I’ve been reading up on a whole lot of labor history this past year which has led me to come up with a whole lot of questions on rent-seeking among market participants. Among them, I wonder: What are the causes of rent-seeking among labor interests and what leads to their success?
One of the answers, I think, is labor’s short-term advantage in the spatial economy. Jefferson Cowie’s book on RCA really sparked this idea. He argues that capital has in advantage over labor because they can more easily pick up and move when workers become militant and seek out cheaper labor. On the flipside though (and Cowie doesn’t get into this), labor can become more militant in the first place due to short-term advantages in the spatial economy. Once a corporation sinks millions of dollars into a factory in a particular location, they’re somewhat beholden to the demands of labor in the local market. Of course, new workers can migrate into the region, but there is usually a definite advantage for labor nonetheless. I think this partly explains the successes of early unions in stationary industries like transportation (think Railroad Brotherhoods), extraction (think UMW) and the service sector (think contemporary Los Angeles).
My other big theory still needs to be hashed out a little more, but I think rent-seeking by labor interests relies heavily on rent-seeking by corporate interests in many cases. Before the New Deal and the Progressive Era, we had what Kolko called The Triumph of Conservatism. We must not forget that however powerful the AFL-CIO and other labor groups are today, the original kings of rent-seeking were early corporations. Through lobbying for regulations, subsidies, monopoly privileges, and tariffs, many large businesses were able to capture political rents for themselves or their shareholders. Labor leaders saw this as an opportunity to get a piece of the pie for themselves. Because of these monopoly rents, these industries became less competitive which allowed labor interests to “take wages out of competition” for themselves as well. After certain kinds of regulation (pro-business) have been introduced into an industry, it’s often easier to introduce other kinds (pro-labor). Things get messy at this point, but we can still answer the question of which came first: corporate or labor rent-seeking? The answer is corporate rent-seeking.
Of course, my theory is still in its infancy and I don’t have any comprehensive history data for the various industries. The other problem is separating the effects of the spatial economy from the effects of rent-seeking. Any comments, suggestions, and critiques are welcome as always!
- Josh McCabe
