This Week’s Applied Hayek: Occupy AFL-CIO Edition

Chapter 18 of The Constitution of Liberty is on “Labor Unions and Employment,” which will be considered in my class next Monday evening (are you paying attention, class?), the day before Ohio’s vote on the reforms to public employee compensation and collective bargaining rights.  Advance polls suggest Gov. Kasich’s reforms are going down to defeat, chiefly because of tactical mistakes.  National Review’s Brian Bolduc explains.

Anyway, Hayek’s chapter on labor unions was written before the rise of public employee unions that are the chief focus of controversy today.  Much of Hayek’s chapter discusses unionization and its wage-distorting effects in the context of Keynesian theory, and as such reads as a perfect diagnosis of the steadily growing inflation of the late 1970s, and why both over in the UK under Thatcher and here in the U.S., unions needed to be reined in.  Nowadays it is the public sector unions that need discipline.  Here and there, as usual, Hayek offers timely observations, such as:

In few other areas are progressives so little willing to consider the reasonableness of any particular measure but generally only ask whether it is “for or against unions” or, as it is usually put, “for or against labor.”

Most interesting in this chapter is Hayek’s lengthy analysis of how unions are a force for increasing inequality among workers, which would suggest that the OWS movement might want to picket the headquarters of the AFL-CIO and especially the government union offices.  This argument is too long to summarize here, but at the end Hayek offers this observation that is certainly germane to our present controversies:

This path [of union reform] is still blocked, however, by the most fatuous of all fashionable arguments, namely, that “we cannot turn the clock back.”  One cannot help wondering whether those who habitually use this cliché are aware that it expresses the fatalistic belief that we cannot learn from our mistakes, the most abject admission that we are incapable of using our intelligence.