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catallaxy in technical exile

Labour myths: wages are indeterminate and the legitimacy of violence

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Myth 6. Wages are “indeterminate”.

An essential prop for the theory of collective bargaining is the idea that wage rates are “indeterminate” so that it is essential to push for a higher rate, like a determined seller haggling at a market stall. One of the fallacies in that analogy is that a potential buyer at a market stall can refuse to accept the price that a seller demands, they can walk away and leave the item for others to make an offer. But the striking workers who walk away from their jobs do not leave them for others to take up, they enforce a picket line to keep the facility idle until such time as they choose to return. And a factory owner, unlike a buyer of merchandise, is not usually in a position to walk away and leave the investment behind. That is also a part of the argument against the idea of the natural advantage of capital.

A large part of Hutt’s book The Theory of Collective Bargaining is devoted to a review of the literature on the “indeterminateness of the price of labour”. This theory challenged the older “wage fund theory” according to which wages took up some fixed proportion of the national product and if some workers increase their share, then others have to make do with less. The apparent demise of the wage fund theory opened the gate for unions to push as hard as they could with the apparent blessing of economic theory (if they wanted it).

Hutt suggested that the more robust case against the “laissez faire” approach by trade unions is based on considerations of productivity and the downstream effects of anything that undermines it. Equally damaging are the consequences when governments intervene or unions conspire to set wages too high. Wage gains that are not related to productivity cause inflation that impacts on other workers and the community at large. And the legal minimum wage is likely to make the slow, the unskilled and the inexperienced unemployable at “the going rate”. That is Hutt’s label for the highly effective exclusionary device which parades as a protection for the workers, when in fact it guarantees long term unemployment for those at the bottom of the heap.

This section in Hutt’s first book is not his clearest piece of writing and the exposition is much improved in The Strike Threat System. The main message that emerges is the unsatisfactory level of argument and evidence adduced even by significant theorists such as Mill and Marshall when they alluded favourably to the “indeterminateness” theory.

The other point that Hutt picked up from his research on this debate was the problem experienced by classical economists in exerting any impact on public opinion and government policy. He became alert to the ways that “power thought” and “custom thought” trump “rational thought” in the formulation of economic policy. His investigation of this phenomenon resulted in his book Economists and the Public. Closely related to that problem was the capitulation of many economists to the hegemony of “the politically possible” so they were not prepared to address the general public and explain the policy options and the likely outcome of each. His reflections on this topic appeared in the book Politically Possible….?.

7. The moral legitimacy of violence by trade unionists.

At this point we approach the remaining assumptions with some layers of protective misinformation cleared out of the way. But still the going is likely to be heavy.

Unfortunately most writing on this topic is emotion-charged. That is hardly surprising. The strike is a form of warfare and the expectation of its use—as a fact or as a threat—has come to condition nearly all private policy in determining wage offers. The strike-threat system has created a species of continuous aggression and resistance to aggression; and union policymakers have felt it essential to keep alive suspicion and hostility toward management and investors…Time-honored but virtually fictional stories of the inequities and iniquities of former days are propagated and reiterated with conviction by public-spirited novelists, journalists, jurists, clergymen, and academics, as well as by parties seeking to exploit the myths. (STS, p 22)

Hutt noted that exploiters of aggressive nationalism usually make much of legendry struggles for “freedom” in ages past, so unionists and their apologists have perpetuated the myths of “labor’s bitter history.”

The threat of violence is usually kept hidden (the gun under the table) as much as possible in genteel talk about “collective bargaining”. This is the term invented by Sydney and Beatrice Webb to describe the function of trade unions when they represent the workers to negotiate with management on wages and conditions. It is particularly useful for their purposes because it conveys a picture of convivial and benevolent solidarity among the workers. As described above, this picture has turned out to be an illusion. Worse, the innocent sounding words do not signal the role of violent coercion, which has usually been an ingredient of strike action, which in turn is an essential adjunct to collective bargaining.

The question of the moral legitimacy of “the right to strike” is confused by the different meanings of “strike” and “the right to strike”. It is often presented as a self-evident fact that workers have the right to absent themselves from the workplace in a free society. From this it is supposed to follow that there is a right to have mass “absenting” when the shop stewards signal “all out”.

Leaving aside the matter of contractual agreements that may be violated by leaving work at short notice, the gritty moral issues arise when (a) not all the workers want to go out and (b) management tries to recruit replacement workers for the ones who have gone out.

What is the legitimate use of violence? It is generally accepted that the state, or at least agents of the state, have the right and indeed the duty to use violence (under clearly defined rules) to maintain law and order and to protect the realm. The lawful use of private violence is generally restricted to self-defence. In the light of this principle, the use of violence by trade unions to enforce conformity in strikes and the use of violence on picket lines is clearly outside the law unless the law has been revised to permit the unions to operate outside the limits that apply to everyone else.

Hutt put the question in strong terms in The Strike Threat System – “I want the reader to consider whether the survival of the democratic system may not be dependent upon a general recognition of the illegitimacy of privately motivated coercion in all forms”. The particular form of coercion that he had in mind of course was the violence of striking workers.

The acceptance of trade union violence is one of the great blemishes on the face of the western democracies. The tolerance that is extended to trade unionists in that respect (and not generally to common criminals) reflects the hold on the popular imagination that is exerted by the mythology of the labour movement. This was very clear during the waterfront dispute of recent memory when the liberal intelligentsia and sympathetic commentators in the media lined up to support the wharfies without blinking an eye over the potentially lethal violence that they were using. The ultimate absurdity of their stance was demonstrated by the suggestion or implication that the substitute dockworkers were equipped with balaclavas and dogs in order to inflict violence instead of the real reason which was to save themselves and their families from violent retribution.

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Written by Admin

June 20, 2006 at 4:06 pm

Posted in Uncategorized

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