Monday, January 15, 2007

Unions & Guilds & Distributism & Chesterton

by John Peterson



“Trade Unions are confederations of men without property, seeking to balance its absence by numbers and the necessary character of their Labor.”
~ G.K. Chesterton, A Short History of England.


Two of today’s economic-political movements are unconditionally dedicated, at least conceptually, to the welfare of workers: Distributism and Organized Labor. And yet, with the exception of this shared purpose, the two movements signify almost nothing in the way of common theories and practices.

What may seem a paradox is, however, very easily explained. Distributism’s solution to the plight of workers is based on the natural affinity between the ideas of business ownership and work. Unionism’s solution is based on the natural antipathy between business ownership and work.

The purpose of the following discussion will be to suggest that Unionism would be strengthened, and its prospects brightened, if it would abandon its traditional belief in the incompatibility and unavoidable antagonism toward business ownership and work, or—to use a traditional phrase—between Capital and Labor.

The Anti-Ownership Posture of Unions

Organized Labor exists because wage-employees are easily replaceable components in a fractionated production process. As individuals they have no bargaining power, and are subject to the whims of business owners and to cyclical swings in the demand for Labor. As a matter of simple justice, integral to the right of self-defense, workers can and must protect themselves from the inequities of the employment system: deficient wages, unjust dismissal, abuse from supervisors, job insecurity, and inadequate opportunity for occupational advancement. Under the right of assembly (and the right of self-defense), hired workers can and must band together for Collective Bargaining and other types of mutual support. Because Work Stoppage is the single effective threat a hired worker has, the Right to Strike is as fundamental as the Right to Organize. None of this can be denied, given the overwhelming predominance of wage-employment, and the attendant lack of business-ownership for workers in our society.

The main problem of Organized Labor has always been that in order to address the problems inherent in wage-employment, Unions have accepted the idea that workers and owners are natural enemies. Unions have accepted as normal or inevitable the state of affairs in which Capital and Labor are at opposite poles—with divided interests, conflicting motives, and antagonistic aims.

In the era of Robber Barons and Sweat Shops, the classic model of Capital-versus-Labor undoubtedly helped workers put a stop to unconscionable practices of exploitation and injustice by rapacious Owners. It was impossible for workers to own the means of industrial production, and the Owners knew it and took full advantage of the fact. But there are fundamental problems with the continuing use of that adversarial model today. First, it presupposes the idea that human work is a commodity and is subject to the same supply-and-demand analysis that is applied to the purchase of lumber, steel, or phosphates. In so far as workers and their Unions are immersed in this zero-sum struggle, they will be forced to justify their demands to the Capitalist-Owners on a competitive basis against the cost of raw materials, leases, equipment, overhead, marketing, and profits. In bargaining with owners for benefits, even with the coercive threat of the Strike, Labor tacitly admits that the value of work is defined by what can be won at the bargaining table. This degrades and dehumanizes Labor. It must also be said the Labor-versus-Capital model is sanctioned by a discredited Marxism and the notion that class conflict is an inescapable historical process leading to the inevitable Workers’ Utopia. The historical affinity of Trade Unionism for Communism and Socialism cannot be denied, and may have served a useful purpose at one time—that can be argued pro and con. What is important to acknowledge now is the failure of Marxism as a convincing economic theory and as a viable economic system. The collapse of the Soviet Union has called into question not only the practical applications of Communism, but, as well, the atheistic-materialistic-deterministic philosophy on which it was based. Those who would continue to tie Organized Labor to the Marxist notions of class warfare or to the demonization of private property, are merely recommending exploded theories and failed policies that lead nowhere.

The second problem of the Capital-versus-Labor model has to do with the emergence of what might be called an “Ownership Vacuum” in the modern business corporation. Today’s typical large business is owned by an army of anonymous shareholders: holding companies, pension accounts, mutual funds, insurance trusts, individual investors, other corporations, and foreign interests. A modern manufacturing and service company like IBM, for example, lists over 700,000 different owners of common stock. These “owners” do not manage the firm and have no voice in setting policy. Fewer than five percent of formal stockholder initiatives ever succeed. And while owners of large blocks of shares may have a representative on the Board of Directors, command of the enterprise is really in the hands of the Chief Executive and his cronies who control the board. The ascendancy of this elite class of all-powerful professional managers, who have taken the mantle of business power from the old-style Capitalist-Tycoon-Entrepreneur, makes any talk of Capital-versus-Labor irrelevant. The Capitalists (that is to say the shareholders) do not come to the table.

Because the business executives do not own the corporations that employ them, but do exercise total control over the policies and resources of these corporations, the motives and aims of these men must be considered apart from the business goals of the enterprise. In brief, the personal aggrandizement and self-promotion of the manager who is not an owner boils down to:

A) Short term thinking, which jeopardizes the long term business health of the enterprise (example: siphoning money from employee pension funds to improve short term profits).

B) Cronyism, which robs the enterprise of the best leadership and which institutionalizes incompetence.

C) Self-awarded privileges and payoffs beyond the dreams of rapacity: multi-million dollar paychecks, golden parachutes, perks that would make any self-respecting emperor blush.

D) Merger mania in the quest for expanding personal power (as opposed to the quest for sound business results).


The dispersion of Ownership has permitted this self-indulgent management style to flourish unopposed. But this “Ownership Vacuum” should suggest an unprecedented opportunity for Organized Labor. All that is required is that Unions consider a view of the business corporation in other terms than the old Capital-versus-Labor model.

The Pro-Ownership Posture for Unions

The Labor Movement’s vaunted power in the political and economic fronts has uses that can never surface so long as Labor continues to demonize Ownership. We all know that Labor Unions have fought Employee Ownership Stock Plans (ESOPs), Capital Credit, and other forms of worker ownership with the excuse that workers should not have divided loyalties. We also live with the mentality of government legislators and regulators who feel worker ownership of the businesses for which they work is a conflict of interest. (As an aside, this writer was once offered stock in a privately-held company where he was employed, until the IRS voided the offer with the warning that too high a percentage of the employees were becoming shareholders in the firm.)

We are dealing with a pervasive mind-set that that Capital and Labor are incompatible. This may well be because of the history of merciless exploitation to which Owners subjected Labor in the early stages of Industrialization, and it may also be because of the fashionable Marxist theory of an inevitable class struggle. But clearly, and regardless of mind-sets, once the idea of worker-ownership is examined, it becomes extremely suggestive for Organized Labor both tactically and strategically. Consider just the fact that it is the shareholders and the workers who are most united in purpose—to assure a healthy, prospering business enterprise for growing profits and expanding employment. This goal is not the first priority of the professional managers or government regulators who may come to the bargaining table. Therefore ownership and Labor have natural affinities, and the time for taking advantage of them is long over due.

Here are a baker’s dozen of ideas.

1. A Union should aspire to the largest possible holdings in common stock in the corporations for which its workers are employed. Union pension trust-accounts should be so invested. Large minority owners of common shares in today’s corporations have an entree into the board room where key policies are formulated, including key policies affecting Labor.

2. As well, the Union should aggressively seek control over any employee benefit accounts (pension funds, for example) for the purpose of accumulating and controlling large blocks of shares in that corporation.

3. Labor should aspire to permanent membership on the Board of Directors, preferably not as a negotiated concession, but as the right of a major stock-ownership group.

4. Unions should get behind every manner of employee-ownership program, whether formal ESOP programs, Capital Credits, Leveraged Buyouts, negotiated profit sharing, subsidized IRAs or whatnot.

5. Union sponsored and employee owned (and risk-insured) stock-buying cooperatives or mutual funds should be originated.

6. To the extent that Union ownership of shares is impeded by laws and regulations, the political power of Unions should be brought to bear. Unions should sue for changes in business charters and lobby against laws and regulations that restrict Union ownership of common stock and the control that goes with it.

7. Unions should form alliances with other share-holder groups to pursue common goals.

8. It should go without saying that individual Union members should own at least a few shares in the company that employs them, for even individual investors have ownership rights that go beyond the monetary value of the shares, and large numbers of individual investors can mount a serious challenge to management under certain conditions.

9. Union lobbyists should work for business-friendly and Labor-friendly government regulation, rejecting the Democrats’ anti-Business politics and the Republican’s anti-Labor politics. Union lobbyists should not be permitted to reflect the Marxist doctrine of class struggle and Capital-vs.-Labor warfare, but should promote in every possible way the ownership of business corporations by Labor.

10. Union workers should return to the ancient ideal of the sanctity of work, entreating their members to Labor with pride, to work well, and to earn their pay with honesty and dignity. Unions should foster the pride of ownership that lends stature and purpose to Labor, increases productivity, and can serve Labor by invigorating feeble enterprises headed for oblivion and unemployment.

11. Unions should sponsor business education for their memberships, stressing how businesses create wealth and explaining the benefits and risks of ownership.

12. Unions should approach management from the point of view that the Union is an owner of the business, and that the executives bargaining with the Union are employees of the business. Today’s professional executives typically own very little stock in the firm, and what they own they were awarded by the Executive Board, which they control, in the form of very favorable stock options. No, these men are not Capitalists, not tycoons, and definitely not entrepreneurs. They have merely been sufficiently more clever or more ruthless than other professional managers at climbing the corporate ladder. They are essentially bureaucrats, and their sole concern is preserving their personal fiefdoms and expanding their empires. As such, they are the natural enemies of both Capital (the shareholders) and Labor. Without being crude about it, suffice it to say that wresting the perks from today’s executive team is a far more intimidating threat to them than the smaller menace of a Work Stoppage.

13. Unions should demand, at one and the same the same time, Labor concessions that are fair and business practices that are sound. This approach will benefit workers and shareholders more than conventional Union bargaining strategies (Wages versus Profits), and this is especially true if the workers and shareholders are to a significant extent the same people.


Whether or not most of these suggestions are feasible, or can be made feasible, has never been tested—and should be tested.

In the end, what may prevent the revolution may well be a dreadful and pervasive complacency. What is the recent record of Trade Unionism here in the United States? In 1960, one-third of the private-sector work force was organized. Today, the percentage is one in ten and declining. What there is of radical Labor activity goes unheralded today, except in small and exceptional pockets of geography like Decatur, Illinois, or in the worker-owner squabbles which frequently and meaninglessly erupt in the surrealistic world of Professional Sports. Otherwise, the Union movement seems to have slumped into a comfortable and nearly invisible limbo. Workers, to use the phrase of entrepreneur Jack Stark, are “the Living Dead”—submissive, alienated, and hopeless. Meanwhile, the Labor News is dominated by action on the Union-Merger front, an ominous sign that Organized Labor is taking on the coloration of the Professional Business Management Elite.

Just now the “Ownership Vacuum” in large corporations is a gaping opportunity for energizing the Trade Union movement. It is even conceivable that Organized Labor could bring a just, equitable, and final solution to the inequities seemingly inherent in industrialization. Labor could do so along revolutionary lines never envisioned by the great theorists of Distributism and through means those men would have thought impossible. We can now only dream of such a settlement in which the workers will own the great corporate enterprises for which they toil, will have their grievances redressed through Democratic processes, and will reap their share of the rewards of business success.

Perhaps the best that this kind of a brief paper can do is to suggest to all workers and Union members this simple but potent slogan: “Ownership Is Good!”

Reprinted from The Distributist, 5-1, September, 1995

Interview with Thomas Storck

On Cooperative Ownership

John Médaille Interview in Romania

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