Wednesday, May 02, 2012

The All-Powerful Unions

Daron Acemoglu and James Robinson:

Unions can mobilize their members to strike and can act as a powerful interest group, but their power is also probably limited relative to those of the very rich both in democratic and non-democratic societies — and in the US, the power of unions was probably seriously, perhaps irreversibly, damaged by Ronald Reagan’s victory over the air traffic controllers’ strike.

In consequence, in the US today, the fear is not that unions will take over the political process, but that the rich elite — including but not limited to the banking elites — will and in fact have already done so.

This makes us believe that, though the unions, when they have the power, can also act as extractively as other groups in pursuing their interests at the expense of the rest of us, they are not the main elites threatening the inclusivity of Western institutions.

That being said, it is probably true that unions have been in a more rent-seeking mode in the second half of the 20th century compared to their pivotal role in the development of inclusive institutions in the 19th and early 20th centuries. For example, the story of democracy in Britain would have likely been very different without the labor movement, which mobilized the disenfranchised to demand voting rights for all. Similarly, the US labor movement played a central role in giving voice to workers and improving working conditions. Is anything different today? The answer is not clear. But one possibility is that in fighting for broad-based issues such as democracy or limits on harsh, even coercive, working conditions for most workers, the labor movement in the 19th and early 20th centuries was both more effective and more clearly on the side of greater inclusivity in economic and political institutions. This may have changed once unions’ demands shifted to higher wages, more generous health insurance and better pensions for their narrow membership.

On the other hand, some also argue that a strong labor movement is even more necessary today as a counterweight against the creeping political inequality in favor of the very wealthy and the politically-connected corporations. We think that some sort of organization to counterbalance the political power of the mega-rich is indeed necessary. Whether this role can be — and should be — played by unions is a question that requires more thought and research (i.e., we don’t know the answer).

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