[On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises (1956)]
All varieties of (government) interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which — from the point of view of the authors’ and advocates’ valuations — is less desirable than the previous state of affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it. (Ludwig von Mises, Human Action, p. 854)
The mass myopia of our age has been a reactionary reverence for government intervention. When anything goes wrong, from a train wreck to a change in stock market prices, the craven crowds always clamor for just one more law. Throughout the world there is a spirit of egalitarianism and trust in government omnipotence that blinds people to the inevitable and undesirable consequences of the very intervention they currently advocate. There can be little question that the great majority of our fellow men believe that governmental action is the best answer to every economic problem of poverty or prosperity.
This general trend toward government intervention has been spurred on by the thought that majorities can continue to take by legal force from the rich and give to the poor to the perpetual benefit of society as a whole. Government intervention is therefore considered a moral and economic weapon to be used for the welfare of all the “have-nots.” The crusade for creature comforts is no longer considered to be a struggle against the niggardliness of nature. Instead, it is dreamily idealized as a campaign for the political allotment of each group’s “fair share” of the wealth produced by others.
The most astonishing phase of this development has been the rapidity with which more and more of the despoiled “haves” are joining the interventionists’ cult, formed for the express purpose of leveling down their supposedly unearned wealth. Every day new groups of “haves” are joining the pressure groups who feel that “there ought to be a law” to end their troubles by protecting them from the operations of a free market. Seldom do they ask for a repeal of the laws which are so often the root of their troubles. In accordance with the religion of the day, they ask for new legal restrictions which they think will protect them from the ills produced by the interventional laws already on the statute books.
In the United States, an example of this trend is clearly seen in the demand arising from some employers and their associations for the individual states to enact so-called right-to-work laws. The proposed laws would outlaw all employment contracts which specify that all employees must pay dues to the union chosen by the majority of an employer’s employees in a government supervised election. Such contracts, even though they represent the free and voluntary wishes of the employers and the employees concerned, would be declared to be against public policy and therefore illegal. A growing number of employers believe that such laws will bring about a better balance of the scales in the “class warfare” supposedly going on between “labor” and management. This would seem to indicate that many present-day employers have neither faith in freedom nor an understanding of the economic principles which reveal that a free market is the most efficient means that free, peaceful, and intelligent men can use for the advancement of individual men as well as the general welfare.
Those who advocate a legal ban on union shops seldom realize that they are sealing their own doom and placing their future fate in the hands of legislators who are only too eager to assume control of all economic activity. They fail to see that such laws are basically a surrender of their rights to employ whomever they might choose under free-market conditions. They seem to believe that the intervention they support is good intervention because, in their opinion, it will strengthen their side against the common enemy “labor.” They believe it will increase their freedom and enchain their “opponents.” Alas, employers, too, are victims of the current tendency to think of wealth production in terms of “class warfare,” rather than in terms of social cooperation for mutual advantage in a free and peaceful market.
These employers, commonly considered as “haves,” are actually advocating a program outlined by Karl Marx for the destruction of the very capitalistic system which has provided them with their present wealth and positions. They should know better. If they will not read, study and digest the 881 pages of Human Action, they should at least examine carefully the much shorter Communist Manifesto pamphlet written by Marx and Engels in 1848.
The Communist Manifesto tells us that
The immediate aim of the Communists is … a conquest of political power by the proletariat.… In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property.… Property, in its present form, is based on the antagonism of capital and wage-labor.… The proletariat will use its political supremacy, to wrest, by degrees, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the State, i.e., of the proletariat organized as the ruling class.…
Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production.
This document, which represents the early thinking of Marx, provides a blueprint for all government intervention. It is in line with the Mises thesis that government intervention, that results in a successful demand for more and more government intervention, must finally lead to the elimination of the market economy and the establishment of a socialist dictatorship.
There are, of course, many methods for destroying wealth and setting up a dictatorship, but the original method of the Marxists, as mentioned above, was to propose crippling intervention which would be “economically insufficient and untenable.” Then, when this original intervention made matters worse, they could easily create a demand for further “despotic inroads on the rights of property” until finally all economic activity was directed by the Socialist State as the sole owner or controller of the means of production. Marx decreed that this program of government intervention would eventually lead to the abolition of private property and the establishment of the Socialist State. Mises agrees. It was a series of such “despotic inroads” on private property that eventually converted the German economy into a National Socialist dictatorship. Such step-by-step intervention, if followed to its logical conclusion, will produce the same results in any country, even in the United States.
The major mistake in the thinking of those who advocate the so-called right-to-work laws is their thought that these laws will remedy some of the sins of the federal labor laws that now grant special privileges to labor unions. By the sagacious use of these privileges, labor unions extort higher than free-market incomes for their members at the expense of the general welfare. This situation results from popular blindness to the fact that in a moral society the only way anyone, including unions and their members, can honestly earn more wealth is to create it and not take it from others.
The advocates of such laws accept the fallacious idea, found in many classical economic textbooks, that wealth is distributed after it is produced. While much wealth is distributed, in the sense of being transported geographically, it is not distributed in the popular sense that the entrepreneur distributes or divides the proceeds of a contemplated or completed business venture into rent, wages, and interest, with the remainder labelled as profit or loss. Few, all too few, even among those called economists, seem to realize that in a free-market economy the owner of every factor of production receives the full market value of its contribution, as it is freely evaluated at the time the owner of that factor agrees to participate in the joint venture. This must be true, if we believe that free men only make and sign contracts which provide each signer with what he considers the best terms available to him at that time.
All free-market contracts or agreements seek a share of the benefits emanating from the increased division of labor and the resulting exchanges. In a free economy these exchanges take place at prices set at the margin where supply and demand balance as the result of the relative subjective values placed on all the offered products by all those participants who both contribute to and share in such market exchanges. These prices will be arrived at by a mental process wherein each participant arranges his satisfiable desires according to a scale of values. Each participant then exchanges his contributions for a mutually acceptable medium of exchange to the point where further quantities of that medium would no longer, in his opinion, buy goods or services which the participant values higher than the pleasures of rest (disutility of further labor) or those things which he has produced or can produce without the cooperation of others.
Too many people fail to understand the underlying principles of voluntary exchange in a free market. This ignorance of economic principles leads many to believe that when labor unions use their government-granted privileges to take by force (steal) that wealth which belongs to others, they are registering “social gains” for all workers. This is part and parcel of the Marxian class warfare doctrine that wealth production is a battle between capitalists and workers and that any gain for some workers is a loss for capitalists and therefore a gain for all workers. Unfortunately many people tend to place themselves mentally in the position of those who get these so-called gains, obtained by the legal looting of society by labor unions. The majority of people today do not realize that they are often the very ones who must pay for these so-called social gains in the form of higher prices, lower wages, and, all too frequently, chronic unemployment. They are not co-gainers. They are the losers. Popular acceptance of this fallacy permits labor unions to go on their merry way of extortion with encouragement from the very folks they are injuring.
Unless the popular thinking on this matter is corrected, these immoral and uneconomic activities of labor unions will eventually create a situation for which the popular solution may well be a socialist dictatorship. If this possibility is to be averted, those who are better informed must pierce the fog and show beyond any per-adventure of doubt that the currently popular activities of labor unions are injurious to the general welfare and result in relatively lower living standards than would prevail in a free-market economy.
The fact that many current labor union practices are injurious to the general welfare does not mean that all actions of all labor unions must of necessity be considered evil or uneconomic. There are many truly economic functions that labor unions can perform. In a free and moral society, unions would be solely voluntary groups organized to help their members by helping them to increase their production and thereby their contributions to society. Their chief purpose would be to raise the standards of workmanship and production. They would then be a force for the general economic good of society as well as their members.
In the last half century, popular and professional opinion has swept from one extreme to another. Fifty years ago, it was thought that unions could do no good. Today, there is a strong tendency to think that unions can do no wrong. Even their physical violence is accepted with complacency. They are a law unto themselves, free from legal liability for their lawlessness. It is both necessary and important that we distinguish between the activities of unions that are economically beneficial and those that are destructive of life, property, and social cooperation.
Because of the recent activities of most labor unions, there is a growing tendency for those who have some understanding of economics to associate all union activities, and thus unions themselves, with evil or uneconomic actions. We do not do this with those professional organizations that now set high standards of ability and performance for all their members and prospective members. At another time and clime, it is entirely possible that groups called unions might more closely resemble our best professional organizations in that they might set and maintain high standards of membership and performance. They might then attract all the better workers and, if such were the case, employers might find that union members were much better workers than nonunion members. If memberships in such unions were open to all qualified workers, they would no longer represent a group that was seeking selfish privileges at the expense of the general welfare. They would be groups straining to increase the quantity and quality of production so that all market participants would receive higher returns for their contributions. If we can visualize such a situation, we will then be better able to understand why employers should be free to sign contracts to hire only such high type workers and why the so-called right-to-work laws would interfere with the main objective of social cooperation — the increased satisfactions of all the individual participants in the market.
What is the “right-to-work?”
Since the days of Adam and long before Adam Smith, man has been vitally concerned with his right to live. God so created man that he cannot live without continually refueling and refurbishing his body. Men must work in order that men may live. Men thus have an absolute need and, therefore, an inherent right to work. This is an elementary fact which very few question.
This inherent right-to-work, like the allied right to the pursuit of happiness, is God-given. If we assume that it is given equally to every man, and to be consistent we must, we must also assume that the rights of one man, properly understood, cannot conflict with the rights of another. It must then follow that the inherent right to work is merely the right of each individual man to use his mind, physical abilities, and accumulated capital to produce those things which he needs and wants in accordance with his own individual values, abilities, and moral desires. It does not include any right for one man to impose his will on any other man. Nor does it compel any man to employ any other man, union member or nonunion member.
Intelligent men know and understand the underlying economic principle of the division of labor, whereby men by mutual cooperation can increase their total production and thereby the satisfactions of all who voluntarily participate in such social cooperation. This system of cooperative specialized production and exchange, known as the free-market economy, permits each participant to profit by his contribution to the increased satisfaction of other participants. If, at any time, any participant did not consider his market receipts more valuable to him than his contributions, he need merely refrain from market participation.
In a free-market economy, every human act of social cooperation is undertaken with the expectation that the results will improve the condition or satisfactions of each participant. If this were not so, the individuals would not voluntarily participate. These principles of mutual advantage apply to all market transactions, including employment agreements freely negotiated between employers and employees. Agreement as to terms can be reached only when all parties thereto expect that the results will increase their satisfactions over what they would be, if they did not so agree.
Unfortunately, few people understand these economic principles. Confused by our modern complicated society, many people seem to think that one party to an agreement is in a position to impose his will on the other. In the case of employment agreements, it is erroneously assumed that, left alone, employers can force their terms on employees. This fallacious belief leads to a demand that the government should intervene to “protect” employees by passing laws that limit and regulate the terms and conditions of private as well as public employment.
Some such laws seek to give certain men, usually union members, a legal “right-to-work” for employers who would prefer to hire other men, usually nonunion members, willing to work for terms more satisfactory to the employers. Such coercive measures have led some men to believe that new laws should be passed which would give nonunion men a legal “right-to-work” for employers who have agreed to hire only union members. These man-made legal “rights-to-work” for specified employers should not be confused with our God-given inherent right-to-work for ourselves or for others who voluntarily seek our services at terms that are mutually satisfactory. The one, government intervention, is a coercive unequal right that forcefully limits the equal rights of others; the other, God-given, is an equal right of free men that places no burden on any man.
The so-called right-to-work laws would outlaw “union shop” agreements, whereby employers contract to hire only those who agree to join the majority selected union within a specified time period. Proponents of such laws maintain that where union shops are legal, unions can and do stop the employment of those who will not join or pay tribute to the union. That, of course, is true. Such proponents then argue that union shop contracts prevent nonunion men from earning a living in their chosen fields. This, they hold, is a violation of the inherent right-to-work of men who refuse to join or pay tribute to the union of the majority. Such logic assumes that men have an inherent right-to-work for a particular employer, whether he wants them or not.
Do men have such an inherent right? In this writer’s opinion they do not.
We should keep our minds on the chief objective of a free society. This should always be the pursuit and maintenance of economic freedom with its two basic corollaries: (1) The right to own and enjoy all property rightfully earned or received; (2) the right to make and sign contracts with others for the mutual advantage of the participants, provided such contracts do not trespass on the property or equal rights of other free and moral men. This right, to make and sign contracts, includes the right of employers and employees to make and sign mutually agreeable contracts for moral employment.
In a free economy, all such mutually satisfactory employment agreements would be valid. On the other hand, all employment relations maintained by compulsion would be invalid. No employer or prospective employer has any right to employ any person who does not want such employment at the terms proffered. Likewise, no employee or prospective employee has any right to employment with any specific employer, if that employer does not desire him as an employee at the terms for which that person is willing to labor. In a free society, all employment must be mutually advantageous in the long run to employers, employees, and consumers. If, for any reason or lack of reason, either party to an employment agreement finds the agreement unsatisfactory or disadvantageous in any manner, he should be free to terminate that agreement and accept a more satisfactory one as soon as his contractual obligations have been fulfilled. In a free economy, this right to discontinue employment applies equally to employers and employees. In the absence of a prior voluntary agreement, no employer has any valid right to the services of any free man. Likewise, in the absence of a prior voluntary agreement, no man has any valid right to a job with any specific employer.
It is apparently difficult today for many people to understand that while people do have a right to work, they do not have a right to any specific job. When the late Calvin Coolidge was governor of Massachusetts, he met the issue squarely at the time some Boston policemen went out on strike. He stated simply and clearly that no one had the right to be a policeman. Failure to grasp this principle is the crux of popular confusion about the Oppenheimer, Ladejinsky, and many other cases in current headlines.
In the absence of prior agreements, people do not have a right to a job with the government or any other specific employer. In a free economy all employment is agreed on at mutually satisfactory terms. No employer has any right to employ an unwilling worker. Likewise, no job applicant has an inherent right to employment with any employer who does not want his services. A voluntarily signed union shop contract indicates that, under prevailing conditions, the employer prefers not to hire nonunion workers. He has every right to sign such a contract and would only do so if he thought it would be economically advantageous.
One of the most valuable attributes of freedom is the right of free men to choose their associates, so long as that association is mutually satisfactory and not in conflict with the equal rights of others. This right of free association includes the right of men to reject association with those whom they consider objectionable. If these rights are exercised wisely and economically, individuals, and thus society, will benefit. If they are misused, those responsible and, to a lesser extent, all others will suffer.
In a free economy, men have a right to associate voluntarily in labor unions. Likewise men have a right to refuse to join any such unions. Unions, as organizations of free men, also have the right to accept or reject applications for membership and suffer the consequences. So long as all this is done voluntarily, without force or coercion or the threat thereof, no free man need complain except to point out the wisdom or lack of wisdom of any particular action.
In a free society, men will join unions and pay dues only when they consider it is to their advantage to do so. if the laws did not grant union members privileges over and above those of nonunion members, few men would join unions unless those unions, operating in a free economy, could help them get and keep better paid positions. To do this, unions would have to help their members locate and fill more productive jobs. This and this alone would entitle union members to increased real wages. All union dues and fees would then represent only a fraction of this increased wealth production.
Thus, unions, if stripped of their special legal privileges, would only exist where they contributed to the increased satisfactions of society as well as of their members. No worker would voluntarily contribute to a union treasury, unless he believed that the benefits received, or expected to be received, would exceed the costs to him.
In a free society, employers also enjoy the right of free association. They are entitled to employ any applicant they wish, provided the contemplated type of activity is acceptable in a free and moral market society and the terms of employment are acceptable to the applicant. Employers also have a right to reject any or all applicants and suffer the consequences. They have a right to hire only union members or only nonunion members, if they can find such applicants willing to accept their terms. If they refuse employment to the best available applicants because of personal antipathies, their economic losses may be considerable. If they seek the greatest economic advantages or profits, they must select their employees with economic efficiency and profits uppermost in their minds. If they are to survive in a highly competitive market for consumer dollars, they must employ only those who provide the most efficient service desired for the wages paid. In a free market, supply and demand will determine wage rates. If all men are employed at their market wage, that is the highest wage any employer believes he can profitably recover from customers for the product of that labor, then any employer or prospective employer, seeking a new employee, must offer applicants better terms than those previously prevailing and these new and higher terms must be paid to all doing similar work.
Both employers and labor unions have a right to sign and maintain any contract for moral employment, so long as the agreement is reached voluntarily without the use or threat of any force, coercion, or violence. Only the market compulsions of supply and demand should prevail. Once such a contract is signed, it becomes the private property of the respective parties. It is then the function of government to protect that private property from violence and assist in the peaceful adjudication of any differences which may arise.
Today there is an almost religious belief that the government should do more than maintain peace and umpire differences of opinion. Millions believe that government intervention can create “social gains” by interfering in the free market so as to force one group to grant another group certain terms, rights, or privileges that they could not obtain in a free market. Taking advantage of this popular lack of economic understanding, labor unions have sought and obtained the sanction of laws which permit them to dictate the terms under which their chosen branch of production is permitted to function. If the entrepreneurs cannot or will not agree, production ceases and accumulated capital lies idle, deteriorating without satisfying any of the admitted desires of consumers. Even when they permit industry to operate, unions have often acted so as to prevent the use of the most efficient methods of production. They utilize their legal right, to prevent others from taking the jobs they want, to insist on “featherbedding,” whereby consumers, acting through employers, must pay for labors that are not needed or may not be performed.
These and many other current activities of labor unions act as a damper on production and the general welfare of all market participants. Such union activities also irk employers and all others who understand economics and seek increased production for the greater satisfaction of themselves and other consumers.
Many employers seem to feel that if they could only get State governments to step into the employment picture on their side and outlaw union shop contracts, such as they now sign largely under duress, they could then increase production, profits, and the general welfare without so much union interference. They fail to realize that the power of unions to exact uneconomic benefits for minority groups at the expense of society is the result of legal rights obtained under federal law, whereby majority selected unions are entitled to speak for all employees, whether or not they are members of the union and whether or not the employer desires to hire or fire any particular employee. This is the legal source of present-day uneconomic union power and until this legal right is withdrawn, the unions will continue to be able to extort privileges for those they represent at the expense of all others, including employers, consumers, and nonorganized workers.
If these practices should become general, the losses of union members would exceed their gains. Those the unions represent would then suffer as consumers in a market that offered fewer consumer goods than would be found in a free market. If these decreases in production were not offset by increased capital accumulation and operating efficiency, a real, as well as a relative, decline in production would result. In such an event, the uneconomic effects of union policies would become evident to more people than they are today. Our continued increase in both capital accumulation and business efficiency has tended to hide the losses resulting from the depredations of unions. As a result, only a few people are now able to visualize and realize that our increasing living standards could be increased still further, if popular opinion would only oppose the uneconomic actions of unions.
All members of society, who desire to enjoy the advantage of social cooperation, must be willing to pay the price for such advantages. If we want to go to the opera, we must pay the price of admission. If a man is a member of any private organization and certain dues or fees are levied on its members, he must pay them or withdraw. If a worker wants a certain job, he must meet the terms acceptable to other applicants. If an employer wants an employee to report for work at seven o”clock in the morning and the employee refuses to report for work that early, the employer should be free to seek someone else willing to do so. No prior employee should have any right to stop the employer from employing such a willing applicant in his stead. No one questions the right of workers to change their jobs, if they can find others they like better. Likewise no one should question an employer’s right to change his employees, if he can find new ones more suited to his needs or personal likes.
The same principle applies to the union shop. The right to contract is a basic part of economic freedom and private property. No laws should prohibit or limit the free right of contract unless the contemplated contract violates the equal rights of others. In a free economy, employers and employees would be permitted to sign union shop contracts. They would also be legally permitted to sign, if both parties so desired, what have been called “yellow dog” contracts (wherein employees voluntarily agree not to join a union). In order to get union shop contracts, unions would then have to offer employers something better than they could get from nonunion workers. In order to get “yellow dog” contracts, employers would have to offer more attractive terms than unions could obtain for their members. A man has no inherent right to any specific job. The fact that an employer voluntarily signs a union shop contract merely shows that, under the prevailing circumstances, he prefers to hire union help. He does not violate the rights of any person, unless such person is a party to a contrary valid employment agreement that preceded the signing of the union shop contract.
Where the union shop contract is a voluntary agreement, it is similar in principle to any other voluntary employment contract signed for the purpose of increasing production. Employers should be free to employ whatever applicants they can persuade to accept their proffered terms. If they are foolish enough to want only workers who demand higher than free-market wages, without providing higher than average output, either in quantity or quality, that is their right. However, in a free economy few employers would be that foolish. If they were, the consumers would not long allow them to remain employers in a free market. They would take their trade to those who could sell at lower prices because they paid lower wages.
No businessman voluntarily signs any contract unless he is convinced, at the time of signing, that its advantages outweigh its disadvantages. Whenever an employer signs a contract with a union, he expects that the net results will be lower business costs than if he did not sign that contract. He would not sign a union shop contract unless he thought that, all things considered, it would bring him the best workers at the lowest wages. If he did not think so, he would never voluntarily sign such a contract.
Under present laws and popular opinion, however, labor unions can call a strike and prevent men from working. Under existing circumstances, they can prevent not only the employment of their own members but also the employment of all applicants for the jobs they refuse to fill. Some of this power arises from popular acceptance “of the union picket line, but part of it arises from the strength given unions by law, wherein employers are prevented from negotiating with nonunion members or nonstrikers. The law gives the union and its members a vested right in jobs once occupied by them and curtails the right of employers to discharge workers they no longer desire. Employers are often stopped from finding other workers willing to work at terms that strikers refuse. This, of course, is a violation of the free-market principle of voluntary social cooperation.
Unions and their members frequently occupy key positions enabling them to close down an entire plant or industry by interrupting the flow of production at a vulnerable spot. They are thus able to interfere with the work of many jobs other than their own. The losses they can thus afflict on employers, fellow workers, and consumers often exceed the cost of their immediate demands. By the use of this form of coercion, they are often able to force employers to sign contracts, including union shop contracts, which they would not sign under free-market conditions where the wishes of consumers would prevail instead of the legal privileges granted unions and their members.
In a free economy, men and groups of men would have the right to compete for all jobs. They would have no right to prevent unemployed or lower paid men from competing for their jobs, particularly when they refuse to work at them themselves. As the law now operates, unions and their members are able to force some employers to pay higher than market wages. They can also force some consumers to pay higher than market prices. This reduces consumer purchases and satisfactions. In addition, unions are often able to bar applicants from employment in their industry. This forces the rejected men to compete and drive wages still lower in other jobs, or else remain unemployed. This, in turn, has resulted in a demand for so-called minimum wage laws and then a further demand for unemployment insurance for those that unions and minimum wage laws make unemployable.
Our problem is to correct popular opinion and remove from the statute books all laws that are a result of the popular fallacy that it is a “social gain” for labor unions to be granted privileges to hold up production until they can extort whatever they want from the hides of all other participants in the market. Once this is done, unions will no longer be able to compel employers to sign union shop contracts under duress or fear of uneconomic losses.
The difficulty before us can be seen by a comparison of current newspaper stories with those of thirty-five or more years ago. Today, when union strikers threaten violence, injure peaceful citizens and damage property, most governors refuse to call out the national guard or militia to protect the menaced populace and private property. Instead, they issue statements blaming both sides in the “dispute.” They seek to compel mediation. They refuse to protect nonstrikers who want to work. They thus permit small groups to terrorize the community for weeks and months on end with great losses of property and occasional loss of limbs and lives. Present-day politicians fear the power of the unions at the polls.
In 1919, when the police of Boston, Massachusetts, struck for the right to join the American Federation of Labor, things were different. Large numbers of policemen then went on a strike, hoping they could compel the city to grant them more favorable terms than they could obtain on a free market. The lives and property of Bostonians were suddenly left without police protection. Governor Calvin Coolidge immediately called out the State Guard and protected all those who desired to work as Boston policemen at the terms the city offered. The governor was warned that organized labor would oppose him at any future election and thus prevent his advancement in the political world. His laconic reply was “It does not matter.”
The important thing to note, however, is that the very next year the governor was nominated and elected as vice president of the United States. Five years later, he proved to be very popular at the polls as a candidate to succeed himself in the Presidency.
Today, there is no way of knowing whether a political candidate could be elected if he took such a stand in favor of a free market in labor management relations. Few, if any, candidates for public office will take such a stand because it is generally accepted that most people now believe that the present uneconomic actions of unions represent “social gains.” The answer does not lie in enacting into law similar “social gains” for employers whereby the states become their champions in a “class warfare” with employees championed by the national government. Transferring economic decisions, from the economic dollar democracy of the market to the political democracy of an electorate without economic understanding, would not solve any problem. It would only create a demand for more “economically insufficient and untenable” measures which would further help to revolutionize “the mode of production,” from a consumer-run economy into a socialized political dictatorship that would closely resemble the National Socialist regime of Hitler’s Germany.
The philosophy behind the agitation for the so-called right-to-work laws is the philosophy that production is a form of “class warfare” between employers and employees. It then follows that if government gives one group too much power, it must in justice give the other group sufficient counter-balancing power. Government then attempts to maintain a balance in the arena where these battles are fought. Under such conditions, competition is maintained only by bringing the most competent down to the level to which the least competent can be boosted.
The purpose of business is production for the economic satisfaction of consumers. Success and profits are measured by the ability of market suppliers to satisfy consumers. All production for market exchange, based on the advantages obtained by the division of labor, is a matter of social cooperation and not “social warfare.” Trying to equalize two groups by granting privileges now to one and now to the other is like trying to make two opera singers equal, by preventing each one from singing notes the other cannot duplicate. The only way that such equality can possibly be attained is by curtailing the satisfactions that each party can provide consumers. It is a matter of pulling down, not building up. The fact that unions have been given certain privileges destructive of social cooperation is not sufficient reason for giving other destructive privileges to employers. The net result can only be less social cooperation and a decrease in total production.
One of the great things that the agitators for “right-to-work” laws forget is that the problem is basically one of getting the government out of moral business transactions and not into them, if they now seek State laws controlling employment contracts, they are inviting State governments to participate in every employment situation. All employment agreements and their terminations will then admittedly become a function for political, rather than market, decision. It will be a further delimiting of the free-market area wherein individuals and consumers remain free to register their wishes on economic matters.
If these laws are enacted, they will tend to develop further a situation such as is now found in some states where labor-management relations are supervised by Fair Employment Practices Commissions. In those states employers no longer feel free to employ those applicants whom they consider the most capable to perform the tasks at hand. They fear the ruling of some bureaucrat and must pay strict attention to the whims and wishes of those who have full power to penalize them or injure their public relations by threat of a court suit.
The evils of much uneconomic intervention of government is apparent in the operation of the New York State FEPC law. This writer was recently told of a situation concerning a girl who belonged to a particular religious sect. She desired a position in a bank department which at that time was entirely composed of girls belonging to the same particular religious sect. The bank wanted to employ this applicant, but would not do so because it feared that some bureaucrat might rule that such employment would be evidence of bias in favor of that particular sect. The employer felt that he must employ a member of another sect, or better yet a member of a minority race, who might or might not fit into this particular job as well as the rejected applicant.
Many New York employers no longer hire people solely on the basis of their ability. Instead, they feel that their employment policies must be so conducted as to maintain the same racial and religious ratios that are found in the local population. The aptitudes and predilections of any particular group or individual must be forgotten. If they do not do so, they must waste time and energy in defending their decisions before bureaucratic commissions and in the public press.
Under “right-to-work” laws, nonunion applicants would be given a legal standing in court and the employer might well be told whom he could employ and whom he could not employ, or be found guilty of bias against trouble making nonunion members. The bureaucrats of the states would intervene more and more, telling employers how many union and nonunion members they could employ as well as whom they could or could not fire, promote, or retire. The bureaucrat would be present at every hiring, firing, and promotion. Labor-management relations might well resemble those of Hitler’s Germany where a man once hired could not be fired except for a crime against the State.
The problem is to stop the states from intervening in free-market personnel relations and not to seek such intervention. Two wrongs never make a right. The economic answer is to repeal the bad intervention and not try to counterbalance it with another bad intervention. Such moves only provide the politicians with greater power over the entire economy.
Unfortunately, many businessmen seem to think that the evils of intervention began with the New Deal. Actually, the seeds were sown far, far earlier. They were in the Interstate Commerce Act, the Sherman Anti-Trust Law, and the Act creating the Labor Department to help a politically favored group, the Income Tax Amendment, and the Federal Reserve Act and many others of pre–New Deal days. These earlier acts bore the fruit that led to the depression that started in 1929.
Each of these early laws was a government intervention which interfered with and hampered the operation of free markets. Each one granted privileges to one group at the expense of all others. They were all a burden on consumers and the general welfare. They all created vested interests that now resist the removal of these privileges. They were the original “despotic inroads on the rights of property … which appear economically insufficient and untenable.” The New Deal Acts were only the “further inroads on the old social order … unavoidable as a means of entirely revolutionizing the mode of production.”
Actually, if we stop to think of it, it is ridiculous for the government to grant counter-privileges to one group to offset the very privileges it has granted to other groups. All such privileges are a further obstruction to production and tend to reduce the satisfactions obtained from participation in the market.
The best example is probably the monopoly situation. First, the government grants monopoly privileges to certain firms or domestic industries. Then these firms or industries utilize these privileges to line their pockets at the expense of consumers. Isn’t it then ridiculous to point to the results and demand that the injured groups be granted offsetting monopolies whereby they can recoup their losses? The logical solution is to take away the original privileges which caused the trouble in the first place.
The same solution is applicable to the labor-management situation. The cause of the present economic evils in labor-management relations is the club that federal laws have furnished labor unions whereby they can bludgeon established employers with capital in the form of fixed production facilities. Such employers must continually surrender to the unions or lose the entire value of their established reputation and invested capital. They are not free to employ the unemployed or lower paid workers who might be very happy to work for them.
The unions should be stripped of this club, as most employers have been stripped of the privileges they had legally obtained during the latter part of the last century. Granting privileges to labor unions is no better or no worse than granting privileges to employers or groups of employers. A free-market society requires that government be neutral, so far as it can be, and refuse to grant special unearned privileges to any group, because, in the end, all such privileges must be paid for in the sweat of all who labor and produce the wealth that consumers seek in the marketplace.
A perfect free-market society is probably unattainable by fallible men. Nevertheless it should ever be the goal of all moral and intelligent men and particularly of those economists who try to educate and influence their fellow men. As Mises has so ably demonstrated in all his writings, “There is no other means to attain full employment, rising real wage rates and a high standard of living for the common man than private initiative and free enterprise” (Planning for Freedom, p. 17).
Every proposed measure should be weighed as to whether or not it advances the economy toward “private initiative and free enterprise.” Increased government intervention tends to direct the economy further away from a free-market society.
Many call our economy a mixed economy. Actually it is, in the terms of Mises, a “hampered market economy.” It is constantly in movement as every economy must be. It must move either toward freedom or toward statism. The better economic understanding our leaders and people have, the more likely it is that present uneconomic measures will be repealed and that the trend will be toward rising real wage rates and constantly higher living standards for all participants in the market economy. Economists should, therefore, oppose every proposed measure that moves in the other direction. So long as American popular opinion approves of present-day union shops and union activities, we are going to have them, but we shall have to pay the price in terms of lower production and lower living standards than a free economy would provide.
Everyone wants freedom, but probably no group wants it any more than employers as a group. Unfortunately, too many employers have sought special privileges in the past. Actually, it was undoubtedly some of the early government-granted privileges for some employers that produced the demand for the New and Fair Deal intervention. Most such intervention was planned to help organized “labor” and the other large groups that had suffered when employers were in the saddle and obtaining favorable intervention for themselves.
So long as political groups can grant economic privileges, there will always be attempts to buy their votes in one way or another. The political problem is to so limit government that politicians cannot grant economic privileges to any groups. We must remove the temptations to greedy men who seek to gain their wealth at the expense of others rather than through the economic principles of voluntary social cooperation.
The aim of free people should always be a government that provides equal protection for all and favors for none. Men alone, or in groups, should be permitted to choose their associates and that includes the right to choose those with whom they associate in their employment. The right to make contracts, one man with another or a group, should be unlimited so long as other men have a similar right. Employers and employees should be free to sign mutually satisfactory employment contracts for closed shops, union shops, open shops, or anti-union shops. The only limitation should be that they are signed voluntarily.
The important thing is to work for basic principles whereby peaceful persons can pursue their personal satisfactions through the cooperation inherent in a free market. The place of government in the market is that of a policeman who arrests marauders, not that of a politician who bestows favors.
If the country is flooded with “right-to-work” laws, it will only serve to temporize for a time the evils now inherent in federal labor laws. Such State laws will perhaps allay for a time the fears that many people have concerning the dire consequences we are now experiencing as a result of union activities. Actually, it might be both better economics and better expediency to let present laws go their limit, so that people might soon learn how bad they really are.
This writer now hates to admit that, as an “expert” for the House Committee on Education and Labor, he was one of the few who helped to write the first draft of the Hartley bill. This was the bill that was later amended and passed as the National Labor Management Relations Act of 1947, more popularly known as the Taft-Hartley Law. He is quick to add that he resigned from this Committee before it reported the bill in a different form to the House of Representatives. He has learned through personal experience that it does not pay to compromise either moral or economic principles for illusory short-term advantages. His 1947 political experience, as related below, substantiates his belief that even politicians, who place emphasis on winning the next election, would do well to advocate freedom ideas consistently and not seek favors for either employers or employees.
After the Republican Congressional victory in 1946, the late Senator Robert A. Taft, of Ohio, summoned this writer to his office to discuss the top position on the Senate Labor Committee which was then about to consider what later became the Taft-Hartley Law. This writer wanted as much freedom in the law as Congress would approve and was willing to make the financial sacrifice involved, if he could work toward that goal. But the senator outlined his philosophy and stated that he wanted to change the law just to the extent that it could be passed over the veto of the then Democratic president, Harry Truman. The senator sincerely believed that with a Republican presidential and Congressional victory in 1948, the law could subsequently be changed to the form in which he really desired it.
At that time, 1947, the country was thoroughly aroused against the union abuses practiced under the protection of the Wagner Act. The nation was ready for a change in its basic labor laws, but there were only a very few people who had any understanding of the specific changes that were needed to protect private initiative and free enterprise. The senator proposed that the law be ameliorated toward freedom only so far as two-thirds of the Congress would approve over a presidential veto. The senator and others thought such an expedient move would improve the immediate situation and help elect a Republican slate in the ensuing national elections.
This writer opposed this thinking on the basis that it would be better not to have any new law at that time. His contention was that a successful veto of a better law would result in a growing public pressure for the repeal of the Wagner Act and the election of the party that espoused such a move. The senator was not willing to go that far. He believed his policy was politically more realistic. It was this writer’s contention that, if the senator’s plan were successful, the public would be persuaded that the then evident economic distress flowing from union activity had been remedied and the next tide of public opinion might well be in the other direction. The senator demurred and so this writer accepted employment with the House, rather than the Senate, Committee.
The late great senator from Ohio had his wish and skillfully drafted an ameliorating measure which passed over the presidential veto. However, in the judgment of this writer, freedom and the Republican Party lost. The Republicans failed to carry on their fight to repeal the still obnoxious sections of our federal labor laws and public opinion, which once seemed against government intervention in labor-management relations, has apparently taken a turn in the opposite direction. In fact, the amendments, more recently proposed by the Republican leadership, have been in the direction desired by union leaders. In the words of their sponsors, they are “middle-of-the-road” in principle.
Somewhat the same situation is involved in the so-called right-to-work laws. If they are passed in a large number of states, they will temporarily relieve the present uneconomic evils that exist in federal labor laws. They will allay the fear among those people who see and comprehend the dire results now flowing from present union activities. The organized labor union minority can then more easily organize its forces to lobby successfully for a federal law which would at one stroke outlaw all the so-called right-to-work laws of the various states.
On occasion, this writer has watched with interest the actions of John L. Lewis, president of the United Mine Workers Union. This union leader has, more consistently than any other union leader, followed the policy of getting his members all the privileges the law permits them. He has obtained high wages for a few miners, while greatly reducing the number of jobs in coal mining. Young men, who might have become miners, are shut out and must compete for lower-paid jobs by driving those wages still lower or remain unemployed.
This is using the laws to the fullest extent. It also illustrates how economically foolish they are. A privileged few gain at the expense of the entire community and production is diverted into other lines whose products are not the ones consumers want most.
Neither labor leaders nor their members can be blamed for using privileges which the people have granted them by law. It has only been the prudent temporizing of most unions that has permitted their Marxian moves to become so generally accepted. Few people understand the underlying fallacies on which they are based. Economic education must be rescued from the political arena. The burden placed on economists, who are not dependent on political or public payrolls, is great and they have a public duty to speak out against all those who would expand political controls at the expense of a free people supported by the products of a free market.
We cannot blame those who take advantage of present uneconomic laws. These laws are wrong. The blame must fall on those who sanction them and permit them to continue on the statute books. Actually, if the unions had been less temperate in pushing their legal privileges to their ultimate and logical conclusion, they might well have lost their privileges to hamper the free market at will. It is by the very process of slow steps, each scarcely noticed, that unions have been able to persuade unsuspecting millions that the uneconomic gains of the legally privileged few are “social gains” for all.
The American public, as well as the world public, must be alerted to the dangers that flow from government economic intervention. By a process of gradualism, a politically privileged few have fastened on our economy this Marxian policy of ever-increasing “despotic inroads on the rights of property.” If the New and Fair Deals had been enacted in toto, they might well have brought the people to their senses far quicker than our continued middle-of-the-road compromising with moral and economic principles.
The so-called right-to-work laws are just that, a proposed middle-of-the-road compromise with free-market principles for expedient purposes, with the hope lurking in the back of the minds of those who advocate them, that some day everything will clear up without employers or consumers ever having to face the issue or the price of meeting it. They forget that the laws of economics are the inexorable laws of cause and effect and that unsound actions will never produce desirable results.
If men want to enjoy ever higher living standards, they must act intelligently and oppose all man-made laws that limit the application of such intelligence to economic matters. Every government intervention is an interference with actions which would grant greater satisfactions to consumers. The only way to increase human satisfactions is to remove all such brakes on increased human happiness and not place any new ones on the statute books of either state or federal governments.
Every legislative proposal should be weighed on the scales of economic understanding. Does it tip the balance toward a free economy or toward a socialist dictatorship with the politicians in control of the means of production? The so-called right-to-work laws are definitely a step in the direction toward Socialism. They limit the right of free men to negotiate contracts for morally acceptable purposes and attempt to substitute the decisions of politicians for those that consumers would like to express in the market place.
This essays originally appeared in On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises (1956) as chapter 9, “Is Further Intervention a Cure for Prior Intervention?”
