The Labor Policy of the Free Society
12. Collective Bargaining, The Law, and the Free Market
Law in the United States today is not concerned as a general rule with establishing the exact wages and conditions of employment of the working population. In regard to the large number of workers whose wages and working conditions are established by means of direct negotiations between them and their employers, without the intervention of labor unions, the law is relevant, indeed, in only the same general and minimal rule-making way that it applies to all private contracts.
The role of the law is notably different, notably greater, however, in connection with collective bargaining, the process by means of which the wages and working conditions of more than fifteen million workers are directly established and those of an indeterminately larger number indirectly affected. Collective bargaining is a process governed at almost every stage, procedurally and substantively, by a code of laws which stops short only of establishing quantitatively exact wages and conditions of employment.
Law governs the manner in which employee representatives are selected, establishes procedures which unions and employers must follow in the actual process of negotiation, indicates permissible and prohibited subjects of collective bargaining. Perhaps most important of all, it regulates and defines the economic techniques available to and used by unions and employers as means of enforcing their respective bargaining positions. In a somewhat less detailed way, the law also defines the juridical status of the collective agreement and is even concerned, although on a very general level, with the manner in which collective agreements are administered by unions and employers.
Any legal structure can be effectively applied, intelligibly described, or fruitfully understood only in terms of the principles and social goals which determine its content. The more complicated legal structures are the most difficult to apply, to describe, or to understand; and largely for this reason it is both more difficult and more necessary to deal carefully with the principles and goals of a complicated legal structure.
Conceptual Confusion and the Shifting Framework
These observations have an especial significance in relation to the law governing the collective-bargaining process. For the truth seems to be, in some instances at least, that this single legal structure simultaneously houses principles and goals which are contradictory and conflicting. In its current form, the law governing collective bargaining reflects different political pressures and competing political, social, and economic concepts. To make things even more difficult the situation is fluid; rules change from year to year, if not from week to week. It is difficult at times to gauge the true import of a shift in the application of a rule; it may indicate merely a technical correction, but it may also be the surface manifestation of a profound and massive realignment of basic principle.
But the volatility of the present situation does not eliminate the necessity or desirability of examining basic principle. Its effect is, instead, to emphasize the need for examination of historical trends concurrently with the analysis of the competing principles and goals. If it is true, as someone has said, that current views affect our reading of the past, it can scarcely be less true that past events determine to a considerable extent both the present and the future.
The Market as the Ultimate Determinant
One very large idea must be re-emphasized at the outset, both because of the perspective it affords generally, and because of the aid it gives in evaluating specific, complex aspects of existing rules and policies governing the collective-bargaining process. With very limited and relatively unimportant exceptions, wages and working conditions are established, even under collective bargaining, on a market basis. Neither law nor executive fiat fixes the actual details of the labor contract; those details are established by the interplay of the individual goals and wishes of workers, unions, consumers, and enterprisers, representing the consumption, labor, and capital factors which make up a market. But although it is true that the law has not supplanted the market, it is equally true that the law has had a great deal to say about the way the market operates. The market controls, but who controls the market is another thing.
Few in the United States, responsible labor leaders least of all, wish to abandon the market determination of wages and working conditions. The fate of labor unions in Soviet Russia has created a strong tendency to believe that there is an enduring and independent role for labor unions only in a market economy; hence there is no strong desire among labor union leaders to substitute socialism for the private-enterprise system of organizing production. Furthermore, union leaders on the whole are opposed to compulsory arbitration, the other nonmarket method for determining worker income.
The realistic context of discussion, therefore, is the market determination of wages and other working conditions, and the relationship of law to collective bargaining in that context. A structure of law and governmental policy that is unintelligible upon any other basis yields to rational analysis and evaluation when examined in the light of market theory. For market theory, viewed in terms of both jurisprudential and economic principles, provides intelligible standards of measurement. And these standards render possible a logical, rational evaluation of law and policy.
The Free Market and the Hampered Market
The right of private property is a legal right; and without this right, insuring to its possessor the faculty of controlling the material subjects of the right, a free market could not operate. The right to contract, to make binding exchanges of the things which one owns and controls in virtue of the legal right of private property, is in turn another legal right without which a free market is impossible. The right to live and act, to follow the normal pursuits of men, to seek work, to set a price on one’s labor, to work, indeed to refuse to work under unsatisfactory conditions—these are all rights absolutely indispensable to the operation of a market. Needless to say, they are all juridical rights—rights which are only illusory or at best hypothetical except to the extent that the instruments of organized society embodied in the law and law-enforcement agencies protect them and punish their invaders. No market system can function properly without the aid of an agency intent upon extirpating, preventing, and punishing the use of brute force.
Far from opposing law and government, therefore, it is distinctly probable that free-market concepts created the idea and the actuality of the rule-making and law-enforcing nontotalitarian state. As Part I of this book was intended to demonstrate, the free-market concept is really only a technical term for the idea of liberal civilization. It is a restrained way of evoking the rights of man and personal freedom. It means that men shall be free to engage in normal, peaceable pursuits without fear of physical restraint from either their fellowmen or agents of the state.
The concept of the interventionist state differs precisely at this point. It would use the force embodied in the state and its agents to prevent some and redirect other peaceable human activities which the concept of the free market would insulate and immunize. The free-market concept is one which would permit all men to price their labor or their goods or services at whatever level pleases them. The interventionist concept would put some men in jail for asking prices above an arbitrarily determined level; would put other men in jail, or impose other types of penalities, for asking or giving prices below a certain level. It is the interventionist state which imposes maximum prices, rents, and interest rates, and which prescribes minimum rates for certain types of labor, agricultural products, and rail, motor, and steamship transport.
The free-market concept considers the act of pricing like other human acts and would, therefore, make it subject to similar legal rules. When a man states a price, he is voicing an opinion concerning the value of the commodity or the labor or the service which he is offering; and free-market thinking, aware of this important fact, would have the law treat price-opinions in the same way as other opinions. It would permit individuals or groups of individuals to have the same freedom in pricing their labor, their goods, or their services and in thinking or voicing political opinions. It says to any individual or any group: you are free to voice whatever opinion you wish or to set whatever price you wish, but you are not free to prevent any other individual or group from voicing other opinions or setting other prices. The free-market concept produces both the right of free speech and the Sherman Act.
It is necessary to note very carefully that this consequence is neither accidental nor arbitrary, but the ineluctable result of a logical application of the free-market concept. The concept itself forbids one individual or group, whether private or governmental, to restrain the peaceful activity of others. The moment such restraint is permitted, the free-market concept no longer prevails; and the interventionist concept has taken its place.
The Free Market: More Sinned Against Than Sinning
Many have asserted that the market concept represents an impractical ideal, unsuited to modern life and to the necessary role of government therein; and that interventionism is absolutely necessary. It is said that the very goal of the free-market concept—a free, secure, productive society—cannot be obtained within the structure of law and government required by the concept; and that, in consequence, interventionism is necessary if only to achieve the admittedly attractive result. In an unhampered market, it is alleged, people are free to lie and to cheat and to sell “harmful” things; wealth is progressively more unequally distributed; the rich get richer and the poor get poorer; the total wealth of nations tends to decrease; and, worst of all, free-market nations are subject to periodic economic crises with all the misery, tragedy, and terrible human sorrow which they involve. The state must intervene to eliminate the objective evils and to minimize the inequities of the unhampered market economy. The free-market concept is unrealistic, outmoded, irrelevant, irresponsible.
If our task here is to understand the free-market analysis, it is necessary to examine these charges, for they contain some rather strong statements. We have already dealt with some of these allegations (in Chapter 5), but some others must be considered at this point. Thus, it should be noted, in the first place, that free-market ideas have never in the known history of man had an opportunity to control completely the affairs in even one nation. This single fact must indicate that one cannot convincingly attribute to the free-market economic and legal system all the evils which have occurred in the past.
Critics of the free market may have committed other equally significant errors. Their acquaintance with history has at times been superficial. Furthermore, they have very often not really understood the economic and legal theory which they have condemned. During the period of the maximum flourishing of the free-market concept and its attendant legal institutions, the wealth and the productivity of the largely free-market world has increased astonishingly; and social and economic distinctions among men, previously enormous and categorical, have begun to diminish. Absolute social distinctions have tended to disappear. The comforts of life, vastly improved, have tended to become more widespread. And wealth and honor have tended to go to the men who were most astute in the production and distribution of these comforts—not to men most astute in war and politics. Perhaps we should read the last fifty years of interventionism as partly the history of the politician and war-maker striking back at the man of commerce for his impudent assault on their medieval rank and privilege.
Free-market ideas do not privilege lying and cheating; they certainly do not reward them. Classical common law, not interventionism, created the legal prohibitions against fraud and misrepresentation. Market theory protects the right to voice opinions concerning either ideas or prices, not because it approves all ideas or prices, but because there is no way of testing their validity other than by exposing them to the free choice of the people. The market place of ideas is no more nor less indispensable than the market place of prices. It is only a less effective, less smoothly working market; people know much sooner in a free society whether a price-opinion is “right”; it takes longer for a “wrong” political opinion to be rejected and eliminated. Thus, market theory would approve the outlawing of both wrong prices and wrong political opinions if there were some objective, reliable, authoritative method of proving them wrong in the beginning and by legal methods, just as it outlawed fraud and misrepresentation. But there is no such thing as a true or a false price. Prices are opinions; they are either acceptable or unacceptable to the people. And there is no way of telling whether they are acceptable without a try. Political ideas and proposals are the same. They are neither true nor false; they are acceptable or unacceptable. Only experiment determines whether they are acceptable.
Market theory resists and exposes all fraud and falsehood. It differs with interventionism on this point in insisting that all frauds be prosecuted by the most effective available means. It declares that if fraudulent advertising by businessmen is to be prosecuted, so too, then, should the frauds of labor union leaders be prosecuted. Significantly enough, recent interventionism has created an elaborate mechanism for prosecuting merely deceptive advertising, while at the same time erecting a special privilege for picketing, an inherently fraudulent activity engaged in constantly by labor unions.
Free-market theory proceeds along the same lines in regard to harmful merchandise. If it can be proved that merchandise is harmful, its sale should be prohibited. The only doubts of free-market theory lie in the accuracy of the definition of harmful and in the practical possibilities of legal control. Prohibition of the manufacture and sale of alcoholic beverages is the classic case in point. Market theory says only that we should not make a fool of the law. Where there is doubt as to the harmful quality of merchandise, and where at the same time people strongly desire that merchandise, the law makes a mistake in forbidding it. There is nothing more important in civilization than respect for law and legal institutions. Persons who bend the law to silly, futile ends do a great deal of harm.
It is inaccurate to say that free-market theory passively stands by to permit the propagation of harmful things. For centuries men have been trying to reconcile the ideal and the practical, have been trying to solve the problem of freedom and control. Free-market thinking effects the reconciliation, provides the answer to this old problem. It teaches us to distinguish between what we as individuals subjectively consider harmful and what is inherently and objectively harmful; in either case it proposes the use of appropriate controls. It knows that the law is not the instrument to use in propagating and enforcing convictions which are only personal and subjective and not shared commonly by most members of a society. This is simple good sense, not the passive acquiescence in evil which it has sometimes been said to be. Only the naive rush headlong into the enactment of laws and the creation of elaborate political controls on the basis of subjective notions of “right” and “wrong,” “good” and “bad,” “equity” and “inequity,” “fair” and “unfair,” “just” and “unjust.”
More and more sensitive and intelligent persons are beginning to realize that the free-market concept has been maligned during the past fifty years. They are beginning to realize that it is inaccurate to say that free-market thinking favors the do-nothing state, inequality, social injustice, the rich, sharp business practice, exploitation of the consumer and the worker, and so on. A great many thinking persons would probably agree today in saying, with that great and eloquent leader of free-market thinking, Ludwig von Mises, that
But at the same time it is common to hear that the free market must be modified, if not abandoned, because of the recurrent, tragic, business depressions it inevitably produces. The answer of free-market analysis is that, not the free market, but the very methods used to thwart and to limit it are responsible for the recurrent depressions noted in societies which are largely free and industrialized. They show a significant correlation between depressions and state intervention in the market, between unemployment and state tampering with the wage structure. Free-market analysts make the logical point that you cannot blame a free market for a given consequence when important interventionist institutions are present and can be shown to bear a logical relationship with that consequence at the crucial time. They point to state policies tampering with interest rates, fiat money, tariffs, state-established or protected monopolies and cartels, subsidies, encouragement of interference by labor unions with the free working of the market—and ask whether it is sensible to blame the free market for consequences which ensue when the market has not been allowed to work in an unhampered way.
Labor relations and collective bargaining present a special case (an especially illuminating one) of the differences and the issues between the free market and the hampered one. In surveying the developments in the law concerning collective bargaining, we shall use the market principles developed by the common law as the point of departure. We shall thus operate within a context which will render the existing situation more intelligible; and it is to be hoped that the use of this method will even enable us to fix more precisely than would otherwise be possible the exact nature and character of the existing legal structure. By noting the body of rules which prevailed earlier, moreover, we may be able to grasp more realistically the character and scope of those which came later.
