Labor's Strong Arm

Power and Privilege: Labor Unions in America, by Morgan O. Reynolds, New York: Universe Books, 266 pp., $14.95

Labor unions in the United States have succeeded like no other interest group in staging a public-relations coup. Consider that the media, government, the academic community, and the general public generally perceive the interests of organized labor to be synonymous with the interests of workers as a group; that unions are popularly regarded as necessary to correct the "inequality of bargaining power" between individual employees and corporate employers; and that the so-called right to strike has attained an unchallenged status as one of the basic components of a free society.

Yet each of these perceptions, which have been keystones of national labor policy in this country since the 1914 Clayton Act and the 1935 Wagner Act, is empirically and theoretically unsound. Nonetheless, only a handful of contemporary economists have recognized the errors of these policies. In the last 30 years the mainstream of economic thought has departed from the view that, in the words of Harvard economist Edward H. Chamberlin, "the public interest requires the imposition of major restrictions on the monopoly power of labor." In its place is the now-dominant position that unions play a necessary and positive role in mediating the harsh forces of modern industrial life.

Morgan O. Reynolds, a professor of economics at Texas A&M University, is at present the most prolific and articulate spokesman of the minority viewpoint that unions backed by federal labor laws represent undesirable concentrations of economic power and impediments to competition. In Power and Privilege, Reynolds updates and supplements many of the classic themes propounded by his predecessors, such as Henry C. Simons, W.H. Hutt, and Sylvester Petro.

Reynolds's thesis, familiar to those who have been following his previous work, is simple: Labor unions, relying on the coercive powers of government, act as monopolists in various ways. They demand the involuntary membership or financial support of individual workers (through "agency fee" or "union shop" agreements). They compel employers to negotiate exclusively with the union on behalf of all employees performing defined types of work (through "exclusive representation" and mandatory collective bargaining). They prevent willing individuals from peaceably accepting voluntary employment on terms refused by the union and its members (through picketing, strikes, and their attendant violence). In the words of Reynolds, "Unions are fundamentally cartels—groups of producers with sectional interests diametrically opposed to those of consumers. Unions are labor OPECs."

Reynolds manages to do what many economists (and, for that matter, lawyers) are unable to do: he explodes the myths of union rhetoric in a style that is both engaging and comprehensible to a lay audience. He explains how labor unions have so effectively captured the political process (particularly the Congress) despite their representing only a small fraction of the total workforce. The answer lies in the potent incentives of labor cartels to restrict wage competition and the federal government's unique ability to confer those and other legal privileges by legislative edict.

The "spoils" are enormous. Reynolds observes that American labor unions "collect more than $5 billion annually in dues, fees, and assessments." Thus, it is not surprising that "unions are the largest organized political group in terms of manpower and money."

Reynolds's insight into academic and intellectual support of unionism is keen. In his 1975 edition of The Theory of Collective Bargaining, W.H. Hutt observed that "even the great Alfred Marshall became woolly" when confronted with the practice of wage bargaining and the implications of strike power. "Like their fellow intellectuals whom they have influenced, [economists'] sympathies have all too often ruled their minds," according to Hutt.

Reynolds does not let the intellectuals off so easily. In his view, the pro-union sympathies of academics, like most phenomena, can best be analyzed in economic terms. There is an elaborate "collective bargaining industry" that supports lawyers, arbitrators, government bureaucrats, and—not incidentally—professional aggrandizement of the academic-intellectual community. Hence, many academics like former Secretary of Labor Ray Marshall are, in effect, professional advocates of the interests of organized labor. (As Reynolds notes, the pro-union bias of modern intellectuals is not a recent development. Even Adam Smith displayed "a garbled sentimentality toward unions" when he indulged in the popular notion that individual employees lack equality of bargaining power vis-à-vis employers.)

Lest the reader think that Power and Privilege is brimming with stridency and shrill polemics, be assured that Reynolds's analysis of collective bargaining, unions, and labor legislation is thorough, erudite, and fastidiously accurate. He explores the economic, historical, and legal aspects of union activity with remarkable comprehensiveness, synthesizing these disciplines to produce what may be the best (certainly the most readable) single volume on the subject. Ample tables, appendices, and footnote references reveal the breadth of scholarship compressed into 266 pages of text.

Reynolds is surely correct when he states that "a loss of nerve in the intellectual, academic, and political communities has long exempted unionism from the normal scrutiny directed at interest groups like corporations and bureaucracies." Now, when the Marxist "critical legal studies" movement is gaining influence among law school faculties, balance is needed more than ever. Reynolds's forceful critique of the prevailing pro-union orthodoxy demonstrates that individual workers and consumers would be better off in a free labor market.

The prescription Reynolds writes out for the anticompetitive maladies wrought by the innumerable state and federal laws regulating employment is simple and specific, but admittedly unrealistic: "The right thing to do is to deregulate.…Repeal, abolish, rescind, revoke, and do away with [federal labor legislation].…Restore the rule of law in labor relations.…" Although this solution does not seem politically feasible in today's climate (even with some union leaders' rumblings about wanting what they call deregulation), one hopes that an informed electorate could eventually overpower the special interests of organized labor.

Power and Privilege is both inspiring and depressing—inspiring because Reynolds challenges and debunks the prevalent myths surrounding the institution of collective bargaining; depressing because these myths seem so well entrenched that reform is literally an Augean task. I am reminded of Henry Simons's gloomy prophecy 40 years ago: "Monopoly power must be abused. It has no use save abuse.…Here, possibly, is an awful dilemma: democracy cannot live with tight occupational monopolies; and it cannot destroy them, once they attain great power, without destroying itself in the process.…A community which fails to preserve the discipline of competition exposes itself to the discipline of absolute authority."

Mark S. Pulliam, an attorney practicing in San Diego, represents employers in labor matters.