catallaxy files

catallaxy in technical exile

Myth 8: Collective bargaining to even up the shares between labour and capital.

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This is the last of the eight myths identified in the first post in this series. The next post addressed the nature of the factory system and the way that both radicals and conservatives failed to understand the ecology of freedom and prosperity. The third post was about the legends of suppression and the struggle of labour. The fourth was the solidarity of labour. The next addressed the “indeterminacy of wages” and the legitimacy of trade union violence.

Reasonable and peace-loving supporters of the labour movement may concede that violence in industrial relations is an evil, but they may argue that it is (or was) a necessary evil to obtain justice for the downtrodden and disadvantaged. Can these people continue to defend the strike threat system if it is demonstrated that the main beneficiaries are the most reckless and violent players, the “bloody aristocracy of labour” whose members achieve pay and conditions that most other workers, white and blue collar alike, can only dream about?

The humanitarian purpose of collective bargaining is to improve the lot of the working class as a whole by a redistribution of wealth from capital to labour. This is the central point that Hutt contested in his two major books on collective bargaining and the strike threat system. Those books argue, in some length and detail, that claims enforced by the threat of strikes can only advance sections of the labour force at the expense of unorganized labour, the unemployed and the community at large without affecting any overall transfer of wealth to the working class at large.

He spelled out how the threat to disrupt the entrepreneurial process by the concerted withdrawal of labour (boosted by supplementary force) has:

1. severely curtailed the wages-flow;

2. raised the cost of the capital resources which constitute labour’s tools;

3. extensively attenuated the wage-multiplying power of the assets provided;

4. aggravated inequalities of income;

5. materially worsened industrial relations, tending to destroy the workers’ dignity, their pride in achievement and their sense of purpose;

6. often frustrated attempts to improve conditions of employment in the work-shop and office;

7. mitigated against the market provision of employment security;

8. through the increasing pressures of ‘wage-push’ in recent years [the 1920s], been mainly responsible for the political expediency of inflation.

As far as Hutt could find in the literature, unprotected and non-unionised workers gained proportionately as much from general upward movements in productivity as workers in unions. It seems that there is no clear correlation between the degree of unionization and the speed of wage-rate increases.

The exceptions to that pattern are (a) the “bloody aristocrats of labour” who do better than average and (b) workers (or the unemployed) who do worse than average either because they are excluded from any kind of work by “the going rate” (wage rates set too high which render them unemployable) or because they are kept in lower paying jobs by exclusive practices enforced by the strike threat.

The evidence establishes, indeed, that the wholly “unprotected” wage earner, with no union to offset his supposedly inferior “bargaining power,” gains proportionately as much from general economic progress as the wage earner in a “strong” labor union unless exclusions enforced through strike-threat pressures (or other causes) are currently pushing him further down the scale of relative wage earnings. That is, in the relatively low-productivity spheres to which the “unprotected” are often confined by the “protected,” earnings tend to increase as rapidly as they do in the privileged spheres. (STS, p 22)

On point 1 above, Hutt referred to some tendentious writing by the Webbs regarding the eighteenth-century unions being “forced” into demanding protection because the industries in which their members were employed were menaced by “pauper labor.” Hutt argued that the industries where union members were employed would have prospered if labor had been recruited from less productive and less well-paid occupations. Releasing the “paupers” from their poverty would have enabled them to buy goods and services and generate multiplier effects that would benefit an everwidening circle of trades and industries. In his view the unions were simply asking for protection of sectional privilege. “The interests of those referred to as ‘pauper labor’ were regarded as of no importance, either by the unions or – (in this context) by their famed defenders, the Webbs.”

Point 5 is illustrated by a story told to me by an elderly German migrant who had been a skilled metalworker. During the war his house was destroyed by allied bombing and so he slept at the factory which was also substantially damaged. At the end of the war there was no direction from anyone and no home to go to, so he and his fellow workers set to work to rebuild the factory. He came to Australia and plied his trade in a metalwork shop. Late one afternoon he made a mistake with a job and he was still making good the damage when the “knock off” hooter sounded. A shop steward appeared and told him (with some interesting use of language) to desist. He protested that he was fixing up a mistake in his work. It was his fault and he just
wanted to make it good before he went home. The shop steward promised that if he tried that stunt again the whole shop would be called out on strike. So much for commitment to quality and personal responsibility.

The cure that Hutt proposed was the enactment of the principle underlying the British Combination Acts of 1799 and 1800 adapted to the present day. The reform suggested:
1. would bring to an end an era of distributive injustices and tolerated povertycreation;
2. would raise the material welfare of perhaps 90% of the people;
3. would release resources for new occupations in which the product enriches life;
4. would enormously increase income security; and, above all,
5. would bring about an unprecedented improvement in the quality of human relations.

William Stanley Jevons anticipated much of Hutt’s case in his book Methods of Social Reform and Other Papers (1883).

Among other things Jevons made the following points.
Firstly. The supposed struggle with capitalists in which many Unions engage, for the purpose of raising wages, is not really a struggle of labour against capital, but of certain classes or sections of labourers against other classes or sections.

Secondly. It is a struggle in which only a few peculiarly situated trades can succeed in benefiting themselves.

Thirdly. Unions which succeed in maintaining a high rate of wages only succeed by PROTECTION—that is, by levying contributions from other classes of labourers and from the population in general.

Fourthly. Unionism as at present conducted tends therefore to aggravate the differences of wages between the several classes of operatives; it is an effort of some sections to raise themselves at the expense of others.

At the end of the argument Jevons concluded:

The Unionist overlooks the fact that the cause to which he is so faithful, is only the cause of a small exclusive class; his triumph is the injury of a vastly greater number of his fellow-workmen, and regarded in this point of view, his cause is a narrow and selfish one, rather than a broad and disinterested one. The more I admire the perseverance, the self-forgetfulness, the endurance, abstinence, and a hundred other good qualities which English workmen often display during the conduct of a great trade dispute, the more sincerely do I regret that so many good qualities should be thrown away, or rather misused, in a cause which is too often a hurtful one to their fellow-men.

Conclusion.

Mistaken views about the past are a living force in the present, as shown by a letter to the Sydney Daily Telegraph 10 April 2006:

Union membership has fallen steadily, in part because of the institutionalisedprotection that up until now has been build into the industrial system. Unionism itself arose as a response to the unrestrained greed and uncaring attitude of the early industrialists.

That greed and uncaring attitude is alive and well today and more common than many of us would like to think possible. Nothing concentrates the thought processes like self-preservation, and people are worried about their future and the future of their children.

I believe that Mr Howard’s much-vaunted political nous is awry in this instance and there will be a reckoning. For the record, I am not a union man or, up to now, a Labor voter. But I am
worried and I vote.

We need to learn from the mistakes of the past if we can, otherwise we may have to repeat them. Many people will not find all of the views in this paper congenial at first glance and some will strongly dissent. The nature of the objections will be revealing and it will be interesting to note how many people offer considered arguments and evidence to support their case and how many adopt the approach described by Stuart Macintyre in The History Wars.

They obey only Rafferty’s rules. They caricature their opponents and impugn their motives. They appeal to loyalty, hope, fear and prejudice. In their intimidation of the history profession, they act as bullies. In submitting history to the loyalty test, they debase it. (p 222)

Of course people who have imbibed the eight assumptions virtually with their mothers milk and those who use them to justify their own careers will need some time to assimilate Hutt’s message. Strange as it may seem, some may not even try to do so, although this will not apply to those thinkers and scholars who accept that their first responsibility is to be prepared to reconsider each and every assumption that they hold.

As noted at the start of the paper, if Hutt’s ideas turn out to be robust even in part, then interesting questions will be asked about the academics and other intellectuals who were supposed to be tending the flame of independent scholarship. I think it is fair to say that Bill Hutt was a true scholar and a gentleman, painstaking, thorough, courteous, engaged and caring.

His criticism of the mythology of the labour movement was not motivated by any sectional interest but rather by the quest for truth. In addition he was convinced that the poor and the weak will be major beneficiaries from the market order, operating under the rule of law, in a moral framework that includes honesty and compassion. This especially applies to the
unemployed who for various reasons ranging from partial handicaps to lack of training and experience have to be junked from the workforce because they cannot be gainfully employed at the minimum wage rate.

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Written by Admin

June 20, 2006 at 10:44 pm

Posted in Uncategorized

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