Monday, January 3, 2011

Facts or Fallacies Part III: Combinations, Murder and the Primordial Lump

In Part I, I compared the statistical fact that non-farm employment was lower in September 2010 than it had been in December 1999 with the assertions that those who believed any such thing could occur were guilty of a lump-of-labor fallacy. In Part II, I rehearsed debating points regarding Paul Krugman's columns citing the alleged fallacy.

My intention in Part III is not to refute the fallacy claim. I believe I did that sufficiently in "Why Economists Dislike a Lump of Labor" and "The Lump-of-Labor Case Against Work-Sharing." To date, no one has brought forward a substantive rebuttal to those articles. Instead, I will explore further the evolution of the fallacy claim.

In "The Lump-of-Labor Case Against Work-Sharing," I established that David Frederick Schloss was the originator of the phrase designating the lump-of-labor fallacy (the term "lump work," designating labor sub-contracting, can be traced back to Henry Mayhew's 1851 London Labour and the London Poor). That attribution has not been challenged and has even been taken up by The Economist -- without, of course, giving credit to the researcher or acknowledging his debunking of the fallacy claim. A few months ago, I discovered the probable source of the stock explanatory supplement to the fallacy claim, "their theory is that the amount of work to be done is a fixed quantity…" which appeared in a report in the New York Times on the 1871 Newcastle engineers' strike.

The phrase and the explanation still leave questions as to the origin of the general idea, which was in some respects already a commonplace by 1871, as several precursors to that 1871 New York Times report and contemporary letters to the editor of the Times of London demonstrate. What those precursors have in common with the New York Times report and with much subsequent usage is the contention of a union principle of extortionate obstruction.

John Wilson in "Economic Fallacies and Labour Utopias" (1871) cited "the enforcement of all sorts of arbitrary restrictions on the combined workmen" attributable to a "Unionist reading of the Wage-fund theory."

James Ward in Workmen and Wages ("What Trades-Unions Really Are", 1868) alleged the "real cause of the objection to piecework and overtime… the fallacy which lies at the bottom of this whole system [of trade unions] as:
…the view that wages being determined in their amount by importunity and combination, they form a fund for the general benefit of all, and that the fund gained by the contributions and exertions of all ought not to be encroached upon by the superior strength and dexterity of a few.
Harriet Martineau in "The Secret Organisation of Trades," (1859):
Their aim and object is, in every case which we have been enabled to investigate, to stint the action of superior physical strength, moral industry, or intelligent skill; to depress the best workman in order to protect the inferior workman from competition; to create barriers which no Society-man can surmount, and which few non-Society-men dare to assail; and, in short, to apply all the fallacies of the Protective system to labour.
Martineau refers to an 1838 article, "Trades Unions and Strikes," as authoritative regarding the true motives and practice of trade unionism. The 1838 article commented on the conspiracy trial of five leaders of the Glasgow Cotton Spinners Association, which took place in the wake of a strike and the murder of John Smith, a strikebreaker. In his capacity as Sheriff of Lanarkshire, the article's author, Archibald Alison, had conducted the raid on the union meeting and arrested the accused.
Sheriff Alison (1792-1867), historian, entrepreneur and leading figure in the judiciary, was deeply involved with measures against political activists for more than twenty years. His investigations included the demonstrations leading up to the 1832 Reform Act, the activities of individuals with trade union and Chartist sympathies, protesting cotton spinners and those involved in the 1848 bread riots. He received special commendation for his work on the latter when, following bread riots and a series of demonstrations (at which he was on occasion to be seen on his horse on the police front line), apprehended persons, seen to be ringleaders, were prosecuted and transported.
In "Trade Unions and Strikes," Alison discussed the "leading particulars and principles on which all Trades' Unions are founded" in detail. Among the myriad restrictions imposed by "this despotic body" "upon the freedom both of capital and labour" were regulations regarding wages and hours of work:
The ruling Committees also take upon themselves to fix the number of hours which the men are to labour, and the wages they are to receive. It would be incredible, a priori, to what a length in some trades their laws carry this restriction; and how effectually, by a compact, well organized combination, they can succeed in raising, for a long period, the price even of the most necessary articles of life.
Alison's own political philosophy can be discerned from his observation in yet another article he wrote on the Glasgow incident, "Practical Working of Trades Unions," that "Violence, terror, and intimidation, are in fact the foundation of all popular combination":
No one seemed to anticipate that the workmen themselves were to be the principal sufferers by the repeal, and that the despotic authority assumed by the Managing Committees was to be the source of far greater distress and suffering to the operatives than all the Combination Laws had been, or than any government, how despotic soever, could venture to inflict. Yet all this has now proved to be the case, and the misery thus brought upon the working classes by the tyrants of their own creation far exceeds in intensity any thing which has been produced even by the combined effect of scarcity of provisions and commercial embarrassment. A more memorable commentary never has been read on the prudence of intrusting the working-classes to their own guidance, according to the approved system of Modern Political Philosophy, or of the enormous peril even to themselves, of those principles of self-government, which are at once the most popular, the most common, and the most dangerous of the many false doctrines which for the last ten years have overspread the world.

If, indeed, the working classes could be brought to combine without violence and intimidation to others, much of the argument urged in support of the unlimited power of combination would be well founded, and by far the greatest part of the suffering they bring upon themselves and their fellows would be avoided. But experience proves that this never is the case: and a consideration of the disposition of human nature in such circumstances forbids the hope that it ever will be otherwise. Violence, terror, and intimidation, are in fact the foundation of all popular combination; and so universally is this the case, that it may be doubted whether there has been so much as a single instance of combination, either before the repeal of the Combination Laws, or since that time, of a strike lasting for any considerable time without threats or violence to the new hands, having formed, either by express agreement or general understanding, an essential part of the system. Indeed, if you speak to an operative in any trade of striking, and conducting himself according to the principles he ostensibly professes, that is, of giving to others that liberty in disposing of their labor which he asserts for himself, he will at once, if you are in his confidence, laugh at your folly, and admit that, without intimidation and menaces to others, combination would be a mere empty name.
It needs to be emphasized that in the above passage, Alison indicts all trade unions, not only the Glasgow Cotton Spinners Association. Did the Cotton Spinners have restrictive regulations? It would appear so. A less hostile source than Alison states, "The great object of this Association, as appears from its regulations, and the Report to which we have referred, was to keep up the wages of cotton-spinning in and around Glasgow, by producing, artificially, a short supply of that class of labourers." Can one generalize from this single observation? "Glimpses of similar organizations, among various bodies of workmen, have been obtained, from time to time, in the progress of strikes, or in the proceedings of courts of justice." Nevertheless, the author of this milder treatise in Tait's Edinburgh Magazine concluded, "The real cause of the misery of the working classes, is a short supply of food and employment, occasioned by artificial means, and an unjust appropriation of even of what exists by the privileged classes."

There are still a few loose threads to be tied up regarding the tenets of classical political economy on machinery and the matter of Luddism or frame-breaking. I had earlier suspected an 1831 popular tract, The Working-Man's Companion. The Results of Machinery, Namely Cheap Production and Increased Employment, Exhibited: Being an Address to the Working-Men of the United Kingdom, as a possible source of the fallacy claim. That book presents an amiable and didactic rebuttal to the error presumably committed by those who break knitting frames to protest their destitution. The book’s central premise was a popularization of Say’s Law of Markets:
There is no truth so clear, that as the productions of industry multiply, the means of acquiring those productions multiply also. The productions which are created by one producer, furnish the means of purchasing the productions created by another producer; and, in consequence of this double production, the necessities of both the one and the other are better supplied. The multiplication of produce multiplies the consumers of produce.
The consequence of this law is that there is no such thing as a limit to the wants of consumers or to the means available to consumers to satisfy their wants. Thus the amount of work to be done is also unlimited and, in fact, expands as a consequence of machinery. The introduction of machinery may indeed displace workers in one particular occupation but will soon open new opportunities. With regard to that temporary displacement, however, the author had a bit of advice uncharacteristic of latter-day fallacy claims: withdraw your labor from the market!
There is a glut of laborers in the market. If you continue in the market of labor during this glut, your wages must fall. What is the remedy? To go out of the market… When there is too much labor in the market, and wages are too low, do not combine to raise the wages; do not combine with the vain hope of compelling the employer to pay more for labor than there are funds for the maintenance of labor: but go out of the market. Leave the relations between wages and labor to equalize themselves…
Similarly, John R. McCulloch recites, in "Effects of Machinery and Accumulation," a thoroughly orthodox version of classical political economy, refuting arguments by Malthus and Sismondi about the prospects of a "general glut" of the market. But he had some novel things to say about the hours of work:
It may, however, be asked, would the demand be now sufficient to take off the increased quantity of' commodities?—Would their excessive multiplication not cause such a glut of the market, as to force their sale at a lower price than what would be required to-repay the diminished cost of production? But it is not necessary, in order to render an increase in the productive powers of labour advantageous to society, that these powers should always be exerted to the full extent. If the labourer's command over the necessaries and comforts of life were suddenly raised to ten times its present amount, (and this would really be the effect of the improvement in question), the consumption as well as the savings of the labourer would doubtless be very greatly increased; but it is not at all likely that he would continue to exert his full powers. In such a state of society we should no longer hear of workmen being engaged 12 or 14 hours a day in hard labour, or of children being immured from their tenderest years in a cotton-mill. The labourer would then be able, without endangering his means of subsistence, to devote a greater portion of his time to amusement, and to the cultivation of his mind.
McCulloch also saw no threat from combinations of labor to the functioning of the laws of supply and demand, "it is obviously false to affirm that workmen are allowed to dispose of their labour in any way they please, so long as they are prevented from concerting with each other the terms on which they are to sell it." McCulloch argued that even when workmen combine to enforce an unreasonable demand, it does no harm because they will fail in their object.

Finally, there is the curious matter of David Ricardo's famous chapter On Machinery, added to the third and last edition of his Principles of Political Economy, in which he contended that "the discovery and use of machinery may be attended with a diminution of gross produce; and wherever that is the case it will be injurious to the laboring class, as some of their number will be thrown out of employment, and population will become redundant, compared with the funds which are to employ it."

Ricardo's supposition has been upheld by such worthies as Paul Samuelson ("Ricardo was Right!") and John R. Hicks ("A Reply to Professor Beach"). Joan Robinson went so far as to suggest, "…there appears to be, from a long period point of view, very strong grounds for the popular opinion that inventions tend to reduce employment." Samuelson, however, reiterated that, "Needless to say, the doctrine is wrong which claims that all inventions that shift resources from circulating capital to fixed capital -- to durable machines at the expense of "wage funds" -- must reduce the demand for labor."

As I said at the beginning, my intention here has not been to refute the fallacy claim but to provide further background on an allegation that has already been thoroughly discredited but that keeps reappearing with impunity.

UPDATE: The story gets even weirder as I continue to examine Sir Archibald Alison's political philosophy. He was not an economic liberal. He was an arch-Tory and an outspoken defender of protectionism in the form of the Corn Laws. One might say it is hypocritical to be for protectionism for the privileged, propertied classes but against it for the impoverished working class. But it's more complicated (and convoluted) than that, even. It is not Alison's contradictions and hypocrisy themselves that are at stake but the peculiar reception and adoption of some of his principles toward the end of the 19th century by self-styled "liberals".

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