In 1983, there were approximately 17.7 million union workers. Today, that number stands at 14.5 million, with every estimate showing a continued downward trajectory. Clearly, the Norma Raes of the world are going extinct.

But as Samuel Johnson quipped, one should never dismiss the triumph of hope over experience. In celebration of Labor Day, the leftie rag New Republic recently published an interview with labor strategist Rich Yeselson defending the role of unions in the U.S. As a labor organizer, Yeselson’s bias is on full display. Instead of giving an objective view of stagnating union membership, he obfuscates to boost his own profession.

When asked if unions are dead, Yeselson rightly says “no” while pointing out that millions of Americans are still active members. Unions not only retain fairly hefty membership, but also own valuable real estate in big cities and pension funds worth billions of dollars. Despite declining membership, there is still plenty of capital left over from organized labor’s heyday.

Fancy buildings and promised retirement benefits aren’t enough to reverse the downward trend however. Public opinion about unions is also on the decline. Between Volkswagen plant workers voting against joining the United Auto Workers and the confectionary company Hostess declaring bankruptcy to rid itself of unionized employees, there is a growing perception of greed directed at labor organizers. There is also the uncomforting fact that state and local governments – the industry most heavily unionized in the country – are underwater on their pension obligations. Even politicians are starting to face the truth: there is less money in government coffers than was promised. New Jersey Governor Chris Christie recently toured his state telling voters that pension funds “will go bankrupt if we don’t make significant changes to it.” He won’t be the last to break the bad news.

Yeselson plays stupid to this fiscal reality. Throughout the interview, he defends the legacy of unions with sophistry and economic inanity. Yeselson acknowledges that unions often try to “take the wage out of competition.” But, he asserts, this is not a problem. With locked-in wages, “the quality of the product, innovation, etc. are the ways that companies, ideally, compete.”

This is patent nonsense. Wages are an integral part of running a business. Management can’t determine costs without accounting for the price of labor. Competition in wages means business can attract the best and brightest workers. An industry without workers who compete for wages is stagnant, unable to innovate to its full capacity. For someone on the side of worker well-being, Yeselson doesn’t want to see business competing for employees by offering higher wages or more generous benefits.

The biggest whopper of the Yeselson interview comes when he asserts that unions are “inherently conservative institutions which historically developed parallel with the development of capitalism itself.“ Ezra Klein backs him up on this point by claiming “you’ll find unions pretty much everywhere you’ll find capitalism.” This is a classic mistake of correlation with causality. Just because the labor movement accelerated with American economic power during the twentieth century doesn’t mean it helped in the process. If anything, unionization inhibited the ability of the entrepreneurs to succeed. Yeselson says unions “are as much a part of capitalism as Henry Ford or Apple.” That’s also incorrect; Henry Ford and Steve Jobs created products for the marketplace. Unions don’t produce anything for consumers. They leech off the profits of business.

Yeselson even has the gall to say that unions are inherently capitalist because they “use contracts…to link their members to the fortunes of the companies they contract with.” Clearly, Yeselson needs to brush up on his common law. Contracts aren’t contracts when they have the implicit use of force at their backing. Business either chooses to bargain with unions by choice or by force. The National Labor Relations Act – passed at the height of the New Deal – compels some private U.S. companies to bargain with unionized employees. Yeselson tries to say that “contracts are not unilaterally imposed at gunpoint upon terrified managers” but “are bargained between two institutions who have both common and conflicting interests.” Again, why must management bargain to begin with? Why are there deliberations over wages and benefits?

With government acting as the muscle behind unions, there is no choice. Company owners must bargain or face the threat of fines or jail time. This isn’t an amicable relationship. It’s a thuggish shakedown. Is it any wonder why Jimmy Hoffa is such an intolerable brute?

Ayn Rand had unions pegged best when she declared their purpose has never been to empower the average worker. “Unions and trade associations,” she wrote, “are not directed against employers or the public but against the best among their own members.” The goal has never been about “raising the weak in any way whatever, but simply forcing the strong down to the level of the moron.”

Yeselson ends his futile attempt to defend unions by bringing out the classic trope: “Unions, as the old saying goes, the folks who brought you the weekend.” This is nothing but an elementary school myth. A bunch of greasy-haired petition-gatherers didn’t create the weekend. Capital accumulation and rising productivity make it possible for people to take off work at the end of the week. Otherwise, the drop in commercial activity would render a business unprofitable, and thus unable to keep the lights on. This has always been the great secret behind unionist fiction.

With economic growth still staggering, the decline of union membership can’t come soon enough. Freed from the demands of overpaid bargainers, innovation and productivity inevitably rise. Increasing numbers of Americans are migrating to states with less strenuous union laws. When given a choice, workers go with their money is; not where there’s tough talk about bargaining rights. Labor is important; business is important; and solidarity is important. They are all no doubt conservative principles worth maintaining. But the right of every man to choose for himself takes precedent over all. You can’t build without capital; just as you can’t organize without sovereign will. Unions violate the spirit of voluntary association by the very fact they have government-backing. Yeselson is lying to himself if he sees forced collective bargaining as a necessary component of capitalism. And he is doing workers a great disservice by encouraging the formation of unions.

  • Jonathan James Rychart

    But they do have a choice whether or not to work at that company. Still free association. Unions absolutely are capitalist. Whether they’re “good” or not is subjective, but they’re definitely a product of a free market.

  • Jerry

    Guest,

    Like water flowing downhill, you fail to understand that money (which means that it takes jobs with it) ultimately flows to where ever it gets the best return regardless of all efforts of governments and unions to prevent it. North America was in the enviable position of being on top of the world after WWII, having lost no infrastructure, industry, and comparatively low loss of life. Like third and fourth generation of family wealth it's been squandered. It doesn't enjoy that position today. The rest of the world has caught up.

  • random2409

    A very one dimensional and very strange analysis. You make an implicit claim that somehow unrestrained capitalism is more efficient, effective and profitable when the reality of it is actually the deeply dysfunctional, edge of the cliff, disaster-economy that we are currently saddled with. You also seem curiously blind to the nature of democracy, i.e. its dynamism arises from the process of compromise necessary as competing socio-political forces meet. I also find it disturbing and a bit worrying that a man of obvious education and intelligence should quote Ayn Rand, a discredited, ranting, spit-flecked right wing nutjob. Finally, bearing in mind that the American economy is a hollowed out shell, cracking under a mountain of debt, you can hardly claim that a decline in unionisation in the US has led to economic gains….

  • Guest

    Oh, and BTW, capitalism–at least the type the writer of this article seems to advocate–is WAY over rated.

    Finally, to say that unions violate free association is nothing but Orwellian double speak (and, BTW, Orwell was a socialist.)

    People form and join unions because they choose to. If that isn't the very essence of political "free association," I don't know what is.

    • Bobbo

      It is no coincidence that the decline of unions coincides with globalization and the decline of the middle class in the United States. Make no mistake about it: the propaganda in this piece is to push the agenda of the 1%. I can only laugh when I read the claim that "government acts as the muscle behind unions" — as if there was a strict wall of separate between government and corporations! Do you really want a free market driven economy? Well then level the playing field. If there should be no government recognition and support of the rights of unions, there should be no government recognition and support of the corporate structure and corporate "personhood." There is no justification for the state to subsidize capital by gratuitously providing limited liability as a matter of law.

      • Guest

        Upon further consideration, and after reading some of the other comments that largely compliment my original posts, I wonder if the writer isn't being PAID by someone with big money, that has in interest in destroying unions, to write this tripe. It's that dishonest and that inaccurate.

        More reality:

        The decline of unions has also corresponded with the exporting of American manufacturing jobs to other countries–which was done in order to ESCAPE the influence of unions, including the higher wages paid to American workers.

        This further highlights the truth that as manufacturing jobs have disappeared, and with them the unions that represented them, the American middle class has been decimated.

        As someone else said above, "bearing in mind that the American economy is a hollowed out shell, cracking under a mountain of debt, you can hardly claim that a decline in unionization in the US has led to economic gains . . . "

        Back in the 1970s, roughly one out of every three American workers was in a union. Back then, the US was still the unquestioned top dog in the world economically, the American middle class was still thriving, American corporations were doing extremely well, and the United States was still manufacturing items (other than weapons) that the rest of the world wanted to buy. Also, the United States was running trade surpluses and its overall debt was but a small fraction of what it is today.

        Today, with the destruction of unions, the outsourcing of manufacturing jobs to other countries, the only people that have made out are the top 1% of the population (the Walmart heirs collectively have as much wealth as the bottom 40% of the American population, for example), the country runs yearly trade deficits, and this country is drowning under debt— everywhere.

        And yet, this writer points to unions as the problem??

        Whoever is paying you off to write this stuff, should be better at lying. Some lies are just too blatant and ridiculous to believe, even after 35 years of Reagan, Bush, Clinton, Obama neoliberalism, and dumbing down of the American population as a whole, and, in true Orwellian fashion, the rewriting of history to discredit the role unions played in fostering and sustaining American middle class prosperity.

    • Jerry

      People form and join unions because they choose to.

      Not really true. A person doesn't have a choice to work at unionized companies without joining their union.

  • Guest

    This article is such B.S.

    The decline of the American middle class correlates perfectly with the decline of unions. Without unions making sure that the surplus of the capitalist system was distributed somewhat more equitably, and fighting for better working conditions and benefits, there would have been no unions.

    The forty hour work week, worker pensions, and other "middle class" benefits were all brought to the United States via unions. Is it any wonder then, that as unions have disappeared, the forty hour work week is increasingly a thing of the past, worker pension plans are a joke, and the accumulation of wealth at the very top of the economic pyramid continues a pace while real wages for every one else have stagnated or declined?

    This guy is such an ideologue, that he is blinded to historical FACTS.

  • Guest

    "Public sector unions are the largest part of union membership today and government is responsible for the mountain of debt and the hollowed out shell of an economy as it struggles to fund increasing and unsustainable public pension liabilities that have bankrupted cities like Detroit."

    Let's see: In the 1970s, one out of every three American workers was in a union. We didn't have that "mountain of debt" back then.

    Let's see: Over the last 35 years union membership has been decimated to just about 12 to 14% of all American workers. By your rationale, with the decline of union membership, the amount of debt should have gone down. Instead, it has exploded exponentially during that time.

    If you blame the "mountain of debt" on public sector unions, rather than on the fact that the government has continued to borrow money to fund unnecessary wars, has steadily decreased taxes on the wealthy over the past 34 years (thus, decreasing overall tax revenues), and has destroyed the ability of the average working man to afford a middle class lifestyle without resorting to debt, then all I can say is that you really don't know what you are talking about.

    As for the state-level abuse of public sector unions, yes, the police and firefighters unions have negotiated for themselves obscene retirement/pension packages in many places. But that is because our politicians are mostly whores, who, in return for police and firefighter union endorsements at the local level, are willing to sell out fiscal responsibility.

    However, most teachers don't have those kinds of obscene retirement packages. Most other types of municipal and state wide, and federal workers also don't have such sweetheart deals.

    Admittedly, there has been SOME public sector union abuse (mainly on the part of the cops and the firefighters), but to blame ALL public sector unions for what ails our society financially shows incredible myopia and faulty reasoning on your part.

  • Guest

    Let me also add, that the "destruction of money and its transmogrification into 'token' status" has not been the work of unions. Rather, it has been the work of American politicians (starting with Nixon) and financial elites working largely under the influence of "Mr. So Called Libertarian" Milton Friedman and his "monetarist" economic ideas that have been put into high gear most recently by the likes of Bernanke and Yellen.

  • Frank Zeleniuk

    Milton Friedman was indeed a monetarist with too much faith in government, I might add.

    Bernanke and Yellen follow Keynesian theory as most Central Banks do.

    But you are right American politicians are mostly responsible for the devaluation of the dollar.

  • Frank Zeleniuk

    "Moreover, if there is any true definition of "anti-American," I would classify selling-out-your-fellow-American-citizens- solely-for-the-sake-of-a-greater-return-on-investment -by-moving-their-jobs-overseas as an action that fits it perfectly."

    Sorry but Unions had a greater input to selling out your fellow American citizens by pricing themselves out of the market.

    Tarriffs will only protect from cheaper imports, they can't do anything to improve exports and the US used to be the biggest exporters of manufactured goods. Cheaper labor elsewhere killed the US export market and the wealth of emerging economies, such as China and India, improved.

    The truth is that protectionist policies that may help some Americans wind up hurting the majority of Americans with higher consumer prices.

  • Jerry

    Thus, all of that governmental interference with the "free market" in the form of trade barriers and labor protections didn't cause the devaluation of the currency, as you assert.

    Where did I say that? The devaluation of the currency (which is far greater than Frank stated. He's too generous, but I'll get to that later) was caused by the central bank. That's the ONLY place currency depreciation can happen. If the central bank was doing it's job as it should be, there would be no need for a central bank. The only reason for a central bank is precisely create currency depreciation.

  • Jerry

    Moreover, if there is any true definition of "anti-American," I would classify selling-out-your-fellow-American-citizens- solely-for-the-sake-of-a-greater-return-on-investment -by-moving-their-jobs-overseas as an action that fits it perfectly.

    How could anything be MORE anti-american than prohibiting other non-union workers from freely offering their services to an employer because a union says so? What you advocate is conflict between fellow american citizens. America was supposed to be a free country.

  • Frank Zeleniuk

    One of the prime purposes of the central bank is to prevent "deflation". But I agree the ultimate responsibility for the currency devaluation lies with the Central Bank. Politicians over 100 years of the central banks existence eventually removed all restraints on the Central Banks ability to create money out of thin air.

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James E. Miller is editor-in-chief of Mises Canada and a regular contributor to the Mitrailleuse . Send him mail

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