THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Wednesday, October 20, 2021

Win the Battle, Lose the War?

       Seemingly out of nowhere, American workers are threatening strikes; October is being labeled “Striketober.  Largely as the result of the current shortage of workers, labor unions are pushing for increased pay and benefits, shorter hours, improved working conditions, and so on.  The pandemic has put organized labor in the best bargaining position it has had in decades, and public opinion of unions is the highest it’s been since 1965.


It seems like a golden opportunity for organized labor to regain a lot of lost ground and ensure that workers finally get that bigger piece of pie that has always eluded them, but there are some serious problems with the strategy.  For one, public opinion is on the unions’ side, but that will start to fade rapidly as right to work laws are repealed and prices start going up in response to higher labor costs.  Right now, rising costs are being blamed on the greedy corporations, but that can change very quickly to the greedy unions.  Christmas is coming, but not only is the goose not getting fat, it might never make it to the table.  With supply chains disrupted first by government regulations, the pandemic and now union demands, supplies of virtually everything are drying up as stevedores and truckers go on strike.


There are other problems, especially in the mid- to long-term.  Right now, there is a worker shortage, possibly due to people expecting to get higher wages and some kind of UBI or the equivalent out of the multi-trillion-dollar budget that they’ve been promised.  Of course, few of them realize the effects of creating so much counterfeit money and at the same time attacking the productive capacity that makes floating massive amounts of funny money possible.

It’s called inflation and, contrary to what Keynes told us, inflation does not bring full employment, or any kind of employment for that matter.  It cheapens the money, destroys savings, sabotages wage and retirement income, and encourages consumer debt in the hope of buying now and paying later with cheaper money.

It doesn’t work that way.  Consumption debt can only be repaid with cheaper money if you actually have cheaper money, which is what got you into trouble in the first place.  The most frightening danger, however, is when people decide the currency is worthless and the strange phenomenon of hyperinflation takes off.

Money to burn?


Where ordinary inflation is caused by creating fake money, so that the price level rises in response to money that has less and less value, in hyperinflation the price level rises faster than the money supply can be increased.  During the hyperinflation in Germany and Austria-Hungary after World War I, the central banks couldn’t print money fast enough to keep up with the demand, even as massive amounts of currency piled up in the streets and was swept up like trash and burned as fuel.

It couldn’t happen here?  In 1914 Germany had the soundest economy and the best financial system in the world.  Its government social welfare programs were the envy of Europe and Americans were starting to demand similar measures.  Within five years the German economy was completely destroyed.  In fifteen years, they experienced the rise of Hitler, who promised to make Germany great again — and kept his promise . . . at the small cost of genocide and global war.


Then there’s the problem of “job or capital flight.”  Guess what happens when labor costs get too high in one area?  That’s right, companies move to other areas where wage costs are lower.  These days, when politicians are competing to see how many new jobs they can “create,” it’s easier than ever before to shift jobs out of the country altogether.  Workers won’t have to worry about immigrants taking their jobs.  People will stay in their own countries as higher labor costs bring American jobs to them without having to immigrate.


What about automation?  At the pace of technological advancement these days, and the fact that many companies realized during the pandemic that they didn’t need quite as many human workers as before, there will probably be an upsurge in technological displacement.  When a company is on the fence about whether to keep the workers they have or replace them with machinery, guess what they’re going to do when unions demand higher fixed wages and benefits?  Companies will purchase machines that don’t complain and get rid of human workers — and their unions — that do.

It looks pretty grim, but there’s an answer, and it’s one that’s been around for quite some time, centuries, in fact.  The most recent phase of the solution, however, was initiated in the 1950s by Louis Kelso in the books he co-authored with Mortimer J. Adler, The Capitalist Manifesto (1958) and The New Capitalists (1961).  As an editorial in Life magazine in 1964 put it, “If the machine wants our job, let’s buy it.”

When the labor statesman Walter Reuther, president of the UAW, heard about Kelso’s ideas, it changed his whole approach to “the Labor Question.”  Instead of fueling the inflationary wage-price spiral in which the more workers win, the more they lose, Reuther had a different idea.  As he said in his testimony before the Joint Economic Committee of Congress, February 20, 1967,

Walter Reuther


 The breakdown in collective bargaining in recent years is due to the difficulty of labor and management trying to equate the relative equity of the worker and the stockholder and the consumer in advance of the facts….  If the workers get too much, then the argument is that that triggers inflationary pressures, and the counter argument is that if they don’t get their equity, then we have a recession because of inadequate purchasing power. We believe this approach (progress sharing) is a rational approach because you cooperate in creating the abundance that makes the progress possible, and then you share that progress after the fact, and not before the fact.  Profit sharing would resolve the conflict between management apprehensions and worker expectations on the basis of solid economic facts as they materialize rather than on the basis of speculation as to what the future might hold…. If the workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing as such cannot be said to have any inflationary impact upon costs and prices…. Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth.

Of course, this sounds like redistribution if you’re not familiar with Kelso’s ideas and don’t read carefully enough (or at all).  Why it’s not — and where the money comes from for this will be covered in the next posting on this subject.