The Strike-Threat System

16 Empirical Studies of Labor’s share

IN THIS chapter I propose to quote, and where it seems helpful to comment on, the crucial findings, expressed verbally, of the statistical economists who have conducted meticulous investigations into recorded experience of changes in income shares.

The most famous (perhaps “notorious” would be a more appropriate adjective) was a thorough and ingenious pioneer effort by Pareto. Publishing his findings in 1897, as the emerging strike-threat system was causing deep misgivings among the prescient, but before it had developed as the strong influence it is today, he summarized the results of his own statistical studies in what is known as “Pareto’s law.”1 He maintained that if income sizes and the number of persons receiving incomes are plotted on logarithmic scales, the result is an approximately straight line, and that “at all recent times the slope of this straight line” had been constant. But he claimed further that the law holds “in all countries and at all times.”2 In a later treatise, Pareto himself warned against hasty deductions from his finding. “Empirical laws,” he wrote, “have little or no value outside the limits for which they were found experimentally to be true.”3 Moreover, I do not think that any economists today accept his apparent suggestion that what his studies seemed to prove had happened over a wide scale would necessarily be repeated under different institutions in later periods.

In any case, Pareto’s statistical procedures (not the data he used) were questioned in the 1930s by Yntema, Gini, and other statisticians. Through visual illusion due to representation on logarithmic scales, his curve suggests a rigidity of the proportions which is today recognized as misleading. But the phenomenon which he sought to illustrate, and for which he was trying to find an explanation remains. His work certainly did demonstrate that, for a variety of reasons which it is difficult to identify empirically, any existing market-determined distribution of income is very difficult to change.

Bowley, making careful studies of income distribution in Britain, and discussing such changes as were discernible over the period 1880 to 1913, remarked: “The constancy of so many of the proportions and the rates of movement . . . seems to point to a fixed system of causation and has an appearance of inevitableness.”4 This has been termed “the Bowley law,” although that rigorous and meticulous statistician certainly intended the words “seems” and “appearance” to bear their full meaning.

In 1928, studies by Cobb and Douglas5 brought out the fact that the ratio of aggregate wages plus salaries to aggregate value added in manufacture has proved tenaciously stable over time. Many authors have tried to explain or to explain away this relationship (which has become known as “the Cobb-Douglas function”). But a long chain of subsequent painstaking statistical inquiries, assisted by theoretical analysis, has failed to disclose convincing evidence that labor’s share has increased in relation to the nonlabor share. Despite the enormous costs the unions have incurred (in the form of wages foregone, equality of opportunity in the labor market destroyed and social cohesion sacrificed) in efforts to change the proportions, they have seemingly remained obstinately fixed.

Covering the period 1850 to 1910, when the strike-threat influence was relatively unimportant, a pioneer study by W. I. King suggested that the proportion of income enjoyed by labor had fallen from about 78 to about 76 percent.6 But even had the data available for that long period been adequate, the imponderables are so many that the seeming decline in labor’s share can hardly be regarded as significant.

Simon Kuznets, in a famous study, presented data showing a rise in labor’s share between the periods 1919–28 and 1929–38 from about 73 to 78 percent.7 But the comparison is, of course between a boom, full employment, period in which, as I have insisted, labor’s share can be expected to be well below the average and a period marked by the most disastrous depression of American history, with chronic unemployment, during which, as I have also insisted, labor’s share can be expected to be well above the average. In the case of Kuznets’ figures, this tendency is magnified because he included relief payments in labor’s income.

In another impressive investigation into income shares, D. Gale Johnson, building among other things on the earlier investigations of King and Kuznets, constructed tables which indicated a rise in labor’s proportion over the course of five decades. The data he analyzed suggest that labor’s share of money income in the economy as a whole had increased from 68 percent in 1900 to 75 in 1952.8 But Johnson himself pointed out that nearly half of the apparent increase occurred prior to 1929; and that was a period in which the strike-threat influence, although growing in the non agricultural sector (spasmodically and with some setbacks), was still exerted over a relatively small portion of the United States economy.9 Moreover, for the earlier period, Johnson was working with inadequate data. From 1929 onward the data become more plentiful and more reliable. Comparing the period 1930 to 1939 and 1940 to 1949, Johnson’s findings show that labor’s share fell;10 yet it was in the middle of the first period that the Wagner Act seemed suddenly to enhance strike-threat power by more than any other event in the history of labor.

These findings, says Johnson, “can be explained, in part at least, by the failure of our national income data to record the income produced by government property” (see page 230), “by the effect of increased urbanization . . .” (see page 229), and “by the transfer of labor from relatively capital intensive to capital extensive industries”11 (see page 229).

It seems that, as soon as we make due allowance for the illusory factors discussed above (pages 230–232, 1 to 5), we find that, in Clark Kerr’s words, “labor’s share of national income has remained more nearly constant than any other economic variable in society”;12 “there is little apparent increase since 1929 in tabor’s share; and it is since 1929 that the great growth in unionism has occurred in the United States. . . . employees are better off to the extent that all income recipients are better off.”13 Kerr’s position in respect of constancy of shares seems to be confirmed by the results of all other serious inquiries. Some of these have independently examined the data and tested the inferences of other investigators, as well as having brought out the consequences of different definitions of the categories compared. Thus J. Alterman has shown that, in the corporate part of the economy, the proportional shares of capital and labor were virtually the same during the periods 1922–1929 and 1947–1959.14 S. Lebergott, whose critical review of earlier statistical work in the field Alterman is discussing, confirms the finding of long-term stability in the proportions (for which he suggests “a market mechanism” is responsible).15 Dealing with the manufacturing field (in which one would have expected strike-threat transfers to be most effectively achieved, by reason of the typical short-term specificity of the assets), he shows that wages as a percentage of value added (in the United States) had long-term stability over the whole period 1889 to 1954; and he quotes in support the findings of Wooden and Wasson, for the period 1929 to the early 1950s, as also showing “an approximate constancy,” and as being “a more precise measurement.”16 A study for Canada, by S. A. Goldberg, presents data which suggest at first that the share of wages in aggregate income had risen there between 1926–1930 and 1954–1958.17 But this impression is dispelled when the author makes his own essential qualifications, which refer to a rapid shift from agriculture to industry and from unincorporated ownership to corporate organization (both of which factors could, as we have seen, have accounted for a rise in labor’s share even if no union pressures had been present).18 In any case, a critical discussion of Goldberg’s careful investigation by M. C. Urquhart leaves the impression that it is doubtful whether even a moderate rise in labor’s share was really experienced in Canada over the years examined. Thus, “if we include in labor’s share of income that part of the unincorporated enterprise income which should be attributed to it . . . the null hypothesis that factor shares have not changed has not been disproved.”19

I. B. Kravis begins his study with a claim that he will show “the notion of long-run constancy in relative shares” to be false,20 because he finds “some evidence of a slight tendency to drift downwards”21 on the part of the property share since 1929, and he attributes this “slight” apparent transfer from “property to labor”22 to exactly the causes which I myself have suggested would have led us to expect such a transfer.23 Yet, comparing “averages for overlapping cycles,” he finds that the property share since 1929 “. . . has been characterized by near secular stability. . . .”24 It seems to me that this is his crucial conclusion.

E. F. Denison, examining the ordinary business sector, reaches the conclusion that (excluding the depression and the war years, and making the necessary adjustments) there was “substantial stability” in respect of the employee percentage of income.25 M. Reder, interpreting these findings for the period 1929 to ì952, suggests that is “is tantamount to saying that labor’s functional share of private non-farm output was constant. . . . ”26 And independently discussing an apparent rise in the “employee compensation” share which Denison’s figures suggest, and directing attention to “labor’s functional share” (that is, “employee compensation” after correction for the illusory element due to “self employment”),27 and allowing for a real influence tending to raise labor’s share,28 namely, “an increase in the relative numbers in industries with more than average employee shares,” Reder concludes that “it is quite possible that (this share) . . . has stayed constant in the United States since 1910 or thereabouts.”29 Moreover, he refers to the significant finding that “within individual industries there is also very substantial stability (overtime) of the wage share.”30

Bronfenbrenner’s acceptance as proven “the observed degree of constancy in the relative shares of labor and capital in developed capitalist countries”31 has already been noticed.

Phelps-Brown, asking whether the unions can in fact achieve what their most active members believe is their primary purpose, namely, the winning of “a larger share of the product,” says that “the observed stability of the distribution of the product between pay and profit” suggests that such a purpose is “delusive,” and he gives reasons for holding “that the profit margin in the selling price is in practice not generally compressible by wage rises.”32 During the last hundred years, “the proportionate share of the product accruing to employed labor has not changed widely or cumulatively.”33 “The trend of the wage-income ratio is conspicuous for its stability.” In Sweden, “the wage-income ratio was no different in 1913 from what it had been in 1961.”34

In his textbook, Samuelson includes among the “six basic trends of economic evelopment” with which he suggests the fundamental “facts of economic history in the advanced nations” . . . can be “summarized,” “Bowley’s law” (see pages 241-242), relating to the apparent long-term fixity of the proportions. He rightly warns the student that all such empirical laws are “only approximate truths.” But after plotting the relevant data, he remarks of the period 1900 to the present, that “labor has kept about the same share of total product, with property also earning about the same relative share throughout the period.”35

Kaldor, who is among those who have stressed the “stability of shares” which, he says, has been experienced “in the advanced capitalist economies over the last hundred years or so, despite the phenomenal changes in the techniques of production, in the accumulation of capital relative to labor and in income per head,”36 should have added (in the context of the word “despite”), “and above all despite the enormous increase in the strike-threat influence.”

There are indeed studies which indicate not only the apparent constancy of labor’s proportion of income over long periods of time, but suggest that the strike-threat influence does not cause the percentage share of wages or of employee compensation in occupations subject to that threat to be higher or to increase more rapidly37 than in fields not subject to it. For instance, in 1930 Douglas drew the attention of economists to the fact that, contrasting six highly unionized industries with eight nonunionized industries, and referring to the period between 1914 and 1926, “wages in the nonunion manufacturing industries have risen at least as rapidly as have those in the union manufacturing trades. . . .”38 This finding was accepted with respect but obvious reluctance and skepticism.39 However, later investigations have tended to confirm Douglas’s tentative conclusions. Thus, P. Sultan who, like the rest, finds that “over time, labor’s percentage has remained amazingly constant,”40 demonstrates also that the ratio of wage and salary payments plus supplements to income in unionized and nonunion industries between 1929 and 1956 followed “a remarkably similar path.” His conclusion is that, in the absence of runaway inflation or deflation, “union wage/income ratios are likely to approximate those in the nonunion sector, union wage pressures notwithstanding.”41 That is, movements in labor’s proportion of income in unionized and nonunion industries appear to be correlated over minor cycles of boom and depression.42 Moreover, interpreting data presented by Levinson, Sultan shows that while unionized workers were most successful in avoiding wage-rate adjustment during the great depression, during the recovery from 1933 onward, the nonunion workers caught up and during 1934 “received extraordinarily large wage increases.”43 And referring to the fact that, from 1934 to 1937, unorganized workers gained nearly twice as much as the organized workers, he remarks: “It is surprising that at the very moment in history when unions enjoyed tremendous power and influence, the relative wage differential accruing to the union sector should appear to diminish.”44 “The mushroom growth of unionism since the mid-thirties has not produced any upheaval in distributive shares.”45 Sultan rightly insists, however, that “it is impossible to determine what the distribution of income would have been in the absence of union pressures.”46

Simler reaches almost identical conclusions. Dealing with the period 1929 to 1954, he finds that in the private sector “labor’s share in unionized industries has generally not increased more than in nonunionized industries”;47 and he comments further that, if other years had been chosen for comparison, it would look as though unionism must have had adverse effects on labor’s share! His conclusions are unequivocal. Using Levinson’s data he finds that, between 1919 and 1929, “the influence of unionism on labor’s share had been non-existent,” and that between 1929 and 1947, a tendency for the figures to indicate a rise in labor’s percentage (from 56 to 59.3 percent) is to be explained by “factors other than unionism.”48 He finds further that “the hypothesis that there exists a positive and significant correlation between the strength of trade unionism and labor’s relative share of income is not confirmed by the available data for the manufacturing sector of the American economy. . . . The hypothesis originally asserted by Dobb and since advanced by others, that ‘where wage earners are strongly organized in trade unions, one might expect labor to succeed in obtaining a larger share of the product than elsewhere’ is contradicted by the experience in the manufacturing sector of the American economy in the first half of the twentieth century.”49 And yet it is in this particular field, the manufacturing sector, in which the importance of fixed, nonversatile assets are most important, that I have shown the possibility of exploitation of investors to have been greatest.

Kenneth Boulding, concluding an essay in which he submitted “a partial rehabilitation of the wage fund doctrine,” and advancing the thesis that the distribution of income “is largely independent of what happens in the labor market,” comments (without reference to the empirical studies with which he obviously expects his readers to be aware) on “the evident impotence of trade unions in increasing the share of labor in national income”;50 and Clark Kerr, weighing up, together with his own investigations, a whole range of independent inquiries in the field, finds that “labor’s share, . . . industry by industry, has fared no more favorably in unionized industries than in nonunion industries.”51

Again, among those who have reviewed previous investigations into labor’s share, we find Albert Rees, who is satisfied that “no effect of unions on labor’s share . . . can be discovered with any consistency,”52 that is, that when adjustment of the data to allow for some of the illusory factors which I have listed above (pp. 230–233) has been made, there is “a remainder that shows no particular relation to union power.”53 Whenever the aggregate output of the community is increasing more rapidly than the population of working age, the unionized and the nonunionized sectors of the economy enjoy intermittent increases in real earnings, and during inflations’ intermittent increases in money earnings, for exactly the same reasons. That is, Rees insists, the union gains “would . . . have taken place even without the union.”54

Bradley also, summarizing the findings of post-World War II empirical investigations conducted by some of the economists whose work I have been quoting, and by other authorities, says that, over the periods studied, “wage gains did not occur entirely or even largely in those industries and trades where most workers were represented by unions. Nor were wage losses restricted entirely or largely to the industries or trades where most workers were not represented by unions. In terms of real wages the two groups did about equally well.”55

The same considerations apply to wage rates fixed under legal enactment. In an important article from which I have already quoted, Yale Brozen has concluded, from a careful study of United States data, that such wage-rate increases as have been gained via successive amendments of the minimum wage Statute “would have come anyway in most cases within two to five years” because “the wage rates of low-paid employees in non-covered occupations have been rising at 4 percent per year since 1949. . . . What successive amendments to the minimum wage statute have done is to jump rates in the year of application. Very slow rates of increase then occur in the following years . . .”56 (My italics.)

Experience under inflation gives special emphasis to the point these economists are making. If there were no strike-threat influences present, and any measure of inflation occurred, prices would increase and the demands for all kinds of productive services (in terms of money) would increase more or less in proportion to the prospective prices of final products. Inflation makes it profitable for entrepreneurs to bid up the money price of labor in the same way that the growth of real income similarly makes it profitable for entrepreneurs to bid up the real price of labor. Strike-threat pressures have never been needed to bring about such revaluations.

But what does remain true is that, when the extent of the use to be made of the strike threat has not been fully anticipated, and its consequences not allowed for, investors are exploitable. This truth has been constantly stressed since the earlier chapters. But the corollary has been equally stressed that expectations of exploitation will not continue to be wrong indefinitely. Hence, any redistributive tendencies due to this cause will be temporary. Evidence of such temporary influences on income shares is discernible in empirical studies. These influences have, however, obviously been insufficiently important, in relation to others, to show in most of the aggregate figures. What empirical investigations have apparently established is that workers in newly organized industries may gain through the strike threat, sometimes appreciably;57 although after a while the unionized workers cease to gain further in relation to workers in nonunion occupations. This is, of course, direct confirmation of the thesis I have just reiterated.58 I conclude that if all the other determinants of the relative shares can be assumed to have been tending to establish a near constant ratio, the failure of the strike threat system discernibly to change that ratio can be attributed to the factors discussed in the previous chapter.

We have noticed, however, yet other reasons why labor’s share could be expected to have been increasing. Hence, the observed constancy of its share (except through cyclical factors) suggest that strike-threat activity, while it has undoubtedly greatly reduced the flow of wages, has not only failed to transfer income from investors to workers, but everything points to its having worked as a contractionist force on labor’s percentage. (See above, p. 234.)

The passage quoted from Kaldor (see page 245) reflects the general surprise of economists that an apparent big “accumulation of capital relative to labor” has not brought about a rise in labor’s percentage. The most plausible explanation is, I think, the one I suggested above (pages 144–145), namely, that the more exploitable forms of investment, which tend to be the most wage-multiplying, have been avoided. A less wage-multiplying composition of the stock of assets appears to have come into being. The effect of strike threat pressures may, I repeat, have been not only greatly to reduce labor’s absolute income below what it could otherwise have been but even to reduce its relative share in some measure.

In case any reader should still be under misapprehension on the point, the demonstration in this chapter that, in an era in which the strike threat is an established institution, wage rates in unionized industries do not increase more rapidly than those in nonunion activities, does not mean that the strike threat has not succeeded in winning for labor unionists (as distinct from Labor) considerably higher real wage rates on the average than they could otherwise have gained (out of the aggregate real income which the distortions of the system must have greatly reduced). There is no important controversy about this. H. Gregg Lewis has estimated that the unions in the United States have been able to raise the wage rates of their members, relatively to nonunion workers, by between 10 and 15 percent.59 However, as the forcing up of wage rates in one field forces down wage rates in other fields,60 any absolute gain to the average union worker would have been less than his relative gain, even if there had been no adverse effects upon the aggregate wages flow. But, in the light of the effects of the strike-threat system upon the magnitude and composition of the assets stock, “organized labor” must have shared a much smaller cake. Hence, when the costs of organization to achieve strike threat power and the costs of the occasional exercise of that power are allowed for, a net absolute advantage is probably enjoyed by a very small proportion only of the workers who confidently believe themselves to be beneficiaries. This consideration has an important bearing on the political practicability of reform aimed at the establishment of a nonstrike era. The overwhelming majority of labor unionists would almost certainly benefit.

 

NOTES

61 Vilfredo Pareto, Cours d’Economie Politique (Rouge, 1897), Vol. II, pp. 304 et seq.

62 These words are the summarization of “Pareto’s law” as presented in the National Bureau of Economic Research, Income in the United States (1922), p. 344.

63 Vilfredo Pareto, Manuel d’Economie Politique (Giard et Brière, 1909), p. 391.

64 A. L. Bowley, The Division of the Product of Industry (Oxford: Clarendon Press, 1919).

65 C. W. Cobb and P. Douglas, “The Theory of Production,” American Economic Review, supp. (March 1928).

66 W. I. King, Wealth and Income of the People of the United States (New York: Macmillan, 1915), p. 160.

67 Simon Kuznets, National Income and Its Composition, 1919-1938, Vol. 1 (New York: Macmillan, 1938), Tables 22 and 64.

68 D. Gale Johnson, “The Functional Distribution of Income in the United States, 1850–1952,” Review of Economics and Statistics, May, 1954, p. 178. Johnson recognized that labor’s share in money income had increased more than its share in real income. (Ibid., p. 180.)

69 By the end of the period nearly one-third of the nonagricultural workers were union members.

70 D. Gale Johnson, op. cit., p. 178.

71 Ibid., p. 175.

72 Clark Kerr, “Labor’s Income Share. . .,” in New Concepts in Wage Determination, eds. G. W. Taylor and F. C. Pierson (New York: McGraw-Hill, 1957), p. 260. See Kerr’s Table I, column 4, p. 280.

73 Ibid., p. 281.

74 J. Alterman, in Behavior of Income Shares, (National Bureau of Economic Research, 1962), p. 93.

75 S. Lebergott, in Behavior of Income Shares, p. 57 (see above, p. 223).

76 Ibid., p. 85.

77 S. A. Goldberg, The Behavior of Income Shares, pp. 189 et seq.

78In the employment shift to agriculture, a real factor (see 5 on p. 229) and an illusory factor (see 5 on p. 232) are involved. In the shift to employment in corporations, the factor is illusory (see p. 231, number 4).

79 M. C. Urquhart, in The Behavior of Income Shares, p. 272.

80 I. B. Kravis, “Relative Income Shares in Fact and Theory,” American Economic Review (1959), p. 917.

81Ibid., p. 931.

82 Ibid., p. 918.

83 He says, “The number of man-hours worked has not expanded as fast as population . . ., while reproducible capital (in constant prices) has nearly doubled in relation to man-hours.” “The greater responsiveness of the supply of capital to the demands of a growing economy has led to price-induced substitution with existing techniques and probably also to capital-using innovations.” (Ibid., p. 918.) And finally, “a change in the industrial composition of employment and income” was a factor. (Ibid., p. 946.)

84 Ibid., p. 931.

85 E. F. Denison, “Distribution of National Income Since 1929,” in Survey of Current Business, 1952.

86 M. Reder, “Alternative Theories of Labor’s Share,” in M. Abramovitz, The Allocation of Economic Resources (National Bureau of Economic Research, 1959), p. 197.

87 See p. 231.

88 See pp. 229-230.

89 Reder, op. cit., p. 197.

90 Ibid., p. 200.

91 M. Bronfenbrenner, op. cit., p. 284.

92 E. H, Phelps-Brown, Economics of Labor (Oxford: Oxford University Press, 1962), pp. 184-5.

93 Ibid., p. 220.

94 Ibid., p. 222.

95 Paul Samuelson, Economics (7th ed.; New York: McGraw-Hill, 1967), p. 719.

96 N. Kaldor, “Alternative Theories of Distribution,” Review of Economic Studies, 1955-56, p. 84.

97 On private gains achievable by unions (at the expense of consumers and laid-off or excluded workers) see p, 248.

98 Paul H. Douglas, Real Wages in the United States, 1890-1926 (Boston: Houghton Mifflin Co., 1930), p. 592.

99 Consider, for example, the discussion by H. A, Millis and R. E, Montgomery, Labor’s Progress and some Basic Labor Problems (New York: McGraw-Hill, 1938), pp. 212-3.

100 P. Sultan, Labor Economics, (Henry Holt, 1957), p. 73.

101 Ibid., p. 389.

102 During World War II, the proportion enjoyed by the unionized industries did increase relatively, probably because price controls were more important in the unionized industries (see above, pp. 000-000) and because war demands for the output of the unionized industries increased relatively to demands for the output of nonunionized industries, involving overtime payments in the former as well as a larger proportion of demand not subject to market rationing.

103 Sultan, op. cit., p. 191.

104 Ibid., p. 393.

105 Ibid., pp. 384-5. Could it not be that entrepreneurial anticipations had already caught up?

106 Ibid., pp. 384-5.

107 N. J. Simler, The Impact of Unionism (University of Minnesota Press, 1961), p. 41.

108 Ibid., pp. 40-41.

109 Ibid., p. 11.

110 K. Boulding, in David McCord Wright, ed., The Impact of the Union (New York: Harcourt Brace and Co., 1957), p. 148.

111 Kerr, op. cit., p. 283.

112 Albert A. Rees, The Economics of Trade Unions (Chicago: University of Chicago Press, 1962), p. 94.

113 Ibid., p. 95.

114 Ibid., p. 81.

115 P. Bradley, Labor Unions and Public Policy (Washington, D.C.: American Enterprise Association, 1959), p. 63.

116 Y. Brozen, “The Effect of Minimum Wage Increase on Teenage Employment,” Journal of Law and Economics (1969), pp. 121-122.

117 For example, Arthur M. Ross, “The Influence of Unionism Upon Earnings,” Quarterly Journal of Economics, February 1948, pp. 263-286.

118 A neat statement of the empirically-based principle is that “new unionism has been the source of relative wage advantage . . . whereas continuing unionism has not.” Arthur M. Ross and William Goldner, “Forces Affecting the Inter-industry Wage Structure,” Quarterly Journal of Economics, May 1950, pp. 254-281.

119 H. Gregg Lewis, Unionism and Relative Wage Rates in the United States, (Chicago: University of Chicago Press, 1963), p. 193.

120 Every “contrived scarcity” entails an “incidental plenitude”. (See Chapter 7). I am not overlooking here the frequent tendency of nonunion undertakings which are competing with union undertakings to match duress-enforced wage-rate increases, in order to discourage the spread of unionization to their activities.

• 1Already in the late 1920s I had reached the conclusion that all the textbook treatments I could find of this important subject were—superficially considered—definitely indefensible or inadequate and unconvincing, For instance, the great Alfred Marshall’s treatment of what he appeared to regard as the crucial issue—bilateral monopoly—was illustrated by his famous example of the barter of nuts and apples; yet as I saw the problem, the circumstances he was thus postulating were, for a variety of reasons, of negligible practical significance. And Marshall was widely regarded as the greatest economist of his age.
• 2Already in the late 1920s I had reached the conclusion that all the textbook treatments I could find of this important subject were—superficially considered—definitely indefensible or inadequate and unconvincing, For instance, the great Alfred Marshall’s treatment of what he appeared to regard as the crucial issue—bilateral monopoly—was illustrated by his famous example of the barter of nuts and apples; yet as I saw the problem, the circumstances he was thus postulating were, for a variety of reasons, of negligible practical significance. And Marshall was widely regarded as the greatest economist of his age.
• 3I expected that the obvious challenge of my book would prompt a major contribution, from economists better qualified than myself, to deal with the questions I raised. During my entire academic life I have been expecting an authoritative book. But although there have been many splendid contributions, mainly in the form of articles that have given more or less the same answers that I myself have given, they have had hardly any policy impact. The following economists have all written cogently on aspects of the problems discussed here, and I have gained something substantial from each of them (although some might differ—or would have differed—sharply on certain issues): Fritz Machlup, Ludwig von Mises, Milton Friedman, Friedrich A. Hayek, Aaron A. Director, M. Reder, Goetz A. Briefs, John Van Sickle, Armen A. Alchian, William R. Allen, Marshall Colberg, Yale Brozen, Arthur A. Shenfield, S. Rottenberg, H. Gregg Lewis, Gottfried Dietze, Clarence Phil-brook, Henry Hazlitt, H. Demsetz, F. A. Harper, A, Rees, P. Sultan, V, Orval Watts, C. E. Lindblom, C, H. Cooley, Henry Simons, W. Eucken, E. H. Chamberlin, Wilhelm Röpke, David McCord Wright, Gottfried Haberler, Sylvester Petro, N. J, Simler, Ben Rogge, Helmut Schoeck, H. G. Johnson, and P. Mieskowski. Of course, there are many others who would share some or most of my conclusions. Yet these economists have not yet succeeded in making their convictions on the strike-threat issue influential. They have failed, particularly, to win the sympathy even of those of their academic colleagues whose minds are not closed (which, unfortunately, I often think today is a small proportion).
• 4There is of course today an enormous literature on “labor economics.” I find it for the most part tendentious, often derivative, and usually devoid of any original or independent thinking. Much of it has been written, I guess, to satisfy the imperative in American universities to “publish or perish.” Trying to judge whether there is anything worthwhile in all these volumes has been exasperatingly time-consuming and unrewarding. But it is the bias of most of this literature which is most disturbing. In an article published a few years ago, I ventured a diagnosis. I said that most books on “labor economics” have been by labor consultants, arbitrators, conciliators, mediators, labor attorneys, labor correspondents; and that such “economists” cannot think or write dispassionately on matters affecting their incomes.
• 5Two decades ago, a leading member of the British Labor party, Lady Wootton (Barbara Wootton), stated quite categorically, that it is “the business of a union to be anti-social; the members would have a just grievance if their officials and committees ceased to put sectional interests first.” F. A. Hayek, commenting on this passage, noted “few liberal sympathizers of the trade unions would dare to express . . . [this] obvious truth.” But why should trade union sympathizers, including their academic advisers, not dare to refer to such a truth unless they felt that their political ambitions or prospects as consultants, or advisers, or labor journalists would be jeopardized by so frank art admission?
• 6Two decades ago, a leading member of the British Labor party, Lady Wootton (Barbara Wootton), stated quite categorically, that it is “the business of a union to be anti-social; the members would have a just grievance if their officials and committees ceased to put sectional interests first.” F. A. Hayek, commenting on this passage, noted “few liberal sympathizers of the trade unions would dare to express . . . [this] obvious truth.” But why should trade union sympathizers, including their academic advisers, not dare to refer to such a truth unless they felt that their political ambitions or prospects as consultants, or advisers, or labor journalists would be jeopardized by so frank art admission?
• 7The problems to be considered here fall within this theoretical framework. Wage-rate increases enforced through the strike threat benefit those remaining employed at the enhanced labor costs. But, on whom does the burden then fall? On the specific investors? On investors in general? On displaced or excluded workers? On consumers? What is the incidence of the burden? This problem is like that which economists discuss under the heading of the incidence of taxation. To express the issue in abstract terms (which means in the simplest terms), any one party to the productive process can exploit one or more of the other parties only in a measure determined by the “elasticities of supply” of the different productive services rendered by the people or by the assets employed. In this connection I propose to draw attention to four vital realities: (1) In the absence of man-made barriers to mobility, noticed above (p. 4), there is a wide range of alternative uses for a large proportion of workers and assets, a fact which implies long-term elasticities of supply. (2) Assets are often substitutable for labor (a consideration which is usually taken into account under the heading of “elasticity of substitution”). (3) If growing large scale recourse to the strike threat, accompanied by growing hostility to inflation, does not cause a disastrous cumulative decline in real income (depression without deflation), it must eventually force labor somehow to become the residual claimant on the value of the product, in order to make profitable the replacement of the complementary assets labor requires, let alone permit any growth in the stock of such assets in response to society’s saving preference. (4) Substitution of the consumption process for the saving process may contribute to the elasticity of supply of assets as such. (See p. 145)
• 8The only practically important case of monopsony (to be discussed in Chapter 8) involves some clear “shut-in” power. Yet even the Webbs, in two massive studies (both special pleading for the union movement), have presented no evidence of “employers,” in collusion or singly, ever deliberately and fraudently enticing employees into specialized occupations, with a view eventually to reducing their remuneration unfairly.
• 9The effect of wage rates determined under labor union pressure is, I shall insist, to distort society’s production structure, while it causes no redistribution whatsoever in favor of the poorer classes as such. The only income transfers that the use of strike power can effect are (1) in favor of those employed in one occupation at the expense of those in others, or (2) in favor of workers as such when entrepreneurs generally have failed to forecast the extent to which, as investors, they will be subjected to duress-imposed costs.
• 10When a wage rate is raised so as to price some part of potential output higher than consumers are prepared to pay, the wage gain is partly at the expense of workers who would otherwise have found their most remunerative employment in that trade; partly, of course, it is at the expense of consumers in general; but hardly ever (and I shall be developing this point at some length) is it at the expense of those who provide complementary resources—i.e., the assets which, in general, multiply the yield to effort. It is consumers who ultimately pay wages; and when the market value of output of any kind is forced (whether by the right to strike or through legal enactment) above the level which the free market would have determined, the effect is, in general, actually to harm the poorer classes disproportionately. This “regressive” consequence is aggravated because the process keeps (in the long run) a large segment of the work force in low-productivity and low-paying jobs; or (in the short run) forces workers into short-time jobs and (encouraged by unemployment compensation) into idleness. Hence the effect of the strike-threat system upon the distribution of the wages flow is to render it less equitable.
• 11Through the consequences of the strike-threat system upon the composition of the assets-stock, and the nature of the employment outlets available, the flow of output as a whole and hence aggregate real income will be reduced. And, because all must admit that it is highly improbable that any substantial redistribution of the shrunken real income in favor of labor has ever been thereby effected, obviously the system has all along been reducing the flow of real wages and the average of real wage rates.
• 12In the “classical” theory of wages, as it had evolved at Cambridge in the pre-Keynesian era (by which I mean before publication of J. M. Keynes’s General Theory of Employment, Interest and Money in 1936), the issues which I have discussed in this chapter were virtually ignored. On the points which concern society most seriously, exposition was hopelessly contradictory for this reason. An inherent part of Alfred Marshall’s imposing synthesis of the “orthodoxy” of his age was the marginal productivity theory of wage-rate determination. This was clear, for instance, when he criticized Cliffe Leslie who (in attempting to justify strike-threat actions) had, Marshall showed, failed to understand why competition tended to establish equivalence of net advantageousness in labor’s earnings. Yet other passages in Marshall’s writings appear to me to have been quite inconsistent with the insight he showed in his reference to Leslie.
• 13This criticism applies, I suggest, particularly to Marshall’s discussion of what has been called the “range of indeterminateness” under bilateral monopoly; for the circumstances imagined relate to the problem of income distribution, I maintain, only under the assumption of wrong predictions. And I find that his contemporaries and successors who have relied upon similar kinds of reasoning have never stated this assumption—either explicitly or implicitly.
• 14Marshall does recognize, through his notion of “derived demand,” that consumers ultimately employ all the resources used. But does not his analysis treat only the particular case? For one thing, it shows that consumers are the more exploitable the greater the inelasticity of demand’ for the output happens to be. For another, it indicates that the suppliers of fixed and circulating capital who have failed to anticipate and discount typical trade-union practices (the vital qualification which Marshall does not specifically make) are more exploitable (a) the fewer the alternative uses there happen to be for the assets they have provided, (b) the smaller the proportion of labor cost to the total cost of the output, and (c) the fewer the opportunities of replacing existing employees by others (for example, strikers by blacklegs) or by labor-economizing machinery or organization.
• 15Marshall’s lack of rigor on the labor issue raises a question of great sociological interest. In his Economics of Industry he seems to imply (without clearly referring to the strike threat) that workers as a whole gain through their unions. He says that their power “to sustain high wages depends chiefly on the influence they exert on the character of the workmen themselves. . . .” If this means that the unions increase personal efficiency so that the market value of the workmen is higher, the question is how the unions manage to do so. Exploiting the consumer and excluded workers could, of course, take away, in Marshall’s words, “that want and fear of hunger which depressed the physique and moral character of the working class,” on the part of the exploiters; but as it would further depress those exploited, it is difficult to see how the “working class” as a whole could benefit. He goes on to say, “Unions have been at once a chief product and a chief cause of this constant elevation of the standard of life: where that standard is high, unions have sprung up naturally; where unions have been strong, the standard of life has generally risen.” That unions have been a product, of which more has in fact been acquired when the standard of living generally has been rising, is beyond question. But overcoats and bicycles and cars and television sets have also been products of which more has been acquired as standards of living have risen. Hence it is quite another matter to claim that living standards generally have risen because the unions have been strong, or because people generally have more overcoats or bicycles. Marshall refers also to the unions compelling employers to treat the worker “as an equal with something to sell that they (the employers) wanted to buy.” Of course union officials who are allowed to use the strike threat will be treated courteously by managements, as will their tax assessors. But will management’s fears of a union’s powers enable its members to raise their earnings without exploiting people poorer than themselves? Marshall did not face this sort of question with frankness; nor, in my judgment, have most subsequent economists.
• 16Marshall’s lack of rigor on the labor issue raises a question of great sociological interest. In his Economics of Industry he seems to imply (without clearly referring to the strike threat) that workers as a whole gain through their unions. He says that their power “to sustain high wages depends chiefly on the influence they exert on the character of the workmen themselves. . . .” If this means that the unions increase personal efficiency so that the market value of the workmen is higher, the question is how the unions manage to do so. Exploiting the consumer and excluded workers could, of course, take away, in Marshall’s words, “that want and fear of hunger which depressed the physique and moral character of the working class,” on the part of the exploiters; but as it would further depress those exploited, it is difficult to see how the “working class” as a whole could benefit. He goes on to say, “Unions have been at once a chief product and a chief cause of this constant elevation of the standard of life: where that standard is high, unions have sprung up naturally; where unions have been strong, the standard of life has generally risen.” That unions have been a product, of which more has in fact been acquired when the standard of living generally has been rising, is beyond question. But overcoats and bicycles and cars and television sets have also been products of which more has been acquired as standards of living have risen. Hence it is quite another matter to claim that living standards generally have risen because the unions have been strong, or because people generally have more overcoats or bicycles. Marshall refers also to the unions compelling employers to treat the worker “as an equal with something to sell that they (the employers) wanted to buy.” Of course union officials who are allowed to use the strike threat will be treated courteously by managements, as will their tax assessors. But will management’s fears of a union’s powers enable its members to raise their earnings without exploiting people poorer than themselves? Marshall did not face this sort of question with frankness; nor, in my judgment, have most subsequent economists.
• 17To sum up. When the owners of assets or the suppliers of labor anticipate the possibility or likelihood of “exploitation,” as they will if society permits attempted “exploitation,” they will be unexploitable. Neither the providers of assets nor the providers of effort and skill are exploitable by one another (a) unless the former fail to predict and allow for the full cost consequences of future strike threats when they choose their investments, or (b) unless the latter fail to predict the wage-rate consequences of lockout threats or monopsonistic action by the hirers of labor when choosing and preparing for specialized employment. To me it seems unchallengeable that, because during the past half century or more the strike-threat influence has obviously been increasing, investors must on the whole have predicted the cost implications and hence have been virtually unexploitable. I use the word “virtually” because whether they have overestimated or underestimated the cost effects of strike power is difficult to judge. But if my reasoning is valid, the major consequences of society’s tolerance of the strike-threat system must have been simply a slowing down of the rate of increase in aggregate income, to the disadvantage of both participants, and with no discernible change in the proportion in which income is shared between “capital” and “labor”.
• 18Even the Webbs’ presentation quotes no facts which might suggest the operation of formal monopsonies during the eighteenth and nineteenth centuries. Actually their explanation of the need for the protection of labor relies most often on the fact that “employers” had not combined. They refer, for example, to the craft guilds fighting for legislative protection “against the cutting down of their earnings by the competing capitalists.” This is of course the opposite of the monopsony allegation. If the masters were competing in the sale of the product, they were equally competing for the purchase of labor and materials. Hence they would have been tending to bid up the remuneration of the work force (actual or potential) as a whole, not to push it down.
• 19We must notice at the outset that, as feudalism and serfdom disappeared during the last two centuries of the Middle Ages, and especially following the Black Death, associations of workers for peaceful and lawful purposes had been neither illegal nor discouraged. Nor were they ever illegal or discouraged in subsequent ages. But from the thirteenth century, the conviction clearly emerged that certain antisocial practices affecting the pricing of products (including the product of labor) had to be restrained for the common good. Thus, practices known as “forestalling, engrossing and regrating” were forbidden by ordinances and statutes because these were supply and pricing procedures which were perceived to be exploiting the common people through the contriving of scarcities of food and necessities.
• 20Collusive action to raise the price of labor was, then, regarded as pernicious only in the sense that agreements to raise the price of food or necessities (such as salt) were considered pernicious. The spirit of the law seems never to have been hostile to artisans as such, still less to the laboring masses. Its hostility was directed against what I like to call “the contrived scarcity.” Cases such as those brought against London carpenters in 1339 and against shoemakers in 1349 certainly seem to have had the aim of preventing specific commodity prices from being forced up.
• 21One thing which makes the preindustrial revolution era rather difficult to interpret is a blatant inconsistency in this respect. Merchant and craft guilds, constituted by charter, had the explicit right to act in a manner which would have been criminal, under the common law and certain statutes, had it not been for the protection of a charter. Wyclif accused the guilds of conspiring “that no man practicing their craft shall take less payment daily than that they have agreed among themselves,” and that “they oppress other men who are in the right” (meaning that these others were prepared to work for less). But the guilds were protected by charter. The anomaly can probably be explained in terms of pre-eighteenth-century conservatism. Unsettling change could be prevented by way of protection of a privileged status quo (and this policy took the form among other things of encouragement of craft and merchant guilds) as well as through the prevention of any new privileges which seemed likely to arise. Revolutionary changes were feared. By the middle of the eighteenth century, however, the guilds had largely lost their power, and rather different forms of organization—labor unions of the modem type—emerged as “friendly societies.”
• 22A supplementary policy, developed following the Black Death, was that embodied in wage-fixing by authority and, following the Elizabethan Statute of Artificers, generally bolstering up the guild system. Important provisions of this statute had, however, the effect of enforcing adherence to contract. An artisan wishing to transfer to another master required a testimonial certifying that he had carried out his obligations to the master he was leaving. In some cases the employee was bound by contract until a specific piece of work had been completed, for example, “any ship, house or mill or any work taken by the gross or piece.” If he left before then, his master could claim damages fixed in the statute.
• 23Recourse to special statutes to outlaw “conspiracy” in particular trades seems to have been mainly because really effective enforcement of the common law (when there was no exoneration through guild privilege) had seemed beyond the administrative machinery of the courts until modern times. Common law cases had to be heard by judges and hence were costly. They were time-consuming. By reason of long delays, artisans charged could often escape trial by moving to other districts where they could seldom be traced. Statute law cases, on the other hand, could be dealt with expeditiously by justices. That is why we found “masters,” in the emergent industries of the seventeenth and eighteenth centuries, petitioning Parliament for explicit statutory protection against “conspiracy” for their own industries or trades. In Britain, as a whole, some 40 such statutes were repealed in 1824. But before then enforcement of common and statute law in this sphere seems to have been curiously casual. Moreover, as I have already insisted, conspiracy law was not aimed primarily at labor.
• 24Recourse to special statutes to outlaw “conspiracy” in particular trades seems to have been mainly because really effective enforcement of the common law (when there was no exoneration through guild privilege) had seemed beyond the administrative machinery of the courts until modern times. Common law cases had to be heard by judges and hence were costly. They were time-consuming. By reason of long delays, artisans charged could often escape trial by moving to other districts where they could seldom be traced. Statute law cases, on the other hand, could be dealt with expeditiously by justices. That is why we found “masters,” in the emergent industries of the seventeenth and eighteenth centuries, petitioning Parliament for explicit statutory protection against “conspiracy” for their own industries or trades. In Britain, as a whole, some 40 such statutes were repealed in 1824. But before then enforcement of common and statute law in this sphere seems to have been curiously casual. Moreover, as I have already insisted, conspiracy law was not aimed primarily at labor.
• 25Nevertheless, the problem to which these laws were believed to offer a solution seems to have increased in importance during the late eighteenth century, probably because of the gradual emergence of labor unions in the modern sense in the relatively highly-paid crafts and occupations, and their apparent growing activity. Unions were “friendly societies” concerned with the commendable task of insuring their members against the worst consequences of sickness or unemployment. This was the more conspicuous side of their activities but probably not the most important. Indeed, it seems that their insurance funds were often more in the nature of strike funds. Where apprenticeship had survived, they enforced the rules under some protection from the otherwise virtually moribund Elizabethan Statute of Artificers. Some “friendly societies” were trying to maintain, even at that time, what is today called “the closed shop.” In the light of rising sophistication during the eighteenth century, the harm done may well have been becoming more conspicuous. For instance, Adam Smith pointed out that the wool-combers were able, by refusing to take a reasonable number of apprentices, not only to “engross the employment, but reduce the whole manufacture into a sort of slavery to themselves, and raise the price of their labour above what is due to the nature of their work.”
• 26Nevertheless, the problem to which these laws were believed to offer a solution seems to have increased in importance during the late eighteenth century, probably because of the gradual emergence of labor unions in the modern sense in the relatively highly-paid crafts and occupations, and their apparent growing activity. Unions were “friendly societies” concerned with the commendable task of insuring their members against the worst consequences of sickness or unemployment. This was the more conspicuous side of their activities but probably not the most important. Indeed, it seems that their insurance funds were often more in the nature of strike funds. Where apprenticeship had survived, they enforced the rules under some protection from the otherwise virtually moribund Elizabethan Statute of Artificers. Some “friendly societies” were trying to maintain, even at that time, what is today called “the closed shop.” In the light of rising sophistication during the eighteenth century, the harm done may well have been becoming more conspicuous. For instance, Adam Smith pointed out that the wool-combers were able, by refusing to take a reasonable number of apprentices, not only to “engross the employment, but reduce the whole manufacture into a sort of slavery to themselves, and raise the price of their labour above what is due to the nature of their work.”
• 27Nevertheless, the problem to which these laws were believed to offer a solution seems to have increased in importance during the late eighteenth century, probably because of the gradual emergence of labor unions in the modern sense in the relatively highly-paid crafts and occupations, and their apparent growing activity. Unions were “friendly societies” concerned with the commendable task of insuring their members against the worst consequences of sickness or unemployment. This was the more conspicuous side of their activities but probably not the most important. Indeed, it seems that their insurance funds were often more in the nature of strike funds. Where apprenticeship had survived, they enforced the rules under some protection from the otherwise virtually moribund Elizabethan Statute of Artificers. Some “friendly societies” were trying to maintain, even at that time, what is today called “the closed shop.” In the light of rising sophistication during the eighteenth century, the harm done may well have been becoming more conspicuous. For instance, Adam Smith pointed out that the wool-combers were able, by refusing to take a reasonable number of apprentices, not only to “engross the employment, but reduce the whole manufacture into a sort of slavery to themselves, and raise the price of their labour above what is due to the nature of their work.”
• 28Persons in possession of any articles of trade may sell them at such prices as they individually may please, but if they confederate and agree not to sell them under certain prices, it is conspiracy; so every man may work at what price he pleases, but a combination not to work under certain prices is an indictable offence.
• 29Now the actual effect of these two acts was simply to make more explicit what had indeed been the law during four centuries or more. But nearly all writers on this topic, the Webbs being most influential, have represented the “Combination Acts” as the legislative outcome of a sort of conspiracy among “employers” or “capitalists.” Actually the reverse is the truth. The 1799 Act came to be passed almost by accident. Indeed, so casually were both acts enacted that, in Sir James Fitzjames Stephen’s History of the Criminal Law, we are told that “there is no account of any debate on these Acts, nor are they referred to in the ‘Annual Register’ for these years.” What actually happened in 1799 was that a bill, more or less in the form of the 40 or so other anticombination statutes already applying to particular trades, was introduced in Parliament. The original aim in 1799 was simply to forbid “conspiracy” on the part of millwrights. During the proceedings Wilberforce (the famous antislavery champion) suddenly and unexpectedly moved for an amendment to make the principle apply to all industries and occupations. There seemed to be no good reason for opposing this amendment and the bill became law with little opposition. No one spoke against the Act on principle, although some thought that too much power was being given to the lower courts. Some unimportant changes were introduced the following year in the amending Act.
• 30Now the actual effect of these two acts was simply to make more explicit what had indeed been the law during four centuries or more. But nearly all writers on this topic, the Webbs being most influential, have represented the “Combination Acts” as the legislative outcome of a sort of conspiracy among “employers” or “capitalists.” Actually the reverse is the truth. The 1799 Act came to be passed almost by accident. Indeed, so casually were both acts enacted that, in Sir James Fitzjames Stephen’s History of the Criminal Law, we are told that “there is no account of any debate on these Acts, nor are they referred to in the ‘Annual Register’ for these years.” What actually happened in 1799 was that a bill, more or less in the form of the 40 or so other anticombination statutes already applying to particular trades, was introduced in Parliament. The original aim in 1799 was simply to forbid “conspiracy” on the part of millwrights. During the proceedings Wilberforce (the famous antislavery champion) suddenly and unexpectedly moved for an amendment to make the principle apply to all industries and occupations. There seemed to be no good reason for opposing this amendment and the bill became law with little opposition. No one spoke against the Act on principle, although some thought that too much power was being given to the lower courts. Some unimportant changes were introduced the following year in the amending Act.
• 31The important point to remember is that the new combination laws did not make any activities illegal which had not already been criminal offenses for centuries. They were, writes Donald Dewey, “thought to incorporate no new legal principle but were rather designed to improve the cumbersome enforcement procedure which largely nullified the usefulness of a conspiracy prosecution.” Yet they are described as “severe,” as inaugurating “a new and momentous departure,” “a far-reaching change of policy,” an era of “legal persecution” of would-be strikers or strikers. These are descriptions of the acts by Sidney and Beatrice Webb, in a seriously slanted work characterized at times by meticulous scholarship—a work which has had an enormous influence in spreading the myth. The truth is, however, that the “Combination Acts” were just as leniently, almost half-heartedly, enforced as the common law against conspiracy (and the various special statutes forbidding conspiracy or combination in particular industries) had previously been.
• 32The important point to remember is that the new combination laws did not make any activities illegal which had not already been criminal offenses for centuries. They were, writes Donald Dewey, “thought to incorporate no new legal principle but were rather designed to improve the cumbersome enforcement procedure which largely nullified the usefulness of a conspiracy prosecution.” Yet they are described as “severe,” as inaugurating “a new and momentous departure,” “a far-reaching change of policy,” an era of “legal persecution” of would-be strikers or strikers. These are descriptions of the acts by Sidney and Beatrice Webb, in a seriously slanted work characterized at times by meticulous scholarship—a work which has had an enormous influence in spreading the myth. The truth is, however, that the “Combination Acts” were just as leniently, almost half-heartedly, enforced as the common law against conspiracy (and the various special statutes forbidding conspiracy or combination in particular industries) had previously been.
• 33Although the costs of proceedings against strikes or against observed preparations for strikes had probably been cheapened by the 1799 Act, the law retained much uncertainty. In the case of convictions by J. P.’s, appeals to the upper courts became almost habitual; and the judges, as is not unknown today, seemed to enjoy showing their authority and superior grasp of the law by upsetting the decisions of their inferiors. The penalties which could be imposed in the lower courts were much lighter than in the upper courts, but whether the likelihood of convictions when the law had been broken was increased (with a consequent rise in respect for the law) is problematical. The Parliamentary agent who drafted the 1824 Act which repealed these laws (who claimed with good reason that this branch of law had been “his particular study for twenty years”) maintained that the effects of the combination laws had been “negligible”—a “dead letter.” Very few prosecutions had been made under them, he said, but many under the clause of the Statute of Artificers, which forbade any worker to leave his job before the completion of certain specified kinds of work, like a ship or a bridge. Otherwise, such prosecutions of strikers as occurred tended rather to be based on the charge of “conspiracy” under the common law.
• 34Some of the facts which point to the leniency in administering the law, both previously and subsequently to the Combination Acts, are mentioned by the Webbs. Nevertheless, they manage to leave the impression that an era of unparalleled harshness followed during the first quarter of the nineteenth century. Other “historians” have reinforced this impression. J. L. and Barbara Hammond write that during this age, “the workpeople were at the mercy of their masters,” The Webbs’ inconsistency on the point is monumental. They admit that the representation of the period 1799-1824 as one of “unmitigated persecution” involving continuous repression of the trade-union movement is a “romantic legend” and “semi-mythical,” yet claim at the same time that “the legend is not without a basis of fact.” Combinations with the simple aim of insuring enforcement of the law in labor’s favor had been tolerated before 1799, they assert, but were suddenly outlawed afterward. The Webbs contend that before the nineteenth century, unions had not always been prosecuted, even if they were “technically within the definitions of combination and conspiracy,” but between 1800 and 1824, they were. I find no evidence of this whatsoever in secondary authorities. They allege that from 1800 to 1824 the “combination acts” drove union members “into violence and sedition.” The truth is that sabotage, violence and intimidation of nonstrikers, managers and owners had been normal concomitants of such strikes as did occur long before the enactment of the new “Combination Acts,” as Adam Smith testified in 1776 (see p. 36). And, after the repeal of these acts in 1824, a year of exceptional disorders accompanied widespread strike activity. It is significant that subsequent history records how, as unions gradually won immunities and privileges before the law, their reliance upon intimidation and violence tended, on the whole, to increase (see Chapter 4). It is not only in the present age that steps taken to achieve peace and protect life and property have been represented as acts of aggression which can thereby themselves be charged with engendering war and violence.
• 35Some of the facts which point to the leniency in administering the law, both previously and subsequently to the Combination Acts, are mentioned by the Webbs. Nevertheless, they manage to leave the impression that an era of unparalleled harshness followed during the first quarter of the nineteenth century. Other “historians” have reinforced this impression. J. L. and Barbara Hammond write that during this age, “the workpeople were at the mercy of their masters,” The Webbs’ inconsistency on the point is monumental. They admit that the representation of the period 1799-1824 as one of “unmitigated persecution” involving continuous repression of the trade-union movement is a “romantic legend” and “semi-mythical,” yet claim at the same time that “the legend is not without a basis of fact.” Combinations with the simple aim of insuring enforcement of the law in labor’s favor had been tolerated before 1799, they assert, but were suddenly outlawed afterward. The Webbs contend that before the nineteenth century, unions had not always been prosecuted, even if they were “technically within the definitions of combination and conspiracy,” but between 1800 and 1824, they were. I find no evidence of this whatsoever in secondary authorities. They allege that from 1800 to 1824 the “combination acts” drove union members “into violence and sedition.” The truth is that sabotage, violence and intimidation of nonstrikers, managers and owners had been normal concomitants of such strikes as did occur long before the enactment of the new “Combination Acts,” as Adam Smith testified in 1776 (see p. 36). And, after the repeal of these acts in 1824, a year of exceptional disorders accompanied widespread strike activity. It is significant that subsequent history records how, as unions gradually won immunities and privileges before the law, their reliance upon intimidation and violence tended, on the whole, to increase (see Chapter 4). It is not only in the present age that steps taken to achieve peace and protect life and property have been represented as acts of aggression which can thereby themselves be charged with engendering war and violence.
• 36Some of the facts which point to the leniency in administering the law, both previously and subsequently to the Combination Acts, are mentioned by the Webbs. Nevertheless, they manage to leave the impression that an era of unparalleled harshness followed during the first quarter of the nineteenth century. Other “historians” have reinforced this impression. J. L. and Barbara Hammond write that during this age, “the workpeople were at the mercy of their masters,” The Webbs’ inconsistency on the point is monumental. They admit that the representation of the period 1799-1824 as one of “unmitigated persecution” involving continuous repression of the trade-union movement is a “romantic legend” and “semi-mythical,” yet claim at the same time that “the legend is not without a basis of fact.” Combinations with the simple aim of insuring enforcement of the law in labor’s favor had been tolerated before 1799, they assert, but were suddenly outlawed afterward. The Webbs contend that before the nineteenth century, unions had not always been prosecuted, even if they were “technically within the definitions of combination and conspiracy,” but between 1800 and 1824, they were. I find no evidence of this whatsoever in secondary authorities. They allege that from 1800 to 1824 the “combination acts” drove union members “into violence and sedition.” The truth is that sabotage, violence and intimidation of nonstrikers, managers and owners had been normal concomitants of such strikes as did occur long before the enactment of the new “Combination Acts,” as Adam Smith testified in 1776 (see p. 36). And, after the repeal of these acts in 1824, a year of exceptional disorders accompanied widespread strike activity. It is significant that subsequent history records how, as unions gradually won immunities and privileges before the law, their reliance upon intimidation and violence tended, on the whole, to increase (see Chapter 4). It is not only in the present age that steps taken to achieve peace and protect life and property have been represented as acts of aggression which can thereby themselves be charged with engendering war and violence.
• 37Some of the facts which point to the leniency in administering the law, both previously and subsequently to the Combination Acts, are mentioned by the Webbs. Nevertheless, they manage to leave the impression that an era of unparalleled harshness followed during the first quarter of the nineteenth century. Other “historians” have reinforced this impression. J. L. and Barbara Hammond write that during this age, “the workpeople were at the mercy of their masters,” The Webbs’ inconsistency on the point is monumental. They admit that the representation of the period 1799-1824 as one of “unmitigated persecution” involving continuous repression of the trade-union movement is a “romantic legend” and “semi-mythical,” yet claim at the same time that “the legend is not without a basis of fact.” Combinations with the simple aim of insuring enforcement of the law in labor’s favor had been tolerated before 1799, they assert, but were suddenly outlawed afterward. The Webbs contend that before the nineteenth century, unions had not always been prosecuted, even if they were “technically within the definitions of combination and conspiracy,” but between 1800 and 1824, they were. I find no evidence of this whatsoever in secondary authorities. They allege that from 1800 to 1824 the “combination acts” drove union members “into violence and sedition.” The truth is that sabotage, violence and intimidation of nonstrikers, managers and owners had been normal concomitants of such strikes as did occur long before the enactment of the new “Combination Acts,” as Adam Smith testified in 1776 (see p. 36). And, after the repeal of these acts in 1824, a year of exceptional disorders accompanied widespread strike activity. It is significant that subsequent history records how, as unions gradually won immunities and privileges before the law, their reliance upon intimidation and violence tended, on the whole, to increase (see Chapter 4). It is not only in the present age that steps taken to achieve peace and protect life and property have been represented as acts of aggression which can thereby themselves be charged with engendering war and violence.
• 38Enforcement of the law against conspiracies seems, then, to have been just as lax, lenient, or reluctant after 1799 as before. And it remained true that when there was no clear evidence of illegal conspiracy, associations of workers continued to be looked upon without disfavor. That is, unless they were observed to be arranging in concert not to accept less than an agreed wage rate (which as Mansfield’s judgment made clear, alone constituted the ancient crime of “conspiracy” or “combination”), no action against them is recorded, even in the Webbs’ great book; and just as had happened in the eighteenth century, “when masters complained, the magistrates were more inclined to seek a reconciliation than inflict penalties.”
• 39Enforcement of the law against conspiracies seems, then, to have been just as lax, lenient, or reluctant after 1799 as before. And it remained true that when there was no clear evidence of illegal conspiracy, associations of workers continued to be looked upon without disfavor. That is, unless they were observed to be arranging in concert not to accept less than an agreed wage rate (which as Mansfield’s judgment made clear, alone constituted the ancient crime of “conspiracy” or “combination”), no action against them is recorded, even in the Webbs’ great book; and just as had happened in the eighteenth century, “when masters complained, the magistrates were more inclined to seek a reconciliation than inflict penalties.”
• 40Enforcement of the law against conspiracies seems, then, to have been just as lax, lenient, or reluctant after 1799 as before. And it remained true that when there was no clear evidence of illegal conspiracy, associations of workers continued to be looked upon without disfavor. That is, unless they were observed to be arranging in concert not to accept less than an agreed wage rate (which as Mansfield’s judgment made clear, alone constituted the ancient crime of “conspiracy” or “combination”), no action against them is recorded, even in the Webbs’ great book; and just as had happened in the eighteenth century, “when masters complained, the magistrates were more inclined to seek a reconciliation than inflict penalties.”
• 41Enforcement of the law against conspiracies seems, then, to have been just as lax, lenient, or reluctant after 1799 as before. And it remained true that when there was no clear evidence of illegal conspiracy, associations of workers continued to be looked upon without disfavor. That is, unless they were observed to be arranging in concert not to accept less than an agreed wage rate (which as Mansfield’s judgment made clear, alone constituted the ancient crime of “conspiracy” or “combination”), no action against them is recorded, even in the Webbs’ great book; and just as had happened in the eighteenth century, “when masters complained, the magistrates were more inclined to seek a reconciliation than inflict penalties.”
• 42There is no evidence whatsoever that law enforcement initiatives and judgments in common law or statutory conspiracy cases between 1800-1824 diverged from the long-established principles enunciated with the clarity of simplicity by Mansfield. And discussions by unions with managements about wage rates and conditions of work had never been frowned upon, provided they did not lead to anything resembling the strike threat, or to obvious preparations for a strike (as the Webbs themselves indirectly admit.) On occasion, when such discussions appeared likely to be angry, the magistrates would even be invited to be present as conciliators. Apparently, it was regarded as quite legal for a union in one district to correspond with a union in the same trade in another district about wages and conditions of service.
• 43Many cases in the early 1800s concerned organizations of artisans that, faced with the gradual dissolution of their privileges or the competition of labor-economizing machines, fought to preserve their position with every available legal means. Generally speaking, they were unsuccessful and often had to admit increasing numbers of poorer workers into their protected trades as interlopers and, according to the Webbs, suffer “the progressive degradation of their wages.” However, the union leaders were free to petition Parliament and use normal channels of propaganda and peaceful agitation. Some asked that their position be protected by restraint on entry through the application of the wage-fixing clauses of the archaic and ineffective Elizabethan Statute of Artificers, or through its restrictive apprenticeship clauses. Even such large-scale collusive activities occurred as the organization of a petition with 300,000 signatures asking for the Statute of Artificers to be made effective, and the organizers were in no danger whatsoever of arrest or prosecution. On exceptional occasions, the unions were successful in such requests, presumably because they were not regarded as “combinations” in the legal sense of “conspiracies,” or because they agreed to abandon such organization machinery as could be used for strike-threat pressures.
• 44Many cases in the early 1800s concerned organizations of artisans that, faced with the gradual dissolution of their privileges or the competition of labor-economizing machines, fought to preserve their position with every available legal means. Generally speaking, they were unsuccessful and often had to admit increasing numbers of poorer workers into their protected trades as interlopers and, according to the Webbs, suffer “the progressive degradation of their wages.” However, the union leaders were free to petition Parliament and use normal channels of propaganda and peaceful agitation. Some asked that their position be protected by restraint on entry through the application of the wage-fixing clauses of the archaic and ineffective Elizabethan Statute of Artificers, or through its restrictive apprenticeship clauses. Even such large-scale collusive activities occurred as the organization of a petition with 300,000 signatures asking for the Statute of Artificers to be made effective, and the organizers were in no danger whatsoever of arrest or prosecution. On exceptional occasions, the unions were successful in such requests, presumably because they were not regarded as “combinations” in the legal sense of “conspiracies,” or because they agreed to abandon such organization machinery as could be used for strike-threat pressures.
• 45From the researches of scholars such as T. S. Ashton (who have dug into the correspondence of industrial firms during the period we are considering), we know today what was not known at the time by the law-enforcement authorities. There were indeed secret discussions among industrialists relating to wages. As such, the discussions may have been “conspiracies”—infringements (by “employers”) of the 1800 Combination Act. Yet there were “few, if any prosecutions. . . .” It is understandable, therefore, that knowledgeable humanitarians of the day should have felt that gross injustice to the workers was involved. But for reasons to be discussed in Chapters 8 and 9, it is highly doubtful whether the early industrial concerns could ever have wielded effective monopsonistic power. The real purpose of the apparent collusion the researches mentioned have disclosed was, I am inclined to think, defense. We know that many trade unions were being formed during the 1800-1826 period, despite the illegality of “combination.” It is scarcely surprising, therefore, that representatives of the investors should have felt it essential to cooperate, not to exploit labor monopsonistically, but in order to resist wage-rate concessions wrung from managements confronted with the strike-threat “in detail.” (See p. 47.)
• 46It is possible indeed that the widespread tolerance of illegal strike-threat action encouraged the unions to believe that, if they played their cards correctly, particularly their political cards, they were beyond the law. Already members of Parliament whose constituencies included union members had recognized that they constituted a serious voting bloc. For instance, the Webbs themselves mention how both the Whig and Tory members for Liverpool thought it expedient to take up the unions’ case against the 1799 Act. Of course, laxity in the law’s administration may have created an impression of harshness when prosecutions were brought. Prosecutions may have come to be so unexpected and capricious as to be regarded as outrages. But far from enforcement having been carried out in a spirit of repression, the authorities were obviously “reluctant to interfere in such disputes unless the public peace was thought to be endangered,” and even so, in less-dangerous situations, the courts appear to have preferred simply to insist upon the dissolution of the unlawful organizations rather than apply the legislatively authorized sanctions. They tried as far as possible to achieve obedience of the law without the imposition of fines or imprisonment.
• 47In part, what seems to have been happening during the first quarter of the nineteenth century was that, because the machinery of enforcement was still inadequate, unions could, by proceeding with careful strategy, often rely upon no action being taken against them. They were advised by such shrewd friends as Francis Place—probably the most successful political intriguer of history—and numerous politicians who had perceived the vote-swinging power of the unions.
• 48As an example of the alleged “repression” which occurred after 1799, we can consider the case of the cotton weavers. They were permitted to organize openly and agitate for legislation which would permit the justices to fix wage rates for them in accordance with the provisions of the outmoded Statute of Artificers. After several years of costly activities, it at last became clear that their efforts had been fruitless. They saw their privileges evaporating as a great increase in the numbers who found their most remunerative outlets in cotton weaving occurred. A huge strike (for those days) was then organized. But no “savage” suppression of these incontrovertibly illegal activities followed. On the contrary, authorities allowed the strike to last for three weeks before calling the police. Then, “the whole strike committee was arrested by the police.” They were found guilty and sentenced to from 4 to 18 months imprisonment. There was neither injustice nor savagery in the sentences.
• 49We have by turns conceded what we all ought manfully to have resisted; and you, elated with success, have been led on from one extravagant demand to another, till the burden is become too intolerable to be borne. You fix the number of our apprentices, and often-times even the number of our journeymen. You dismiss certain proportions of our hands, and you will not allow others to come in their stead. You stop all surface machines, and to the length even to destroy the rollers before our face. You restrict the cylinder machine, and even dictate the kind of pattern it is to print. . . . You dismiss our overlookers when they don’t suit you; and force obnoxious servants into our employ. Lastly, you set all subordination and good order at defiance, and instead of showing deference and respect to your employers, treat them with personal insult and contempt.
• 50Nor is there evidence of further changes in judicial interpretation of the common law disadvantageous to labor after 1800, as the Webbs suggest in the phrase, “the common law doctrine . . ., as subsequently interpreted by the judges, of itself made illegal all combinations whatsoever of journeymen to regulate the conditions of their work.” For “combination” in the sense attached to that word at the time (namely, “conspiracy”) had been illegal since the Middle Ages. There was nothing new in that. Are not the Webbs’ words, “to regulate the conditions of their work,” a euphemism for “unlawful activities deliberately undertaken”?
• 51The passing of the generalized Combination Acts may perhaps have been a greater deterrent to strikes. It is rather difficult to judge because, despite the mildness of law enforcement, anything resembling conspicuous concerted action by the workers to fix wage rates had been relatively rare—although increasing and, before 1799, apparently becoming more and more violent. Adam Smith remarked in 1776, as though it were an unassailable fact, that workmen’s combinations “have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrages.” In circumstances which so sober an observer as Adam Smith could describe in terms like that, was it really surprising that there should have been occasional recourse to the courts to check the spread of intimidation, disorder, and sabotage? And were not demands for special and general legislation to assist that process wholly reasonable?
• 52The Webbs admit that “some combinations of journeymen were at all times recognized by the law” and that “many others were only spasmodically interfered with”; yet they allege that organizers (or would-be) organizers of strikes were subject to “legal persecution . . . as rebels and revolutionaries.” This assertion cannot be substantiated unless the leaders could be charged with “conspiracy” or organizing violence.
• 53The case which the books most often cite to show the oppressive nature of subsequent policy in the application of the law against conspiracy is that of the “Tolpuddle martyrs.” This case involved farm workers who were trying to form an organization to force up their wage rates. They had established the “Friendly Society of Agricultural Laborers” for their village. Now as a friendly society, such an association was encouraged rather than discouraged by the law. But as a cloak for illegal activities (including “conspiracy”), it was not immune from prosecution. In the Tolpuddle case, however, the alleged crime was not conspiracy, but “unlawful oaths.” The society, which had an elaborate ritual and rather frightening paraphernalia—for example, a picture of Death, “painted six feet high”—was demanding loyalty through the administration of oaths. Naturally alarmed, the local farmers pointed out what was happening—preparations for strikes or violence—to the local justices, who were perhaps traditionally sympathetic to farmers (as they were not to the new industrialists). Nevertheless the justices were reluctant to get a prosecution going. They thought it preferable first to warn those concerned of the penalties which had to be imposed under the relevant law—seven years transportation. But apparently the activities of the society continued, and the authorities then felt bound to intervene. It was proved that illegal oaths had been administered—in view of the explicit warning, it seems quite recklessly and defiantly. Five ringleaders (the only members charged) were found guilty under the “Unlawful Oaths Offenses Act” of 1797 (an act inspired by the atrocities of the French Revolution), and not under the combination laws or the common law. Under the 1797 act, the original sentence had been the death penalty; but this penalty had been reduced to seven years transportation shortly before the Tolpuddle case (a fact which in all probability had encouraged the leaders’ defiance). The law (wise or unwise) was clear-cut. The offenses were proven. The court had no option. Yet the Webbs describe the conviction of the Tolpuddle offenders as a “scandalous perversion of the law;” and because the sentence to transportation was confirmed by the Home Secretary, the Webbs refer to his “policy of repression. “
• 54The case which the books most often cite to show the oppressive nature of subsequent policy in the application of the law against conspiracy is that of the “Tolpuddle martyrs.” This case involved farm workers who were trying to form an organization to force up their wage rates. They had established the “Friendly Society of Agricultural Laborers” for their village. Now as a friendly society, such an association was encouraged rather than discouraged by the law. But as a cloak for illegal activities (including “conspiracy”), it was not immune from prosecution. In the Tolpuddle case, however, the alleged crime was not conspiracy, but “unlawful oaths.” The society, which had an elaborate ritual and rather frightening paraphernalia—for example, a picture of Death, “painted six feet high”—was demanding loyalty through the administration of oaths. Naturally alarmed, the local farmers pointed out what was happening—preparations for strikes or violence—to the local justices, who were perhaps traditionally sympathetic to farmers (as they were not to the new industrialists). Nevertheless the justices were reluctant to get a prosecution going. They thought it preferable first to warn those concerned of the penalties which had to be imposed under the relevant law—seven years transportation. But apparently the activities of the society continued, and the authorities then felt bound to intervene. It was proved that illegal oaths had been administered—in view of the explicit warning, it seems quite recklessly and defiantly. Five ringleaders (the only members charged) were found guilty under the “Unlawful Oaths Offenses Act” of 1797 (an act inspired by the atrocities of the French Revolution), and not under the combination laws or the common law. Under the 1797 act, the original sentence had been the death penalty; but this penalty had been reduced to seven years transportation shortly before the Tolpuddle case (a fact which in all probability had encouraged the leaders’ defiance). The law (wise or unwise) was clear-cut. The offenses were proven. The court had no option. Yet the Webbs describe the conviction of the Tolpuddle offenders as a “scandalous perversion of the law;” and because the sentence to transportation was confirmed by the Home Secretary, the Webbs refer to his “policy of repression. “
• 55The case which the books most often cite to show the oppressive nature of subsequent policy in the application of the law against conspiracy is that of the “Tolpuddle martyrs.” This case involved farm workers who were trying to form an organization to force up their wage rates. They had established the “Friendly Society of Agricultural Laborers” for their village. Now as a friendly society, such an association was encouraged rather than discouraged by the law. But as a cloak for illegal activities (including “conspiracy”), it was not immune from prosecution. In the Tolpuddle case, however, the alleged crime was not conspiracy, but “unlawful oaths.” The society, which had an elaborate ritual and rather frightening paraphernalia—for example, a picture of Death, “painted six feet high”—was demanding loyalty through the administration of oaths. Naturally alarmed, the local farmers pointed out what was happening—preparations for strikes or violence—to the local justices, who were perhaps traditionally sympathetic to farmers (as they were not to the new industrialists). Nevertheless the justices were reluctant to get a prosecution going. They thought it preferable first to warn those concerned of the penalties which had to be imposed under the relevant law—seven years transportation. But apparently the activities of the society continued, and the authorities then felt bound to intervene. It was proved that illegal oaths had been administered—in view of the explicit warning, it seems quite recklessly and defiantly. Five ringleaders (the only members charged) were found guilty under the “Unlawful Oaths Offenses Act” of 1797 (an act inspired by the atrocities of the French Revolution), and not under the combination laws or the common law. Under the 1797 act, the original sentence had been the death penalty; but this penalty had been reduced to seven years transportation shortly before the Tolpuddle case (a fact which in all probability had encouraged the leaders’ defiance). The law (wise or unwise) was clear-cut. The offenses were proven. The court had no option. Yet the Webbs describe the conviction of the Tolpuddle offenders as a “scandalous perversion of the law;” and because the sentence to transportation was confirmed by the Home Secretary, the Webbs refer to his “policy of repression. “
• 56The case which the books most often cite to show the oppressive nature of subsequent policy in the application of the law against conspiracy is that of the “Tolpuddle martyrs.” This case involved farm workers who were trying to form an organization to force up their wage rates. They had established the “Friendly Society of Agricultural Laborers” for their village. Now as a friendly society, such an association was encouraged rather than discouraged by the law. But as a cloak for illegal activities (including “conspiracy”), it was not immune from prosecution. In the Tolpuddle case, however, the alleged crime was not conspiracy, but “unlawful oaths.” The society, which had an elaborate ritual and rather frightening paraphernalia—for example, a picture of Death, “painted six feet high”—was demanding loyalty through the administration of oaths. Naturally alarmed, the local farmers pointed out what was happening—preparations for strikes or violence—to the local justices, who were perhaps traditionally sympathetic to farmers (as they were not to the new industrialists). Nevertheless the justices were reluctant to get a prosecution going. They thought it preferable first to warn those concerned of the penalties which had to be imposed under the relevant law—seven years transportation. But apparently the activities of the society continued, and the authorities then felt bound to intervene. It was proved that illegal oaths had been administered—in view of the explicit warning, it seems quite recklessly and defiantly. Five ringleaders (the only members charged) were found guilty under the “Unlawful Oaths Offenses Act” of 1797 (an act inspired by the atrocities of the French Revolution), and not under the combination laws or the common law. Under the 1797 act, the original sentence had been the death penalty; but this penalty had been reduced to seven years transportation shortly before the Tolpuddle case (a fact which in all probability had encouraged the leaders’ defiance). The law (wise or unwise) was clear-cut. The offenses were proven. The court had no option. Yet the Webbs describe the conviction of the Tolpuddle offenders as a “scandalous perversion of the law;” and because the sentence to transportation was confirmed by the Home Secretary, the Webbs refer to his “policy of repression. “
• 57The case which the books most often cite to show the oppressive nature of subsequent policy in the application of the law against conspiracy is that of the “Tolpuddle martyrs.” This case involved farm workers who were trying to form an organization to force up their wage rates. They had established the “Friendly Society of Agricultural Laborers” for their village. Now as a friendly society, such an association was encouraged rather than discouraged by the law. But as a cloak for illegal activities (including “conspiracy”), it was not immune from prosecution. In the Tolpuddle case, however, the alleged crime was not conspiracy, but “unlawful oaths.” The society, which had an elaborate ritual and rather frightening paraphernalia—for example, a picture of Death, “painted six feet high”—was demanding loyalty through the administration of oaths. Naturally alarmed, the local farmers pointed out what was happening—preparations for strikes or violence—to the local justices, who were perhaps traditionally sympathetic to farmers (as they were not to the new industrialists). Nevertheless the justices were reluctant to get a prosecution going. They thought it preferable first to warn those concerned of the penalties which had to be imposed under the relevant law—seven years transportation. But apparently the activities of the society continued, and the authorities then felt bound to intervene. It was proved that illegal oaths had been administered—in view of the explicit warning, it seems quite recklessly and defiantly. Five ringleaders (the only members charged) were found guilty under the “Unlawful Oaths Offenses Act” of 1797 (an act inspired by the atrocities of the French Revolution), and not under the combination laws or the common law. Under the 1797 act, the original sentence had been the death penalty; but this penalty had been reduced to seven years transportation shortly before the Tolpuddle case (a fact which in all probability had encouraged the leaders’ defiance). The law (wise or unwise) was clear-cut. The offenses were proven. The court had no option. Yet the Webbs describe the conviction of the Tolpuddle offenders as a “scandalous perversion of the law;” and because the sentence to transportation was confirmed by the Home Secretary, the Webbs refer to his “policy of repression. “
• 58Becker, op. cit., p. 179.
• 59A coalition formed in 1924 between a rather extreme radical or socialist party and a nationalistic party representing mainly Afrikaans-speaking whites had applied a Wage Act, an Industrial Conciliation Act, an Apprenticeship Act and other legislation to perpetuate rather than to secure this situation.
• 60Actually, my challenge in South Africa was made in the form of a quota proposal purely for polemical purposes. I thought it would be an effective way of exposing how unjustly the standard rate (and indeed the whole system of wage-rate determination) was working. On other grounds, we must recognize how the quota system could itself be used for discrimination against a race with good traditions whose people had been more successful than those of another race by reason of the virtues of their traditions. For instance, a quota restricting the number of Jewish medical practitioners according to the proportion of Jews to total population in the United States would be grossly discriminatory.
• 61I did not then know of Eugen Böhm-Bawerk’s important Control or Economic Law? which reached conclusions similar to those I reached. It had not then been translated into English. Nor had works by Ludwig von Mises which dealt briefly with the same issue.
• 62I discuss Marshall’s contribution on pp. 7-9.
• 63I noticed the important contribution of Professors Johnson and Mieskowski too late to permit a discussion of it in all appropriate contexts. I refer to its findings in an appendix to Chapter 15. I received E. P. Schmidt’s splendid study. Union Power, on the day I received the page proofs of this book.
• 64W, H. Hutt, “Misgivings and Casuistry on Strikes,” Modern Age, Fall 1968.
• 65Barbara Wootton, Freedom under Planning (Chapel Hill: University of North Carolina Press, 1945), p. 97,
• 66F. A, Hayek, The Constitution of Liberty (Chicago; University of Chicago Press, 1960), p. 505.
• 67That is, as is to be explained later, the workers will be forced to hire or rent the fixed assets they need and to pay interest on the circulating capital because the owners of assets will only make them available on those terms.
• 68Sidney and Beatrice Webb, The History of Trade Unionism and Industrial Democracy (London: Longmans Green and Co., 1920).
• 69Because, as we are about to see, when duress-imposed labor costs in any activity reduce the number of workers who can be profitably employed in it, the number of workers who must compete for employment in other activities is increased, while as consumers all other workers will be disadvantaged.
• 70A tax is said to be “regressive” when the proportion of the tax to the taxpayer’s income is greater the smaller his income. Thus import and excise duties and sales taxes are obviously regressive.
• 71I use the work “substantial” because in this context I am relying upon empirical evidence (see chapter 16). In the light of the general case argued in this chapter and the rest of the book, the word “substantial” could be omitted.
• 72Cliffe Leslie was one of a group of writers on wage questions (of whom the others were Thornton, Longe and Fleeming Jenkins) who had tried to show how union initiatives could enable a redistribution of income in labor’s favor. They had a considerable influence on John Stuart Mill during the last years of his life, when he was contemplating entry, and after his entry, into politics. I have discussed their contributions in my Theory of Collective Bargaining (Glencoe. Ill.: Free Press, 1954).
• 73“Bilateral monopoly” means, in this context, “monopsony” (see above footnotes) among the purchasers of labor and monopoly (a union) among the suppliers of labor. Under such conditions there is no market determination of the price of labor.
• 74The demand for a thing is said to be “inelastic” when a change in its price will have little influence on the amount of it that will be purchased.
• 75Alfred Marshall, Economics of Industry (London: Macmillan, Ltd., 1909), p. 389.
• 76Ibid., pp. 388-9.
• 77Within the category “labor” there must have been a consequential regressive redistribution (see footnote 10 and below pp. 168, et. seq.).
• 78S. and B, Webb, op. cit. p. 46 (my italics). On the whole, Parliament sided with the craft guilds until the middle of the eighteenth century (by which time their effectiveness was rapidly weakening); but with the spread of laissez-faire ideas in the latter part of the century, Parliament was less inclined to protect craft privileges.
• 79So effectively has the myth I am here exposing been propagated that even in Armen A. Alchiàn and William R. Allen’s University Economics (2nd ed.; Belmont, Calif.: Wadsworth Publishing Company, 1967), which contains by all odds the most satisfactory elementary discussion of the labor union issue to be found in any currently used textbook, the student is told that the British anticonspiracy laws tried to abolish “the right to form a union—which is a very different thing from a strike.” Associations of working people were encouraged rather than frowned upon provided they did not resort to anything resembling the strike. Nor is this textbook quite correct in saying that “the threat of violence via the strike was basically what anticonspiracy laws aimed to stop. . . .” (p. 406). This was true only of certain of the special statutes, referred to on pp. 29-30. The gist of any “conspiracy” offense was concerted action to agree upon a price or wage rate. (See p, 31.) Violence was always a separate transgression.
• 80The London carpenters were charged with trying to keep “foreigners” (i.e., workmen from outside London) from accepting less than sixpence a day.
• 81Wyclif was attacking the masons employed in church building. The quotation is A. H. Gardner, Outline of English Architecture (New York: Scribners, 1946), p. 24.
• 82Quoted in M. D. George, The Combination Laws Reconsidered, cited in Economic Journal History Supplement, 1927, p. 215.
• 83Important instances were in the woolen, cotton, linen, silk, hemp, fustian, hatters, dyers, pressers and the iron industries.
• 84This is surely indicated in the very name of an early general statute: Act of Conspiracies of Victuallers and Craftsmen, 1549. Consumers’ interests were paramount.
• 85I say “apparent” because the evidence of growing union activity is mainly indicated in the increasing number of court cases involving unions; and this may have been correlated with rising industrial outputs or due to more vigorous law enforcement.
• 86One very defensible practice of those days (which survived into the nineteenth century) was the subsidization of craftsmen in the form of what were called “traveling” or “tramping” benefits if they were prepared to leave an area in which there was unemployment. This could have led to an improved allocation of labor over area—greater geographical mobility.
• 87Smith, op. cit., p. 126.
• 88The King v. Eccles, quoted in Donald Dewey, Monopoly in Economics and Law (Chicago: Rand McNally and Company, 1959), p. 120n.
• 89Quoted in Webb, op. cit., p. 70n.
• 90The amendments concerned provision for arbitration.
• 91Dewey, op. cit., p. 117.
• 92Webb, op. cit., pp. 72 and 81.
• 93George, op. cit., pp. 214-15.
• 94Webb, op. cit., pp. 64-70,
• 95J. L. and Barbara Hammond, The Town Labourer, 1760-1832: The New Civilisation (London: Longmans, Green and Co., 1917), p. 129.
• 96S. and B. Webb, op. cit., p. 64.
• 97Ibid., p. 63.
• 98See the Minutes of Evidence of the Select Committee on Artisans and Machinery (1824) and George, op. cit. Mrs. George’s judgment (which coincides with my own on this issue) is all the more powerful because her obvious bias is against the masters. For instance, one of the examples she gives of the lax enforcement of the law against strikes is of the stocking weavers whose union had organized strikes with impunity in 1817, 1819, and 1821. Only after the third strike was there a prosecution and four members of the workers’ committee convicted, but released after successful appeal to the sessions. “The prosecution was a monstrous one,” says Mrs. George (op. cit., p. 216). But the strike was unquestionably a criminal act, and Mrs. George (normally an exemplary historian) does not disclose the grounds for her caustic adjective.
• 99Or other conditions of work.
• 100See p. 31.
• 101Dewey, op. cit., p. I88n.
• 102Webb, op, cit., pp. 74-5.
• 103Ibid., p. 59, In the Webbs’ account, there is no hint that, at the time, increasing numbers were raising their earnings by finding better-paid employment in the spheres in which the supposed “degradation of wages” was occurring.
• 104Whether, on the whole, this statute facilitated the exploitation of labor through monopsony or whether, through response to workers’ pressures, it conferred labor privilege is uncertain. It had long been of no clear effect when its wage-fixing clauses were repealed in 1813. The statute as a whole was repealed in 1824.
• 105T. S. Ashton, The Industrial Revolution (London: Oxford University Press, 1964), p. 93.
• 106Dewey, op. cit., p. 119.
• 107See Graham Wallas’s great and fascinating biography, The Life of Francis Place, 1771-1854 (London: Longmans, Green and Company, 1898; New York: Knopf, 1918). Wallas was a frank admirer of that extraordinary man.
• 108Webb, op. cit., pp. 58-59.
• 109Quoted in Ibid., pp. 75-6.
• 110Ibid., pp. 58-59. My italics.
• 111Smith, op. cit., p. 67.
• 112Webb, op. cit., p. 64. My italics.
• 113An Act of 1793 was intended to foster concerted working-class initiative to establish friendly societies.
• 114Every member of the society could have been charged according to the Act.
• 115Those who condemn the Tolpuddle sentences point out that the only evidence given about meetings of the friendly society (which had administered the illegal oaths) was that they had been orderly. At that stage, however, the meetings would naturally have been orderly. But where the authorities had not been so alert, organization of the kind which in this case was anticipated and prevented, had brought arson and murder. In certain other localities, haystacks and farms had been destroyed.
• 116Ibid., p. 146.
• 117Ibid., p. 146. Five years of the seven-year transportation sentences were subsequently remitted, although, through someone’s blunder, it was two years later before four of the five returned to Britain. It was quite common to remit sentences or quash convictions in “conspiracy” cases also, once illegal activities had been abandoned.
• 118There are some aspects of “fair employment practices” legislation which may work in the opposite direction from the minimum wage—discouraging or eliminating racial discrimination instead of fostering it. As Gary Becker puts it, “through litigation, fines, unfavorable publicity, imprisonment,” and so forth “the cost of not hiring some disadvantaged groups” is increased. But he does not, I think, bring out the crucial point, namely, that because antidiscriminatory policy pressures in this form are not in fact used effectively against the unions (at least in the United States), managements have to balance the disadvantages of having to appease proletarian cupidity and prejudices—supported by the unions—on the one side, with the disadvantages of not buying labor in the cheapest market plus any penalties which might be imposed on them for appeasing proletarian prejudices on the other side.
• 119The requirement under the Fair Labor Standards legislation that firms shall be “reasonable and just” in hiring does not sufficiently protect managements from the unions. It is certainly possible, however, that the course of U.S. politics may eventually lead to enactments which insist upon some percentage sharing of jobs. This could, at any rate, insure a nonracial sharing of privileges and injustices. Many years ago, I challenged the South African labor unions by suggesting an arbitrary quota system which would have had such an effect. I pointed out that the “Coloureds” (that is, the half-castes) of the Cape industrial area were approximately equal in number to the whites. I reminded the unions that the Coloureds had, half a century previously, supplied most of the skilled labor in the area. But there was then, as they knew, a very small proportion left in well-paid, artisan work. As the unions typically claimed that the purpose of standard rates (including legally enacted minimum wage rates) and other labor protective laws was to prevent the exploitation of the Coloureds as well as the whites, my challenge was that they should agree to enforce a gradually introduced quota system under which the Coloureds could be assured 5 percent of the better paid employment openings in the first year, 10 percent in the second year, and so on, so that after a couple of decades the privileged occupations (if they were privileged) would be shared equally between the two groups. Naturally the challenge was ignored.
• 120The requirement under the Fair Labor Standards legislation that firms shall be “reasonable and just” in hiring does not sufficiently protect managements from the unions. It is certainly possible, however, that the course of U.S. politics may eventually lead to enactments which insist upon some percentage sharing of jobs. This could, at any rate, insure a nonracial sharing of privileges and injustices. Many years ago, I challenged the South African labor unions by suggesting an arbitrary quota system which would have had such an effect. I pointed out that the “Coloureds” (that is, the half-castes) of the Cape industrial area were approximately equal in number to the whites. I reminded the unions that the Coloureds had, half a century previously, supplied most of the skilled labor in the area. But there was then, as they knew, a very small proportion left in well-paid, artisan work. As the unions typically claimed that the purpose of standard rates (including legally enacted minimum wage rates) and other labor protective laws was to prevent the exploitation of the Coloureds as well as the whites, my challenge was that they should agree to enforce a gradually introduced quota system under which the Coloureds could be assured 5 percent of the better paid employment openings in the first year, 10 percent in the second year, and so on, so that after a couple of decades the privileged occupations (if they were privileged) would be shared equally between the two groups. Naturally the challenge was ignored.