Should union members become capitalists?
The perils of labor throwing in its lot with capital are nicely illustrated by a cartoon from the 1950s that a colleague gave me a few years ago. Two steelworkers are sitting outside the locked gates of the plant. One says to the other: "You should have told me we were going to strike when I bought the stock."
But joining the capitalists is perhaps labor's best hope, says Tyler Cowen, responding to Krugman's Monday column on the hollowing out of the middle class. Saving the middle class requires rebuilding unions, Krugman says.
We need to restore the bargaining power that labor has lost over the last 30 years, so that ordinary workers as well as superstars have the power to bargain for good wages.
But Cowen, who is getting tons of attention for his pessimistic take on the U.S. economy, The Great Stagnation, doesn't see that making much difference.
Trade unions, even if they could become strong again (which is hard to see), would likely accelerate this process of substituting capital for labor, rather than counteracting it. A one-time union wage premium, even if it does not come at the expense of other workers, will put only a small dent in the long-term trend.
If the cost of workers goes up via union bargaining, Cowen is saying, companies will have even more incentive to buy robots and computers to replace them. Instead, he suggests, workers should be encouraged to participate in growing corporate profits by buying stock and other assets. If you can't get hired by 'em at a decent wage, become a shareholder. Cowen:
I have never seen it suggested that this "hollowing out" process will lead to lower output, quite the contrary. Those gains go somewhere. This is a reason to encourage the ownership of capital and on a quite broad basis.
Jay here. This is basically Bush's "ownership society" revisited. The U.S. economy will keep growing, Cowen says, but much of the gain will continue to be reaped by capital, not labor. Of course, for families offered a vision of the American dream that may be no longer attainable, finding the wherewithal to buy stocks is a tad problematic.
Comments
Jay,
An ownership society based on equity, rather than debt, would be an improvement. The ownership society promoted by the Bush administration was a fraud as using debt to acquire overvalued assets is the road to poverty, not riches.
In a free and open society labor unions are an impediment to individual and social progress. Would it make sense to have students collectively bargain over grades? Sure the bottom 20% of students would like that! Why would the top 80% of students agree to go along? So it is with labor.
The lie unions sell to workers is that without collective bargaining industry will take advantage of them - that they would all be at risk. In truth only the worst 10 - 20% of workers would be at risk. Capitalists need labor and it is in their interest to hire the best workers they can get for the money.
Individual workers who demand more than the market will bear do not get hired. Unions who demand more than the market will bear see their jobs outsourced.
That Krugman fails to recognize market forces apply as well to unions as they do to individuals demonstrates once again how partisanship has blinded him.
Posted by: Dan | March 10, 2011 7:36 AM
Ask Enron, Worldcom and Lehman Brothers ex-employees how trading wages for stock options worked out for them.
And someone please explain to Dan in the comment above the difference between workers bargaining over wages and working conditions, and students bargaining over grades.
Posted by: Joe | March 10, 2011 1:55 PM
I know some time ago you posited that it would be interesting to see a parallel universe that used full-reserve banking as opposed to our fractional-reserve system.
I submit that such a system would have much less commercial banking with loans and debt, and far more investment banking with stock issuance and ownership. Broader, more egalitarian ownership would the natural result. An article from yesterday cited that just 6% of the productivity gains of the last 2 years have passed through to wages. That's atrocious.
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Posted by: Josh Dowlut | March 10, 2011 3:31 PM
Union members are capitalists. If any organizations are available to working Americans that are more capitalistic in their effect than labor unions I am not aware of them. In pure form a union’s function is to get a maximum amount of the profits (in one form or another) generated by business endeavors into the pockets of the unions’ members, the companies’ employees. What could possibly be more capitalistic then to go for the gold? Make no mistake, in the economic food chain a labor union is and must be a predator; for to suppose that given enough time and sufficient opportunity the managers of capital invested will eventually do the right thing by its labor is naiveté beyond description. I was raised on union wages and during a time when Americans were rightly barraged with warnings of the evils of communism. Where our fathers failed was to include a warning that the other extreme, unregulated capitalism is survival of the fittest, perhaps the most unforgiving economic system ever devised by man. We are witnessing the dismantling of the American dream in exchange for enormous corporate profits for the benefit fewer and fewer citizens. More and more our country is beginning to resemble old Europe with its two classes an elite, politically powerful few lording over the working poor. This is what our ancestors escaped from; do we really wish to go backward?
Corporate America and their Republican toadies salivate at the prospect of depriving American workers of their labor unions because they understand these organization offer middle America potentially its’ greatest source of power to escape the chains of economic bondage; the ultimate result of unfettered corporate greed supported by a bought and paid for political party.
In the midst of this dastardly attack on the middle class the American labor movement can blossom. It need only mobilize to follow the timeless guidance of it greatest leader John L. Lewis and organize the unorganized; this time in defense of the American dream. The American people will do the rest.
Posted by: ASA | March 10, 2011 9:04 PM