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Title: 'Change' Under Obama: From Dumb to Dumber and From Bad to Worse
Source:
Lew Rockwell
URL Source: http://www.lewrockwell.com/reisman/reisman49.html
Published: Mar 9, 2009
Author: George Reisman
Post Date: 2009-03-09 20:41:19 by Dakmar
Keywords: None
Views: 240
Comments: 24
A recent article in The New York Times quotes President Obama as saying, “I don’t buy the argument that providing workers with collective-bargaining rights somehow weakens the economy or worsens the business environment. If you’ve got workers who have decent pay and benefits, they’re also customers for business.” (March 2, 2009, p. B3.) The President’s statement reveals a great deal about his understanding or, more correctly, lack of understanding of economics. Collective bargaining is the joining together, typically through the instrumentality of a labor union, of all workers in a given occupation or industry for the purpose of acting as a single unit in seeking pay and benefits. It is an attempt to compel employers to deal with just one party – i.e., the labor union – and to come to terms agreeable to that party or to be unable to obtain labor. The imposition and maintenance of collective bargaining necessarily depends on compulsion and coercion, i.e., on the use of physical force against both employers and unemployed workers. This coercion is necessitated, in substantial measure, precisely by the seeming success that collective bargaining can achieve. That success is measured in terms of the rise in wage rates that it achieves. That rise in wage rates is all that labor union leaders and their ignorant supporters are aware of. Precisely this “success,” however, is the cause of major problems. The first is that higher wage rates reduce the quantity of labor that any given amount of capital funds can employ. For example, at a wage of $20,000 per year, $1 million of payroll funds can employ 50 workers for a year. But at a wage of $25,000 per year, it can employ only 40 workers for a year. With every further rise in the wage, correspondingly fewer workers are able to be employed. Higher wage rates also serve to raise costs of production and thus the selling prices of the products that the higher-paid workers are producing. These higher selling prices reduce the quantities of the products that buyers are able and willing to buy. And thus, whether as the result of the reduced purchasing power of capital funds in the face of higher wage rates or the reduced quantities of products demanded by customers in the face of higher product prices, the effect of collective bargaining is a reduced quantity of labor employed, i.e., unemployment. It is shocking, indeed, frightening, that the President of the United States, whose main concern at the moment is supposedly with overcoming mass unemployment and preventing its getting worse, does not understand that any policy that drives up wage rates drives up unemployment. The unemployment that collective bargaining causes is what explains why it is necessary to resort to coercion against wage earners in order to maintain the system. The self-interest of the unemployed is to find work, and to accept lower wage rates as the means of doing so. And taking advantage of that fact is to the self-interest of employers. Thus there are two parties, unemployed workers and employers, whose self-interest lies with a reduction in the higher wage rates achieved by collective bargaining. If these parties are free to act in their self-interest, the system of collective bargaining must break down. How are they to be prevented from acting in their self-interest? The answer is physical force. Stepping outside the system of collective bargaining must be made illegal if the system is not to break down. That means employers and unemployed workers must be threatened with fines or imprisonment for acting in their self-interest and withdrawing from the system of collective bargaining. In the last analysis, they must be threatened with the specter of armed officers ready to cart them off to jail if they disobey the requirements of the system, and to club and shoot them should they physically resist being carted off to jail. (It is not always necessary that the physical force that imposes and maintains collective bargaining come directly from the government. It can often come from labor unions that the government chooses not to prosecute when their members physically assault strikebreakers, surround factories and refuse to allow entry or exist, start fires, set off stink bombs, shoot out tires, and perform other acts of vandalism and intimidation.) In saying, “I don’t buy the argument that providing workers with collective-bargaining rights somehow weakens the economy or worsens the business environment,” President Obama confesses to not knowing that collective bargaining raises prices and causes unemployment. He confesses to not knowing that it raises costs and prices not only through the imposition of artificially high wage rates, but also in imposing on employers the use of unnecessary labor, sometimes as many as four or five workers to do the job that just one could do. (A classic example of this is the insistence on the use of a carpenter, plumber, electrician, tile setter, and drywaller to make a simple repair in a bathroom, merely because the separate labor unions involved claim each operation as belonging to their respective members exclusively, i.e., claim a monopoly on that type of operation.) He confesses to not knowing how the enormous difficulties that labor unions put in the way of firing incompetent workers are responsible for such phenomena as so-called Monday-morning automobiles. That is, automobiles poorly made for no other reason than because they happened to be made on a day when too few workers showed up, or too few showed up sober, to do the jobs they were paid to do. The automobiles companies were unable to fire such workers without precipitating a crippling strike, to which the system of compulsory collective bargaining gave them no alternative. Collective bargaining, with its imposition of higher costs and prices and lower product quality, is at the root of the destruction of the American automobile industry and many other American industries. President Obama not only chooses not to know this, but selects union leaders as his companions, including the leader of the United Automobile Workers Union. (The Times article from which I quoted him is accompanied by a photograph that shows him, in what appears to be a round of golf, with Ron Gettelfinger, who is the president of the U.A.W., James Hoffa, who is the president of the Teamsters, and John Sweeney, who is the president of the A.F.L.-C.I.O. The article notes that “Mr. Sweeney has visited the White House at least once a week since Inauguration Day.”) The reader should keep in mind the coercive nature of collective bargaining. Then he should consider Mr. Obama’s observation that “If you’ve got workers who have decent pay and benefits [as the alleged result of collective bargaining], they’re also customers for business.” This statement makes about as much sense as declaring that people who are successful at sticking up gas stations are also customers of gas stations. Moreover, the workers who are unemployed by collective bargaining are not customers of business, or not very good customers (they can’t afford to be). And the products offered by business to its customers are poorer and more expensive because of collective bargaining. This is something, it must be stressed, that reduces the buying power of the wages of workers throughout the economic system, i.e., reduces what economists call their “real wages.” Mr. Obama needs to forget the nonsense he believes about collective bargaining and paying extortionate wages somehow benefiting business and learn to understand how it harms wage earners, how it harms every wage earner who must pay more and get less as the result of legally enforced collective bargaining. He must learn to understand how it also harms every worker who must earn less as the result of being displaced by collective bargaining from the better-paying jobs he could have had if wage rates in those lines had not been driven artificially still higher by collective bargaining and thus reduced the number of workers who could be employed in them and thereby forced those workers into lower-paying jobs. Unfortunately, it does not seem very likely that Mr. Obama will ever learn any of this. He appears to be so charmed by the use of compulsion and coercion that he and his supporters in Congress are ready to unleash a reign of outright mass intimidation against American workers. In a bow to Orwell’s 1984 and its world filled with such slogans as “war is peace,” “freedom is slavery,” and “love is hate,” Obama and his henchmen are readying “the Employee Free Choice Act.” This is an act designed precisely to end employee free choice, by depriving workers of the benefit of a secret ballot in deciding whether or not they want to join a union. In the words of The Times article, this is “a bill that unions hope will add millions of new members by giving workers the right to union recognition as soon as a majority of employees at a workplace sign pro-union cards. The bill would take away management’s ability to insist on a secret ballot election.” Here we have it. Obama is against the secret ballot. No, he’s not yet announced any opposition to the secret ballot in elections for public office. But there’s absolutely no difference in principle between being against the secret ballot in elections concerning whether or not to unionize and being against it in elections for public office. In both cases, it is a matter of subjecting people to intimidation if they express a choice that is opposed to the one that an organized, powerful group wants them to make. In this case, that group would be the union goons who would distribute the “pro-union cards” that workers would be asked to sign or refuse to sign in their presence. Are Obama and his followers really so naïve as not to know that any worker who would reject joining a union in these circumstances would, at a minimum, be exposing himself to ostracism and the chance of substantial personal economic loss in the event the union gained recognition and he is on record as having opposed it? Be assured, they are not so naïve. They look forward to the intimidation. They look forward to it in the recognition that that is what is required to swell the ranks of the unions once again. The last occupant of the White House often gave the impression of having an inadequate command of the English language and of experiencing great difficulty in speaking in grammatical sentences and using words in accordance with their proper meaning. The present occupant of the White House speaks impeccable English, with crisp, clear pronunciation. Nevertheless, his actual knowledge – of economics, of the meaning of individual rights, and of the nature of government – appears to lag far behind that of his bumbling predecessor. Furthermore, while Bush may be accused of disregarding the rights of foreign terrorists at war with the United States, Obama is out to disregard the rights of peaceful, productive American citizens. This is apparent not only in his readiness to deprive American workers of the secret ballot in union organizing elections, but also in his efforts to dramatically raise the taxes of everyone earning more than $250,000 per year, in an attempt to achieve a substantial redistribution of income. It is also evident in his policies on energy and healthcare as well. In sum, the “change” that Obama promised his mesmerized supporters in the election campaign, and is now in process of actually delivering, is nothing more than change from dumb to dumber and from bad to worse. March 9, 2009 George Reisman [send him mail] is Pepperdine University Professor Emeritus of Economics, and is the author of Capitalism: A Treatise on Economics. Visit his website. Copyright © 2009 by George Reisman.
Poster Comment: I read a little bit ogf this earlier today and stopped reading once I suspected it was turning into an anti-labor screed. Remembering this article a few minutes ago, I went back to read the entire atricle, and still find it anti-labor. I don't think labor unions should be allowed to use the power of The State to enforce their druthers. What the author leaves out, however, is that capital does so all the time, also quite contrary to free market ideology.
The wider principle here is the readiness of Obama and his associates to resort to intimidation to further their goals. It is the method of street thugs and of dictators. That is what is present in their attempt to deprive workers of the secret ballot in deciding whether or not to unionize.
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#1. To: Dakmar (#0)
Liberty is not a means to a higher political end. It is itself the highest political end. Liberty is not a means to a higher political end. It is itself the highest political end. Shades of Henry Ford in reverse. Ford created well paying private sector jobs, and Obama never held a job in his life.
Bring back Jerry Ford!
The ultimate effect of shielding men from the effects of folly, is to fill the world with fools. - Herbert Spencer
Liberty is not a means to a higher political end. It is itself the highest political end. Ignorant???? Really???
This guy must have seen Obama's pet ape up close.
Liberty is not a means to a higher political end. It is itself the highest political end. Yet curiously enough I'd bet a months wages that he was in some way a recipient of a Ford Foundation grant, evil traitorous Marxist freaks that they are.
The ultimate effect of shielding men from the effects of folly, is to fill the world with fools. - Herbert Spencer
Really??? I know some damned amusing auto workers. They are so much nicer than they're portrayed in most right-of-center editorial pages.
The ultimate effect of shielding men from the effects of folly, is to fill the world with fools. - Herbert Spencer
and do you agree with the author's premise that Obama doesn't know or doesn't understand? i think he knows and understands full well, but it's not the agenda of his masters and friends in high places.
Why should my self-interest be subverted to fulfill the self-interest of the unemployed? This guys whole argument is that individual needs should be squelched for The Greater Good. That's exactly what he's trying to accuse Obama of.
The ultimate effect of shielding men from the effects of folly, is to fill the world with fools. - Herbert Spencer
see #11 for roundabout answer
The ultimate effect of shielding men from the effects of folly, is to fill the world with fools. - Herbert Spencer
I think Obama is a True Believer, too high up for the champagne hangover. I think the author of this piece is blinded by ideology, refusing to call a spade a spade when free trade runs afoul of free markets.
The ultimate effect of shielding men from the effects of folly, is to fill the world with fools. - Herbert Spencer
You just defined collective bargaining.
Recession is when your neighbor loses his job. Atlas is now shrugging. We all know how management would prefer to have the govt on their side as the Kanawha County Coal Operators Association did when they use Baldwin-Felts Detectives (goon squads) to machine gun workers to death who dared to strike and resist company violence. To this day when a (WV) mine cave in or fire kills workers there is another round of "safety hearings" while Sen. Rockefeller cries his crocodile tears. And, as always these hearings allow the mine operators time to mitigate any rules that they find too expensive to implement.
Hell yes. The very existence of corporations depends on state force. The Divine Right of Capital: Dethroning the Corporate Aristocracy. ... now with Solium™!
Is this disquised commie talk?
From your little Red link above. The Divine Right of Capital expands on a theme that many Leftist writers allude to but rarely explore in depth: the correlation between the profit motive and the co-optation of our democracy by private corporate interests.
No.
... now with Solium™!
Sounds like an anti capitalist rant. What is wrong with making a profit off of an employee?
Nothing, especially if you're the employee.
... now with Solium™!
So if I put effort into getting a company together. Buy the stuff. Then I should what. Pay the dude I hire 50 percent?
Only if you sleep in the same bed.
... now with Solium™!
See the full citation above from Divine Right of Capital. The nugget immediately above is the yin to the yang of fiat money inflation.
... now with Solium™!
Lord Acton
#2. To: All (#1)
Lord Acton
#3. To: Dakmar (#0)
“I don’t buy the argument that providing workers with collective-bargaining rights somehow weakens the economy or worsens the business environment. If you’ve got workers who have decent pay and benefits, they’re also customers for business.” (March 2, 2009, p. B3.)
#4. To: James Deffenbach (#2)
#5. To: All (#2)
From Dumb to Dumber
Lord Acton
#6. To: Dakmar (#0)
That rise in wage rates is all that labor union leaders and their ignorant supporters are aware of.
#7. To: Dakmar (#5)
Lord Acton
#8. To: Jethro Tull (#3)
Shades of Henry Ford in reverse. Ford created well paying private sector jobs, and Obama never held a job in his life.
#9. To: Cynicom (#6)
Ignorant????
#10. To: Dakmar (#0)
#11. To: Cynicom, Jethro Tull, James Deffenbach (#6)
#12. To: christine (#10)
(Edited)
#13. To: christine (#10)
and do you agree with the author's premise that Obama doesn't know or doesn't understand?
#14. To: Dakmar (#11)
This guys whole argument is that individual needs should be squelched for The Greater Good.
Depression is when you lose your job.
Recovery is when Obama loses his job.
#15. To: Dakmar (#0)
(Edited)
I read a little bit of this earlier today and stopped reading once I suspected it was turning into an anti-labor screed. Remembering this article a few minutes ago, I went back to read the entire article, and still find it anti-labor. I don't think labor unions should be allowed to use the power of The State to enforce their druthers. What the author leaves out, however, is that capital does so all the time, also quite contrary to free market ideology.
#16. To: Dakmar (#0)
What the author leaves out, however, is that capital does so all the time
So what do stockholders contribute, to justify the extraordinary allegiance they receive? Very little. Yet this tiny contribution allows them essentially to install a pipeline and dictate that the corporation's sole purpose is to funnel wealth into it. The productive risk in building businesses is borne by entrepreneurs and their initial venture investors, who do contribute real investing dollars, to create real wealth. Those who buy stock at sixth or seventh hand, or one-thousandth hand, also take a risk—but it is a risk speculators take among themselves, trying to outwit one another, like gamblers. It has little to do with corporations, except this: public companies are required to provide new chips for the gaming table, into infinity. It's odd. And it's connected to a second oddity—that we believe stockholders are the corporation. When we say that a corporation did well, we mean that its shareholders did well. The company's local community might be devastated by plant closings. Employees might be shouldering a crushing workload. Still we will say, "The corporation did well." One does not see rising employee income as a measure of corporate success. Indeed, gains to employees are losses to the corporation. And this betrays an unconscious bias: that employees are not really part of the corporation. They have no claim on wealth they create, no say in governance, and no vote for the board of directors. They're not citizens of corporate society, but subjects. We think of this as the natural law of the market. It's more accurately the result of the corporate governance structure, which violates market principles. In real markets, everyone scrambles to get what they can, and they keep what they earn. In the construct of the corporation, one group gets what another earns. The oddity of it all is veiled by the incantation of a single, magical word: ownership. Because we say stockholders own corporations, they are permitted to contribute very little, and take quite a lot. What an extraordinary word. One is tempted to recall the comment that Lycophron, an ancient Greek philosopher, made during an early Athenian slave uprising against the aristocracy. "The splendour of noble birth is imaginary," he said, "and its prerogatives are based upon a mere word."
#17. To: Prefrontal Vortex (#16)
We think of this as the natural law of the market. It's more accurately the result of the corporate governance structure, which violates market principles. In real markets, everyone scrambles to get what they can, and they keep what they earn. In the construct of the corporation, one group gets what another earns. The oddity of it all is veiled by the incantation of a single, magical word: ownership. Because we say stockholders own corporations, they are permitted to contribute very little, and take quite a lot.
#18. To: Prefrontal Vortex (#16)
#19. To: Old Friend (#17)
Is this disquised commie talk?
#20. To: Prefrontal Vortex (#19)
#21. To: Old Friend (#20)
What is wrong with making a profit off of an employee?
#22. To: Prefrontal Vortex (#21)
#23. To: Old Friend (#22)
#24. To: All, bluegrass (#16)
It has little to do with corporations, except this: public companies are required to provide new chips for the gaming table, into infinity
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