"Individual workers are too weak to bargain with corporations"
THIS CLICHE was stated recently in public print somewhat as follows: The obvious defect of the theory of laissez faire was that the individual laborer, with his family obligations and his lack of mobility in seeking employment, did not have equal bargaining power with the owners of ever more centralized industry.
There is probably no popular misconception that is more universally believed today, or more devastating in its consequences than this one. And no popular concept could be more completely in error. This belief is at the core of the twin major threats to the future of our economy and to the prosperity of all: unemployment and inflation.
Undue worry over the weakness of the bargaining power of the individual is responsible for the aggressive use of force and coercion that raises wages in certain areas above free market rates. This causes restriction of employment in those areas to less than would prevail in a free market. At the same time, it causes the very rigidity in wages that makes adjustment impossible and makes unemployment permanent.
Put in another way, real wages are raised too high for all to be hired. Because of union activities, men are not free to bid Wages down in the exact places and by the exact amounts so that exactly those men who need jobs can get them promptly. Whereupon, the government invariably resorts to a very tricky method of reducing real wages - by making money worth less. This, of course, is done by inflation.
Although such tactics may eventually accomplish in some small degree the purpose desired, the method is at best incredibly clumsy, inefficient, and inadequate. At worst, it could lead to catastrophic increases in the money supply, and then dictatorship "to bring order out of chaos." This has happened elsewhere.
If family obligations and lack of mobility weaken one's bargaining power, it is hard to see how increasing the size of a business unit would not also weaken its bargaining power, for the increase in size would seem to increase both its obligations and its immobility. In fact, immobility always is a greater problem for the employer with plant and equipment than for the average employee.
The picture of the "weak individual" bargaining with the "mighty corporation" is false in all its implications. By promoting unionized power over employees, it undermines the rights and alternatives of the "individual" so as to greatly hamper, rather than increase, his true bargaining powers. When competition for jobs is free, an individual has a chance to find the best possible niche for himself in the huge matrix of industry. But when unions block his free response to opportunities, and hold him to his present job with threats of "loss of seniority," he is continuously injured.
Individuals, who are free to follow their own dictates in moving from one employer to another, wield an irresistible force upon employers. How could any employer hold any employee without providing wage and working conditions which, in the opinion of the employee, are the best attainable?
An excellent example of "weak" individuals bargaining with "powerful corporations" is that of the house-wile dealing with "giant supermarkets." Does she organize, march in a body, demand en masse, picket? She does not! She simply proceeds, as an individual, from one store to another and selects what she considers to be the best bargains. With the magic of her discernment, she has beaten these goliaths down to where the net profits earned by supermarkets average about one cent for each dollar rung up.
It would seem to be simple good sense to give careful attention to the very real and vital advantages of a free market to the "little fellow" before giving them up in favor of the totally illusory advantages of force.
The inescapable conclusion must be that "little" and "big" alike find far richer rewards and far more protection of their economic and social welfare in complete freedom to bargain individually than they can ever find in the use of force. The important fact to remember about unionized force is that it is directed, fundamentally, not against the employer, but against other would-be competitors in the labor market - other laborers. For how could wages be raised above free market wages except by limiting competition - that is, by freezing someone out? It is usually this "someone" who is the weakest and most pathetic of all the victims of the violence and coercion by which unions gain their ends.
How can laissez faire really be so bad, when all it means is: keep arbitrary, physical, coercive force out of the market place?
Roland W. Holmes