Labor Unions, Thugs, And Storm Troopers by George Reisman 1.

New York Times Columnist Eduardo Porter on How to Raise Wages The following three paragraphs are a quotation from the article "Unionizing the Bottom of the Pay Scale" by New York Times columnist Eduardo Porter. The article appeared on the front page of the business section in the December 5, 2012 Nati onal Edition. The subject of the article is the present attempts going on to uni onize the employees of such establishments as fast-food restaurants and Walmart, whose workers are at the low end of the general wage scale in the US. Union leaders know they are fighting long odds hemmed in by legal decisions limi ting how they can organize and protest, while trying to organize workers in indu stries of low skill and high turnover like fast food. But they hope to have come upon a winning strategy, applying some of the tactics that workers used before the Wagner Act created the federal legal right to unionize in 1935. We must go back to the strategies of nonviolent disruption of the 1930s, suggests Stephen Lerner, a veteran organizer and strategist formerly at the Service Emplo yees International Union, one of the unions behind the fast-food strike. You can t successfully organize without large-scale civil disobedience. The law will chang e when employers say there s too much disruption. We need another system. In the 1990s and 2000s, the S.E.I.U. unionized tens of thousands of mostly Latin o janitors from Los Angeles to Houston, including thousands of illegal immigrant s, who were until then considered impossible to organize because of their legal status. It did so by putting pressure not only on the building maintenance contr actors but also on the building owners who hired them, often resorting to bare-k nuckle tactics. In 1990, the union asked members to mail their trash to Judd Mal kin, the chairman of the company that owned buildings in the Century City comple x in Los Angeles, printing his address on garbage bags. Mr. Malkin met Mr. Lerne r soon thereafter. Porter believes, wrongly, that labor unions are able to improve the standard of living of wage earners throughout the economic system and that they do so by mea ns of securing increases in money wage rates. He, along with almost everyone els e, commits the fallacy of assuming that because earning more money is obviously an intelligent policy for an individual wage earner to pursue, it follows that i t must be an intelligent policy for all wage earners taken together to pursue. H e is totally ignorant of the fact that increases in money wage rates obtained by labor unions reduce the quantity of labor demanded and thereby cause unemployme nt, less production, higher prices, and an added burden of supporting the unempl oyed. He is ignorant of the fact that what serves to increase money wages withou t causing additional unemployment is merely the increase in the quantity of mone y and consequent increase in the volume of spending in the economic system. But this phenomenon serves equally to raise prices and thus does not improve the sta ndard of living of wage earners. To state these points in the customary terminology of demand and supply, the onl y way that wage rates can rise is either if there is less supply of labor, which means unemployment, or more demand for labor, which will also mean more demand for consumers goods and thus higher prices of consumers goods. Thus, however surpr ising it may be, we must conclude that higher money wages, whether obtained thro ugh less supply of labor or more demand for labor based on a larger quantity of money, simply do not raise the standard of living of the average wage earner. We must conclude that if they really wish to raise the standard of living of the a verage worker, the unions are utterly misguided in making the increase in money

wages their goal. But that is their goal and they have no other comparably major goal. I want to acknowledge that there is a way that an increase in the demand for lab or can raise wage rates without increasing the demand for consumers goods and pri ces. And that is insofar as it takes place as the result of an increase in savin g. What would contribute to this would be reductions in government spending acco mpanied by equivalent reductions in taxes that are paid out of funds that would otherwise be heavily saved and invested. In this category are the corporate inco me tax, the progressive personal income tax, capital gains taxes, and inheritanc e taxes. The additional savings that resulted would be expended in substantial m easure in paying additional wages. The wage earners would be in a position to in crease their consumption spending correspondingly. This would not represent an i ncrease in overall, total consumer spending, because it would be financed by an equivalent, indeed, more than equivalent reduction in consumer spending on the p art of the government. Thus, while wages rose, nothing would be present to make prices rise. Of course, such tax reductions are absolutely anathema to the labor unions and their supporters. What does improve the standard of living of wage earners is increases in the pro ductivity of labor, i.e., the output per unit of labor. This serves to increase the supply of goods relative to the supply of labor and thus to reduce prices re lative to wage rates. It can be accompanied by prices actually falling while wag e rates remain unchanged. Or, when the effects of an increase in the quantity of money and volume of spending going on at the same time are allowed for, by pric es staying the same while wage rates rise, or by both prices and wage rates risi ng but with prices rising by less than wage rates. I must point out that an essential foundation of a rising productivity of labor is a sufficiently high degree of spending to produce capital goods rather than c onsumers goods. This outcome too is supported by reductions in government spendin g accompanied by equivalent reductions in taxes that are paid out of funds that would otherwise be heavily saved and invested. Porter and almost everyone else is totally unaware of these facts. Above all the y are ignorant of the fact that the wage earners' standard of living does not ri se from the side of wage rates rising but from the side of prices falling. As in dicated, the fall in prices need not be an absolute fall. But it must at least b e a relative fall. That is, prices must fall at least in comparison with what th ey otherwise would have been if the only factor operative were an increase in th e quantity of money and volume of spending. When one grasps the fact that the standard of living of wage earners rises from the side of prices falling rather than wages rising, it is but a short step to t he conclusion that labor unions are not only utterly ignorant about how to raise the standard of living of wage earners in general, but operate in diametric opp osition to the interests of wage earners in general. Labor unions can raise the standard of living of narrow groups of workers, by ga ining monopolistic privileges that limit the number of workers who can be employ ed in a given line of work or by causing or maintaining an artificial need for t he services of workers of given types. But in these cases they reduce the standa rd of living of other workers. The workers who are barred from working in the unionized fields must find work i n other fields, where their added numbers serve to depress wages. If minimum wag e laws prohibit that fall in wages, then the workers displaced end up as simply unemployed or take the jobs of other workers who become unemployed. Compelling the continued employment of more workers than are needed to produce a

product despite the fact that economic advances have made their employment in t hat line of work no longer necessary, has the effect of maintaining a product pr ice that is unnecessarily high and thereby of depriving wage earners throughout the economic system of the funds they would have had available as the result of a lower price to spend on other products. And, it should be realized, the produc tion of those other products, previously not affordable because of lack of avail able funds, would have required the employment of an amount labor equal to the l abor initially displaced. In the light of these facts, one can understand how the productivity of labor ov er the last 225 years or so has risen by enormous multiples with a comparably en ormous positive effect on real wages and the general standard of living and no n egative effect whatever on the overall rate of unemployment. Indeed, the total n umber of wage earners employed has also increased enormously, in line with the i ncrease in population made possible by the rise in the productivity of labor and consequent rise in the standard of living. The only contribution of the labor unions to this process is to impede it. At ev ery step of the way, they fight the rise in the productivity of labor whenever i t threatens to reduce the number of jobs available for their members. Indeed, th ey openly pride themselves on "making work" rather than making goods, apparently incapable of grasping that making work by requiring more labor to produce a goo d than is necessary, serves to prevent the production of other goods, that would have been available in addition to the one, particular good they are concerned with. Labor union membership in private employment has greatly declined over the decad es, from about 35 percent in the mid 1950s to about 7 percent today. The reason is the fact that unionization imposes artificially high costs on firms, in the f orm of above-market union wage rates and reduced efficiency and quality of produ ct as they struggle with union hostility to improvements in productivity, arbitr ary work rules, and the difficulty or even impossibility of firing incompetent w orkers. Under such conditions, firms cannot meet the competition of other firms, foreign or domestic, that are non-union, and thus sooner or later must go out o f business. The most recent large-scale example is that of Hostess Brands. It fi nally had to close when one of the major unions it had to deal with was unwillin g to accept a wage reduction, with the result that 18,000 workers became unemplo yed. This kind of story, repeated hundreds of times over, explains the decline i n union membership. To continue in existence, labor unions need "fresh blood" to drain. Their most f ruitful source in recent decades has been government employees, who now account for about half of their overall membership. By making huge contributions to the political campaigns of corrupt politicians, and having their members vote for th ose politicians en masse, the public-employee unions can secure outlandish wage and pension benefits for their members, financed by the taxpayers. In the face o f governmental bankruptcies or impending bankruptcies, this process has encounte red growing opposition and, hopefully, may now be nearing its end. I must briefly comment on the specific main subject of Porter's article, the cur rent attempt to unionize the lowest-paid workers in the economic system. If succ essful, it may well serve to improve the standard of living of those workers in this group who keep their jobs. They will receive higher wages. But the rise in price of things such as hamburgers and other fast foods, and the kind of goods that Walmart sells, that will be necessary to cover the higher co sts imposed by the rise in wages, will result in a reduction in the quantities o f these goods that buyers can afford to buy. This in turn must result in a reduc tion in the number of workers who are employed in producing or distributing thes e goods. These workers will then either be unemployed or drive down wage rates e

lsewhere in the economic system. In addition, the real wages the standard of living of workers throughout the economi c system who buy these products will be reduced because of the need to pay highe r prices for them, including, of course, the very considerable part of this grou p who are themselves low-income earners. And the prices that they pay will be hi gher not only because of the union-imposed rise in wage rates, but also because of the union-imposed reductions in the productivity of labor. Can this outcome really be Porter's and the unions' idea of economic improvement for the poor? And now I come to one point on which Porter is right, the point that appears in the final paragraph that I quoted from his article. It is Porter's realization t hat to achieve their goals, labor unions must rely on tactics of intimidation an d thus, implicitly, on force and violence. This is the meaning of the "bare-knuc kle tactics" that he lauds as having proved successful in union organizing effor ts in the past. Porter refers only to "the union ask[ing] members to mail their trash to Judd Malkin, the chairman of the company that owned buildings in the Ce ntury City complex in Los Angeles, printing his address on garbage bags." He doe s not mention such things as preventing access to factories and stores by mass p icketing, physically assaulting non-union workers, setting off stink bombs in fa ctories, and shooting out truck tires. But the implication is clear. It is does not go away by using the word nonviolent before disruption. Intimidation, force, and violence, that is Porter's and the unions' s theory of how to raise the standard of living of the average wage earner. It is the theory of those whose heads are as empty of knowledge of economics as were the heads o f our apelike ancestors. 2. The California Federation Of Teachers Incites Hatred Against the Rich The California Federation of Teachers describes itself, on the home page of its web site as "the statewide affiliate of the American Federation of Teachers. The CFT represents faculty and other school employees in public and private schools and colleges, from early childhood through higher education." The CFT is a labor union. Its parent organization belongs to the AFL-CIO. As suc h, it is an organization founded on precisely the same kind of ignorance of econ omics that I have just described. The effects of its operation on the quantity a nd quality of the product of its members and their employers (principally the Ca lifornia Department of Education) are what one would expect from the influence o f a powerful labor union. Namely, in this case, very low performance on the part of the students and graduates, who generally rank near the bottom nationwide in math and English test scores. However, when it comes to matters of knowledge of economics, and all that depend s on knowledge of economics, such as understanding much of modern history and mo dern literature, current events, and contemporary public policy, the effect of i ts existence is even worse. This is because in these areas, it and many, if not most, of its members, work to fill the minds of young students, who are in schoo l to gain knowledge, with worse ignorance than that with which they came to scho ol. Its and its members' ignorance of economics serves to produce hordes of igno rant malcontents who are hostile to the capitalist economic system, individual r ights, economic freedom, and the founding principles of the United States. (Of course, here and there, one might find a member of the CFT who would disavow all of its destructive beliefs and activities and agree with the principles I'v e expressed. But can anyone believe that he would be allowed freely to teach tho se principles? That he would not encounter overwhelming pressure not to do so an

d that his life would not be made very difficult, to say the least? Whatever els e it might be, the CFT is almost certainly not an organization devoted to suppor ting free inquiry and open discussion that would constitute a challenge to the b asis of its very existence. The fact that it uses dues paid by its members to ad vance its political agenda, irrespective of the convictions and choice of the in dividual members, is confirmation of this fact.) It should almost go without saying that in addition to teaching the same kind of pro-union ideas that Porter propounds, the CFT and its members also teach much of the rest of the Marxist body of doctrine, above all, the exploitation theory. This is the belief that capitalists and the rich (in today s jargon, the 1 percent ) systematically steal from and impoverish the great mass of the people (i.e., the 99 percent ). The vacuum-filled heads of the Marxist teachers contain absolutely no awareness of the fact that under capitalism the wealth of the rich is accumulated through th e repeated introduction of new and improved, more efficiently produced products that serve to raise the standard of living of everyone. And that as that wealth is accumulated, it does not stand as a giant pile of food on the plates of glutt onous capitalists but as capital, i.e., as means of production that produce the products that everyone capitalists and non-capitalists alike buys and that provide t he foundation of the demand for the labor of all those who are wage earners. The wealth of the capitalists the rich in other words, is the source of the supply of goo ds that non-capitalists buy and of the demand for the labor that the non-capital ists sell. Everything that reduces this wealth, reduces the demand for labor and the supply of products. In both ways, it reduces real wages and the general sta ndard of living. Thus, contrary to the beliefs of the ignoramuses of the CFT, taxing the wealth o f the rich does not serve to transfer food from the plate of a glutton to the pl ate of a starving person, or to provide benefits of any kind to the poor that in any sense are free. On the contrary, it serves to make people poorer, by reduci ng the demand for their labor and the supply of products available for them to b uy. In the light of this background, one should consider the animated cartoon video that the CFT released the other day and that is now prominently featured on its web site. The video is titled Tax the Rich. It is narrated by Ed Asner, a Hollywoo d actor. I urge readers to watch this video in full and listen carefully to Asner's comme ntary. It is a work not only of ignorance but of the kind of malicious ignorance with which one would try to incite a mob the kind of ignorance that under the Rus sian Czars was used to foment pogroms and that under Hitler was used to set off the infamous Krystallnacht, i.e., the night in November of 1938 when Jewish-owne d stores across Germany were attacked and wrecked by Nazi mobs. Hitler depicted the Jews, who comprised not quite 1 percent of the German popula tion, as a sneaky, gluttonously greedy conspiratorial group working to better th emselves at the expense of the 99 percent or more of the German people who were non-Jews. He blamed the Jews for Germany s defeat in World War I, for the hyperinf lation that followed, and for the Great Depression. In the same way, the CFT and Asner depict our 1 percent the rich as another sneaky, gluttonously greedy conspirato rial group working to better themselves at the expense of the 99 percent or more of the American people who are not rich. They blame the rich for the bubbles and crashes in the stock market and real estat e market, and for people s loss of their jobs and homes. Again and again, they cla im that the suffering of 99 percent has been caused by the deliberate evil of 1 percent. So malicious is their propaganda, that in their attempt to ridicule the

productive contribution of the rich, which the left has long been in the habit of mocking as the trickle down theory, their video shows a rich man urinating on mem bers of the 99 percent. (It s possible that this frame has now been removed from t he video in response to complaints. But it is reproduced here.) This is the kind of class hatred the California Federation of Teachers is peddli ng to the American people and which is being taught to the intellectually helple ss children in the classrooms of its members. How long will it take if 99 percen t of the people become convinced that all of their problems in life are the resu lt of the evil of 1 percent of the people, before the 99 percent turns on the 1 percent in an orgy of hatred and destruction? That is the outcome that the CFT, Ed Asner, and all the rest of the mindless lef t are preparing. They are in process of organizing the persecution of a highly p roductive and provident minority of 1 percent of the population by an increasing ly miseducated and manipulated 99 percent. The first portion of this article showed how the success of labor unions in impo sing their demands depends on the activities of thugs. Thugs are needed by the u nions to perform such activities as mailing garbage to employers otherwise unwil ling to deal with them and for creating "too much disruption" for employers to s tand. Their tactics, "bare-knuckle," as Porter describes them, or brass knuckle, as one in fact should say, are required if the unions are to have their way. Th e thugs make offers, that in the terminology of The Godfather, employers "can't refuse." The California Federation of Teachers and its members are pursuing policies that go far beyond the employment of thugs every now and then. Their policies and th eir day-to-day teaching are serving to manufacture a generation of hate-filled, mindless zombies, who know nothing but leftist propaganda and who will be readil y available to serve as storm troopers in a future war against capitalism and "t he rich." Their claim to knowledge will be little more than their ability to cha nt that they are part of the 99 percent and that they hate the 1 percent. So long as the California Federation of Teachers controls most education in Cali fornia, a foremost civic duty of every legislator and every voter in California is to take every opportunity to vote to cut the budget of the California Departm ent of Education insofar as it is used directly or indirectly to promote the doc trines of class hatred and class warfare espoused by the CFT and its members. An excellent opportunity to do this was offered in last November s elections. A pr oposition was on the ballot in California, Proposition 30, that threatened a $6 billion cut in funding for public education unless the voters approved $6 billio n in new and additional taxes. The voters clearly should have rejected the propo sition and urged that whatever cuts that were to be made, be made above all in t he funding for courses serving to spread the hate-filled ideology of the CFT and its members. Such spending cuts are as necessary in the body politic as is the surgical removal of malignant cancer tissue in the body of a human being. At the present time, the public should demand apologies from the CFT, Ed Asner, and the producers of their disgraceful animated video. While its production was not a crime, the class hatred it espouses, along with all the class hatred regul arly inculcated in students by the CFT and its members, serves to produce an int ellectual climate in which crime on a massive scale will certainly be the result.

Copyright 2012 by George Reisman.

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