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Monday, February 28, 2011

Aggregation + mobility = power2, or ruminations on corporations, unions, and governments

This morning's Financial Times offers a classic expression of the "alarmed capital" argument.  First articulated in the US in the 1850s, this is an argument against business regulation that highlights capital's ability to up and leave for more favorable jurisdictions:
Manufacturers could shift production out of the US to Canada or Mexico as a result [of Pres. Obama's "anti-business" proclivities], warned George Buckley, chief executive and chairman of 3M.
In the context of the current controversies here in Wisconsin, this has gotten me to thinking about power and the mobility of corporations, unions, and governments ....

Buckley's "manufacturers," as a rule, are not individuals but corporations like 3M.  And corporations are collectivities, aggregations of capitalists. To think of labor unions as collectivities takes no leap of the imagination today, but we've lost that perception of corporations. To regain a sense of it, listen to Henry Clay, portraying corporations as safe for a budding democracy in a speech to the U.S. Senate in 1832 (p. [100]):
The joint stock companies ... are nothing more than associations, sometimes of hundreds, by means of which the small earnings of many are brought into a common stock, and the associates, obtaining corporate privileges, are enabled to prosecute, under one superintending head, their business to better advantage. Nothing could be more essentially democratic or better devised to counterpoise the influence of individual wealth.
Corporations and unions, in this sense, are two sides of the same coin--the one, an aggregation of capitalists, and the other, an aggregation of laborers.  Organization enables both "to prosecute, under one superintending head, their [members'] business to better advantage."

Recognizing this essential similarity helps us to understand why, in the age of "trusts and monopolies" at the turn of the 20th century, comparably large organizations of labor sprang up just then.  The organization of labor, in other words, developed in tandem with the organization of industry.  At the Chicago Conference on Trusts (p. 330), hosted by the city's Civic Federation at the height of the Great Merger Movement, Samuel Gompers of the American Federation of Labor described the historical dynamic in these words:
In the early days of our modern capitalist system, when the individual employer was the rule under which industry was conducted, the individual workmen deemed themselves sufficiently capable to cope for their rights; when industry developed and employers formed companies, the workmen formed unions; when industry concentrated into great combinations, the workingmen formed their national and international unions[;] as employments became trustified, the toilers organized federations of all unions--local, national, and international--such as the American Federation of Labor.
And it is why the Sherman Anti-Trust Act of 1890 could be applied to unions, as it initially was.

But capital is generally more mobile than labor, since it's easier to move one's money around than to uproot oneself, one's person. And aggregated capital (a corporation) is more mobile than aggregated labor (a union), because a union is more securely tied to a locality.  One can easily imagine 3M moving its operations off-shore, as countless American manufacturers have done.  This is what makes the "alarmed capital" argument a credible threat and gives it such potency.  But how could a union relocate?  And what kind of threat would that pose?  The idea seems nonsensical.

The fact that mobility, whether actual or threatened, is a potent weapon in the arsenal of capital, but not of labor, helps to explain the declining power of private-sector unions as the mobility of corporations has increased so dramatically since the 1970s.  (Notice that I say "helps to explain"--there are obviously other factors at work as well.)  And, by extension, paying attention to the power that derives from mobility helps to explain why public-sector unions have not experienced the same decline:  their employers, though also organized (into governments at all levels), are anchored, by definition, to their locality.  Governments' inability to threaten to leave town, in effect, levels the playing field for unions.  So public-sector unions have tended to retain their strength as the power of private-sector unions has declined.

Viewed from this perspective, what Gov. Walker of Wisconsin is trying to do, in his strident efforts to limit the power of public-sector unions, is to tilt the playing field in the favor of government to the same degree that it is tilted in favor of corporations in private sector.

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