If you have studied economics, you know the work of Kenneth Arrow, for his work in growth theory, information economics, and social choice. You also know the work of Robert Solow, one of the architects of Neo-Keynesian economics. Bloggers know J. Bradford DeLong for his willingness to "grasp reality with both hands."
Recently Dean Baker has become one of those people who becomes an overnight sensation because of decades of hard work for his cogent attacks at the pieties of finance worship that have led us to this particular crisis. Alan Blinder, who has mixed successful work on macro-economic theory with public policy innovations has been a beacon of the pragmatic search for economic justice.
Jeffrey Sachs has gained a rock star aura for pointing out the simple reality that the worst poverty is allowed by the pernicious choice of inaction. Lester Thurow has been an advocate for making difficult choices, to restore long term growth in works stretching back before anyone knew what the internet was, or had seen a fax machine. Peter Temin is known for his landmark study on macro-economic policy and the Great Depression. I think a copy of Robert J. Gordon’s macro-text has passed through the hands of virtually every economics student in the last 20 years.
What is amazing about the list of supporters that Larry Mishel has managed to gather in support of the Employee Free Choice Act is that there is not one filler name in the group, each and every signer is a member of the economics profession of distinction.
So what is the economic case for the EFCA? The first part of the case is simple: capital can organize. That’s what a corporation is, a legally protected way for capital to organize. For a market to function, the participants have to have roughly equal power: that means that because we need concentrations of capital to run a modern society, we must also have concentrations of labor, and that means that labor must be able to organize to bargain fairly. In far too many places, a few companies have a monopoly on the good jobs, and can therefore pay less than the work is worth.
The second part is that there has to be a linkage between productivity, and wages. If not, then eventually consumers burn through savings, burn through credit, and collapse in a heap. As they are doing now. Finally the economic case for unionization is that a better work force can do better work. America’s period of most rapid economic growth, was also the period of growth of unions. If the profits of work fall behind the profits of speculation, soon work will be seen as something that fools do.
So what about the argument that unions make companies "less competitive?" It’s only true if de-unionized companies are allowed to act as a free rider for services and innovations that unionized labor forces create. It isn’t that unions are less competitive, it is that de-unionized companies steal from the common good. This was the motivating purpose behind the original National Labor Relations Act: so that a few factories paying poor wages did not drive down wages for all. And without buying power for all, inequality festers, and people cannot afford to buy the very things the society can afford to make.
EFCA is not a broad change, it is a small re-balancing of the scales. It is not a cure all, nor a revolution. It is more like COBRA, or like the Americans with Disabilities Act, or the recently passed S-CHIPS. It is not the perfect, but it is an essential step, that can be taken now, one that does not preclude others to be taken later. Employers have rights, you can make yourself crazy thinking of all the rights employers have, it is time to make sure that employees have a way of protecting theirs.
It’s something so obvious, even an economist can see it.
Related posts:
- Who are Union Members? New Study Shows “The Changing Face of Labor”
- Exclusive: New Poll Shows Clear Majorities Distrust Big Corporations, Favor Unions
- Name FDL’s Newest Blog about Labor, Workers, and Unions
- “Feinstein Bailing on EFCA” or “Reporter Punk’d By Chamber of Commerce”?
- Welcome to Work in Progress
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A zed on my first try…?
*g*
By a hair, CTuttle. By a hair!
Not bad for just logging on in eons tho… Eh? ;-)
EFCA is one small step in redressing 30 years of conservative and business efforts to gut unions and diminish the rights of workers.
“that de-unionized companies steal from the common good”
Need to drive that point home in the right-to-work states…
And redefine “free trade” to “fair trade”
EFCA is one small step in redressing 30 years of conservative and business
effortssuccesses to gut unions and diminish the rights of workers.Fixed.
Righto. So how can there be a sustainable recovery, since, after the stim, workers will still be too poor to keep consumer spending going.
One thing that we all can agree on is that just as we would not want an election that is free, but unfair, we cannot have trade that is free, but unfair.
Time was when the capital markets served a useful function. There are two primary components to economic activity in our system. Capital and labor. As our greatest president famously said, ‘Of the two, labor is superior because all capital was at some point generated by someone’s labor’. In other words, if you are to apply the chicken or egg question to this issue, labor clearly comes first. And is therefore superior.
Now, one may be willing to be gracious. One may be willing to accept the notion of an equivalence. Both components being necessary for economic activity in our modern world.
But what has happened in this country over the past forty years, is a systematic tilting of the political system, the laws, the rules of the game and even the popular culture to favor capital over labor. The propaganda has been so pervasive and incessant that we don’t even notice it. The message broadcast 24/7 in a multitude of ways is that work is for suckers. The way you get ahead in America is through ‘investment’. We have devalued labor to the point where wages can stagnate for a generation and people just accept it. What do you expect if you are stupid enough to just work for a living?
One of the ways that we discourage certain behavior and encourage other behavior is with the tax code. We consider smoking tobacco to be a dangerous vice. So, we tax the hell out of cigarettes. Look at our tax code. We tax income from work, even with our so called progressive income tax system, at a significantly higher rate than we tax income from ‘investment’. Because work is for losers. “Investment” is how smart people make their money.
When this mentality takes hold, it is a short trip to con man heaven. Because the line between ‘investing’ and gambling is non existent. When everyone is scrambling for some way to increase their ‘rate of return on investment’ you have created an environment where anything goes. It is all about ‘playing the angles’.
We have created an environment where a mechanism for raising capital (Wall Street and Investment Banking) has become the tail that wags the dog. The only function that Wall Street fullfils is to raise operating capital for businesses. They don’t know jack shit about running businesses. They don’t know jack shit about managing people. It turns out they don’t even know jack shit about raising capital in a responsible manner. Yet we have essentially given them the power to determine fundamental business policy and strategy for the entire nation.
These parasites have puffed themselves up, convinced that it is due to their heroic efforts that the capital, the life-blood of the system is generated to the benefit of all. When it is a self serving fatuous argument. They place themselves at the center of the universe and construct a toll booth. Funny how money always seems to stick to the people entrusted with the job of managing it. These people are essentially bookies in pinstripes. Running numbers and pegging ponies. And they have come within an eyelash of destroying the country and perhaps the global economy.
The recognition by FDR’s government during the New Deal that workers had to have a means of exerting countervailing power against capital was one of the strongest insights I got out of the au courant history refresher book, the one by Rauchway.
It’s good to see such a prominent list of economists supporting a reversal of this long slog of reaction to those earlier laws and initiatives. (And I heartily recommend that book —it’s short but packed with information.)
Every group of workers should be able to decide to join a union if they want to without management looking over their shoulders all the way to the ballot box. This is what has happened for the last forty years! I told an anti-union friend that he earned the rate of pay he did just because Unions drove up the pay scales by negotiating with management.. He couldn’t refute it.. he sat there dumbfounded as the Truth of that statement hit home!
Always appreciate a strong recommend, even when it’s already high on my wish list.
When I went over to Amazon to find a link for the Rauchway book I ran up on one that I’ve never got around to, by Peter Temin. Some day soon …
it would seem to me that higher wages work in a similar manner to credit. It gives people money to spend and that fuels industry and that demand creates jobs and so on. The difference of course is that credit is like an anchor which allows non productive entities – banks to extract wealth and not impact on productivity or the standard of living since servicing debt eventually overcomes the consumer/worker.
High wages is the way to for bulking up the economy. The capitalist only looks at extracting profit and so they will do anything to lower costs of production even ending it!
Thank you SWEG
Yes yes yes and yes… did I say yes?
So much of the economic theory has focused on capital that we’ve lost sight of the fact that no matter how much capital you have, no matter how good your factories, if you don’t have skilled workers, the ‘capital’ doesn’t actually have all that much value.
What I saw 20+ years ago was a system of unions that appeared to make the workforce rigidly resistant to change. I sympathized with the pleas of management to have more ability to redesign jobs, or work situations.
What I didn’t recognize was how important unions — and a social safety net — are to long term, stable productivity. That means the unions need to take a larger role in promotion and also in disciplinary actions (when needed, and they don’t necessarily have to be punitive).
In other words, the feedback systems within unions seemed non-existent.
Now, the ‘capital’ feedback loops are designed to be deceptive and as a result, they are fundamentally destabilizing to the larger economy.
Not sure what the solution is, but clearly more protection for workers has to be a first step, and your highlighted topic looks like a good step. The sooner, the better.
You are quite welcome Joel. And as an aside, I’m not qualified to judge who the greatest president was. I leave that to the historians who recently chose Lincoln.
There isn’t an economist alive that has a clue all their learning theories and advise that has led the Country Markets and yes the people have proved them to be wrong. Now when we need people to truely tell us how to fix the economy they spout their Bull but have no real answers. They still get people to listen to them even like our new President so things will undoubtably get worse. The best solution to the economiste is for somebody to smak them in the mouth with a baseball bat. It may seem a little harsh but is the only way to shut them up. Listening to them is the worst thing anyone can do.
“So what is the economic case for the EFCA? The first part of the case is simple: capital can organize.” That’s so true and so obvious but a point that needs to made constantly since most people forget that capital is organized around essentially metaphysical entities called corporations that have more rights than real human beings and have perpetual existence. In casual speech, we tend to attribute the qualities of wealthy individuals with corporations and vice versa even though they are legally separate.
I agree with the comment but I think the real economic case for unions is that human beings actually do get better treatment in a capitalistic society which must deal with them, as a matter of empirical fact (apart from the value judgment whether a society of unionized Swedes or Americans who have decent health insurance, a living wage and a pension for a decent retirement is better off than a tribe of New Guinea aboriginals. In the most unionized countries like Sweden, Norway, and Denmark, the “social contract” is negotiated between management and labor without the unreliable political intermediaries and look what they’ve got.
Profound!
The effective functioning of our economic system requires a compact between labor and capital. It is a consumer based economy and most of the people in the economy make their living by working, by laboring, not by investments or capital. Therefore, growth in the economy which is generated by increased productivity of the workforce results in increased profits which need to be equitably shared between shareholders and employees. Because those employees are in a broad sense the nation’s consumers upon whom the entire economy depends.
With the rise of radical Republicanism in 1980 populist political impulses where channeled into anti-government sentiment resulting in a drive for deregulation and lower taxes. Anti-labor policies were enacted. The fundamental compact between labor and capital was destroyed. Labor was considered to be nothing more than a parasitic business expense. Everything was done to reduce the cost of labor.
But the paradox remained. How can you encourage the consumer economy to continually increase spending, while starving wages, the source of that spending? The answer from the financial ‘industry’ was credit. Instead of giving workers a share of increased profits generated from increased productivity, they would make cheap easy credit available to them. And how can you extend hundreds of thousands of dollars of credit to people who’s incomes simply don’t warrant it? Collateral. And the only real collateral the vast majority of people had was their homes. So, you get your corrupt appraisal houses who are in your employ to begin the process of pumping up the artificial value of their shitbox houses. Soon, on paper, the fifty thousand dollar piece of crap house was worth two hundred thousand dollars. Now, this person could refinance and continue to buy all sorts of consumer stuff. Enough to keep the profits flowing. Without any wage increases. Why it was capitalist heaven wasn’t it?
If we are serious about fixing this mess, just pumping money into the banks is not enough. Just pumping money into the economy and creating jobs is not enough. We need to restore the fundamental compact between capital and labor so that in the future, labor has the political power to insist on its fair share of the profits generated from increased productivity. This needs to be the engine of growth in this country. Not credit. Unless we do this, any attempts to fix this mess are simply going to create more debt and a bigger mess at the other end of the tunnel.