The Labor Policy of the Free Society
15. Collective Bargaining and Nonviolent Union Action
The historical quest of unions for special economic advantage has not been confined to efforts to interfere by violent methods in the free operation of the market. It has been implemented also by nonviolent, monopolistic, economically coercive methods, by legal maneuvers aimed at placing employers in a position more readily vulnerable to union demands, and by devices designed to bring to the aid of unions involved in economic controversies the prestige and influence of political forces. We have already seen how difficult it has been for the law merely to bring unions within the juridical structure and effectively to control their violent interferences in the operation of the market. The law’s attempts to control the more subtle economic and political efforts have been even more awkward and confusing.
Monopolistic and Economically Coercive Union Methods
The role certainly does not belong, historically or theoretically, to the Constitution of the United States or to the common law. And free-market theory, the villain chosen by the historical version which has been orthodox for the last twenty or thirty years, fits the role least of all. Free-market theory calls for a uniform rule of law prevailing throughout every economic unit. For it is only in such circumstances that economic activity distributes itself effectively and rationally. In a system of conflicting laws, the distribution of economic activity may be influenced as much by the laws as it is by the more objective considerations of productivity and efficiency. In a very real sense, therefore, the confusion in the law hampered the market, and the effective distribution of productive activity, in much the way that most interventionist measures do. Hence it is a mistake to say that the confused status of the common law, even though it may have worked out in some instances to prevent labor union interference with the free market, was a situation tracing essentially to free-market thinking. It was a situation calling for a political remedy, a coherent national legal structure.
On the whole, then, the national law under the Sherman Act broadly resembled the common law as regards acceptance of the basic right of self-organization and the right to strike. In going further to outlaw secondary boycotts and combinations in restraint of trade, the Sherman Act was similar to one of the competing branches of the common law. This branch may be called, for lack of a better term, the antimonopolistic one, or the free-market branch, since it was concerned with eliminating monopolistic and coercive interferences in the working of the market.
We have already discussed the Taft-Hartley measures designed to control union coercion of free employee choice and to bring unions within the juridical structure. We deal at this point with that law’s rules concerning monopolistic labor union action during economic disputes.
Those rules can be adequately understood only in terms of free-market principles; for it is fairly evident, from analysis of the Act as a whole, that its aim was to eliminate all monopolistic, economically coercive trade-union interference in the operation of the market. In the first place, the Act absolutely forbids the closed shop, that institution which serves double duty as a means not only of coercing free employee choice, but also of tightly controlling the labor market. In terms of the present discussion, the prohibition of the closed shop is properly viewed as an endeavor to free the labor market of the monopolistic control of labor unions. Of course, labor unions and their agents and apologists object strenuously to this measure. But that is to be expected; monopolists do not usually take kindly to measures which deny their privileges.
One of the most serious consequences of the currently prevailing misinterpretation of the Taft-Hartley Act is that it disguises what would otherwise seem obviously to be the aim of the law, namely, to apply and to implement the free-market concept toward which the common law was aiming: to establish the right to strike but to prohibit all other interference in the free operation of the market. Any kind of combined concerted action going beyond the simple strike and peaceable persuasion, according to market theory, represents coercive restraint and amounts to a combination in restraint of trade, if not to clearly monopolistic interference in the market. One union has the right to withhold its labor in a dispute with an employer; but when it enlists the aid of another union or another employer against the primary employer, the latter is being made the victim of a market-manipulating operation. That is what the principles of the free-market concept suggest, and, except for the current misinterpretations to the contrary, that is the kind of conduct which the Taft-Hartley Act seems to have attempted to forbid.
Political Intervention in Collective Bargaining
There is a sense, however, in which the industry-wide strike is of the most profound importance. The existence of such strikes, with the overwhelming economic power which they demonstrate and the incredibly complicated damage they can do, compels rethinking on the most basic levels concerning labor-relations policy. While few students in the field have been induced by such strikes to go so far as to challenge the wisdom of the policy of establishing the basic right of self-organization or the basic right to strike, some have begun wondering whether it is wise to give those rights any positive legal protection. This line of thought ends in a reconsideration of the advisability of the features of the current law which prohibit employers from interposing economic resistance to the organization of their employees. It suggests that perhaps employers should be allowed to combat unionization with all the legal means which used to be at their disposal prior to such legislation as the Wagner Act.
Probably for these reasons, liberals take the position that the problem should be treated indirectly and entirely in terms of clear-cut rules of law. They point out that industry-wide strikes are not nearly so grave and important as they are sometimes said to be. What they actually mean is that there is no overwhelming need of immediate, drastic, arbitrary action. The sensible approach, they insist, is to adhere to the basic elements of labor-relations policy which have naturally evolved consistently with traditional liberal principles: let employee organization develop as naturally as possible in as completely noncoercive an environment as possible, with both unions and employers subject to clear-cut and effectively enforced rules prohibiting all forms of coercion. The fundamental assumption of this point of view is that in a completely uncoerced environment the natural checks and balances of a market economy will keep collective bargaining and strikes within socially desirable limits, will preserve intact the basic liberal principles accepting the right of self-organization and the right to strike, and will permit unions to grow and mature gradually and naturally into their important role in a free-market economy.
There must be no mistaking this last point. Immediately, ultimately, in the short run and in the long run, the effect of putting all businesses in an industry under such extra pressure to increase wages will certainly be substantially the effect of a price increase in one form or another, direct or indirect, actual or potential. Prices will be higher than they otherwise would be; or quality will be lower; or there will be less production and less employment than there otherwise would be. There are no other alternatives. It is vain to hope that only profits, and nothing else of interest to the community, will be affected by rigging the market in this manner. In a full-production economy, where productive capacity is already being strained, history has shown us how readily these monopolistic pressures for wage increases are immediately translated into price increases. In sluggish periods, when it is already difficult to sell at existing prices, the effect of a wage-cost increase (beyond that which free-market factors call for) can only have undesirable results of one kind or another—most probably reduced production or quality impairment.
Those who would insist at this point that the effect might be to compel employers to become more “efficient” overlook certain vital factors. Already under strong compulsion to efficiency, the employer is usually, in slow periods, as efficient as he can be under existing conditions of reduced production, or is in the process of becoming so. But, even more important, the blunt, massive, undiscriminating weapon of government seizure in order to compel wage increases not called for by market conditions is as ill-adapted to promoting business efficiency as one might expect a device to be when it was originally created for an entirely different purpose.
In summary, it takes both motive and means to achieve greater efficiency, just as it does everything else. Government seizure does not provide motive; profits and the free market do that. Government seizure does not, on balance, increase motive, either; for, like high taxes and excessive government regulation, it tends on the whole to limit the efficacy of the great, central, motivating influence, profits, as much as it tends to accentuate the desire to increase efficiency. And government seizure during depressed periods is certainly not very helpful in providing the means necessary to achieving greater efficiency. Entirely the contrary. It takes from hard-pressed businesses at a most crucial time such little margin as they may possess—the very margin which might have been used to increase efficiency and production at lower unit costs.
The case against government seizure, in good times or bad, is the case against all government interventionism designed to limit profits and to increase costs of production. These devices may serve certain purposes exceedingly well; politicians have found them useful for centuries. But no one has ever been able to demonstrate that they provide the things that everyone wants, that they increase the wealth of nations and the well-being of people generally.
In terms of the present discussion, government seizure is properly viewed as another species of the market manipulation which has been the real meaning of collective bargaining over the years for union leaders. Like boycotting techniques, government seizure is designed to bring to bear upon employers forces which have no relationship to the peaceable, productive activity of the free market. The real desires of the workers themselves, the productivity of workers, conditions on the market generally—all these factors are subordinated in the process of establishing wages; and political intervention is given the dominant role.
Basically, the demand for the use of government seizure amounts to a declaration on the part of union leaders that they are no longer satisfied with what they can gain through striking, or even through the boycotting and other monopolistic techniques which they have used so long. Where employees participate voluntarily, a strike is a form of action which indicates that employees are dissatisfied with the existing wage structure. Unless there are great numbers of other workers who think that the existing wage structure is adequate, the strike is by itself a bargaining technique which is likely to secure from employers all concessions which existing conditions on the market make possible. If employees are forbidden to strike, it is not quite so certain that all employers will give in wages every last cent which the market would permit. And that is why the right to strike should be maintained, and why, probably, the Taft-Hartley Act does not absolutely prohibit even those strikes which imperil the national health and safety, but only postpones them.
But in advocating government seizure, unions aim at securing without a strike everything that (and possibly more than) they could get through striking. A union leader no longer need worry about anything, the real desires of the workers and other market conditions least of all. A great problem for all union leaders during strikes is whether or not the union members will remain “loyal.” Union members are likely to abandon the strike, to return to work, if the demands of their leaders seem unreasonable while the offers of the employer seem tolerably reasonable. They are especially likely to do so if it appears that other workers are accepting the wages offered by the employer. Besides being a valid and true technique of the free market, the successful voluntary strike is thus a sign that the union leaders have perceived correctly the temper of their own members and have analyzed other conditions on the market accurately.
Strikes fail when union leaders have not interpreted these market factors accurately. When a businessman sets a price too high for existing market conditions, he is compelled either to reduce the price or to go out of business. Union leaders would prefer to be free of these rigorous alternatives, and government seizure suggests itself to them as an ideal system of freeing themselves from all restraints emanating from either the market or their own members.
Government seizure, with its confiscation of profits, hurts employers in roughly the same way that a strike hurts them. It may even hurt employers a little less than a strike does, in some cases; but that point is not important. The important point is that it obviates the necessity of striking and thus frees union leaders of all controls. They no longer need worry about the real desires or the loyalty of their members; there being no strike, the members continue to receive their wages and will be willing to back up indefinitely any demands made by the leaders. Only the employers and the consumers are hurt by the seizure, not the union or the employees. Nor need union leaders fear the conditions on the labor market; thousands of able men may be unemployed and willing to take jobs at the wages spurned by the union leaders, but since there is no strike those men have no possibility of making their existence felt.
Thus, government seizure and confiscation of profits represent utopia for union leaders. They can make the wildest of economic demands and insist upon them indefinitely. Or they can settle for less and then in a little while, for any or no reason at all, ask for additional concessions. If denied, they can again threaten to strike, and government seizure will be re-instituted, and the whole spectacle will be reproduced. No wonder unions scorn compulsory arbitration. After all, the arbitrators are often influenced, many times by express mandate of the law, to take market-factors into consideration. And unions cannot always be sure that their wishes will be respected in the selection of the arbitrators. But government seizure is different. It virtually removes market and political hazards. The advantage to the union is a fixed and unremovable feature of the system. No matter what the political climate, if government seizure is part of the law, the cards are stacked against the public, unemployed workers, and the employer, in the union’s favor. Government seizure is interventionist politics domesticated to the will of union leaders.
Real problems arise, however, in the situation where the employer absolutely refuses to make any concession whatsoever to the union. Take the case, for example, where an employer says to the union leaders during negotiations: “I am perfectly willing to discuss with you frankly and sincerely all matters of interest to you and the employees; but my judgment and experience convince me that this business can be operated effectively only if I continue to have the complete control of it which I now have. Therefore, the only agreement I will sign is one which declares that the level of wages, the conditions of work, the hours, the promotion or disciplining of employees, and all other employment factors remain subject to my exclusive control.”
There can be little doubt of the fundamental soundness, economic and legal, of the latter point of view. The written words of the law itself are definitive. The law states as clearly as words can that employers are under no duty to reach any agreement whatsoever. For the NLRB to say that employers violate national policy in steadfastly refusing to make any concession at all is equivalent to saying that the law requires certain concessions, when this is manifestly not so. A similar conclusion is indicated when one departs from the abstract legal plane of analysis to the real facts of economic life. If it be true, as the NLRB and some courts insist, that the employer must make certain concessions, who is to determine the exact character of the concessions? Neither law nor policy affords an answer to this question. Certainly not the union; and equally certainly not the NLRB.
As a result, few if any employers today will approach collective bargaining with such an orientation. Practically all employers confine themselves to calculations designed to keep at a minimum the concessions which they feel that the law compels them to make, whether or not they themselves think it advisable to make any concession at all at the given time. Obviously, even in such circumstances the market ultimately controls; unions will not insist upon concessions which the employer absolutely cannot make; nor will they insist upon concessions fantastically out of all proportion. But here, as in so many other features of labor relations law in the United States, the fact is that the market has been rigged by political forces in favor of the unions.
We end as we began the discussion of collective bargaining. The market controls ultimately in the determination of wages and working conditions; the law as written so states the matter; but the law as interpreted tends to rig the market in favor of unions.
