It should be no wonder that the percentage of the labor force controlled by unions tends progressively to decline. Where the unions hold sway, companies cannot compete. Their market share falls and they ultimately go bankrupt. The only way that unions can maintain any given share of the labor force is by finding new victims to replace the ones they have sucked dry. FULL ARTICLE
Source link: http://blog.mises.org/3783/the-union-hunt-for-more-victims/
The Union Hunt for More Victims
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{ 45 comments }
Damn! I’m even going to quit my beer drinking union! Today! I guess I’ll take up solo whiskey drinkin
George Reisman would better serve Austrian Economics thought by articulating a way to bring unions into the free market than he does by denigrating them for having and using state-granted coercion.
Just as I presume Reisman would advocate eliminating the state-protected monopoly status of enterprise, for instance that of the US Postal Service, and forcing it into the free market, he should similarly advocate eliminating the state-protected coercive power of labor unions while articulating their path from statist creations to market competitors.
Reisman seems to place far too much blame on the unions themselves and not nearly enough on the true source of their destructive activity — government. He should reverse this tack, identifying the state as the problem, and describing how, free of both government protection AND prohibitions (e.g., conspiracy in restraint of trade), unions could serve the interests of their members in the free market.
V Harris
Without unions our owners would not be sending jobs off shore.
Note that the people who complain about unions also complain about govt labor legislation.
Before WW1 half of all Americans lived in poverty. My Libertarian friends think THEY would be running the top half if they got what they wanted. Fat chance!
The main point of this article was to demonstrate that unions have a cost that lots of people are not aware of. It is done beautifully. Professor Reisman is a delight to read.
Billvald, did you read the article? What does your WW1 comment have to do with anything? What conclusions are we supposed to draw from “Note that the people who complain about unions also complain about govt labor legislation.”? Your comments seem entirely enrelated with anything that Prof. Reisman said. Are you just posting for the pleasure of seeing your words on your computer screen? If that is so, allow me to suggest opening a Word document and typing to your heart’s content. Please post full, coherent thoughts.
V Harris,
While I agree that the State’s special endorsement of union violence is a problem, I find that Professor Reisman’s treatment of the unions is fair and deserved. Though without the state unions couldn’t behave like the thugs they do today, I think it’s important to remember that it is the unions that are engaging in the coercion directly, the State is just their accomplice or their backer.
Also I find your plea for Professor Reisman to explain how “unions could serve the interests of their members in the free market,” misplaced. To my mind at least, unions achieve their goals through threats of violence and special legislation. Even by your own admission of what a free market in labor would look like, it’s unclear to me what (if anything) a free market union would do.
Identifying the problem, at this stage, is more important to me than fantasizing about what the world might look like after the problem is solved.
“Where the unions hold sway, companies cannot compete. Their market share falls and they ultimately go bankrupt.”
I am sympathetic to both the views of George Reisman and V Harris’s criticism. I’d like to know, however, what Reisman makes of the case of United Parcel Service. UPS has been a union shop from its very beginning, and yet it remains dominant in its field, as well as highly profitable. If unions necessarily suck companies dry, why hasn’t UPS been overwhelmed by its non-union competitors?
Daniel,
It should be noted that UPS has just acquired (or is in the process of acquiring) a major non-union freight carrier, Overnite Transportation. Unions like the Teamsters have now been driven by competition (spurred by deregulation) into smaller,concentrated, local markets, which are much like the local UPS routes serviced by the familiar unionized brown trucks. However, profits and growth in this sector have apparently reached a plateau and UPS is looking for the long-haul LTL market segment, which is mostly non-union, for its future growth opportunities. There have been several articles in the trade magazines outlining the shifting strategies of UPS and FedEx that you can check out. I’ve read some in Traffic World and Pacific Shipper, possibly Journal of Commerce and Wall St Journal may have additional articles related to the Overnite deal.
One additional comment regarding unions and sucking companies dry with reference to UPS. The perfect example of Dr. Reisman’s exposition of the destructive effects of unionization are the Big # auto makers, especially GM. Another example would be Big Steel. An important factor: these are two mature industries. UPS competes in a relatively new market niche of express delivery service, which was not provided by the USPS. As such, the market’s “newness” or immaturity may have allowed UPS to be unionized and still experience substantive growth. The Overnite transaction may be an indicator of market maturity and the limiting factor of unionization on further growth.
I will readily concede that unions have played a significant role in decreasing the competitiveness of the American auto and steel industry, but I have to take issue with making an exception of UPS’s success because it supposedly not a “mature industr[y]” and because it “competes in a relatively new market niche of express delivery service”. UPS has been a union shop since 1907, making it a tad younger than Ford and a little older than General Motors. And while it is true that UPS competes in the express delivery market, that does remain a very small part of their overall package volume, albeit a highly profitable one. It remains to be seen whether or not the profitability of parcel delivery as we know has plateaued, but I would not bet on it considering the still-growing market of online shopping. I should point out that overnight delivery as it exists today was conceived and put into practice by non-union Federal Express AND that unionized UPS was able to successfully adapt and flourish in the new market.
For the record, I am a Teamster employed by UPS, I have a copy of Reisman’s Capitalism on my nightstand, and I read Mises.org every day.
“the [communist] Party must more than ever and in a new way, not only in the old, educate and guide the trade unions, at the same time bearing in mind that they are and will long remain an indispensable “school of communism” and a preparatory school that trains proletarians to exercise their dictatorship”
Vladimir Ilyich Lenin said it all (from “Ultraleftism, an Infantile Disorder”).
Seriously, there’s nothing wrong in collective bargaining and trade unions – as long as membership is voluntary, and no coercive powers of state are used to compel employers to deal with union members. Though, I suspect, the lack of coercion will make catering by unions to short-termism of their members impossible real quick.
And, yes, unions may have a very useful role in a free market – as providers of job search, legal and dealmaking assistance to their members, for a membership fee. Operating, essentially, as a temp workforce agency co-ops, and competing for both workers (on the basis of their fees and quality of services and job availability) and for employers (based on availability and quality of labor, and on the negotiated prices).
The contractor companies and temp agencies who seek contracts for their employees are a common sight in the high-tech industry.
Professor Reisman argues as though unions of workers are the sole impediment to the existence of a laissé faire economy where everything would be bought and sold in an unregulated and competitive market place. The truth is otherwise. Individual workers are the least powerful of the participants in a market place that includes business associations, professional associations, the military-industrial complex, the economic power of big business, Chambers of Commerce, farm and other lobbyists and who knows what other distortions. As the least powerful of the various players in the market it makes sense for workers to band together to try to fight for a better deal just as do all those other self-interest groups. Unions are an easy target but it is unlikely that they are the worst distortion in the market
It may be the case that union activity in one area sometimes has bad effects on other workers whether unionised or not in other areas. The same might be said about any of the special interest groups that act as though indifferent to the effects of their activities on other sectors of the economy or on individuals. Perhaps a better (or more practical) solution would be for those non-unionised workers to form their own union and fight for the biggest piece of the pie they can get. It’s the American way.
Just as it makes little sense to criticize the US Postal Service for behaving like what it is — a regulated monopolist, it makes little sense to berate labor unions for behaving like what they are. Rather than attack these monsters that government has created, wouldn’t the better approach be to formulate and advocate a proposal to move both from government-protected to market-disciplined enterprises?
Perhaps there is no useful purpose for voluntary labor unions in the marketplace — but perhaps there is. Reisman could, for instance, propose lifting all prohibitions against collusion among workers, then the market itself would determine whether or not laborers are successfully able to restrict supply and so raise the price of their labor.
At any rate, less effective in persuading labor away from the ‘dark side’ is to continually enumerate the evils of unionism, while the more persuasive way is to explain what is needed for workers to leave the state protection of unionism and come into the free-market fold.
Thus, it seems to me that, in response to Milkman’s plea for more charismatic leadership to reinvigorate unions, the proper response would be to articulate what free-market unions would look like, describe what is needed to get from here to there, and describe the benefits that might accrue to laborers were they actually freed to voluntarily pool, restrict the supply, and raise the price of their labor.
V Harris
V Harris,
I respect your efforts, but don’t you think you are being a bit naive? I do not think much anyone who is a proponent of trade unionism would even listen to an argument that involves taking away their coercive powers and giving nothing in return. I mean that literally- they would ignore or condescend to you at best, and respond with open anger at worst.
Reisman’s line of advance is indeed targetted at those who are not themselves in unions, and this seems to me the only hope of cutting their power. Change will never come from within those organizations, they are born out of a combination of perceived victimhood on the one hand and naked avarice on the other. I respect that Mr. Holway is a Teamster who reads Reisman, but I see him as a radical anomaly in an otherwise predictable system. I would like to hear that I am wrong!
Mark
If I can ever get my business off the ground, unions will indeed try a different tack–and so will the workers they represent and the companies that are currently being (mis)identified as the enemy because “…it is obvious that something is keeping us all from achieving our hearts’ desires.”
Big “if.”
Mark,
A campaign favoring decoupling labor unions from the state would necessarily be targeted at ALL the relevant stakeholders and decision makers — as well as the public at large.
Of course you’re right: as with state-protected monopolies, those who benefit most from statist labor unions will never be persuaded to change the system, regardless of all arguments to the contrary.
Rather, it is all the rest of the stakeholders and decision-makers that we are interested in.
It is those who might be persuaded to change their support of the extant system — when seeing that there are free-market alternatives to maintaining rather than destroying labor unions — who are the intended audience.
V Harris
Unions are notorious for their hostility to labor saving machinery and to any form of competition among workers, for featherbedding practices, indeed, for “making work” by deliberately and arbitrarily increasing the number of workers required to accomplish a given task
Whenever a union succeeds in obtaining above market wage rates for its members, it also reduces the number of workers who can be employed in its field. This is because of the operation of one of the best established principles of economics: Namely, the higher the price of anything, including the wage of any kind of labor, the smaller is the quantity demanded of that good or labor service.
More workers or less workers, which is it?
The supply and demand curves for the factors of production (land, labor, and capital) aren’t all the same. A Union may simply increase the cost by being in the position of a monopoly supplier.
It seems a lot of people argue this is a good thing when Intel or Microsoft does it. Except that there is no entrepenuer making billions, why is having a monopoly supplier of labor any different and any more or less evil?
And the parallels to the AMD/HP/Intel work – If you accept nonunion employees, you will have to find nonunion protection services (pinkertons instead of the police), and nonunion transport services, and probably nonunion retailers and consumers.
I tried to point out that economic power is also subject to abuse and corruption when corporations try to restrict trade in the manner governments do – and people seemed to think this was silly.
But when a large number of people do the same thing in the form of a Union, somehow the evil, tyranny, corruption becomes visible and is spoken against.
When Intel tries to coerce HP, they somehow have a right, but when a union does the same thing they don’t?
tz,
As far as I can tell, the problem here is that you define “coercion” categorically differently than other people on this board.
You seem to define coercion in terms of ends. For example, let us say that the government says “If you do not do thing A, we will put you out of business.” and a corporation says “If you do not buy product B from us, we will stop dealing with you, which due to market conditions will likely result in you being put out of business.” To you (if I understand your position correctly) these two things are identical, as both result in the hapless entrepeneur being put out of business if he does not comply.
Where I and, I assume, the others who have been arguing with you differ is that we see the two examples as being categorically different due to the different means being employed. In the first example, the government is using the threat of violence to get you to comply. In the second example, no violence is used, but rather an actor is threatening not to exchange goods or services with you if you do not comply.
You always and everywhere have a right not to have violence threatened against you, but never do you have a right to someone else’s products. You did not earn them. If you want them, you must ask for them, and trade for them. The fact that you need his products or services to survive or thrive does not give you a claim to them. If your need was seen as superior to his right to trade as he wishes, the system of property rights would logically collapse into a system of redistribution based upon need (perceived or actual). Therefore, your interpretation of “coercion” must always result in socialism.
If you believe in property rights at all, it seems to me that you seek companies to engage in “good” competition, but think that using their influence thusly is “bad” competition that must be stopped. This is a false dichotomy.
In conclusion, Intel is not coercing HP in the same way that a union, backed up by government violence, is coercing it’s employer. Minus the threat of violence, perhaps your comparison would hold more weight, but that is the very point at issue.
Mark
The government need not use violence either – it can interfere “merely economically”, for example by taxation, asset seizure or even other lesser things including preventing the exchange of goods. No one yet said this would be non-coercive.
Unions need not use violence yet they can be just as coercive. Almost all of the article didn’t explain unions as bad in terms of having government help or using violence.
Consider unions simply as suppliers of labor dictating the terms of the supply (including buying extra, unneeded units, requiring not buying other goods from non-union suppliers, etc.). Is just this proper or improper?
So a Union – as long as it is not backed up by government violence – though quite capable of destroying a business by interfering economically (through mutual union-only agreements), would be fine with you? Then you also should disagree with the article.
But also note there is another false dichotomy. If HP violates the agreement with Intel, Intel goes to court to get government violence to comply.
I think it was Tanya Harding who wanted to injure Nancy Kerrigan in the parking lot so she would not be able to skate. This is competition, though there is a difference between doing so on merit on ice and doing other things.
You also misstate my position, it is not “If you do not buy product B from us”, it is “If you do any trade with 3rd party X we will put you out of business – not only will we not sell to you, we will prevent anyone else from reselling to you and where we can we will prevent anyone from buying your products”. The first is a transaction purely between the two parties – an exchange occurs or does not. The second is the attempt to interfere with exchanges with 3rd parties. Having the government say I can’t trade with X is not different than having a trading partner who is not X say I can’t trade with X.
Just because someone provides a product I need does not give him the right (though it might give him the ability) to restrict my liberty. I may have no claim on his product, buy you seem to say my need for his product gives him a claim on my liberty or maybe even my life simply because he can make a claim. I gave the example of a juror – vote not guilty or I won’t trade with you?
“If you do any trade with 3rd party X we will put you out of business – not only will we not sell to you, we will prevent anyone else from reselling to you and where we can we will prevent anyone from buying your products”.
It’s still not equivalent to murder, but it’s a little more tangible as an argument. Exactly how does a company prevent other companies from doing business with the targeted company? By threatening not to do business with the other companies as well? Wouldn’t that be like cutting off one’s nose to spite his face?
Obviously if a company did use or threaten coercion then you have a criminal matter, not mere economic pressure. Oh, and taxation or asset seizure is definitely not “merely economic”, but coercion. Violence isn’t the issue–initiation of force is the issue, and I’ve yet to understand how economic pressure can be an initiation of force.
tz,
Here is my somewhat scattershot response.
“The government need not use violence either – it can interfere “merely economically”, for example by taxation, asset seizure or even other lesser things including preventing the exchange of goods. No one yet said this would be non-coercive.”
This is incorrect. All of the things you mentioned- asset seizure, taxation, etc, are backed up by violence. I meant not only such things that literally involved violence (warfare, etc.), but also things that were backed up by the threat of violence in the face of non-compliance, as all of those things are.
“You also misstate my position, it is not “If you do not buy product B from us”, it is “If you do any trade with 3rd party X we will put you out of business – not only will we not sell to you, we will prevent anyone else from reselling to you and where we can we will prevent anyone from buying your products”. The first is a transaction purely between the two parties – an exchange occurs or does not. The second is the attempt to interfere with exchanges with 3rd parties.”
The original hypothetical I posited was in this format-
If you do not (do thing Y) I will not (do X).
By your own admission, this is legitimate in some cases. You claim that when the condition involves a third party, it ceases to become legitimate.
However, I fail to see why putting conditions like “do not trade with person Z” as a precondition to trade with me is an illegitimate act. If the property I am trading is mine, I can put whatever restrictions I wish on it’s transfer. I may only be prohibited from including acts of violence against innocents as a condition, as those are always illegitimate. What is it that makes these conditions illegitimate?
“Just because someone provides a product I need does not give him the right (though it might give him the ability) to restrict my liberty.”
Your liberty does not extend to the goods held by others, but only your own. To say otherwise is to say that liberty means that needs or desires trump ownership. If that is the case, violence may be employed to strip “owners” of their possessions. This is not liberty, but what Bastiat referred to as “plunder”. Put in a different way, the word “liberty” does not extend over other people or their property. Therefore, you are correct- ownership of such things does not give them the right to restrict your liberty- but the business in our example has not done so.
“Consider unions simply as suppliers of labor dictating the terms of the supply (including buying extra, unneeded units, requiring not buying other goods from non-union suppliers, etc.). Is just this proper or improper?”
Proper, if not backed by violence. The business can either choose not to deal with them and take the consequences or, if they cannot afford to do so, they must, to use a technical term, suck up and deal.
“So a Union – as long as it is not backed up by government violence – though quite capable of destroying a business by interfering economically (through mutual union-only agreements), would be fine with you? Then you also should disagree with the article.”
Re-read the article. Reisman’s main problem with unions is that they are backed by government violence or the threat thereof. I cannot speak for Prof. Reisman, but to make myself clear, yes, I have no problem with unions when not backed by government force.
“I think it was Tanya Harding who wanted to injure Nancy Kerrigan in the parking lot so she would not be able to skate. This is competition, though there is a difference between doing so on merit on ice and doing other things.”
Did you read my brief digression on the difference between coercion through violence and coercion through refusal to trade? Do you agree or disagree?
“But also note there is another false dichotomy. If HP violates the agreement with Intel, Intel goes to court to get government violence to comply.”
I did not read the discussion you had in re: the Intel issue, so I cannot properly comment here. However, if the contract they made was a legitimate one that did not involve the use of force and Intel is defrauded by HP they of course can use violence to extract damages.
Mark
The coercion debate made me think of a question. I’m interested in the issue of unions, since I’m a grad student, and the idea of unionization of grad students has caught on at some institutions (thankfully not mine). For various reasons, I feel that a union would in no way serve my interests, and would in fact hurt my position as a grad student and my relationship with my advisor. If other grad students actually do go ahead and unionize to bargain with the university, I would want to opt out- I want no union bargaining with the university on my behalf. If I and other studnets who feel the same way can opt out, don’t we undermine the union? This has always been my question about free market unions- don’t the non-participants make it difficult for the union to accomplish anything (thus leading to calls for coercive union membership as a condition of employment)? On the other hand, if I cannot opt out of the union or the agreements it makes, isn’t that coercion? Or is that kind of coercion somehow OK because it balances the “coercion” (as some in this discussion have defined it) that the university can supposedly employ by refusing to trade salary and education for grad students’ labor?
It isn’t murder, but I would note two other Toms (Paine and Aquinas) would say an invalid law is no law – and I think they would agree that an invalid contract provision is no provision. There are other examples such as some Microsoft betas which say you can’t review, or worse, say anything against Microsoft (even if true). What happens when every EULA says that?
Let me take the HP/Intel as an example. If Intel writes into its sales contracts that if they sell you a chip, you cannot sell it to any other board builder or computer manufacturer, or if you are a redistributior you can only sell to retailers, and in each case you cannot sell to each other or establish a market to resell chips – only the consumer might be able to resell, and then there would be limits on how many they could buy.
The other companies might be in the same situation – it normally only appears with monopoly power (and I don’t say the monopoly rents are evil, but only using the monopoly to restrict liberty). Intel cuts off HP, but HP cannot simply buy inventory from any of Intel’s customers because they agreed to provisions similar to what they are trying to impose on HP.
Ultimately, monopolies are unstable – but they have very long noses and can tolerate a lot of cuts if they can hold onto and even increase monopoly rents and use those to make demands other than price.
Economic pressure can be coercive. Lets say I buy a one-inch strip of property along the perimeter of your property and build a 20 foot high steel wall. You can’t get in or out. I am not using “force” or using violence. I say I will allow you access to your property if after a month you will sell it to me for $1. All the wall does (if you are inside) is prevent you from trading with 3rd parties, at least those that don’t have helicopters (I assume the airspace is a commons).
Force or coercion has a broader definition than just violence. If I am in a position of power over you, I can choose to use that power or not. That power might involve violence or might not. There are many ways of causing harm or pain that don’t involve physical injury. I specifically exclude monetary (pricing) power. I suppose power is the ability to cause harm or pain. The one-inch 20 foot high wall gives me power – I can force you into exchanges not because you volunteer, but because I can cause harm to you if you don’t.
Economic pressure – at least in the form of refusing to exchange – is not coercion since I can’t make you trade against your will. But the terms of exchange ought to be limited to swapping ownership (or leasing where I just buy some rights to what you own).
HP has 1. Its right to exchange freely with any other entity. 2. Money. Intel wants to exchange its chips for 2 and 1, not just 2. My point is that HP’s right in 1. is inalienable and thus cannot be sold. If we split the transaction, where Intel sells chips, and where Intel buys liberty, and isolate the latter, how would we look upon just that portion of the transaction?
But it makes a difference if Intel is in a monopoly position. If I can easily change suppliers, they might have to pay a great deal (not that it would make it right) to get me to sign an exclusive contract, and I could demand equally egregious terms from my side (so we could limit each other’s liberty). If I am reliant on Intel, they can not only force me to pay higher prices for the chips (which I can pass on to consumers), but also force me to lock myself into them as a supplier, i.e. sell my liberty cheaply even if I don’t wish to sell it at all. As I’ve said, the latter is NOT voluntary exchange.
“If I and other studnets who feel the same way can opt out, don’t we undermine the union?”
Absolutely. The union in question is an organization of sellers of a good who, in order to raise prices, have cartelised. In plain English, they are a bunch of people who all sell one thing who get together and say “Hey, if we all raise our price, and no one cheats, and there is no reasonable alternative to us, we can make greater profits!” By opting out, you can potentially undercut them and therefore do indeed undermine them. But there is nothing wrong with this.
“This has always been my question about free market unions- don’t the non-participants make it difficult for the union to accomplish anything?”
Yes. It does. The same is true in any cartel, however- there is always incentive to opt out, and opting out causes the fragmentation of the cartel.
“On the other hand, if I cannot opt out of the union or the agreements it makes, isn’t that coercion?”
This depends. If you cannot opt out because the government says “you must be part of a union or we will arrest you” or because other students say “join or union or else we will hurt you” then yes, it is indeed coercion. However, if the school decides that a condition for future employment is union membership then it is not coercion- it has the right to set conditions of employment. Both parties to a business relationship can state their terms- if either doesn’t like it, you walk away. Note, though, that as you are already a grad student, your pre-existing contract may prevent them from compelling you in this manner, depending on it’s terms.
“Or is that kind of coercion somehow OK because it balances the “coercion” (as some in this discussion have defined it) that the university can supposedly employ by refusing to trade salary and education for grad students’ labor?”
Non-violent coercion- like the university making union membership a requirement for admission- needs no excuse, and is at the discretion of the party seeking to enact it.
Violent coercion, however, is a whole ‘nother ball of wax. The fact that the university is wealthier than the students they employ does not give the students the right to threaten them with violence. Violence is indeed what is being threatened here- either through having the government use the threat of force to compel the university to allow unions or to force all students to join the union once created. Were this a legitimate use of force, it follows that all people who are poorer than those they seek to transact with could use violence against them so as to compel terms that they claimed were “fair” in order to remedy a perceived “power imbalance”. Taken to it’s logical conclusion, this is nothing more than mugging writ large.
If you put restrictions on property you transfer to me, then I don’t own it, as ownership means the complete set of rights over property. Therefore it is not my property. If it was, I would have exactly the same rights you had before the exchange. In this case, after the exchange, I have inferior rights, so I am merely leasing it from you or whatever you want to call it.
My point is you can exchange with me, or not exchange with me, but you cannot legitimately use an exchange of property to abridge my rights or liberty. You have the absolute right not to exchange with me, but you only have the right to demand property or money in the exchange. When you demand something else, it is not an economic transaction in the market, it is bribery, or extortion, or something else.
If your liberty doesn’t extend to the goods held by 3rd parties, where does your right come from to subject me to a demand I not exchange those same goods with those same 3rd parties?
For that matter, if you allow all manner of conditions, I could demand you become a socialist as a condition of trading with me. Let us all mutually destroy each other’s rights to trade freely in the market “voluntarily”.
If rights and liberty are above the market, they can’t be demanded in trade and are inalienable even if you would desire to alienate them. If they are not, then government is simply the monopoly which you have already agreed to trade all your rights for their protection or whatever benefit you probably already use.
This is not just academic. Just because I engage with the government to avoid being annoyed or worse, I won’t maintain that I have renounced my rights because I can’t do so. I cannot give my freedom to government nor to a corporation. They are not for sale because they cannot be sold.
tz,
“My point is you can exchange with me, or not exchange with me, but you cannot legitimately use an exchange of property to abridge my rights or liberty. You have the absolute right not to exchange with me, but you only have the right to demand property or money in the exchange.”
If I make a contract in which you are employed by me on a project, I am neither demanding property nor money. I am demanding that you act in a certain way- accomplishing the project according to the terms we agree upon. This may, for example, include a proviso stating that you must come to work every day at 9:00. Since this is compelling physical action by you, is this legitimate? One can infer, too, that this places restrictions on your physical action and dealings with others- you can neither sign a contract to work elsewhere at 9:00 nor go for a walk nor go to the store, etc, etc. Therefore, by employing you thusly I am forbidding you from working for others. Is this acceptable or not under your definition of liberty?
Let us remove the issue of monopoly for a moment. After all, Intel enjoys the market power is has due to its patents, and I believe patents are illegitimate, and so we may be on the same side at least in part. As a practical matter, I do not think monopoly would be a huge issue in a truly free market without things like patents. So, let’s just say that I, non-monopolistic seller Y, say that if you deal with me, you must not deal with seller X for a certain duration. You have plenty of other choices at reasonable prices, but you decide that you really like my products, so it’s worth it to you. You agree. Are you now contractually bound not to purchase goods from X for the duration agreed upon, or is that contract illegitimate since you are “selling that which cannot be sold”?.
What I am trying to get at is whether the issue is “power imbalance” or whether such a contract can be made at all (in your opinion). Your answer may lend clarity to this discussion.
Yes, I read the article and disagree with it. By the text, Reisman is not in favor of unions or labor legislation.
Reisman ignores the history of the labor movement. The legislation was passed because the “libertarian” Captains of industry were hiring thugs to gun down the labor organizers.
You are purchasing my labor (which I describe as my property) from 9am until some later time. I can suggest different hours, but if you want those particular hours of my time, and will pay for them, I would exchange them. If you purchase those hours, I no longer own them so could not also sell them to others any more than I can sell the same physical object twice. (Think a collectible with serial numbers where low numbers are more valuable – you are purchasing a nonfungible hour of my time). I could also point out that I’m a night person so my “best” hours are later and offer them. If I bill you for 8 hours, I must work 8 hours – If I bill 4 people for 8 hours in a day, something is wrong.
I would say the contract restricting me from dealing with X would be illegitimate. You could instead make a long term contract saying you would sell me an equivalent or superior product for some percentage less than X’s price for the duration. (You might know that X has a new technology which will save 90% in price, so want to lock me in before that happens). I might be convinced otherwise since the duration is limited and it is only one specific seller in one transaction. If you then start adding “not X or anyone else”, and extend the duration, and try to cover all future transactions it would be illegitimate. Also, could I buy X’s products through Z without dealing with X?
To cross the governmental line again for a minute, we probably both have driver’s licenses and social security cards. I maintain I have not transferred any of my rights (because I cannot do so) although I might cooperate with extortion or usurpation because that is more convienient. If getting a license means giving up the more general freedom of movement, you would say the exchange is legitimate.
Dear billwald,
Thank you for your insightful, well-argued post. I can honestly say you have contributed toward the on-going discussion. I found particularily enlightening your use of the phrase “hiring thugs to gun down the labor organizers.” If we had more of your dispassionate reasoning and nuanced view of history, this blog could be even better than it is now.
[insert ad hominem here]
If you put restrictions on property you transfer to me, then I don’t own it, as ownership means the complete set of rights over property.
Since ownership is control over the property, I would tentatively agree with this statement, barring an exhaustive consideration of possible restrictions. But is it relevant? Does one not still have the right to agree to the terms or find another trading partner?
Lets say I buy a one-inch strip of property along the perimeter of your property and build a 20 foot high steel wall. You can’t get in or out. I am not using “force” or using violence.
I would say that this is coercion because you are restricting access to the property, or at least restricting my freedom of movement. But this is hardly “economic pressure”.
Intel cuts off HP, but HP cannot simply buy inventory from any of Intel’s customers…
So HP doesn’t agree to Intel’s terms and Intel refuses to sell to them. HP goes to Intel’s competitor AMD and AMD gets a big boost from HP, taking market share away from Intel. Such exclusive restrictions only work if competition or entry in the market is also restricted. Otherwise, extreme conditions hurt the seller more than they do the buyer. Standard Oil had lots of “economic” power, but was unable to restrict competitors from entering the market.
Let’s cut to the point (at least I think this is the point): are there any unjustifiable restrictions that can be in contractual agreements? Yes, I think there are, but it’s difficult to elucidate on particular conditions. At the extreme end, you cannot sell yourself into slavery, for example, because you cannot alienate your will. I would agree that you cannot sell your rights away, but I don’t think you’ve given an example of that actually happening.
Two factors mitigate unreasonable contracts. First, competition. If one party wants a strict contract, then a competitor has a market advantage by offering more lenient contracts. Second, legal enforcement of contracts. If two parties go to court over a contractual violation, will the judge and jury simply say that the parties must abide by the contract as written, or will they say that unreasonable terms are unenforceable?
In a way, I’m cheating, because these factors are pragmatic instead of principled, but I think common or customary law and a history of judgements will provide better guidance for contractual terms and their enforceability than a bunch of politicians trying to create legislation that specifically spells out what contractual terms should be legal and which ones shouldn’t.
TZ:
Let us hypothesize. I make objects of type X, which type of object I and only I have the knowledge to make.
I sell you 500 of these items, with the caveat that if you sell them to members of Nation Y, I will not sell you any more of these items ever.
You have the 500 items in hand. Can I legitimately physically prevent you from selling these objects to whomever you please? Clearly the answer is no. You own them, you may dispose of them as you wish.
If you defy my (admittedly, in this context, pretty stupid) order, and sell to members of Nation Y, and I refuse to sell you any other of my Object X, have I violated your rights? If I make not selling to you, either, a condition of purchasing further Object X from me for my other customers, have I violated your rights?
The way I see it, the answer is no. I have not violated your rights, though I have clearly ended your Object X Selling business.
Now, this may not be very nice of me, but it isn’t a violation of your rights.
So far there seems to be agreement that without government coercion unions, as suppliers of labour, would be acceptable players in the market place. Workers could choose whether to join and employers could choose whether to be a union shop, a non-union shop or allow a mixture. This seems OK except that unions do not normally employ the workers and are therefore not under any direct economic pressure to negotiate employment conditions on pain of having to ‘carry’ the workers until a purchaser for their labour is found. The pressure comes indirectly from their members who may be unemployed until a deal is struck with an employer. Another problem is that there is little or no competition between unions. Each union (as far as I am aware) has a monopoly based on either industry or trade. Do the AMA and other professional associations count as unions for the purposes of this discussion?
A further sticking point seems to be whether the right to property extends to placing conditions on purchasers of that property. It is argued that if it does not include that right then the owner’s rights are violated and if it does include that right and it is exercised then the new owner does not wholly own the property. I think both arguments are fallacious because the right to own property is not and never has been unrestricted.
Property rights are a social construct. The societies that establish those rights can set conditions on property in general or on particular items of property. E.g. vehicle use is restricted and I’m not free to start a pig farm on my land in the middle of town. So to suggest that preventing a corporation from setting conditions that effect third parties is an unacceptable restriction on the right to property is to ignore the fact that those rights only exist in so far as the community permits them. If it considered against the general interest to permit a corporation to set conditions that affect the rights of third parties then it is reasonable and legitimate to outlaw such conditions.
As to whether needs override property rights well of course they do in certain circumstance. The Scholastic economists taught, “In necessitate omnia sunt communia (in necessity everything is common) “
tz,
“I would say the contract restricting me from dealing with X would be illegitimate.”
“I might be convinced otherwise since the duration is limited and it is only one specific seller in one transaction. If you then start adding “not X or anyone else”, and extend the duration, and try to cover all future transactions it would be illegitimate. Also, could I buy X’s products through Z without dealing with X?”
You began by saying that the transaction would be forbidden outright, but then you seem to change your answer. This quote seems to indicate that whether the restriction would be permissible would depend on the severity of the restrictions. If that is indeed the case, how do you determine which restrictions are reasonable and which are unfair? And again, to be clear, does the relative “wealth” and “power” of the parties matter? If I am unfathomably wealthy and have many other suppliers but agree to your restrictive covenant terms because it amuses me, is that acceptable? What if it restricts me from using your competitors for only one day? An hour? If any of these are acceptable, clearly no RIGHTS have been violated- a right would be violated whether it was for an hour or forever. It seems that what you object to must therefore be not a right but a principle, which is by nature flexible. Can you elaborate it?
Neil,
Underlying this discussion is, I think, a presumption of some sort of natural rights by both parties. If what you say is true, it of course would render all of our points moot- the only “rights” (although, really you are saying that there is no such thing as rights at all!) anyone would ever have is the totally arbitrary and mutable rules of the society in which they lived. But because this is such a different assumption from which we are using, I respectfully submit to you that it is best saved for a different discussion about the nature of or existence of rights. I do not think it adds here, but rather distracts from the points at issue.
It is somewhat like someone interrupting a discussion about the validity of taxation by saying “I don’t even think either of you really exist! Prove that you do!” Of course if true (that we do not exist) that makes the discussion about taxation irrelevant, but is probably a digression best saved for a different time.
Mark
p.s. I think that is a good comparison, but it occurred to me that it could be taken as being sarcastic. I assure you that is not the case.
Mark,
I assume my summary of the position reached regarding unions is OK since no-one has seen fit to disagree with it, at least not yet! And no one is buying into the question of whether the AMA and the like are just unions in a different guise.
The “unions good or bad” discussion seems now to be at an end and the thread has moved away from George Reisman’s attack on the union movement to a discussion of property rights and how they impact on the rights of organisations. You tell me that contributors to this forum believe property rights originate in “some sort of natural rights” which apparently means they should be discussed as though they are unlimited. If correct, that would certainly render my point about the social application of those right somewhat irrelevant. But does it not also make the discussion taking place purely hypothetical by ignoring the environment in which rights exist and are applied?
Now that the discussion centres on property rights surely it is reasonable to clarify what those rights are. How does one relate natural rights which surely only belong to natural creatures to corporations? Do the contributors to this discussion believe there are such things as natural corporations? And what might the “some sort of natural rights” that you refer happen to be? Surely unless and until that question is resolved the discussion is doomed to be inconclusive.
We are indeed a long way from unions at this point but I am just joining in the discussion as it stands and there seems little point in building a logical castle on shaky foundations. However, I’ll respect your view that I am in the wrong discussion and merely observe from the sidelines unless invited to contribute.
Neil,
One more word before I go to sleep- I did not mean to exclude you from the discussion, only to mention that the points you raise, though technically pertinent (in that they would indeed undercut us both if true) are so far-ranging and all-encompassing that their discussion would entirely pull this conversation out of kilter and in a new direction entirely.
Indeed, if there are no such thing as rights, this discussion is on worse than a “shaky foundation”, it is on no foundation at all! However, since we all (I think?) have been assuming that there are such things as rights, to digress on that topic would pull the argument off into new territory and may mean that these issues are never actually resolved, as so often happens on the internet.
Consider two scientists discoursing on the potential consequences of a new breakthrough in string theory. A third comes in and says that he does not believe in string theory at all. Of course this is pertinent to the discussion-if string theory is false, the breakthrough is meaningless!- but it totally changes the argument from one about discrete consequences that this breakthrough will have to the validity of the meta-theory itself. These are very different things.
Anyway, I did not mean to be rude.
Mark
Greetings, Dr. Reisman!
While reading your article I was waiting with baited breath to soon read about the areas were unionism is currently more “successful” than ever: general government employees and teachers, as a subcategory. Reasons for union-growth, union actions and results in these areas are almost “lab-examples” for studying
unionism!
Looking forward to an article on unions in these areas — and the results that are altogether too obvious!
Regards
FRED
The basic objective of a union (as opposed to what in Britian was called a friendly society or in America a fraternity) is not to provide health care, old age pensions, and so on for its members (although it may do such things – and such mutual activity is a good thing).
No the basic function of union is to increase the wages and conditions of its members ABOVE WHAT THE MARKET WOULD PROVIDE.
There is no way BY DEFINITION that such a activity can be brought within the “market” (i.e. within voluntary interaction).
A union may use various methods – it may “picket” a place of work (it is not accident that “picket” is a military term – the whole point is to keep people out of the place of work, and not to keep them out by some sort of philosophical discussion), or a union may threaten to damage the place of work, or to damage the homes or bodies of workers who “break the strike”.
Or a union may use government – via various regulations.
However, if a union manages to provide its members higher wages or better conditions than volunatary interaction would provide the ecomomy (i.e. people) have to pay.
Other people will have lower wages and worse conditions than they otherwise would have done – or will just be unemployed. And the economy as a whole will not work as well as it could have (i.e. the losses to other people will be greater than the gains the union members make). It will not really be “greedy fat cats” at the top who pay the price of unionism – it will be the poor.
The final point is that unions tend to undermine unionised industries, so (in the end) even union members lose by unionism.
Car plants, steel mills, in the end nothing can survive unionism unscathed.
There is no way to achieve higher wages or better conditions for all by short cuts like unionism. It may look as if unionism is not doing harm for awhile, but this is only because general economic growth is masking the effects of unionism. Only real economic development will do the job of improving general wages and conditions over time.
Paul Marks,
You wrote: “No the basic function of union is to increase the wages and conditions of its members ABOVE WHAT THE MARKET WOULD PROVIDE. There is no way BY DEFINITION that such a activity can be brought within the “market” (i.e. within voluntary interaction).”
It seems to me that you are describing workers in a ‘perfect market,’ rather than a ‘free market.’
If not, is it your contention that in an ‘imperfect’ free market, workers will NEVER be successfully able to voluntarily collude in restricting the supply of, and thereby raising the price of, labor? What would prevent them from doing so?
Also, if there were a free-market union organized to serve its members, would you consider its obligation to improve the lot of ALL workers, as you seem to imply, or just that of its members?
V Harris
Professor Reisman’s article proves once again the destructive, wealth destroying effects of coercive interference in peaceful market activities. Labor unions destroy jobs, destroy capital, and impose injustice wherever they operate. The violence of a labor strike is usually directed at competing workers (“scabs”)who would gladly work for less than union wage rates, and who risk life and limb when they dare to cross a picket line.
The mindset of labor union types is particularly disgusting–an unsavory mix of virulent anti-intellectualism and a craving to use force–including violence–to get something for nothing. I grew up in a blue collar, heavily union town. The favorite parting line among friends used to be:”Don’t work too hard”.
Dr. Reisman’s book “Capitalism” is the most impressive work on economics I have read since “Human Action”. His analysis of the determination of price and criticism of the “marginal revolution”;his use of these powerful insights to logically demolish the myth of monopoly capitalism;and his masterful identification and refutation of the premises built into the notion of “pure and perfect competition” are all brilliant. In some ways, his writing reminds me of my first reading of”Man Economy and State” by Murray Rothbard 35 years ago. However,”Capitalism” is more powerful and more original because its insights are the product of the author’s mastery of both economics and philosophy.
Mark’s “However,”Capitalism” is more powerful and more original [than MES] because its insights are the product of the author’s mastery of both economics and philosophy” pushed me to take a quick look at Reisman’s work. I get it now: Reisman makes it plain he holds some animosity toward Rothbard.
Paul
What was the animosity? Does he refute the marginal theory in MES?
Hi Gekko: It sounds like it was personal for Reisman. Without actually making an argument (IMO), Reisman seems to indict Rothbard of being a Soviet government sympathizer. I believe it is partly based on Rothbard’s suggestion that Washington has perhaps a more aggressive military history towards other nations than Moscow has. It sounds like Reisman was a proponent of the USG’s involvement in the cold war, whereas, Rothbard was not as enthusiastic. These are my impressions. I haven’t looked at it in great depth.
My understanding is that Rothbard was a strong critic of the U.S.’s involvent in the Cold War. I do not know what Professor Reisman’s views on the Cold War are, but they are really beside the point as far as the economic problems caused by government-privileged unions are concerned.
Regarding economics, I believe that an important area of differnce between Professor Reisman and Rothbard is that Professor Reisman holds that both supply and demand contribute to the determination of prices, including factor prices. Rothbard, however, holds that prices are utlimately determined by consumer demand and that factor prices are the result of that factor’s expected contribution to the production of the final consumer good.
The description of the Union:
No the basic function of union is to increase the wages and conditions of its members ABOVE WHAT THE MARKET WOULD PROVIDE.
is simply the description of any monopoly. When Union force employers to use a millwright, a plumber, and an electrician instead of one skilled worker, I think it is called “featherbedding”. When Microsoft forces consumers to take a browser, media player, etc. it is called “bundling”.
Does not all the evil effects listed for unions also apply to a monopoly like Microsoft – wealth consumers would rather spend on other desired things instead of bundled or artificially high priced software? I’m still waiting for some distinction to be made between the two since I see unions condemned as devils but Microsoft and other monopoly or near-monopoly businesses lauded as angels for what amount to the same kinds of actions with the same kinds of economic effects.
And meanwhile there are parallels about what is said here about why the poor quality – the lack of security, crashes is really ok for Microsoft and by the Union organizers that unionism really is better labor even if it is really inefficient and impaired people still have to be paid even if they don’t do the job. I guess businesses just tolerate bad software on their computers and bad workers on their lines because it is too difficult to fight or switch.
It also might be able to get better wages and/or conditions for all, but by shifting spending from land or capital to labor. Do I pay two people $10/hour or one person $15/hr to run a machine costing X? But the difference is not merely economic – labor represents human beings at the end, and an optimal outcome for profits might not be one for society.
I am against regulating the market, but just want to note that life and important things go beyond the market – a machine-only world of “The Terminator” might be provably optimal from an economic standpoint – zero labor! Yet we would all be dead. The market is a very powerful force much like the forces of nature and ought to be our servant. We can think of “labor” as merely biological robots – not much different from slavery except they have some hours to themselves – or as something different in kind from capital, though it is part of the market. This messes with the philosophy and the equations of markets to treat labor and capital differently, but maybe it ought to be so.
As to my earlier points, I said “I might be convinced otherwise” that some restrictions within contracts could limit liberty yet be legitimate. I said that because I haven’t explored it in sufficient depth to see if I could create a case, or more properly where you could do a set of restrictions that did not actually interfere with liberty.
For example, you could let me use some equipment designed to work only with your product (and you would worry about damage if used with a competitive product) – as a condition of using that equipment? But this would be a side agreement – it might effect the same result but bypass the problem. In short, I can say that I’m not sure and need to explore things, but my default is that it violates my rights, but I’ve not done the equivalent of a mathematical proof.
OR – if you write into a contract with a third party that they cannot sell to me, you have violated my rights – indirectly – and violated the rights of that third party. If I hire someone to murder you, it doesn’t mean I am not guilty of murder simply because the violation occured by proxy – even if the proxy did the deed.
I already said you aren’t violating my rights by not selling more items to me. You can make the same caveats or more to the other people you sell to – but someone might eventually resell to me. In the first case you have warned me that you will not sell again to me, but you don’t impair my ownership.
In the case where you sell to someone else, you impair their ownership since you don’t merely say a caveat, but write a contract with such a (illicit) provision. I assume you intend this by the differing descriptions you use when you describe your transaction with me and your later transaction with 3rd parties.
It is possible that you can prevent my trade in your items, but that is one thing that ought to take place in the marketplace. You can decide you hate nation Y so much you never make another item X. Or try to find someone who will not resell. But I would be equally free to find someone who would or to change their minds.
Concerning the matter of UPS’s success and profitability despite being a “union shop” since 1907: Perhaps someone better-informed on the nationwide package delivery business might offer more insights, but as far as I know, UPS was the only nationwide package delivery service available to most people other than the U.S. Post Office Department / Postal Service. (The reasons for this are another matter.)
When a business’s only competitor is a government agency, as long as the union’s “sucking companies dry” practices don’t diminish productivity to some level less than the pathetic productivity we see in almost all government bureaucracies, there’s a lot of room to offer poorer service at higher prices while surviving and remaining profitable.
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