A capitalist's perspective on labor unions

27 Jan 2016 02:36

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This is not a photography post.

Recently quite a few politicians have attacked organized labor as lazy, overpriced, patronizing to better employees, and unfair to independent-minded ones. And often diligent, moderately-paid workers who might seem to stand to gain quite a bit from a union are inclined to agree. Both would do well to consider how business leaders approach similar situations—and how the surprisingly cooperative solutions can benefit both sides in the long run.

Investors hire professional negotiators (executives and managers) to deal with workers and other corporate stakeholders, and contentedly pay them a lot more than typical union dues. They share this cost in proportion to their stakes and earnings, as a charge against the earnings available for shareholders and ultimately the assets available for creditors' principal and interest.

Investors bargain collectively. Once one has bought a share or a bond, he or she generally must share only proportionately in distributions and claims. Side arrangements are not allowed.

Business leaders value and defend a stable operating and competitive environment. They often negotiate hard for local infrastructure commitments and seek relief from rivals anticompetitive practices and market abuses.

Investors align incentives and provide some assurance of fair treatment for “key” employees. Executives and managers are rarely laid off with business cycles and are often provided generous severance packages in bad times and bonuses or stock options in good ones. Who works well with the constant fear of unfair firing? And why go above and beyond to help a business work better (for instance, by developing very specialized skills, or contributing to an invention) when all you're sure to get is a question of whether you're the now extraneous labor?

Investors and managers tend to prioritize budgeting for their children's extended education and living among relatively “sophisticated” areas. While much of this may be unnecessary elitism or a conspicuous consumption it indicates a learned perception of need for long-term reliable income and social stability to perpetuate the skills businesses need to succeed. A race to the bottom of hitting workers when they're down doesn't work out well for anyone in the long run—while there are opportunities here and there in perpetually low-wage areas, the real money is in building skills and value.

Investors and managers generally choose to commit to the formal protections and attendant bureaucracy, transparency and scrutiny of not only basic corporate rules but also public trading. One can choose to invest in a given company (or adopt an unusual management structure, although that tends to scare off co-investors), and major changes are put to a vote, although from there they apply company-wide. There are plenty of business models available but for hundreds of years the big widely-held corporations—warts and all—have generally made much more success for all involved.

So, in many ways the business owners' collective approaches to their contributions inform the value of a collective approach for the workers'. (If you've had the fortune and foresight to open a retirement account, think about how this runs the investments you eagerly follow!) And in the long run this can build prosperity for all involved. But there are some key differences between capital and labor that make fairness and stability, rather than all-out maximization of the possible reward, much more important for labor:

  • One can't well diversify investments in skills. One can spread out investments to average out idiosyncratic risks, but the scarcity of time means it's almost always better to specialize: learn to do one thing well, acclimate to certain circumstances, and do it again and better as much as possible. There is some risk of needing to re-train as technology progresses, but everyone loses out if the job isn't worth taking due to a trap of unequal bargaining power.
  • Labor is by far the most important factor of production. Work and invention can and do substitute for most of the others, are necessary to preserve and defend them, and eventually command greater value than all of the others. Even “black gold” (much more valuable than the regular kind) can sustain only small economies. Some at very modest standards of living; others eager to reinvest in education and going businesses for when it will run out, leaving them largely barren and devoid of natural resources—like Switzerland, or Japan.

Japan? Where they make the world's best cameras? Maybe it is a photography post…

During the latter half of the 1920s, when [Canon founder] Yoshida was in his late 20s, he frequently travelled to Shanghai, China to procure the necessary parts for his jobs. A story was told that Yoshida decided to make high-grade 35mm rangefinder cameras when he met an American trader, Roy E. Delay in Shanghai, who told him:
——”Why do you come over here to buy camera parts? Your country has already produced good battleships and airplanes. If your people can produce such good battleships, there is no reason why you cannot make your own camera parts.”——
By nature, Yoshida liked to tinker with machines and instruments, and he was already engaged in repairing and remodeling motion picture cameras and projectors. It was natural that Yoshida would be attracted to the making of cameras.
When asked about his motives in disassembling a Leica to produce Japanese made high-grade 35mm cameras, Yoshida explained in later years:
“I just disassembled the camera without any specific plan, but simply to take a look at each part. I found there were no special items like diamonds inside the camera. The parts were made from brass, aluminum, iron and rubber. I was surprised that when these inexpensive materials were put together into a camera, it demanded an exorbitant price. This made me angry”.

And a little righteous anger can go a long way.
(Free as in Freedom: Richard Stallman's Crusade for Free Software, Chapter 1: For Want of a Printer, Sam Williams)

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