The Difference Between Cartel And Organized Labor
The Difference Between Cartel And Organized LaborDescribe TheDifferenceBetweenCartelAndOrganizedLabor here.
I'm thinking I'm thinking. Don't rush me...
Cartels are illegal. OrganizedLabor? is not [well, not in civilized western countries at least].
A cartel is at root a group of capitalists with money who want more. OrganizedLabor? is at root a group of workers who want better treatment. [This describes OrganizedLabor? as a concept. In practice, some individual unions are very corrupt, make sweetheart deals with industry, and screw their members.]
In the United States, the National Labor Relations Act specifically excludes labor unions and collective bargaining situations from antitrust law. If workers in an industry organize into a union; such activity does not violate anti-trust laws. However, an industry whose workforce is unionized can choose to organize a cartel to bargin with the union (at least in some cases). In the absence of a labor union; it is an anti-trust violation for companies to organize a cartel to set wages or working conditions. Or so I think, IamNotaLawyer.
Cartels --> higher prices --> people have less money --> bad.
OrganizedLabor? --> higher salaries --> people have more money --> good.
OrganizedLabor? --> higher salaries --> luxury products cost more --> millionaire consumers have fewer goods --> the rich's net wealth decreases --> bad. [Sure, but that's not exactly the worst problem in this world.]
Cartels reinforce the tendency for capital to accumulate -- Under standard economics with decreasing returns to scale, there isn't such a tendency at all.
OrganizedLabor? works against this.
But programmers *are* the rich. We earn substantially more than average (for example, graduate programmers in the UK earn double the legal minimum wage). And we spend that surplus on luxury goods, such as computers, travel, food, wine, musical instruments and sports. Nowadays, with pension funds backed by shares, most of us will go through many economic positions: being cheap labor when we are young, heavily indebted when we buy houses, comparatively well off in late middle age, and living off unearned income derived from capital in our retirement.
I'm also reminded of Sir Humphrey and his irregular verbs: "we are organized labor, you are engaging in anticompetitive behavior, and they are evil capitalists".
On the other hand, there's a lot to be said for some sort of mentoring organization for young programmers which tells them that they have choices, and working 80-hour weeks is not the only choice.
Earlier, this page said:
OrganizedLabor? --> higher salaries --> products cost more --> consumers have fewer goods --> society's net wealth decreases --> bad
which is now corrected to better match reality. In particular, the facts that the poor don't have any net wealth so when talking about "society's wealth" we're talking about the rich's net wealth. And crucially, that if products cost more as a result of higher salaries then this cannot possibly lead to fewer consumer goods, as the two effects cancel out perfectly. In reality, the cost of basic goods rises only a little and the cost of luxury goods rises a lot as the increased salary leads to more buying power in the hands of the workers and the poor in comparison with the fixed buying power of the managers and the rich. The net effect is that the economy is retooled so that scarce resources go towards providing for the needs of the many instead of the wants of the few.
...the facts that the poor don't have any net wealth...
Untrue. Note the use of the word wealth and not money. The two are related concepts, but not the same. Wealth refers to the goods and services available for purchase with some finite amount of money. Money is a worthless commodity in isolation, only valuable for the amount of wealth that it is able to be traded for. Thus, as the price of any good goes up, the net wealth of a society goes down. Because the poor have less money than the rich (duh!), their wealth goes down much faster than the rich's when the price of a good goes up. The people you are trying to help end up disproportionately hurt. This is an example of the ParadoxOfSocialistThinking?.
Untrue. Note the use of the word net in the term "net wealth". The poor have no net wealth because their liabilities outweigh their assets. Many have negative wealth. And what you say about the poor being hurt by rising wages is not only untrue but blatantly contradicts the facts as they have been explained. Here's the explanation again in shorter words:
If wages double and prices double, then the poor are hurt in absolutely no way because the two effects cancel out exactly. The refusal to accept that 10$ * 2 / 2 == 10$ is incomprehensible.
On the other hand, if all wages double, that doesn't mean that rent and other unearned income will double. That puts the rich in a worse position with respect to the poor. The buying power of the rich is reduced in favor of the poor. So as far as wages' relation to prices go, you'd be doubling wages but the price of basic goods would not double. It would increase slightly while the price of luxury goods would increase greatly. The price of consumer goods on average would double but again that means jack and neglects the vast difference between what happens to basic goods and luxury goods.
This is all standard economic theory which anyone who understands the difference between the paper and real economies should know. Of course, claiming to understand something isn't the same thing as understanding it. This is part of the ParadoxOfCapitalistThinking? wherein capitalists claim to understand economics but actually know jack. As opposed to socialists, who don't know jack.
A little more precision would be helpful here. Merriam Webster defines cartel as:
The key point is "limit competition or fix prices". Not every instance of intra-corporate cooperation is a cartel; in fact, all capitalist economies allow corporations to cooperate to a large degree. They step in when the cooperation works to the detriment to the consumer, which often happens in highly vertical markets with only a few players. Take a recent example, Sotheby's and Christie's were able to work in collusion to fix art-market prices because the two auction houses control nearly all of the auction traffic in the art market. I don't know the numbers, but I'd imagine that the two combined control perhaps 95% or 99% of the market. [Except within a particular trade.]
It's feasible that a labor union could act the same way, but in practice they never do. That's because unions in industrialized economies never get to control 95% of the labor market.
To limit organized labor or any cartel is to deny the FirstAmendment's guarantee of freedom of association. The problem with organized labor is the special protections legislated to it and its members. Labor unions enjoy special rights during their formation phase where company management cannot alter certain work conditions. Labor unions members enjoy special exemption from layoffs during a strike period. These, and probably other, protections have given labor unions negotiating power that they would not otherwise have allowing them to exact higher salaries and benefits than they would otherwise be able to achieve causing costs to rise and production to fall. Of course, this is true for any functioning cartel.
Whether or not the FirstAmendment grants a blanket "freedom of association" is highly debatable--many forms of "association" are indeed illegal, so my guess is no. Freedom of association is nowhere mentioned in the text of the amendment; what is protected is the "right of the people to peaceably assemble and petition the government for redress of grievances". In other words, the right to engage in peaceful protest. The right to form trade cartels, labor unions, crime syndicates, bowling leagues, KKK chapters, GrandConspiracys, baseball teams, swingers clubs, and barbershop choirs is not covered by this clause. Most of the foregoing are perfectly legal, even some that are regarded as reprehsnible (such as KKK chapters). About the only one which is categorically illegal is "crime syndicate", though swingers may find some local governments hostile. Cartels and labor unions are subject to much regulation, including (in the former case) the anti-trust laws.
Cartels may or may not have government protection. The American steel industry is an example of industry currently trying to get special protection. American labor unions are another example of cartels that protected by the government. Cartels of any form are inherently unstable because low cost producers have a strong incentive raise production, gain more market share, and increase their net profit. Also, since cartels' only function is to increase individual firm's profit margin, there is a strong incentive for new companies to enter the market. These two incentives act as a sort of safety valve that protects society from the worst effects of cartels. [As long as the barriers to entry are low enough that new companies *can* enter the market.] The problem with institutionalizing the cartel in the form of legislation is that the law tends to mute the two incentives that keep cartels in line and, in the process, limiting innovation and stifling new companies.
Labor unions do give employees an advantage, leading to higher salaries. That however is a good thing, and required to compensate advantages that the employer have, though they are lot caused by laws.
There are a few main differences between an "ideal market" and the situation between employers and employees. First, you cannot decide not to work, if no company is willing to pay you enough. You have to work to survive. [Unless there's a welfare system that pays enough to live on. If there isn't, your statement holds because even crime is work.] Second, if the prices for a product goes too low an an ideal market the production will decrease until the price goes up. But if salaries goes down, amount of people able to work will not decrease. [Unless they go so low that people die off.]
Summary: If employees were not allowed to form unions, the salaries would be very low, and people would get less money. That is a bad thing in itself.
But remember, this is economics and here in the Western world, we've long since stopped caring about justice when talking about economics. We care about efficiency. People who don't believe in social darwinism are socialists, communists or just being swindled by the corrupt labor unions. [Where do centrists fit?]
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(last edited February 20, 2005)
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