Making Sense: The ‘Puzzling’ Erosion of Unions

Paul Solman answers questions from NewsHour viewers and web users on business and economic news most days on his Making Sen$e page. Here’s Thursday’s query:

Name: Richard R.  Palmer, MD

Question: Thank you for picking up on my nudge about the Triangle Shirtwaist Fire. I would like to get your perspective on the puzzling erosion of the linked union movement and the American middle class. My own view is that the period 1946-1972 was a golden age of balance of capital and labor under the influence of the unions, the Wagner Act, a sympathetic Supreme Court responding to a reliable post-New Deal consensus. It seems to me that there was a golden goose in this balance, and it has puzzled me that on the one hand workers could be weaned away from collective action, and on the other hand business could lose sight of the utility of the Henry Ford principle that having workers with good income made for good markets.  

Why would the trend toward 300 billionaires and 300 million paupers make sense to owners?  Do they — and their Tory agents in Congress and now the Federal judiciary — really figure that if the world-wide income level is leveled to China’s that there will be markets for all those toys?  Is there a theory that clarifies this? 

Paul Solman: Now let’s not go overboard. America is not a country of “300 million paupers” and isn’t about to become one anytime soon.

That correction disposed of, I too wonder at the time horizon of anti-union businessmen. But remember the fallacy of composition, so common to competition: the interest of any individual player isn’t the same as the interest of the whole. In fact, one of our favorite living economists, Robert H. Frank of Cornell, is about to publish in October a book that explores this very theme in depth: The Darwin Economy: Liberty, Competition, and the Common Good. Or there’s Jared Diamond’s account of Easter Island and its ecological demise 

Two final points: from the perspective of an owner or manager, unions can be a huge pain in the neck. And it’s not as if their record is entirely unblemished, either.

Photo: Rally in support of Wisconsin public unions at the state capital in February, 2011. By flickr user Dimmerswitch.

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