Capitalism starves babies (and other lies)

I’ve discussed labor unions and touched on how they’re not particularly helpful to America anymore. In this editorial, E. J. Dionne Jr. discusses the future of American industry and the wrongs labor unions tried to right. It’s an interesting read, although every time I thought he might finally be heading for truth, Mr. Dionne takes an undesirable intellectual detour. For instance:

Decades ago, Walter Reuther, the storied head of the United Auto Workers union, was taken on a tour of an automated factory by a Ford Motor Co. executive.

Somewhat gleefully, the Ford honcho told the legendary union leader: “You know, not one of these machines pays dues to the UAW.”

To which Reuther snapped: “And not one of them buys new Ford cars, either.”

It’s a semi-witty response and one that any company interested in technology should heed. However, Mr. Dionne draws the wrong conclusion from that exchange. Of course the machines don’t buy new cars, but the logic flow does not automatically lead back to “Machines Bad, Assembly Workers Good”. The purpose of a business is to maximize profit. If robotic assembly arms help reduce costs, they’re useful. Finding ways to make the displaced workers productive is the next exercise. However, those unions so determined to “help” workers don’t understand that those displaced workers may be more productive working elsewhere. It’s the “creative destruction” described by economist Joseph Schumpeter, referenced in the editorial.

Mr. Dionne then debates the manner in which the left liberals Democrats progressives should tell the story of unions and labor and looking out for the little guy. He promotes that as more compelling than the story of capitalism told by economic conservatives. Rather than stumble along, leaving the core of the debate to the other side, progressives should discuss how government shepherding of creative destruction can improve lives. Consider:

But this muddle reflects a default on parts of the left and, especially, within the Democratic Party. Because so many Democrats fear that they might sound like — God forbid! — socialists, they are unwilling to challenge the right’s core story. Capitalism, all by itself, would never have achieved the rising living standards that were the pride of the United States in O’Neill’s 1950s and still are today. The rules enforced by the National Labor Relations Board made it possible for Reuther’s union to organize by protecting workers’ rights. Cheap 30-year mortgages, which became the norm because of Federal Housing Administration guarantees, created a nation of homeowners.

As medical costs rise, more Americans will need government help. More employers will need to offload the costs of medical insurance to avoid bankruptcy. Yes, that’s “socialized medicine,” just like Medicare. But don’t tell anyone. The phrase plays terribly in focus groups.

For 60 years New Dealers and social democrats, liberals and progressives, turned Schumpeter on his head. They insisted that few would embrace capitalism’s innovations if the system’s tendency toward creative destruction was not balanced by public innovations to spread the bounty and protect millions from being injured by change. It’s a compelling story. Walter Reuther knew it well. Too bad it isn’t told very often anymore.

Mr. Dionne can argue that socialist redistribution and intentional economic stagnation are the best policies for America, but I need more proof than the National Labor Relations Board and mortgage guarantees, which don’t amount to proof that the private industry can’t handle those tasks. He can even argue that socialized medicine is necessary because businesses can’t provide it much longer. I’ve mentioned a better solution in the past, but the debate is worthwhile. He shouldn’t pretend that he’s promoting an improved, socialistic version of capitalism, though. Resisting change doesn’t stop it from happening. If it did, we’d still be using the horse-and-buggy and listening to vinyl records Gramophones.