Unions, the rule of law, and political rent seeking.

• Author: Thieblot, Armand
• Position: Report

Under the Obama administration, the influence and involvement of trade unions in government policy decisions has surged to unprecedented levels. Some of the more egregious examples include the proposed Employee Free Choice Act, which abolishes the secret ballot among workers deciding on union representation and imposes forced interest arbitration of contract disputes; the selective protection of union healthcare benefits from proposed "reform" legislation; the awarding of assets seized from major automotive companies to the United Automobile Workers; and the involvement of union personnel, especially members of the Service Employees International Union, in electioneering efforts mad counter-demonstrations on behalf of the Democratic party. That all of this has occurred within less than a year is especially troublesome. What makes it more so is the well-established pattern, on the part of unions, to disregard and disrespect the rule of law.

Unions disrespect the rule of law in two principal ways, one more obvious than the other. First, in the past and still today, they violate it by disobeying or ignoring whatever it happens to be in its contemporaneous guise, whether common law injunctions, tort law prohibitions, Taft-Hartley unfair labor practices, or Landrum-Griffin reporting requirements. They do this as economic rent seekers--hoping to secure for themselves and their members rewards greater than the value society accords them in a free market. Second, they dishonor the very principles of the rule of law by engaging in a corrupt, symbiotic relationship with lawmakers. They do this as political rent seekers hoping to secure rewards of their own choosing, independent of economic or market restraint.

The first section of this article covers the relationship between unions, the rule of law, and economic rents from the origin of the union movement through the changing patterns of the three phases of its growth cycle as measured by membership. Each phase is about 40 years long, although there are no sharp edges or defining moments to mark transitions. The first phase, development, lasted from about the end of the 19th century through the New Deal and to the beginning of World War II. During this time period, union membership rose from about 15 percent of the manual, nonfarm workforce to around 40 percent by 1940. Unions began the period striving to neutralize the economic rents of other factors of production, especially those of capitalists--a class including not only financiers, but also industrialists, merchants, businessmen, ship owners, rich people in general, and large-scale employers in particular who were assumed to possess it in excess. By the end of the period, with considerable help from government, unions had not only succeeded, they had acquired substantial economic rents of their own.

The following phase, maturity, lasted for roughly the next 40 years, until about the beginning of the 1980s. Union membership rose to something over 60 percent at its peak. During this period, still with massive government help, unions perfected extracting rents from their economic opponents--succeeding to the point that in some cases the rents of others became negative, causing them to withdraw from the system and thereby reducing the opportunities for unions in turn. During the period of the ensuing third phase, decline, that started about 1980 and still persists, union membership fell back to pre-1918 levels, except in the public sector. In their decline, unions have begun to morph into well-financed institutions seeking a different kind of economic rent, one whose source is not another factor of production but the polity as a whole. There may be another phase in the making.

The second section discusses this more recent, self-substituting union movement that grew from the change in union orientation away from private industries mad away from dependency on traditional organizing and financing measures towards a unionism wholly interrelated with government and polities. When Samuel Gompers, then head of the American Federation of Labor, was asked in the early 1920s what unions wanted, he famously replied, "'More." At the time, everyone correctly understood that unions' targets were the capitalists from whom additional wages and benefits would be wrested by force, and also that if unions were successful, capitalists would have to be content with "Less," thus, just a transfer of economic rents within the system from one factor to another.

By the 1980s and 1990s, however, when unorganized capitalists had become thin on the ground and those already organized had mostly been rendered uncompetitive by past concession to union demands, unions' new guiding trope became "More government." To achieve it, unions became mordantly political. In economic terms, after unions had absorbed all of the readily available economic rents from their capitalist opponents, they have turned to seeking rents from new sources beyond the system from the polity at large (from taxpayers), using government as the intermediary. For want of a better term, I call this political rent seeking. It should be of general concern that, not being bridled by most of the competitive restraints posited by Gordon Tullock (1967) in his classic exposition of rent seeking, unions engaging in political rent seeking may be nearing the point of dominance over the auction of government rents to the point that they can, or may soon be able to, write their own labor laws, and thus their own rewards, free from any normal economic or competitive restraints. This should be of general concern.

Unions from Their Origin through the Period of Membership Growth: The Creation of Labor Law (1741-c. 1900-c. 1940)

Unions and unionism existed in the United States well before 1900, and the early period was not without its labor drama. The first recognized labor dispute occurred in 1741 when the journeymen bakers of New York struck for higher wages and were promptly tried for conspiracy. As summarized by Morgan Reynolds (2009), standard union tactics developed very early: "By 1810, union tactics were fully formed: bargain 'collectively,' demand fixed minimum pay rates, enforce dosed shops, stage strikes with picket lines, scab lists, strike funds, and traveling cards, and promote ... solidarity." Their primary goal, after collective organization, was "more," and they wanted employers and business owners to give it to them: more wages, more control of jobs, more of a voice in how firms were run.

Even before 1800, labor organizations had formed in the big cities, and the shoemakers of Philadelphia had already conducted strikes in 1796, 1798, and 1799. These were illegal activities under the common-law protections of private property rights. Their activities were sometimes suppressed, but mostly by dint of the threat of enforcement action rather than the fact of it unless ordinary tort laws restricting violence, sabotage, and coercive intimidation were massively violated. Thus, when unions took to the streets in the first great labor dispute that might be called national, the railway strike of 1877, and engaged both in an illegal conspiracy that stopped intercity traffic and in serious rioting and destruction of property, state troops armed with Gaffing guns were called out, and 26 men died in the ensuing gun battles. The strike eventually failed, but union leaders were not prosecuted for having called the strike or participated in it, only those individuals caught red-handed were prosecuted. Law enforcement by either police or judicial action was powerless to prevent recurrence of labor actions or violence within them. A pattern was being set.

The 1877 railway strike was only one of approximately 1,400 that the Bureau of Labor Statistics later identified as having occurred up until then. During next quarter century, until 1905, unionists engaged in 36,757 more strikes, directly affecting 181,407 establishments and costing close to $500 million ha lost wages. In both the 1894 Pullman strike and the 1902 anthracite coal strike, some 660,000 strikers threw themselves out of work and at the very least interfered with their companies' fights to operate their private property as they saw fit. At the Carnegie Steel (Homestead) lockout in 1892, entrenched workers fired on Pinkerton detectives hired to protect strikebreaking replacements, attempted to sink the barges they arrived on with cannon fire, and poured oil into the fiver and set it on fire before the Pinkertons surrendered.

There was violence on both sides, of course, and posturing and proselytizing ha terms one might find not much different today. According to one contemporary anti-union view, "Organized labor knows but one law, and this is the law of physical force--the law of the Huns and Vandals, the law of the savage. All its purposes are accomplished either by actual force of by the threat of force" (Carlton 1920: 174). On the union side, protagonists argued that "the violence occurring during a strike is often exaggerated; and much violence is due to outsiders or to the unauthorized acts of irrepressible members of the union." Or again, "The typical strike is waged in an atmosphere so surcharged with menace, that wide-spread intimidation and sporadic acts of violence are precipitated as inevitably as the atmosphere of the earth precipitates dew" (p. 174). Finally, "The intense hatred manifested towards the strike breaker or 'scab' is a cause of much violence during the course of a strike" (p. 175). There was no mystery that what occasioned the violence was the seizure or protection of the economic rents that were assumed to exist and to lie with capital. (1) Then as now, the only disagreement was over the justness of the laws that the holders of economic rents used to defend them against acquisitive aggressors.

The law and the judicial system of the period favored employers and industrialists, especially after the...