"Whenever I go into a restaurant, I order both a chicken and an egg to see which comes first"

Sunday, February 28, 2016

The End Of Big Labor - A Return To Free Markets And Economic Enterprise

There were clear class distinctions in New Brighton, a small city in New England, undistinguished today but one well-known for its former industrial strength. First and foremost among the classes were the WASP captains of industry, the grandchildren of the great industrialists of the 19th century who made the city into The Manufacturing Capital of the World.

They were tended by the professional middle class, diverse in ethnic origin, and ambitious.  These doctors, dentists, and lawyers were in turn served by the painters, electricians, and plumbers who had few aspirations except solid American ones – Kinder, Küche, Kirche and a week at the shore.  Finally there were the factory workers who  turned out tools, ball bearings, and locks; and their wives who cleaned house for the West End.

The workers of New Brighton were Polish immigrants – nine-to-five, no benefits, galley slave working conditions, Saturday afternoon picnics in the park, and kielbasa and church on Sundays.  They were the shadowy forms seen in factory basements and quickly forgotten by the town's burghers. They were far from the Country Club, the Vineyard, Cape Cod, or Nantucket.

The history of New Brighton is a history of the Carpenters, Payntors, Streeters, and Franklins who brought flinty New England parsimony, enterprise, ambition, and practicality to the Connecticut River Valley and built the industries that provided the arms and materiel that ensured a Union victory in the Civil War.  Before that these visionary settlers forged flintlocks and bayonets to supply Washington’s Revolutionary armies.

For two hundred years these adventurers, entrepreneurs, and capitalists provided the intelligence, wealth, and enterprise to build New Brighton and the Union.  Like many better-known industrialists of their era, New Brighton's capitalists were philanthropic and generous with their money. The Frederick Law Olmsted park, a public space that was designed to preserve local flora, provide light and air for factory workers, and created a recreational space and a Walden-like oasis in the midst of a dynamic industrial city, exists thanks to their wealth and civic engagement. One of New England's best art museums was founded by a prominent local artist but funded by the town's industrial magnates.

The supply of laborers for the many factories of New Brighton far exceeded demand, and they were expendable. Warsaw, Lodz, and Gdansk heard of American corporate expansion and hiring almost before the workers on Arch Street. Managers at Ruff & Billings had to turn away applicants for the most menial work.  Hundreds if not thousands of Kowalskis, Mylnarksis, Granskis, and Pulaskis were lined up outside the doors of every factory in New Brighton.  Thanks to cheap labor, permissive labor laws, and hardworking, America-or-bust immigrants, the factories were always humming.

The town grew and prospered.  There were more and more shops along Broad Street in the Polish section of town. Immigrant spending kept Bobby's Smoke Shop, the New Brighton Diner, pharmacies, dry cleaners, barbers, and wedding shops alive and well.  The Polish immigrants were happy because they had escaped the hardships and penury of the old world.  The painters, electricians, and plumbers were happy because the local economy was growing; and the captains of industry were delighted to see their bank accounts swell, their children’s trust funds prosper, and a three-home retirement just over the horizon.

As the industrial age faded and employment was transformed from the factory floor to the downtown office, the secretary was the most important employee of any office. Without her, work would stop. Interoffice memos would pile up. Communications with clients would amass into a giant backlog. Middle managers would never be able to find critical files. No matter how much creative vision, enterprise, jawboning, and negotiation on the part of senior management, the real work got done in the trenches.  Blue collars became white in a matter of a generation.  Unskilled labor done by non-English-speaking workers became a thing of the past.  By the end of the 20th century New Brighton was struggling to survive.  Without the industry on which it had depended for 200 years, the economic base collapsed. Poles no longer immigrated to New Brighton, and poor and often dysfunctional Puerto Rican, black, and Dominican families took over their former enclaves.

The Twenty-First Century will be the first without labor. Intelligent machines, robots, drones, and online commerce have already replaced the pipe-fitter; and steam pressers and lathe operator will soon be things of the past.  Most heavy industry, the locus of the American labor movement, has moved overseas, and the economy is quickly becoming a technology- and information-driven one.This transformation is a good thing, for it has raised the productivity bar. Those who work will eventually work at better-paying, more productive jobs more consistent with talent and education.

The break up of big labor has been instrumental in the growth of entrepreneurship, both in the high-tech industries of Silicon Valley but also in small business.  Although these small enterprises still labor under the yoke of government regulation, at least they have more control over their labor force.

Without a doubt workers are struggling to find their way in this new, mobile, increasingly free market economy. Older workers miss generous union benefits, fat contracts, and tenure; and new ones, often immigrants, have neither the skills, language, or cultural savvy to move efficiently between jobs. Yet there are many signs of progress.  First generation Salvadoran immigrants in the Washington, DC area are no longer blowing leaves but owning and operating landscaping companies.  Salvadoran women who were low-paid maids and nannies have formed small companies which rely on efficient management models - better work in half the time for only marginal increases in fees.

This scenario is no different from the mid-Twentieth Century.  The sons of Italian immigrants who broke rock and worked on road gangs now owned trucking, cement, gravel, and construction companies. It was not because of Big Labor and their government supporters that these entrepreneurs profited; it was despite it.

The labor movement is but a shadow of its muscular, intimidating self of the 1930s. Labor has lost out to capital, enterprise, free markets, and economic mobility and will never regain its place and position.

While working in Poland after the fall of the Soviet Union, foreign experts were surprised to hear of the summary dismissal of Lech Walesa, the Solidarity Gdansk shipyard worker hero.  In many ways he was the man who led the Communist bloc in their revolt against the Communists and who was responsible for coalescing thousands of workers in their revolt against Soviet totalitarianism.

Foreigners soon found out that although the aristocratic Poles poised to take over the reins of government respected Walesa for his courage and pluck, to them he was an ignorant peasant, a worker, a factory worker, and totally unacceptable to lead the country.  Poland like all European countries has a long and storied noble history.  Polish royalty intermarried throughout Europe and the aristocracy was among the continents most polished, sophisticated, and wealthy. To even consider a peasant like Walesa was anathema.

A similar scenario is being played out in Venezuela.  The current President is a former bus driver who, despite his working class, socialist credentials, came completely unprepared for the job. He neither has Chavez's brains, political ability, or popular charisma.  Chavez' misguided social populism was sure to end in ruin, but Maduro has accelerated the country's demise.

The point is that the answer to the chicken-egg puzzle, capitalists have always come first.  It is they whose brains, insight, canniness, and entrepreneurial drive have created the infrastructure within which labor works.  Bill Gates in a recent hour-long interview with the BBC told of how he not only understood the new language of computer software, but had the vision to see that information technology would be revolutionary. Gates and Steve Jobs are no different from John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie or any of the industrialists of the early 20th century.

America relies far more on the creative and entrepreneurial genius of people like Gates and Jobs than on the labor that feeds the furnace.  Of course one cannot do without the other; but entrepreneurs have always thought first and foremost about their new product and service and left labor to reconfigure accordingly.  If the days of Big Labor were back, Apple and Microsoft might never have happened.

The labor movement is dead.  Labor is dead; and the challenge facing American leaders is not how to revivify the Teamsters, or the American Federation of Teachers, but how resolve the fundamental economic issues which prevent social and income mobility.  In other words to begin with the problem and then work towards a solution; not to automatically apply an assumed principle - in this case the inherent value of labor.

An  Enterprise Day should replace Labor Day - a time to honor the most enterprising, creative, innovative, intelligent, and risk-taking among us;  a day to honor those schools which reward talent, initiative, and high performance; a day to acknowledge those students who have graduated because of their own abilities, ambitions, and high goals.

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