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The capitalist-labor balancing act: Scales are now tipped more in favor of capitalists

Photo by Drew Beamer on Unsplash

Our society and economic structure here in the United States is based on an economic system known as capitalism, with an overlay of some concepts borrowed from socialism. For the most part it works pretty well. Historically, it has been more successful as a structure for a civilized and enlightened world than have been the economics of a Marxist type of socialism or totalitarian type of communism. While there are various forms of capitalism, it has been generally described as an economic system based on private ownership of the means of production, private property, wage labor, a pricing system, and competitive markets. Owners of the means of the production of goods or services are the decision makers regarding strategy and tactics, and prices and the distribution of goods and services are mainly determined by market competition.

Critics of capitalism argue that it establishes power in the hands of a minority capitalist class that exists through the exploitation of a working class majority; that it prioritizes profit over social good and over the protection of natural resources and the environment; and that it is the engine of inequality and economic instability. Supporters of capitalism argue that it provides better products through competition, creates strong incentives for economic growth, yields a productivity and prosperity that greatly benefits society overall, and that it is the most efficient system known for the allocation of resources.

Both arguments contain truths. But because of the natural predilection of our society in favor of capital and capitalists (ever wonder why capital gains and dividends are taxed at lower rates than is income derived by labor?), Congress, and city and state governments, from time to time introduce ideas to try to maintain a rational and viable balance of power between capital and labor, and to try to cause a rational sharing and distribution of capitalism’s financial rewards between capital and labor. Hence we see various elements of socialism overlaying our capitalistic base. We see such things as a National Labor Relations Board with the dual missions of protecting labor’s right to collectively bargain and guarding against unfair labor practices. And we have public K-12 education, public libraries, public police forces, public parks and municipal power plants; and of course Social Security. We hear political speech about laws relating to such things as minimum wage, family medical leave, child labor, etc.

Supreme Court rulings

It now seems that our third branch of government has now also come down on the side of capitalists. Let’s explore the backdrop.

In the Citizens United case of 2010 our Supreme Court ruled that corporations and unions have the same free speech rights as individuals under the First Amendment, and therefore can promote and fund their preferred politicians and favored political issues. Importantly, the court also ruled that the First Amendment free speech rights of the stakeholders and employees of a corporation were not violated even if the corporation promoted policies different from those favored by their stakeholders and employees.

Stephen E. Smith II

In the Abood v. Detroit Board of Education case of 1977 public school teachers in Detroit essentially sought to overturn the requirement that they pay union dues on the grounds that they objected to certain political activities of the union. Unions have two basic purposes. The first is to collectively bargain for better working conditions, benefits and pay. The second is to fund and promote political positions that will advance the interests of labor. In Abood, the Supreme Court ruled that while objecting teachers didn’t have to pay full union dues, they did have to pay “agency fees,” which would be a proportioned amount equal to a share of just the cost of collective bargaining. The court ruled that these teachers were benefited by collective bargaining and they should not be “free-riders.” This has been the law for more than 40 years.

Now comes along the Janus case in 2018. Mark Janus did not join the union and did not therefore pay union dues because he disagreed with the union’s political perspectives. But because Janus did have the benefit of the union’s efforts with respect to collective bargaining, he was asked, in accordance with the law established by the Abood case, to pay an “agency fee.” Although seemingly fair as a means of avoiding “free-riders,” the Supreme Court overruled its decision in the Abood case, and ruled that the First Amendment free speech rights of Mark Janus were violated even if he was just paying an “agency fee.”

Scales tipped toward capitalists

Our third branch of government has now tipped the scales a bit more in favor of the capitalists. Corporate boards and managements can support politicians and political issues without regard to the First Amendment free speech rights attendant their constituent stakeholders and employees. But union boards and managements, on the other hand, cannot support politicians and political issues without regard to the First Amendment of speech issues attendant their constituent members.

Could even a majority of shareholders and employees in a corporation, with leanings opposed to those of the corporation, prejudice the financial ability of a corporation to promote political issues favorable to it? No. Their freedom of speech is not violated. Could a small minority of workers, with leanings opposed to those of the union, prejudice the financial ability of a union to promote political issues favorable to it? Yes. Their freedom of speech would be violated.

The ruling in Janus is a continuation of the weakening of labor’s ability to negotiate, and follows on the heels of the current public debate about “right to work” laws, and other efforts to weaken the ability of labor to participate in the financial benefits visited upon the country by virtue of capitalism.

Stephen E. Smith II, JD, is an attorney who practiced law in the Minneapolis-St. Paul metropolitan area from 1967 until 2011 with a focus on the representation of entrepreneurs and their start-up, development stage and emerging businesses.

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Comments (4)

  1. Submitted by Paul Udstrand on 08/17/2018 - 09:06 am.

    Now?

    Dude, the scales have always been tipped against labor with very few exceptions, specially now that 90% of labor are: “At-Will” employees without any enforceable contracts. Why do think wages and salaries aren’t budging despite low unemployment and relatively high GDP?

  2. Submitted by Dave Eischens on 08/17/2018 - 10:01 am.

    Very clear

    Well explained Stephen, and I believe done so in a non-partisan manner, thank you.

    This is a prime example of why many people feel our country’s playing field is not level. The remedy of course being in active participation of more citizens in our governmental process. The more that participate, the more level the field becomes. This appears to be happening. Likewise, it’s encouraging to see many candidates rejecting campaign bribes, a promising step to ensure that government is “for the people”. Surely would be interesting to see comments from the more conservative thinkers on these pages.

  3. Submitted by Richard Graham on 08/19/2018 - 05:51 am.

    The unFairShare fees that were being charged by somelabor unions

    Thank you Mr. Smith for that very good editorial, although one major fact was not included and it was a very important part of the recent SCOTUS ruling in Janus vs. AFSCME. In short, the so-called “agency fees” (a.k.a., unFairShare fees) that certain public-sector labor unions/PACs were charging non-members were set/determined in a very questionable and inaccurate manner.

    In fact, even though it was illegal, those unFairShare fees were in some case being used to fund purely political activities for the unions/PACs. Here in Maine, we even had union/PAC officials admit to that fact during a hearing while under oath. Needless to say, the questionable accounting practices seem to reach far beyond our state and was part of the reason why the SCOTUS Justices ruled in favor of Mark Janus.

    With the Janus case ruling now public, and it’s clear that millions of public servants had our First Amendment rights violated by unions/PACs such as SEIU and AFSCME, it’s time for those organizations to be held accountable with full refunds going to all parties involved. In addition, the folks who were involved with the accounting fraud aspects of this case deserve to be prosecuted and held accountable for breaking the law. Capitalism is indeed a great part of our country, but with that it’s obvious that overly greedy people become willing to break-the-law in order to line their own pockets. More socialist programs in our country won’t solve this problem, but IMO a more strict enforcement of existing laws will reduce this problem.

  4. Submitted by Richard Graham on 08/19/2018 - 04:01 pm.

    Janus case

    If this site will allow, a union official with SEIU out in Oregon just had a LTTE published that’s titled ‘The real reason union leaders don’t like Janus’ and it seems very accurate and worth reading. It’s posted at http://www.registerguard.com/news/20180817/real-reason-union-leaders-dont-like-janus

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