In the early days of capitalism there was a mass exodus
from farm to factory. No one forced the masses to work in
factories; they did so because factory work was better and more
profitable than the alternative – sixteen hours a day of backbreaking farm
labor for less money. Or begging, prostitution, crime, and
starvation. As Ludwig von Mises explained in Human Action (p. 615):
The factory owners did not have the power to compel
anybody to take a factory job. They could only hire people who
were ready to work for the wages offered to them. Low as these
wages were, they were nonetheless much more than these paupers could
earn in any other field open to them. It is a distortion of facts
to say that the factories carried off the housewives from the nurseries
and the kitchens and the children from their play. These women had
nothing to cook with and to feed their children.
These children were destitute and starving. Their only
refuge was the factory. It saved them in the strict sense of the
term, from death by starvation.
The same can be said of the conditions in some of the
poorer countries today. Labor unions that complain about “sweatshops”
and “child labor” are not concerned about the well-being of Third-World
children. Quite the contrary – they see them as competition for
unionized labor and want them all thrown out of work and into the
streets. Academics and clergy who assist labor unions in these crusades
are viewed by the union bosses as useful idiots.
As capitalism developed, there was an inexorable increase
in wages, thanks mostly to capital investment by entrepreneurs.
Increased skill, education and experience on the part of the workers
themselves (i.e., human capital development) makes them more valuable to
employers by making them more productive and hence increases wages, but this
is a slow and very incremental process. Capital investment, on the
other hand, is capable of producing much larger leaps of productivity.
Think of the productivity of a farm worker who plows a field behind a team of
horses, compared to performing the same task on a tractor. He is no
more skilled or hard working, yet he is infinitely more productive in terms
of acres plowed per day.
When capital investment increases worker productivity, it
means more profits for the capitalists who must them compete for the
more skilled labor. They must pay them more or risk losing them to
other employers – and losing the revenue that they can help generate as
well. Under capitalism there is a strong correlation between the growth
in labor productivity and the growth in wages.
In addition to being responsible for higher wages, capitalism produces
cheaper products, more products, and better quality products, thanks to the
never-ending process of competition. The lowering of prices gives
workers an even bigger pay boost with which they can purchase the increased
array of products and services produced by capitalism, thereby enhancing
their standard of living.
Nothing benefits “the masses” economically more than the
growth of capitalism, for capitalists have always understood that the way to
become really wealthy is to provide more value at lower prices to the largest
possible customer base. Thus, products like cars and refrigerators that
were at first the exclusive province of the wealthy soon became available to
everyone.
Productivity growth spurred by capital investment is also
responsible for shortening the work week. The only way workers can work
less but get paid more is by being more productive, i.e., producing more
revenue per hour or week for their employers. Human capital investment
plays a role here, but so does capital investment and risk taking by entrepreneurs.
Thanks largely to capital investment, the work week in America is about half
of what it was at the advent of what economic historians call “the second
industrial revolution” that began at the end of the American Civil War
(1865). The shorter work week is the result of capitalism, not lobbying
by labor unions or federal legislation that only codified what already
existed.
Capitalism is also responsible for the demise of child labor. Young
people originally worked in factories (and still do in many parts of the
world) out of economic necessity, for the alternatives were crime,
prostitution, begging, or starvation. As workers became more productive
and better paid, thanks to capitalism, they were able to take their children
out of the factories and send them to school. Legislation banning child
labor only codified what capitalism had already been hard at work
abolishing. Moreover, such legislation was usually inspired by labor
unions who wanted to throw young people, who competed with union labor, out
of work. This kind of “child labor” legislation was designed to harm
children by depriving them and their families of economic opportunities that
they so desperately needed (and need).
Capitalism has also made the workplace safer.
In relatively “dangerous,” strenuous, or dirty jobs, employers must pay a
wage premium because relatively few people want such jobs. Economists
call this a “compensating difference.” The man who rides on the outside
of the garbage truck at daybreak, in the winter, in the northern states, does
so because he makes a very good salary – better than any of his
alternatives. Profit-seeking capitalists have always understood that
they need to pay more to get people to perform risky or dangerous work.
Therefore, they have also always understood that there is profit in making
the work place safer. A safer workplace requires a lesser
compensating difference. Lower wages paid to the workers can mean
higher profits for the capitalist. Thus, the American workplace had
become safer and safer for generations before the Occupational Safety and
Health Administration (OSHA) was established in the 1970s.
Indeed, OSHA has often reduced workplace safety with its clumsy and
stupid workplace rules enforced by government bureaucrats with no knowledge
of the specific work that they are regulating.
Labor unions, on the other hand, have never benefited anyone but the
highly-paid union bosses and some of their members, who have never
accounted for more than about one-third of the American labor force (less
than ten percent today in the private sector). If unions are successful
at raising wages above market rates with strikes, strike threats, shut downs,
sabotage, or negative smear campaigns against corporate executives
(“corporate campaigning”), the laws of economics dictate that some
of their members will lose their jobs – usually those with the least skill,
experience, and seniority. Employers will not pay workers more than
they can produce in revenue for them and still stay in business. Thus,
a new hire who can produce say, $500/week in additional revenue, is not
employable if the union “succeeds” in negotiating a $700/week wage.
This is the “disemployment effect” of unionism.
In addition, labor unions in America have long been the main
source of anti-capitalist propaganda, and of lobbying for anti-capitalist
legislation (corporation income taxes, minimum wage laws, labor regulation,
etc.). By weakening capitalism in this way, they weaken the main source
of productivity growth and hence the main source of wage increases. The
union bosses keep their high-paying jobs by benefiting at best a slim
majority of their members, while harming the economic prospects of other
union members and especially non-unionized workers, whom they demonize and
slander by calling them “rats,” “scabs,” and much worse. Indeed, there
is a very long history of violence perpetrated against competing, non-union
labor by American labor unions, who are celebrated with their own holiday at
the end of every summer.
T
