Workers of the World, Don’t Unite!

the birth of business unionism

In honour of Fake Labour Day, Tom DiLorenzo writes:

As every good free market economist knows, the only way unions have ever been able to raise wages above market-clearing wages is by the use of violence.

Okay, but whence this assumption that unions raising wages means raising them above (rather than to) the market-clearing price?

Employers of labour form firms in order to, e.g., reduce transaction costs and take advantage of economies of scale, but (except to the extent that they get government help in doing this, which of course they often do) we don’t describe this as lowering their costs below the market price for their services; instead, we say that that’s part of the process by which the market price is determined.

Why should different rules apply to the sellers of labour? If association enables employers to get a better deal without necessarily relying on government intervention, why should we assume that any benefits that workers derive from like association must somehow involve the state?


16 Responses to Workers of the World, Don’t Unite!

  1. Raimundo September 7, 2009 at 6:24 pm #

    Well he doesn’t say that workers CAN’T gain such benefits without reliance on the state but merely that “the only way unions HAVE EVER BEEN able to raise wages above market-clearing wages is by the use of violence.” It’s a sad reality that given how much state support business has (ever had), unions can only get real bargaining power if they have state support.

  2. Anon73 September 7, 2009 at 6:47 pm #

    Been listening to some interesting marxist podcasts, apparently free competition always means a few monopoly firms dominate the market due to economies of scale. Neato…

  3. Sheldon Richman September 7, 2009 at 7:40 pm #

    While Tom doesn’t explicitly make the assumption you ascribe to him, Roderick, I suspect he has made it implicitly.

  4. MBH September 7, 2009 at 8:37 pm #

    …whence this assumption…?

    The question’s rhetorical, but I’d say that the assumption plays off a pre-conscious belief (to borrow from Milton Erickson) in a monarchical universe (to borrow from Alan Watts). Many well-intending folk believe that only government intervention can combat abuse of labor. They believe it, not because they think people can’t take care of each other, but because they think — first and foremost — in terms of how the system can compel people to take care of each other. That belief, I think, is from whence the assumption came — the belief that whether or not people can take care of each other is secondary to what the system can do.

  5. Gary Chartier September 7, 2009 at 8:58 pm #

    Roderick makes the great conceptual point that, in a genuinely freed market, collective bargaining would be just one of the factors that determined what the actual market price was. Lorenzo’s failure to acknowledge this is surely one problem with his argument.

    But isn’t it also important to emphasize that, in today’s decidedly un-freed market, the net effect of the state’s intervention has been to tip the balance in favor of employers? So even if one chose to ignore Roderick’s point and thought that, in a freed market, union-derived wage gains really would result from the use of violence to force compensation about market-clearning levels—the fact remains that we’re not living and working in a freed market. In the real world of actually existing capitalism, it seems perfectly likely that unions are often, at most, partially counteracting the effects on workers’ compensation of persistent state support for the corporate elite, and so helping to restore wages to what they would be in a genuinely freed market.

    • Stephan Kinsella September 11, 2009 at 4:50 pm #

      Gary, great point, but I’m sure we all agree here that the use of the term “freed market” means you should be shot, right? Pugnacious enough? 🙂

    • Zach Bibeault September 22, 2009 at 3:44 pm #

      “it seems perfectly likely that unions are often, at most, partially counteracting the effects on workers’ compensation of persistent state support for the corporate elite, and so helping to restore wages to what they would be in a genuinely freed market.”

      Possibly, but no one can say for certain. As Kinsella has stated before, big corporations are often suspect of being part of the political class but it can’t necessarily be known if (or if so, how much) they would be smaller and less dominating in a free market.

      I know you’re not endorsing coercion-backed unions, but I think it’s important for others to remember that supporting coercion-backed unions in an effort to counteract the effect of coercion-backed corporations is merely enacting big government to attempt to solve a problem caused by big government — which has led to most of the expansion of the State that we can see.

  6. JOR September 7, 2009 at 9:13 pm #

    Incidentally, I’m reminded of your ancient post puzzling over why many right-wingers can understand spontaneous order in economics, but not in biology, and why many left-wingers have the opposite problem; inability to grasp spontaneous order of economics and society but ready acceptance of biological evolution.

    It occurred to me even back then that most right wingers don’t grasp spontaneous order of social and economic organization. Even the most “free market” of conservatives/Republicans, and quite a good many right-libertarians, conceive of “the free market” as all progress and wealth and everything socially beneficial being imposed from the top down by the Natural Elite. (Cue Reisman’s infamous quote to the effect that individualism isn’t about the importance or self-determination of, you know, all those pesky individuals, but rather about the imposition on the aforementioned of progress by Randian Supermen).

    • MBH September 7, 2009 at 9:51 pm #

      …And those Randian Supermen turn out to be less “men” and more “alien.” (I’m referring to Roderick’s description of Randian epistemology as blind to already established knowledge, thus making the Randian character into an “alien-explorer.”) If only Rand stuck to her Nietzschean roots, she would have ended up with Ubermenchen instead of extra-terrestrials.

  7. Kevin Carson September 7, 2009 at 9:49 pm #

    Excellent point. Brad Spangler raised the same issue in an anti-union piece at Mises Blog: the same people who blandly assert that unions can’t raise wages over the natural wage determined by productivity, would never dream of denying that hard bargaining is part of the price discovery process in any other area of economic life, or suggest that people ought to simply take whatever offer is tendered.

    I think DiLorenzo makes a second implicit assumption: the wage offers that prevail in the present system (or rather, that would prevail if the present system were the same in all particulars except the absence of unions), ARE the market-clearing wages.

    JOR’s point about spontaneous orders is an excellent one as well. I’m sure there’s some Hayekian point to be made about the hubris involved in dismissing the consequences of killing off thousands of species a year, or of hand-waving about geo-engineering as a solution to global warming from CO2 emissions.

    BTW, what’s the name of the guy jumping up and down with the bombs in the cartoon? I want to write him in on the 2012 ballot.

  8. Bob Kaercher September 8, 2009 at 9:32 am #

    “In the real world of actually existing capitalism, it seems perfectly likely that unions are often, at most, partially counteracting the effects on workers’ compensation…”

    Well, maybe for the workers who are members of state-certified unions, but what about the vast number of those who are not? Aren’t they in fact paying higher prices for union product even as they toil under state-capitalism? For non-union workers, aren’t today’s state-approved unions actually a part of the state-capitalist apparatus that’s exploiting them? In fact, I think I’ve seen points by LLs that that’s what unions have done: Sold out to big business in exchange for a seat at the table of power.

    I think the points left-libertarians make about how statist variety capitalism privileges many capital owners over laborers are important points to make, I just don’t know that they necessarily lead to support for unionism. Seems like another example of “second-bestism” that a lot of libertarians of all different prefixes defer to that seems to wind up validating some aspect of the statist machine.

  9. RTRebel September 8, 2009 at 11:35 pm #

    I don’t think DiLorenzo is attacking voluntary labor unions and organizations in general, but he’s condemning the unions that used violence to achieve price floors for wages. If these wage increases occurred voluntarily, it wouldn’t be “raising wages above the market price” but really updating the market price on wages. Subtle difference but a significant one!

    • JOR September 10, 2009 at 12:43 pm #

      I think DiLorenzo would probably take the standard Blockheadian line that labor organizations not only wouldn’t, but couldn’t, exist at all in a free market. (Which is about as convincing as arguing that firms wouldn’t, nay, couldn’t exist in a free market).

  10. Mike Gogulski September 11, 2009 at 1:35 am #

    No, no! It’s just not possible! (cower)

  11. Chris Baker September 16, 2009 at 2:19 pm #

    Thank you, Tom. Keep in mind that almost all these attacks on unions come from people who have spent their entire lives in academia and/or think tanks. These people have little or no experience in the real world.

    Those of us who live and work in the real world feel differently. I’ve been in IT for over ten years, and I would love to see some form of unionization. However, I don’t want to see the old types of unions.

    My biggest fear with unions (and others share this fear) is that they will make it more difficult to fire people who deserve to be fired. That being said, we have the reverse without unions. Far too many people are fired who definitely do not deserve it.

    Libertarians would do well to drop their idiotic anti-union bias. It might also put them more in touch with real people who do real jobs in the real world.

    It’s also no accident that as unionization has went down, the number of hours that people work has went up. It is absolutely obscene that companies today are having people work 60 and 70 hours a week when there are good people out of work. People gave their lives for the 40-hour work week, and now we see people give it up without a fight.


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