Doug Casey on Labor Unions

(Interviewed by Louis James, Conversations with Casey)

Contrarian investor and free-market thinker Doug Casey doesn’t mince his words. That’s why he is a sought-after speaker at investment conferences – not only for his spot-on investment advice but for his no-holds-barred views of the markets, economy, and politics. In light of the recent events in Wisconsin, here are his musings on labor unions.

L: Doug, we recently talked about turmoil arising from the clash between labor unions clinging to wages from the fat years and bankrupt governments facing lean-year budgets. You saw that as a sign of more imminent chaos – a warning worth giving – but we didn’t really get into the subject of labor unions themselves. Knowing your philosophical bent, I’d bet your views on them might surprise many people…

Doug: My take is that there’s nothing inherently wrong with unions, as long as they are voluntary associations of people – they’re just associations working in certain trades or in certain places. It’s natural. Sure, why not?

But there are problems with the way unions exist in reality today, particularly when membership is made mandatory. That’s a violation of the human right to work. When you can’t work unless you join the union, and union membership is limited – often to people with political connections or family relations with union officials – it’s clear that the union is not a defender of the little guy, but a kind of protection racket. It’s a fraud.

That doesn’t just harm the individual worker who may wish to enter a unionized field; it has broad economic consequences. When only union members can work, the union can set wages at whatever level they want. That makes the product or service in question more expensive for everyone in society. In other words, unions don’t help the average working man – they only help those who can get into the unions. They hurt everybody else: non-union workers, employers, and consumers at large. And it gives union bosses extraordinary power.

L: Always a dangerous thing. As a matter of principle, whenever unions get politicians to write their wishes into law, what they do ceases to be collective bargaining and becomes naked coercion. And of course the politicians pander to the big unions; unions are big blocks of voters. How could it be otherwise?

But Doug, you’re the capitalist’s capitalist, the world’s most unabashed defender of wealth accumulation – aren’t you supposed to hate labor unions? Don’t you risk being kicked out of the cigar club for The Evil Exploiters of the Masses?

Doug: First off, there’s no way I’m giving up my cigars – especially those from Cuba. But how could I object to voluntary associations of people? If unions were more like the Lions Club or Rotary Club – both of which simply encourage people to get together and act in unison – I’d have no beef with any of them. But the fact of the matter is that labor unions, guilds, and so forth are not truly voluntary associations. And that’s entirely apart from the corruption that the union movement is riddled with – not just in the U.S., but everywhere in the world.

The good news, however, is that coercive unions are on the way out. They’re anachronisms. They’re leftovers from the time when people were like interchangeable parts in the giant factories they worked in. People were so replaceable that one person was little better or worse than another – because they were basically biological robots. In the early industrial era, labor was in oversupply, society was poor, and conditions were harsh everywhere. It’s understandable why workers felt they had to band together for self-protection. But the industrial era is gone. The assembly line with thousands of workers is totally outmoded. In the global information age, trying to extort high wages for manual labor is pointless. Soon robots will be doing almost everything, then nanomachines will replace the robots. People will only be doing work that requires thought, judgment, and individuality. Those aren’t things that can be unionized.

L: I’ve long thought that Big Labor was a rational market response to Big Business, a lot of which relied on rote behaviors back then. If you were just one little guy on the assembly line and your supervisor didn’t like you, what chance did you stand without the backing and solidarity of your fellow laborers? Unfortunately, huge industrial concerns were highly vulnerable to sabotage – it’s hard, for example, to police thousands of miles of railroad tracks.

I believe that weakness in the soft underbelly of tight-fisted business owners proved too tempting a target for many workers. And that sort of thuggery prompted management to hire thugs as well, to intimidate workers. I can’t really say who started it, but tit for tat brutalized the whole dialogue – and both sides scrambled to secure politicians in a sort of labor-relations arms race. “Labor” and “management” have been at odds – sometimes violent odds – ever since. It’s no surprise to me that Marx and Engels, products of the early industrial era, saw everything in terms of class conflict.

Absent government coercion to be used as a weapon by one side or the other, organized labor and management would have worked out their differences in a very different way. If one union bargained collectively for a high wage for their members, another union could bargain for a lower wage for their members and get the jobs. Or the company could decide to hire non-union employees and take on the extra burden of dealing with each employee individually. It would be a normal market process that would discover the right price for reliable labor at any given time and place.

As with so many things, it’s the state and its coercive power that’s the problem, not the unions. Nor management.

Doug: Exactly. It was also a time in history when society was changing from an agricultural base to an industrial one, so of course there was turmoil. Just like today.

Suppose some Mexicans or Salvadorans living in Detroit got together today and formed a union for Hispanic people and offered to build cars for half the wages the current unions are getting. They could even allow non-Hispanics to join the union – to try to defuse the inevitable accusation of racism – but the deal would be that you join to get steady work in exchange for willingness to work cheap. Would the mouthpieces of Big Labor stand up to defend them? I doubt it.

[To read the rest of this 5-page interview, including Doug’s thoughts on labor unions and why Big Business is on its way out – simply click here.]