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Henry Hazlitt: What’s Wrong with Our Labor Policy

Henry Hazlitt (1894-1993) was one of the 20th century’s greatest writers on economics. His 1946 classic Economics In One Lesson is still an excellent introduction to the subject for the general reader. And, for a number of years, he was columnist in Newsweek, bringing economic insights to the issues of the day and expressing them with clarity. The article below is a classic example of this. It appeared in Newsweek on this day in 1946.

The coal strike has vividly revealed what is wrong with our present labor laws and previous labor policies. This, unfortunately, is no assurance that right policies will now be applied. A crisis may force men to revise their ideas; but no crisis, however great, can force them to think clearly. So the coal strike has revived all the old schemes for compulsory arbitration and for making strikes on public utilities illegal.

But if the coal strike has proved anything at all it is that these schemes simply do not work. The Smith-Connally Act, under which the government has been trying to combat John L. Lewis, is precisely such a scheme. It makes “wartime” strikes against the government illegal. But the first serious attempt to enforce this provision of it has proved futile. The government is afraid of making a martyr of Lewis. And it has no assurance that jailing him will stop the strike.

Compulsory arbitration of labor disputes, in fact if not in name, was tried during the war. It worked only when it gave the unions substantially what they wanted. When it did not, Lewis and other union leaders simply ignored or defied the War Labor Board, and the government was too frightened to do anything about it. The Railway Labor Act, in fact if not in name, imposes compulsory arbitration, certainly so far as the employer is concerned; but whenever one of the railway emergency boards has handed down a decision that the unions did not like they have defied it, and the government has been obliged to change its decision.

The assumption behind all the proposals for government “fact-finding” or compulsory arbitration of labor disputes is that the government board or “court” will know what is the “fair” or “right” wage and will settle the strike on that basis. This overlooks all the realities. The truth is that when a governmental board decides such questions it almost invariably, and sometimes grossly, favors the union—not merely because this seems the best political course, but because this is the way to make the decision stick. For the board is usually trying to avert a threatened strike or settle an existing one. It is therefore much more concerned to satisfy the union than the employer. And the very fact that government intervention of this sort exists or can be appealed to destroys any real collective bargaining. Neither side will make a settlement if it thinks that a government board will award it something better.

Finally, even if the government board or “court” were courageously impartial, and much better informed on economic affairs than politically appointed boards are in the habit of being, it would be no more capable of fixing a “right” wage for each class of worker and occupation than of fixing a right price for each article. Compulsory arbitration of labor disputes means, in effect, government wage fixing. Government wage fixing would soon politically necessitate a return to government price fixing. Such a scheme, in short, would drive us back toward a controlled if not a totalitarian economy.

Only when such remedies are recognized as false are we likely to adopt the real remedy. This is simply to repeal the discriminatory curbs on employers and the discriminatory immunities to unions that we have enacted in the last fifteen years, and to subject both employers and unions impartially to the common-law provisions against force, fraud, intimidation, and violence. We may add whatever machinery of mediation or voluntary arbitration we think likely to be helpful; but the solution lies in restoring common rights and duties.

It is true that this will not prevent all strikes; nor will any remedy under a free system. But it would mean a tremendous improvement over the present legal situation, which, by making it all but impossible for a union to lose a strike, has put enormous irresponsible power into the hands of labor leaders. The Lewis coal strikes of 1927 and 1932, before we had a Wagner Act, collapsed
completely. His union was shattered and prostrate until it was put on its feet first by the NRA, and then by the Wagner Act. What the Federal government needs to do today is not to prosecute Lewis in the courts, but simply to stop building him up. He seems very tall because he is standing on the Wagner stilts. Kick these out from under him, and he will shrink to normal size.

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