My apologies to Paulie the Pollock, with whom I once argued against unions from 3am to 6am on a cold April morning while fork lifting. You were right. I was wrong. You were a helluva forklift driver by the way.

I am now pro-union.

Yes, I understand and agree with the Austrian position that the end result of unionization is higher unemployment and a higher cost of goods across an economy. But as with many of the Austrian positions, there is an immediate benefit to the group that initiates an economic intervention. A union can improve the working conditions, wages, and benefits of its members. It is the non-union worker, or the unemployed man who would have been hired in that industry at the lower non-union wage, who is negatively affected. Such are the unintended, and often un-attributed, consequences of economic intervention.*

The Austrians make a similar argument of unintended consequences in regards to currency devaluation. In fact one might think of unionization as a bottom-up intervention and inflation as a top-down intervention. Currency inflation effects those in banking and the wealthy less than it does the working class. That is to say, as those standing nearest the cash registers and making commission from an expanding supply of money and credit, the banker's wages will rise first with an inflation. The income of the upper classes will also rise, as the managements of publicly held companies are compensated for the performance of the company’s stock, equity markets being highly correlated to inflation. Their ownership of homes and equity portfolios will also provide them protection.

The last to see his wages rise will be the low paid worker. If he owns no home or stock or precious metal he will have seen his savings eroded by the inflation. Even without a savings he will have seen prices rise in food, energy, clothing, and rent all before his wages have risen. Being furthest from the banking centers from which the inflation originates, the low-paid worker is damaged the most. At minimum a union is necessary to protect a worker’s real purchasing power by tying wage increases to an inflation metric.

But there is a more essential argument for unionization and that is for the workers to unionize and get their share of the company before it is slowly gutted by the Harvard trained, leisure-class managers. The brave entrepreneurs who created companies such as the Home Depot have all moved on. These were the risk-takers and innovators, who thought up new ways of marketing, sales and production. In their place is a crew of MBA men and women who make cost-cutting and efficiency decisions from the top. Alongside them are highly trained accountants, busy at work making adjustments to the balance sheet to best produce the illusion of growing profitability, working to manipulate the stock price higher and bonus themselves and their managers.

But these MBA men and women are economically unproductive. They create nothing new. They have none of the ingenuity and courage of the original entrepreneur and engineer. They are spreadsheet trained and bonus driven. What they call better efficiency and profit is no more than a further cost or sacrifice born by the company’s workers.

The Home Depot, like Walmart, is “proudly non-union”. I watched as they tried to run Old Marvin out. They had it out for Patrick and Dan who were experts in the electrical and plumbing departments. They had it out for Roy too. They had it out for all of the longest tenured workers with wages that had risen over the years, or had been hired at an earlier time for a higher wage (Home Depot jobs were at one time well paid). They were all being fired and replaced by new crop of minimum wage workers. How is this not corrupting and destroying a company? How is this economically productive?

There appears to me to be a company lifecycle where with luck and hard work and sometimes genius a business is engineered and grown. When its growth has peaked its creators move on, giving it over to the Harvard men and women who then slowly begin its destruction, slowly stripping it of its value for their own personal benefit (and the shareholders). Why shouldn’t the workers unionize to take their piece? Why shouldn’t they defend themselves against the sacrifices being forced upon them by management--by a management enriching itself as a result of those sacrifices? Unions are unproductive, but equally so are the leisure class managers. It is as though two parasites were fighting over a decaying corpse. What was economically productive and lively departed with the entrepreneur.**

As I argued above, inflation has less effect upon the wealthy class than the worker. At the Home Depot the average raise among those who received them was $0.10, clearly less than the Fed’s traditional 2% target inflation. The Fed is simply another group of MBA (and PhD) men and women trained in spreadsheets and management efficiencies. Like the wastefulness and corruption the managers reap upon a company, the Fed reaps a similar corruption upon the economy. In both cases it is the poorest who bear the dearest cost. A union is their only defense.


* There is also the Austrian argument that union intervention weakens and destroys a company and is thus counterproductive for its members. My view is nuanced on this point, as you will see below.

** The successful entrepreneurs make up a tiny fraction of the population yet their ingenuity and daring is what drives an economy, is what is productive. The unions and managers (and government) then parasitically fight over what was created. As in all things, only creators matter.

1 comment:

  1. http://www.youtube.com/watch?v=ZKkfvJP9KSA


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