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Unions Are Capitalism’s Rheumatic Fever

November 18, 2012

For every action there is an equal and opposite reaction, so says Issac Newton’s third law of motion. The same principle applies to social systems and physiological systems. People wonder how Germans could have embraced Nazism, but we in the Anglophonic world forget that in the 1930s Bolshevism’s ability to deliver death on an industrial scale had frightened the wits out of the property-owning classes. The eye-witness accounts of mass murder over 15 years were familiar to everyone in continental Europe, so people “held their noses” and voted  for a man who professed pathological hatred for Bolshevism. After all, the Nazis couldn’t be worse than the Bolsheviks, who had an unquenchable bloodlust, could they? Similarly, rheumatic fever is the body’s autoimmune response to Streptococcus pyogenes and leads to polyarthritis, heart failure and St Vitus’ dance. Suffers usually take long courses of antibiotics to avoid another bout of heart failure, which can be fatal.

In a story from the US (via Creative Minority Report), labour/labor unions have managed to get 18,500 workers fired from the iconic (to Americans) baker, Hostess. In addition, there will be collateral damage to Hostess’s suppliers and service providers etc. It reminds me of The Strawbs’ song that was in the charts in the 70s, “Part of the Union” which had the memorable line, “With a hell of a shout, it’s out brothers out, and the rise of the factory’s fall”. That song was supposed to be satirical, although at the time it was taken as a paean to trade unionism.

The UK doesn’t have much by way of private sector trade unionism, because the private sector unions destroyed many of their employers in the 70s, with their short-sighted demands for increased wages and benefits without a commensurate rise in productivity to fund them. The big unions now reside in the public sector, protecting the selfless angels who work for free, “providing the country’s vital services”. For example, employees of the National Health Service, the nearly comprehensive (93%) school system and the army of clerks and bureaucrats who administer Gordon Brown’s welfare labyrinth, all work for practically nothing. Er, I mean their salaries and pensions exceed those of the private sector and they have a fraction of the job risk that the private sector faces. Of course, like Greece’s bureaucrats and the workers of Hostess, they are in for a rude awakening one day soon when the productive sector collapses under the weight of the public sector’s contradictions.

How did the unions get to be this stupid? The answer is obvious – capitalism compelled labour to optimize on an ever-shorter time horizon. As per a previous post, socialism is the prerogative of those without the ability to defer gratification, and if you are compelled to sell your labour for the price of subsistence between pay packets, then a Pareto-efficient response is to seek short-term optimization of your own benefits and damn the consequences. Nec spe, nec metu indeed.

Unlike modern economic systems, pace Adam Smith, that do not distinguish between the three factors of production, i.e. labour, land and capital, the Church has always maintained that labour is the primary efficient cause (Laborem exercens) and that the wealth of nations originates from the labor of workers (Quadragesimo anno). And since wealth is the product of labour, labour is entitled to keep its fair share. Which means not being gouged either by capitalists, land owners or by the government, through immorally high taxes. And also, by our economic system’s greatest menace, the hidden-in-plain-sight debt-based money cartel.

It is hardly surprising that a lethal combination of debt-based money plus capitalism led to the pathology known as trade unionism. It’s an act of grace that we haven’t had war in the West yet (but Greece shows us the future). Although, we have managed to indebt the rest of the world by way of getting us out from under our debt burden, temporarily. Problem is, unless Martians land soon and take out a $100 trillion dollar loan, or someone invents nuclear fusion enabling the marginal price of energy to drop to zero, we are going to be pressed to death, like St Margaret Clitherow, by the bankers.

The popes have emphatically rejected socialism, kicking it out the door in all their economic encyclicals. But, it then crawled back in through the u-bend in many of their prescriptions to address the pathologies of capitalism. First and foremost is the frequent demands for a just wage, the value of which has suffered from inflationary demands since Rerum novarum. In John Paul II’s conception of a “family wage” the father should be paid enough to support his family in reasonable comfort, without the need for the mother to work. Laudable indeed, but how many families with children can live on a single wage given the level of indebtedness? Medieval guilds are described as proto-unions, but the major difference is that guilds were essentially price-fixing cartels of sole-trader capitalists, whereas unions are engaged in an existential struggle with employers. The capitalist-unionist contest is an unnatural contention of man against man, and cannot be reconciled to the distributist philosophy, first espoused in Rerum novarum.

Unions cannot help workers in aggregate because their stated purpose is to extract the maximum amount of rent (unearned income) for members only from the other wealth creators. They achieve this by artificially limiting the supply of labour so that employers must pay a higher price for their labour than would payable in the absence of unions. This is how guilds worked – compelling tradesmen to sell at a higher price than that which they were wonted. The rent extracted as higher wages and benefits to unionists is paid for in part by the customers of the goods and services purchased, and unseen by the workers who do not get hired at a lower wage and are obliged to enter a lower value-added industry. For example, London tube drivers earn a relatively large wage that is visibly paid for by passengers through the capital’s high tube fares that go up by more than inflation every year and invisibly by rejected tube drivers who get other less remunerative employment.

Capitalism and trade unionism are engaged in a mutually destructive paradigm that has largely run its course. The West has sufficient wealth stored to permit the struggle to continue for a time, but the journey to poverty is non-linear. It starts off slowly, almost imperceptibly but as the crash approaches the speed is incredible. Waiting to pick up the bits that will be left are the banks who hold promissory notes on our labour, our children’s and our grandchildren’s – if we let them.

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From → Chapter 1

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