King Ludd’s throne

Over at LewRockwell.com Blog, Karen De Coster recently posted about Ford’s Camaçari assembly plant in Brazil, taking it as an opportunity to complain about the way union thugs [sic] run Ford’s business in Estadounidense assembly plants, and how Ford may have trouble introducing a similar manufacturing model in U.S. plants because the UAW is hesitant. Other than noting that the stories are little more than a couple of glorified Ford Motor Company press releases, passed off as journalism by the Detroit News, I don’t have anything in particular to say about the set-up Camaçari, or for that matter about Ford Motor Company or the UAW. (I consider the both of them to be brontosaurs of state capitalism — massive, slow, stupid, and probably doomed to extinction.) But I do want to mention De Coster’s boilerplate complaints against labor unions, and what they presuppose.

De Coster, like lots of other anti-union libertarians, claims that unions are economically harmful because they’re toxic to efficiency and flexibility. The idea is that organized workers will tend to use their organization to oppose advances like automation, technological upgrades, flexible job duties, and reorganization of processes for greater efficiency. Partly because union contracts tend to preserve old job descriptions in amber, to better mark off each worker’s turf, and partly because organized workers will use their coordinated bargaining power to oppose anything that reduces organized workers’ hours or introduces new, not-yet-unionized (or differently-unionized) jobs into the shop. I don’t necessarily find this complaint very persuasive. But. hell, let’s grant most of it, for the sake of argument. Suppose that a union like the UAW does tend to block upgrades for greater efficiency and flexibility. If that’s true, why is it true? Because the unionized workers don’t own the means of production.

It’s no surprise that there would be conflicts between the interests of the workers and the interests of the boss and board when it comes to innovation in shop-floor technology or processes. For a wage laborer, sometimes new technology and new processes mean easier and better work to do; often they mean that your hours will be cut or you’ll lose your job entirely. In any case they will be deployed and integrated into the flow of work according to what the boss finds most useful; they may very well result in you, as a wage laborer, getting stuck with speed-ups or harder work.

None of this is a decisive argument against innovations in shop-floor technology or processes; sometimes things have to change, and change can be hard. But it is a natural source of conflicts between labor and capital. When workers are organized — and when the goals of the organized workers are limited to eking out the highest hourly wages and benefits, the most reliable hours, and the easiest conditions, that they can get within the existing ownership structure and business model of the corporation, through stage-managed labor actions, back-room negotiations with the boss, and multiyear fixed contracts, while the boss and the board keep ahold of final control over conditions on the shop-floor and most or all of the residual profits from any efficiency improvements, what you’ll tend to see is a perpetual collision between a small but powerful coterie of managers and owners, who have every reason to try to shove new processes and technologies down their employees’ throats, to the extent that they can get away with it, and a consolidated mass of workers who have little reason to care about starving themselves lean in order to fatten profits that don’t go to them. Why should workers want to do more work faster, or to take on more flexible job descriptions, if they only stand to lose hours or subjected to speed-ups for their trouble? Both workers’ livelihoods and process efficiency get caught in the crossfire.

But the business model offered by that small coterie, and the union organizing model offered by that consolidated mass aren’t the only business models or union organizing models on offer, and the fact that they are so prevalent in American heavy industry today is the direct result of a series of political decisions and a system of government economic regimentation that allowed that business model and that organizing model to shove alternatives out of the way. Alternatives like that offered by the Industrial Workers of the World and other state-free wildcat unions, which called not for a fair day’s wage for a fair day’s work, but rather for abolishing the wage system, and replacing it with worker ownership of the means of production, coordinated through decentralized, participatory unions.

If the workers themselves jointly own the means of production, then the union has no reason to sandbag efficiency upgrades: if organized workers keep most or all of the residual profits then they have every reason to want more flexible job descriptions, more efficient processes, and greater integration of labor-saving technology. Maybe it’ll mean fewer hours of labor; but since the worker keeps the increased profits, the reduction of hours is a net gain rather than an economic blow. And if workers make agreements amongst themselves as to the conditions of their own labor, they have little reason to want their specific role in the shop written on tablets of stone, and little reason to fear new processes or technology which they are free to take up or not to take up on their own terms and at their own pace, rather than as dictated by a chain of command.

De Coster trashes the UAW for responding to the incentives that the wage system presents for their workers; but rather than getting rid of the UAW, the better solution would be to quit the griping and change the incentives. There is no natural connection between labor organizing, on the one hand, and Luddism or labor-contract sclerosis, on the other. It’s a matter of the artificially rigidified economics of state-subsidized corporate capitalism, and the artificially narrowed vision of the state-patronized establishmentarian labor movement. The only reason that centralized, state capitalist corporations like Ford find themselves confronting top-heavy establishmentarian unions like the UAW over efficiency upgrades is that the both of them have conspired — with the active patronage and regulatory encouragement of the United States federal government — to sustain a business model in which the vast majority of workers have no stake in, and thus little or no natural interest in, the efficiency of the shop, and little or no control over how new processes or new technology, if implemented, will affect the hours and conditions of their labor.

The solution isn’t more ruthless corporate union busting; the solution is to strike at the root of the problem, by abolishing the government economic regimentation that sustains both establishmentarian unionism and state capitalism. If the UAW is cut free from the smothering patronage of the State, and becomes what union so often were before the Wagner/Taft-Hartley era — a wildcat industrial union, free to play hardball and free to set its sights not just on negotiated wage and benefits settlements, but on the unionized workers themselves owning the shop, the machine and the tools — then King Ludd’s throne will crumble out from under him, and you’ll soon start to see unions that not only accept, but champion innovations in technology and industrial processes. If workers own the shop, why wouldn’t they want to increase their own efficiency? After all, they get to keep the difference.

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  1. Joel Davis

    One problem with worker cooperatives, though, is that workers will have a certain amount of inertia to labor innovation. If my job is likely to be replaced, I have an incentive to not want to vote for any such measure or for anyone who makes such a change.

    Also, I’m less likely to layoff or fire one of my friends.

    This can be solved through semi-creative retention and if the worker co-ops organize behind some sort of entity that has an incentive to pressure its members to be productive rather than good friends. but I see a lot of strife and confusion until an acceptable model is found.

  2. chris-acheson

    Joel:

    It doesn’t have to work like that. If a cooperative can reduce the amount of labor they have to do by 10% while maintaining the same output, they don’t have to lay off 10% of their workers. They can all reduce just their hours by 10%, while keeping their total annual pay the same.

  3. Sergio Méndez

    Charles:

    I bet the problem is “how we make the workers to own the shop”. It seems that a company were all the founders start on equal grounds, have more of a chance of doing that. But how we are going to make that workers own the means of production in larger stablished companies, were bosses have no incentive at all to release the control they have over it?

  4. Rad Geek

    Joel,

    Well, it’s certainly true that cooperative forms of production don’t eliminate all possibilities of perverse incentives for workers. But, as Chris mentioned, in most cases labor-saving technology or changes to workflow present a much less perverse incentive for workers who keep residual profits than for workers who receive a straight hourly wage (since an increase in profits means a direct and immediate increase in effective hourly pay, even if it’s accompanied by a decrease in hours worked).

    There is still a worry about people in specific skilled trades, which might be eliminated entirely by the new technology or processes (buggy-whip makers, whatever). I don’t have an immediate answer for that, but I doubt the issue is likely to be much more of a problem in co-ops than it already is in existing capitalist firms with strong trades unions.

    As for nepotism and favoritism towards your buddies, I’m sure that’s going to be a problem in worker co-ops, but it’s not like that problem doesn’t exist in capitalist firms, too. I don’t see any particular reason to expect that it would be worse in one set-up than in the other.

    Sergio,

    Well, presumably the answer is to give the bosses an incentive to start disgorging their control over the shop to the workers. Strong unions, if they can break out of the Wagner/Taft-Hartley straitjacket, are good at pressuring bosses, through strikes, pickets, boycotts, secondary strikes and boycotts, work-to-rule, open-mouth sabotage, and other forms of shop-floor direct action, until they get part or all of what they want.

    That can either mean gradual changes which give workers buy-in into the existing firm, until they finally have more or less complete control; or it can mean rendering a shop so ungovernable that the boss abandons it at the first crisis, at which point the workers can occupy it at set up autogestión. Also, there’s good reason to think that unions can create an environment where, in the last resort, it is much easier for an organized body of workers to walk out en masse from an existing shop and set up their own, new shop under worker control (if there’s a strong network of mutual aid societies to help them through the transition, union hiring halls to help them find work, a strong culture of solidarity which will encourage people to keep their business with the workers who walked out rather than with the boss they walked out on, etc.).

    The main question is how to get unions to start setting their sights on worker ownership of the means of production, rather than the current goal of a negotiated peace within the context of the wage-labor system. And, again, I think that the answer is letting unions loose from the confines of the Wagner/Taft-Hartley straitjacket. The entire system was devised to give conservative unions concrete competitive privileges in return for ensuring that they kept their goals as modest and their tactics as polite as possible. Without those privileges, industrial unions like the UAW would have good reason to become more radical (as CIO unions often were in the early 1930s), and unions that are already far more radical (like the IWW) would be more likely to grow and regain some of their former strength.

  5. Rad Geek

    Micha,

    Thanks for the kind notice.

    Here’s a cross-post of my reply, for the benefit of those who hate clicking through links.


    I agree with you that worker ownership of the means of production wouldn’t instantly solve all the problems of labor, and that — for all I’ve said in the King Ludd post — there might be other reasons why it turns out not to be viable, or at least not universally practicable. My main point was just to show that one alleged problem with unionism, presented by De Coster and others as if it were intrinsic to unionism as such, was actually only a problem with the particular model of union organizing that both anti-union business types and the establishmentarian union bosses fetishize, and which the Wagner/Taft-Hartley system actively subsidizes and protects in the name of “industrial peace,” at the expense of competing organizing models — like, for example, the worker-ownership model of the IWW. Those other organizing models may have problems of their own, but they don’t have the problems that De Coster treats as intrinsic to unionism.

    After all, one of the myriad justifications for profits going to the capitalist is that the capitalist takes on the most risks, using her own money as an entrepreneur to start an uncertain business, with a high failure rate, and also extending in time when she will get recompensated, assuming the business becomes successful. Whereas a poor laborer just scratching by may not have the wherewithal to take such a large risk, nor be willing or able to withhold present consumption for the chance at a bigger future payoff - the poor laborer just wants a certain payoff now, in the form of wages.

    Well, O.K., sure, but two things.

    First, insofar as this argument works, it seems like it’s an argument for capitalists to take a role and get a cut in the high-risk start-up period for a firm; not necessarily much of an argument for capitalists remaining as residual profit recipients after the firm is already well established. It’s perfectly possible to have both an infusion of working capital during the start-up period and a worker co-op at the end (either because the capitalist agrees to those terms, going in, or because the workers organize after a while and use their stronger bargaining position to convince her to disentangle herself and find a new entrepreneurial opportunity). The question is why that sort of thing doesn’t happen now. Maybe it’s because there’s some other reason why it’s not viable, but I’d suggest that a lot of the reason has to do with the way in which prevalent business models and prevalent union organizing models are supported and rigidified by government economic regimentation (as well as the establishmentarian business and union culture that that regimentation promotes).

    Second, it’s true that, especially for very low-paid wage workers, a lot of their economic decisions are going to be made as a reaction to the extremely precarious economic situation that they are in. This will naturally tend to make people more risk-averse and more interested in certain and quick pay-offs than they might otherwise be. But the precarity isn’t a fixed natural fact; it’s largely the product of specific government policies which ratchet up fixed costs of living while ratcheting down opportunities for homesteading and labor, with workers’ livelihoods caught in the squeeze. Eliminate those policies and you’ll begin to see workers with more of their costs of living safely covered and with more in the way of back-up options should their current arrangement fail.

    But becoming an investor and a risk-taker generally presupposes some level of acquired wealth, where you have taken care of basic needs and have some money left over to risk and save. Poor laborers aren’t generally going to have access to that sort of capital, and they are the ones who seem to benefit from organizing their labor the most.

    Well, organizing your labor and providing a cushion of wealth to fall back on aren’t mutually exclusive options. Unions themselves can (and, in the past, often did) provide an institutional vehicle for helping cushion workers from economic falls — by improving wages, but, more importantly by providing institutions that help workers on the bum to find new work (e.g. union hiring halls, now illegal under Taft-Hartley) or for workers to help each other provide for themselves and their families during lean times (e.g. mutual aid societies, now partly illegal, or heavily regulated — if they do anything that might be construed by the government as selling insurance — and in any case crowded out by government welfare).

    If it turns out that one aspect of radical labor solidarity (worker ownership of the means of production) works out best when accompanied by another aspect of radical labor solidarity (a vibrant network of mutual aid), well, I’m happy enough with that conclusion.

  6. Micha Ghertner

    I think we are pretty much in agreement; I just wanted to point out a few possible pitfalls with solving the principal-agent problem by merging principal and agent.

    First, insofar as this argument works, it seems like it’s an argument for capitalists to take a role and get a cut in the high-risk start-up period for a firm; not necessarily much of an argument for capitalists remaining as residual profit recipients after the firm is already well established.

    True, and this already happens in practice with serial entrepreneurs who start a business, sell it off to a new set of owners/managers once it becomes successful, and move on to start other projects. But what determines the price the original entrepreneur sells it for? The net-present value of future earnings. Much of the economic (as opposed to accounting) profits will already be taken into account in the sale price of the business; it’s just a question of which parties will own and manage the firm most efficiently in the future.

  7. Kevin Carson

    Excellent post, and very thoughtful discussion between you and Micha.

    I would add that many of the constraints on workers’ alternatives and bargaining power are historical, built into the structure of existing capitalism from its beginnings.

    Capitalism, as a historical system, didn’t emerge through the processes of a free market. It has a great deal of structural continuities with the Old Regime, in ways described by people like Immanuel Wallerstein and Chrisopher Hill. The great landed oligarchs, privileged monopolists, etc., of the Old Regime switched to a capitalist mode of operation and incorporated increasing market elements into the overall structure of the system. But the fundamental distribution of property was shaped by the system’s origins in feudalism, and (as Paul Graham said), culturally “our employer-employee relationship still retains a big chunk of master-servant DNA.”

    Because of the birth scars of primitive accumulation, and the structural continuities with the Old Regime, existing capitalism starts from the presuppositions of concentrated, absentee ownership of capital—and hence the wage system. And most of the classical (and Austrian) statements of the labor-fund doctrine take this for granted as a natural state of affairs, rather than as the result of an immense act of robbery.

    Had the modern market economy evolved naturally, from societies with widespread ownership by copyholders, cottagers and town artisans, and no restraints existed on free association by the lower orders, industrialization would probably have occurred in societies of small owners cooperatively pooling their own capital for self-managed production.

    But because of the system’s structural presupposition of capital concentrated in the hands of a small class of absentee investors, the most obvious answer to the agency problem is ruled out from the get-go.

    The managerial hierarchy is a Rube Goldberg contraption for eliciting effort from those with no rational interest in working harder or more efficiently. And hierarchy, by divorcing reward from cost, creates an inherent conflict of interest.

    A couple of tangential points:

    1) Roderick Long quoted Spencer on something very like Graham’s “master-servant DNA,” arguing that with cooperative ownership the conflict of interest involved in piecework would disappear.

    2) I just finished Bodek & Waddell’s The Birth of American Industry, which argues that American corporate management’s attitudes toward labor are rooted in the Sloan system of management accounting. That system assumes 1) that production labor is the only “variable cost,” and 2) that the only option for cost cutting is therefore “non-exempt employees.”

    So by definition, management salaries aren’t judged by the same efficiency criteria as those of production workers. And American management is prone to a business model of “increasing efficiency” by decimating human capital, and otherwise stripping assets and milking the enterprise, in order to improve the short-term balance sheet and game their own stock options and bonuses.

    I’ve talked to lots of retirees from retail and other service industries, and all their stories are the same. Thirty years ago, career sales people were paid a family wage and were an immense source of value because they knew the market and customers’ tastes inside-out. The companies decided it would be more profitable to replace them with minimum wage kids who didn’t know jack shit. So they shifted from a business model based on human capital, and the ability to make something, to a business model based on finance and marketing, and the use of branding and intellectual property to collect tribute from the people actually doing something.

    As Eric Husman said, GM has transformed itself from a company that makes cars to a company whose profits come mainly from financing auto sales (GMAC). Every year that their manufacturing operation makes a profit, it’s probably because they sold off another couple of plants. And it’s because they view the production workers as a cost rather than an asset, but consider the seven-figure salaries of human tapeworms like Bob Nardelli and Al Dunlap to be worth every penny.

  8. Kevin Carson

    P.S. I should have added that Micha’s comments on possible reasons for accepting wage labor are very much valid, and even in a true market society devoid of privilege some people would probably prefer to avoid the responsibilities and risk of residual claimancy, and the bother of running an enterprise. My guess, though, is that with the barriers to cooperative employment being much lower, and labor’s ability to walk away from the table and pursue other options being much greater, wage labor would be far less central to the system, and would be on terms much more favorable to the worker where it existed. IOW, absentee capitalist ownership and wage labor would not determine the character of the system in the way that they do today.

  9. shiva

    “There is still a worry about people in specific skilled trades, which might be eliminated entirely by the new technology or processes (buggy-whip makers, whatever). I don’t have an immediate answer for that, but I doubt the issue is likely to be much more of a problem in co-ops than it already is in existing capitalist firms with strong trades unions.”

    Well, if you go beyond workers’ co-ops to an entirely co-operative society - one in which both workers and “non-workers”* share all the resources according to need, not profit - then that isn’t an issue…

    (Of course, in such a society there wouldn’t be a meaningful distinction between that which is “work” (in today’s terms, ie heteronomous activity carried out for payment) and “non-work” (ie leisure, hobbies, whatever) - things would be done because they needed to be done, not because of what one would get in return for it… and, of course, it’s probably also a very fair response to say “but you would say that, you’re an anarcho-communist” ;) )

    *by which i mean disabled people, kids, full-time parents, etc, not bosses, entrepeneurs or aristocrats, which in that society of course wouldn’t exist

    I’d also like to try to defend Luddism (the original early 19th century movement)- it wasn’t about a knee-jerk reactionary opposition to new technology per se, but to the application of new technology in such a way that it would further disenfranchise workers and strengthen the hierarchical/capitalist system - in other words, IMO it’s best understood as resistance against proletarianisation. The first chapter of Linebaugh and Rediker’s The Many-Headed Hydra explains this pretty well…

  10. Laura J.

    It’s also important to keep in mind that skilled workers aren’t incapable of becoming skilled in another related field when their previous specialty starts to decline in economic value, so long as there are social structures in place that can help them keep themselves afloat long enough to adapt. Skilled buggy-whip makers would probably be better candidates for training in other leatherwork-related trades than your average unskilled job-seeker, for example.

· June 2008 ·

· September 2008 ·

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