From the Freeman, 1973
Another economic fallacy has been effectively refuted by the scholarly analysis of W.H. Hutt in his most recent book. The false belief that unions exercising the threat of strikes upon employers improve the welfare of labor is analyzed thoroughly and the conclusion is obvious.The effect of wage rates determined under labor union pressure is to distort society’s production structure while it causes no redistribution whatsoever in favor of the poorer classes as such — the system has all along been reducing the flow of real wages and the average of real wage rates.
While the book primarily concerns itself with the economic consequences of the strike-threat in our labor market, it presents an equally devastating argument for the superiority of the free market in the determination of the wage rates of labor.
The book shows
that what we call “the market” provides the only conceivable means of achieving either orderliness and the elimination of coercive action in the process of human cooperation, or results which are regarded intuitively as “just” by the overwhelming consensus among free peoples.
At first this may all seem to be simply a restatement of free market arguments. However, Hutt’s thesis does not concede the “right to strike,” a matter on which most free market proponents are willing to yield. Hutt argues,
To forbid strikes and boycotts would not be to restrain any basic human right. Every person would remain free to refuse to sell his assets, his products, and his services, when the refusal is not a breach of contract. That is, a person would retain his unrestrained right to prefer (a) to be employed by another, (b) to work on his own account, or (c) to enjoy leisure instead of pecuniary remuneration. But this right cannot be appealed to as justification for the concerted or the simultaneous refusal of a group of persons to continue to work in an industry, in a firm, or in a key position in an industry or firm.
The Hutt argument against the mass withdrawal of all workers is convincing. However, while he clearly demonstrates that such action can result only in a loss of welfare to the members of society, the dilemma arises in matters of implementation. Any “antistrike” laws would be contrary to the tenets of the free market philosophy unless a clear breach of contract can be demonstrated.
In refuting John Stuart Mill’s argument about the futility of striking, Hutt argues that strikes often do pay. But they “pay,” I would argue, because laws protecting property are not enforced. The growth of the strike-threat system has come about because laws favoring unions have been implemented, and laws protecting persons and property have not been enforced.
The strike-threat is clearly the product of a collectivist mentality and in all probability would be nonexistent in an ideal free society. However, if individuals wish to pursue an action detrimental to their welfare (the concerted or the simultaneous refusal of a group of persons to continue to work in an industry), their freedom in pursuing such folly must be defended. Professor Hutt argues otherwise, and after a thorough reading of The Strike-Threat System, the reader should draw his own conclusions.
The analyses of labor’s past and labor’s share are extensively dealt with by Hutt. He lays to rest the popular notion that unions were once beneficial, showing that unions have always inflicted injustices and disrupted production. His chapters on the impact of unions on the total labor market are invaluable to the critic of union history.One thing for certain, this book most certainly will become a classic for students of the free market philosophy examining the labor market. At long last a satisfactory volume exists for teaching the free market theory of labor economics. We all owe Professor Hutt our gratitude for filling this void in economic literature.
This review originally appeared in the Freeman, Vol. 23, no. 12, 1973, pp. 758–760.
