File Unions in the Dustbin of History
By Alec Rawls © 1995/1998. (1200 words) Originally published in The Stanford Review 3/6/95.

Ronald Reagan performed three critically important single acts as President. He bombed Libya, which effectively neutralized Moammar Kadafy as a sponsor of international terrorism; he invaded Grenada, which seems like a small thing until you realize that Carter would not have; and most importantly, he fired the air traffic controllers when their union illegally went on strike.

Thanks to the collapse of OPEC and tumbling oil prices, there had been a break in the very high rates of inflation of the time, but the wage-price spiral was poised to continue apace unless wages fell accordingly. The unions had been setting the trend for wages so the next set of union contracts would be critical. When the air traffic controllers struck for continued high wage increases, Reagan lopped their heads off. Every damn one of them. The country was shocked and wage demands were greatly moderated. Wage inflation broke along with price inflation and we have enjoyed low inflation ever since. It was one of the greatest single acts of Presidential leadership this century.

Now we have Clinton. Last week Clinton ordered the federal government not to do business with any enterprise that hires strike-breakers. What a gigantic step backwards. Other forms of collusive price setting are illegal in this country and unions should be regarded as an evil for the same reasons. Competitive prices are allocatively efficient. Compared to this baseline, monopoly power raises prices and constricts supply. It benefits the monopolists at the expense of the public interest.

Allocative efficiency is not the only concern. Society also has distributional goals. But the efficient way to pursue distributional goals is to let markets work -- to promote competition to achieve allocative efficiency, or the highest sum of prosperity -- then use tax and safety net systems to ease the heaviest burdens.

At the very least, socially concerned meddling with wages should stop with the minimum wage, where at least it targets the greatest need. No one would claim that a "minimum wage" of twenty dollars an hour is socially efficient, but thanks to unions, that is what we have in the auto industry. Those who get the union jobs benefit, but many jobs are lost and everyone pays the higher price for goods, and that is before accounting the seniority rules and other costly inflexibilities that unions impose.

Beyond wages there are health and safety concerns to address, but again, the most that could be socially called for here is the enforcing the barest minimum standards. The efficient course is to allow competition in the labor market to favor employers who take those precautions for which the benefits outweigh the costs. Only when the options of workers in some segment of the labor market are so limited that the lack of competition allows grossly inefficient safety hazards to persist should government step in. With an Occupational Health and Safety Administration that presently goes far beyond the setting of minimum standards, and a glut of lawyers looking for deep pockets to sue for negligence, safety concerns provide no valid excuse for allowing collusion.

On campus, the food service workers, groundskeepers and some other university employees are unionized. If the Stanford community and the administration want to pay these workers above market wages, that is Stanford's business. But the idea that these people are entitled to a higher than market wage is absurd.

The only time it might be in the public interest to have workers collude to form a single seller of labor is when some group of workers can only go to one buyer of labor, as in the old fashioned company town. Then the monopoly power of the one party can offset the monopoly power of the other. As we see with baseball strike, this is still not a very good solution and the better answer might be to find some way to introduce competition. When conditions can support competition, it is absolutely against the public interest to allow collusion.

Until the iron curtain fell, we had to keep up the pretence that unions are morally tenable because unions had become a rare locus of independent power in some eastern bloc countries. To support Solidarnosc in Poland we had to not speak the truth about unions at home. Now that Marxism-Leninism is dead everywhere but in China and some academic departments it is time to close the chapter on unions in America.

This would not require actually making unions illegal. Few employees are irreplaceable, even en masse. Witness the air traffic controllers. All that is necessary for unions to wither away and die is to deny them any power to interfere with the hiring of competing personnel. Unions have historically enforced their strikes through violence and intimidation. Any such strike enforcement should be mercilessly crushed. It should be treated as any other criminal conspiracy. Individual perpetrators should be thrown in jail for twenty years and any union organization that can be tied to such behavior should be at that point declared a criminal organization. All of its complicit personnel should be prosecuted and all of its assets confiscated.

The biggest asset to union intimidation is the tradition in this country of union sympathy. The benefits of unions are easy to see because they concentrate on a distinct group of employees. The harm, in contrast, lands on the unemployed, and is spread widely over consumers and savers in the form of higher prices and a lower return to capital. This diffuse harm is easy to overlook, while the worker who benefits might be a neighbor or a friend.

The costs of unions are pushed further into the background by the way that a strike amplifies the personal stakes for union members. When a person goes on strike he is putting all his chips on the table, risking everything for that higher than competitive wage. He is setting the competing labor supply up to be his enemy, raising the stakes to those of war. Society's diffuse interests have no chance against this emotional tidal wave and sentiments of union loyalty and scab betrayal become entrenched wherever unions are established. In this way unions are like a cancer, spreading their toxins as they go, seducing people into siding with a small number of beneficiaries over the public interest.

As unions are rolled back, this vicious cycle unwinds. The last twenty years have seen great progress in reducing the union infection. Mostly the unions have killed themselves off. Union labor has done so much damage to every company and industry it has invaded that union employers have mostly disappeared. The steel and auto industries only survived by making massive substitutions of capital for labor, which greatly reduced the ranks of union labor.

Enter our bumbling, please everybody, know nothing President. He actually did the right thing on NAFTA, supporting international competition over the objections of unions. Now I think he is following his unprincipled instincts as a glad-hander to try to pay the unions back for their losses. That is like having chemotherapy for lung cancer, then feeling bad for the cancer and smoking a carton of cigarettes to make up for it. We need to hasten the demise of unionization, not forestall it.

(Alec Rawls is pursuing a Ph.D in economics.)


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