Unions in the New Economy

Note – Elyzabethe is on vacation for the next few days and will be spending that time sipping 40s out of brown paper bags and sitting on various porches in Ohio. What else is there to do in Ohio?

Last week Professor of Law and Economics at the University of Pennsylvania Law School published an essay about the rise and fall of unions in the Think Tank Town portion of the WaPo online. In short, he observes that unions were a creature of the “corporatist-regulated” economy and were declining precisely because we are moving away from that type of economy and towards more unregulated markets.

Unions still bargain for a fair wage, but antitrust or industrial regulation no longer provides for above-competitive prices to pay those above-market wages. The unraveling of the coherent corporatist theory, a theory combining corporate, labor and antitrust elements, leaves unions alone. Unions are a corporatist institution; they do not prosper in a competitive economy. If my analysis is correct, then no change in labor law or labor market policies, absent changes in overall industrial policy, will allow unions to become the mass movement they were in 1945.

One of the weak points of the essay, in my opinion, is the rather passive construction of Wachter’s analysis. He does point out that without government intervention, most specifically the National Labor Relations Act, unions would not have flourished as they did. But rather than point to a number of agents which precipitated a change away from unions, he rather lamely suggests that people simply decided that free competition in the marketplace was best for society and an incidental element of that change resulted in the decline of unions.

As Eric Nilsson points out at the Heterodox Economist, an “agentless” process did not undermine unions. “U.S. businesses did.” I agree with Nilsson that the effect of this passive construction of Wachter’s argument implies that the whole process was inevitable and even desirable.

Wachter’s overall point that unions may not ever rise to the level of prominence as they once did might be true. But there are huge historical and political forces being glossed over here.

Perhaps the single most powerful political force in U.S. politics from the 1940s through the next four decades was anti-communism. And the push against communism cannot be understood without the context of the Great Depression and World War II.

Without progressive labor laws, entitlement programs, and the ensuing creation of the middle class, we would never have made it out of the Great Depression. Without large corporations, it would be have been insanely difficult to mobilize a war economy to fight World War II. These two factors working together created a huge middle class and entitlement programs which have had the effect of tempering the boom and busts of the normal economic cycle.

After the memory of the Great Depression began to fade and after the war was over, anti-communism began to seep into the public consciousness. The Soviet Union became the Other, the bad guys, the barbarians at the gate trying to infiltrate our way of life. All of our public policies slowly began to be seen in that light. Which opened the door for big business to fight back against the unions and label them as bad for America because of the theory of unions was antithetical to the American way of life.

To say that people simply saw the wisdom in unregulated markets is to make it sound like we all got together, weighed the theoretical models and chose one. The choice of unregulated markets cannot be divorced from the anti-communism that affected everything in our national discourse for at least forty years.