In the 1930’s, when workers in San Antonio forced by the Depression into degrading pay and conditions organized to improve their plight, they set in motion a series of unintended consequences. Their labor union, organized by authentic Communists, aimed to create a protected proletariat. Their efforts were undermined by New Deal bureaucrats, who blew up the whole program with a simple innovation – a national minimum wage.
Employers, legally barred from maintaining degrading and abusive conditions, replaced most of the workers with machines. Over the following decade, the number of workers dropped dramatically, while wages more than tripled, working conditions improved, and the industry evolved.
This was a fantastic outcome for everyone. Yes, everyone. The difficulty we have in understanding that fact helps explain why politicians still struggle to make sound economic policy.
If we measure prosperity solely in terms of income, then we miss the bulk of what modern American capitalism has done for humanity. Wages over the long-term have generally increased, but that’s not the miracle. The miracle is what capitalism has done for the purchasing power of ordinary people or the cost of goods in terms of the number hours worked to earn them.
How much did it cost to send a 300-word message to Grandma in 1930? What about in 1990? How much has that cost dropped in just the past twenty years? That same phenomenon has slashed the cost of practically everything, so that even the poorest Americans typically own refrigerators, smart phones, cars, and so on. Even the cost of gasoline in real terms has been relatively flat over the past seven decades.
The only thing that consistently costs more now than it did twenty years ago is skilled human labor. The cost of services that depend on direct interaction with a physically present human expert – like health care and education – have skyrocketed. The greatest beneficiaries of modern capitalism globally have been educated, hard-working people.
The failure of efforts like the Pecan Workers’ Strike and success of the effort to build a Federal safety net moved America up the economic value chain. Outlawing the worst abuses and protecting people against penury allowed the country to continue its long, spiraling, economic journey upward. It created demand for workers in new types of jobs; jobs that demanded engineering and creative skills that were poorly rewarded before.
Those jobs also weakened the value of unions since individual workers could compete for value on their own merits and share more of the rewards. This move meant that labor, freed from union constraints, became almost like capital – portable, marketable, even improvable.
What lessons does the failed Pecan Workers’ Strike offer for politics?
First – It’s usually wrong for the government to do nothing, but it’s almost always best to do as little as necessary. The Feds could have jumped into the Pecan Workers’ Strike headfirst and tried to dictate every aspect of working conditions in that industry. That happened in some other situations. Employers in such a case would have needed some industry protections, which they would have gotten. That industry would have continued with higher prices to consumers, subsidies to the businesses, and a halted progress toward mechanization and innovation.
You can see the results of these kinds of mistakes in states and industries that mandate union membership, issue tough job security protections, and stifle change in the name of worker protection. Lighter regulation is better than heavy and it’s also sometimes better than nothing.
Second – The Feds could have done nothing at all, the KKK could have succeeded in their efforts to break the strike, and nothing would have changed. A complete absence of regulation would have halted the move up the value chain just as easily as forced unionization.
With no safety net and little to curb abuses, capitalism eats itself. The economy starts to move up the value chain, but the disruptions inevitably created by that shift drive people out of their careers. With nothing but luck to stop them from dropping into sucking poverty, more and more of them become functionally unavailable either for education, the workforce, capital development, or consumption. Instead of adapting, they are ruined.
The gaping maw of unmitigated poverty gradually swallows an increasing share of the population, until even the wealthy see the value of their capital erode. Growing poverty eventually makes automation pointless as the pool of desperate people available for the most demeaning labor grows. The brief flowering brought on by the lack of rules shrivels away. Those who were lucky enough to have parents or grandparents who benefited from the temporary boom live in a brittle shell of wealth behind high walls while the banana republic around them withers.
Doing nothing at all to regulate the economy and develop infrastructure is a bad idea.
Third – Unions suck. Government was always more effective at improving labor conditions than unions. Collective bargaining created a whole new infrastructure to feed on individuals and siphon away their resources. Like any other organization, the union’s primary goal very quickly becomes self-promotion.
The value of unions has passed but the organization lingers like a persistent rash continuing to stifle innovation and suck energy from the economy. Unions solved their last problem more than half a century ago. In our time they are a horrid relic that promotes mediocrity and corruption.
For those who want simple answers, regardless whether they live on the left or the right, the world is a frustrating place. Marxists aren’t the only enemies of capitalism. Simple answers are just as dangerous.
Happy Labor Day.