#40 Labor Relations Act (New Deal)

Rothbard wrote extensively on unions, and believed that laborer’s lack sufficient information on price relationships gathered by the entrepreneur. Laborers fighting for better compensation disrupts the natural market forces of increased productivity.Increased productivity is a net benefit for everyone in society, under a sound monetary standard because it yields falling prices.

However, to fully cover the depth of Rothbard’s explanations on why Unions are a net negative (anti labor) is beyond the scope of today’s post. As with this particular series we want to continue looking at the various economic reforms brought about by the New Deal as a whole.

The Labor Relations Act of 1935, as apart of the second New Deal under FDR, sought to reform unionization in two ways. Firstly, was to ban company [led] unions, and secondly was to regulate labor-employee relations with trade unions.

The primary purpose of this act was to collectivize bargaining power of the laborer, where rather than the individual or the individuals working at a particular company engaging in negotiations for better pay or working conditions, it would be done across industries as a whole on behalf a union representing the collective.

I can see a few immediate problems with this approach to labor reform. Primarily, that every employer and place of employment is different. Individuals have different preferences. What works for one group of laborers and the entrepreneur who provides them with gainful employment, might not be an advantageous condition for others. Smaller, corporate unions are much more likely to effect change at a local level, change that represents the best interest of the individuals advocating it.

Trade unions, on the other hand, are more akin to governments. They breed the same manners of inefficiency and bureaucratic rent seeking as any other administrative organization. Individuals represent their own best interests, but as history shows us, organizations can often misrepresent the well being of the individual and prioritize well being of the organization (or the individuals at the top of said organization).

At the time of the Labor Relations Act, both the AFL and the CIO were created as separate relations and reform entities, and have since merged into the singular AFL-CIO. Considerable pressure is brought upon independent unions to affiliate with the AFL CIO which provides lobbying power and access to resources like legal counsel, that otherwise are less available. Thus incentives to participate are powerful.

It’s not unheard of for trade union organized strikes to go ignored by individuals who choose to defy union mandates (which they don’t believe represent their own best interest) and continue to work. These individuals are often called scabs. For more reading on other important labor union changes of the time, see the Railway Act here.

Book of the Month:

The Ethics of Money Production by Jorg Guido Huulsman

-“If certificates may add to the value of bullion then certificates may have a value on their own. Therefore they can also be traded without being physically integrated with the precious metal of which they certify the quantity. Then they are money substitutes. The potential abuse of substitutes is a very considerable disadvantage. One may therefore justly doubt that on a free market they could have gained any larger circulation.”

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