Monday, September 5, 2011

A More Perfect Union?

*While Elia Kazan’s 1954 masterpiece On the Waterfront is remembered primarily for its artistic achievement (garnering eight Academy Awards, including Best Picture and Best Actor for a young Marlon Brando), the portrayal of political corruption within unionized labor reflected a reality that was and still is all too true.[1] Kazan at this time had lost considerable respect in some circles (as well as halved director’s fees) due to his testimony before the House Un-American Activities Committee, “an organization charged with weeding out those who were sympathetic to the Communist Party.”[2] A former Communist himself, Kazan under oath identified several associates affiliated with the Communist party. The courage of Brando’s Terry Malloy to speak out against the corrupt unionists has been noted as a probable apologia for Kazan’s own political confession. However, his marginalization by those who opposed his testimony continued even late in life, as demonstrated by the crowd’s divided reactions to his Honorary Oscar in 1999. As shown in Kazan's treasured film, unions have a tendency to implement an extreme form of coercive tribalism and marginalization in order to achieve their objectives. This occurs in the form of protecting union “brothers and sisters” at the expense of virtually everyone else. To oppose their methods is to be like Adolf Hitler according to some unionists.[3]

In the crusade to “save jobs,” technological and operational progress is hindered greatly. Instead of allowing innovative steps to be taken to further productivity and company health (which usually includes more hires and increased wages), inefficient jobs are maintained for the mere sake of “saving jobs.” Rather than being means to an end, jobs become the ends themselves in the hands of the union. As GMU economist Russell Roberts explains,
The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren't there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman's response: "Then why not use spoons instead of shovels?"
New technology leads to higher productivity and lower costs. “Those lower costs lead to lower prices as businesses compete with each other to appeal to consumers," says Russel. "The result is a higher standard of living for consumers. The average worker has to work fewer and fewer hours to earn enough money to buy a dozen eggs or a pair of shoes or a flat-screen TV or a new car that's safer and gets better mileage than the cars of yesteryear…When it gets cheaper to make food and clothing, there are more resources and people available to create new products that didn't exist before…So many job descriptions exist today that didn't even exist 15 or 20 years ago. That's only possible when technology makes workers more productive."

Sound economic theory, however, has no bearing on the “mobster mentality” found within many unions.[4] Accountability is diffused among the collective whole, watered down until it is virtually non-existent. Individual clashes with the mob mentality often lead to threats, property destruction, and union-on-union violence. While most support the basic idea of unionized labor, one cannot help but recognize the eroding effect unions have on both businesses and the economy as a whole.
Despite the common trumpeting of the so-called Progressive Era in the early 20th century, the economic reforms of that era have been some of the most damaging in American history. These early progressives sought to "move beyond the political principles of the American founding."[5] Despite claims for social justice, what these progressive policies ended up creating was social control. This manifested itself in the exclusion of “unfit workers,” mainly blacks and immigrants.[6] The “Labor Unions” entry in The Concise Encyclopedia of Economics reads,
Economist Ray Marshall, although a prounion secretary of labor under President Jimmy Carter, made his academic reputation by documenting how unions excluded blacks from membership in the 1930s and 1940s. Marshall also wrote of incidents in which union members assaulted black workers hired to replace them during strikes. During the 1911 strike against the Illinois Central, noted Marshall, whites killed two black strikebreakers and wounded three others at McComb, Mississippi. He also noted that white strikers killed ten black firemen in 1911 because the New Orleans and Texas Pacific Railroad had granted them equal seniority. Not surprisingly, therefore, black leader Booker T. Washington opposed unions all his life, and W. E. B. DuBois called unions the greatest enemy of the black working class. Another interesting fact: the “union label” was started in the 1880s to proclaim that a product was made by white rather than yellow (Chinese) hands. More generally, union wage rates, union-backed requirements for a license to practice various occupations, and union-backed labor regulations such as the minimum wage law and the Davis-Bacon Act continue to reduce opportunities for black youths, females, and other minorities.
Many often point to unions as the source of higher wages, safer working conditions, and shorter work days. However, as explained above, it is increasing technology, wealth, and productivity that make these circumstances both plausible and sustainable. Of course, unions have been "successful" at these various activities as well. "In doing so, however, they have reduced the number of jobs available in unionized companies. That second effect occurs because of the basic law of demand: if unions successfully raise the price of labor, employers will purchase less of it. Thus, unions are a major anticompetitive force in labor markets. Their gains come at the expense of consumers, nonunion workers, the jobless, taxpayers, and owners of corporations."[7]
Many vocal activists claim that unions built the middle class. A recent study concludes that the decline in union membership has resulted in the decline of the middle class and stagnant income over the past several decades. This helps foster the myth that “the poor are getting poorer” and that unions are the only thing keeping evil corporations from turning the entire population into quasi-slaves. However, the statistics often used in these studies are highly misleading. As economist Steven Horwitz writes,
According to researchers at the University of Michigan, the poorest fifth of households in 1975 earned, on average, almost $28,000 more per year by 1991, adjusted for inflation. According to U.S. Treasury data, an astounding 86 percent of households that comprised the bottom fifth in 1979 had climbed out of poverty by 1988…The vast majority of American households do move up: The reality of the U.S. economy over the last 30 years is that everyone has gotten richer in absolute terms, and significantly so. Simply measuring income and wealth tells us very little about the lifestyle of typical Americans. For example, poor Americans today are more likely to own basic household goods like washing machines, dishwashers, color TVs, refrigerators, and toasters than the average household was in 1973.

Economist Thomas Sowell recognizes the talk of "poor getting poorer" as the fallacy of "confusing the fate of statistical categories with the fate of flesh-and-blood human beings."[8] The reason? "It is an undisputed fact that the average real income-that is, money income adjusted for inflation-of American households rose by only 6 percent over the entire period from 1969 to 1996...But it is an equally undisputed fact that the average real income per person in the United States rose by 51 percent over the very same period."[9]

As one commentator notes, “In other words, if the middle class in America has shrunk, it is only because so many formerly middle-class households have moved to the upper-income brackets, while a significant number of households previously in the lower brackets have moved up to the middle class and beyond.”
True growth comes from capital investment, creation of wealth, technological advances, increased skill and education, and competition. Based on my own observations, the observations of more seasoned employees, historians, and economists, unions tend to engage in the very thing they claim to be fighting against: exploitation and coercion. Though there is still "a role for labor unions, just as in a free market there is still a role for agents or managers who help their clients find work and negotiate their contracts,"[9] this must come without the government attachments. To politicize the union does a great disservice to both the labor force and the company as a whole.[11]

With that, Happy Labor Day!

*This is an edited excerpt from my internship research paper needed for graduation.

UPDATE: Here is an informative analysis of the "rising income inequality."

1. On the Waterfront was partly based on the Pulitzer Prize-winning New York Sun series "Crime on the Waterfront" by journalist Malcolm Johnson.

2. Daidria Curnutte, "The Politics of Art: Elia Kazan and the Scandal Over On the Waterfront," The Film Journal 2 (July 2002).

3. Ironically, the Nazi comparison backfires.

4. Economists like Charles Baird have gone so far as calling labor unions "labor cartels."

5. Ronald J. Pestritto, William J. Atto, "Introduction to American Progressivism," in American Progressivism: A Reader, eds. Pestritto, Atto (Lanham, MD: Lexington Books, 2008), 2.

6. See David E. Bernstein, Thomas C. Leonard, "Excluding Unfit Workers: Social Control Versus Social Justice in the Age of Economic Reform," Law and Contemporary Problems 72 (2009).

7. Morgan O. Reynolds, "Labor Unions," The Concise Encyclopedia of Economics, ed. David Henderson, 2nd ed. (Indianapolis, IN: Liberty Fund, 2007).

8. Thomas Sowell, Economic Facts and Fallacies, 2nd ed. (New York: Basic Books, 2011), 140.

9. Ibid., 140-141.

10. Robert P. Murphy, The Politically Incorrect Guide to Capitalism (Washington, DC: Regnery Publishing, 2007), 25.

11. For further reading, see Morgan O. Reynolds, Power and Privilege: Labor Unions in America (New York: Universe Books, 1984); Thomas E. Woods, Jr., "What Made American Wages Rise? (Hint: It Wasn't Unions or the Government.)" in his 33 Questions About American History You're Not Supposed to Ask (New York: Three Rivers Press, 2007).

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