Unions are a vital part of American capitalism. Conservatives today see them as an enemy, but unions historically have strengthened capitalism by providing a way for workers to participate in the system.
In the early days of industrialization, factory owners exploited the workers. Wages were low, hours were long, and working conditions were unsafe. The free market system enforced this exploitation. If one factory offered higher wages, they would lose business to a lower-priced competitor. It was a “race to the bottom,” with no protection for the workers.
The Marxist solution was for workers to take over the factories. This idea turned out to be a failure, and Russian workers soon ended up worse off than before. The “workers” that took over were just as ruthless as the old bosses, and less competent.
Marx thought that capitalism itself was to blame. He can be forgiven, based on what he saw in the late nineteenth century. It was not a glorious period in the development of capitalism.
In America, workers were able to effect change within the system. They formed unions and demanded their rights through collective action. Without unions, capitalism in America might have suffered the same fate as in Russia. Indeed, many union organizers were Marxists. The triumph of American capitalism was in achieving a balance between the needs of factory workers and owners.
Rather than collectivize the whole economy, as Marx advocated, unions are a little bit of collectivism within our free market system. They allow the workers to protect themselves instead of demanding, say, wages fixed by the government.
One of the principal functions of the National Labor Relations Board (NLRB) is to determine, through secret-ballot elections, the free choice of employees regarding whether or not they wish to be represented by a union in dealing with their employers, and if they do wish to be, by which union.
Today, all managers know that good business depends on good labor relations. Even where there is no union, there are practical reasons to keep workers happy. The German economy is a wonderful example of labor and management working together, and competing successfully against foreign companies.
Policy makers wishing to protect our capitalist system (Republicans) often assume this means protecting “management.” That’s not always true. Labor and management must work together. The role of public policy is to keep the playing field level. Just as government must not choose winners and losers among companies, it must not upset the balance between labor and management.
Democrats make the same mistake. They assume that protecting the workers means protecting the unions. In the construction industry, unions are entrenched and block entry to new workers. This is a case where the union may be good for its members, but not workers in general.
Union power can become unbalanced in various ways, including – too weak, too strong, two-tier unions, and public sector unions.
In the case of General Motors, the UAW became too strong and killed the golden goose. The company went bankrupt because management made concessions they could not afford. In other industries, like food processing, unions are weak and working conditions are dangerous. The food industry also takes advantage of illegal immigrants.
To address the problem of too-costly concessions, the UAW and other unions have adopted a “two tier” approach. In a two-tier union, older members enjoy the benefit of certain concessions not shared with new members. If these second-tier members conclude that the union does not represent their interests, they may split and form a new union. Here again, what’s good for the union is not always what’s good for the worker.
Finally, we have public sector unions, which represent people in government jobs. This situation presents a moral hazard because the “managers” are elected officials and the “owners” are taxpayers. Many state governments have gotten into dire financial trouble as a result.
Various agencies, such as the NLRB, EEOC, OLMS and OSHA, are charged with protecting American workers and maintaining a balance of power with management. As these agencies become politicized, and overstep their legal mandate – then American capitalism will suffer, and the workers will suffer, too.