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Ethical And Economic Aspects Of Labor-Management Power Relationships In The Thought Of Reinhold Niebuhr And John R. Commons

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Ethical And Economic Aspects Of Labor-Management Power Relationships In The Thought Of Reinhold Niebuhr And John R. Commons

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Content T his d isserta tio n has been 62-1314.
m icro film ed exactly as receiv ed
CHANG, Donald Mark, 1927-
ETHICAL AND ECONOMIC ASPECTS OF LABOR-
MANAGEMENT POWER RELATIONSHIPS IN THE
THOUGHT OF REINHOLD NIEBUHR AND JOHN R.
COMMONS.
U n iversity of Southern C alifornia, P h.D ., 1961
R eligion
University Microfilms, Inc., Ann Arbor, Michigan
Copyright by
Donald Mark Chang
1962
ETHICAL AND ECONOMIC ASPECTS OF LABOR-MANAGEMENT
POWER RELATIONSHIPS IN THE THOUGHT OF REINHOLD
NIEBUHR AND JOHN R. COMMONS
by
Donald Mark Chang
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(Religion)
August 1961
UNIVERSITY OF SOUTHERN CALIFORNIA
GRADUATE SCHOOL
UNIVERSITY PARK
LOS ANGELES 7. CALIFORNIA
This dissertation, written by
Donaid.Mark..Chang........
under the direction of h.T.§..Dissertation Com
mittee, and approved by all its members, has
been presented to and accepted by the Dean of
the Graduate School, in partial fulfillment of
requirements for the degree of
D O C T O R O F P H I L O S O P H Y
Vx*-'' N . 1 — ^
r ......................\ .......
Dean
D ate... ..- a ? . .
disserta:
r\
[ITTEE
..
Chairman
TABLE OF CONTENTS
Chapter Page
I. INTRODUCTION . .......................... 1
II. THE ETHICAL THOUGHT OF REINHOLD NIEBUHR . . 21
The Essential Nature of Man
Collective Egotism
God and Man
God's Grace and the Newness of Life
Faith and Love
Justice, Brotherhood, and Equality
Irony and Tragedy
Balance of Powers
The New Political Creeds
The Self and History
Niebuhr's Thought Related to the
Modern Political Economy
III. THE INSTITUTIONAL ECONOMICS OF JOHN R.
COMMONS................................... 97
A Doctrine of Man
Principles of Economic Action
The Transaction
The Role of Customs and Going Concerns
Property
A Theory of Value and Ethics
Production, Social Control, and Capital-
Labor Administration
IV. AN ANALYSIS OF POWER . ....................160
The Concept "Power" in the Thought of
Niebuhr and Commons
The Basis of Power
Kinds of Power
iii
Chapter
V.
VI.
iv
Page
The Theory of the.Balance of Power
Property and Power
Management Power
The Separation of Ownership from
Management
The Manifestation of Corporate Power
Labor Union Power
Centralization of Administration and
Control
Alteration in Union Leadership
Two Aspects of the Union Monopoly Issue
Affect of Unionism on Wages
Bargaining Power.
The Cost of Agreement or Disagreement
Liberal Illusions and Disproportions
of Power
Power, Pride, and Responsibility: A
Summary of the Analysis of Power
AN ANALYSIS OF THE BALANCE OF POWER THEORY. 259
The Theories of Niebuhr and Commons
The Relevance of Niebuhr's Ethical
Categories to the Balance of Power
Theory
Fallacies of the Theory of the Balance
of Power
Forms of Collusion: The Allen Bradley
Case
More Subtle Forms of Collusion
Summary
GOVERNMENT. REGULATION OF P O W E R............. 298
Government Regulation in the' Thought of
Niebuhr and Commons
The Danger of Domination and Tyranny
The Socialist Issue in Niebuhr's Thought
Regulation of Management: the Antitrust
Laws
The Extension of the Antitrust Laws to
Oligopolies
V
Chapter
VII.
Regulation of Labor: National
Labor Policy
The Labor Injunction
The Taft-Hartley and Landrum-Griffin
Laws
The Tripartite Advisory Group
The Relevance of the Pragmatism of
Niebuhr and Commons to Government
Regulation
SUMMARY AND CONCLUSIONS .............
The Modern Political Economy
The Contributions of Commons
The Contributions of Niebuhr
The Niebuhr-Commons Approach to
Social Power
Page
364
BIBLIOGRAPHY 398
CHAPTER I
INTRODUCTION
.As the industrial revolution in America spread
over twentieth century life, labor, land, and capital were
increasingly coalesced into industrial complexes. It was
wholly beyond the capacity of the Individual worker and
independent entrepreneur to meet effectively urgent social
and economic needs, to bring industry into existence, to
carry out its operations, and to distribute its products.
Out of these urgent needs developed the great corporate
and trust complexes, and, perhaps concomitant with this,
organized labor's growth in numerical strength and effec
tiveness in political and economic action.1 Growth
patterns in both managerial and labor spheres have resulted
in an unparalleled ascendency of economic power.
^See, for example, the decision of Justice Holmes
In Vegelahn v. Guntner, 167 Mass. 92 at 108, 44 N. E. 1077
(1896) .
1
2
Two major political-economic power complexes have
arisen. The first major force is the modern corporation
which has become quasi-public, in that a large degree of
separation of ownership and control has taken place by a
dispersion of ownership, frequently so widely scattered,
that security holders exercise virtually no control over
the wealth they have contributed to the enterprise. A few
large corporations exert significant power over others,
indeed, over the whole of society. The corporation is no
longer merely a legal device through which private busi
ness transactions are carried on by individuals. Rather,
it has become a method of property tenure and a means of
organizing economic life. It has become a means by which
the wealth of many individuals has been concentrated into
large aggregates and by which control over this wealth has
been surrendered to unified direction. As a result, a
realignment of property relationships has occurred. The
direction of industry by persons other than those who have
invested their wealth has raised questions of the motiva
tion behind such direction, and questions concerning
management's relationship to the relatively new segment of
economic power, namely, organized labor. By these and
3
other changes in the American corporation, the power of
those in control has been greatly enlarged, and the
status of both worker and property owner has radically
changed.
While size alone may be said to give these huge
corporations a social significance not attached to smaller
business units, many checks, which formerly worked to curb
the use of business power, are no longer available. Tradi
tionally, the private enterprise system operated on the
assumption that the self-interest of the operator would be
held in check by the pervasiveness of competition in a free
market economy, conditions which have long been regarded as
guarantees of economic efficiency. In the modern quasi
public corporation these assumptions have been largely
overturned. A. A. Berle, Jr., and Gardiner C. Means
write:
The corporate system further commands attention
because its development is progressive, as its
features become more marked and as new areas come
one by one under its sway. Economic power, in
terms of control over physical assets, is appar
ently responding to a centripetal force, tending
more and more to concentrate in the hands of a
few corporate managements. At the same time,
beneficial ownership is centrifugal, tending to
divide and subdivide, to split into ever smaller
units and to pass freely from hand to hand. In
other words, ownership continually becomes more
4
dispersed; the power formerly joined to it becomes
increasingly concentrated; and the corporate system
is thereby more securely established.^
In an essay written for the Fund for the Republic,
Berle states flatly that the American corporate system
now represents the "highest concentration of economic
power in recorded history," pointing to the 150 corpora
tions which hold sway over 50 per cent of American manu
facturing based on assets; and on the same basis, "about
two-thirds of the economically productive assets of the
United States, excluding agriculture, are owned by a group
of not more than 500 corporations. '"3
A series of studies in the 1930's by Berle and
Means revealed that the typical pattern of capitalist
organization in this country was oligopolistic. That is,
a large share of the productive activity is carried on by
a small number of' corporations. The United States had
0
A. A. Berle and G. C. Means, The Modern Corpora
tion and Private Property (New York: Macmillan Co., 1932),
p. 9-
^"Economic Power and the Free Society" (New York:
Fund for the Republic, 1957), P* 14; see also Berle, The
20th Century Capitalist Revolution (New York: Harcourt,
Brace & Co., 1954), pp. 25-26.
become a domain of giants which have significant power
over the prices they charge, the prices they pay, and even
over the minds of the consumers whose desires and tastes
they partly synthesize.^ More recent figures appear to
confirm this finding, and that the concentration exists
not only in individual markets, but also in the economy as
a whole.5 Berle writes:
4
Berle and Means, op. clt.; U. S. Congress,
Temporary National Economic Committee, The Structure of
the American Economy, Part I, Basic Characteristics,
National Resources Planning Board (Washington, D. C.:
U. S. Government Printing.Office, 1939)* Commons wrote a
significant review of Berle and Means' classical study,
and it is reprinted as an appendix to Economics of Col
lective Action (New York: Macmillan Co., 1950), pp. 297 ~
335-
e ;
^U. S. Department of Commerce, Office of
Business Economics, Survey of Current Business (April,
1955); R. W. Goldsmith, R. C. Parmelee and Others, "The .
Distribution of Ownership in the 200 Largest Nonfinancial
Corporations" (U. S. Congress, Temporary National Economic
Committee, Investigation of Concentration of Economic
Power, Monograph No. 29; Washington, D. C.: U. S. Govern
ment Printing Office, 1940), pp. 1, 150-68; see also the
many volumes of hearings before the T. N. E. C., and the
Committee’s many monographs, particularly those cited in
this chapter, and W. L. Thorp, W. F. Crowder, and Others,
"The Structure of Industry" (U. S. Congress, Temporary
National Economic Committee, Investigation of Economic
Power, Monograph No. 27; Washington, D. C.: U. S. Govern
ment Printing Office, 1941); Berle, The 20th Century
Capitalist Revolution, and Power Without Property (New
York: Harcourt, Brace & Co., 1959)*
The development of oligopolistic concentration of
power may be traced to. at least 1905, when ro.ughly the same
6
We cannot, however, leave the quantitative esti
mate quite there. Large corporations, in and of
themselves, are impressive vehicles of power.
Not less interesting is the fact that in a con
siderable and growing number of industries
(covering a rough estimated 70 per cent of all
American industry) a pattern has emerged--that
which we may christen the "concentrate." Ameri
can law, if not American economics, has in gen
eral prevented monopoly. But it has sanctioned
and perhaps even encouraged a system, industry, in
which a few large corporations dominate the trade.
Two or three, or at most, five, corporations will
have more than half the business, the remainder
being divided among a greater or less number of
smaller concerns, who must necessarily live with
in the conditions made for them by the "Big Two"
or "Big Three" or "Big Five" as the case may be.
Past rights have been collectivized; present capacity is
concentrated; future economic government will be by rela
tively few men.
The second major force in the political-economic
power complex is organized labor. Unions serve as a
100 corporations did as great a proportion of business as
they do today. The 1930 studies represented the first
actual measurement of the power structure. Berle, in his
study The Twentieth Century Capitalist Revolution, however,
points out that the share of industrial assets in the
hands of large corporations reached a relatively stable
level of about 45 per cent between 1931 and 1947- The
level of concentration, he wrote, was "a static condition
varying slightly from year to year but increasing, if at
all, 'at the pace of a glacial drift.'" P. 26.
^Berle, The 20th Century Capitalist Revolution,
p. 26.
channel and administrative agency for worker protest.7 in
an earlier stage of the growth of the economy, working
conditions were tolerated which later came to be condemned.
With increasing material wealth and greater familiarity in
the use of democratirc political machinery, it was to be
expected that more attention would be given to the condi
tions of work and the rights of workers. The twentieth
century saw the recognition of the principle that workers
should be allowed to form labor unions to improve their
position. Whatever the judicial view, unions were not
widely regarded by legal authorities and economists as
monopolistic organizations to be regulated in the same way
as business. Indeed, they have frequently been considered
Q
as checks on business power. If unions were in their very
nature a limitation of competition among workers, this was
not regarded as the same kind of evil as a limitation of
7c. Kerr, F. H. Harbison, J. Dunlop, and C. A.
Myers, "The Labor Problem in Economic Development,"
International Labor Review, LXXII (March, 1955)> P* 13j
L. Sayles and G. Strauss, The Local Union (New York:
Harper & Bros., 1952), pp. 4, 15-
®J. K. Galbraith, American Capitalism, the Con
cept of Countervailing Power (London: Hamish Hamilton,
1957), PP. 114-16.
8
competition among business organizations.9
By guiding the relief of workers' discontent into
orderly channels, and by representing workers' varied
interests, unions perform a beneficial role in society.
Yet, unions are primarily conflict organizations, with
separate traditions and loyalties, and leadership which
is intent on improving the power and prestige of the
union. It is demonstrable that large segments of labor
have amassed vast economic power. Such power is obtained
first through the control of the productive energy of
workers. By securing the support of the workers for
strike activity, productive effort can be withdrawn from
the employer. Such power will be extended, of course, if
the employer is denied alternative sources of labor supply.
This is more likely to be realized if employment is full.
Effective control of labor conditions for all competing
employers will also be sought, since often the product •
market exceeds the labor market in area. A union will
^Neil W. Chamberlain, Labor (New York: McGraw-
Hill Book Co., 1958), p. 399-
10C. Kerr, "Industrial Conflict and Its Mediation,"
American Journal of Sociology, L (November, 195^)>
pp. 231-33.
therefore attempt to organize all employers who are com
petitive with each other. Restrictions of the number of
workers, together with threatened stoppage of production,
become twin offensive weapons. There are other sources of
labor strength: alliances with other unions, the size of
assets or strike funds, or availability of other relief
funds, such as credit union or consumer cooperative credit
and unemployment compensation. In a general sense, the
condition of the economy also affects union power. It Is
Increased in periods of business expansion and decreased
in periods of recession.
Since power is a relative matter, a union may gain
as much by weakening the employer as by strengthening
itself. When employers are organized, unions may seek to
divide them by concentrating their attacks on one
employer, by offering a more attractive bargain if one
employer breaks away, or by driving a wedge between the
employer group and their customers. Through collective
bargaining, grievance procedures, and use of the strike,
the labor union has. come to exercise a proprietary inter
est over worker protest.
Efforts of labor unions to advance the welfare of
their members have been coordinated with vast political
10
programs designed to effect broad national policy. Suc
cessful implementation of union economic power relies
to a large measure on the fashioning of a legal climate
11
favorable to the collective bargaining process.
This introductory sketch of two positions of vast
power in the economy raises questions as to how these power
complexes are to be held in check and regulated so as not
only to minimize the occasions for their conflict, but to
operate in a manner beneficial, rather than destructive, to
■'■■'■While there has been development of striking
proportions over the past century in this area, certain
factors have presented and continue to present serious
difficulties in effectuating planned political action.
Primary among these are socio-economic factors--for ex
ample, lack of political solidarity among union members,
their political apathy, and their ignorance stemming
largely from inadequate union education programs. C. R.
Daugherty and J. B. Parrish, The Labor Problems of American
Society (New York: McGraw-Hill Book Co., 1952), pp. 419-
21; E. W. Moore, Industrial.. Relations and the Social Order
(New York: Macmillan Co., 1951 )> PP* 5T8-QQ; L. G.
Reynolds, Labor Economics and Labor Relations (New York:
Prentice-Hall, Inc., 1949)> P- 132. Also, there are fac
tors relative to the American electoral system which have
served to Impede political action. See Florence Peterson,
American Labor Unions (New York: Harper & Bros., 1952),
pp. 38-40. Finally, there is the sweeping ban of Section
304, Taft-Hartley Act, which, however, has been effec
tively circumvented by labor. See my article, "Labor
Political Action and the Taft-Hartley Act," Nebraska Law
Review, XXXIII (May, 1954), p. 55^-
11
the economy. In surveying these power complexes, we
shall have to consider their relationship to each other
in the context of bargaining power and their relationship
to the economic regulatory role of democratic government.
This role of government is exercised primarily through
two media: the antitrust laws as applied to product mar
kets, and federal labor laws in pursuit of a national
labor policy. These laws will be surveyed in analyzing
the economic regulatory role of democratic government.
It is demonstrable that these apparently opposing
power blocs have found it to their mutual advantage, on
occasion, to join forces and to exploit the consumer,
rather than to utilize their combined power to the more
laudable end of improving production methods. The ques
tion arises: shall labor, in collaboration with manage
ment, be entitled to extract from consumers whatever the
combined monopoly strength of both permits? Shall our
standard for distributive justice be nothing more than
bare economic power, exploitation of whatever economic
advantage one possesses and can defend from dilution?
The collusive efforts of labor and management have been
found to range from the more obvious kind, typified by the
Allen Bradley line of cases, to the more subtle variety in
12
which labor and management join to extract from consumers
whatever their strategic economic position permits in
maintaining high levels of wages and prices. These forms
of collusion will be surveyed from a legal and economic
point of view.
In the context of these developments, two thinkers
appear to have brought their respective systems of thought
to meet the problems arising from the massed economic
strength of labor and management, one from the side of
religion and ethics, the other as a specialist in econom
ics .
It has been written that few of our contemporary
theologians have grappled with man's relation to God and
man's relation to man as seriously as Reinhold Niebuhr,
and "no single thinker has done more to reveal the bank
ruptcy of secular illusions and ideals of our time."^^
Key to an understanding of Niebuhrian analysis is the wide
use of the dialectical method. That is to say, Niebuhr
believes that, most of the deeper truths about man, God,
history, and reality must be stated in such a way as to do
•^George Hammar, Christian Realism in Contemporary
American Theology (Sweden, 1940), pp. 250, 287, 289.
justice to contradictory or seemingly contradictory
aspects of the human situation. Thus, two opposite facets
of a problem are presented. Each of these is reduced
further to negative and positive elements. Then the
Christian answers are shown to meet the complexities of
reality. Niebuhr warns, however, that once any one element
of a Christian answer is emphasized at the expense of some
other facet, distortion occurs. Niebuhr's system arises
out of an analysis of the human situation integrated with
the insights of Christian revelation. Experience and
faith interpenetrate each other on every level. No
inquiry into the human situation is without presupposi
tions, and there is no purely revelational answer without
organic connection with the essential nature of>man and the
fabric of history.
In his ethics Niebuhr attempts to relate Christian
faith to a dynamic economy made possible by modern technol
ogy. This is contrary to a popular tendency manifest since
the sixteenth century to separate economic thought and
action from Christian theology and ethics. In part, this
separation has been justifiable rebellion against the
effort of the medieval church to impose laws in detail
on the economic order which in turn suppressed creative
14
growth.
The emancipation of economic life from Christian
criticism was greatly aided by the complacent assumption
by classical economists of a preestablished harmony between
efforts of individuals to seek their own advantage and the
welfare of the community as a whole. Under this assump
tion, injustices would be automatically eliminated if
economic activities were given free rein.^ But in
Niebuhr's view, complacency about the sufficiency of
automatic self-correction in the economy is no longer pos
sible when its consequences are seen. These consequences
include vast exploitation, human misery, and a dehumanized
culture. The most immediate cause of our distress is our
unwillingness or inability to "reestablish community," or
reconstruct justice under the new conditions brought about
by technological advancement.1^
*
The ever increasing introduction of technics into
the fields of production and communications
^Reinhold Niebuhr, "The Christian Faith and the
Economic Life of Liberal Society," Goals of Economic Life,
ed. A. D. Ward (New York: Harper & Bros., 1953 )> P* 438.
•^"God's Design and the Present Disorder of
Civilization," The Church and the Disorder of Society,
Amsterdam Assembly Series, III (New York: Harper & Bros.,
1949), P. 13.
15
constantly enlarges the intensity and extent of
social cohesion in modern man's common life; and
also tends constantly to centralize effective
economic power. . . . The effect of technics
upon production is to create greater and greater
disproportions of economic power and thus to make
the achievement of justice difficult.-*-5
The avoidance of Christian ethical perspective
amounts to an evasion of deeper problems which all men
face in seeking a tolerable harmony with other men, and
tends to obscure the fact that the root of man's lust for
power and of his "cruel and self-righteous judgements on
his fellows" is in himself and not in some social or
economic institution. The point is emphasized again and
again in Niebuhr's writings: the root problem and peren
nial crisis of man is the persistence of corruption of
inordinate self-love, no matter how perfectly the level of
human moral or social achievement is conceived.16 In
Niebuhr's view, then, ethical norms are either implicitly
or explicitly involved in most judgements economic systems
■^Nxebuhr, "Will Civilization Survive Technics?"
Commentary, I (December, 1945), PP* 2-3.
•^Niebuhr, Faith and History (New York: Scribnerfe,
1949), PP- 84-85; "Wisdom of the World," Christianity and
Society, XIV (Spring, 1949 ), p* 4; The Children of Light
and the Children of Darkness (New York: Scribner's,
1944), p. 16.
16
make about life.
The economic thought of John R. Commons is cen
trally concerned with ethical values as an integral part
of economic analysis. He believes that in human experi
ence is to be found a vast storehouse of social values
which will yield valuable guides for helping society
gradually change from an emphasis on conflict to a stress
on mutuality. In one of his principal treatises he writes:
During the stages of the economic science when
the economists imitated the physical sciences,
the individual was treated in economic theory
like atoms, molecules . . ., controlled by exter
nal force and not self-controlled. . . . [The
economists'] science was founded on materialism,
and when businessmen, as well as economists, came
up against such facts as labor turnover, trade
unions, secret ballot, and emancipations of slaves,
where laborers had "wills of their own," they had
to treat them either as dishonest and call in the
army or begin to adopt methods of investigation
and understanding based on purposes of the human
will instead of the economic theory of causation
by physical forces.
■^Commons, Institutional Economics (New York:
Macmillan Co., 1934). "The problem now is not to create
a different kind of economics--1 institutional1 economics--
divorced from preceding schools, but how to give to
collective action, in all its varieties, its due place
throughout economic theory." P. 5* "Everything herein
can be found in the work of outstanding economists for
two hundred years. It is only a somewhat different point
of view." P. 8.
17
Thus does he reject orthodox economic thought. At the
same time, however, his theories supplement and do not
] 8
refute conventional theory.
Commons approaches problems of social control by
analyzing the structure of collective action in the con
text of economic power. In his view the economy is not
mechanistically automatic and self-directing; rather, it
is guided by human decisions, judgements, and actions,
individual as well as collective. The economy, then, is
conceived of as a social organization, in which all activ
ity is stabilized, regularized,, and controlled by the
society of citizens. Individuals are not self-sufficient,
independent entities; nor is society the summation of
individual members. Individuals may best express them
selves by participating in the groups of which they are
members; group action is seen as "collective action in
control, liberation, and expansion of Individual
action."-1 -9 Commons sees social values as fundamentally
institutional and relative to social organization.
Freedom, for example, is a social achievement, created by
^Economics . . ., pp. 15^-55*
19Ibid., pp. 23, 132.
collective action controlling, liberating, and expanding
individual action.^0
In this view Commons broadens the concept of
"transaction" to include social action and adds the con
cepts of a "going .concern" and its "working rules," which
in turn are broadened to include both private and social
forms. He is concerned with making the business system
serviceable enough to deserve to survive, although he is
not certain this effort will succeed. He is equally con
cerned about conditions of labor, and is deeply impressed
with the ability of labor unions to lift the workers from
fear, servility, and insecurity to a new dignity and cour
age commensurate with their rights of economic citizen-
snip. Commons's theory provides considerable insight into
the significance of economic power and the ways in which
it might be directed to achieve public as well as private
purposes.
As a result of the development of the labor and
management power complexes, two questions arise. First,
what is the meaning of the thought of Niebuhr and Commons
in the modern political-economic situation? Second, to
20Ibid., p. 118.
what extent is their theoretical orientation applicable
to a technical society? It is the purpose of this disser
tation to examine and analyze these questions. For this
purpose, two sources of data will be used. Primary
emphasis will be given to the thought of Niebuhr and
Commons. The other source will be the relevant aspects
of the legal, economic, and political science interpreta
tions of labor-management relationships. Several aspects
of these relationships will be analyzed. In the first
place, there are the positions of management power and
labor power and the factors which make them significant
in the political economy. These power positions are
especially important, because they provide a perspective
for examining two situations: (l) the various determin
ants of the relative bargaining power of labor and manage
ment as they confront each other; and (2) the possibilities
for collusion between labor and management, as they deal
with each other to advance their mutual interests. This
total situation, in turn, raises questions as to the role
of government in regulating and holding these power
complexes in rough balance, and the adequacy of existing
laws to accomplish these purposes.
20
Application of various aspects of the thought
of Niebuhr and Commons therefore involves an inter
disciplinary effort, a legal, economic, political
scientific, and Christian ethical study of the political
economy. Before analyzing some aspects of the congruencies
of their thought in these areas, a closer analysis of each
of these systems of thought must be made. Finally, we
shall attempt to apply relevant aspects of their thought
to the problems of labor and management power outlined
above.
CHAPTER II
THE ETHICAL THOUGHT OP REINHOLD NIEBUHR
The Essential Nature of Man
At the base of Niebuhr's ethical thought is his
view of the essential nature of man, in which there are
two elements. One consists of man's natural endowments
as a creature of nature and history. Niebuhr includes in
this aspect of human nature all of man's "natural endow
ments, and determinations, his physical and social
impulses, his sexual and racial differentiations, . . .
his character as a creature imbedded in the natural
order.The second element in man's nature is his
intellectual and spiritual stature. Man is characterized
■^Niebuhr, The Nature and Destiny of Man (New York:
Scribner's, 1949), Vol. I, p. 270..
Niebuhr's theology reaffirms the doctrine of ori
ginal sin, thus rejecting Rauschenbusch's contention that
the doctrine is invalid because it Is impractical--since
"the social gospel is above all things practical, so it
would have no motive to be interested in a doctrine which
. . . concentrates on a past event which no effort of ours
can influence." See Walter Rauschenbusch, A Theology for
the Social Gospel (New York: Macmillan Co., 1917), p. 42.
21
22
in this- aspect as a creature of freedom transcending the
natural process and transcending himself. These con
cepts are basic because they provide both direction and
limits for Niebuhr's thought. Man's freedom creates the
possibility of actions which are contrary to and in
defiance of the requirements of his essential nature,
because his freedom stands in contradiction to his fini-
tude. This clash is the occasion for his sin,2 the
biblical foundations of which are religious-~man's
rebellion against and attempt to usurp the place of
God, and man's injustice to man. Man falsely makes
himself the center of existence in an attempt to trans
gress the bounds set for his life, impelled to do so by
his pride and will-to-power, and this subordinates other :
life to his will, resulting in injustices in human
2Niebuhr, op. cit., pp. 1, 1-25, 167; An
Interpretation of Christian Ethics (New York: Meridian,
1956); Beyond Tragedy: Essays on the Christian Interpre
tation of History (New York: Scribner's, 1938);
Discerning the Signs of the Times (New York: Scribner's,
1946); Faith and History; Self and the Dramas of History
(New York: Scribner's, 1955); and Christian Realism and
Political Problems (New York: Scribner's, 1953)-
relationships.3
Yet man is not satisfied merely to live. He is
impelled by his will-to-live, to seek the realization of
his "true self," and this can only be fulfilled in the
3The Nature . . . , pp. 1, 178-81, 16, 23.
Niebuhr's dialectical analysis of man's nature is clearly
exemplified in his finding that man is both "great and
weak," "free and bound," "blind and far-seeing."
The concept of sin, however, has been largely
rejected by modern culture. The consequences of this
rejection have been tragic. Niebuhr writes:
"Our current history is actually a remarkable
illustration of the way Nemesis overtakes the pride of
man and how divine judgement is visited upon men and
nations who exalt themselves above measure.
"The liberal part of our culture thought that the
Christian idea of the sinfulness of all men was outmoded.
In its place it put the idea of a harmless egoism,
rendered innocuous either by a prudent self-interest or
by a balance of all social forces which would transmute
the selfishness of all into a higher social harmony. The
vanity of that idea was proved by the ever more dynamic
disproportions of power in our society and the ever
greater destruction of community in a technical society.
Sometimes the liberal part of our culture conceived the
idea of redemption through growth and development. Men
suffered [so it was,argued] not from sin but from impo
tence. But fortunately the whole historical process was
Itself redemptive. It translated man from impotence to
power, from ignorance to intelligence, from being the
victim to becoming the master of historical destiny.
This illusion proved as tragic as the first one. Since
the sin of man lies in the corruption of his will and
not in his weakness, the possibilities of evil grow with
the development of the very freedom and power which were
supposed to emancipate man." Christian Realism and
Political Problems, pp. 106-107*
24
lives of others. Thus the will-to-live is, paradoxically,
transmuted into the will to self-realization, which
involves self-giving in relation to others. In addition,
the will-to-live is transmuted into the will-to-power, for
man is also interested in prestige and social approval.
Having the intelligence to anticipate the perils
in which he stands in nature and history, he
invariably seeks to gain security against these
perils by enhancing his power, individually and
collectively. Possessing a darkly unconscious
sense of his insignificance in the total scheme
of things, he seeks to compensate for his insig
nificance by pretensions of pride.^
Thus conflicts between men are never simple con
flicts between survival impulses, but rather involve
situations in which each man or group seeks to guard its
power and prestige against competing expressions of power
and pride. This conflict is, by its nature,'more stubborn
and difficult than mere competition between various sur
vival impulses in nature, since the very possession of
power and prestige always involves some encroachment on
those of other persons and groups.
Resort to the symbol of the Devil lends dramatic
expression to the Christian insight that human sinfulness
^The Children of Light and the Children of
Darkness, p. 20.
25
is never merely sheer God defiance. Man has been tempted.
There is something inevitable about the precariousness of
man's situation, because it treads the narrow line between
nature and spirit, and thus man is tempted to grasp at
partial solutions to his insecurity and to absolutize them.
His unwillingness to accept his finitude is based in
unbelief and is primarily expressed in pride.
The greatest of man's sin, then, is pride, of
which there are three types. First, the pride of power,
in which self-sufficiency and self-mastery is assumed by
the ego, imagining itself secure from all vicissitudes.
The truth is, however, that man is tempted by the basic
insecurity and uncertainties of society and history to
make himself more secure and prove his significance in
life by attempting to dominate other men, matter and
events. The instrument by which this is attempted is
man's will-to-power, sin in its highest form.^
The second type of sin is intellectual pride,
human knowledge pretending to be more true, final and
^The Nature . . ., pp. 188-94. His statement
that "The powerful nation, secure against its individual
foes, must fear the possibility that its power may chal
lenge its various foes to make common cause against it,"
(p* 94), must be held applicable here.
26
ultimate than it really is. It forgets that it is
involved in a temporal process and imagines itself in
absolute transcendence over history. In fact, however,-
all such pretensions are prompted by an uneasy feeling-
that the knowledge is not final and conceals weakness.6
As Niebuhr has written:
The intellectual pride of man is of course a
more spiritual sublimation of his pride of power.
Sometimes it is so deeply involved in the more
brutal and obvious pride of power that the two
cannot be distinguished. Every ruling oligarchy
of history has found ideological pretensions as
important a bulwark of authority as its police
power. But intellectual pride is confined neither
to the political oligarchs nor to the savants of
society. All human knowledge Is tainted with an
"ideological" taint. It pretends to' be more true
than It is. It is finite knowledge, gained from
a particular perspective; but it pretends to be
final and ultimate knowledge. Exactly analogous
to the cruder pride of power, the pride of intel
lect is derived on one hand from ignorance of
the finiteness of the human mind and on the other
from an attempt to obscure the known conditioned
character of human knowledge and the taint of
self-interest in human truth.7
Finally, there is moral pride, revealed in all
self-righteous judgements, a pretension that the self's
standards are God's. This amounts to a disavowal of God,
for "the sinner who justifies himself does not know God as
6Ibid., pp. 194-98.
7Ibid., pp. 194-95-
27
O
judge and does not need God as Saviour." Niebuhr adds,
. . . the sin of self-righteousness is not only
the final sin in the subjective sense but also
in the objective sense. It involves us in the
greatest guilt. It is responsible for our most
serious cruelties, injustices and defamations
against our fellow men. The whole history of
racial, national, religious and other social
struggles is a commentary on the objective wicked
ness and social miseries which result from self-
righteousness.
The sin of moral pride, when it has conceived,
brings forth spiritual pride. The ultimate sin is
the religious sin of making the self-deification
implified in moral pride explicit. This Is done
when our partial standards and relative attainments
are explicitly related to the unconditioned good,
and claim divine sanction.9
Collective Egotism
-Niebuhr's analysis of human frailty would be
incomplete without his concept of collective egotism,
because the group is more arrogant, hypocritical, self-
centered and ruthless in pursuit of its ends than the
individual. Group and individual, on the other hand,
share in their inconsistent claims that they are justified
by the primary right of survival, and that they are the
8Ibid., pp. 198-200.
9Ibid., p. 200.
28
bearers of interests and values larger than its own, by
which their conflict with competing wills are justified.-1 -®
t
In a sense collective sin is a magnification of individ
ual sin. The group demands the individual's undivided
loyalty, denying its contingent existence and arrogating
to itself a final and ultimate status. This pretension
is compounded by the individual, who identifies himself
with the group as a member of the group, arrogating to
himself the same ultimate status of the group. The
greater the strength and wider the dominion of a commun
ity, Niebuhr contends, "the more will it seems to repre
sent universal values from the perspective of the individ
ual."-1 - - 1 - Thus, collective pride may be viewed as man's
ultimate effort to deny his contingent existence.
The very essence of human sin is In it. [Niebuhr
adds] it can hardly be surprising that this form
of human sin is also most fruitful of human guilt,
that is of objective social and historical evil.
In its whole range from pride of family to pride
of nation, collective egoism and group pride are
a more pregnant source of injustice and conflict
than purely individual pride.42
10Ibid., pp. 208-11, 272-74.
-^Moral Man and Immoral Society (New York:
Scribner's, 1932), pp. 49, 212-13.
42The Nature . . ., p. 213-
29
Collective man's behavior is rooted in what
Niebuhr calls "human nature," or his "essential nature.”
Niebuhr writes,
If we examine the constants and variables in
that behavior, the most apparent constant fac
tors are obviously derived from those aspects
of human nature which constitute man a creature
of nature, namely his natural hungers and needs,
and the natural forces of cohesion in his com
munities, such as the sense of kinship. But
natural necessity is not the only source of the
constant factors. Some are derived from-the
unvarying way in which man's unique freedom
manifests itself, such as his yearning for an
ultimate and his inevitable abuse of his free
dom . 13
Niebuhr draws a sharp distinction between "moral
man and immoral society," between the moral social .
behavior of individuals and social groups such as those
which are economically-oriented. In the sense that they
are able to consider the other person's interest in their
conduct, and even, on occasion, are capable of favoring
the advantages of others to their own, individual men may
be considered moral. Naturally endowed with a measure of
sympathy and consideration for their fellow man, it is the
individual's rational faculty that prompts him to a sense
of justice. This sense of justice may be refined and
^^The Structure of Nations and Empires (New York:
Scribner's, 1959)* PP* 287-88.
30
purged of egotism, until the individual is able to
respond with a fair degree of objectivity in a social
situation in which his own interests are at stake. These
achievements, however, are nearly impossible for the
social group.
In every human group there is less reason to
guide and check impulse, less capacity for self
transcendence, less ability to comprehend the
needs of others and therefore more unrestrained
egoism than the individuals who compose the group
reveal in their personal relationships.
The inferiority of the morality of groups to
that of individuals is due in part to the diffi
culty of establishing a rational social force
which is powerful enough to cope with the natur
al impulses by which society achieves its cohe
sion; but in part it is merely the revelation of
a collective egoism, compounded of the egoistic
impulses of individuals, which achieve a more
vivid expression and a more cumulative effect
when they are united in a common impulse than
when they express themselves separately and dis
creetly. 1^
All social groups present us with a twofold
opportunity for either self-denial or self-aggrandize
ment. But the larger the group, the more prone It will
be to express itself selfishly In community affairs,
because it is more powerful and therefore more able to
^ Moral Man and Immoral Society, pp. xi-xii.
31
defy any social restraints which might be devised. The
same is true of internal restraints, because a common
mind and purpose is more difficult to achieve in a larger
group; thus, it will be more apt to be unified by momen
tary and immediate impulses and unreflected purposes.
And except as it faces external perils and is unified in
conflict with other groups, increasing size makes more
difficult the achievement of a group self-consciousness--
an aspect of social life Niebuhr views with extreme dis
taste.^ He writes,
Our contemporary culture fails to realize the
power, extent and persistence of group egoism
in human relations. It may be possible, though
it is never easy, to establish just relations
between individuals within a group purely by
moral and rational suasion and accommodation.
In intergroup relations this is practically an
impossibility. The relations between groups
must therefore always be predominantly political
rather than ethical; that Is, they will be deter
mined by the proportion of power which each group
possesses at least as much as by any rational and
moral appraisal of the comparative needs and
claims of each group.16
The great significance of this analysis of the group and
intergroup conflict will be dealt with in a later
15Ibid., pp. 46-49.
1^Ibid., pp. xxii-xxiii.
32
chapter.^
God and Man
To Niebuhr, the modern view of man in western
civilization rests on two traditions, the classical and
the biblical. Classical strands are mainly two, a
rationalism which tries to explain man from his unique
intellectual faculties, and a Platonic dualism which tends
to identify body with evil and mind or spirit with good.
On the biblical side are likewise two roots of unique
insight into the human situation. First is the doctrine
of creation. Contrary to Greek thought of the divine as
mind giving form to pre-existent matter, Christianity
affirms God as both vitality and form, and, as the ex
nihllo Creator, responsible for an order which is essen
tially good. Correlative to this axiom are an apprecia
tion of the given unity of man as body and spirit, and of
history as a meaningful sphere in which natural vitalities
are constantly being guided and changed by human freedom.
The second biblical root is an understanding of man not so
much from the uniqueness of his rational faculties as from
■^See Chapter IV, infra.
33
the nature of God in his historical self-revelation. The
imago dei doctrine relates man to God's will and personal
ity rather than to man's rationality. Man is thereby
given a dignity which is related to the radical character
of human freedom, in that man's sin derives not from his
limitations but from his proud unwillingness to accept his
finitude.
Thus, Niebuhr writes,
The Christian faith teaches that the world is
not evil because it is temporal, that the body
is not the source of sin in man, that individual
ity as separate and particular existence is not
evil by reason of being distinguished from undif
ferentiated totality, and that death is no evil
though it is an occasion for evil, namely, the
fear of death. The biblical view is that the
finiteness, dependence and insufficiency of man's
mortal life are facts which belong to God's plan
of creation and must be accepted with reverence
and humility.18
For man to "understand himself truly," he.must begin with
a faith that he is understood "from beyond himself, that
he is known and loved of God" and can only find himself by
obeying divine will.^9 By this relationship of obedience
it is possible for man to relate himself to God. without
^ The Nature . . . , p. l6j.
19rbid., p. 15.
34
pretending to be God; it is also possible for man to
accept his finitude without associating it with evil.
Yet, Niebuhr writes,
The uniqueness of man's spirit can be appreciated
even more than idealism appreciates it, though
always preserving a proper distinction between
the human and the divine. Also the' unity of
spirit and body can be emphasized in terms of its
relation to a.Creator and Redeemer who created
both mind and body.2^
The crux of the matter for Niebuhr is that "both
the majesty and the tragedy of human life exceed the
dimension within which modern culture seeks to comprehend
human existence."2^ He has pointed out how self-refuting
are the alternative explanations, and he has demonstrated
the relevance of the Christian understanding.
The fact that man can transcend himself in
infinite regression and cannot find the end
of life except in God is the mark of his creativ
ity and uniqueness; closely related to this
capacity in his inclination to transmute his
partial and finite self and his partial and
finite values into the infinite good. Therein
lies his sin.22
Both the dignity and misery of man have the same source.
Man stands perpetually outside and beyond every social,
2QIbid., pp. 15-16.
21Ibid., p. 122.
22Ibid.
35
natural, communal, and rational cohesion. He Is not bound
by any of them, and this makes for his creativity. He is
tempted to use all of them for his own ends, and this Is
the basis of his destructiveness. Niebuhr writes,
Man is both strong and weak, both free and
bound, both blind and far-seeing. He stands
at the juncture of nature and spirit; and is
involved in both freedom and necessity. His
sin is never the mere ignorance of his ignorance.
It is always partly an effort to obscure his
blindness by overestimating the degree of his
sight and to obscure his insecurity by stretch
ing his power beyond its limits.23
Inevitably, man is anxious. His anxiety is the
''internal precondition to sin. "2^ ■ To separate creative
and destructive elements in anxiety is not a simple task;
for this reason it is not easy to purge moral achievement
of sin. The same action may reveal a creative effort to
transcend natural limitations, and at the same time may
reveal a sinful effort to attribute unconditioned value to
contingent factors in human existence.
However, anxiety is not to.be Identified with sin,
because there is always the ideal possibility that faith
will purge anxiety of the tendency to self-assertion.
23ibld., p. 181.
2Z+Ibid., p. 182.
36
Niebuhr points to this as the reason why orthodox Chris
tianity has consistently defined unbelief as the root of
sin, which is essentially rebellion against God. Man is
only freed from anxiety when he places perfect trust in
divine security. Niebuhr writes,
In Christianity it is not the eternal man who
judges the finite man; but the eternal and holy
God who judges sinful man. Nor is redemption
in the power of the eternal man who gradually
sloughs off finite man. Man is not divided
against himself so that the essential man can
be extricated from the non-essential. Man con
tradicts himself within the terms of his true
essence. His essence is free self-determination.
His sin is the wrong use of his freedom and its
consequent destruction.25
Closely related to these concepts of man is a
two-fold understanding of revelation. God is revealed
to man, first, in his personal religious experience.
Secondly, God is revealed through man's social-historical
experience, that is, through Hebrew prophetism, which
paves way for the Christ who finally reveals the essential
nature of man. The transition from understanding man in
the light of his self-knowledge to understanding him in
the light of revelation is an affirmation of the "self's
capacity for self-transcendence," which is one element of
25lbid., p. 16.
37
his essential nature. Man's memory, his imagination, and
his capacity for self-criticism are elements of revela
tion. These philosophical elements are framed in religious
perspective in personal religious experience. Niebuhr
writes:
The general revelation of personal human experi
ence, the sense of being confronted with a "wholly
other" at the edge of human consciousness, con
tains three elements, two of which are not too
sharply defined, while the third is not defined
at all. The first is a sense of reverence for a
majesty and of dependence upon an ultimate source
of being [God as Creator]. The second is the
sense of moral obligation laid upon one from
beyond oneself and of moral unworthiness before
a judge [God as Judge]. The third, most problem
atic of the elements in religious experience, is
the longing for forgiveness [God as Redeemer].26
The Christian answer to the question, (man's
dilemma of his relationship to God) how a holy God can
deal with sinful man, is expressed in the doctrines of
atonement. These doctrines, Niebuhr writes, express
. . . the good news . . . that God takes the sin
fulness of man into Himself; and overcomes in His
own heart what cannot be overcome in human life,
since human life remains within the vicious circle
of sinful self-glorification on every level of
moral advance.27
26Ibid., p. 131.
27
Ibid., p. 142.
38
It is Christ who is the revealer.2^ He reveals God's
character in historical action, thus giving added meaning
to the imago del doctrine. Christ as the incarnation of
perfect love reveals the essential nature of man as one
created in love and for love, to live in love with his
fellows. Further, by the drama of the Cross, he reveals
that all men contradict their essential naturesj only the
revelation of Christ, the solution to the human dilemma,
fully reveals the depth of human self-contradiction.
The revelation of God as redeemer accentuates
a previous knowledge of God as judge, for the
simple reason that the revelation of His redemp
tive love clarifies His character of Holiness,
in terms of which human sin is judged. The
anthropological consequences of this paradox
are that faith in God's ultimate resolution of
the contradiction in which man stands clarifies
man's knowledge of that contradiction. He sees
that his anxiety is due to his unbelief.29
The central problem of God and man is essentially
the relationship between other-worldliness and historical
Involvement. The absolute moral values incarnated in the
personality of Jesus are related organically to this
other-worldliness. "Since man is a citizen of two worlds,"
28Ibid., II, p. 16.
29lbid., I, p. 290.
39
Niebuhr explains, "he cannot afford to renounce his
citizenship in either. He must work out his destiny both
as a child of nature and as a servant of the absolute."30
It is not a disjointed relation between God and man which
is the cause of man's confusion In his world environment;
the relation of the Individual to both God and the world
is perverted in himself. Niebuhr is equally convinced
that this perversion of man's self can be righted only
within man's relatedness to God and the world.
God's Grace and the Newness of Life
Niebuhr's discussion of man and God leads to his
analysis of the biblical revelation of grade, which Is a
concomitant of the revelation of truth. Grace is both
(1) a forgiveness which, in repentance, brings new
resources of fulfillment, and (2) a power which needs
forgiveness on every level for the inevitable claims to
possession of a superior righteousness the self or its
institution will make.
The Christian gospel nevertheless enters the world
3Qpoes Civilization Need Religion? {New York:
Macmillan Co., 1927), P* 186.
4o
with the proclamation that in Christ, both "wisdom" and
"power" are available to man. Not only has the true
meaning of life been disclosed, but also resources have
been made available to fulfill that meaning. Niebuhr
writes:
The two emphases are contained in the double
connotation of the word "grace" in the New
Testament. Grace represents on the one hand
the mercy and forgiveness of God by which He
completes what man cannot complete and over
comes the sinful elements in all of man's
achievement; grace is the power of God over man.
Grace is on the other hand the power of God fn
man; it represents an accession of resources,
which does not have of himself, enabling him to
become what he truly ought to be.31
The grace of God is effective, because it leads
men to repentence and a "newness" of life. The: pride of
the self is broken, and life is recentered on God. Freed
from self-concern, the self is made free for responsible
action. The power of God also operates within man, who
may thereby grow in grace. Growth in grace is growth in
faith, hope, and love. Yet, God's grace is not a posses
sion to which man may lay claim; it is offered constantly
anew only to those who have the humility and boldness to
receive it as a gift.
^1
The Nature . . ., II, pp. 98-99*
41
However,. Niebuhr warns that even in the new life
there exist contradictions between man's selfishness and
divine will. Human pride and arrogance may indeed mani
fest themselves under the guise of religious virtue.
Ultimately, man must rely on the power of God over man,
the power of God to forgive him for contradicting divine
will.
Both aspects of the meaning of grace, then, must
be stressed. Man remains a sinner, and sin appears on
every new level of virtue. But Niebuhr emphasizes that
recognition of this fact must not obscure the indetermin
ate' possibilities for man to realize social progress,
individually and collectively.32 Niebuhr sees that "the
two sides of the experience of grace are so related that
they do not contradict, but support each other,"33 and
that this is important in providing the motivation and
humility for the exercise of social responsibility. He
continues,
32"Reply interpretation and Criticism,"
Reinhold Niebuhr: His Religious, Social, and Political
Thought, ed. C. W. Kegley and R. W. Bretall (New York:
Macmillan Co., 1956), p. 437*
33The Nature . . ., II, p. 125.
42
To understand that the Christ in us is not a
possession but a hope, that perfection is not a
reality but an intention; that such peace as we
know in this life is never purely the peace of
achievement but the serenity of being "completely
known and all forgiven"; all this does not destroy
moral ardour or responsibility. On the contrary
it is the only way of preventing premature com
pletions of life, or arresting the new and more
terrible pride which may find its roots in the
soil of humility, and of saving the Christian
life from the intolerable pretension of saints
who have forgotten that they are sinners.34
It is important to distinguish between good and
evil in the historical process. But every realization of
good is tainted with evil, and every structure of justice
is incomplete. The mercy of God is needed to complete
these incomplete structures and to destroy all sinful
distortions. Because of this, the doctrine of Atonement
is the "final key" to a Christian interpretation of his
tory. Niebuhr writes:
The Christian doctrine of Atonement is therefore
not some incomprehensible remnant of supersti
tion, nor yet a completely incomprehensible
article of faith. It is, indeed, on the other
side of human wisdom, in the sense that it is
not comprehensible to a wisdom which looks at
the world with confident eyes, certain that all
its mysteries can be fathomed by the human mind.
Yet it is the beginning of wisdom in the sense
that It contains symbolically all that the
Christian faith maintains about what man ought
to do and what he cannot do, about his obligations
3^Ibid., pp. 125-26.
43
and final incapacity to fulfill them, about the
importance of decisions and achievements in his
tory and about their final Insignificance.35
Faith and Love
By his anxiety over his creaturely finitude and
without a relation to God, man is caught in a vicious
circle of egocentricity, and the reality of life is
obscured from him.36
Since man’s insecurity arises not merely from
the vicissitudes of nature but from the uncer-
tiainties of society and history, it is natural
that the ego should seek to overcome social as
well as natural insecurity and should express
the impulse of "power over men" as well as
"power over matter." The peril of competing
human will is overcome by subordinating that
will to the ego and by using the power of many
35rbid., p. 212.
36The Nature . . ., I, pp. 122, 124, 125, 13-17,
26, 167-208, 228-40, especially 182-203* It is not man's
finiteness Itself that is the cause of man's sinfulness,
which only occurs when the self ceases to regard itself as
finite when it claims for itself the comprehension and
power to grasp the Infinite and universal. Although man,
made in God's, "image," may transcend the natural, he re
mains also a "creature" who is involved in all relativities
and contingencies of nature and history. The essence of
man is his freedom, and by sinning, he rebels against God.
Yet man is creative in his freedom, and not all he creates
is inevitably sinful. Sin is the result of man's strength
and weakness, of freedom and necessity, independence and
dependence, pride and sensuality. Man becomes anxious, and
his anxiety is the "internal precondition of sin."
44
subordinated wills to ward off the enmity which
such subordination creates. The will-to-power is
thus inevitably involved in the vicious circle of
accentuating the insecurity which it intends to
eliminate. . . . The will-to-power in short
involves the ego in injustice. It seeks a secur
ity beyond the limits of human finiteness and this
inordinate ambition arouses fears and enmities
which the world of pure nature, with its competing
impulses of survival, does not know. . . .
The will-to-power is thus an expression of
insecurity even when it has achieved ends which,
from the perspective of an ordinary mortal, would
seem to guarantee complete security. . . . Man
seeks to make himself God because he is betrayed
by both his greatness and his weakness; and there
is no level of greatness and power in which the
lash of fear is not at least one strand in the whip
of ambition.37
Against this pessimistic structure of man, Niebuhr
asserts the continued presence in man of the original per
fection of man. Man possesses an original righteousness,
suggesting that the contradiction between man's essential
nature and his sinful condition is insoluble from the
standpoint of man's resources and can only be resolved
from the standpoint of God's r e s o u r c e s .38 These are faith
47
Ibid., pp. 191-94.
38au Interpretation . . .3 pp. 98-IOO. Niebuhr
does not stop with finite existence: there is something
before and beyond worldly life--creation before,
eschatology beyond. Any attempt to bridge this gap
will finally be impossible, but it can be approached by
way of Christian forgiveness and God's grace.
45
and love.
Without faith in God's providence man cannot be
freed of the anxiety that drives him to sin; without hope
he cannot face the future unafraid. At the same time,
without love he cannot relate himself creatively to his
fellow men, for the self instinctively knows that beyond
the norms of justice in any given situation there remains
the imperative of a love which requires an I-Thou relation
ship rather than I-it for its fulfillment. Niebuhr
relates faith and love in the following passage:
This character of the theological virtues as "law"
■ to sinful man is perfectly revealed in the "thou
shalt" of the law of love. . . . Such a commandment
can be understood as stating an ultimate condition
of complete harmony between the soul and God, its
Both man and history are given ultimate meaning
by virtue of their relation to the trans-historical
Divine. Unlike creatures of the animal world, man is
something more than nature and can rise above it to wit
ness and comprehend his natural involvement; -he is thus
himself partially a divine spirit. The Nature and
Destiny of Man, I, pp. 13-16; Reflection on the End of an
Era {New York: Scribner's, 1944), pp. 114, 201; The
Children . . ., p. 49*
To the question, can this be validated by reason,
Niebuhr answers, "The canons of logic and rationality
are transcended when reason attempts to comprehend the
final irrationality of things. Ultimate world-views
therefore seem more or less rational to given ages and
eras because they satisfy the temper of the day."
Reflections on the End of an Era, p. 198.
46
neighbor and its self in a situation in which
this harmony is not reality. If it were a
reality the "thou shalt" would be meaningless.
If there were not some possibility of sensing the
ultimate perfection in a state of sin the "thou
shalt" would be Irrelevant. . . . It is the sense
of ought.39
When pride, resulting from lack of belief or
faith, is considered the essential root of sin, sin may
then be defined on a vertical plane as separation from
God. On a horizontal level sin is manifested in injustice
to one's fellow men and injury to the self in sensuality,
that is, the self, in its freedom, gives undue attention
to the element of vitality within the self.
On the other hand, faith in the ultimate security
of God's love overcomes all insecurities of nature and
history. Such a faith is an ideal possibility, and a pre
requisite of love, because without faith man is driven to
anxiety and thence to self sufficiency, pride and self-
love. ^ In his faith man loves God and places trust and
39The Nature . . ., I, pp. 286, 293-
4°Ibld., pp. 271, 289; II, pp. 63, 99, 295 ff.
Niebuhr thus vindicates the Reformation idea of justifi
cation by faith.
Original sin in the human personality is . clearly
manifested when man tries by his own reason to understand
the whole of life by his own power within the dimensions
of his own life. Vol. I, pp. 170, 271.
47
confidence In. Him; man recognizes and accepts his
creatureliness and affirms the persistence of self-love.
For faith is not only an answer to the human condition
of self-contradiction; It reveals that contradiction more
fully and clearly. Man knows that he ought not to be
anxious about, his sinful self, and he sees that his
anxiety Is due to his unbelief.Thus, Niebuhr affirms,
^ Ibid., I, pp. 288-92. "The prophetic faith,
that the meaningfulness of life and existence implies
a source and end beyond itself, produces a morality which
implies that every moral value and standard is grounded
in and points toward an ultimate perfection of unity and
harmony, not realizable in any historic situation."
An Interpretation . . ., p. 100.
Even thou love, justice, equality and forgive
ness in their absolute'dimensions are not attainable in
our finite existence, because each is corrupted by sin,
they have been Informed by a higher, absolute ethic,
manifested in revealed religion--which discloses that
life Is "good in spite of its evil and evil in spite of
its good.” An Interpretation . . ., p. 98; Moral Man and
Immoral Society, p. 257•
Christ is central In revealing this paradoxical
relation between history and eternity. The Cross and
Crucifixion imply man's despair, since he can never
realize Christian ethical goals because of his human
limitations; but it is also man's hope, since by God's
grace and forgiveness his life will be completed.
Finitude itself Is not evil; it is the pretensions of
achieving God's power and comprehension that gives rise
to sin. An Interpretation . . ., pp. 113, 114; The
Nature . . ., I, pp. 12, 167-70.
48
A faith that is able to transcend the catastrophes
of history must .. . be able to define both the
possibilities of human creativity in history and
the limits of human possibilities. It must also
be able to clarify the fact that the evil of
fanaticism, conflict, imperialism, and tyranny
have their source in man's ambition to overleap
his limitations and to seek unconditioned power,
virtue, and security for his existence.^2
It is precisely in periods of social chaos that the rele
vance of the Christian faith is made starkly clear, when
all other simpler interpretations of life break down, and
men are driven to seek a more profound interpretation.
The Christian faith affirms that the same Christ
who reveals God's sovereignty over history is also the
perfect norm of human nature. This perfection is not the
sum of various virtues or obedience of any laws; it is
the perfection of sacrificial love. That love which
Niebuhr has appropriated to his thought is the pure, per
fect love that is revealed In the cross of Christ, a love
transcending the possible and historical. It is a suffer
ing love of one who seeks nothing for himself, but rather
who directs love to all neighbors. God's command to love
becomes the "minimal standard of moral conduct" and hence
42"Faith for History's Greatest Crisis," Fortune,
XXVI (July, 1942), p. 131.
49
the ground of our ultimate fulfillment, in the light of
which all our moral achievements are judged.^3 The per
fectionist element deeply permeates Niebuhr's love ethic,
he refers to it as the "impossible possibility." The
l
absolutism and perfectionism of Jesus’ love ethic is set
uncompromisingly, not only against the natural self-
regarding impulses, but also against the necessary prudent
defenses of the self which are required because of the
egoism of others. Human finiteness and sin prevent full
embodiment of love in any human action and motive, because
we are judged by love, and because we may approach and
most nearly approximate perfect love. We may do this by
contritely recognizing our finiteness before God, and
thereby avoid pretensions that most seriously distort our
lives.^
Thus the law of love is so absolute that its ful
fillment is an impossibility. It Is idle to assume that
human society could ever be knit together by perfect
^ The Self and the Dramas of History, pp. 35-36,
38; An Interpretation . . ., p. 100; "The Christian Faith
and the Economic Life of Liberal Society, " op. cit.,
p. 435-
44
An Interpretation . . ., p. 39•
50
love In which each carries the burdens of all, and the
anxieties of each are quieted by the solicitude of all.
Actually, perfect accord between man and man is constantly
violated by the inordinate concern of each for his own
welfare.
Since men are separated from one another by the
uniqueness and individuality of each spirit, however
closely they may be bound by ties on the "natural" side
of their essential nature, they cannot relate themselves
in terms which will do justice to their essential nature,
unless they are related in terms of l o v e . Christian
faith reflects an optimism which places ultimate reliance
on God-love and not human-love; and the way to repentance
as a gateway to God's Kingdom is the love of God, for God
commands us to love our fellow man for no reason but that
God loves us- We are obliged to emulate His love, to
forgive and love as God forgives and loves. Thus love is
the fundanental law of man's nature, and brotherhood the
fundamental requirement of his social existence. Because
man's power of rational freedom gives him a status higher
^The Nature . . ., I, pp. 271-72.
51
than those of nature, "no fixed levels can be placed
upon either the purity or the breadth of the brotherhood
for which men strive in history." At the same time
"no traditional attainment of brotherhood is secure
against criticism from a higher historical perspective
or safe from corruption on each new level of achieve
ment."46
Three varieties of love are perceived from the
command of love. The first type is the perfect relation
of the soul to God in which obedience is transcended by
love, trust and confidence. The second variety of love
is the conscious impulse for unity and harmony between
life and life, soul and soul within individuals. The
perfect harmony of the soul with itself, and the love of
neighbor--perfect accord of life with life and will with
will--*derive from absolute communion with, love of, and
faith in God. Lacking this faith man reverts to self-love,
anxiety, and self-sufficiency, which separates men from
each other and inhibits real concern for the needs of
46Ibid., II, pp. 244-45, 197-
52
others,^7 "Life," writes Niebuhr, "must not be lived at
cross-purposes. The self must establish an inner unity
of impulses and desires and it must relate itself harmoni
ously to other selves and other unities."^8 Transcendent
love, then, is a unity, a one-ness of many, without loss
of identity of any single unit. It becomes the ordering
principle in society.
Third, love is complete self-abnegation, the pour
ing out of life for life, the uncoerced giving of self to
the object of devotion. This means that man's unique
freedom requires him to seek fulfillment not within him
self but In others, through brotherhood; but in pursuit of
this he should not regard others simply as tools and
^Ibid., I, pp. 2g4-95* "Heal love between per
son and person Is therefore a relationship in which spirit
meets spirit in a dimension in which both the uniformities
and the differences of nature, which bind men together and
separate them, are transcended. This is no simple possi
bility. Each soul remains, in a sense, inscrutable to its
fellows. It is a possibility only by way of the love of
God, . . . Where the love of God does not undergird and
complete the relation of man to man, the differences which
nature creates and sin accentuates, differences of
geography, race, time, place and history, separate men
from one another; and the similarities of nature and of
reason may indeed unite men but not on the level of
spirit and freedom."
48
An Interpretation . . ., p. 44.
53
4Q
instruments of his self-realization.
The law of love is a law and yet not a law. It
is a law in the sense that it is the basic and final
requirement of human relations which men transgress at
their peril, for every transgression disturbs and imperils
the social harmony of life. Yet it is not a law--it is a
norm but not an obligation, at least not one which can be
enforced. For every effort to enforce it negates it. An
enforced submission of the will to an external force pre
supposes a conflict between the self and society or the
self and its higher self, which love would overcome. The
problem is relating this law to the exigencies of daily
living. This is difficult because the law of love Is
really not a law at all, but is an ideal which transcends
all law.50
The social validity of love as an ideal Is pro
gressively weakened as it is applied to more intricate and
collective human relations. Even in the implausible event
that a group should achieve a consistently unselfish
^9"The Christian Faith and the Economic Life of
Liberal Society," op. cit., pp. 439-^0.
5Qchrlstianity and Power Politics (New York:
Scribner's, 19^0), p. 9*
5^
attitude toward other groups untainted by self interest, it
is improbable that any competing group would appreciate or
even recognize the moral character of the achievement. Sec
ond, such a high level of unselfishness requires immediate
sacrifices. When an individual might conceivably sacrifice
his own interests without hope.of reward, how is an individ
ual who is responsible for the interests of his group to
justify the sacrifice of interests other than his own? In
Niebuhr's view, it is this moral obtuseness of groups that
makes a morality of pure disinterestedness Impossible.51
Justice, Brotherhood, and Equality
Primarily love is the moral requirement in which
all schemes of justice are fulfilled and- negated. There
is no justice which can be regarded as finally normative;
this is because the higher possibilities of love stand
constantly transcendent over all ideas and systems of
justice, which may thereby be corrected and lifted to
higher levels of more perfect b r o t h e r h o o d .5^ jn addition
qi
Moral Man and Immoral Society, p. 272.
^ The Nature . . ., I, pp. 285-88.
all such realizations of higher justice contain contradic
tions to as well as approximations of the ideal love:
"Sanctification in the realm of social relations demands
recognition of the impossibility of perfect sanctifica
tion. "53 Love is involved in all approximations of justice
love transforms justice, dynamically, creatively, often
sensitizing the conscience to the needs of the neglected.
Indeed, "basic justice" in any society depends upon the
"right organization of men's common labor, the equalization
of their social power, regulation of their common interests
and adequate restraining upon the inevitable conflict of
competing interests."54
Rules and laws of justice are related positively
to the idea of love, because to the extent that they
extend the sense of obligation, the giving of self for the
other, they serve the ends of brotherhood.55 gut even
53ibid., II, p. 247.
54.An Interpretation . . ., p. 163-
55The Nature . . ., I, p. 248. This is so in
many ways: "Systems and principles of justice are the
servants and instruments of the spirit of brotherhood
In so far as they extend the sense of obligation towards
the other, (a) from an immediately felt obligation,
promoted by obvious need, to a continued obligation
expressed in fixed principles of mutual support; (b) from
a simple relation between a self and one "other"
56
under the best possible human conditions, as in a family,
love can never take the place of justice; this is the
result of sin and human finitude.^ justice, then, has
both positive and negative dimensions: positive in that
the spirit of brotherhood is furthered, negative in that
a calculation of rights, setting of boundaries to prevent
incursions on the interests of others, is involved. Thus
harmony achieved through justice under the sinful condi
tions of man, is at best but an approximation of brother
hood.-^ As Niebuhr has written:
In so far as justice admits the claim of the
self, it is something less than love. Yet it
cannot exist without love and remain justice.
For without the "grace" of love, justice always
degenerates into something less than justice.58
to the complex relations of the self and the "others;" and
(c) finally from the obligations, discerned by the individ
ual self, to wider obligations which the community defines
from its more impartial perspective. These all contain
some higher elements of disinterestedness, which would not
be possible to the individual self."
5^Ibid., p. 248. "A relation between the self and
one other may be partly ecstatic; and in any case the cal
culation of relative interests may be reduced to a minimum.
But as soon as a third person is introduced into the rela
tion even the most perfect love requires a rational esti
mate of conflicting needs and interests."
57ibid., pp. 248-53-
5®Niebuhr, "Justice and Love," Christianity and
Society, XV (Autumn, 1950), p. 7-
57
Thus laws and systems of justice have a negative
as well as a positive relation to mutual love
and brotherhood. They contain both approxima
tions of and contradictions to the spirit of l o v e .59
There is therefore no justice, even in a sinful
world, which can be regarded as finally normative.
The higher possibilities of love, which is at
once the fulfillment and negation of justice,
always hover over every system of justice.60
Love implies freedom for man to develop his essen
tial potentialities without external hindrance. But in
the realities of the societal situation, human being com
petes with human being for fuller development of life.
The result is that men, endowed with privileges, and powers
lacking in other men by nature, will necessarily be
enhanced in their positions, from which they may exploit
other lives.At this point the ideal of equality as a
regulative principle becomes relevant, in order to police
the affairs of men. Equality seeks to "prevent this com
petition from resulting in exploitation, by advancing and
defending the claims and interests of one life with equal
force against every other life."^2 it none the less remains
' 59yhe Nature . . ., II, p. 251.
6o I b l d . , I, p. 285.
6lIbid., pp. 254-55-
5gAn Interpretation . . ., pp. 133-34.
58
an Ideal, corrupted by the necessities of social cohesion
and by man's sinfulness. It is the "pinnacle of the ideal
of justice" which "points toward love" as the final norm
of justice: this is equal justice, the approximation of
brotherhood under conditions of sln.^3 Viewed as an
ascending scale of moral possibilities, imaginative justice
leads beyond equality to give special consideration to the
Inordinate needs of another's life; viewed as a descending
scale, distributive justice, corrective justice, functional
equality, restores and adjusts inequalities.
Equality is a "principle of criticism under which
every scheme of justice stands."0^ Also, the "problem of
politics and economics is the problem of Justice."^5 The
- strength of egoism in all social groups is such that the
power of every group needs to be checked by the power of
those of whom it is tempted to take some advantage. The
struggle for justice consists in correcting the "injustice
and brutalities which flow inevitably from an unrestrained
63The_ Nature . . ., I, p. 254. "A higher justice
always means a more equal justice."
^ An Interpretation . . ., p. 102.
65Ibid., p. 128.
59
and undisciplined exercise of power."66 Largely in trying
to increase the power of the victims of injustice, and in
efforts to thwart, in turn, efforts of the victims who may
be tempted by their new power.
All human communities are harmonies of human
vitalities in varying degrees of stability or precarious
ness. 6? As Niebuhr states,
Human vitalities . . . express themselves from
collective as well as individual centers, and
both may be endlessly elaborated. Any premature
definition of what the limits of these elabora
tions ought to be inevitably destroys and sup
presses legitimate forms of life and culture.
But this capacity for human creativity also
involves the destructive capacity of human vital
ity. Vitalities may be developed inordinately.
Various forms of vitality may come in conflict
with one another, or one form may illegitimately
suppress another. The tension among the various
forms may threaten or. destroy the harmony and
peace of the community.68
The quality and order of these harmonies are determined by
two factors of social power: the coercive and organizing
power of government, and the balance of vitalities and
forces. While each of these principles is capable of
66Ibid., p. 155; The Nature . . ., I, p. 255*
^ Ibld., The Nature . . ., II, pp. 260-64.
6®The Children . . ., pp. 47-49*
6o
achieving such an equilibrium of social forces that the
highest possible Justice and brotherhood are approximated,
they also contain possibilities contradicting justice and
brotherhood. Government can degenerate into tyranny,
balance of power may turn into an anarchical situation,
and the "frail bark of social justice must tread a thin
line between them."69
The most crucial aspect of this is man's anxiety
created by the dialectical tensions of his freedom and
finiteness: man's free spirit "causes him to break the
harmonies of nature and pride of his spirit prevents him
from establishing a new harmony. The freedom of his
spirit enables him to use the forces and processes of
nature creatively; but his failure to observe the limits
of his finite existence causes him to defy the restraints
of both nature and reason."70 Since man's anxiety may
only be overcome by the impossible achievement of faith in
God's love, to the extent that he lacks this trust, he
will seek security by his own devices; the key expression
of this pretension of self-sufficiency is the will-to-
69The Nature . . . , II, p. 258.
7°ibid., 1, p. 17.
61
power
Irony and Tragedy
In the light of his view on the ambiguity of all
virtue, Niebuhr has increasingly turned to the concept
of irony for the Interpretation of social experience. An
understanding of the ironic aspects of history is one of
the principal resources of the Christian faith for an
interpretation of culture. The concept of irony may be
defined by distinguishing it from the concepts of tragedy
and pathos. Tragedy arises from the fact that good and
evil are so "intertwined" that it is often necessary to
"do evil in order to do good. "'72 There are situations,
for example, in which a choice must be made between equal
ly valid loyalties, and one value must be sacrificed to
another. Niebuhr points to the contest between Antigone
and Creon as tragic, because each from his own standpoint
was right.73 Modern democratic nations face a tragic
^ ibid., p. 183j The Children . . ., p. 20.
7gThe Irony of American History (New York:
Scribner's, 1952), p. 157.
73Ibid.
62
dilemma in being forced to risk atomic warfare in order
to avoid the outbreak of war. All rational resolutions
of such tragic dilemmas which pretend that a higher
loyalty is necessarily inclusive of a lower one, or that
a prudent compromise between competing values can always
be found, are, according to Niebuhr, false. Thus, a
"tragic choice is purest when it is deliberate."*^
The ironic arises from the corruption of the gift
of freedom, rather than from any evil inherent in that
gift. The result is that ironic situations are not
usually the consequence of deliberate choice. Niebuhr
writes:
The evil in human history is regarded as the
consequence of man's wrong use of his unique
capacities. The wrong use is always due to
some failure to recognize the limits of his
capacities of power, wisdom, and virtue. Man
is an ironic creature because he forgets that
he ±s not simply a creator but also a creature.75
Irony, then, consists of
. . . apparently fortuitous incongruities in
life which are discovered upon closer examina
tion, to be not merely fortuitous. .. . If
T^Ibid., p. 166.
75ibid,, p. 156.
63
virtue becomes vice through some hidden defect
in the virtue; if strength becomes weakness
because of the vanity to which strength may
prompt the mighty man or nation; if security
is transmuted into insecurity because too much
reliance is placed upon it; if wisdom becomes
folly because it does not know its own limits--
in all such cases the situation is ironic.76
The tragic motif is subordinate to the ironic
one, because evil and destructiveness are not regarded as
the inevitable consequences of the exercise of human
creativity. There is, according to Niebuhr, always the
ideal possibility that man will break and transcend
natural harmonies and necessities and yet not be destruc
tive. He explains:
The destructiveness in human life is primarily
the consequence of exceeding, not the bounds of
nature, but much more ultimate limits. . . .
Man's dominion over nature is declared to be a
rightful one. Divine jealousy is aroused by
man's refusal to observe the limits of his free
dom .77
These limits exist because man is a creature as well as
a creator; but they cannot be sharply defined. Thus,
distinctions between good and evil cannot be made with
absolute precision. It is, however, clear that the
76ibid,, p, viil.
77ibid., p. 158.
64
"great evils of history" are caused by human pretensions
which are "not inherent in the gift of freedom." They
are a corruption of that gift. "These pretensions are
the source of the ironic contrasts of strength leading to
weakness, of wisdom issuing in foolishness."^
The ironic must also be distinguished from the
pathetic. Niebuhr explains that pathos consists of
"essentially meaningless cross-purposes in life, of
capricious confusions of fortune and painful frustra
tions. "^9 He continues:
Pathos, as such, yields no fruit of nobility,
though it is possible to transmute pathos into
beauty by the patience with which pain is borne
or by a vicarious effort to share the burdens
of another. Thus, the situation in a displaced
persons camp may be essentially pathetic; but it
may be shot through with both tragedy and grace,
through the nobility of victims of a common
inhumanity in bearing each other's sorrows. One
who is involved in a pathetic situation may be
conscious of the pathos without thereby dissolv
ing it. We can, after all, pity ourselves. But
consciousness of the pathos does not dissolve it
since the participant does not bear responsibil
ity for it. He is the victim of untoward circum
stances; or he has been caught in the web of
mysterious and fateful forces in which no meaning
?8Ibid.
79ibid., p. 166.
65
can be discerned and from which no escape
is possible.8®
Niebuhr summarizes the distinctions between irony,
tragedy and pathos:
An ironic situation is distinguished from a
pathetic one by the fact that a person involved
in it bears some responsibility for it. It is
distinguished from a tragic one by the fact that .
the responsibility is not due to a conscious
choice but to an unconscious weakness.81
,Any culture or religion that is deficient in the
tragic sense of life is, in Niebuhr's view, inadequate to
give us guidance in a time in which the very securities
of a technical society have been transmuted into evil.
We need a faith that throws light on the importance of
every historical task and responsibility. But it must on
the other hand reveal the limits of all historical striv
ing. For human existence is precarious and will remain so
to the end of history. Human achievement contains a
tragic element of friistration and corruption and will con
tain it to the end of history. There is an ultimate
answer to these tragic aspects of human existence, but
that answer can be known only to those who have stopped
80Ibid.
8~*~Ibid., pp. 166-67-
66
looking for some easy escape from t r a g e d y .82
How does the concept of irony apply to the con
temporary historical scene? We shall defer discussion of
this question to a subsequent section in this chapter,
following the discussion of Niebuhr's political philosophy.
The Balance of Power
Two characteristics of human nature underlie the
factor of power in social organization. These are (l) the
unity of reason and vitality, of body and soul, which
insures that all vital resources at the disposal of the
individual or group will be used in the pursuit of egois
tic purposes; and (2) the sins of self-interest and pride,
so deeply imbedded in human nature that they are immune to
moral or rational suasion.83 a conflict of interest may
be resolved by coercion and treat of force, whether the
sanction be imposed by government or other groups in the
community, just as well as by the calculation of avail
able resources on each side, or purely rational or moral
82"iraith for History's Greatest Crisis," Fortune
(July, 19^2), p. 128.
83The Nature . . ., II, pp. 258-59-
67
considerations.®^ Two facts, that (l) will seeks to
dominate will, and (2) self seeks withdrawal from the com
munity, represent twin forms of corruption imperiling
achievement of human brotherhood. Since this is true,
and since all social life includes many forms of vitality
related in terms of mutual support and potential conflict,
it becomes the task of man's social and political genius
to contrive ways of mitigating conflict and creating
instruments to enlarge mutualities of social existence.®®
Equilibrium of powers and vitalities best prevents
domination of one life over another and enslavement, and
in this sense there is an approximation of brotherhood.
On the other hand this condition is not brotherhood.
Pressure and counter-pressure of power by different mem
bers of the community create tensions which can become
anarchical if the tensions go unresolved. Society there
fore requires that its various equilibria be consciously
controlled and manipulated by instruments of authority and
subordination; the necessary concomitant of the principle
®^Ibid., p. 259.
85Ibid., p. 265.
68
of balance is the principle of government.86
The central norms by which government seeks to
achieve equilibrium of power among competing groups are
love and justice, the latter subsumed under the law of
love, the "final law of human freedom." This means that
man must affirm this law by fulfilling his life not within
himself but in others. But it also means that he must
recognize the reality of another lav/, that of self-love,
which pervades his entire sinful existence. Standards of
justice may therefore be said to be (l) manifestations
of the law of love, to the extent that one subordinates
one's own interests to the welfare of the community, or
at least calculates the various competitive claims where
there is more than one neighbor; and (2) a practical
compromise between the law of love and the law of self-
love, in the sense that the selfish inclination of man
to advance his own interests to the disadvantage of others
is assumed and the norms of justice seek to arrive at an
equitable adjustment of competing claims.
^ Ibid., pp. 265-66; "Coercion, Self-Interest and
Love," in Kenneth Boulding, The Organization Revolution
{New York: Harper & Bros., 1953)* P* 229.
69
It Is from the standpoint of these laws that
Christianity speaks to man's social dilemmas,, and that
every scheme of justice must be viewed as tentative and
p r o v i s i o n a l .87 The moment it is given an aura of the
absolute it becomes an instrument of injustice:
A free society is justified by the fact that the
Indeterminate possibilities of human vitality may
be creative. Every definition of the restraints
which must be placed upon these vitalities must
be tentative. This is so because all such definitions,
which are themselves the products of specific histori
cal insights, may prematurely arrest or suppress a
legitimate vitality if they are made absolute and
fixed. The community must constantly re-examine
the presuppositions upon which it orders its life,
because no age can fully anticipate or predict the
legitimate and creative vitalities which may arise
in subsequent ages.66
Nevertheless, the individual Christian is justi
fied by faith to participate in a sinful world, to take
the best possible course of action, even though this means
involvement in corporate evil and impinges on one's moral
and value structure. Niebuhr summarizes this point In the
following passage:
Justification by faith In the realm of justice
means that we will not regard the pressures and
counter-pressures, the tensions, the overt and
67The•Nature . . ., I, p. 91*
66The Children . . ., p. 83•
70
covert conflicts by which justice is achieved and
maintained, as normative in the absolute sense;
but neither will we ease our conscience by seek
ing to escape from involvement in them. We will
know that we cannot purge ourselves of the sin
and guilt in which we are involved by the moral
ambiguities of politics without also disavowing
responsibility for the creative possibilities of
justice.89
The New Political Creeds
According to Niebuhr's political philosophy, the
contemporary world is divided roughly into the "children
of light" and the "children of darkness. "90 The children
of light "believe that self-interest should be brought
under the discipline of a higher law," since "evil is
always the assertion of some self-interest without regard
for the whole, whether the whole be conceived as the
immediate community or of the total community of mankind,
or the total order of the world."91 The children of dark
ness, on the other hand, are "moral cynics who know no
89fhe Nature . . ., II, p. 284.
SJCA'The children of this world are in their
generation wiser than the children of light." Luke 16:8.
91fhe Children . . ., p. 9 ■
71
law beyond their will and interests."92 They are wise
in that they understand the power of self-interest in all
men, but they refuse to acknowledge the genuinely creative
potentialities of man's nature. The children of light,
though virtuous, are foolish and sentimental because they
do not recognize self-interest as a potent force both in
their opponents and in themselves.93
Fascism is representative of the children of dark
ness. It knows no principle except the self-justifying
character of its own power.9^ it is characterized by a
cynical awareness of self-interest in society, but, lack
ing, the virtuousness of the children of light, it trans
mutes the natural will-to-live into will-to-power, which
it romanticizes and deifies.95 Niebuhr contends that this
ideology is rooted in the inequitable conditions of our
contemporary technical society, for which not the Germans
or Italians alone but rather the entire world is
responsible. Especially to be held responsible are the
9^lbid.; "Politics of the Children of Light,"
Christianity and Crisis, Nov. 29, 19^3, p. 2.
93The Children . . ., p. 20.
9^"New Issues, Old Allies," The Nation, July 19,
1941, p. 51.
The Children . . ., p. 20.
72
optimistic liberal Christians for their extravagant
emphasis on individualism.96 Finally, German fascism
"is a type of politics that neither the communist nor
liberal interpretation has envisaged," because it is
contrary to the "dialectic of history."97 its romantic
primitivism, the particularism of its racial superiority
creed, its disavowal of an "ethical universalism," separ
ate it sharply from classical liberalism or Marxism,
although the latter ideologies helped to sow its seeds.96
Classical liberalism and Marxism, in contrast to
fascism, are representatives of the foolish and misguided
children of light.99 Although presenting antithetical
social programs, they entertain a common assumption that
history is redemptive, and that life grows steadily
better. However, classical liberalism operates on the
presupposition that man is primarily good, works harmoni
ously with his fellows, and has no need of governmental
9^lbid., p. 44; "The German Problem," Christian
ity and Crisis, Jan. 10, 1944, p. 2.
97"New Allies, Old Issues."
98"The Religious Level of the World Crisis,"
Christianity and Crisis, Jan. 21, 1946, p. 4.
99The Children . . ., pp. 26, 32.
73
restraints. Even when man pursues his own self-interest
to the maximum, the laws of a mechanized universe will
automatically operate to achieve the general interest.
Indeed, when man surpasses his fellows economically, such
success indicates the wisdom, diligence, integrity, and
foresight necessary for survival in life's battles.
Such an ideology fails, therefore, to relate the individ
ual organically to society or show the need for such a
relationship if neither is to suffer the encroachment of
the other. It is a tragic failure to realize that society
as well as the individual is entitled to freedom.^1
In the nineteenth century during the capitalism1s
most expansive drive, bourgeois civilization was "able to
obscure the conflict of interest and passion which
expresses itself even In the most ordered community and
even the most delicate equilibrium of power among na-
tions."102 The spirit of capitalism in that earlier
lOOThus, Darwinian and Spencerian theory lend
further support to classical liberalism, since it provides
moral justification for exaggerated individual initiative.
101"The Limits of Liberty," The Nation, Jan. 24,
1942, p. 87; The Children . ■ ., p. 4.
102Paith and History, p. 159*
74
period was the spirit of an "irreverent exploitation"
of nature.403 At the same time nature was supreme.404
Thus, no rational checks that a restraining government
might seek to enforce would be tolerated to interfere with
"natural laws;" meddling political organizations were
deemed sources of evil.405
Complacency about this system has resulted in a
tacit moral sanction; the privileged groups, dedicated
to maintaining the status quo, have read this sanction
into liberal Protestantism. Nowhere, says Niebuhr, has
this complacency been more acute than in the United States,
for nowhere else has liberal culture remained so un
shaken. 4°6
Marxism, which in the U. S. S. R. has been per
verted into Soviet Communism, differs from classical
liberalism in visualizing a better world "on the other
side of the revolution."407 gut Marxism exposes the
4°^The Nature . . ., I, p. 20.
4°^Ibid.
10^Ibid. , p-. 103-
4Q^Faith and History, p. 161.
4Q7r [ , he Children . . . , p. 60.
brutality of social forces and shows how reason inay well
be an instrument of interest and passion.1^8 Further, it
acknowledges the fact that societies do not themselves
continue to grow and improve; they also regress and die
if internal criticism against injustice becomes suffi
ciently stringent. If they are to survive, they must
exist on an altered basis.109 Thus, Marxism, recognizing
the dialectic of history, fails to relate this dialectic
to a theological basis. Rather, Marxism mistakenly sup
poses that the "altered basis" of the new society will be
purely economic. It analyzes men as an Inexorable product
of natural forces but projects the new society that man
will build in terms of the utmost rationality. This
new society, emerging as an apocalypse after the anachron
istic state withers away, is presumably the handiwork of
one group in society, exercising absolute dictatorial
authority during the provisional transition between state
and no state. Of all classes this "saving remnant," the
108paith and History, p. 160.
1Q9lbid., p. 212.
llQiphe Nature . . I, p. 20.
76
111
proletariate, does not bear the taint of sin. x This
assumption, according to Niebuhr, constitutes one of
Marxism’s deadliest errors, because the provisional means
becomes the end result, as it has.
Marxism errs again when it presumes too uncritical
ly that the socialization of property will comprise the
absolute solution for man's problems. Marxism holds
that man was innocent before the institution of private
property, as if to imply that the institution of property
and not the sinfulness of man is represented by the
fall.173 The resultant equality in this classless society
is far too absolutistic to be seriously considered as pos
sibility within the historical process; it becomes too
simply the condition for justice while liberty is neg
lected . 17^
All these political ideologies--fascism, classi
cal liberalism, Marxism--fall outside Christianity because
they put man on a pinnacle as the master of historical
•^••^Faith and History, p. 160.
112ibid., p. 187.
773jbid., p. 210.
77^Ibid. ■ , p. 190.
77
destiny. Fascism is avowedly anti-Christian. Marxism
and classical liberalism, both of which contain principles
illumined by Christianity but are devoid of real Chris
tian goals, are heresies of the Christian faith.Only
the "perenially valid" elements of democracy, informed by
Christianity, avoids the fundamental errors of the other
ideologies. It does this by (l) seeking unity within the
conditions of freedom, which is necessary because man is
"essentially free;" and (2) maintains freedom within the
framework of order, necessary because man "by nature" is
social. Niebuhr writes,
Preservation of a democratic civilization requires
the wisdom of the serpent and the harmlessness of
the dove. The children of light must be armed
with the wisdom of the children of darkness but
remain free from their malice. They must know
the power of self-interest in human society with
out giving it moral justification.
However, democracy is hardly preferable to any
other form of government when its proponents transmute it
^•^Ibid. , p. 160.
116”a False Defense of Christianity," Christian
ity and Crisis, June 12, 1950, p. 73-
l17l , Democracy, Secularism, and Christianity,"
Christianity and Crisis, March 2, 1953> P- 19•
•^^The Children . . ., pp. 4o-4l.
into a religion, sharing with other secular religions the
error of knowing no other dimension than the social.H9
Unquestioned devotion to democracy results in a loss of a
tolerance vital to its operation and development, a lack
1 on
which will in the end prove fatal. Many Americans,
convinced that ours is the only surviving democracy in
the world today, believe that the "community" and "plan
ning" aspects of European socialism disqualify those
governments from meriting the name.-1 -2' 1 - They would, by
this logic, confuse democracy with any of the various
types of economic structures with which it might be
1 PP
associated at a given historical moment. “ That is to
say, they would confuse the "perenially valuable elements"
of a democracy with its ephemeral ones, which, when taken
to be permanent, are supported uncritically. Democracy
then becomes incapable of adapting Itself to those chang
ing circumstances that require changing techniques of
"Democracy as a Religion," Christianity and
Crisis, Aug. 4, 1947, p. 1.
120ibid.
121
"European Impressions," Christianity and
Crisis, May 12, 1947, P- 2.
122The Children . . ., p. 5-
79
social and economic organization. If It falls to adapt,
it dies. We are therefore admonished to remember that
"no disembodied political ideals or systems of culture
are found in human history. . . . No 'democratic1
civilization has ever existed, or will ever exist, without
contradictory elements of tyranny and imperialism in its
life."^23 Likewise, every tyrannical regime has been able
to boast some minimal achievements of justice.124
When democracy is adapted to meet new demands of
justice, it Insures a greater degree of justice than any
other political form under which society is organized.
It is a form of social organization "in which freedom
and order are made to support, and not to contradict,
each other."125 Order is the first requirement' of any
society "precisely because of the essential freedom of
man."l2^ Democracy provides this order but goes further
to permit the widest range of liberty to exist within it.
Neither liberty nor order is complete or perfect, but the
123"New Allies, Old Issues," p. 5°-
124
I b i d .
- * - 2^The Children . . ., p. 1.
126I b i d ., p. 5.
80
relative justice they achieve together is worth preserv-
ing.-*-2 ^ Finally, Christian faith offers three insights
into the human situation which are indispensable to
democracy: (l) "It assumes," Niebuhr writes, "a source
of authority from the standpoint of which the individual
may defy the authorities"; God is to be obeyed, not man.
(2) The individual, because of his unique worth, will not
be fitted into a political program as a mere instrument.
(3) The "same radical freedom which makes man creative
also makes him potentially destructive and dangerous";
"the dignity of.man and the misery of man therefore have
the same root."'*'2^
Preference for democracy over Nazi or Soviet
totalitarianism is not one of absolute justice over
absolute injustice but a matter of relativeness. Nonethe
less, "one does not lightly hope for the breakdown of any
social system in which there is still a degree of freedom
and the possibility of achieving better social and economic
12?See "Idealists as Cynics," The Nation, Jan. 20,
1940, p. 72; "An End to Illusions," The Nation, June 29,
19^0, pp. 778-79; "Pacifism Against the Wall," American .
Scholar, March, 1936, pp.- 133-^1; Angus Dun and Niebuhr,
"God Wills Both Justice and Peace," Christianity and
Crisis, June 13* 1955* PP- 75-78.
l28"Democracy, Secularism, and Christianity," Chris
tianity and Crisis, March 2, 1953* P* 20.
81
adjustments. "^9 one example cf such a need in our democ-■
racy is for more equal opportunity and social justice.
Contemporary history offers many examples of
ironic refutations of American hopes and illusions.
Especially ironic is the fact that "the experience which
furnishes the refutations is occasioned by conflict with
a foe who has transmuted ideals and hop.es, which we most
deeply cherish, into cruel realities which we most fer
vently abhor. "^30 iea(jers 0f communist states make
the pretension that they have made the "leap from the
realm of necessity to the realm of freedom," and thereby
imagine themselves masters of historical destiny. The
irony of the situation exists in the fact that America,
which must lead the opposition to the-tyrannical results .
of such pretensions, represents the culmination of a
liberal culture which shared, to a limited extent, in the
same illusions about the managing of history. There are
further ironic elements in the relationship between power
and the mastering of history. America now owns far greater
power than she ever hoped to have. The ironic element in
129
"Idealists as Cynics," p. 73-
13°The Irony . . ., p. 11.
82
this "lies in the fact that a strong America is less
completely master of its own destiny than was a compara
tively weak America, rocking in the cradle of its
continental security and serene in its infant innocence "131
Niebuhr concedes that America is a relatively
"virtuous" nation, but he warns that she is not so virtu
ous as she thinks. America tends to correlate her virtue
with her power, and this makes her unbearable to her
allies and impedes her from handling her political affairs
as creatively as she might. The nation is powerful, but a
complacent security in her power leads her to overlook the
fact that all power in managing history is inherently
limited. Thus virtue turns ironically into vice, power
into weakness, when pretension stretches them beyond their
limits. Niebuhr writes,
Israel is undoubtedly a "good" nation as com
pared with the great nations surrounding it. But
the pretensions of virtue are as offensive to God
as the pretensions of power. One has the uneasy
feeling that America as both a powerful nation
and as a "virtuous" one is involved in ironic
perils which compound the experiences of Babylon
and Israel.^32
131ibid., p. 74,
13gibid., p. 160.
83
In Niebuhr's estimation, however, America has
been wiser in her practice than she has in her creed.
Yet this, too, has been due to "the ironic triumph of the
wisdom of common sense over the foolishness of its wise
men.Ml33 jn the debate between bourgeois and Marxist
thought, only "the wisdom of democracy Itself" has pre
vented either strategy from being carried through to it's
logical conclusion. The ironic aspect of American history
is that "we have achieved a tolerable synthesis between
two conflicting ideologies In practice while we allowed
the one to dominate our theory."^3^
These insights of ironic interpretation calls for
a complete reorientation of the spiritual context of our
political thought. Niebuhr asserts that the Christian
faith provides the necessary resources to meet this need.
"Consciousness of an ironic situation," he writes, "tends
to dissolve it."^35 adds:
If . . . a religious sense of an ultimate judge
ment upon our Individual and collective actions
should create an awareness of our own pretensions
133Ibid., p. 106.
13^ibid., p. 108.
133ibid., p. 168.
84
of wisdom, virtue, or power which have helped
to fashion the ironic incongruity, the irony
would tend to dissolve into the experience of
contribution and to an abatement of the preten
sions which caused the irony.136
That judgement can be mediated only by a profound faith
in God.
The Self and History
To Niebuhr, man is to be understood as both a
creature and a creator of history. He is a creature in
that he has natural hungers and needs, and that he has
the natural forces of cohesion in his communities, such
as the sense of kinship. Man is also creator. This is
reflected, on the one hand, in the unvarying way in which
man's unique freedom manifests itself, such as his yearn
ing for an ultimate good and his inevitable abuse of his
freedom. On the other hand, freedom is also the source
of the unique and variable factors in social behavior and
therefore of the unpredictable character of historical
events.■'■37 "History,1 1 he writes, "is thus comprised of
causalities and sequences, coherences and structures
136Ibid., p. 169-
137rjhe Structure of Nations and Empires, pp. 287-88.
85
which are not easily comprehended as meaningful. "138
In the movement of history the self, with all
its fears, hopes, and ambitions, is at the center, and
the mind is on the circumference, serving merely as an
instrument of the anxious self. Niebuhr writes,
We are always part of the drama of life which
we seek to comprehend and participants in the
conflicts and comradeships which we seek to
arbitrate or enjoy. Our judgements of others
are mixed with emotions prompted by our strength
or our weakness in relation to them. Their
virtues and advantages may excite our jealousy
or prompt our emulation. . . . We are involved
as total personalities in the affairs of history.
Our mind is never a pure and abstract intelli
gence when it functions amidst the complexities
of human relations.139
In the knowledge of nature, however, the mind of man is .
at the center of the process of knowing, and the self,
with all its emotions and desires, is on the circumfer
ence. Thus, the self's freedom over natural process
enables it to be a creator of historical events. Both
its memory of past events and its capacity to project
goals transcending the necessities of nature enable it to
create the new level of reality which is human history.
138paj_th and History, p. 56.
^ ^ Discerning the Signs of the Times, p. 8.
86
But the self is not simply a creator of this new dimen
sion, for it is also a creature of the web of events, in
the creation of which it participates.
"In so far as the form of cohesion and the inte
gration cf the community have been consciously con
trived, communities are primarily the creation of the
human will and reason. But the temptation to overestimate
the capacity of man as a creator and master of his history
is particularly strong for Americans. Among the many rea
sons for this is the important fact that America emerged
In a relatively short period from the security of con
tinental mastery to the position of one of the world's
greatest powers.
The great modern social movements and philosophies
with their combinations of voluntarism and determinism may
instruct us about the view of man as a creator of history.
A tendency to equate history with nature and to confuse
the "laws of nature" with those of history has given rise
to a determinism which minimizes the creative role of man.
The most consistent application of this determinism was
140
The Self . . ., p. 41.
^•^Ibid. , p. 163-
87
the Xaissez faire theory, warning men from interference
with the "natural" processes and "natural" balances of
history. This determinism was joined by an excessive
voluntarism, according to which man is called on to use
scientific techniques to manage history as he has managed
nature.
The combination of voluntarism and determinism is
more dangerous in communism. Niebuhr writes,
It has a self-appointed elite, the Communist
Party, who, by reason of being the only ones who
are privy to the logic, which supposedly deter
mines historical events, are able to intervene
at the crucial moments to further the logic and
finally to take the heroic step which will insure
not only the victory of the "proletariat," but
change the whole human situation by making man
the unambiguous master of historical destiny
rather than merely both creature and creator.
Both of these creeds--laissez faire and communism--
are informed by rationalistic, utopian conceptions of man.
These concepts are rooted, in turn, in two misconceptions.
First, man is viewed as a guileless, tame creature. "It
is not understood," Niebuhr writes, "that the 'nature'
which is to be mastered and manipulated contains the self,
lZ|2Ibid., p. 42.
with all of its guile of spirit} and that the mind which
is supposed to master nature is also involved in this
same self, with all of the capacities of self-
deception."'1 '^ Second, neither the radical freedom of
man nor the radical self-corruption of that freedom is
taken into account. Neither creed understands that "man's
freedom imparts a stubborn recalcitrance to his actions
which makes him finally 'unmanageable.1"1^ Neither
sees the self in either its grandeur or its misery. Thus
both are able to exaggerate the freedom of the self as a
creator of history, because both regard history in terms
of nature, and the evil of man as rooted elsewhere than
in the self.
Perhaps the real difficulty in these philosophies
of a rationally ordered historical process is that modern
man lacks the humility to accept the fact that the whole
drama of history is enacted in a frame of meaning too
large of human comprehension or management. Niebuhr
writes,
-^^gft-p-pstian Realism and Political Problems,
pp. 70-71.
^ ^ The Irony . . ., p. 84.
89
A sane life requires that we have some clues to
the mystery so that the realm of meaning is not
simply reduced to the comprehensible processes
of nature. But these clues are ascertained by
faith, which modern man has lost. So he hovers
ambivalently between subjection to the "reason"
which he can find in nature and the "reason" which
he can impose on nature. But neither form of rea
son is adequate for the comprehension of the
illogical and contradictory patterns of the his
toric drama, and for anticipating the emergence
of unpredictable virtues and vices. In either
case, man as the spectator and manager of history
imagines himself to be freer of the drama he
beholds than he really is; and man as the crea
ture of history is too simply reduced to the status
of a creature of nature, and all of his contacts to
the ultimate are destroyed.^5
Niebuhr's Thought Related to the
Modern Political Economy
How does Niebuhr's ethical system apply to the
contemporary political economy? Niebuhr answers this ques
tion by giving two wrong answers. One is to equate
religious with political issues. This is wrong, because
all politics and economics Is morally ambiguous. In the
realm of politics and economics, self-interest and power
must be harnessed rather than eliminated; the goal is
•^^Ibid. a p, 8g.
90
always some kind of a harmony or balance of Interest,
which may be regarded as being related to the final
harmony of ultimate l o v e .-^6 Niebuhr writes,
Realists know that politics is a problem of the
manipulation of power. But they easily interpret
the problem of power in too uncritical terms.
Sometimes they forget that political power is the
compound of which physical force, whether economic
or military is only one ingredient. They do not
fully appreciate that a proper regard for moral
aspirations is a source of political prestige;
and that this prestige is itself an indispensable
source of power.1^7
The other wrong answer stands at the opposite
extreme. It Is to find no relevance at all between faith
and political issues. This is to deny the seriousness of
political decisions and obscures Christian responsibili
ties for the good order and justice of the civil community.
Niebuhr, then, demarcates an absolute Christian
ethic from a relative social ethic. From his viewpoint,
the political economy cannot be appropriately examined in
146mpolitics is morally ambiguous even on the
highest level. . . . Politics deals with power and
inequalities of power in any given situation introduced
moral irrelevancies which cannot be completely overcome."
"American Liberals and British Labor," The Nation, June 8,
1946, p. 683.
l47"pians for World Reorganization," Christianity
and Crisis, October 19, 1942, p. 3*
the perspective of a relative social ethic, which is
itself involved in sin. Nor can it be measured by the
extent to which it falls short of an absolute Christian
ethic, for such an absolute ethic is impossible in our
finite existence.^48 Standards of justice, informed by
this absolute Christian ethic, can and do prescribe goals,
but a realistic analysis of the power factor must first
be undertaken to determine whether the goals are possible
in our human situation. The goals themselves, no matter
how idealistic and valid they may seem in particular
circumstances, are also involved in sin, because in their
very advocacy they presuppose their own validity and
rightfulness as solutions to social problems.-'-49 Thus in
every profferred solution to political-economic problems,
sin and righteousness confront each other as universal
antitheses.
In Niebuhr's estimate, reformation Christianity's
excessive emphasis on the individual, rather than on his
^®"Idealists as Cynics," p. 72.
l49"iphe Sickness of American Culture," The Nation,
March 6, 1948, pp. 267-70; "A False Defense of Christian
ity," p. 73; "A Lecture to Liberals," The Nation, Nov. 10,
1945, p. 491; The Children . . ., p. 11.
organic relation to society and to spiritual elements
that transcend society, has decayed into capitalistic con
centrations of power or into Marxist-Leninist collectivism.
False estimates of the individual lead to anarchy on the
one hand and to tyranny on the other. Although man
is unique and "made in God's image," he is still involved
in the natural process; man is also a biological genus.
Neither is man able to transcend the social order as
completely as he believes. On the one hand, man gained
his individuality with the Protestant Reformation. But on
the other hand, he has corrupted the freedom thus gained
by his inordinate faith in his own ability to life himself
by his own bootstraps. Man has lost his individuality in
an enslaving technical civilization he himself has
created. Niebuhr writes,
Man lost his individuality immediately after estab
lishing it by his destruction of the medieval
solidarities. He found himself the artificer of
■ a technical civilization which creates more enslav
ing mechanical interdependencies and collectivities
than anything known in an agrarian world.151
^ ^ The Nature . . ., I, p. 22.
151lbid.
According to Niebuhr, a fundamental problem of
modern industrial society is how the vitalities of human
existence are to be organized. In organizing these
vitalities, it is Imperative to take into account two
factors: the perennial struggle for power, and the role
of self-interest in that struggle. All communal life
represents to Niebuhr a field of vitality, elaborated in
many forms which are related to each other in terms of
both mutual support and of potential conflict. Yet com
munal life is not merely an order of vitalities which is
prevented from falling into chaos by its conformity to
particular structures. Rather, it is a vast series of
encounters among human selves and their interests. These
encounters are Indeed regularized and stabilized into
patterns; the habit of conforming to these patterns
mitigates the encounters. But the social patterns are
not "eternal 'laws,” and they cannot hide the essential
character of social life as encounter between selves,
whether individually or collectively. Political economic
life, then, deals primarily with human selves, and not
with either the mind or any other sub-rational
vitalities.^52
The perennial importance of power in social
organization is based on two characteristics of these
selves. The one is the unity of vitality and reason, of
body and soul. The other is the force of human sin, the
persistent tendency to regard ourselves as more important
than anyone else and to see a common problem from the
standpoint of our own interest. The second characteris
tic is so stubborn that mere moral or rational suasion is
not enough to restrain one person from taking advantage of
another. The first characteristic, the unity of vitality
and reason in human nature, guarantees that egoistic pur
poses will be pursued with all vital resources which an
152
individual or collective will may control.
Consequently, the perfect accord between life and
life is constantly spoiled by the inordinate concern of
each life for its own welfare, especially as expressed in
the corporate egoism of contending groups. Human society
Christian Faith and Social Action," Christian
Faith and Social Action, ed. J. A. Hutchison (New York:
Scribner 1s,'1953), PP- 240-41.
•^^■The Nature . . ., II, pp. 258-59-
is, then, full of friction and cross purposes; Niebuhr
has characterized this condition as a "perpetual state
of war."15^- Disputes may of course be composed and con
flicts arbitrated into a tolerable harmony by wise states
manship and astute methods of adjudication. But in every
conflict of interest the possibility of marshalling every
possible resource on either side is implied. Most human
conflicts are composed or subdued, by a superior author
ity or power. "But," Niebuhr writes, "the calculation of
available resources on either side is as determinative in
settling the.outcomes of the struggle as more purely
rational or moral considerations. "^-55
Niebuhr recognizes, then, that the contest of
power is the heart of political and economic life. To
understand politics and economics is to recognize the
elements of power which underlie all social structures.
The play of power may be obscured or submerged, but it
cannot be eliminated.^56 Niebuhr writes,
lb4
Moral Man and Immoral Society, p. 19-
-^^The Nature . . ., II, p. 259*
6m scerning the Signs of the Times, p. 187*
96
The common sense of ordinary men is seldom under
the illusion that the jealousies and envies which
infect even the most intimate human relations are
merely the defects of an undisciplined mind. They
are known to be temptations for saint as well as
sinner; for the wise man and the fool. . . . All
common-sense political wisdom seeks to harness and
restrain, to make use of, and to guard against, the
power impulse. A common sense regulation of economic
life does not treat the economic motive as a force
which is about to be eliminated from human society.
It knows that motive to be one facet of the power of
self-interest which must be harnessed, deflected,
beguiled and transmuted in the interest of the com-,
monweal but which can never be completely suppressed.
The common-sense wisdom of mankind is even more
aware of the recalcitrant power of egoistic interest
in collective action. Nations and groups do not
possess an integral consciousness as does the
individual. But they do have an inchoate will;
and that will is capable of only vagrant affirma
tions of ideals and values beyond its own interest.-*-57
ana History, pp. 91-92.
CHAPTER III
THE INSTITUTIONAL ECONOMICS OP JOHN R. COMMONS
Three concepts are fundamental in the institution
al economics of John R. Commons: (l) men are mutually
dependent creatures who must cooperate with one another;
(2) the scarcity of wealth in the economy gives rise to
private property and conflicting interests among
individuals; and (3) collective action is the necessary
ingredient to settle, or at least mitigate, these con
flicts, create a mutuality of interests, or provide a
structure within which a measure of order may be worked
out.1
Essentially, he is concerned with analysis of the
social process in order to find a common ground in which
the social sciences, especially economics, ethics, law and
^Institutional Economics, pp. 619-27*
97
98
p
political science may be coordinated. Indeed, such
coordination is a requirement of social or collective
control, which in turn is essential to economic life;
social control is furnished legislative and administra
tive direction, both public and private. Commons sees
the basic problem in this way:
As I have studied practical problems it has
always seemed to me that the life-and-death strug
gle of making a living and trying to get rich was
at the bottom of all other problems. Out of this
basic struggle come political parties, constitu
tional governments, labor unions, corporations,
and so on. Always I worked out some administra
tive task, but the administration grew out of the
underlying struggle fo,r making a living. Conse
quently I have never been able to think of the
various social sciences as separate fields of
history, political science, law, economics, ethics,
and administration. What we need Is some way of
working through the whole complex of problems
that grow out of this fundamental struggle.
For these reasons I have worked out over the
years the analysis of the three transactions. This
is the smallest unit we can find which permits the
analysis of all dimensions of the human will In
action, with the correlated social relations.3
^Economics of Collective Action, p. 118; "A
Sociological View of Sovereignty," American Journal of
Sociology, VT (1900-1901), pp. 86-87.
3Economics . . ., pp. 118-19•
99
No individual can earn a living or get rich
without regard to what other individuals and
associations of individuals are doing. Each
person is a participant, willingly or unwilling
ly, in many forms of collective control.^
Conflicts of interest, then, are seen as a natural
and necessary part of the social process.^ in the context
of individual and collective action, there occurred such
conflict. But along with this there is also mutual
dependence and the attaining of order--all ingredients
inherent in the social process. Thus the problems society
fdces must be continuously adjusted and readjusted. The
primary means to this constant adjustment are the social
procedures and organization devised by societal groups,
whereby relationships between individuals are stabilized.
The theory of valuation is relevant here. Social stabil
ity is heavily reliant on this theory; for valuation
exists wherever organizations weigh alternatives and make
choices. Commons' approach to "reasonable value" is to
4Ibid., p. 128.
^Institutional Economics, p. 3- Referring to his
own background of public service, during which period he
developed many of his theories, he writes, "I do not see
how any one going through these fifty years of participa
tion in experiments could fail to arrive at two conclu
sions: conflict of interests and collective action."
100
devise, by drawing on human experience, possible courses
of action that will carry society from conflict to
mutuality. His assumption is that whatever is "reason
able" is constitutional--judicial decisions and tests are
his guides--and that reasonableness is best determined
in practice when representatives of conflicting organized
economic interests agree voluntarily on the working
rules of their collective action in control of individual
action.
Collective action proceeds, indeed, not from the
intellectual logic of philosophers and economists,
but from the arguments, debates, conferences,
compromises, mass meetings, agreements, disagree
ments, negotiations, propaganda--among ordinary
people themselves, like business men, laboring
men, farmers, or professional classes, when forced
or persuaded to consider their common interests.
The psychology of this give-and-take process of
conciliation and agreement may be named negotia-
tional psychology, to distinguish it from the
pleasure-pain psychology of the individualistic
economists since the eighteenth century. . . .
It was collective negotiation and compromise
between the conflicting interests and the conflict
ing reasoning of capitalists and laborers, a
process of reasoning which has historically been
known since the time of ancient Greece as "dialec
tics," that is, argument back and forth instead of
logic. They might not arrive at logical truth,
but they arrive at agreement to work together for
the time being.6
^Economics . . ., pp. 28-30.
101
The rule of reason is thus considered the "final rule of
7
valuation in collective action."
Three forms of collective action predominate:
corporations, trade unions, and political parties. Funda
mental economic and political conflicts take place among
these groups--an expression of collective will competing
Q
against collective will. The goal is economic power.
The task of democratic government is to'achieve economic
democracy in the context of these conflicts--essentially
pragmatically, by way of a balance of each institution
against the other in their power. This balance of power,
then, is the instrument for economic progress.^ in the
process of achieving this balance, there may be distin
guished three types of transactions, which, in Commons's
thought, is the basic unit of economic life: bargaining,
managerial, and rationing.^ These transactions have
dimensions of quality as well as quantity. The primary
7Ibid. , p. 39' .
8Ibid,, pp. 118-19-
9Ibid., pp. 313-15; Foundations of Capitalism
(Madison: University of Wisconsin Press, 1957)? p. 97*
^Economics . . ., p. 43*
102
thrust of Commons1s system Is in lifting the quality of
the bargain by the infusion of ethical values, such as
liberty, security, equality, and justice, in the economic
struggle.H
A Doctrine of Man
Such an approach to economic activity carries
with it concepts of economic man different from the "indi
vidualistic," "pleasure-pain psychology" thinking of
12
orthodox economic theory. Man is an active creature who
formulates plans and works to carry them out. He is a
"creative agency looking toward the future and manipulat
ing the external world and other people in view of expected
consequences. rphe huraan mind, Commons writes,
. . . does not wait for' impressions, it is con
tinually looking for them, breaking them up into
parts, and reconstructing them into new feelings.
Those new feelings are . . . active beliefs
Ibid., p. 22. Commons cites three stories to
illustrate the core of his thinking about transactions
and the infusion of ethical qualities in his system.
Pp. 140-42, 28, 23-25.
12Ibid., p. 29.
1 8
Institutional Economics, p. 17.
103
reaching forward for future action. It is this
relation of the part to the whole and of the past
experience to future expectations that becomes the
psychology of our transactions and going concerns.1^
Man's mind, then, is active, participating, having the
power to give direction to events. The individual is a
system of relations, changing with the collective action
of which he is a part and product. He is a different per
son in each different concern or transaction in which he
participates; at the same time he is a product of the
13
social process in which all collective action occurs.
Economics should be "approached as a science of
Ibid., p. 153i The Distribution of Wealth (New
York: Macmillan Co., 1905), pp. 22-23, 24-25-
"But human faculties and capacities have a two
fold function," he writes. "While, on the one hand, they
are the subject of pleasurable sensations, brought about
by contact with appropriate external exciting agents,
they are also the means or conditions for acquiring these
external agents. The human being is one and indivisible.
His personal abilities, his power to labour and acquire
good things, is one side of the same faculties which enjoy
these good things. The power to labour and economize is a
result of the satisfactions gained from food, clothing,
shelter, education, and amusements. The process of eating
food is pleasurable in itself— the food satisfies the
wants of the physical faculties of our nature. Also, these
physical faculties are the means whereby we procure not only
food, but other goods, for the satisfaction of our wants. .
. . These faculties should not be classed as capital."
Pp. 24-25-
-^Economics of Collective Action, p. 117-
104
human beings, instead of a physical or a biological sci
ence," for "no method of investigation, however scientific,
can have the answers to the puzzles of human progress.
Ultimately, progress rests with the human wlll."^8 Man,
then, is not a machine or robot, but rather one who has
basic drives in the pursuit of which he will help shape
society. Commons writes:
The sciences of man today teach us the mutual
harmony and affinity of body and soul. They show
how these shape and reshape each the other. There
is no alienation, there is no antagonism between
them. The soul is simply the expression and
flower of the body. It is that in the body which
experiences all the thoughts and emotions, the
ideals and aspirations. These may be good or bad.
They may be emotions and ideals of love or hate,
of faith or infidelity, of hope or despair. But,
whatever they are, they depend upon the body.
Bodily wants are the primal and indispensable
wants.17
. . . Social conditions are the result of the
human will. This human will finds expression in
two ways--in the every-day activities of individ
uals and in legislation. These two facts are the
causes of social conditions, and they are simply
the manifestations of the human will acting individ
ually .or collectively.
l6Ibid., pp. 113-14.
^ Social Reform and the Church (New York: T. Y.
Crowell & Co., 1894), p. 32.
l8Ibid., p. 14.
105
Principles of Economic Action
Thus the activities of and relations between
persons constitute the focal point of the social process.
Commons points to the transaction as the basic unit of
investigation of this process. Transactions are social,
joint actions, and consequently involve individual
behavior or actions. The constitution of economic action
Commons defines as being the activity of individuals
struggling to "make a living and trying [sic] to get
rich,"1^ produce and acquire wealth:
Our subject-matter is the transactions of human
beings in producing, acquiring, and rationing
wealth by cooperation, conflict, and the rules
of the game.2* - 1
The very word "economy" implies a whole-part relation
ship; it means "the whole activity" of proportioning the
parts, or the resources, so as to get "the largest results
21
or the minimum effort." It refers to a complex process
in which the effort of man to produce a maximum of goods
^Economics . . ., p. 118.
20
Institutional Economics, p. 121.
2IIbid., p. 621.
106
from available resources, or to maximize want-satisfac
tion through consumption. There is a repetition of trans
actions, in which complex economic behavior is guided by
the human will.
Commons here delineates five principles of .
economic action which are apparently inherent in the
structure. These principles are conceived of as activity
in the social process. Commons' definition of a "prin
ciple" makes this evident. He defines a "principle" as
a flow of time and which is "a similarity of cause,
effect, or purpose."22 Commons explains:
Early economists, copying physical scientists,
placed causation in the past and effect in the
present. But a science of getting a living or'
getting rich relative to public purpose places
causation in the future and effect in the present.
Its questions turn on reasons and consequences.
It becomes a science of present worth and future
purpose.
This is why we act as we do, and this is what
we mean by the reasons given for acting. It is
purpose in action. Any fact that throws light on
this relation, not only of past cause to present
effect, or historical development, but of the
future to the present, of end to the means employed,
of purpose to experiment, is relevant to economic
investigation.
22Ibid., p. 94.
107
All sciences seek understanding, as well as
facts. Facts are sought to correct misunderstand
ing. Facts are the proven experiments. To seek
understanding is to ask the question, Why?23
Action involves purpose through choice; that is to say,
ideas, as principles, and their knowledge, which is gained
through experience, are related to action. They are
general concepts derived from actual behavior of persons
going about making a living in the world. As principles
they represent lines of actual choice and action, because
oh
they are implicit in the collective behavior of persons.
The five principles which are primary in inter
preting modern economic activity are sovereignty, scarcity,
efficiency, futurity, and custom.principle of
sovereignty is the principle of government; it is the
"first collective action that helps and restrains every
body in getting a living or getting rich."26 Essentially,
it relates to the use of force--control of violence--
towards legal inferiors by their superiors; it is the
^ Economics . . ., p. 194.
^ Institutional Economics, p. 94•
^ Economics . . ., p. 73-
Ibid., p. 74.
108
effort of a collectivity to take violence out of private
initiative by regulating it. The simplest formulation of
its operation is a violation of some authoritative working
rule of an individual, which then sets a judicial or
quasi-judicial procedure in motion. For example, a plain
tiff brings an action against a defendant, and an official
of sovereignty who commands obedience decides the point.
It is expected that this process will be repeated endless
ly, whether as a labor or commercial arbitration, stock or
other market exchange, or In a state court trial. There
is a pluralism of governments, and sovereignty may exist
in occupational groups, over their members--such as labor
unions, employer associations, or ecclesiastical groups--
just as it does in a political government over its citizens.
These are indeed governments, since they are
. . . collective action in control of individ
ual action through the use of sanctions. To
the extent that the individual is clothed with
this sovereign power of the state does he rise,
from the nakedness of slave, child, woman, alien,
into the armament of a citizen, and his going
concern rises from a conspiracy into a corpora
tion.
Legal Foundations . . ■, p. 121.
109
There exists, however, an hierarchy of superior
and subordinate governments rather than a pluralism of
equal entities. This is seen when one analyzes the kinds
and degrees of power with which a government may enforce
its decisions. They are similar to the extent that each
government determines for its individuals their rights,
duties, and liberties; the federal and state governments
reflect public purpose and policy, other governments
reflect private purpose. Their difference lies in the
kinds of power each may exercise, and there are three
kinds. First, there is moral power, which is essentially
persuasive in nature and is exercised by religious and
social groups; it is the weakest of the three types of
power. Secondly, economic power is power of scarcity, of
withholding property rights from others as a means of com
manding obedience. Economic power based on job and
material scarcity is substantial. But most substantial is
the third type of power, namely, physical power, exclusive
ly held by political governments, because it entails
bodily compulsion, life and death, Of course these are
not hard lines, and the hierarchy is not fixed. More often
there is a blending of all three types of power in a group;
110
but the classification Commons sets forth is substantially
valid. Moreover, their operation is not automatic, for
the rights of dissent are preserved in varying degrees
among the different groups, and "power" indicates not so
much actual use as inducement, threat, and intent.^
A second principle, scarcity, relates to negotia
tions over prices and quantities, over terms of transfer
of ownership and delivery of physical goods. Commons
writes :
Adam Smith had assumed abundance to be the natural
state of man, on account of divine beneficence,
but his common sense assumed also that private
property was natural, and this restrained him from
carrying out logically his.idea of efficiency to
such an extreme limit that, like air, useful
things would have no value. He opposed monopoly,
which was artificial scarcity, but he did not
investigate natural scarcity, or property rights,
because they were self-evident.^9
Scarcity value adheres to property rights in what
is scarce or expected to be scarce,30
In addition the principle Is related to the Individual.
As Commons writes,
^3Ibid., pp. 47-64; Economics . . ., pp. 75-76.
29EConomiCS . . .J pp. 89.90.
3°Ibid., p. 89.
Ill
Diminishing satisfaction with increasing abund
ance supports the conviction that "you cannot
go against the law of supply and demand."
. . . The pleasure of consumption is most
intense when the object wanted is scarce, like
water on a waterless desert, and the pleasure
is least intense when there is an oversupply,
and the excess becomes a "nuisance," as water
in a■Mississippi flood.31
There are three kinds of scarcity: (l) biological,
introduced into economic thought by Darwin's assumptions
of the survival of the fittest and Malthusian "purposeful"
s e l e c t i o n ;32 (2) psychological, relating to the idea of
diminishing pleasure introduced by the hedonistic econo
m i s t s ; 33 (3) proprietary, which is enforced by the working
rules of political government and the collective action of
corporations and labor unions. The latter variety of
scarcity was introduced with the legal development of
intangible property, which has to do with withholding
from others; this is distinguished from corporeal proper
ty, ownership of which forbids trespass by others.
Commons writes that scarcity of intangible property is
"the bargaining idea of two owners withholding release of
3 1 i b i d ., p. 93*
3 2 I b i d .
3 3 i b i d .
112
ownership until a price or ratio of exchange is agreed
upon in the negotiations of a transaction."34
While the older notion of corporeal property was
suitable enough for an individualistically-oriented
political economy— individuals producing wealth for their
own use~-modern economics of collective action demanded
an idea of economic interdependence, whereby the
individual earns a living and gets rich by acquiring
ownership of things produced by others.35 This is the
essential difference between wealth and assets :
"Wealth," thus distinguished, is increased by
increasing the abundance of things useful to
mankind, even going so far as to reduce their
exchange value to zero, like pure air, the most
useful of all. The "assets" of an individual or
association of individuals are increased by
limiting their supply so that they will have
exchange value, or bargaining power, in command
ing other things in exchange, and especially,
in modern life, commanding "money" in exchange.36
Modern business operates on the basis of the
34lbld., p. 94.
35hegal Foundations . . ., pp. 11-28.
-^Economics . . ., p. 94; Institutional Economics,
pp. 74-77.
113
scarcity of "assets" rather than abundance of "wealth."37
Private property is a sovereign power given individuals,
who may withhold supply when scarcity value, in terms of
money, drops below cost of production or some other
standard of reasonable compensation. Mass production
machinery has introduced a new paradoxical factor not
envisaged by the classical economists; for by eliminating
fatigue, the new technology eliminates labor as a supply-
restricing element. The early economists thought labor
to be a "natural" factor of scarcity, whereas monopoly was
"unnatural;" yet, today, private individual property has
become private collective property, and since corporations
are legally "big persons," this may likewise be deemed
quite a "natural" force in promoting scarcity.38
The principle of efficiency may be distinguished
from that of scarcity in that efficiency is power over
nature, while scarcity is power over others.39 Efficiency
37Economics . . ., p. 95* "With assets one can
give security for loans of money, but the security is
worthless if the supply of 'wealth' is increased so
greatly that assets have little or no scarcity value
when sold upon the markets for money."
3®institutlonal Economics, pp. 3^8-66, 386-89,
630-33.
39lbid., p. 387-
114
deals with physical Input and output of industrial
processes, with processing and converting natural
resources into commodities. useful to man. In terms of
value, then, efficiency is "use value."^0 Moreover,
Commons writes, ^
The distinctions of output and income are
related to that between wealth and assets. An
increase of efficiency, that is, an Increase
of output per man-hour, is an increase of wealth
in the form of use valuej but an increase of
money prices or decreases of money wages is an
increase of assets for the employer and may be
a decrease of wealth by restriction of output.
To beat down wages paid, and to uphold prices
received, often described as "business effici
ency, " is an Increase of 'profits and assets,
but Is not an increase of real wealth for the
nation.
The principle of futurity rests on expecta
tions. The concept of time in economic behavior has
shifted from an emphasis on the past in classical
theory, to the present in hedonistic theory, to the
future of "waiting, risking, purpose, [sic] and
^°Ibid., pp. 375-77.
Ix 1
M’ - LEconomics . . . , p. 100.
115
hn
planning.' Commons writes.
The institutional economists begin with the legis
lative, administrative, and judicial decisions of
both governmental and private collective action
on which depend the security of present expecta
tions of future profits, investments, jobs, and
contracts. Without this security of expectations,
there would be little or no present value, present
enterprise, present transactions, or present
employment. Value is present worth of future net
income.
The modern credit system is the institutional creature
of this concept.^ Negotiability and assignability of
financial obligations means salability,, which gives them
^ Institutional Economics, p. 389* He writes,
"When science of Political Economy began to emerge in
the Eighteenth Century, it fell in line with the theory,
then dominant, of an original stated liberty and
rationality of human beings. . . . These theories of
liberty and rationality accomplished extraordinary
results in overthrowing absolute monarchies, abolishing
slavery, and establishing universal education. But it
was not because they were historically true--it was
because they set up ideals for the future. Historically
it is more accurate to say that the bulk of mankind lived
in a state of unreleasable debts. And historically it
is more accurate to say, as Malthus said, that man is
originally a being of passion and stupidity for whom
liberty and reason are a matter of the slow evolution of
moral character and the discipline enforced by govern
ment." P. 390.
^Economics . . . , p. 104.
^Institutional Economics, pp. 389-90.
116
exchange value; that is, the present value of this
intangible property depends•on their expected exchange
value
The fifth principle of modern economic behavior
is custom, or working rules, which refers to a similarity
of behavior that may be expected to continue substantially
unchanged in the future.^ Individuals adjust to these
habitual modes of behavior, and collective action creates
order, stabilizing the wills of the participants by defin
ing the rights and duties of each. When these "usages"
are officially enforced, they become compulsory--such as
that embodied in a statute; in this aspect custom may be
seen as the ultimate principle in stabilizing the wills
of those with superior bargaining power or authority.^
The five part-princ.iples constitute in their
interdependence, the whole of the principle of
willingness. . . . As principle, it is the
expected repetition, with variability, of the
total of all human acting and transacting within
the limiting and complementary interdependence
4 s
''Other aspects of futurity are risk, security,
profit, interest, and savings or investment.
^ Institutional Economics, pp. 44-45-
^Economics . . . , pp. 110-12.
117
of the principles of scarcity, efficiency, working
rules, sovereignty, and futurity. The functional
relations are such because a change in one dimen
sion changes all the others, and thus changes the
whole transaction or concern. If efficiency in
creases then scarcity diminishes, a variation in
the working rules occurs, as well as of expecta
tions of the future, and perhaps of the use of sov
ereignty. °
These five principles explain what the human will
is confronted by in the social-economic process; to make
a living, man must subject natural forces to his will.
The early nineteenth century economists based their
theories on what Commons calls "material forces," only
looking to the costs of production in placing value on
commodities, rather than on the modern "volitional
sciences" of the human will as developed by the courts.
The human will, these early economists felt, was too
arbitrary, too capricious In its behavior, individually
and collectively. Commons, oh the other hand, counts
the Idea of the will as one of the crucial aspects of
his theory. Whether one is earning a living, getting
rich, or avoiding a loss, one is always faced with
alternative objects; it is also a choice of the degree
of power or control to be exerted. The limits of free
^Institutional Economics, p. 738.
118
choice are partly naturally and partly socially deter
mined. ^9 The social process, however, with its "billions
of valuations, in billions of transactions," moves ahead
"on that energy which we call the will."50 The question,
Commons writes,
. . . is not a mathematical question of imaginary
points and lines, of equality or inequality, of
an empty right or duty, but is a question of rela
tive degrees of economic or physical power in the
process of choosing between alternative opportuni
ties. This is a question of valuation and the
proper proportioning of relative degrees of power
of persons over persons. Such a question is one
of public policy, not one of mathematicians.51
^ Legal Foundations . . ., p. 72. "The behavioris
tic concept of the will is that of a will continuously in
action through all the waking and conscious hours of
life. Some of its choices are instinctive, habitual,
unconscious. But its crucial choices are conscious,
perhaps deliberative. Such a will never chooses between
acting and non-acting--it always chooses between two
degrees of power in acting. It'cannot help choosing,
consciously or unconsciously.. If not pulled on by
unconscious wish it is pushed on by conscious want or
necessity, and its choices, quantitatively considered,
differ only in different degrees of durations of power
opened up by the actual opportunities offered at the
time. If the will does not do one thing, it is doing
and must do something else where Its power Is less."
5°ibid., p. 8.
51lbid., pp. 72-73.
Thus, the human will, involved in subjugating the
physical world, endows these physical things with value
in its choices and action. The will integrates the vari
ous aspects of human behavior, through custom, organized
collective action, sovereignty power, and working rules,
to stabilize economic action and achieve security of
expectations. The will is purposeful; it has foresight.
The will is always "up against" something. It is
always performing, avoiding, forbearing, that is,
always moving along lines, not of least resistance
like physical forces without purpose, but of over
coming resistance, with a purpose of looking toward
the future. Every transaction is a two-ended action.
It is two wills acting on each other.52
So endowed, the will is the only force capable of placing
a limit on its own actions. It does so in three ways:
by performance, avoidance, or forbearance. These terms,
developed by modern American jurisprudence, were an
outgrowth of new decisions which turned "mainly on the
collective action of governments, corporations, and labor
unions in control of individuals."53
Performance is a positive, overt act, an exercise
of choice. Yet, the will may forbear, or exercise
52lbid., p. .79-
^ Economics . . . , p. 37.
120
self-restraint in acting, placing a limit on the degree
of power exercised. In making a choice, other alterna
tives are avoided; avoidance is a limit of performance
which is defined by society according to the working rules
of collective action.5^
It is in the process of choosing and acting with
collective groups that individuals become personalities.
Individuals . . . learn the custom of language,
of cooperation with other individuals, of work
ing toward common ends, of negotiations to
eliminate conflicts of interests, of subordina
tion to the working rules of the many concerns
of which they are members. They meet each other,
not as physiological bodies moved by glands, nor
as "globules of desire" moved by pain and pleasure,
similar to the forces of physical and animal nature,
but as prepared more or less by habit, induced by
the pressure of custom, to engage in those highly
artificial transactions created by the collective
will. . . . Instead of individuals the partici
pants are citizens of a going concern. Instead
of mechanical uniformities . . . they are highly
variable personalities.55
54Ibid,,
pp. 38-39; Legal Foundations . . ., p. 73-
79-
55jnstitutional Economics, pp. 73~7^«
"The personality of each organized individual
is higher and more capable than the personality of
unorganized individuals. Their individual activities
are parts of the whole activity of all who are working
together. Their economic activities are their trans
actions and all of the transactions of each individual
are his personality." Economics . . ., p. 132.
121
While there are many courses of possible action pres
cribed by the rules of collective action, the rule of
reason applies to matters regarding the direction of
performance and degree of power exercised. Reasonable
ness, Commons says, is "the final rule of valuation in
collective action. . . . We are under a compulsion to
act 'reasonably'. . . ."56 j_s evident, then, that the
laissez faire attitudes of "going it alone" are outdated,*
there is now a choice in the degree of power as well as
in the kinds of power--"a double choice which is the all-
inclusive foundation of modern economics."57
Since the individual is in some degree a center of
discretion and influence, agreements in transactions are
reached by negotiation, a give and take process of con
ciliation and agreement. This is a key ingredient of
collective action, since such joint action may be achieved
by persuasion between economic equals, or by coercion of
stronger over weaker. This process Commons calls "negotia-
tional psychology;" it is necessary because in this way
conflicts of interest among economic groups occasioned by
56Economics . . ., p. 39-
5^ibid.
122
scarce opportunities are resolved. It is a process
involving the language of
. . . duress, coercion, persuasion, command,
obedience, propaganda. It is the psychology of
physical, economic, and moral "power," the truly
"behavioristic" psychology of economics In pre
paring for the unknown future.58
The Transaction
The development of Commons' theory may at this
point suggest why he considers the transaction the smallest
observable unit of economic and social activity.
Transactions . . . are not the "exchange of com
modities," In the physical sense of "delivery,"
they are the alienation and acquisition, between
individuals, of the rights of future ownership
of physical,things, as determined by the collec
tive working rules of society.59
It is, then, the very vortex of the social and economic
relations of man to man, where individual actions meet in
conflict, mutuality, and achieved order.60 yet action in
58ibid., pp. 109, 29.
■ 59xnstitutional Economics, p. 58. The trans
action thus replaces the "exchange" of orthodox economic
theory.
6QLegal Foundations . . ., p. 67•
123
society can come about only when the individual comes to
terms with other persons and with leaders of the organiza
tions Involved. Thus, Commons writes:
■ The ultimate unit of activity . . . must contain
in Itself the three principles of conflict,
dependence and order. This unit is the trans
action. . . . Transactions intervene between the
production of labor of the classical economists,
and the pleasures of consumption of the hedonic
economists, simply because it is society, that,
by its rules of order, controls ownership of and
access to the forces of nature.61
Moreover, this transaction emphasizes the group
as the primary agent in economic choice, decision, and
activity. Although constituting the smallest unit for
observation, every transaction involves a minimum of five
persons, rather than the buyer-seller axis of exchange,
as the "ultimate unit of economics, ethics, and l a w ."62
It includes the two persons completing any effective
economic action; at least two more who had been closely
considered as possible alternatives, one for each of the
primary participants; and a fifth party available, even
•If not used, as an impartial judge to resolve disputes
Institutional Economics, p. 58.
62
Legal Foundations . . ., pp. 68-69; Economics
. . ., pp. 50-53.
124
regarding the rights and duties of the transactions under
the relevant working rules applicable.
A universe of transactions reduces collective
action to the simplest form of social relationship. It
affords analytical advantage over the older concept of
the market in that three types of activities actually
characterizing the modern economy may be perceived: bar
gaining, managerial, and rationing transactions. Each
type is distinguished from the other, again paralleling
the structures of organized groups, by the kind of powers
it can invoke to obtain mutual observance of reciprocal
rights and obligations essential for carrying the trans
action to its proper completion.
Only in bargaining transactions do transactors
deal with each other as legal equals, they may be individ
uals or a corporate and a labor organization, but they are
forced to determine whether to assume the obligations of
the proposed bargain at the price and quantity stipulated.
Each can seek better terms by superior persuasion or such
other recourses as the strike or lockout.6 3 The managerial
transaction evolved from the historic master-servant
^Economics . . ., pp. 43j 48-49-
125
relationship, Involving a legal relationship of superior
and inferior and a command-obedience situation. Even in
a mass production plant, where a supervisory agent of a
multibranch corporation works with employee members of
a national union, production cannot proceed unless the
supervisor can give relevant orders the employee must
obey.6^
Bargaining and managerial transactions are clearly
interdependent and not separable in fact. For example,
As a bargainer, the modern wage earner is deemed
to be the legal equal of his employer, induced to
enter the transaction by persuasion or coercion;
but once he is permitted to enter the place of
employment he becomes legally inferior, induced
by command which he is required to obey.65
The third type of transaction, rationing, encompasses a
still older form of essential economic activity, and
implies the lodging of power to make decisions and enforce
them in a superior authority. Government determination of
fiscal needs, against which taxes and other assessments are
recurrently levied, is one familiar example. But modern
64
Contractual protection of workers' right of
protest under collective bargaining agreements comes
later.
^6institutional Economics, p. 65.
126
corporate executives carry forward parallel rationing
transactions when they determine expenditures that must
be balanced against potential gross income and apportion
actual income among those with legal title to share it.66
These three units of activity exhaust all
the activities of the science of economics.
Bargaining transactions transfer ownership of
wealth by voluntary agreement between legal equals.
Managerial transactions create wealth by commands
of legal- superiors. Rationing transactions appor
tion the burdens and benefits of wealth creation
by the dictation of legal superiors.67
The distinctions among the three types of transactions
are thus drawn along combined economic and legal lines.
The problem is now posed, how these great collective pres
sures and activities have developed from more rudimentary'
forms. The answer lies in the relationship Commons draws
between customs and going concerns.
The Role of Customs and Going Concerns
It was pointed out above that custom is stabilized
social behavior by which the individual may expect the
usual ways of doing things to continue. Repetition of
66Ibid., pp. 67-68, 876-903.
67Ibid., p. 68.
127
similar experience makes It possible to test different
modes of action by trial and error, to select those that
seem most satisfactory, and to test ideas about physical
phenomena or human behavior. Prom repetition arise cus
toms that conserve lessons of the past and provide a basis
for future expectations.®® Customary behavior is the
elemental form of collective action, the selected ones of
which are extended, developed, and integrated into social
organization. Common modes of practice become more secure
and generally applied through wide acceptance. The classic
example of this is the Anglo-American tradition of common
law, by which the courts select good practices and
6Q
pronounce them the law of the land. ^ Their primary
function is to create security of expectations and there
by achieve order in the social process. Thus these
developments are always taking place.
Among the most significant customs are those
investigated by economics, the working rules laid down by
collective action for the conduct of transactions among
68Ibid., p. 155-
8^Legal Foundations . ■ ., pp. 214-312.
128
individuals. These rules define the limits within which
individual behavior is allowed discretionary action; essen
tially these definitions set the dimensions of avoidance,
and persons perform or forbear within these limits.7^ Work
ing rules, then, define limits within which an individual
may exercise his own will, and' thus canalize or control the
exercise of wills.
As the wills of participants are stabilized and the -
social process becomes more ordered in the processes of col
lective action, a going concern is organized. This refers
to coordinated activity, collective behavior with a common
purpose, a collective will governed by common working rules.
A going concern is a joint expectation of
beneficial bargaining, managerial and rationing
transactions, kept together by "working rules"
and by control of the changeable strategic or
"limiting" factors which are expected to control
the others.71
It is these going concerns, with the working
rules that keep them going, all the way from the
family, the corporation, the trade union, the
trade association, up to the state itself, that
we name Institutions. . . . We may define an
institution as Collective Action in Control of
Individual Action.^2
7°Ibid., p. 145.
^ Institutional Economics, p. 58.
^IMd. , p. 69•
129
Going concerns, as units of organization, occur in all
phases of social life. And all activities of these units
look to the future.
The persuasions or coercions of bargaining trans
actions, the commands and obedience of managerial
transactions, and the arguments and pleadings of
rationing transactions . . . will ultimately
determine production and consumption. In these
negotiations and decisions, which are of the
essence of institutional economics, it is always
future consumption that are at stake, because the
negotiations determine the legal control which
must precede physical control.73
The labor union, the corporation, and the politi
cal state are going concerns, the principal groups or
collectives conditioning human activities in the modern
American economy.7^ They constitute the tools of man's
needs and purposes in industrial society and are dynamic
in nature with constant interaction among men. Although
Commons borrowed the term "going concern" from the courts,
he at the same time rejected the legalistic limitations
imposed on the term of the courts. For example, the
rights and duties of a corporate organization are those
73Ibid,, p. 7.
7^Ibid., pp. 149 ff.; Economics . . ., pp. 23-25.
of an artificial person created by law; but for Commons,
all of the organized groups— going concerns--which
regulate human activity existed prior to any formal
establishment. Formal organization, of course, usually
follows in time. But the act of conscious organizations—
the charter, compact, or constitution that transforms
individuals into corporations, unions, or political
entities~-still does not create a going concern. Nor
does the formalization reduce any one of them to a mere
sum total of individuals, on the one hand, or to an
abstract entity, on the other. Rather, each going concern
develops over a period of time its own working rules
operating through the actions and transactions of those
who observe the rules. Group organizations, then, bind
men together into relationships within which they subse
quently formulate rules that enforce rights and duties,
liberties and obligations, germane to the proper conduct
of their varying interests.
^Economics . . ., pp. 34-35^ 40-41.
131
Property
How the concept of property is related to the three
principal going concerns Commons traces by analysis of the
evolution of the concept itself. Property is an object
held for the owner's exclusive use, sale, or disposal.
Property rights, however, are social relations which are
stabilized by the state. These rights are created by impos
ing duties on others; the state will support the owner's
claims to the property. Moreover, Commons writes,
Private property is but another name for that
coercive relation existing between human being
through which the proprietor commands the services
of others. This also is sovereignty, and in its
mediaeval law "the one word dominion has to cover
both proprietary rights and many kinds of politi
cal power; it stands for ownership, lordship,
sovereignty, suzerainty." Up to this point, there
fore, in European history the state had not yet
clearly emerged. Private property is strictly
competitive, a necessity of the struggle for life,
and has no ethical implication. Neither is it sub
ject to the will of any person outside the pro
prietor himself. When, therefore, order and right
are injected into property, we may say the state
has appeared. Sovereignty and private property,
then, constitute the two branches of this all-
pervasive social relation, coercion, or dominion.76
^ "A Sociological View of Sovereignty," pp. 87-88;
the quotation by Commons is from F. W. Maitland, Domesday
Book and Beyond {Cambridge, England: University Press,
1897), p. 344.
132
Yet, private property is, contrary to the legal view, not
a creature of the state, but rather is "pristine and
anterior."
. . . [private property] springs from the very
nature of man. The state is rather the creature
and offspring of private property. It arises
quite late in the history of property, with the
rise of reflective thinking and the capacity for
rational cooperation. . . . The state is not
sovereign, except to the extent that it has
actually become so, i.e., except as it has actual
ly extracted coercion from private property, and
has, at the same time, acquired for itself the
organization for expressing and enforcing its
will. . . . Private property expresses the
individual will of the several private owners,
or of the private chief, whether patriarch,
pope, suzerain, boss, or industrial monopolist,
who is at the head of the particular institution.
The sociological view, being strictly inductive,
does not impart to the theory of the state that
which is potential and ideal, but only that which
is actual and historical. At the same time, by
recognizing the state as a process and not an
entity, it allows for its further growth and
extension, and even its ultimate absorption of
all private property. Only in the latter event
could it be rightly said that the state is abso
lute and ultimate, as maintained by the legal
view.77
The judicial history of the meaning of private
property indicates its evolution to its present
significance in modern capitalism. Earlier common law
7^Ibid., p. 88.
133
limited the concept to mean physical, corporeal things
held for one's use. A new kind of property gradually
came to be recognized and enforced by the courts--incor-
poreal property, the duty of a debtor to pay money,
arising from credit transactions and contractual obliga
tions.^® This social invention permits the purchase or
sale of mere promises to pay, Just as any tangible com
modities are exchanged. The concept was further enlarged
in the last part of the nineteenth century to include
intangible property, which meant sale or exchange value
of a thing rather than the physical object; it meant pur
chasing power, or rights of s a l e . ^ 9 Examples of intangi
ble property are patents, business goodwill, trade marks,
the rights to do business and to earn a living and get
rich. They are, Commons writes,
. . . worth money; money is purchasing power;
purchasing power is bargaining power; bargaining
power is property; property is assets, and the
assets are means of getting rich. Property is
created by sovereignty, by keeping other people
off, by preventing robbery, trespass, stealing
secrets, or preventing "infringement" upon one's
^®Legal Foundations . . ., pp. 11-21; Economics
. . . T 'PP • 79-80.
^ Legal Foundations . . . , pp. 21-28.
13^
opportunities to buy, sell, or compete. The
creation of intangible property is usually
named the "law of unfair competition." It is
created by creating duties of forbearance and
avoidance.80
After all, then, the term property "cannot be defined
except by defining all the activities which individuals
and the community are at liberty or are required to do or
not to do, with reference to the object claimed as pro
perty. Thus, liberty and scarcity of economic power
are aspects of private property.
Commons' critical exposition of these ideas leads
to a discussion of how business concerns, organized to
produce wealth and acquire income, are made to function
steadily. Its leaders are required to exercise a direc-.
tive function--get the concern going and keep it so;
this is the will in action. Business leaders evaluate
alternatives and select a course of action, and this
depends on the prospects of profits. Since the concern
is a part of the social process, prospective opportunities
must be acquired before they can be used; such acquisition
o0
Economics ■ . ., p. 8l.
8lInstitutional Economics, p. 74.
135
can be made only by negotiations and transactions with the
O n
owners of the opportunities.^ But the critical aspect of
this process of buying and selling is that the commodities
bought and sold are integrated into the social structure
only as transferred property rights and titles, and not as
things. Thus the businessman must rely on the unseen power
of the state to enforce a required minimum of duties on
other persons and hence a degree of ordered, stable social
Ob
relationships, in order to have security of expectations.
A laissez faire attitude is inconsistent with this:
Property rights are indeed artificial. . . . They
are the artificial creations by those who, in the
exercise of sovereignty, endeavor to monopolize
the use of violence. The officials and courts got
their ideas of property from the customs of mer
chants and landlords. By laissez faire was really
meant a maxim of advice to these officials of
sovereignty recommending the use of physical force
against persons who interfered with ownership, but
alternatively recommending the use of physical
force in favor of the owners themselves. . . . What
businessmen and economists really meant by laissez
faire was: prevent everybody else at home and
abroad from doing as they please, in order that we
may do as we please with what we claim as our own.3^
8^Ibid., p. 560.
83Ibid., pp. 589-90.
84
Economics . . ., pp. 82-83-
136
In the free wage bargain the employer acquires
with his promise to pay wages the future labor of his
employee, to be expended under certain conditions at an
agreed rate. Labor, however, is not a commodity, a
machine, or a promise. A worker is legally forbidden to
sell himself into servitude and may only sell his willing
ness to. work. Corporate management of its work force, in
Commons' view, was shortsighted in either considering
labor (l) as a commodity and wages as a consequence of
interaction between demand and supply, or (2) as a part
of a machine whose output determined labor's value.
Commons writes:
The commodity theory Is the merchant's theory of
buying and selling. The machinery theory is the
engineer's theory of economy and output. Man is,
after all, the most marvelous and productive
force of all the forces of nature. He is a
mechanism of unknown possibilities. Treated as
a commodity, he is finished and ready for sale.
Treated as a machine, he is an operating organ
ism to be economized.65
It is the social organization, then, that provides
the setting for the transactions of a business concern.
The expected continuance of transactions in the future
^ Industrial Goodwill (New York: McGraw-Hill
Book Co., 1919)* P* see also pp. 5-6.
137
keeps a concern going and constitutes a going concern.
Commons explains:
It is a joint willingness of all participants:
the willingness of employees and managers to
maintain and operate the plant; the willingness
of customers to buy, of investors and bankers
to lend, of material men to sell, and of others
to participate.86
Commons' analysis of property may be said to be
integral to his total thought. Contrary to traditional
practice, he does not assume private property or owner
ship as a starting point and then determine the economic
implications under static conditions. Instead, he
analyzes economic processes as a part of the total social
picture and finds property relations an Important aspect
of it. . And his study of the change of meaning which the
concept property has undergone in the development of the
modern money and credit capitalistic economy is especially
significant in revealing the development of economic power
and valuation processes.
^ Institutional Economics, p. 422.
138
A Theory of Value and Ethics
Since transactions involve collective actions,
they require collective agreement on valuations; Commons
describes this in the following way: "a theory of the
joint activity and valuations of individuals in all trans
actions through which the participants mutually induce each
other to a consensus of opinion and action."87 "Reason
able" value arises in connection with the bargaining power
of the participants, or, more specifically with the ques
tion, how much disparity of economic power is tolerable in
agreements over prices. Bargaining transactions take place
between legal equals, but in fact the parties1 economic
power may be greatly unequal. Moreover, economic power
is the power of property: the present value of future
bargaining power, and especially the power to withhold
from others "what they need but do not own.The United
States Supreme Court early recognized property rights in
prospective profits and gradually developed criteria for
judging what profits a corporation might be allowed to
87Ibid., p. 25.
88Ibid., p. 3; see also pp. 673-76.
139
expect. These criteria are summed up in its doctrine
of reasonable value.
Thus, with the legal power to withhold commodi
ties and services finally recognized in law,
reasonable restraint of trade, according to the
court's ideas of reasonableness but contrary to
the anti-trust laws, comes to have a standing
in law; and its equivalent bargaining power, or
intangible property, comes to have a standing in
economics. For restraint of trade is bargaining
power, and reasonable restraint of trade is
reasonable bargaining power.89
Again, such a theory of valuation is a departure
from orthodox economic theory. Valuation, for Commons,
is social, not individual; it is lodged in the area of
private power, not in the area of perfect competition.
It is an aspect of social action and social organization.
Commons' concern was not in formulating an analysis for
"free enterprise," in which each private person or busi
ness works in its own interest and whose aim is a maximum
return to itself; rather, he is interested in the struc
ture of opportunities within which the human will may act
through collective action.^
The objects of social valuations, the things values,
are the ways of human behavior--custom, practices.
89lbid., p. 344.
^Economics . . ., pp. 145-49# 152-53-
140
transactions. Social activities are appraised
for their contributions to justice, order, secur
ity, liberty, equality, or whatever purpose.
These public purposes are in turn embodied in
the expected collective action of mankind and
are thereby available to the individual.91
The issue of reasonableness is decided, in the
common law tradition, by the courts, a fact preeminently
true in the American economy, where the Federal Supreme
Court is, in Commons' estimation, supreme over all other
branches of g o v e r n m e n t .92 Early common law courts decided
reasonableness on the basis of a willing buyer and willing
seller, which meant a fair sale and hence fair competi
tion. But with increasing complexity in economic bargains
91Ibid., p. 153.
92jnstitutional Economics, p. 5* Institutional
economics "consists partly in going back through the
court decisions of several hundred years, wherein collec
tive action, not only by legislation but also by common-
law decisions interpreting the legislation (culminating
in the common-law method of the Supreme Court of the
United States), takes over, by means of these decisions,
the customs of business or labor, and enforces or
restrains individual action, wherever It seems to the
Court favorable or unfavorable to the public interest
and private rights. . . . [It also] consists in going
back through the writings of economists from John
Locke to the Twentieth Century, to discover wherein
they have or have not introduced collective action."
141
resulting from collective action, conflicts in interest,
and huge aggregations of power, issues confronting the
courts became correspondingly difficult. Yet, the matter
of the tolerable degree of private power is ultimately a
judicial question. Justice is the basic issue, along
with order, security, liberty, and equality, and the
courts devise a "proportioning the factors" test, in which
all factors are given "due weight;" in the e-nd, reasonable
value means "good judgements."93 This is not a "do good"
theory, but rather is a "reasonable idealism."94
Social valuations play a definite role in shaping
institutions in that they are based on principles for
resolving conflicts and disputes. Their object is to
achieve a common valuation so that order and mutuality
can be accomplished. Yet, in terms of social ethics, dis
putes are not settled by referring to some broad philosophy
of social good. These concepts of social good are rather
derived from the manner in which disputes are settled.
For example, in the area of labor-management relations,
Commons writes:
93
Economics . . ., p. 155*
^Institutional Economics, p. 875•
142
I knew a great labor organization whose leaders
were able during a period of depression to get
their rank and file to accept successive reduc
tions of wages. But it was because the employers
granted that indispensable condition, the preser
vation of the union. With the union preserved
against discrimination and victimization of its
leaders and officers, it could, in cooperation
with the employers, distribute the hardships of
unemployment and reduced earnings among all its
members.
The situation here, as in all other industrial
relations, goes back to . . . that final test of
personality, reasonableness. . . . When employers
and employees understand each other and are striv
ing not only for power but for reasonable solutions
under the circumstances, they do not need the out
sider, however much they may rely- upon him in other
matters. Only when they rest their final appeal on
force and power and inalienable rights, does the
outsider seem to have a place, and then his great
est service to both is the elimination of himself
as soon as possible.95
To Commons, there are two theories of social ethics.
"One was the individualistic theory of the maximum of
pleasure in a world of abundance, where the individual
could not injure others by taking all he wanted," he writes.
"The other was the social theory of conflict of interests
in a world of scarcity, where the individual may injure
others if he takes all he wants. On the foundation of the
latter theory ethics is an historical process developing out
^industrial Goodwill, pp. 176-77-
143
of the decisions of economic disputes and there is no dual
ism of ethics and economics."96 Commons accepts the latter
theory.
His thought on social valuation and ethics would
be incomplete without indicating the distinctively
^ Institutional Economics, p. 225. In a highly
significant series of passages. Commons writes,
"if the subject-matter of political economy is not
only individuals and nature's forces, but is human beings
getting their living out of each other by mutual transfers
of property rights, then it is to law and ethics that we
look for the critical turning points of this human activ
ity.
"The courts of law deal with human activity in its
relation, not of man to nature, but to the ownership of
nature by man. But they deal with this activity only at a
certain point, the point of conflict of interests between
plaintiff and defendant. But classical economic theory,
based on relations of man to nature, had no conflict of
interests in its units of Investigation, since its units
were commodities and individuals'with ownership omitted.
These ultimate units produced, in fact, along with the
analogy of equilibrium, a harmony of interests rather than
a conflict of interests. Hence the ultimate unit to be
sought in the problem of correlating law, economics, and
ethics is a unit of conflicting interests of ownership.
"But this is not enough. The ultimate unit of
activity must also be a unit of mutually dependent inter
ests . The relation of man to man is one of interdepend
ence as well as conflict.
"Still further, this ultimate unit must be one
which not only Is continually repeating itself, with
variations, but also one whose repetitions are expected
by the participants to continue, in the future, substan
tially similar to what they are In the present and have
been in the past. The unit must contain security of expec
tations. This kind of expectation we name Order." P. 57.
144
Christian aspects of his thinking. The bulk of Commons'
Christian ethical thought is set forth in his book Social
Reform and the Church. Because this material is so rele
vant to this dissertation, and in order to convey the
religious tone of the work, it will be quoted extensively.
Deification of man, such as that which the New England
Transcendentalists attempted, is an'inadequate solution
because of its divorce from reality.
The transcendentalism of New England, with its
humanized God and its deified man, was rather a
protest against, than a product of, the new
economic conditions. As the years advanced and
industrial anarchy deepened, the protest turned to
reconstruction. But the tools and materials for the
new structure were not politics and legislation,
but an idealized, transcendental workingman. Tran
scendentalism resurrected man, but not the real
man. It remained for the latter, the man in the
struggle, to find his own way out. By failure
and success, by defeat, by victory often fruit
less, he felt along the line of obstacles for the
point of least resistance. But he, too, needed a
philosophy. Not one that would idealize him* but
one that would help him win a victory. Shorter
hours of labor, freedom to escape from economic
oppression,--these were the needs that he felt.
His inalienable "natural right" to life, liberty,
land and the products of his own labor,--this was
his philosophy. Politics and legislation were his
instruments.97
97;gabor and Administration (New York: Macmillan
Co., 1913), PP. 49-50.
145
A Christian perspective provides the required confronta
tion with reality. Commons writes:
There would be no problem at all, were it not for
our ethical and Christian ideals, which abhor
injustice and inequality. Before the Christian
religion had spread through the world, slavery
was considered as the natural lot of four-fifths
of mankind. . . . But Christ, without attacking
directly the institution of slavery, undermined
its foundations when he taught the brotherhood of
man and the moral dignity of every soul before its
Heavenly Father. Slavery could not long exist
in a world where the religion of Jesus told every
man that he was his brother’s keeper. When reli
gious equality became accepted as.the faith of man
kind, there could be no peace until our laws, our
constitutions, and our courts recognized political
equality. Today the problem is the same. The man
who has a birthright in heaven equal to that of any
other man must not remain on earth the dependent of
his brother. The sword of Jesus will not be
sheathed until every man has an even chance here
below. Economic equality may never be obtained,
and, indeed, it would be undesirable; because the
needs of all are not alike. Our needs depend upon
our education, our culture, our ability to make a
good use of worldly goods. But equality of oppor
tunity, free scope for development of such gifts
as we have, are the logical conclusions of Christian
ity. To be tied to the earth by the daily necessi
ties of life when others, with no greater needs, are
wasting the fruits of our toil, is the essence of
inequality and injustice.98
The command of Jesus to love is central to "saving the
world." We are, Commons writes,
98So cial Reform . . ., pp. 8-10.
146
. . . in the world to obey the command of Jesus,
"Thou shalt love thy neighbor as thyself." This
does not mean to make all the money you can by
close bargains with your unequals and by cutting
down employees' wages, and then to use your money
to build a college, or subscribe to some philan
thropic society which doles out alms to your
neighboring paupers. It means to go yourself,
to get acquainted with your neighbors, to pick
out some hard-worked mechanic, some shiftless
pauper, some slave of drink, and love him. Chris
tians have not loved their neighbors. They have
hired somebody else to love them. . . . Thus
they have intensified social antagonisms. They
have made it impossible to understand the griev
ances and the wants of workingmen. They do not
study these grievances and these wants, because
they do not love the unprivileged and neglected
classes.99
The character of the Church and Its life as well
as that of the preacher's social and pulpit work
. . . should all be determined by the great fea
ture of Christianity which I have already empha
sized, its mediating power in drawing social
classes together. Here is where Christianity
strikes at the root of social ills, and there is
no other power in the community that can so
strike. We must all come around to the simple
gospel of Christ, and we must apply this gospel
In its right proportions, realizing that religion
is love to God, and sociology love to man, and on
these two hang all the law and all preaching.100
Social problems, indeed, are religious problems.
Commons affirms that man is made In the image of God. He
writes,
99ibid., pp. 11-12.
IQQlbid., p. 26.
147
His possibilities are divine; and it is an
appalling sight to see the godlike crushed out
of such a being by poverty, by crime, by intem
perance, by his social and industrial surround
ings. When the Christian Church awakes to the
daily life in the dark places about her, and
understands the essential religious nature of the
problems of labor, poverty, monopoly, then may
these problems be put in the true way of solu
tion . 4^1
Commons appears to closely parallel Niebuhr's
thinking in writing,
I have insisted, as a lesson of science, on the
unity of human nature, and the priority of man's
physical organism in all the walks of life; yet
I do not rule out the eternal verities of reli
gion as they are emphasized today--the sinfulness
of man, his need of conversion, the transforming
power of faith in Christ and immortality. Indeed,
I believe that true science shows these to be
essential to social regeneration. Man, after all,
is not [merely] an animal: he is a being of
aspiration; he rises by his efforts toward the
ideal; he is not to be lifted up from beneath and
carried into the realms of manhood and righteous
ness, but he is to be lured and won and inspired
by longings for faith, hope, and love; yet he is
at the same time the creature of his environment.
The inexorable earthly wants for food, clothing,
shelter, press daily upon him. If he be confident
that these will be regularly supplied in a self-
reliant way, and if in supplying them his bodily
and spiritual powers be not basely exhausted, then
he may rise above the animal and reach out for the
noble joys of the soul; then, and then only, can
religion touch him.
101Ibid., p. 30.
148
This is the fundamental error of the Church.
She has made her spiritual appeal to men who could
not possibly do more than supply their earthly
wants, and has made no effort to help them where
most they needed help. Is it any wonder that they
revile her? The Church has left the radical reli
gious question, the betterment of social conditions,
to atheists and agnostics. Is it any wonder that
efforts at social reform hitherto have risen no
higher than materialism and mammonism? The Church
is to blame that she has withdrawn from the field
where God and duty and the example of her Saviour
called her to lead, and left it to those who sought
only the loaves and the fishes.102
The entire social fabric should be the concern of
the church, and society needs to be "Christianized."103
Commons deplores the gap which modern society has devel
oped between Christian imperatives and ideals and secular
life.
In the times of our ancestors the Church and State
were one. Ecclesiastical questions were political
\questions. The two were deliberated and decided
in the same assembly. Today we have wisely separ
ated Church and State. But we have carried it too
far. We have separated Christians and politics.
Christians are here to save the world, that Is, to
reform the world. They must begin by reforming
politics. They must reform both the machinery and
the spirit of politics, the structure and the func
tions of government. Political reform is not an
end in itself. It is a means for attaining funda
mental social reforms. It is the doorway to the
practical solution of the problems of labor, taxa
tion, crime, pauperism; and these are but the
102Ibid., pp. 42-44.
1Q3ibid., pp. 71-73, 75-76, 78.
149
Christian problems, how to save the world, and
how to save every individual in the w o r l d . ^-^4
Three areas of Commons' thought remain for
\
examination, relating to the application of his basic
theoretical concepts to the processes of production,
social control, and "capital-labor administration."
Production, Social Control, and
Capital-Labor Administration
The production processes include all of man's
efforts in his attempt to overcome the resistance of
nature. Measured in terms of input to output ratios,
input refers to labor and materials, while output is
the product deemed useful to the current period of his-
105
tory. The production of use-values is an example of
the principle of efficiency. By and large, socially and
historically, all production is attributable to labor:
mental, managerial, and manual. The logic of this relates
to the fact that nature is not productive, and that it
104Ibid., p. 95-
institutional Economics, pp. 276-94.
150
resists In differing degree man’s efforts to convert
natural forces to his own purposes. Man does this by
combining and proportioning the basic physical and mechan
ical processes according to human purposes and values'.
Production, then, is limited to the process of turning out
use-values, which vary with the different needs of differ
ent times. To supply these wants is the task of physical
organization. Natural materials are converted to uses and
services by collective effort through managerial trans
actions, which are integrated into the going plants' and
concerns.
Bargaining transactions, occurring over transfers
of ownership, supplies the production process with materi
als, disposes of output, and thus relates the going con-
107
cern to other firms, resources, and markets. 1 This
relationship is called scarcity: quantities wanted and
quantities available. This is, of course, the supply and
demand relationship, whose effects on transactions are
7^ Economics . . . , pp. 150-51.
•*■07’ Institutional Economics, pp. 289, 797-
151
measured in terms of money.-*-0®
Commons Is concerned with who will share in the
fruits of production. His point of reference is social,
not private. In the latter view, if money were taken to
be the measure of efficiency, a businessman who makes a
high net income by beating down wages may be held to be
just as efficient as one who pays high wages but has a
superior organization. A social viewpoint aims at a
wealthy and well-ordered society, which will realize the
highest ideals of human rights, in two aspects: (l) in
the production of wealth, rights which will increase the
efficiency of labor and the quantity of wealth--furnish-
ing motives to industry and increasing the education and
abilities of labor; and (2) in the distribution of wealth,
rights which will enable workers to get a share of the
total product In excess of their minimum subsistence--by
recognizing the freedom to collectively organize and bar
gain, and by giving individuals access to opportunities
for production and acquisition of wealth.^ 9
^Q^Ibid., pp. 261-62; Distribution of Wealth,.
pp. 14-15•
-^^Distribution 0f Wealth, pp. 65-85-
152
At the same time Commons' thinking and analysis
always point toward actual events. He defines economics
as "a science of activity," activity of "the human will
in conflict and in cooperation, in competition and regula
tion, " a science of "ideas and methods of investigation
by which human beings construct their plans of action and
carry on negotiations that determine their activity. "H°
Any thorough study of an industry, a corporation, or even
a transaction, as well as a nation, will resolve itself
into the assumptions and relati rities described in this
chapter. These assumptions and relativities, however,
must be constantly adjusted and reanalyzed, and approached
pragmatically.111 Commons' thinking shows how a social
process acquires the forms which are the basis of modern
business concerns, labor organizations, and the political
state.
Commons is also deeply concerned with the problem
of social control, which is one of the basic reasons for
the combined economic-legal analysis. For it is essen
tially a means of tying ends and means, form and content
H^Economics . . ., p. 203-
111Ibid., p. 204.
153
together, and makes possible the application of practical
judgments on actual events. Correlative with this is his
concept of causation. Once the strategic or limiting fac
tor is controlled, it becomes the cause of the new state
of affairs.
In nature, things merely "happen." But out of
the complex of happenings, man selects the limit
ing factor for his purpose. If he can control
these, then other factors work out the effects
intended. The "cause" is volitional control of
the limiting or strategic factors through mana
gerial, or bargaining transactions. The "effects"
are the operations of the complementary factors
and the repetition of routine transactions.
This, then, is the causal relation in purposive human
behavior, which purpose is partly to modify and control
the social processes. These ideas on causation and con
trol point to the transaction as a basic unit: it is where
the wills of men meet that controls can be exercised. The
transaction is the strategic nexus of social actions.
The formulations of Commons’ total thought are
attempts by him to frame an analysis so that it is rele
vant to democratic social control, relevant to decisions
which some strategically placed person must make--for
112
Institutional Economics, p. 632.
154
example, a judge, legislator, governor, or especially an
administrative commission. These administrative bodies
are held to be a kind of fourth branch of government,
whose function is primarily fact-finding, and which is
empowered to investigate conflicting claims of various
interests and gather facts according to a procedure in
accordance with due process requirements. All of this
is for the purpose of determining a reasonable course of
action between wide possible extremes in the use of govern
mental powers in the e c o n o m y .443
We now turn to the area of what Commons calls
"capital-labor administration." Bargaining is the power
to withhold, and in the context of collective bargaining,
of which the strike is an integral part, Commons writes;
The increasing size of the typical industrial
concern and the spread of mass-production methods
have enhanced the need for collective bargaining.
For the larger the employer, the more the worker
is at his mercy in bargaining as an individual as
to his terms of employment. And the more auto
matic the machine, the less the need for skill in
the man who tends it, and the weaker in consequence
the economic position of the worker who applied for
a job. Since anyone can learn to be a machine
tender in a few days, if one man is not satisfied
•^-*~^Ibid;, pp. 840-73; Economics . . ., pp. 170-83;
Legal Foundations . . ., pp. 354-56.
155
with the wage which is offered, another equally
competent can probably be found who will be.
Moreover, the constant displacement of men by
machines tends to create a continuous oversupply
of workers even at times when industry is expand
ing. And this oversupply weakens still further the
bargaining position of the individual job seeker.
In short, today "individual bargaining" in
any real sense cannot exist. In the absence of
collective action, the inequality in withholding
power between employer and employee is so great
that the term bargaining is a misnomer as applied
to the process by which wages and other terms of
employment are arrived at. Only through organized
group action by workers can equality in withhold
ing power be even approximated.
This process Is central to the preservation of
the American economic system. "Capital and labor" is the
"major economic issue," and the key to a stable economic
government is a balance of power between these.opposing
complexes of power.
If self-governing unions are destroyed, or switched
to political parties, the alternative for this
country, as it has been the alternative under dic
tatorships, is suppression or even elimination of
self-governing corporations and unions, or at
least suppression of their leaders, by military
governments. If American democracy is "saved,"
it will be saved by collective economic organiza
tion of corporations and labor unions.- * - - * - 5
1-^Commons and J. B. Andrews, Principles of Labor
Legislation (New York: Harper & Bros., 1936), pp. 373~7^*
-^•^Economics . . ., p. 263.
156
Thus the choice is a stark one: collective democracy of
economic organizations of capitalists and labor, or a
military totalitarianism.H6
Collective bargaining, on the other hand, creates
a constitutional government for industry and subordinates
the political governments to the "moral control" of this
economic government. This refers to the fact that all
economic disputes between labor and management can be
resolved by administrative agreement--except matters of
economic power.
The question of power is the fundamental question
of class war, or class struggle, breaking out in
strikes, lockouts, and even in military revolu
tions. As such it requires a branch of government
entirely different from an administrative agency,
namely a constitutional convention or a Supreme
Court, with power to substitute for class war the
constitutional legislative system of collective
agreements between opposing organizations of power.
Thus the working of these going concerns in themselves does
not make for ordered and sound relationships; the interact
ing of these large collectives must be supplemented
' * ' 1^This aspect of Commons' thought is criticized
in Chapter V, infra.
117
Economics . . ., p. 266.
ll8Ibid.
by machinery for administration.
The judicial function in this economic field,
however, has been entrusted, in the federal government
system, to the National Labor Relations Board, the
"economic supreme court," which was endowed with power
to deal with fundamental conflicts of labor-management
power. This Is viewed as a development of constitutional
government in the area of economic power, even having the
three branches of government: the judicial branch, which
is mediation or conciliation and culminating in the N. L.
R. B.; the legislative, which is the equal bargaining
power of labor and management creating their own adminis
trative rules to govern their membersj and the executive,
which is bifurcated: managers and foreman of corporations,
and the business agents and executive boards of unions.H9
The Federal Supreme Court is assigned the task of support
ing equality of collective bargaining power. . This system
of balance and equilibrium of economic government is a
rough, imperfect one and is predicated on the "closing of
the world's frontiers of natural resources, predicted by
the economists' doctrine of diminishing returns, and by
119ibid., pp. 266-67, 270.
158
the resulting intensified conflicts of organized
economic power. . . ."120
What is required is a governmental staff of
experts cooperating with labor, management, and other
economic organizations to find solutions to new problems.
Government-sponsored tripartite advisory committees, for
example, chosen from the various interest groups, might
negotiate acceptable standards of action for government
to enforce.121 Thus conflicts may be avoided, mutuality
promoted, and orderly economic progress achieved.
In the labor-management area, the issue of power
is squarely posed by Commons:
The need for collective bargaining arises
from the serious discrepancy in "withholding
power" between the individual employer and the
individual wage earner, a discrepancy which tends
to result in terms of employment highly oppressive
to the worker and injurious to society in general.
It is obvious that the individual laborer is at a
great disadvantage in bargaining with an employer.
The employer is usually a corporation, which is
itself a combination of capital; but the disadvant
age of the laborer is even more fundamental. Being
propertyless, he has no property of others. Having
no resources to fall back upon, he cannot wait
until he can drive the most favorable bargain. It
is a case of the necessities of the laborer pitted
120Ibid., p. 268.
121Ibld., pp. 273-76.
159
122
against the resources of the employer.
An analysis of power by Commons and Niebuhr will be dis
cussed and compared in the next chapter, and economic,
legal, and political data will be drawn upon to place
their analyses in context.
•^^Commons and Andrews, op. cit., p. 373-
CHAPTER IV
AN ANALYSIS OF POWER
The Concept "Power" in the Thought
of Niebuhr and Commons
Both Niebuhr and Commons recognize economic
power as the critical element in determining labor and
management relationships, which, in their institutional
aspect, reveal conflict and cooperation to be inter
dependent in an increasingly■technical framework of
society. In earlier times, the labor-management decision
making process was characterized by coercion and Imposi
tion of unilaterally conceived terms. As strategic posi
tion and bargaining power shifted between the two groups,
there Increasingly developed a process of joint, collec
tive decision, which did several things for both groups:
(l) there was greater knowledge and appreciation of the
other's interests, concerns, and problems; (2) decisions
and policies thus jointly made were given greater
160
161
significance In the operation of the enterprise; and (3)
there developed a high degree of security of expectation,
that these policies and terms would remain in force for a
specified period of time, a time period also jointly
agreed upon. The need for this shift from unilateral to
bilateral decision making had been urgent. As American
society grew in numbers and complexity, Its range of
activities multiplied; concomitantly, the importance of
the group In the economy increased along with the
tendencies toward the centralization of power.
Thus, Niebuhr writes:
The most immediate cause of our distress could be
defined as the inability and unwillingness of
modern men . . . to re-establish community, or
to reconstruct justice, under conditions which a
technical civilization has created.!
But while there is thus no perfect peace or order
in any human community, there are times and sea
sons when a tolerable justice, hallowed by tradi
tion and supplemented by personal discipline and
goodness, gives society a long period of social
stability. . . . New social forces rise up as the
"vengeance of the Lord" against traditional injus
tice. "We are living in such a time.2
"God's Design and the Present Disorder of Civili
zation, 1 1 The Church and the Disorder of Society ("Amster
dam Assembly Series," Vol. Ill; New York: Harper & Bros.,
1949), P- 13-
^Ibid., p. 16.
162
The ever Increasing introduction of. technics
into the fields of production and communica
tions constantly enlarges the intensity and
extent of social cohesion in modern man's com
mon life; and also tends constantly to central
ize effective economic power. . . . The effect
of technics upon production is to create greater
and greater disproportions of economic power and
thus to make the achievement of justice diffi
cult . 3
And, Commons writes,
Wealth is merely nature subdued to man. Capital
is the forces of nature taking orders from pro
perty owners-. . . . Now a new contest begins.
Capital requires labor to utilize it. Labor
depends on capital for a living. The contest
is not between man and nature, but between man
and the owner of capitalized nature.^"
Moreover, conflict between labor and management is
inevitable, and collective bargaining is the best way to
resolve their differences. Commons wrote, in 1913j
[Labor and management] interests are necessarily
conflicting. Open conflict can be avoided in
three ways: by the domination of the employer,
as in the steel trust today; by the domination
of the union, as in the iron industry prior to
the Homestead strike; by the equal dominion of
the two interests, as in the stove foundry busi
ness today. The first and second methods do not
solve the problem; they suppress it. The third
meets it in the same way the similar conflicts
3"Will Civilization Survive Technics?” Commentary,
I (Dec., 19^+5), PP- 2-3.
^Labor and Administration, p. 3^•
are met in the region of politics; namely, a con
stitutional form of organization representing the
interests affected, with mutual veto, and therefore
with progressive compromises as conflicts arise.5
These conditions, Commons adds, are a part of the total con
text of a technical society characterized essentially by
acquisitive, materialistic and productive functions.6
By mobilizing its economic, moral, and political
power, labor compels management to deal with it and grant,
wholly or partially, demands which it makes on the company.
The countering power of management determines the extent
to which it will deal with labor unions, what demands it
will grant consistent with maintaining competition,
efficiency, what freedom it has to operate the company,
and what proposals it will itself advance to the unions.
The Basis of Power
Commons and Niebuhr view power as based in the
"self,1 1 or the "human will." Power for Commons signifies
political, economic, or moral inducement exercised by
^Ibid.., p. 140.
^Economics of Collective Action, pp. 44-49*
especially p. 46 and p. 118.
164
human beings who act volitionally on each other. It
derives from the human will, which is the "unit of power,"
which can exert self-control or self-command, choosing,
acting, or refraining.7 Social or group relationships,
through multiple rights and duties accepted by the individ
ual as a member of society and enforced by varying group
powers, are the characteristic channels of behavior in the
economy, and the web of influences by which individual
action is not only controlled but also liberated and
expanded.®
Niebuhr defines power in social organization as
being based on two characteristics of the self: (l) the
unity of vitality and reason, body and soul, which
guarantees that egoistic purposes will be pursued by the
individual or group with all the resources it may con
trol; (2) human sin, the persistent and inordinate
tendency to regard itself and its own well-being as more
important than that of others--a tendency so stubborn that
moral or rational suasion are inadequate to prevent one
7Ibid., pp. 77, 184.
8Ibid., p. 170.
165
person or group from taking advantage of another. Society
Is consequently full of cross-purposes, as expressed In
the collective egoism of contending groups. "indeed,"
Niebuhr writes, "it is in a perpetual state of war."9
Conflicts and disputes between contending groups
may be composed and arbitrated, of course, into a toler
able harmony by wise, statesmanship and adjudication.
Commons and Niebuhr agree that settlement Is most often
achieved not by actual use of power by a superior author
ity and power, but by an appeal to power. As Commons
writes, it is achieved by "the preliminary use of a
language of promises or threats, indicating an intention
to use that power.
Kinds of Power
Several kinds of power are differentiated by
both thinkers, and while their categories overlap
9
The Nature and Destiny of Man, - II, pp. 258-59*
10Economics . . ., p. 76; Niebuhr, ibid., p. 259;
Niebuhr, Discerning the Signs of the Times, pp. 186-87.
166
considerably, the Christian ethical basis of Niebuhr's
thought here appears to result in a more profound
analysis. For example, Common's classification of power
is grouped according to the kinds of collective action that
exist in the social process; this was discussed above and
may be summarized by the following passage:
Differences in kind are moral power, or propa
ganda; economic power., or bargaining power through
proprietary control of supply, or demand; and -
physical power through administration of violence,
the foundation of sovereignty. . . . Taken to
gether they constitute the whole of power in
economic activity and its use in the public and
private administration of economic affairs.H
Each kind of power, in turn, differs in many degrees of
power, which in the area of collective bargaining is
expressed in terms of control of scarcity arid abundance--
that is, the "alternative opportunities for employment
at different wage rates, or opportunity for sale or pur
chase by transferring ownerships at different prices,
quantities, and monetary v a l u e s ."12 xn terms of his
general theory, degrees of power are expressed by per
formance, forbearance, and avoidance.13
•^Economics . . ., p. 170.
•^Ibid., p. 172.
l3Ibid., pp. 37-40; Chapter III, supra.
167
On the other hand, Niebuhr, also recognizing
with Commons that the variety of types and combinations
of power created are infinite, considers the basic types
of power to be three: (l) rational, an instrument of the
ego used to advance its claims against another, the
shrewd, for example, taking advantage of the simple; (2)
spiritual, which may serve the same purpose, a "soul
force" which may consist of spiritual vitalities such as
mental and emotional energy, possession or pretension of
virtue, prestige of heroic life or of gentle birth; (3)
physical, a "last resort" in individual relations. On the
collective group level, differentiation rests on social
function. Economic power is partly physical and partly
spiritual: physical to the extent that the wealth
created by the economic processes is physical, spiritual
in that the right to use and control this physical force
is derived from such considerations as custom, law, and
prestige.
-^Niebuhr, The Nature and Destiny of Man, II,
pp. 260-63. See pp. 126-30, Chapter III, supra, for a
discussion of custom by Commons as a social force;
Institutional Economics, p. 155> and Legal Foundations
■ . ., pp. 214-312.
168
Economic power, in Niebuhr's view, is not primary
but derivative and hence is not the most basic form of
power. In earlier periods the first landlords were
soldiers and priests who used military and religious
power to acquire and own land. Economic power during the
"bourgeois1 ' period tended to be more fundamental, bending
other forms to its purposes. But it is constantly
restrained in modern democratic societies by the diffu
sion of political power inhering in universal s u f f r a g e . " ^
This is also recognized by Commons.1^
For Niebuhr, political power is a: special cate
gory of power, because it uses and manipulates other
forms of social power to organize and dominate the com
munity. An approximation of equal justice, existing in
modern democracies, is due to a divorce of political power
from special social functions, and the endowment of all men
with a measure of political power to review the policies
and actions of the leaders. The formation of oligarchies
15Ibid.
•^Economics . . ., p. 43*
■^Niebuhr, Reflections on the End of an Era,
'p. 151.
169
Is not thereby obviated; however, it does check their
formation and their exercise of power. Concomitantly,
modern technological developments in industry have
enhanced the economic power and wealth of the owners and
manipulators of the economic process, and has given
workers a new form of power--to withhold their labor col-
1 f t
lectively, for example. Such a shift in the power rela
tions of such groups as labor and management may even
have a spiritual origin. Prophetic Judeo-Christian reli
gion challenges rather than supports- priestly-military
oligarchies, thus helps to destroy them and create
democratic societies.The complexity of the concept
of power and its role in the total social process is
indicated by Niebuhr:
No form of individual or social power exists
without a modicum of physical force, or without
a narrow pinnacle of "spirit'1 which transcends
the conflict and tension of vital forces. But
the tension and balance of such forces in any
given social situation include vitalities and
powers which manifest the complex unity of spirit
and nature, of reason and force, in the whole of
human existence.
■^Niebuhr, The Nature . . ., II, pp. 263-64.
19Ibid.
2QIbld., p. 264.
170
The Theory of the Balance of Power
That power Is principally lodged and organized in
collective organizations is a basic premise of Niebuhr
and Commons. A primary problem of modern society is what
Niebuhr calls "alteregolsm"--the search for a more equit
able distribution of the values of life among the various
groups in the social process.21 Accordingly, both thinkers
affirm the existence of many'governments, for, as Niebuhr
writes, "all subordination of life to leadership in the
various activities of the community is in a sense 'govern
ment1 . . ."22 both Niebuhr and Commons hold that
these organizations of collective self-interest may best
effect an equitable distribution of life values by an
equilibrium of power.among the groups, an equilibrium
that is consciously brought about by judicious exercise
of governmental power and administration,and that is
^Niebuhr, "The Christian Faith and the Economic
Life of Liberal Society," Goals of Economic Life, ed. A. D.
Ward, pp. 442-43; Commons, Economics . . ., pp. 22, 25,
131-
22
Self and the Dramas of History, p. 183; Commons,
Economics . . ■, pp. 74 ff.
171
no-
manipulated and maintained pragmatically. J
As applied to the labor-management area, a basic
assumption of the balance theories of Niebuhr and Commons
is that collective bargaining itself is a continuing
competitive process. Although the conflict of power
between union and management is generally associated with
the negotiation and subsequent interpretation of the agree
ment, the fact is that the power relationships between the
parties are never settled, even temporarily. "The strug
gle," Commons writes, "is permanent and irrepressible. .
. ." For in a wider context, "As long as resources are
limited and wants unlimited, there will be struggle . .
. . And since, as Niebuhr points out, it is '
business of politics so to organize the vitalities of human
existence that a 'commonwealth' will be created out of the
^Nqebuhr, .Christianity and Power Politics, p. 104;
The Nature . . ., 'II, pp. 265-66; The Children of Light
and the Children of Darkness, p. 174. Commons, Economics
. . ., pp. 170-73; Labor and Administration, pp. 104-105,
140. This aspect of their thought is discussed at length
in Chapter V, infra.
04
Industrial Goodwill, p. 39; Economics . . .,
pp. 196-97- Niebuhr's definition of power assumes the
existence of the conflict of interests.
172
conflicting forces and interests of human life,"25 the
conflict between labor and management is extended to the
struggle to control the political parties, which, in
Commons' words, "grant or withhold the rights, duties,
liberties, and immunities of private property. Collective
bargaining, with its differences in degree of power by
control of scarcity and abundance, comes into economics
through corporations, unions, and politics. u
Labor-management conflict is inevitable for
several reasons. In addition to the limitation of
resources as opposed to unlimited desires, Niebuhr and
Commons recognize the existence of an eternal conflict
of interest rooted in employer-employee relationships.
Third, the very dynamic nature of industrial society
results in a situation of considerable flux, which
requires constant renegotiation in order that the parties
may seek new allocations of power and resources. Fourth,
conflict is essential to their survival, if the two
institutions are to keep their respective identities;
25"porce ancl Reason in Politics," The Nation,
CL (Feb. 10, 19^0), p. 216.
of.
Economics . . ., p. 172.
173
their independence is asserted by acts of conflict and
competition. Not all conflict, of course, manifests
hostility; peaceful bargaining and processing of griev
ances are, for example, forms of labor management conflict.
Finally, it should be noted that conflict is not necessar
ily negative in character. While injury may and frequently
does occur to third parties, the costs are frequently
exaggerated. Disputes are frequently resolved through
conflict or its threat; tensions are often reduced--a
factor which looms large in the industrial area, where
sources of unrest and hostility are great; the worker's
interests are better served and his personal liberty is
protected from overdomination of either organization; and
not infrequently the economy is better served, as a result
of rising productivity following a strike and increased
appreciation of each other's interests and concerns.
Yet, as Niebuhr points out, the "internal justice
of a community is never so perfect and the accommodation
27see, for example, U. S., Congress, Senate,
Subcommittee on Labor-Management Relations of the
Committee on Labor and Public Welfare, Factors in Success
ful Collective Bargaining, 82nd Cong., 1st Sess., 1951*
PP- 5-8.
174
of interests so complete that any society can dispense
with the alloy of coercion in the amalgam of its social
pO .
peace.' Niebuhr and Commons recognize that some measure
of authority is necessary and desirable to give stability
and order to society. The basic reason for this is the
factor of s e l f - i n t e r e s t . Niebuhr writes:
All communities . . . are more or less stable or
precarious harmonies of human vital capacities.
They are governed by power. The power which
determines the quality of the order and harmony
is not merely the coercive and organizing power
of government. That is only one of the two
aspects of social power. The other is the bal
ance of vitalities and forces in any given social
situation. These two elements of communal life--
the central organizing power, and the equilibrium
of power--are essential and perennial aspects of
community organization; and no moral or social
advance can redeem society from its dependence
upon these two principles.30
It is therefore idle to assume that human society
could ever be completely knit together by the per
fection of love in which each carries the burdens
pO
°Christianity and Power Politics, pp. 123-24;
Moral Man and Immoral Society, p. 3 •
^Commons, Economics . . ., pp. 131, 139-42.
Niebuhr, "Coercion, Self-Interest and Love," in Kenneth
Boulding, The Organization Revolution, pp. 237“38; and
The Nature . . ., I, pp. 296-97-
^ The Nature . . ., II, pp. 257-58.
175
of all, and the anxieties of each are quieted
by the solicitude of all. That is the vision
of the Kingdom of God, of the Kingdom of perfect
love, which hovers as a possibility and yet
impossibility over all human life. Actually
the perfect accord between each man and his
neighbor is constantly violated by the inordi
nate concern of each for his own welfare.31
Property and Power
Niebuhr's and Commons1 theory of property is
bound up with their thought on power. The two thinkers
identify economic power with private property.32 Property
is the "primary instrument for transmitting authority and
privilege from generation to generation. "33 it j_s this
fact which makes it so morally ambiguous, that is, it has
both affirmative and negative aspects. Affirmatively, it
is an "institution of social peace and justice" in that
it is a "remedy for sin"--"it gives the person power to
31
Discerning the Signs of the Times, p. 186.
32por. Commons' thought on this subject, see
Economics . . ., pp. 41-42, 79-80, and 94-95*
33Niebuhr, Self and the Dramas of History, pp. l83~
84.
176
defend himself against the inclination of others to take
advantage of him. It endows him with instruments for
the proper performance of his function and grants him a
i t 74
measure of security in an insecure world. J Yet, property
may also become so powerful that it becomes a threat to
security and justice.35 Niebuhr summarizes these points
in the following statement:
All property is power; that some forms of
economic power are intrinsically more ordinate
than others and therefore more defensive, but
that no sharp line can be drawn between what is
ordinate and what is inordinate; that property
is not the only form of economic power and that
the destruction of private property does not
therefor guarantee the equalization of economic
power in a community; that inordinate power
tempts its holders to abuse it, which means to
use it for their own ends; that the economic,
as well as the political, process requires the
best possible distribution of power for the sake
of justice and the best possible management of
this equilibrium for the sake of o r d e r .36
Classical economic thought on property, accord
ing to Niebuhr and Commons, contain several errors. First,
it is blind to the factor of power and especially to the
3^Niebuhr, Faith and History, p. 191.
S^Niebuhr, The Children . . ., p. 109-
36Ibid. , p-. 118.
177
possibility that,great disproportions of power would
result in injustice. Commons writes,
The nineteenth century economists developed a
remarkable theory of natural or automatic
equilibrium, provided every individual had per
fect liberty to work or not to work as he wished,
and provided there were no stoppages, frictions,
monopolies, political interferences or wars.
This was a theory in which prices and wages
adjusted themselves automatically according to
supply and demand, determined by the economists 1
discoveries of margins of production, cost,
utility, and other margins. These margins were
the points where the equilibrium of forces
adjusted wages, prices, interest rates, and rents
to the quantities of supply and demand. Thus the
early economists assumed a high flexibility of
incomes, a high mobility in all the factors of
investment, of capital, labor and land, by which
these factors were changed promptly from one
occupation of low income to another of higher
income. They assumed also a full and continuous
employment of all these factors that cooperate
in the great complexity of world production.37
What was left out of account was, of course, the human
will, an active and participating rather than a passive
mind. Also omitted from account was the dynamic charac
ter of the economic process, particularly with the
development of modern technical society which was quick
to transmute the static inequalities of earlier economic
structures into dynamic inequalities in highly collective
37
Economics . . ., p. 179-
178
expressions of economic and political power.38 Laissez
faire economics, characterized by Commons as preventing
everyone else from doing as they pleased in order that
business might do as it pleased,39 ignores the fact that
every economic process begins with a disproportion of
economic power and is a negative aspect of the power in
propertyAn example of this imbalance of power is
cited by Niebuhr:
According to the classical theory, . . . a worker
does not require collective power to set against
the collective power of the factory ivhich employs
him. He will be saved from exploitation by the
possibility of accepting a higher bid for his
services from some other industry. Unfortunately,
however, the worker is much more bound than the
theory assumes. He cannot pick up his family and
shop around from city to city. Furthermore, his
economic weakness, compared with the strength of
the company’s financial reserves, makes it diffi
cult for him to bargain at all. For he cannot
hold out in the hope of securing a better bid
from the bargainer. He can hope only that com
peting companies may bargain against each other
for his services rather than that they may bargain
with him.^1
^Commons, ibid., pp. 77^ 179-80,- Niebuhr, The
Children . . ., p. 102, and "The Christian Faith and
the Economic Life of Liberal Society," op. cit., pp. 434-35.
3^Economics . . ., pp. 82-83-
^Niebuhr, The Children ■ ■ . , p. 10g.
^"Coercion, Self-Interest, and Love," op. cit.,
pp. 231-32.
179
Ideas developed In the nineteenth century simply did not
account for the "organized, unorganized, and maneuvered
pressure groups, a mass conflict" in commercial and indus-
jio
trial civilization.
A second mistake of classical economic thought is
its assumption that every form of self-interest best serves
the economic interests of all.
In short, the laissez-faire theory did not realize
that human freedom expresses itself destructively
as well as creatively, and that an increase In
human freedom and power through the introduction
of technics makes the achievement of justice more,
rather than less, difficult than in non-technical
civilizations. The liberal culture of our era
either believed that the egoism of individuals,
classes and nations was limited and harmless, or
it hoped that the expression of self-interest was
due to ignorance which could be overcome by grow
ing social and political intelligence. This
optimism misread the facts of human nature, as they
are known from the standpoint of the Christian
faith and as they are attested by every page of
history. It therefore led to pathetic illusions
which have been refuted by contemporary history.
Thus the political principles which were to
guarantee justice actually contributed to ever
greater concentrations of power in modern' society,
and to resulting injustices.^3
il P
^Commons, Economics . . ., p. 300; Niebuhr, The
Children . . ., pp..99-100, 103.
^Niebuhr, "God's Design and the Present Dis
order of Civilization," p. 19*
180
The role of self-interest in the economic process may be
more properly found in the limitation of its excesses by
equilibrium of power it must be harnessed--it is "too
powerful and persistent to be simply suppressed or trans-
muted"--lest disproportions of power cause property rights
to become instruments of injustice. Yet, Niebuhr points
out, "self-interest must be allowed a certain free play
for the additional reason that there is no one in society
good or wise enough finally to determine how the individ
ual's capacities had best be used for the common good, or
how his labor is to be rewarded, or how the possibilities
of useful toil, to which he may be prompted by his own
initiative, might be anticipated."^5 And Commons agrees:
Self-interest, or even "enlightened self-interest,"
is one of the facts to be given due weight in all
economic investigations. This "due weight" is
good judgement, which is necessary because self-
interest is always connected with a greater or
lesser degree of community interest which, inverse
ly, is a lesser or greater degree of conflict of
interests.^
^'Commons, Economics . . ., pp. 185-86, 200.
"The Christian Faith and the Economic Life of
Liberal Society," op. cit., pp. 445“56j The Children . . .,
pp. 110-12.
^Economics . . ., p. 200.
181
We shall now consider the context in which the
theories of Niebuhr and Commons are placed--the conditions
of power which exist in management and labor, and the
concept of bargaining power in labor-management relations.
Management Power
The basis of corporate power is to be found in the
privileges and limitations of collective economic action
of corporation legal theory. Berle and Means point out
that:
The real privilege which the state grants is
that of corporate entity--the right to maintain
business in its own name, to sue and be sued on
its own behalf irrespective of the individuals;
to have perpetual succession--!.e., to continue
this entity although the individuals in it changed.
From all this necessarily flowed a limited liabil
ity of the associates. Since only the entity was
liable for debts, which did not attach to the
various individuals, it followed that a stockholder
was not normally liable for any of the debts of the
enterprise,* and he could thus embark a particular
amount of capital in the corporate affairs without
becoming responsible beyond this amount, for the
corporate debts.^7
This significant innovation, the limited liability of cor
porate debts, is accounted important by Commons and is
^A. A. Berle and G. C. Means, The Modern Corpora
tion and Private Property, pp. 128-29-
182
48
a major departure from earlier legal theory. A major
advantage to incorporation is the possible concentration
of large amounts of capital within a single enterprise.
Their concentration of economic power is pointed out by
Commons as follows:
The corporations themselves became . . . great
economic governments using economic coercion,
beginning with railway corporation, and extend
ing to every field of production, manufacturing,
banking, investment, and controlling today nine-
tenths of the industry of the country outside
agriculture.^9
Concentration is made possible by a number of
devices. In the first place, capital ownership is widely
dispersed; as the size of the company increases, so does
the tendency to dispersion of capital ownership. Although
not likely to affect an appreciable proportion of stock
ownership, the recent developments of ownership by
employees and customers have accelerated the dispersal
tendencies. This has in turn brought about a basic change
in the character of wealth--the owner of stock is by and
large a "passive agent, 1 1 one who does not own a major part
of and hence exercises little or no control over the
48
Economics . . ., pp. 59-60.
^Ibid. , p. 270.
183
enterprise; and perhaps most significant, the stock owner
has merely symbolic ownership, while real power, the sub
stance of control, formerly an integral part of ownership,
has been separated from him and lodged in another group.5®
A second device through which concentration of
power is achieved is that of the proxy. In an election
of a corporation's board of directors, the stockholder
ordinarily has three alternatlves--to abstain, attend the
annual meeting and personally vote his stock, or sign a
proxy transferring his voting power to persons designated
by the management group. This proxy committee, so
appointed, becomes the legal agent for the stockholder,
but In fact Is a dummy which exercises power on behalf
of the controlling management. The control group is thus
assured self-perpetuation in office or is in a position
^ Ibid., p. 299; Berle and Means, op. cit.,
pp. 47-68; Abram Chayes, "The Modern Corporation and
the Rule of Law," The Modern Corporation in Society
(Cambridge: Harvard University Press, i960), pp. 39-41;
E. V. Rostow, "To Whom and for What Ends Is Corporation
Management Responsible?" The Modern Corporation in
Society, pp. 53~54.
184
to dictate their own successors.51 The stockholder,
then, merely plays the part of a rubber stamp, and, short
of a revolt by a group outside the management group, this
situation is not likely to be changed.
Third, a huge financial empire may be controlled
through the pyramiding device of the holding company.
Since the corporation as a legal person may hold property
rights, it may hold the majority of stock of one corpora
tion, which in turn owns the majority of the stock of
another, a process which may be repeated several times.
Commons refers to this device as the "consolidation of
ownerships with a coordinated legal control by a board of
directors at the top." Its chief advantage is the elimin
ation of bargaining transactions by enlarging the scope
C ~ O
of managerial and rationing transactions.^ * Moreover, by
this device, and by introducing two or three intermediate
companies controlled by majority stock ownership in a
51
Berle and Means, op. cit., pp. 81, 87,, 245; .
Rostow, op. cit., pp. 47-49, 58-59; Earl Latham, "The
Body Politic of the Corporation," op. cit., pp. 218-36.
52commons, Economics . . ., pp. 56-57-
185
company higher In the series, a company may be completely
controlled by the apex company's ownership of but a frac
tion of one per cent of the total capitalization.53
Fourth, control may be assured with only a small
investment by the use of non-voting stock, a device involv
ing the arranging of different classes of stock, so that
the rights attached to most of the stock is deprived of
the right to vote, at least for the board of directors.
A variant of this is the assigning to the stock held by
the controlling group an excessive number of votes in
proportion to the amount of investment.54 a fifth
device is the voting trust, in which the power to vote
all stocks is placed in trust with a group of trustees,
often a part of management. Ordinarily a majority of the
shares is held in trust, and the trustees are given nearly
complete control over the company. Stockholders are given,
in lieu of stock certificates, trust certificates which
entitle them to share in dividends the directors may
choose to d i s b u r s e .55 Trust control, however, entails a
53;gerle and Means, op. cit., pp. 72-74.
5^ibid., pp. 75-76.
55ibid., pp. 77-78-.
186
high degree of legal fiduciary responsibility and
liability, is open, and is not easily transferrable, and
so is not widely used.
A sixth device of corporate concentration is that
of merger. The statistics cited by various studies indi
cate continuing resort to this method;56 however, since
the passage of the Sherman Antitrust Law, approval of the
Justice Department is increasingly sought to avoid prose
cution; 57 Finally, corporate concentrations may extend
beyond the limits of a balance sheet, since many smaller
companies are organized in constellations around the
giants. These are nominally independent companies; but
their policies, operations, and largely their prices are
tied to and often determined by the central enterprise.58
56Ibid., pp. 172-74, 270-75, 362-64; Fritz Machlup,
The Political Economy of Monopoly {Baltimore: Johns
Hopkins Press, 1952), pp. 217-26; and see, generally, the
two Berle studies, The 20th Century Capitalist Revolution
and Power Without Property; and Readings in the Social Con
trol of Industry (Philadelphia: Blakiston Co., 1949).
57gee, e.g., the following news items: Los Angeles
Times, Mar. 26, 1961, Sec. E, p. 1, col. 3; and Mar. 26,
1961, Sec. E, p. 1, cols. 1-2. New York Times, Feb. 5,
1961, Sec. 3, P- 1, col. 1; Mar. 5, 1961, Sec. 1, p. 84,
col. 1; Feb. 25, 1961, Sec. 1, p. 61, col. 1; and Mar. 5,
1961, Sec. 3, P* 1, col. 8.
58;gerle, gifte 20th Century Capitalist Revolution,
pp. 27-28.
187
There are advantages to be gained from such an arrange
ment: it is, for example, an effective defense against
the anti-trust laws and against undue encroachment of
labor unions.
In addition to these devices, there have devel
oped large financial interests-~insurance companies, pen
sion trusts, and mutual investment trusts--whlch have in
recent years been a major source of capital. At least the
pension and investment trusts--insurance companies
generally seek non-hazardous investments--purchase sub
stantial amounts of common stock and consequently hold
an Increasing percentage of all such stock outstanding,,
especially in the more powerful corporations. Berle
writes of this power position:
[Pension trusts] will Increase their holdings in
the common stocks of the best established and
most powerful corporations, that is, the corpora
tion enterprises which carry on the basic or
most essential economic functions in the United
States. Even today, the ten billions or so which
are devoted to common stock equities by these
funds represent an appreciable potential. They
do not represent a control position in a number
of important industries only because pension
trust managers as a rule have endeavored to
avoid the power position.
Continued avoidance of that position, however,
seems impractical as a permanent policy. Pension
trusts grow as a matter of necessity. The investment
188
is not matter of choice with them: they must
invest as a part of the law of their being. If
part of their investments must go into common
stocks (as apparently they must), the time will
certainly arrive when their power position can
not be avoided--unless, of course, some change in
our present economic system occurs. For one thing,
honest managers of funds cannot honorably refuse
interest in or decline concern with management
of those enterprises in which they have large
investments. For another, it is too much to expect
of human nature that power position will not even
tually excite the interest or the ambition of men
who hold it. Finally, power (though we know little
about it) when locked in any group cannot easily
be declined. Thus we must forecast a time when
these funds now valuating to comparable size with
the other great pool of private investment--insur-
ance companies--will emerge as a major and perhaps
decisive element in choosing the managers and
influencing the policy of the more decisive sec
tors of American production. . . .
[Mutual investment] funds have proved rela
tively popular; the aggregate value of their port
folios is already in excess of $13 billion; they
are therefore appreciable. Unlike pension trusts
and insurance companies, they are not fated to
grow. They may become very large, they may level
off, or they may shrink. They are nevertheless
beginning to be an appreciable element In poten
tial nonindividual control of the corporations in
whose securities they invest.59
Although bankers are no longer vital 'instruments in
corporate control, this entire process Commons refers
to as "banker capitalism."^®
59]3erle, Power Without Property, pp. 41-58.
^Economics . . . , pp. 60-68.
189
The Separation of Ownership from Management
One result of the widespread capitalization of
industrial enterprises with their coordination through
central financial control is the sheer magnitude of
operations, with the consequent advantages arising from
such large scale operations.61 Perhaps more significant,
from the standpoint of the great weight large businesses
carry in society's total economic life, is the transforma
tion of the classical theory of individual enterprise, in
which returns from capital investments are thought to be
separable from returns for managerial ability. The modern
corporation has effectively turned the theory to what
Berle and Means call the "separation of ownership from
management." This phenomenon is recognized by Niebuhr,
who writes,
It has been an error . . . to identify ownership
with economic power. The control and manipula
tion of economic process is also a form of economic
power. It gives workers minimal power resources
to set against the power of ownership; and the
managers of economic process are acquiring an even
larger share of power-.62
^W. L. Thorp, W. F. Crowder, and Others, "The
Structure of Industry."
6.2The Nature . . . , II, p. 262n.
190
Traditionally, the stockholders own the corpora
tion. But the corporation itself, regarded as a legal
person, can hold property rights, including corporate
shares, as for instance in a holding company. Actually,
then, under modern corporation law,^3 put for wholly owned
corporations, significant' separation already exists. Unques
tionably, physical wealth, patent rights, individual surplus
and other assets belong to the enterprise. Stockholders
own a right to a possible return on investment and
theoretically to share in corporate control. The separa
tion of ownership and control, however, is accentuated in
the big companies by resort to the various devices des-
9 -
cribed above which tend to concentrate control in a self-
perpetuating, authoritarian management group free from any
but a limited degree of legal control.^4 As Commons writes,
The "management," by the legalized proxy or simi
lar system, actually elects and dominates the board
of directors, so that, with the growth in size, the
corporations begin to speak of "the management" and
not of the board of directors.^5
^H. W. Ballantine, Ballantine on Corporations
(Chicago: Callaghan & Co., 1946).
^Berle and Means, op. cit., pp. 47-125, 127~52.
^Economics . ■. . J p. 289*
191
As property has been gathered under the corpor
ate umbrella and control Increasingly concentrated, the
power of the control group has steadily widened. Corpor
ate evolution, utilizing the various devices of power such
as the voting trust, has even developed a situation in
which "the dominant forces within the corporation are
frequently not the directors or ordinary officers, but
are individuals or controlling groups who have no necessary
titular place in the corporate scheme. Nevertheless,,
their powers, for practical purposes, may be complete."^6
In examining the break up of the old concept
that was property and the old unity that was
private enterprise, it is therefore evident that
we are dealing not only with distinct but often
with opposing groups, ownership on the one side,
control on the other--a control which tends to
move further and further away from ownership and
ultimately to lie in the hands of the management
itself, a management capable of perpetuating its
own position. The concentration of economic power
separate from ownership has, in fact, created
economic empires, and has delivered these empires
into the hands of a new form of absolutism, rele
gating "owners" to the position of those who sup
ply the means whereby the new princes may exercise,
their power.67
^Berle and Means, op. cit. , p. 233-
67Ibid., p. 124.
192
The trend has plainly been from accentuation
of the Interests of contributors of capital towards
the accentuation of the powers of control.68
The corporation thus in the first instance modi
fies traditional concepts of property, in that property
rights are, after all, divisible.^9 Secondly, the separa
tion of ownership and control results in the loss of the
individual entreprenuer and with him the largely accepted
explanation of a profit-motivated initiative as the prin
cipal influence determining the actions of managers.70
Yet profit calculation continues to be counted a yard
stick of operations in corporate policy.71 As Commons
points out, however, there may be distinguished the
"profit yield" for investors--determined by market valua
tion on the stock exchange--and "profit margin," or "pure
net profit," determined by gross income on the one hand,
and operating and overhead expenses on the other. The
"profit margin" goes to the enterprise. "Here is where
operating management necessarily becomes supermanagement
68Ibid., p. 152.
69Ibld., pp. 333-39.
7°Ibid., pp. 340-44.
77]3erle, Power Without Property, p. 90.
193
and all other participants become necessarily sub
ordinate .
The Manifestation of Corporate Power
How, then, is corporate power manifested? Prin
cipally in six ways. First, the corporation can deter
mine when, where, and how its operations will be carried
on, where it will apply its capital and resources; it has
the capacity to offer or withhold jobs. Second, it has
the capacity to buy or refuse to buy services, supplies,
and raw materials from suppliers, and to utilize the
different modes of transportation. Third, it has the
^ Economics . . ., pp. 306-307- See also
p. 278, where Commons points out another modification
of the traditional concept of profit: "The employers
themselves have changed their human nature. They have
built up in their industries the strongest safety
movement in the United States, and the watchword of
employers in this state has become, now how to defeat
their employees in a suit for damages at law, but what
they call the 'safety spirit,1 that prevents accidents or
restores to health their employees just as soon as the
best medical and hospital care can do it.
"This change in human nature has not abolished the
profit motive. It has changed the motive from making a
profit out of injuries to their employees to making profit
out of the prevention of those injuries. . . . Human
nature, In this case, has been changed by changing the
direction in which capitalistic profit can be made. I
have an idea that it can be changed in many other fields."
194
capacity to determine the product it will make and sell,
and to make available or withhold commodities or services
to the community; this is especially significant, since
the company is empowered to open or decline to open new
areas of production as advancing scientific knowledge
reveals them. Fourth, it can declare or withhold divi
dends, whether and to what extent its profits shall be
distributed and/or given over the capital formation.
Fifth, it can give a part of its funds to philanthropy.73
Sixth, and very important, the corporation has the
capacity to fix and administer prices. In markets which
approach a competitive situation, increases in demand when
supply can no longer be expanded will of course raise
7S
' -^Stockholders, however, do have the option to
sell shares in declining or improfitable companies.
E. V. Rostow, "To Whom and For What Ends Is Corporate Man
agement Responsible?" op. cit., p. 54, writes: "But for
the endocratic corporations, the corporate election is
frequently not a partial but a total farce. Well-informed
investors, analyzing the company's documents, often prefer
to sell their stock, despite the tax and other costs of
such sales, rather than to engage in lengthy and dubious
battles for remedying managerial shortcomings. It is
better business for them, they conclude, to shift capital
to a profitable company than to conduct a quixotic strug
gle against the inherently powerful and entrenched posi
tion of the management. Thus far, investment trusts, wel
fare funds, and institutional stockholders have by and
large refused to cross the line which in their view divides
investment from management. The few exceptions, like the
Atlas Corporation, underscore the generality of the rule."
prices. This is not so in oligopolistic markets.
Prices there are largely administered, that is, are
not tied to capacity operations or the level of demand.
They are usually set by wholly fortuitous circumstances--
for example, whether prices that increase profits at
the moment will bring wage demands, or if there promises
to be any damage to the competitive position of the
company, or if public reputation will be hurt. Par
from being established impersonally by market forces,
administered prices (l) are arrived at by specific
decision of a single firm in an industry, with the tacit
approval of others, or by a firm which is acknowledged
leader of the industry; (2) are set, and production is
managed, with an eye to increased profits; (3) do not
reflect the ebb and flow of consumer demand; and (4) do
not oust the inefficient and reward the efficient--
although in practice these huge firms, having a
substantial share of the market, do spend large sums
for technical development, and have used these develop
ments as an instrument of rivalry with other firms in
196
the industry.^ Moreover, the oligopolistic corporation
is less interested in maximizing short-run returns than
in the long-run. In periods of high and rising demand,
short-run possibilities for increasing prices are likely
to be greater than the long-run estimates of possible
price levels; so that firms can exact higher prices than
they do--they have a "reserve of unliquidated gains from
unmade price advances."75
"The problem of the giant corporation," Niebuhr
? J. K. Galbraith, American Capitalism (London:
Hamish Hamilton, 1957), PP* 42-44, 85-89; G. P. Comer,
"Price Leadership," Law and Contemporary Problems, VII
(1940), pp. 61-73; A. R. Burns, "The Antitrust Laws and
the Regulation of Price Competition," Law and Contempor
ary Problems, IV (1937)* PP* 301-320.
One observer notes, "Some indication of the
looseness of the regulatory force of competition In mass
production industry is to be found in the exhortations
increasingly being delivered by economists, public offi
cials, and 1 enlightened' business leaders, urging manage
ments to shape their price, output, wage and investment
policies in accordance with long-run, over-all social
considerations: increased purchasing power and consump
tion, full employment, an economy of plenty, etc. If
competition, actual or potential, were really effective,
these exhortations ivould be quite uncalled for and
wholly useless." B. W. Lewis, In "The Anti-trust Laws:
A Symposium," edited by D. M. Keezer, American Economic
Review, XXXIX (1949), P* 707-
"^Galbraith, The Affluent Society (Boston:
Houghton Mifflin Co., 1958), pp. 217-1.8.
197
writes, "with its combination of prestige and power, its
right to hire and fire, certainly makes big business a
part of government. The problem of the big corporation
is too great to be solved merely by the enforcement of
the Sherman Anti-Trust A c t . " 7 6 Berle and Means similarly
place the power of modern corporations on a par with
political power, and for this reason insist on subjecting
the corporations to the "same tests of public benefit
which have been applied in their turn to power otherwise
located."' They continue :
In strictly capitalist countries, and particu
larly in time of depression, demands are con
stantly put forward that the men controlling the
great economic organisms be made to accept respon
sibility for the well-being of those who are sub
ject to the organization, whether workers, inves
tors, or consumers. In a sense the difference in
all of these demands lies only in degree. In
proportion as an economic organism grows in
strength and Its power is concentrated in a few
hands, the possessor of power is more easily
located, and the demand for responsible power
becomes increasingly direct.77
In fact, the overwhelming power of management places the
community in a position to "demand that the modern
76"The Teamsters and Labor's Future," New Leader,
XL (Aug. 26, 1957), p. 3-
^Berle and Means, op. cit., pp. 353-5^*
198
corporation serve not alone the owners or the control but
all society."^8 Commons contemplates the same result.79
Berle and Means conclude:
The rise of the modern corporation has brought
a concentration of economic power which can com
pete on equal terms with the modern state— economic
power versus political power, each strong in its
own field. The state seeks in some aspects to
regulate the corporation, while the corporation,
steadily becoming more powerful, makes every effort
to avoid such regulation. Where its own interests
are concerned, it even attempts to dominate the
state. The future may see the economic organism,
now typifiedby the corporation, not only on an
equal plane with the state, but possibly even super
seding it as the dominant form of social organiza
tion. The law of corporations, accordingly, might
well be considered as a potential constitutional
law for the new economic state, while business prac
tice is increasingly assumed the aspect of economic
statesmanship.80
We shall consider subsequently problems of control and
governmental regulation. But we must first consider a
second major bloc of economic power, that of labor.
Labor Union Power
The rise of the organized power of labor has
perhaps done more in the social process to increase the
78ibid., pp. 355-56.
79;Economics . . ., p. 132.
8°Berle and Means, op. clt., p. 357*
199
health and vigor of economic and political life than any
other factor. Niebuhr and Commons agree that this has
been accomplished by virtue of labor's having provided an
equilibrium of power, setting its organized power against
that of management. The labor movement, a social force
challenging what has been essentially private arbitrary
power, is' "not alone responsible for all the shifts in the
equilibria of power by which relative justice has been
established, but it is certainly symbolic of the pragmatic
approach to the issues of justice in a technical civili
zation."^-1 ' This is, as Commons notes, not a theory of
collective negotiation or bargaining, but "conditions and
facts. Workingmen are combining and cooperating. . . .
In this combination . . . they attempt to accomplish
through collective power what they cannot accomplish as
i n d i v i d u a l s . " 8 2 Their power is essentially centered in
their capacity to withhold labor supply in the form of
0-1
Niebuhr, "The Fate of European Socialism," New
Leader (June 20, 1955); P* 8; Commons, Economics . . .,
pp. 271-72.
^ Trade Unionism and Labor Problems (New York:
Ginn & Co., 1921), p. 15-
200
strikes, and this is balanced on management's side by
the latter's power to withhold employment.
According to Commons, private ownership of the
means of production implies that workers' economic
liberties.are circumscribed, and that the freedom of con
tract and labor mobility are i l l u s o r y . ^3 iptie worker
is clearly job-dependent, and in the absence of unionism,
job opportunities are "owned" by employers. While condi
tions of employment may be regulated by legislation, laws
®3commons, Principles of Labor Legislation, pp. 373-
74; Labor and Administration, pp. 327-28.
Joseph Shister and Lloyd Reynolds conclude as
follows in their study of these problems:
"Economic theory usually assumed that workers
stand ready at any time to leave their present jobs for
better ones, and that all voluntary movement of labor is
of this purposeful character. In actuality, however, a
majority of the workers at any time are unwilling to leave
their jobs unless forced to do so through lay-off or dis
charge. Of those who do change jobs of their own accord,
the great majority do so because of some unsatisfactory
feature of their present job. They are 'pushed' into the
labor market through discontent rather than 'pulled1 by
any concrete knowledge of better opportunities. Workers
^^rho move deliberately from one job to a better job Which
they know about in advance are a minority of a minority--
probably not more than 5 Per cent of the labor force even
in good years. It is doubtful whether this is a large
enough group to affect the structure of wages and employ
ment in the way assumed by economic theory." Job
Horizons (New York: Harper Bros., 194-9)* PP* 87-88.
201
do not divest employers of their control over job oppor
tunities. Unions alone challenge that control. It
would seem, then, that the central function of labor
power is its attempt to wrest from management the latter's
monopoly over jobs. Collective organization in such a
contest is crucial.
Commons explains that unions arose in response
to a widening of product markets, which ultimately led to
a separation of interests between journeymen and employer.
In local markets their interests were quite parallel,
usually working side by side, experiencing the same satis
factions in making products of high quality. There were
social pressures to maintain reasonable standards for
wages and prices, so that journeymen could look forward
with reason to the possibility of themselves becoming
employers. As markets expanded regionally, then national
ly, and sales were based on future delivery at fixed
prices, the interests of the entrepreneu r-employer and
worker began to diverge. Expansion of markets also put
new competitive pressures on prices, which in turn led to
efforts to save on labor costs by outright wage cutting,
speed up of production, reduction in the quality of the
202
product, or use of mass production whereby highly
specialized and repetitive operations could be done by
unskilled workers at lower rates. To resist the harsh
consequences of these developments, employees were forced
to organize. As Commons writes, unions "arose as a pro
test against the merchant-capitalist system."84
Thus, union power arose in the first instance as
an offset to exploitation. But job security--protection
against competition of cheaper labor, job rights of
Individual workmen rather than the interests of a general
economic group--was an important element in union power.
In Commons1 view, labor is an interest group whose prime
interest is in protecting its better working conditions.$5
84
Commons and Others, Documentary History of Ameri
can Industrial Society, V (Cleveland: A. H. Clark Co., 1910-
11), pp. 23-24; Commons, "American Shoemakers--A Sketch of
Industrial Revolution, 1648-1895^" Quarterly Journal of
Economics, XXIV (1910), pp. 39-84.
^ Labor and Administration, pp. 261-62; Distribu
tion of Wealth, p. 65- Commons writes that there has been
a "change in the policies of labor unions . . . from
utopian unionism, in which labor organizations had.attempted
to displace capitalists as cooperative business managers,
to modern 'business unionism,' where the laborers accept
their position of permanent wage earners and content them
selves with organizations for bargaining with employers for
higher wages, shorter hours, reduced speed of work, and
security of employment." Economics . . ., p. 315-
203
Indeed, modern collective bargaining does appear
to grant workers a modicum of "property interest" in their
jobs. The following factors seem to amount to.that: legal
recognition of collective bargaining as a "right," workers'
maintenance of their employee status during strikes and
other labor disputes; enforceable employee claims on the
company if illegally discharged for back pay for the
period of that illegal discharge; the rights of seniority
in labor agreements; computation of the cost to labor in
considering technological change; severance pay; and other
like provisions. "Apparently," Commons writes, "a 'new
equity' is needed--an equity that will protect the job
as the older equity protected the b u s i n e s s ."86
This view is further substantiated from the
standpoint of Commons' theory on transactions. The job
transaction is subtle and complex, because its conduct,
considerations, and completion can never really be separ
ated from the persons of the transactor. Constitutional
^Commons, Legal Foundations . . ., p. 307* c. 8;
Selig Perlman, A Theory of Labor Movement (New York:
A. M. Kelley, 1949 ), PP* 193-203; William Gomberg, "The
Job as Property," The Nation, Nov. 26, I960, pp. 410-12.
guarantees against involuntary servitude forbid the
employer from having an enforceable claim on his employee'
labor] the worker, selling his labor, sells a continuing
promise to obey commands in those managerial transactions
in which he participates to produce goods and services.
This promise is not legally enforceable, but the employer'
reciprocal promise to pay wages for such labor becomes a
debt on his business. Thus we have the modern free worker
whose physical person can never be attached, not even when
he withholds collectively and contrary to prior agreement
through a wildcat strike the labor power he has contracted
to sell. The modern wage bargain often assimilates the
many transactions projected by a larger bargain between
institutional equals. In collective bargaining contracts
negotiated between labor unions and corporations, rules
covering far more than wages are established and adminis
tered, impinging on the entire complex of managing, ration
ing, and bargaining transactions by which goods are pro
duced. Worker and employer engage in bargaining trans
actions to determine under what conditions labor power is
to be expended at given rates in jobs. Those same jobs
are from day to day directed by managerial transactions.
205
At the same time, corporate income is rationed by managers
as they face union negotiators pressing for a larger share
of the enterprise's returns through defined forms of
returns and benefits. Thus transactions have generated
new concepts of property and economic relations.
Niebuhr, on the. other hand, deplores such a job-
centered philosophy of unionism. In his view, self-interest
is a legitimate basis of union power. Workers must fight
for a measure of assurance and security in a highly
unstable and insecure world. But if its interests in
achieving higher wages and better working conditions are
conceived too narrowly and without reference to wider
values, its tactics will prove self-defeating in the long
run, wreaking havoc on the general welfare.
Centralization of Administration and Control
None the less unions as power organizations pre
eminently function to mobilize economic, political, and
^"Democracy and the Trade Unions," Christianity
and Crisis, XVII, No. 8 (May 13? 1957 )j and "Hoffa and the
Teamsters," Christianity and Crisis, XVII, No. 18 (Oct. 28,
1957)* See my article, "Union Political Action and the.
Taft-Hartley Act," for a discussion of union political
activity.
moral power to win objectives for its members and leaders.
Perhaps in its most destructive form this may mean compe
tition with other unions; its more desirable function is
its counterweight against management power, pressing
management for wage advances and working conditions. Prom
its nature as a power center stems the necessity for
centralized administration and control. The critical
force in American labor is the national union because of
its control over the collective bargaining process, which
is the mainspring of union influence. The local union by
and large is an instrumentality of the national and has
authority only under conditions determined by the national
union constitution. The national union has become the
focal point of labor power along with the nationalizing
of American life and expansion in size of the union.
With larger size came more national patronage, more nation
al publications and other communication, larger and more
specialized staffs leading to greater effectiveness,
efficiency, and power.
Expansion in the area of collective bargaining and.
the enlargement and spread of bargaining patterns have
also contributed to" centralized determination of union
207
policies. Not only does the national seek a common
program for the entire industry, or area of competitive
production, but bargaining strategy also requires central
control of demands, settlements, and calling of strikes.
Changes in the character and subject matter of
negotiations have added to local reliance on national
echelons. Collective bargaining has become Increasingly
factual, and legal and economic reasoning require greater
expertise. Concomitant with this is the greater inter
vention of Federal agencies in union affairs, and greater
reliance on arbitration, all of which Increase dependence
on lawyers and economists usually attached to national
headquarters. The role of local union officials has been
reduced (l) with the shift in emphasis in union activi
ties from organization to disciplined administration of
the agreement, and (2) with the new methods of organiza
tion and dues collection--N. L. Ft. B. certification, the
union shop,' and the check-off of dues. It is the company
which now enforces the union shop and deducts dues from
employees' paychecks; thus locals serve less as independ
ent centers of leadership and decision-making and more as
208
administrative agencies of the national u n i o n .^8
Alteration in Union Leadership
With these developments came an alteration in the
top echelons of union leadership; officials are now sever
al generations removed from the initial bitter battles and
missionary zeal of the first leaders. They are no longer
crusading radicals. By and large, they are now highly
paid skillful politicians and administrators who are
"organization men," stressing unity and discouraging diver
sity of opinion. This is significant in terms of the
exercise of union power: the leadership is pressed to
achieve material gains for the union and its members, and
the union's prestige must be enhanced by noteworthy gains
if the leaders are to remain in office. At the same time
this tendency may be held in check by a countering pres
sure to achieve a viable settlement without major dispute,
^Leonard Sayles and George Strauss, The Local
Union: Its Place in the Industrial Plant (New York:
Harper Bros., 1951)^ PP* 24, 42; Seymour Lipset, "The
Political Process in Trade Unions: A Theoretical State
ment," in M. Berger, T. Abel, and C. H. Page (Editors),
Freedom and Control in Modern Society (New York: Harper
Bros., 1954), pp. 82-122.
209
lest the security of the leadership and the union be
threatened.89
The combination of the above factors results in
a union government characteristically authoritarian. As
Niebuhr points out, there is often but one party and no
separation of powers.90 Union constitutions usually pro
vide for an elective executive council, but a majority of
the council is usually made up of "administration" men.
While national conventions are held and are delegates
elected by the locals, it is the president who appoints
the international representatives and organizers, who in
turn have the time, scope of authority, and support of the
national to turn out votes supporting the administration.
The president, then, is often leader of a personal politi
cal machine built on patronage.91 The situation is com
pounded by the relative indifference of union members,
®9see, e.g., Business Week, October 20, 1956, p. 98.
90"The Teamsters and Labor's Future."
91Jack Barbash (editor), Unions and Union Leader
ship (New York: Harper Bros., 1959)* PP* 109-ll8j Leo
Bromwich, Union Constitutions (New York: Fund for the
Republic, 1959)* Clark Kerr, Unions and Union Leaders of
Their Own Choosing- (New York: Fund for the Republic,
I960).
210
only five to ten per cent of the membership usually
actively participating in union administration, meetings,
and policy decisions.
On the other hand, two additional factors should
not be overlooked.
1. It is to the interest of the company that
union leadership be central and authoritarian, for the
keeping of commitments at the work level is vital. The
company's commodity must be priced and delivered, and if
successive steps in reaching compromise agreements had to
revert to the union hall for debate and ratification,
risks of delay and interruption arising from political
opposition and factions would be great.
2, At the same time the machinery for effective
operation of democracy is present in union constitutions,
and dissent and opposition do occur on convention floors.
The decline in union militancy seems to be one
result of control centralization and changes in union
leadership. External developments are also important: a
92Jack Barbash, Labor Unions in Action (New York:
Harper Bros., 1948); and Unions and Union Leadership,
pp. 10-35j 40-46.
211
larger measure of employer acceptance and cooperation;
increase in workers' living standards under conditions
of full employment, stimulating acquisitive impulses in
both member and leader; and growth of middle-of-the-road
attitudes in post-war society.93
Two Aspects of the Union Monopoly Issue
Thus, although union leaders are elected and
management officials appointed, they are both highly
centralized, authoritarian governors of power systems.
If monopoly is to be condemned in one instance, it is
often argued, then monopoly in the labor area is to be
found equally objectionable. While this problem requires
extensive analysis and will absorb our attention in the
next two chapters, we shall examine two aspects of the
monopoly issue here. Underlying the charge that labor
unions are monopolies are several assumptions. In the
first place it is charged that union monopoly of bargain
ing rights granted by the Wagner and Taft-Hartley Act has
9^See Sumner H. Slichter, "The Growth, of Modera
tion, " Atlantic Monthly (October, 1956), pp. 61-64. See,
generally, Sidney Lens, The Crisis of American Labor (New
York: Sagamore Press, 1959)*
212
led to further aggrandizement of union power by its use
of industry-wide or multi-employer bargaining.
Multi-employer bargaining is not a generic term
having a fixed meaning and inflexible form. On the con
trary, it is a practical technique of collective bargain
ing that has been adopted with marked success to meet the
particular problems of individual cases. A survey of
judicial opinions shows that it has been conducted either
by a group of employers whose operations are concentrated
within a certain region or by such a group who, though
scattered geographically, have an established competitive
relationship and are recognized as wage leaders in their
industry. The same competitive influences which Commons
saw as responsible for the origin and development of
unions on national lines are also responsible for the
expansion of the bargaining unit.94 in some cases,
multi-employer bargaining has received impetus from the
union's seeking convenience in collective bargaining, and
in some cases to set a wage standard below which producers
in a given market will not be allowed to establish rates
as a means of competing; on other occasions employers have
^Commons, "American Shoemakers--A Sketch of
Industrial Revolution, 19^8-1895•"
213
on their own initiative, developed group bargaining as a
defense against the growth of national unions.
Recently the growth of union collective bargain-
■ ing units has tended to increase multiple employer and
industry-wide bargaining.95 Stimulating to this trend
has been the absence of public, governmental, or judicial
stigmata adverse to groups of employers and labor organi
zations fixing wages and other terms of employment across
the bargaining table, in contrast to that with respect to
price-fixing business combinations.96
On the other hand, the N. L. R. B., empowered by
first the Wagner and then the Taft-Hartley Acts to sanction
such large-scale bargaining, has not gone unchallenged
95chamberlain, Labor, pp. 160-62 and studies
cited therein.
9^0wen Pairweather and Lee Shaw, "Minimizing Dis
putes in Labor Contract Negotiations," Law and Contempor
ary Problems, XII.(1947)* PP* 297f*’*J H. A.Millis and
E. C. Brown, From Wagner Act to Taft-Hartley (Chicago:
Univ. of Chicago Press, 1950), pp. 138-47* 516-21; E. V.
Rostow, "The New Sherman Act--A Positive Instrument of
Progress," University of Chicago Law Review, XIV (1947),
pp. 567ff.-
Multi-employer bargaining, of course, is but one
problem In the much larger area of representation and the
appropriate bargaining unit. See Millis and Brown, c. 14.
214
by both labor and industry themselves.97 While the
Wagner Act authorized the Board to "decide in each
case, whether, in order to assure to employees the
fullest freedom in exercising the rights guaranteed by
this Act, the unit appropriate for the purposes of
collective bargaining, shall be the employer unit,
craft union, plant unit, or subdivision thereof," and
the Board has interpreted "employer unit" to embrace
multi-employer units by way of Section 2(2) of the
A c t , 98 Taft-Hartley1s amendments have added four
97see, e.g., Shipowners Association of the
West Coast, 7 NLRB 1002 (1938); Associated Banning Co.,
19 NLRB 140 (1940).
98se.ction 2(2) reads, in part, "The term
'employer' includes any person acting [in the interest
of] as an agent of an employer, directly or indirectly,
but shall not include the United States or any wholly
owned Government corporation, or any Federal Reserve
Bank, or any State or political subdivision thereof, or
any corporation or association operating a hospital, if
no part of the net earnings inures to the benefit of
any private shareholder or individual, or anyone acting
in the capacity of officer or agent of . . . labor
organization." Italics indicate Taft-Hartley amendments
of the Wagner Act, brackets, the old Wagner language.
215
provisos.99 only one of these is here relevant.Even
so, this provision has not appreciably altered the admin
istration of these provisions from well-established Wagner
patterns. That is to say, the Board in the past has on
numerous occasions found multi-employer units appropriate,
99section 9(b) originally read, "The Board shall
decide in each case whether, in order to assure to
employees the fullest freedom in exercising the rights
guaranteed by this Act, the unit appropriate for the
purposes of collective bargaining shall be the employer
unit, craft unit, plant unit, or subdivision thereof."
Taft-Hartley substituted the italicized words for
Wagner's "insure" and "full benefit of their right to
self-organization and to collective bargaining, and other
wise to effectuate the policies of this Act."
100The fourth proviso added by Taft-Hartley was
Section 9(c)(5): "In determining whether a unit is
appropriate for the purposes specified in subsection (b)
the extent to which the employees have organized shall
not be controlling."
lOlThe effect of Section 9(c)(5) is not yet appar
ent where multiple employer bargaining is involved.
Several cases, involving a bargaining unit within one
company that had been separately certified as appropriate
under Wagner, have arisen in which the Board said that
the only basis for establishing such a unit within one
concern was the lack of union organization--whlch reason
under Taft-Hartley can no longer be controlling. Thus,
separate units were declared inappropriate. See Mandel
Brothers, Inc., 77 NLRB No. 96 (19^8); Delaware Knitting
Co., 75 NLRB No. 27 (19^7); Pomeroy's, Inc., 76 NLRB
No. 96 (1948).
216
and while there is some doubt, will probably continue
to do so.^5 "*^
In all cases considerations of practicality, often
embracing previous history of bargaining and the desires
of the parties involved in each case, rather than analogy
to antitrust principles, have been primary as bases in
Board decisions. ^ 3 For instance,, when the parties con
cerned have worked out a mutually satisfactory arrangement,
and the bargaining history under it has been successful,
the Board will not interfere; likewise, where all parties
agree on the size of the bargaining unit, the Board will
go along unless the desired unit is obviously
See Note, "Designation by NLRB of Unit Appro
priate for Collective Bargaining Under Taft-Hartley
Act," University of Pennsylvania Law Review, XCVT (1948),
pp. 579ff.
1^See New York Times, May J, 1953* editorial
page, cols. 1-2 ("Bargaining Unstabilized"), and con
cludes with the following statement: "We think the
board has gone too far, and seems on the way to granting
almost any group, whether actually a craft or not, the
right to have a bargaining unit. Unnecessary multipli
cation of such units will bedevil and not improve collec
tive bargaining relations."
See also Casteel Distributing Co., 76 NLRB 153
(1948); Norcal Packing Co., 76 NLRB 254 (1948); Retail
Employee Relations Committee, 80 NLRB 1473 (1948); Asso
ciated Shoe Industries, 81 NLRB 224 (1949); Air Condition
ing Co. of California, . 81 NLRB 946 (1949).
217
inadequate.40^
Thus, when policies established under Wagner and
the new ones set out by Taft-Hartley are juxtaposed, it
would seem that the Board has added, to its continuing
policy of preserving both the representative statuses of
employer associations and ultimate self-determinative
rights of its individual members,105 the rights of self-
determination by identifiable groups within all kinds of
larger bargaining units.4^6 That this does not represent
a drastic shift or reemphasis is clearly indicated by the ' ■
legislative history of the Taft-Hartley Act's relevant
sections: all proposals which would have restricted the
10^See, e.g., Agnew Lumber Co., 44 NLRB 1253
(1942); Matter of Shipowners Assn. of the Pacific
Coast, 7 NLRB 1002 (1938); Matter of Admiar Rubber
Co., 9 NLRB 407 (1940).
■^^It appears from the cases surveyed that the
Board, in all questions of multiple unit, has insisted
on the right of each employer to control his own contract-
making decisions; there has seldom been objections by
employers to the establishment of such a unit. See
Matter of Berant Richards Packing Co., 64 NLRB 133 (1945),
and 69 NLRB 1145 (1946).
4065ee U. S., Congress, House, Conference Report
No. 510 on H. R. 3020. 80th Cong., 1st Sess. (1947),
p. 47.
218
Board's power in sanctioning multi-employer units were
rejected.1^7
There are good rea ons for this. Any proposed
restrictions on group bargaining exemplifies a tendency
to confuse that process with the power of national labor
organizations to promulgate and enforce a uniform policy
by shutting down an entire or a significant part of an
industry and hence a major segment of the American economy.
They are obviously manifestations of concern with concen
trations of union power in the nationally organized basic
industries. The objective was regulation of "too-big"
unionism, and the convenient approach for so doing was
prohibition of multi-employer bargaining.
Underlying all of this, however, is the question
able assumption that group bargaining is responsible for
union bigness and power. As far back as 1902, a report of
the Industrial Commission to Congress, of which Commons
was a member, emphasized the value of union organization
1Q^Ibid.; U. S., Congress, Joint Committee on
Labor-Management Relations, Hearings on Operation of
Labor-Management Relations Act, 1947> 80th Cong., 2nd
Sess., pt. 1 (1948), pp. 250-51-, and pt. 2, p. 1126; 93
Congressional.Record 661, 7002 (1947)*
219
on a national rather than on a local scale.Moreover,
it appears from the cases examined that the formation of
employer associations is in the main a defensive tactic to
the organized and established power of national unions.1^
10®"The local union sees its little grievance,
presses its complaint with growing anger, and is tempted
to rush into the last extremeties of labor conflict. The
national officer is able in some degree to see the force
of the opposite contention, and, still more important, is
able to form a rational judgement of what the circumstances
may make it possible to do. His counsel, therefore, is
likely to be opposed to those hasty, rash and hopeless
strikes which make up so large a fraction of the whole
number of labor contests. The national organizations also
tend to diminish the number of labor contests through the
rules and regulations by which they restrain action of the
locals." U. S. Congress, House, H. R. Document No. 380.
57th Cong., 1st Sess. (1902), p. 797* Accord: U. S.,
Congress, Senate, Committee on Industrial Relations, Final
Report, Senate Document No. 415, 64th Cong., 1st Sess.
(1916), p. 65. See also New York Times, May 26, 1953,
p. 28, cols. 2-3 (editorial).
109h . A. Millis and R. E. Montgomery, Organized
Labor (New York: McGraw-Hill Book Co., 1945), P* 21:
discussing the origin of the American labor movement,
they write, "Formation of these trade unions and the
aggressive tactics they adopted in turn brought into being
a number of militant employers associations." The major
advantages of national or regional bargaining from the
company viewpoint also arise from the substantial equality
in wage scales,.stabilization of costs in the industry,
elimination of pace-setting by a wage leader or "whipsaw-
ing" by the union's playing one firm against another, and
removal of wage differentials based on differences in the
wage-paying ability of individual firms. See E. H. Van
Delden, "Management Experience Under the LMRA," Personnel
Series No. 115, American Management Association (1948.),
p . 20.
220
In addition to raising a host of problems, the outlawry
of this mechanism would likely boomerang and deprive
employers of a technique they have found effective in
dealing with large unions. Rigid wage standardizations
has also been fallaciously attributed to multi-employer
bargaining. Again, experience effectively refutes the
assumed truth of that assumption. Thus group-employer
^■10An extensive study, Wages Under National and
Regional Collective Bargaining (Princeton: University
Press, 1946), conducted by E. A. Rolie and R. A.. Lester,
concluded as follows: (1) multi-employer bargaining did
not bring about an inordinate increase in wage levels of
various Industries observed; (2) both management and labor
began to be concerned with the economic interests of the
industry as a whole rather than just those of their par
ticular concerns or locals; (3) there was no indication
that the technological development of the industries was
retarded; (4) rather than having a monopolistic tendency,
it increased the emphasis on management efficiency. See
also J. Pollack, Social Implications of Industry-Wide
Bargaining (New York: Harper Bros., 1948), p. 56; Van
Sickle, "Industry-Wide Collective Bargaining and the Pub
lic Interest," Insights into Labor Issues (Editors, R. A.
Lester and Joseph Shister) (New York: Harper Bros.,
1948).
The Princeton study, cited above, concludes as
follows: "A fixed pattern of wage differentials based on
criteria generally considered fair and acceptable, has
arisen under national bargaining in some industries in this
country. . . . Inter-firm differentials may also be
maintained under national bargaining. . . . Wage rates
paid for the same product or occupation may differ because
the equipment, material, or other jab conditions vary
between plants or within a plant." Pp. 90-91*
221
bargaining appears to have enhanced healthy labor rela
tions .
A second assumption of the union monopoly charge
is that labor markets should be treated as though they
were commodity markets. Unqualified application to the
labor situation of a term developed and refined to refer
to product markets is misleading, a superficial analogy
which is obstructive to realistic analyses. For labor
markets differ vastly from commodity markets. In the
first place each buyer or employer constitutes a market in
that there are as many market places as there are buyers.
In non-unionized markets, (l) buyers quote the wages; and
(2) research studies show that normally employers pay
diverse rates for the same grade of labor in the same
locality under comparable job conditions.1- 1 -1
Not only is a quoted price characteristic of the
labor market, but unlike commodity markets, a considerable
degree of stability In wage rates and relationships over a
period of time is essential for satisfactory employment and
111See Lloyd G. Reynolds, Research in Wages:
Report of a Conference Held April 4-5* 1947 (New York:
Social Science Research Council, August, 19^7)j P* 27;
Richard A. Lester, "Wage Diversity and Its Theoretical
Implications," Review of Economic Statistics, XXVIII
(1946), pp. 152-59.
manufacturing operatlons--whether or not there be collec-
11?
tive bargaining. The many adverse consequences of an
opposite situation are apparent. - ' --'-3 And there are addi
tional reasons for the existence of such stability:
convenience of administration (indeed, employers are more
prone to raise or cut wages on an across-the-board basis
rather than adjust each occupational rate to local demand
and supply); prevention of employee psychological instabil
ity, for wage fluctuations could be a constant source of
friction and speculation; differences in company wage
policies and in employer evaluation of individual jobs .
(which have no counterpart in the commodity markets). All
these factors contribute to a wide range of rates instead
of a single rate for many grades of labor in a locality.11^
While a seller'is monopoly in a commodity market
means that buyers dealing with such sellers have no
^■■'■^Competition in the labor market does not estab
lish a single rate for work of the same grade and quality.
Real wage differentials exist and persist, absent unions,
because of differences in employer policies and the nature
of the labor supply. Reynolds, ibid., cc. 16, 17*
113Ibid.
W. Rothschild, The Theory of Wages (New
York: Macmillan Co., 1954), pp. 71-76.
alternative but to purchase from them, a labor monopoly,
to draw a parallel in the labor market, can only refer to
complete control of labor supply by a single seller or
negotiator for the sale of labor services.. All alterna
tive sources of labor supply must be blocked off from the
employer with whom the union is dealing. Any "leakage"
will amount to a competitive limitation to the seller's or
negotiator's market power. Should there be a national
market for the product, then the union's power will depend
on organizing employees on a nation- and industry-wide
basis, as well as on devising ways of excluding competing
products from organized markets. The union's market power
also depends on control of the production methods, which
may mean denial to the employer of access to labor-saving
devices. Finally, a union's market power may be enhanced
by taking advantage of the elasticity of demand for the
company's products, which may in turn mean that the union
must be in a position to control entry of new firms to the
industry and possibly of pricing policies. Even if all
these conditions were met, union power would still be
limited by substitutes for the product produced by non
union firms. In fact, union power falls short of this
224
ideal model in many respects. No union is likely to
have enough market power to be able to cope with competi
tive influences outside its control; the union's bargain
ing strength will be limited by many such external fac
tors, and any attempt to control labor demand will involve
deep penetration into the functioning of the product
market.
Unions are not profit-making institutions and are
as much political as they are economic. Moreover, monopol
istic principles developed for business cannot be applied
directly to unions: their activities are not determined
by comparisons of, say, sales income and costs; their
policies are not based on marginal operating costs or net
return. In addition to the above wage phenomena,
complete control over wages by unions is surely much more
115See Rothschild, ibid., pp. 106-115; A. M.
Cartter, Theory of Wages and Employment (Honewood, 111.:
R. D. Irwin, Inc., 1959)> Machlup, op. cit., cc. 9, 10-
i v j . Ross, "The Trade Union as a Wage-Fixing
Institution," American Economic Review, XXXVII (1947)*
pp. 566-88; Sumner H. Slichter, The Challenge of Industrial
Relations, Management, and the Public Interest (Ithaca:
Cornell Univ. Press, 1947)* PP* 129-30.
225
unusual than Is such control by management under non
union conditions. - * - - * • ? Generally, wage increases have been
approximately as great in nonunion as in -unionized
industries.-*--*-®
Affect of Unionism on Wages
One other factor needs to be dealt with, namely,
that unions, by substituting control for competition, are
able to obtain considerable increases in wage rates,
pulling wage rates away from a preexisting ideal relation
ship and resulting in a continuous inflationary spiral,
needs to be dealt with. To begin with, labor unions do
7See A. M. Ross, Trade Union Wage Policy
(Berkeley: Univ. of Calif. Press, 1956), cc. 1, 2.
-*--*-®See Rothschild, op. cit., pp. 71-76; Lloyd G.
Reynolds, "Wage Bargaining, Price Changes, and Employment,"
Proceedings of the First Annual Meeting, Industrial Rela
tions Research Association (Madison, Wisconsin: 1948),
p. 44; Reynolds, The Evolution of Wages Structure (New
Haven: Yale University Press, 1956), p. 190; A. Ross and
W. Goldner, "Forces Affecting the Interindustry Wage
Structure," Quarterly Journal of Economics, LXIV (May,
1950), pp. 254-81; Milton Friedman, "Some Comments on the
Significance of Labor Unions for Economic Policy," The Im
pact of the Union, D. M. Wright, ed. (New York: Kelley 8c
Millman, 1956), pp. 204-59* Compare Sumner H. Shlichter,
"Do the Wage-Fixing Arrangements in the American Labor Mar
ket Have an Inflationary Bias?" Papers and Proceedings of
the 66th Annual Meeting, American Economic Association,
American Economic Review, XLIV (May, 1954), pp. 322-46.
226
not intrude into a situation in which wage rates have
been perfectly aligned by competitive forces; rather, they
enter a situation in which relative wages have already been
distorted through the failure of competition to function
effectively,H9 Actually, they may either correct pre
vious distortions of the wage structure, or perpetuate
and accentuate these distortions. Under nonunion condi
tions the immobility of most workers, added to the
unsystematic selection of jobs by those in search of work,
gives employers wide latitude in setting wage rates and
120
other work conditions. Wage determination under
- I --*-5peynoi( js} Labor Economics and Labor Relations,
pp. 350-51, cc. 16 and 18. "Our actual economy, however, is
far from purely competitive. Most prices are administered
by the seller and remain unchanged over considerable periods.
The principal exceptions to this statement are prices of
farm products and certain other raw materials. In a system
of administered prices, price increases may follow directly
and immediately from wage increases, and may build up from
the manufacturing to the retail level instead of vice versa.
Each manufacturer, seeing that his costs have increased,
will raise his prices accordingly. As these higher price
quotations are received by wholesalers, they will raise
their list prices, and finally the retail price level will
rise. Since consumers now have larger money incomes, they
will be able to pay these higher prices, and the system can
remain in balance." Pp. 422-23. See also J. T. Dunlop,
Wage Determination Under Trade Unions (New York: Macmillan
Co., 1944); R. A. Lester, Company Wage Policies (Princeton:
University Press, 1948).
1 PO
Reynolds,. Ibid.; Rolie and Lester, op. cit«
227
collective bargaining is primarily pragmatic and intuitive
rather than theoretical and logical. Employers will con
sider their own economic conditions, the then-existing
labor market, wage levels at other companies, and their
general strategy toward the union.^1 union leaders will
be swayed by rank-and-file sentiment, wage increases cur
rently won by other unions, economic situation of the
industry, and if the industry is not completely organized
1 PP
nonunion competition. In the end the deciding factor
is the underlying economic strength of each, which in turn
depends on the size of the employer or employers associa
tion and the phase of the business cycle.123
Furthermore, a labor union can exert an apprecia
ble influence on wage rates only if most of the industry
serving the market is unionized. If only a small part of
the Industry is organized, the elasticity of demand for
the output of that part will be extremely high, so rela
tively high wages would cause a large decline in output--
assumlng wages are a significant part of costs— and hence
121Reynolds, ibid., c. 17-
1 99
Ibid., pp. 379-84, and c. 2.
123
Ibid.
228
in employment. A union, then, is likely to be strong
only in industries that are localized.Where these
conditions prevail, labor unions affect the wage struc
ture by producing a striking uniformity in the wage rates
for different classes of workers, and among plants in the
same industry, - * - 25 and stabilizing general wage levels dur
ing periods of recession or depression in the business
cycle.
In the course of acquiring Its market position
unions often find it necessary to engage In strike and
.secondary pressure, activities,126 and to press in many
other ways— the sitdown, the slowdown, all forms of picket
ing, for example--for improvement of wages, hours, and
working conditions. But simply to condemn these well-
established practices of labor unions as monopolistic only
beclouds the issues, even though unions unquestionably do
wield a measure of monopoly power. Further discussion of
this apparent paradox must be deferred until the next
12^Ibid., cc. 17, 18.
125lbld., p. 443-
See my article, "Secondary Pressures Under the
Taft-Hartley Act," Lawyers Guild Review, XIII (1953),
PP. 55ff-
229
chapter, following an analysis of bargaining power.
In the preceding two sections we have attempted
to establish and analyze the positions of power of
labor and management. To do this, economic, legal, and
political data have been drawn upon. We may now consider
the various power relationships of labor and management
and the determinants of their relative bargaining
power.
Bargaining Power
That collective bargaining is a power relation-
127
ship is recognized by both Niebuhr and Commons. On the
relative bargaining power of labor and management hinges
the resolution of their differences. It is a process,
according to Commons, which entails three interrelated
and inseparable stages: negotiation, transaction (laying
down rules of action, or terms of the agreement), and
administration.I2® It is a unitary process, because the
^Niebuhr, "The Teamsters and Labor's Future";
Commons, Economics . . ., p. 270.
-^^Economics . . ., PP. 126-27-
strategy and tactics conceived and used by both labor and
management in planning and executing their negotiations
as well as projecting the administration of their agree
ment are viewed as a continuum. A power showdown is latent
in every negotiation, so that strategy must be carefully
planned and tactics skillfully used to avoid recourse to
raw power. Conflict and cooperation in labor-management
relations are interrelated; they are phases in a continuing
relationship. Bargaining power, then, is. the ability to
secure the other party's agreement on one's own terms, and
a variety of factors, economic, political, social,
psychological, ultimately affect the result. Both labor
and management have therefore learned the advantage of
good relations, of quick and effective settlements of dis
putes, and of straight-forward administration of the
agreement, which develops a body of governing rules and
enforcement machinery--that which Commons refers to as the
"transactional" phase.
Of course, bargaining power will operate within a
range, with union and employer each having upper and lower
limits within which each is willing to settle and beyond
which each is unwilling to go; where a settlement will be
affected within that range is the measure of their
231
relative bargaining power and a reflection of their
respective estimates of their abilities to stand a strike.
Commons writes of the concept of the "limits of coercion,"
a range of bargaining within which are the alternatives
available to the employer as buyer and the union as
seller.It is within these limits that negotiation
will take place. However, it would appear that these
limits cannot be known in advance, but only by experience
in the course of negotiation itself and in the process of
agreement. One of the functions of bargaining "feel out"
one another, clarify alternatives, and to make apparently
unreasonable initial demands seem more palatable.
There appears to be another weakness in Commons'
definition of bargaining power as the "proprietary ability
to withhold products or production pending the negotiations
for transfer of ownership of w e a l t h ."^30 such a definition
is apparently premised on property rights and ownership
without regard to other economic circumstances surrounding
property ownership. As one economist put, "freedom to
^ ^ Institutional Economics, p. 331-
13°Ibid., pp. 267, 342.
232
perform an act is meaningless unless the subject is in
possession of the requisite means of action, and . . .
the practical question is one of power rather than formal
f r e e d o m . Under this interpretation, the right to strike
is not to be equated with bargaining power, for its exer
cise may be asserted in varying degrees of effectiveness
in its use--a fact not countenanced by "proprietary
ability." However, Commons in his most recent treatise
recognizes precisely the operation of the "degree of power
by control of scarcity and abundance" in collective bar
gaining.^-^ Indeed, in exercising bargaining power, one
is confronted with alternatives, and "the choice lies in
the degree of power of an individual" so confronted.433
In the confrontation of labor and management bar
gaining power, settlement or agreement depends on each
party's willingness to agree on the other's terms, which
in turn depends on the cost to each party of disagreeing
on the other's terms relative to the cost of agreeing on
1
Prank H. Knight, Freedom and Reform (New York:
Harper Bros., 1947), p. 4.
432Eeonomj_cs . . . ; pp. 172, 54-55-
1 ., p. 39- The treatise was written in 1950.
233
them. If it costs more to disagree than to agree, then
the party will agree, * if it is costlier to agree than
disagree, there will be disagreement. In any case one's
willingness to agree on another's terms represents the
extent of the former's bargaining power.
This deceptively simple outline, however, needs
several qualifying considerations, however. First, when
both assess a situation as costlier to agree than not to
agree, there will be a stalemate. Secondly, bargaining
power is relative to the demands that are made, so that
there may be adequate power to secure some demands and
inadequate power to secure others. Third, bluffing is
important. The bargaining power of both union and manage
ment depends on their estimate of each other's power, but
neither may have an accurate calculation of what the
other's estimates are. At some point during negotiations
the parties may, in their efforts to get a more favorable
deal, harden their stands so that a retreat may not be
accomplished gracefully, and both are faced with a work
stoppage neither really wants.-*-34
13^Neil W. Chamberlain, A General Theory of Econom
ic Process (New York: Harper Bros., 1955 )* pp. 7^-99•
See, generally, F. H. Harbison and J. R. Coleman, Goals
and Strategy in Collective Bargaining (New York: Harper
Bros., 1951)*
234
There is, then, a considerable measure of
subtlety to the bargaining process. In the last analysis,
a primary task is one of persuasion, and the bargaining
process does provide the negotiators opportunities to seek
clues in each other's demeanor, in a search for firmer
ground for judgements of the other's position and estimates
of cost. There may develop over a period of years, after
repeated confrontations, a kind of mutual understanding and
even appreciation of each other's position, so that dis
agreements and pitfalls which neither party wants may be
avoided.
The Cost of Agreement or Disagreement
The factors which influence the cost of agreement
and disagreement are various, and we shall briefly note
135
them. First, as to the determinants of the costs of
disagreement, on the union side, the tactical aspects of
the strike have been greatly developed to impose maximum
pressure and cost to the company. Such considerations, as
135
Chamberlain, A General Theory . . .,
pp. 100-127-
235
the timing, choice of strike victim, calling of sympathy
strikes, morale of the membership, maintenance of solidar
ity of the strikers or the danger of factionalism, are
crucial to the success of a s t r i k e . -*-36 rpj^ structure of
the union itself may determine a strike’s effectiveness:
a handful of skilled draftsmen may close down an entire
plant or even paralyze a whole region; -*-37 less skilled
workers make substitution an easier task, although the
gigantic industrial establishments will find it difficult
to replace the entire body of employees. Picketing is
another bargaining weapon, and although more a supportive
weapon of the strike, it may be used independently."*-38
3 See Eli Ginzberg, The Labor Leader (New York:
Macmillan Co., 19^8), pp. 83-170; F. H. Harbison and
Robert Dubin, Patterns of Union-Management Relations
(Chicago: Science Research Associates, 19^7)*
137por example, a tugboat operators' strike may
affect not only New York Harbor but the entire eastern
market complex of the New York area, as it often has.
-*-38330 Charles 0. Gregory, Labor and the Law.
(New York: W. W. Norton & Co., 19^6), pp. 335-^1* ec. 5
and 6; Gregory, "Constitutional Limitations on the
Regulation of Union and Employee Conduct," Michigan Law
Review, XLIX (1953), pp. 151ff-; Archibald Cox, "Strikes,
Picketing, and the Constitution," Vanderbilt Law Review,
IV (1950), pp. 4ff.
236
It may publicize a dispute, or serve as a symbol of trade
union unity and support in the refusal of members of other
than the primary striking union to-cross the line. Close
ly related to that weapon are the secondary pressures, the
inducement of employees not to work in order to compel and
employer not to join an employer association or to require
one. person to cease doing business with another.- ’ -39 in
the national economy, the only effective methods with any
hope of success of depriving an employer of his markets--
cutting off his source of supplies and equipment--are
those which operate directly against the purchasers of the
goods or services, persons who are "third parties" to
the dispute.
There are more subtle means of imposing on manage
ment a high cost of disagreement. One such tactic is the
slowdown; another is pressure on-the-job, designed to
stimulate grievances; these and other variants are tactics
139
My article, "Secondary Pressures Under the
Taft-Hartley Act."
•^^While this tactic has been generally outlawed
by the Taft-Hartley and Landrum-Griffin Acts, there
are variants of the weapon which have gained judicial
approval. Ibid.
237
of non-cooperation in the daily tasks of production.1^1
In the event that any of these tactics may be
invoked by the union, the alternatives on which management
may fall back are few. It may continue to supply its
customers out of stocks, but this offers no long-run solu
tion, although it may be effective--as when a company
anticipates a strike, forewarns its customers, and pro-
142
duces furiously to build up its inventory. With
smaller companies a whole new work force of strike
breakers may be hired; or a company may remove its plant
to another location. But both these possibilities entail
costs and problems of recruiting and training. Recently,
however, there has arisen a complex of new factors which
tend to blunt effectiveness of union power: automation's
electronic control devices In production and service
operations are capable of continuing a high level of out
put in the fact of a total walkout; even existing produc
tion methods are capable of output levels so high that
plants do not operate all twelve months; strike insurance
141
See Harbison and Dubin, op. cit.
142
In a recession, when productive capacity needs
to be cut, anyway, this can be extremely effective. See
A. H. Raskin, "The Squeeze on Unions," Atlantic Monthly
(April, 1961), for examples of this.
238
programs, - Income tax carry-back provisions, and unemploy
ment compensation merit rating taxes which are lower when
idleness stems from'a strike rather than a company cutback,
all help cushion the company against financial losses. -^3
On the company side, most commonly management can .
increase the union’s cost of disagreeing by withholding
employment of the union's members except on terms agreeable
to the company--the lockout and the layoff. The loss may
be a temporary one, and then only one of income. But this
may compound loss of the job by replacement by other
workers or machinery. And the alternatives available to
the union if there is a lockout are similarly limited.
Members may seek other employment, but for the local
union, this means the dissolution of the organization. A
union member may live off his "stocks" of savings and
strike benefits, but this is also not a long-run alterna
tive.
Both parties may resort to public opinion and
pressure by using the various communications media and
picketing. But public pressure is most effective when
1 ^Raskin, ibid., pp. 56-57-
239
aroused by public officials, on whom both parties will
use all their influence to do their bidding. When public
determination of facts or terms of agreement is once
declared, however, pressures of incurring public disfavor
by continued dispute will be multiplied greatly on both
parties.
A further determinant of a party's bargaining
strength is the cost to the other of agreeing with its
own terms. The primary costs of agreement are tied direct
ly to specific money costs--the higher the monetary
demands, the higher the costs of agreement to the party
on whom the demands are made. But in addition to the
amount of costs, there is the matter of their duration.
Costs of a future date, as for example a wage reopening
a year after initial consummation of the agreement, must
be calculated as part of the cost of present agreement.
Similarly, retroactive costs must also be computed. In
some instances computation of primary costs is difficult,
such as.the cost in output when a steward is allowed the
right to challenge time studies. Yet, time studies, as
well as disciplinary systems in which employees are
allowed to participate, often facilitates their acceptance,
240
and this may be viewed as ameliorative of costs.
Among secondary costs to management are the
following:
1. Where more than one union represents its
employees, concession to one will serve as precedent to
others; similarly, when a union is negotiating with a
number of competing firms, concessions it may grant to one
company must be granted to all, and a concession by one
company may compel a similar concession by other com
panies. This is especially true in modern bargaining in
oligopolistic markets, in which the size and prestige of
one of the companies may place that company in the posi
tion of pattern-maker for the entire industry.
2. Improved conditions of employment granted to
those in the bargaining unit may be granted to those out
side, and maintenance of status, pay, and other differen
tials will further boost costs in the form of improved
employment terms to members of middle and upper management.
3* Perhaps the most important secondary cost is
the impact of changes in labor costs on production costs
^^See Harbison and Dubin, op. clt., pp. 181-201.
241
and product prices, and, through prices, on demand for
the product; the more competitive the product market, the
more significant will be these secondary costs; and the
greater the elasticity of demand, the decline in sales
increases. -^5
Monetary considerations are not the only costs to
be accounted for in agreeing or disagreeing on another's
terms. There are matters involving principle, prestige,
status, sentiment, to which each party may hold as virtual
ly creeds with possibly deep ethical roots; these will
hardly be accounted compromisable. As Commons points
out, negotiation involves a process of joint valuation,
which is to say that union and management philosophies
14
and value structures underlie all their joint discussions.
Conflict of goals takes place whenever there are scarcity
conditions in a society of limited resources which Commons
also postulates.
In like manner, it must not be thought that a
•^5j-Qhn t . Dunlop, Wage Determination . . . , c. 5;
Cartter, op. cit., c. 7; Rothschild, op. cit., pp. 109-115-
14 f )
Economics . . ., p. 127.
1^Ibid. , p.’ 172-
242
modification or alteration of one of these determinants
of bargaining power will be accomplished independent of
effect on another; nor can it be assumed, on the other
hand, that reaction will automatically follow. For
example, a union's reducing its wage demand from twelve
to three cents, thereby reducing the cost of agreement to
management, does not thereby automatically increase its
bargaining power vis i. vis management. In the first place,
the desire and willingness of the union's members may be
dampened by the reduction, and they would be less willing
to strike for three as against twelve cents. Secondly,
the union's bargaining power would also depend on the
company's reassessment of the revised terms, and the
result might be weaker as well as stronger union bargain
ing power. This points up the subjective nature of
bargaining, and its complexity. Finally, relative bar
gaining powers is rarely taken as given; it is more often
manipulated. The parties often engage in maneuvering
their positions, giving a point here, taking a concession
there, to gain the maximum advantage of position over each
,, 148
other.
1 i- lf t
Chamberlain, A General Theory . . ., pp. 128-60.
243
Liberal Illusions and Disproportions of Power
These power relationships between labor and
management, in Niebuhr's assessment, are not taken into
account by "liberalism," which he defines as having two
strands. First, it was a philosophy which insisted that
economic life was to be free of any restraint; it was in
this aspect a philosophy of the middle classes who
possessed enough personal skill, power and property to
prefer liberty to security. Second, liberalism was also
used to describe the political strategy of those classes
which preferred security to liberty and which sought to
bring the rising technical civilization under political
control.^ 9 jn spite of the divergence of these aspects,
and although there appeared variations in this philosophy,
there developed a "pretty sharply defined credo which
holds all liberalism together."150
Central to the liberal creed is a faith in the
perfectibility of many. "It is," Niebuhr writes, "faith
■^^See "Liberalism: Illusions and Realities,"
New Republic (July 4, 1955), PP* 11-12.
^•^"The Blindness of Liberalism," Radical Reli
gion, I (Autumn, 1936), p. 4.
244
that the subjection of nature achieves life's final good;
faith in man's essential goodness, to be realized either
when man ceases to be spiritual and returns to nature
(romanticism), or when he ceases to be natural and becomes
rational; and finally, faith in human history which is
conceived as a movement upward by a force immanent within
j_t.".^51 He continues:
Liberalism is in short a kind of blindness to
which those are particularly subject who imagine
that their intelligence or the ineluctable pro
cesses of history have emancipated them from all
the stupidities of the past. It is a blindness
which does not see the perennial difference
between human actions and aspirations. . . .152
Liberalism is blind, furthermore, to the perennial source
of conflict between life and life, the inevitable tragedy
of human existence, the irrationality of human behavior,
and the character of human history.
In short, it is blind to the strength and persis
tence of egoism and the selfish purposes of men; it ignores
the fact that all men, individually and collectively,
will pursue self-centered goals with all the resources
151"Ten Years that Shook My World," Christian
Century, LVI (Apr. 26, 1939), P* 543-
152n,phe Blindness of Liberalism," p. 5-
245
they may control, and that this is the basis of power.
According to the liberal philosophy, all conflicting
interests in human society and all competing egoistic
drives would result in harmony rather than conflict if
they were only left alone; if political society did not
interfere with economic processes, economic life would
achieve a "natural" harmony. These ideas, as the dis
cussion earlier in this chapter pointed out, were rejected
by Commons as well as Niebuhr.
The theory of the harmlessness of man, if only he
is not controlled and regulated, is usually compounded
with another theory. It is a rationalistic theory which,
according to Niebuhr, provides that "ignorant selfishness
is dangerous to society, but that a wise and prudent
selfishness knows how to relate the interests of the self
to the interests of the whole; so that a wise egoist while
seeking his own pleasure, will finally serve 'the great
est good of the greatest number.' "-*-53 primary error
of this theory is that human reason becomes God, a
153ma Faith for Man's Greatest Crisis," Fortune
(July, 1942), p. 125. Commons does not deal with this
theory.
246
universal value set above all other values; reason is
made, the criterion of all morality.
Rationalism, however, forgets the finiteness and
creatureliness of man. Niebuhr writes:
It does not subject human righteousness to a
transcendent righteousness, the righteousness of
God. Thus it tempts men to "go about establish
ing their own righteousness" and finally degen
erates into a fanaticism more grievous than that
of dogmatic religion.^54
To the extent that human reason frees the human spirit from
the necessities and contingencies of nature, it creates the
possibility for moral action; to the extent that this
emancipation is never complete and "rationality is never
discarnate," it accentuates the disharmonies of nature.
The tragic realities of contemporary history, Niebuhr
points out, have fully revealed the illusory elements in
this confidence in human rationality as the guarantor of
Increasing social peace and justice.^55
These liberal illusions underline the fact that
there are no natural balances of power in history. Where
-^^Beyond Tragedy, p. 232.
«
^^^"Einsteln and the World Situation," Messenger
(Dec. 14, 1954), p. 6. -
power is disproportionate, power dominates weakness and
injustice results. Niebuhr points to a curious irony in
the fact that the laissez faire theory, which wrongly
equates history with nature and assumes that human powers
and impulses are subject to the same limits operating in
nature, "should have been propounded at the precise
moment in history when a technical civilization would
prove how unbounded human power may become, even as all
history has proved how unbounded human ambitions may
be.”156 Adam Smith, father of laissez faire theory, and
James Watt, inventor of the steam engine, were contempor
aries; this fact points up the irony, for the steam
engine typifies the industrial movement, which "made
nonsense of Adam Smith's theory."157 The technical
civilization accentuated rather than mitigated the dis
proportions of economic power.
156"The Sickness of American Culture," The Nation
(Mar. 6, 1948), p. 267-
157Ibid.
248
Power, Pride, and Responsibility:
A Summary of the Analysis of Power
Some legal, economic, and political aspects of
the labor and management power concentrations In the
American industrial scene have been examined in this chap
ter. On the management side we have seen that corporate
concentration has proceeded generally under the specific
sanction of corporation laws by means of a variety of
devices. Among these, were the wide dispersion of capital
ownership, the proxy, the holding company, the non-voting
stock, the voting trust, and the merger. In addition,
there have developed large financial interests in the
insurance companies, pension and mutual investment trusts.
What has resulted, it was pointed out, has been a separa
tion of ownership from management, and a widening of the
power of the management or control group. Corporate power,
it was pointed out, is manifested in a variety of ways
which substantially impinge on community life. This power
complex is so significant, that Niebuhr has identified
corporate power with political power.
On the labor side, we have attempted to show that
while union power first arose as an offset to exploitation,
labor, like management, Is primarily an interest group
interested in protecting the workers' jobs and advancing
their working conditions. As American industry acquired
increasingly national scope, labor unions similarly
expanded, with the national union gaining increasing
ascendancy over the local organization. Along with these
tendencies came a centralization of authority and a change
in the character of union leaders. Union government is
characteristically authoritarian, and personal political
machines commonly preserves the power of a ruling
oligarchy.
In examining two aspects of the labor monopoly
issue, we discovered that multi-employer bargaining
reflected the nation-wide scope of industry and the con
comitant growth of unions; that multiple employer bar
gaining is not necessarily harmful to public weal, but
that it rather tended to enhance healthy labor-management
relations because of its suitability for handling national
industrial problems. .It was also discovered that labor
markets are not similar to product markets. In this
connection, it was pointed out that different conditions
obtain in each type of market, but also that (l) unions
250
are not so much profit as they are political organiza
tions, and (2) wage determination is essentially pragmatic
in unionized markets. Yet, it cannot be doubted that
unions represent a significant power bloc in the economy.
The broad outlines of labor and management power
thus etched out appear to accord with the analysis of
power by Niebuhr and Commons. Commons's classification
of power, grouped as it is according to the kinds of col
lective action existing in the social process, explicitly
acknowledges labor unions and corporations to be major
power complexes. Niebuhr agrees. Also, for both thinkers,
economic power is subsumed under political power, because
political power uses and manipulates other forms of social
power to dominate and organize the community. We may con- •
elude from our analysis of labor and management power
that unions and corporations wield a significant degree
of economic and political power.
Niebuhr and Commons recognize that collective
bargaining is a power relationship. The analysis of
bargaining power underscores the power aspect of labor-
management relations and the inevitability of their con
flict. For, as it has been shown, bargaining power
251
involves an analysis of monetary costs, costs in terms of
organizational prestige, pride, and "principle," and of
maneuvering by each party to achieve its post powerful
position. The analysis of bargaining power underlines
what Niebuhr has pointed out: that in every human group,
which is a collective egoism compounded of egoistic
impulses of individuals, there is "less reason to guide
and check impulse, less capacity for self-transcendence,
less ability to comprehend the needs of others and there
fore more unrestrained egoism than the individuals who
compose the group reveal in their personal relation
ships . m158
According to Niebuhr, the larger the group, the
more certainly it will express itself ■ selfishly in the
total community. Thus, groups such as labor unions and
corporations will be more powerful and therefore more
able to defy any social.restraints which might be devised;
they will be less subject to internal moral restraints.
The larger the group, the more difficult it is to achieve
a common mind and purpose and the more inevitably it will
158
Moral Man and Immoral Society, pp. xi-xii.
252
be unified by momentary impulses and Immediate and unreflec-
tive purposes. Finally, the stronger the group is and the
wider the domination of the community, the more it will
seem to represent universal values from the standpoint of
the individual. ^59
Bargaining power is nonetheless essential to the
economy. This is true, because, Niebuhr writes, "our
contemporary culture fails to realize the power, extent
and persistence of group egoism in human relations;" it
is "practically an impossibility" to try to establish just
relations between groups by moral and rational suasion.
The relations between groups such as labor and management
must therefore always be predominantly political rather
than ethical. That is, their relationships will be
determined primarily by "the proportion of power which
each group possesses."1^0
Our discussion of power in this chapter also
points up the implications of power for the individual.
This, according to Niebuhr, involves a definition of sin.
In its religious dimension sin is rebellion against God
159Ibid., pp. 48-49.
l6oIbid., pp. xxi-xxiii.
253
and is man's effort to usurp the place of God. On the
other hand, the moral and social dimension of sin is
injustice. The ego, which falsely makes itself the
center of existence in its pride and will-to-power,
inevitably subordinates other life to Its will and thus
does injustice to other life. Man is insecure and
involved in what Niebuhr calls "natural contingency;"
man seeks to overcome his insecurity by a will-to-power
which overreaches the limits of human creatureliness. Man
pretends that he is not limited and tries to transcend his
finite limitations, until his mind is identical with
universal mind. Thus, all of his intellectual and cultur
al pursuits become infected with the sin of pride.^61
What are the consequences of these evils for
social relations? For Niebuhr, sin expresses itself as
both pride and lust for power. Man is not content merely
to live; he is "bound" to seek the realization of his
"true nature," and he can only do this by fulfilling his
life in the lives of others. The will-to-live is thus
spiritually transmuted into the will-to-power, or what
Niebuhr calls "the desire for power and glory." Man is
•^^The Nature . . ., I, pp. 178-79-
not only interested in physical survival, but also in
prestige and social approval. He invariably seeks to gain
security against the perils of life by enhancing his power
individually and collectively. As Niebuhr writes, "possess
ing a darkly unconscious sense of his insignificance in the
total scheme of things, he seeks to compensate for his
insignificance by pretension of pride."-^2 Conflicts
between men, then, are never simple conflicts between com
peting survival impulses. They are conflicts in which each
man or group seeks to guard its power and prestige against
the peril of competing expressions of power and pride.
Thus, in labor-management bargaining, the very possession
of power and prestige often involves some encroachment
upon the power and prestige of the other group, and this
conflict by its very nature is a more stubborn and diffi
cult one than mere competition between survival impulses
in nature.
Niebuhr sets forth two forms of pride of power.
In one form, the human ego assumes its self-sufficiency
and self-mastery, imagining itself secure against all
vicissitudes. It does not recognize the contingent and
l62The Children . . p. 20.
255
dependent character of its life and believes itself to be
the author of its own existence, judge of its own values,
and master of its own destiny. This proud pretension,
says Niebuhr, is present in all human life, but it rises
to greater heights among those persons and groups who.have
more than an ordinary degree of power.-^3 The second form
of the pride of power is promoted by a.sense of insecur
ity. Man, knowing himself to be insecure, seek sufficient
power to guarantee his security; but he does so, inevit
ably, at the expense of other life. Persons or groups
which are less secure, either in terms of social recogni
tion, economic stability, or physical health, are tempted
to overcome or obscure insecurity by arrogating a greater
164
degree of power to the self.
The more man establishes himself in power and
glory, the greater is the fear of tumbling from his
eminence, losing his treasure, or being discovered in
his pretension. Obscurity is feared, not by those who are
habituated to obscurity but by those who have become
^ ^ The Nature . . ., I, pp. 188-90.
1^ Ibid. , pp. 190-94.
256
accustomed to public acclaim.
There is, then a need for responsible use of
power. For as Niebuhr points out, "power is not evil.
It may be put in the service of good ends."1^ "^e
know," he continues,
. . . that the best systems of justice which the
world has ever known have been filled with posi
tive evil as well as incomplete good. But we also
know that in a sinful world systems of justice and
civilization are both more precious and more pre
carious than those imagine who think it easy to
substitute some perfect scheme of brotherhood for
them.166
Power cannot be evil of itself, unless life itself is
regarded as evil. For Niebuhr, life is power. Life is
never pure form or reason; it is inherently dynamic.
"Even the purest 'reason' is power," he writes; "accord
ing to the Christian faith perfect power and goodness are
united only in God.nl67
Ultimately, the responsible exercise of power is
1651 1 speak Truth to Power: Comment," Progressive
(Oct.-, 1955), P. 14.
I66»chrlst and Our Political Decisions," Chris
tianity and Crisis (Aug. 11, 1941), p. 1.
l67"power an£ justice," Christianity and Society,
VIII (Winter, 1942), p. 10.
257
related to faith in the gracious providence of God. Faith,
.Niebuhr writes,
. . . represents the only possibility of our per
forming our duty without the alternate distrac
tions of illusion and despair. We cannot, from
the standpoint of our faith, either promise a
bright tomorrow or threaten mankind with the pos
sibility of ultimate disaster. History is today,
as it has always been, filled with hours of deci
sion in which we can relate ourselves to its
promises or contribute to its disasters. It is
therefore more important to seek to do our duty
in watchfulness and soberness than to speculate
overmuch about the perils which lie before us.168
While the injustices of the earlier period of
industrialization, such as that cited by Commons in his
Economics of Collective A c t i o n ,169 have long disappeared
from the American industrial scene, Niebuhr writes that
modern industrial developments have "constantly increased
the power of fewer and fewer centers of economic authority."
It may be regarded [he continues], as an axiom
of political justice that disproportions of
power increase the hazard to justice; for to
be armed with power means that the temptation
to do what one wants Increases. And what one
wants immediately is usually not the. common ;
welfare.170
l68"can We Avoid Catastrophe?" Christian Century
(May 26, 1948), p. 506.
l69Pp. 141-42.
170nWin civilization Survive Technics?" p. 4.
Modern society has, then, been unable to estab
lish a tolerable justice. Out of the new power alignments
have come other forms of injustice. However, Niebuhr and
Commons firmly hold that the problems of power in a
technical society will not be resolved by eliminating the
power of one of the partners of labor and management, who
jointly contribute to the balance of power through which
justice is sought. Nor would an approximation of justice
be achieved without a proper relation of government to
economic life. We shall now turn to these in turn--the
principle of balance, and the role of government.
CHAPTER V
AN ANALYSIS OF THE BALANCE OF POWER THEORY
The Theories of Niebuhr and Commons
The net result of Niebuhr's dialectical structure
of his ethical system, and Commons' analysis of the social-
economic process, Is a delicate balance between opposite
poles, and it is only in their discussion of concrete
problems that the applicability of these systems of
thought is pinpointed and emphasized. The question of
how reasonable value, ethics, and Christian faith enter
the debate involving union and corporate power must
therefore be approached from the general superstructure
of their systems to their specific pronouncements of
application.
The concepts central to Niebuhr's system are
love and justice, the latter of which is subsumed under
the law of love, the "final law of human freedom." This
means that man must affirm this law by fulfilling his life
not within himself but in others. But it .also means that
259
260
he must recognize the reality of another law, that of
self-love, which pervades his entire sinful existence.
It is from the standpoint of these laws that Christianity
speaks to man's social dilemmas, and that every scheme and
structure of justice must be viewed as tentative and pro
visional.^ The moment they are given an aura of the
absolute, they become instruments of injustice.
Standards of justice may therefore be said to be
(1) manifestations of the law of love, to the extent that
one subordinates one's own interest to the welfare of the
community, or at least calculates the various competitive
claims’where there is more than one neighbor; and (2) a
practical compromise between the law of love and the law
of self-love, if we assume that the selfish inclination
of man to advance his own interests may be or are to the
disadvantage of others, and the norms of justice seek to
arrive at an equitable adjustment of competing claims.
A Christian contribution to standards of justice
in economic and political life, Niebuhr asserts,
must therefore not be found primarily in a pre
cise formulation of the standard. It must be found
rather in strengthening both the inclination to
seek the neighbor's good and the contrite awareness
^The Nature and Destiny of Man, I, p. 183-
261
2
that we are not inclined to do this.
This emphasizes both the moral possibilities of men and
their tendency to give undue weight to their own interests,
with consequent need of restraint. It provides an oppor
tunity for Christian action inspired by love and undertaken
for others in the community.
The economic system of Commons is founded on
group action, which is the instrument of economic action.
Three organizations, the union, the corporation, and
government, are basic and are activated by man's will-in-
action, primarily a self-centered system of social rela
tions shaping society around materialistic and acquisitive
values through these collect!ves-in-action.3 Man acts by
and with groups, a fact acknowledged by Niebhur,^ while
Commons places a more affirmative emphasis on the results
of group action. For the right to incorporate, precisely
^"The Christian Faith and the Economic Life of
Liberal Society," op. cit., p. 441. It should be noted
that the possibility of individual change, "to seek the
neighbor's good," represents a third alternative for con
trolling power. This is in addition to a balance of power
and governmental regulation.
^Institutional Economics, pp. 121, 621.
^"The Christian Faith and the Economic Life of
Liberal Society," op. cit., pp. 442-43-
262
like the right to unionize, expands and liberates individ
ual action,5 even as it controls individual action.^
Through a manifold web of transactions, working rules,
negotiation and bargaining, checks and balances are called
into play which automatically equilibrate labor and man
agement power as they deal together, to yield values more
profound and worthwhile than material, acquisitive ones--
freedom, liberty, security, justice, and equality.? Still,
both Niebuhr and Commons warn against the dangers of self-
interest, and both point to the need for political power to
protect social values and redress economic d i s b a l a n c e s . 8
For as Commons points out repeatedly, social
cooperation does not rest on a divinely appointed or
"natural" harmony of interests, but rather on a state of
order that men learn to establish among themselves. Such
^Economics of Collective Action, pp. 15, 132, 231.
^Institutional Economics, p. 69*
^Economics . . ., pp. 22, 172.
% iebuhr, "The.Christian Faith and the Economic
Life of Liberal Society," op. cit., pp. 436-37* Commons,
Economics . . ., pp. 131* 139-42; Commons and Andrews,
Principles of Labor Legislation, p. 532; Commons, Labor and
Administration, pp. 104-105, 140.
263
a state of order must control the conflicts among Individ
uals arising from the scarcity of goods, and it must pro
vide for the organized cooperation indispensable to effi
ciency. Government is central in maintaining this
equilibrium of collectivities; "instead of the tradition
al equilibrium between equal individuals in economic
theory, the alternatives today are between an economic
government based on balance of power between self-govern
ing corporations and unions, and a suppression of both
a
organizations, or their leaders, by military power. ^
Commons writes,
The system of economic government is not idealis
tic nor even voluntary because it is not built
upon an ideal of a perfect society of socially
minded individuals, but, on the contrary, these
economic government's are dictated by the closing
of the world's frontiers of natural resources,
predicted by the economists' doctrine of diminish
ing returns, and by the resulting intensified
conflicts of the organized economic power of
corporations, unions, and political parties.
Niebuhr agrees with these viewpoints:
There must be an organizing center within a given
field of social vitalities. This center must
arbitrate conflicts from a more impartial perspec
tive than is available to any party of a given
^Economics . . ., pp. 263* 180-81.
10Ibid., p. 268.
264
conflict; it must manage and manipulate the pro
cesses of mutual support so that the tensions
inherent in them will not erupt into conflict;
it must coerce submission to the social process
by superior power whenever the instruments of
arbitrating and composing conflict do not suf
fice; and finally it must seek to redress the
disproportions of power by conscious shifts of
the balances whenever they make for injustice.1]-
The need, then, is to balance the unbalanced dis
proportions of power introduced into modern life by large-
scale production and distribution. Such a balance is
necessary because disbalances of power prevent competitive
bargaining from being as free and as equitable as laissez
faire economic theory claims, because unequal power is
always a threat to justice. And in a technical society
justice can only be approximated when the centralization
of power inherent in industrial structures is matched by
the organization of individuals in a collective social
power, for while the development of the industrial process
requires corporate concentrations of power, organization
of labor union power becomes a necessity of justice. The
individual worker was helpless in contracting for decent
working conditions with huge companies, but the collec
tive power of the union made it possible to balance in
^ The Nature . . ., II, p. 266.
265
1 2
some measure the power of management.
The danger of imbalance can only be considered
"in the context of the larger problem of bigness in our
society generally. There is certainly less danger in
balanced bigness than in unbalanced bigness.nl3 it is
no cure to eliminate or undercut the power of one side
of the labor-management equilibrium.-^ The complexity of
competing claims in the community requires that norms of
justice be constantly defined and redefined; the power of
particular interests in the community requires that bal
ances and equilibria of power be constantly constructed
and reconstructed, because new vitalities constantly enter
the picture to create new conditions, which thereby render
12
Niebuhr, "Coercion, Self-Interest, and Love,"
op. cit., pp. 231-32; "The Meaning of Labor Unity," New
Leader, XXXVIII (Mar. 28, 1955), P- 8; "A Dark Light on
Human Nature," Messenger, XIII (Apr. 27, 1948), p. 7*
Commons and Andrews, Principles of-Labor Legislation,
pp. 528-29; Commons, Trade Unionism and Labor Problems,
p. 15-
■^Niebuhr, "The Meaning of Labor Unity, " p. 9,‘
Michael Reagan, "Gearing Democracy to Bigness," The
Nation (June 8, 1957), p. 496.
^Niebuhr, "The 'Right to Work' Laws," Christian
ity and Crisis, XVII (Mar. 18, 1957), P- 25-
. 266
old balances unjust. Particular systems and structures
of justice are not eternal norms to which life must always
conform but are ad hoc efforts to strike a balance between
the ultimate moral possibilities of life and the immediate
given realities.^
The Relevance of Niebuhr's Ethical Categories
to the Balance of Power Theory
Social efforts to achieve justice are never a
simple question of setting morality against power.
Niebuhr and Commons recognize that the task of securing
justice is an endless political task and is therefore
always involved in a contest of power. The most moral of
men are seekers of power; this is even more true of
groups. The larger the group, Niebuhr points out, the
more certainly it will express itself selfishly in the
community.-^ Vie have already seen that in Niebuhr's
thought, the pretensions and claims of a collective or
■^Niebuhr, "Coercion, Self-Interest, and Love,"
op. cit., pp. 237-38, 240-42; Commons, Economics . . .,
pp. 203-205.
•^Moral Man and Immoral Society, p. xii.
267
social self greatly exceed those of the individual. Sin
ful pride and idolatrous pretensions are an inevitable
concomitant of the cohesion of large economic and poll-
i
tical groups.
Social groups, then, are driven by their pride and
pretensions to dominate or attempt to dominate other
social groups. The weak may be dominated by;the strong.
The immorality of groups also helps to explain the
recalcitrance and stubbornness of the man of power. His ■
recalcitrance is not simply due to "personal defects" or
"self-deceptions;" the real cause, Niebuhr asserts, "lies
in the representative character of the oligarch, [who]
expresses not only his own impulses but those of a social
group. . . . Niebuhr insists that modern culture fails
to realize the power, extent and persistence of group
egotism in human relations. Because it is almost
impossible to establish just relations between groups,
intergroup relations must be largely determined by the
proportion of power which each group possesses.
The quest for justice can therefore never be
•^Reflections on the End of an Era, p. 43-
268
separated from attempts to secure a more equal distribu-
tion of power in society. Disproportionate power is always
irresponsible power and is the source of injustice. A
major task of attempts to achieve justice, then, is to
increase the power of those social groups which are the
weaker in the existing disproportion. "Justice," Niebuhr
writes, "is basically dependent upon a balance of power."^8
The question of the "balancer" of power in a technical
society, that is, the role of democratic government in
regulating the balance of power, will be discussed in the
next chapter. Our concern here is to point out that the
problem of justice can never be separated from the reali-
ties and use of power and the necessity for a'balance of
power.
An equilibrium of power, in which the will-to-
power of one social group is restrained by the counter
pressure of power by another social group results in a
condition of tension. Niebuhr acknowledges that these
tensions may become overt, and overt tensions may degen
erate into c o n f l i c t.-*-9 Any achieved social harmony,
•^Christianity and Power Politics, p. 26.
19Ibld., pp. 26-27.
269
then, is precarious. Moreover, modern technology and
mass communication serve to underline the tentativeness
of the equilibrium.
A balance of power is not brotherhood, which is
a "community of love." The law of love should be recog
nized as standing on the edge of history, and not in his
tory, and as representing an ultimate rather than an
immediate possibility. It should be recognized that a
degree of justice in a sinful world can only be .maintained
by a tension of competitive forces, a balance of competing
interests. Yet, Niebuhr points to the fact that beyond
and above every human relation as ordered by a fixed
structure of justice, by custom, by tradition, and by
legal enactment, "t:here remain indeterminate possibilities
of love in the Individual and personal encounters of those
who are In the structure."2^
Even where the power conflicts are sharpest, it
is possible for men to respect one another as persons and
to remain aware of common interests, common traditions,
and common loyalties. Love working within the hearts of
^ Christian Realism and Political Problems,
pp. 167-68.
270
people can do much to strengthen common loyalties, to
raise the moral level on which power still adjust itself
to power, and to develop within the community many kinds
of personal relationships in which such love is expressed.
The conflict of power can thus be modified and transcended
in many ways. The problem of achieving justice will
become simplified, if the various contending groups and
individuals do not cloak their struggles for power with
self-righteous illusions.
Justice, according to Niebuhr, is not an independ
ent norm. It is the social embodiment of love and always
stands under the criticisms and higher possibilities of
love. Justice also depends on the balance and dispersion
of power. Equality is a principle ingredient of justice;
it is the mark of a higher justice. Every higher justice
is always a more equal justice. Niebuhr describes equal
ity as a "rational, political version of the law of
love,"21 sharing the quality of transcendence with love,
yet standing in a "medial position between love and jus
tice."22 The principle of equality is related to the
2- * - An Interpretation of Christian Ethics, p. 108.
22Faith and History, p. 189-
271
principle of balance of power, in that "the principle of
equality allows and requires that the self insist upon
its own rights and interests in competition with the rights
and interests of the other.,,23
Fallacies of the Theory of the Balance of Power
What is clearly advocated by Niebuhr and Commons
in their theory of equal bargaining power is that labor
and management power is to be equalized by public action.
But the discussion in Chapter IV on the determinants of
bargaining power has revealed several fallacies of the
equilibrium theory. First, bargaining is dependent at
least as much on what each party is seeking--which would
seem to be beyond the scope of control legislation--as
it is on the relative coercive power. As a case in point,
it has been shown that the power to erect the costs of
oh
disagreement is relative to the objective sought. This
points up the non-operational nature of the standard of
"equal power." To attempt a definition of "balance," on
g3jbid.i pp. 189-90.
^Chamberlain, A General Theory of Economic Pro
gress, pp. 128-60.
272
the basis of which one is to determine equality or
inequality, appears to be an exceptionally difficult if
not impossible task.
Second, if equality were to be attained, in the
context of an oligopolistic market in which a few big
businesses were countered by big unions, the result might
well be a stalemate— a perpetual balance where neither
side is willing or able to disturb the equilibrium, a
situation which may be far removed from creative, demo
cratic development. Third, from a policy viewpoint, size
may not be a sound basis for establishing and measuring
the content of power. But there is no reason to believe
that where workers are unorganized, firms should be
reduced to the size necessary to achieve equality of
bargaining power with individual workers. Nor is there
necessarily any wisdom in adapting the size of a union or
bargaining unit to.considerations that influence the size
of companies; what is optimum union size will not
necessarily produce equal bargaining power with optimum
company size. '
Perhaps the most serious question that may be
raised about the equilibrium theory is whether giant power
273
in the hands of business can be rendered socially innocu
ous by pitting it against giant power of labor. In this
respect, the collaborative aspects of the collective bar
gaining relationship should be recalled. A fundamental
fact of modern industrial society is the mutual dependence
of each party on the other, arising from the inescapable
requirement that some agreement be reached so that opera
tions on which both depend and which give both their
functional significance may proceed. There are, of
course, socially positive results from this collaboration:
the bargaining process is increasingly professionalized;
both parties think in long-run and broader social terms,
and gain respect for each other; more attention is given
to administration and enforcement of the agreement; and
there is less resort to industrial strife.^5
On the other hand, cooperation and collaboration
often generate problems extending beyond the bounds of the
collective bargaining relationship, so that the legiti
mate interests of other companies, workers, and the
consuming public are adversely affected. Collaboration
^5see, e.g., H. Rosen and R. A. H. Rosen, "The
Union Business Agent Looks at Collective Bargaining,"
Personnel, XXXIII (May, 1957), pp. 540-42.
274
then spills over to collusion, in which the parties con
nive to control their market, supplies, or prices, or to
engage in practices of mutual interest to serve their
exclusive advantage. Balance of power based on the self
interest of conflicting groups then becomes a situation
in which the interests of the two coincide. Economic
power blocs do not necessarily produce their own restraints;
in fact they may produce the conditions conducive to the
growth'of collusion.
Forms of Collusion: The Allen Bradley Case
Labor-management collusion may take many forms,
and we shall begin with the most flagrant type exempli
fied in a series of Supreme Court cases. Although the
Federal High Court had in the important Hutcheson case
virtually sealed off antitrust suits against labor, there
was left an entree through which courts might justify
such suits:
So long as a union acts in its self interest and
does not combine with non-labor groups, the licit
and illicit under §20 are not to be distinguished
by any judgement regarding the wisdom or unwisdom,
the rightness or wrongness, the selfishness or
275
unselfishness of the end of which the particular
union activities are the m e a n s . 26
The leading case among the many decisions in this
area is the Allen Bradley case.27 There, a three-way cir
cuit linked union, contractors, and manufacturers into a
highly profitable cooperative network. The electricians
union, whose jurisdiction covered all New York City elec
trical workers secured closed shop contracts with most
OQ
of the City's manufacturers and contractors.
2^312 U. S. 219j 233 (1940). Except to the extent
that they have broadened the area of union liability some
what, the Taft-Hartley and Landrum-Griffin Acts leave this
area of the law largely untouched.
2^Allen Bradley Co. v. Local Union No. 3j Interna
tional Brotherhood of Electrical Workers, 325 U. S. 797
{1945)- This was a civil suit to enjoin alleged viola
tions of the Sherman Act. For an excellent commentary on
the case, see E. M. Dodd, "The Supreme Court and Organized
Labor, 1941-1945/' Harvard Law Review (1945), pp- 10l8ff.
pQ
The union's jurisdiction extended to workers
engaged in the manufacture and installation of electrical
goods. For many years the union geared its program to
expand membership, shorten hours of work, increase wages,
and enlarge job opportunities for its members. At the
time of this case all of these goals had been achieved.
The union is one of the larger A'. F. of L. organizations
which had "conquered the ravages of the depression and
the terrific impact and decline in building on employment
of its members, by imposing the closed shop on virtually
all local employers of electricians. It would.not permit
anybody to do electrical work in this area unless he
belonged to the union. And it would not accept new mem
bers unless there was more work available than the existing
276
Manufacturers agreed to confine their sales to local
contractors under contract with the union, and contrac
tors agreed to buy only from local manufacturers with
union agreement. These arrangements permitted (l) control
2Q
of the prices of all electrical products in the City; ^
(2) control of the market by boycotting recalcitrant local
contractors, manufacturers, and by eliminating out-of-
state competition in the New York a r e a ; 3° and (3) increased
wages, shortened hours of work, more jobs, soaring prices,
and increased profits.
members could handle. By having its installation members
refuse to handle any equipment manufactured by outside
shops, thus discouraging its importation, the local
insured a plentiful supply of production work for its
members employed in New York shops. This practice
eliminated from the New York area the competition pre
viously afforded by out-of-state manufacturers, some of
whom were organized by the same national union with which ■
Local No. 3 was affiliated." Gregory, op. cit., pp. 279-
80.
^9"Some New York manufacturers sold their goods
in the protected city market at one price and sold identi
cal goods outside of New York at a far lower price."
325 U. S. at 800.
^Companies bringing this suit were out-state
manufacturers of electrical equipment who were excluded
from the New York City market. Thus, the unionized New
York manufacturers and contractors had this entire market
to themselves. ■
277
Purporting to resolve two conflicting Congression
al policies to "preserve a competitive business economy"
on the one hand, and "the rights of labor to organize to
better its conditions through the agency of collective
bargaining" on the other,31 justice Black wrote the major
ity opinion. "Congress never intended that unions could,
consistent with the Sherman Act, aid nonlabor groups to
create business monopolies and to control the mobility of
goods and services."32 The conviction against the
tripartite arrangement was upheld.
Yet, the Court's holding was important not so much
for what it did hold as for what it did not. For
. . . aside from the fact that the labor union
here acted in combination with the contractors
and manufacturers, the means it adopted to con
tribute to the combination's purpose [use of the
strike and boycott] fall squarely within the
"specified acts" declared by Section 20 [of the
Clayton Act] not to be violations of the federal
law; . . . under our holdings in the Hutcheson
case, . . . had there been no union-contractor-
manufacturer combination, the union's action
here, coming as they did within the exemptions
of the Clayton and Norris-LaGuardia Acts, would
not have been violations of the Sherman Act. . . .33
31325 U. S. at 807-
32325 U. S...at 808.
33325 u. S. at 807.
278
Thus, the Hutcheson loophole was kept narrow; labor policy
would be formulated (and properly so) by the N. L. R. B.,
and guided by the Wagner and Norris-LaGuardia Acts.^
Severe criticism, however, has been level at
these limiting statements of the opinion.35 The major
error, it was argued, was that the Court hung onto and
solidified the Hutcheson doctrine, and this has "created
by its own excess of ingenuity" utter confusion.36 The
Court has set up a rule that leaves labor free to "main
tain the most flagrant of market controls ... as long
as it relies on its own resources and does not connive
with employers."37
3^See Millis and Brown, op. clt., p. 75n.
35see, e.g., Gregory, op. cit., pp. 280-88;
Justice Roberts’ dissent in the Allen Bradley case, 325
U. S. at 813-20; and Judge Clark's majority opinion in
that case in the Court of Appeals, 145 F.(2d) 215 (1944).
■^Gregory, op. cit., p. 284.
■^Ibid.; this, in turn, leads to the additional
difficulty of determining what evidence is required to
show that a "combination" or a "connivance" existed. See
Gregory, op. clt. , pp. 281-82, and Judge Clark's Allen
Bradley decision, op. cit.
Regarding the Allen Bradley case, Gregory writes
that any conclusion that "connivance existed between the
employers and the union . . . seems the' sheerest inter
ference, " op_;__ci_t. , at p. 281. But Justice Black,
referring to the findings of fact of the trial court,
said that "the union's contribution to the trade boycott
279
Closer analysis of the Black opinion seems to
show these fears unwarranted. The objection seems to
overlook two crucial factors. First,
Congressionally permitted union activities may
restrain trade in and of themselves. There is
no denying the fact that many of them do so,
both directly and indirectly. Congress evident
ly concluded, however, [and most authorities
agree]38 that the chief objective of antitrust
legislation, preservation of business competition,
could be accomplished by applying legislation
primarily only to those business groups which are
directly interested in destroying competition.39
was accomplished through threats that unless their employ
ers bought their goods from local manufacturers the union
laborers would terminate the 'relation of employment' with
them and cease to perform 'work or labor' for them; and
through their 'recommending, advising or persuading others
by peaceful and lawful means' not to 'patronize sellers of
boycotted electrical equipment.'" 325 U. S. at 807.
Further, "In the course of time, this type of individual
employer-employee agreement expanded into industry-wide
understandings, looking not merely to terms and conditions
of employment, but also to price and market control." And
this was accomplished through agencies which were "set up
composed of representatives of all three groups to boy
cott recalcitrant local contractors and manufacturers and
to bar from the area equipment manufactured outside its
boundaries." 325 U. S. at 800-801.
3®See, e.g., Gregory, op. clt. , pp. 200-205,*
Machlup, op. clt., pp. 193-235.
39jUBtice Black continued: "Congress feared the
concentrated power of business organizations to dominate
markets and prices. It intended to outlaw business
monopolies. A business monopoly is no less such because
a union participates, and such participation is a viola
tion of the [Sherman] Act." 325 U. S. at 811.
280
Moreover, when Section 6 of the Clayton Act provided that
Sherman's prohibitory ambit may not be construed to forbid
"existence and .operation of labor . . . organizations,
instituted for the purposes of mutual help," "mutual help"
means "mutual help" and not "employer help.."^
However, just what is and is not "self interest"
was left largely undefined. The courts themselves have
provided some guides. We know, for example, that the
Allen Bradley case says that a union acts in its self
interest when it negotiates a collective bargaining agree
ment embodying a promise "not to buy goods manufactured by
companies which did not employ members of [the
^Section 6 of the Clayton Act reads: [It is
provided] "That the labor of a human being is not a com
modity or article of commerce. Nothing contained in the
antitrust laws shall be construed to forbid the existence
and operation of labor, agricultural, or horticultural
organizations, instituted for the purposes of mutual
help, and not having capital stock or conducted for pro
fit, or to forbid or restrain individual members of such
organizations from lawfully carrying out the legitimate
object thereof; nor shall such organizations, or members
thereof, be held or construed to be illegal combinations
or conspiracies in restraint of trade, under the anti
trust laws."
Justice Murphy, dissenting, wrote that "If the
union . . . had acted alone in its self-interest, result
ing in a restraint of interstate trade, the Sherman Act
concededly would be inapplicable." 325 U. S. at 820.
And Dodd, op. cit., p. 1051, commented that the
Court's holding means that the union's campaign was "not
illegal by reason 'of the ..union's war aims but only because
of its choice of allies."
281
union]. The issue, then, is the extent to which the
Allen Bradley doctrine should be applied beyond the facts
of that case. It would seem that the doctrine should be
confined to its own facts; that a union demand relating
to wages, hours, and working conditions, made in the
course of collective bargaining negotiations and imposed
by the weight of union strength and economic sanctions,
is protected unless the demand was instigated by employers
or non-employee groups to achieve market control and
ho
power to fix prices. This appears to be the case, from
a survey of other cases, all of which have been decided
in the l i g h t of the Allen Bradley r u l i n g .^3
4l325 U. S. at 809-
^This is the. only area of antitrust prosecution
in vhich unions may be prosecuted today.
key cases are as follows: United Brother
hood of Carpenters v. U. S., 330 ,U. S. 395 (1947), revers-
ing and remanding 144 F.(2d) 546 (C. A. 9, 1944);
Philadelphia Record Co. v. Manufacturing Photo-Engravers
Assn., 155 F.(2d) 799 (C. A. 3, 1946), reversing 63 Fed.
Supp 254 (D. C. E. Pa., 1945); U. S. v. Women's Sports
wear Manufacturers Association, 23 LRRM 2519 (U. S.
Supreme Court, 1949), reversing 75 Fed. Supp. 112 (D. C.
Mass., 1947); Hunt v. Cromboch, 325 U. S. 821 (1945);
Courant v. Photographers Local, 176 F.(2d) 1000 (C. A. 9,
1949), cert, denied, 338 U. S. 943 (1950); Davis Mills
Corp. v. Federation of Dyers, 18 LRRM 2433 (D. C. S. N. Y.,
1946); East Texas Lines v. Teamsters Union, 163 F.(2d) 10
(C. A. 5, 1947); Bay Area Painters and Decorators Joint
Committee, Inc., v. Orack, 1950-51 Trade Cases, p. 64, 298
282
The Allen Bradley doctrine and its more recent
refinements appear to have etched out a fairly clear area
within which labor unions may be held liable under the
antitrust laws.
More Subtle Forms of Collusion
The limited "bread and butter" job-centered bar
gaining function that American labor has imposed on it
self appears to leave it with little alternative but to
press for higher wages and more benefits. Unions in the
oligopolistic sector of the economy, in which competitive
standards of the market have been relaxed and the
phenomenon of price leadership or the administered price
has been introduced, have benefited by these conditions.
For firms so relieved of market pressures are in a posi
tion to make concessions in a collective bargaining agree
ment which they otherwise might not be able to make.
A corporation's capacity to sustain a particular
cost structure is measured partly by productivity'changes
(D. C. Calif., Div. 2, 1951); U. S. v. Milk Haulers and
Dairy Workers Union Local 916, 1950-51* Trade Cases,
p. 62, 887 (consent decree, U. S. District Court, So.
Illinois, filed June 29, 1951)*
283
and partly by the effects of discretionary or oligopolis
tic control over price. Higher wages may be supported not
only by greater output from a given input, resulting In a
lower labor cost per unit, but also by the exploitation of
the company's advantages in the product markets.^ The
union may thus improve its wage bargaining position not
only by cooperation in Improving methods of production and
hence Increasing it, but also by collusion in joining with
the company to exploit the consumer. Especially under
conditions of full employment or in periods of high demand,
employers are able to grant the high wage Increases
demanded and pass the increase on as an increase in p r i c e .^5
^Rothschild, op. clt. , pp. 83-105, 136-43;
Cartter, op. clt., pp. 45-74, 95-H5; Berle, Power With
out Property, op. cit., pp. 82-86.
^Galbraith, American Capitalism, op. cit.,
pp. 190-98.
It is a well established policy in the steel
industry, for example, of making the occasion of a wage
increase the opportunity for a rather larger increase in
prices and corporate revenue. This may be illustrated
by recent studies of inflationary rises In steel prices,
covering the period 1953-57- See Herman Roseman, "The
Price of Peace," Reporter (Feb: . 4, i960), pp. 13-15* and
studies cited therein. Roseman found that of the
industry's total price raise per ton of steel during this
period, $20.46, $8.93 went to wages and salaries, but 40
per cent of this amount went to substantial salary
increases for nonunion staffs; thus only $5-36, or
approximately a quarter of the total, went to union wage
284
The negotiated wage bargain can thus easily
become an agreement to pursue joint ends at the expense
of unrepresented parties. And "there is no inherent mech
anism in our present system which can with certainty pre
vent competitive sectional bargaining for wages from
setting up a vicious spiral of rising prices under full
employment."^6
increases. The breakdown is as follows: wages, $5-36, or
26 per cent; salary (non-production), $3-57, or 18 per
cent; profits, $4.85, or 23 per cent; cost of materials,
supplies, and other costs, $6.68, or 33 per cent.
Also significant is the amount allocated to profits,
23 per cent. This is important, because the industry in
this period apparently shifted from a "traditional" 8 per
cent of profit, when operating in what is considered the
"normal" rate of production of about 80 per cent, to a 12
or 13 per cent profit rate. This, of course, required
price increases, and given the relative inelasticity of
demand for steel, a raise in price will necessarily
increase profits. Roseman, who estimates that had steel
prices increased by but half of the actual amount, the
price level for steel would have been more nearly the
"average" of other industrial prices; and profits would
have been approximately 10 per cent of sales, rather than
16, the post-war average.
At the same time, steel wages have risen sharply,
so that by mid-1959, . while steel workers averaged $3*10 an
hour, the manufacturing average was $2.23 (p. 14).
See also John Keats, "G. M. Stumps the Senators,"
The Nation (Nov. 29, 1958); B. J. Widwick, "Minuet in
Steel," The Nation, May 9,. 1959; Eugene Havas, "The Con
sumer in the Steel Vise," The Nation, June 6, 1959* And
see the following articles in the New York Times: Oct. 18,
1959, Sec. 4, p. 5, cols. 1-3; Dec-. 27, I960, Sec. 4, p. 6,
cols. 1-2; Mar. 15, 1'959, Sec. 4, p. 9, cols. 1-2; Jan. 10,
1960, Sec. 4, p. 6, cols. 1-3; Jan. 10, i960, p. 1, col. 5*
^W. H. Beveridge, Full Employment in a Free
285
Similarly, unions have recently stepped up the
rate of investing their funds, rather large sums of money,
in banks, utilities, and a variety of other industrial
enterprises.^ These investments raise questions as to
the wisdom of allowing unions to invest these accumulated
funds in ways which may often lead to grave conflicts of
interest. Labor also sometimes joins management of an
h A
industry in pressing for tariff protection. °
In a sense, all of this may be regarded as
labor's recognition that a firm’s ability to earn income
is the source of Its members' wage receipts and security
of continuing employment. The worker's job is his real
ownership in the enterprise, and as one observer writes,
"the harmony of purpose between enterprise and worker,
their mutually and common dependence on adequate
profitability," is based on the employee's job stake in
Society (New York: W. W. Norton & Co., 19^-5), P- 199-
^See "Labor's Money Invested for Purpose and
Profits," Time, Jan. 20, 1961, p. 82; Raskin, op. cit.,
p. 56.
lift
See Joseph A. Loftus, "Is Labor Turning
Protectionist?" The Nation (Mar. 11, 1961), pp. 211-14;
New York Times, February 12, 1961, Sec. 3* P« 1,
cols. 2-3, and Feb. 26, 1961, Sec. 1, p. 1, cols. 6-7.
286
the company.^ Moreover, formerly, the economic limits
to a union's interest in managerial efficiency were
supplied by the concept of market forces determining
wages independently of management. But with the weaken
ing of the market forces, labor may press for wage
increases to the limit of the ability of the company to
provide them; since that ability depends on the total
operation of the business, in which a large element of
discretion exists, the union may insist on improved
management performance in any phase of the firm's opera
tion and may even take over many of the functions normal
ly assigned to management, has been done in the bituminous
coal and clothing industries.5^
In bituminous coal, for example, John L. Lewis's
United Mine Workers Union serves as a supplement to the
market position of a coal industry weakened by competitive
fuels and high production costs. The union has promoted
maximum use of machinery and other technologically
advanced devices to mine coal, cooperated in forcing
^Peter Drucker, The Practice of Management (New
York: Harper Bros., 1950), pp. 87-106, 117-20.
yl. Galbraith, American Capitalism, p. 116.
287
marginal producers out of business, and collaborated in
establishing a price policy which has permitted achieve
ment of the highest wages and broadest fringe benefits
of all major industries.51 it has mutually agreed with
the producers to abandon all forms of industrial strife;
one result of this has been the accumulation of one of the
largest union treasuries, and funds which are so carefully
husbanded that the union owns a substantial portfolio of
various securities and a controlling interest in a bank..
Especially since 1950* there has been a rapid
growth in union-negotiated pension plans. 52 With few
exceptions joint labor-management boards administer
industry-wide negotiated pension funds. It is estimated
that they control assets of several hundred million
dollars, not counting reserve funds. These pension funds,
like those of the corporate pension funds and mutual
investment funds, usually purchase large amounts of
51jjaskin, op. cit., p. 56.
52See Robert Tilove, ’ ’Pension Funds and Economic
Freedom," Fund for the Republic Report, 1959.. PP* 9-19-
In 1930, only an estimated 2.7 million persons were
covered by private pension plans. By 1957 the total had
grown to 17-7 millions. Pension plans are expected to
cover approximately 45-55 per cent of the wage and salary
labor force in the next decade.
288
common stock, particularly in the bigger companies.33
Generally unions have made no attempt to use this poten
tial power to influence or attempt to control the cor
porations in which they hold stock. There are, however,
exceptions, and "they are precisely of the kind that
proves the rule, in the sense that their contrast to com
mon practice only reenforces the validity of the general
ization. "5^
An outstanding instance involved the Montgomery
Ward proxy dispute in 1955* The following events took
place in rapid succession:
1. Dave Beck and James Hoffa of the Teamsters
induced two Teamster Funds to purchase 12,500 shares of
Montgomery Ward stock.
2. Sewell Avery, one of the principals in the
proxy battle, signed a collective bargaining agreement
with Beck covering 15,000 employees; the agreement
included a union security clause, against which Avery
had heretofore, been opposed adamantly.
3- Almost immediately, Beck announced that the
53Ibid., pp. 36-37-
5^lbid., p. 70.
289
union's proxies would be cast for Avery.
In situations such as these, in which unions are
placed in a position of potential control or influence
over a company, and In the more typical wage-price situa
tion in oligopolistic markets, shall unions, In collabor
ation with management, be entitled to extract from con
sumers whatever their strategic position permits?
There appears to be at least one restraint on
union-management collusion. Economic theorist Joseph A.
Schumpeter pointed out that the condition precedent to
large aggregations of capital investment in mass produc
tion industry was some degree of monopoly control of the
market, and mass production was the instrument by which
prices of goods were reduced to the consumers. This was
contrary to expectations, since according to the classi
cal model monopoly power was not supposed to bring with
It declining prices, improved quality of products, and
an advancing living standard. Such monopoly power,
however, does entail a dynamic kind of' competition--that
which came with innovation, new products, new technology.
These developments may take place among firms within an
55lbid. The union's holdings, however, amounted to
but 0.2 per cent of the total vote. Other examples are
cited on pp. 70-71 of the Tilove Report.
290
industry as well as from without it. Thus inventiveness
almost surely assures that while monopoly power may give
short-run protection to large aggregations of capital, it
cannot secure permanent protection from competitive
technology. Large firms are required, then, to maintain
extensive research facilities to constantly probe for new
techniques and products, lest some new product better
meets the need it is designed to serve, or a similar
product be sold at lower prices because of improved
methods of production. Such competition, said Schumpeter,
is much more effective than simple price competition.56
Since the advantageous position of the union
depends on the market advantage of the business, to the
extent that the company is subject to the Schumpeterian
type of competition, we may conclude that the unions are
similarly subject to the same restraint. That this is
apparently an effective restraint may perhaps be exempli
fied by the recent steel situation. That industry's
abstention from further increasing prices in the years
^ capitalism, Socialism, and Democracy (New York:
Harper Bros., 1950), pp. 87-106, 117-20.
291
1959-1960 was apparently based on recognition that
aluminum, plastics, prepressed concrete, fiberglass, and
other domestic materials have joined foreign steel pro
ducts in competing for markets traditionally ruled by the
oligopoly of steel companies. ■
In spite of these weaknesses of the theory of
labor-management equilibrium, because in a technical
civilization large-scale organizations are produced by
inexorable tendencies to collective expression--as Niebuhr
and Commons both maintain--a rough balance of these
institutions of social power is nonetheless desirable.
Collectivization of power in industrial management, a
technical necessity, makes necessary organization of
labor power. But labor power, substantial in oligopolis
tic areas, is not everywhere uniform;57 labor strength
varies widely in diverse areas and in different stages of
labor relations. Its precariousness may be seen by the
facts that:
1. Organization of workers by unions is far
^Galbraith, American Capitalism, pp. 114-16.
292
from complete; there exist masses of unorganized workers
without benefit of collective bargaining; only approxi
mately 25 per cent of American workers is unionized.
2. Collective bargaining is no longer spreading;
union membership dropped in 1959 and i960 after remaining
stable for ten years.
3. Union strength is distributed very unevenly
across the nation, ranging for example from 8.3 pen cent
of employees belonging to unions in North Carolina, to
35*7 per cent in California.
1
4. The extent of union organization among the
various industries varies greatly, strong in automobile
and steel, for example, but struggling in textiles and
oil and chemicals.
5. While collective bargaining is accepted
labor policy in most firms, there remains an organized
and determined opposition, notably in the South Atlantic
and Southern states.58
^®See Lens, op. cit., pp. 11-25, 252-277; Raskin,
"Splits Widen in Merged Labor's House," New York Times,
Apr. 30, 1961, Sec. 4, p. 8, cols. 1-5; Statistical
Abstract of the United States (Washington, D. C.: Govern
ment Printing Office, 1959), pp. 237, 283; Los Angeles
Times, Mar. 9, 1961, Sec. P, p. 1, cols. 5-6; Joseph
Rayback, A History of American Labor (New York: Macmillan
& Co., 1959), PP. 413-34.
293
Niebuhr writes that
. . . we do not cure problems of a technical
society by eliminating the power of one of the
partners of labor and management, who jointly
contribute to the balance of power through which
justice is achieved. Nor do we contribute to
anything by assuring some lonely workman of the
right to find employment alone without the
"falderal" of unionism.59
The point is that if the modern capitalistic sys
tem is to survive in the context of justice, free and
democratic unionism is indispensable to match the central
ization of power inherent in the industrial process.
Furthermore, collective bargaining itself is justified
not only by extending the diffusion of power which
strengthens democracy, but also as an effective brake
against the exercise of absolute authority over employ
ment and conditions of employment.
In addition, however, Niebuhr points to the
necessity of the profit motive in the industrial process.^
Commons also recognizes this need.61 Moreover, Niebuhr
■^"The Right to Work Laws," p. 25-
^"Christian Faith and Social Action," Christian
Faith and Social Action, ed. J. A. Hutchison (New York:
Scribner's, 1953), P* 232.
^ Economics . . ., pp. 123, 278-79-
294
adds, no form of social organization can entirely elimin
ate the profit motive, which he identifies as being a
"particular interest," because the profit motive is deeply
rooted in man's social life. In fact, it is a "perennial
moral perplexity."^2 Niebuhr writes:
What was defined as the profit motive was, as a
matter of fact, not purely individual interest
but usually concern for the family. Not only
were particular interests likely to include con
cern for the family rather than the self but they
were also not purely economic since they might
express desire for prestige and power rather than
gain.63
Summary
Niebuhr and Commons consider the achievement of
justice and social harmony possibly only if self-interest
is checked by the assertion of conflicting self-interest.
"An uneasy balance of power," Niebuhr writes, would
seem to become the highest goal to which society could
aspire. "64
f . O
"Christian Faith and Social Action," op. cit.,
p.- 232.
63Ibid.
^"Politics and the Christian Ethic," Christian
ity and Society (Spring, 1940), p. 1; Moral Man and
Immoral Society, p. 164.
295
The disproportions of power introduced into
modern life by mass production and technological develop
ments required correction, and so the power of management
came to be balanced by the power of labor unions. The
equilibrium thus established is one which, according to
Niebuhr and Commons, is characterized by tension, and hence
one which may easily degenerate into overt conflict. Any
balance of power, then, is precarious. The force of human
egoism, individual and collective, make the struggle
against the abuse of power a perpetual one. The arbi
trary use of power is an ever-present danger in any social
group. The danger is multiplied, as we have seen in
this chapter, when apparently opposing labor and manage
ment power blocs join forces to engage in mutually bene
ficial practices at the expense of others not included
in the two groups.
Thus, even if an equilibrium of power were to be
achieved between labor and management, there is still the
possibility that these power complexes will connive to
engage in practices, in order to advance their mutual
interests. One of the more obvious forms of collusion
is exemplified by the Allen Bradley case, in which a
296
union joins a company to create a business monopoly. In
this instance, both parties are subject to prosecution
under the antitrust laws. There are other more subtle
forms of collaboration. A union and company may join to
foster a wage-price spiral; a union may be placed in a
position of potential control of a company by its invest
ment practices. For these activities there are no legal
remedies.
The principle of labor and management equilibrium,
then, would appear to be untenable, unless a superior
authority, representing broader societal interests, can
so regulate social conditions as to minimize the occasions
under which collusive practices may take place. The
balance of power, as Niebuhr points out, is a "condition
of tension," a kind of "managed' anarchy," which requires
an "organizing center" in the field of social vitalities.
This center, representing and acting on behalf of the will
of the community, is necessary to oversee the social
equilibria and establish unity and cohesiveness.^5 We
^Niebuhr, The Nature . . ., II, pp. 265-66; The
Children . . ., p. 17^.
In his article "Optimism and Utopianism," World
Tomorrow (Feb. 22, 1933 )> P* lj he writes that society is
297
now turn to the government's regulatory role.
confronted with the treble problem of decentralizing
power as much as possible, of bringing power under social
control, and of establishing inner moral checks upon it.
CHAPTER VI
GOVERNMENT REGULATION OF POWER
Government Regulation In the Thought
of Niebuhr and Commons
"It was," Commons writes, "the expansion of
transportation and banking that Initiated the national
economic organizations of capital and labor, and the
resulting national legislation-and administration
counteracting and regulating these organizations."-1 - When
the conflict between labor and management reaches a point
where its effects are harmful to society, or when con
flict becomes collusion with similar deleterious effects,
Commons believes that the question is not whether, but
rather when and how government must intervene, and to
what extent.
-^Economics of Collective Action, pp. 261, 264,
267.
298
299
For Niebuhr and Commons, a primary source of
governmental authority is "collective action in control
of violence," the authority to compel obedience to its
decisions. According to Niebuhr, this is, of course, an
oversimplified identification of physical force with
authority. Actually, prestige is an important factor in
authority,^ particularly, Commons would add, the power of
persuasion by virtue of the expertise of governmental
regulatory agencies which investigate economic and social
conditions on which political decisions are based.3 This
connotes willing obedience as indicative of the community's
inclinations, for "Traditional government is more legiti
mate than pure democrats are inclined to believe." It
has "enough implicit consent to dispense with fraud and
to rely on only a minimum of force.Implicit consent,
^Niebuhr, The Structure of Nations and Empires,
p. 8, and "Coercion, Self-Interest, and Love," In Kenneth
Boulding, The Organization Revolution, p. 249*
■^Commons, Economics . . . , pp. 76, 266-67, and
Commons and Andrews, Principles of Labor Legislation,
p. 520.
^Niebuhr, "Power and Ideology in National and
International Affairs," Theoretical Aspects of Internation
al Relations, ed. W. T. R. Pox (South Bend: Univ. of Notre
Dame Press, 1959), PP- 107-108.
300
in turn, derives from "emotions, habits, and traditions
growing out of organic and historical experiences. . . ."5
It is, however, the achievement of justice, or the reputa
tion or hope for its achievement, that is the primary
source of government's prestige.
The factor of compulsion none the less bulks large
in the thinking of Niebuhr and Commons; some measure of
coercion is required if social cooperation on a large
scale is to succeed. According to Niebuhr, "The limita
tions of the human mind and imagination, the inability
of human beings to transcend their own interests suffi
ciently to envisage the interests of their fellowmen as
clearly as they do their own makes force an inevitable
part of that process of social cohesion."^ In a parallel
passage, Commons writes.
Private self-interest is too powerful, or too
ignorant, or too immoral, to promote the common
good without compulsion. . . . The common wants
of society--justice, . . . etc.--can be supplied
^Niebuhr, The Structure of Nations and Empires,
p. 3; Commons and Associates, History of Labour in the
United States (New York: Macmillan Co., 1918), I, pp. 5“6.
^Moral Man and Immoral Society, p. 3•
301
only by compulsory contributions from individ
uals , and compulsory administration of govern
ment. 7
The task of government, then, is to seek to prevent par
tial and parochial interests from chaotic conflict or
competition and provide channels for the maximum degree
of cooperation. It can best do this with respect to labor
and management by consciously controlling and manipulating
an equilibrium of these vital social forces, thereby
mitigating the conflict and approximating brotherhood
within the limits of human selfishness.®
Balance of power, however, is not brotherhood,
since it is achieved only by restraint of will-to-power and
counter-pressure. Yet, Niebuhr points out, love is not
Distribution of Wealth, p. 61. Industrial Good
will, pp. 37-39* he writes, "People are neither equal nor
unselfish. Government has necessarily come In to
restrain powerful and unscrupulous individuals and
classes, and protect the weak and scrupulous." Pp. 37_38.
o
Niebuhr; The Children of Light and the Children of
Darkness, p. 44; The Nature and Destiny of Man, pp. 257-58,
266; Christianity and Power Politics, p. 104. Commons:
Economics . . ., pp. 272, 299-301; Industrial Goodwill,
pp. 38-39* 43-44; Labor and Administration, pp. 104-105,
140. Commons and Andrews, Principles of Labor Legislation,
PP. 375* 528-32, 510-11.
excluded; for without love the balance and attendant
tensions would become intolerable. Thus the principle
of equilibrium is a principle of justice to the extent
that it prevents domination and enslavement, but it is
an anarchical principle to the extent that unresolved
tensions result in conflict.9 All structures of justice
presuppose restraint of conflicting selfish wills and
abuse of freedom. But they also furnish the means by
which men fulfill their obligations to their fellow men
by responsible exercise of freedom. Competition is a
method of choosing between divergent interests, which,
while stimulating initiative and capacity performance,
also disintegrates valuable social relationships. By
stimulating union and management to aggressive action to
achieve their respective objectives, which can only.be
reached at each other's expense, competition contributes to
the disintegration of their relationship on which public
^Niebuhr, The Nature . . ., II, p. 266.
He writes, "A balance of power is in fact a kind
of managed anarchy. But even so it Is a system in which
anarchy invariably overcomes the management In the end.
An equilibrium of power without the organizing and
equilibrating force of government Is potential anarchy
which becomes actual anarchy in the long run." The Chil
dren . . ., p. ljb.
303
welfare depends. "Thus," writes Niebuhr, "a genuine
Christian contribution to the ideological conflict in
democratic society must serve to mitigate conflict" and
to achieve integration of community, for "it will prevent
men from heedlessly seeking their own interests in the
name of justice and from recklessly dominating value
preferences, other than their own, as evil."-*-^
Moreover, it is required that government, moving
"from case to case and point to point," distribute power
so that collective social power roughly matches industrial
concentrations of power--thus achieving the highest
possible justice and order.^ For the power of these two
groups is sufferable in a democracy only as instruments
of justice. Yet, as our discussion in the previous
chapter shows, the principle of government may easily
degenerate into domination and tyranny; moreover, it is
lOniphe Christian Faith and the Economic Life of
Liberal Society," Goals of Economic Life, ed. A. D. Ward,
p. 442; The Self and the Dramas of History, pp. 190-92;
The Nature . . ., II, pp. 192, 198.
•^Niebuhr, The Children . . ., pp. 115? 117-18;
"Plutocracy and World Responsibilities," Christianity and
Society, XIV (Autumn, 1949), P* 8. Commons and Andrews,
Principles of Labor Legislation, pp. 429, 519-34.
304
never a pure and disinterested power, but rather one
exercised'from a particular center and by a particular
group in society. Government is simultaneously the source
of order and the root of injustice, and a basic problem
of politics is to prevent the force and instrument of
order from becoming the instrument of tyranny; it must
seek the greatest possible social check on government
power.
Still, governmental organization of the entire
realm of social vitalities "stands upon a higher plane
of moral sanction and social necessity than the principle
of balance of power," because equilibrium with govern
ment degenerates to anarchy, and because government
represents a more conscious effort to achieve justice
than balance. Government "belongs to the order of the
historical, while power balance belongs . . . to the
order of the natural.
^^Niebuhr, Faith and History, pp. 220-21; Moral
Man and Immoral Society, pp. 239-40; The Nature . . .,
II, p. 267* Commons, Industrial Goodwill, pp. 37-48.
^Niebuhr, The Nature . . ., II, p. 266.
305
The Danger of Domination and Tyranny
In his thought on government, Commons places
great emphasis on the aspects of checks and balances and
the separation of powers in modern American democracy.
Political power is vested in individual citizens, who are
thus protected in their "privileges and immunities."^
The state is vested with a monopoly of the sanction of
violence, and because government is representative of
broad public purpose, it is the proper agency for "author
izing, prohibiting, and regulating the use of physical
force in human affairs."^ The supposition is that the
government is impartial with reference to any disputes
arising between citizens and will therefore be able to
use its power for moral ends.
Actually, however, as Niebuhr points out, the
ideal is never completely attained, even in the most
democratic societies. To begin with, the community must
allow an oligarchy to arise within it in order to ward off
•^Institutional Economics, pp. 684-86; Economics
. . ., pp. 266-6J.
■^Institutional Economics, pp. 686-92.
•^Ibid., p. 684.
306
the peril of anarchy by organizing the community. At
the same time this oligarchy gains its position in the
community by some special measure of power or skill with
which it organizes the vital forces of the community.
Niebuhr writes:
Government is thus at once the source of order
and the root of injustice in a community. Thus
the external peace between communities is marred
by competitive strife and the internal peace by
class domination. Both forms of sin are related
to the insecurity of the community.17
The oligarchy's exploitation of its eminence for their
own advantage points up the inevitable corruption of
government, because the coercive power required to main
tain order and unity is never pure and disinterested;
power is exercised from a particular center and by a
particular group in society.
In modern times liberal society assumed that it
had destroyed every specific power center in the community
by democratic checks on the organs of government. This,
Niebuhr writes, was illusory, for the "proletarian revolt
against bourgeois society was prompted by resentment
against the injustices which arose from the inordinate
•^Niebuhr, Faith and History, p. 220.
307
power of the commercial and industrial oligarchy of
modern society."!® Thus, the same power required to
establish the unity of a society also becomes the basis
of injustice in it, because it seeks its own ends, rather
than the common weal.
Another aspect of the moral ambiguity of govern
ment is that it is, according to Niebuhr, "impossible to
draw too sharp a moral distinction between the use of
force and coercion under the control of impartial tri
bunals and its use by individuals and groups who make it
a frank instrument of their own interests."!9 a com
munity may be impartial in using coercion against two
contestants whose dispute offers no peril to the life and
prestige of the community. But wherever such a dispute
affects the order or prestige of the community, its
impartiality evaporates. Niebuhr cites the Sacco-Vanzetti
case as an example.
The two institutions of property and social strati
fication are in the same position of moral ambiguity as
l8Ibid., p. 221.
!9] y j 0ral Man and Immoral Society, p. 240.
308
government. Niebuhr points out that both institutions
are necessary instruments of justice and social order; yet
both are fruitful of injustice.^ For every social group
tends to develop imperial ambitions which are aggravated
by the lusts of its leaders and privileged groups. Those
who hold great economic and political power are more
guilty of. pride against God and of injustice against the
weak than those who lack power and prestige. Niebuhr
writes:
Wherever the fortunes of nature, the accidents of
history or even the virtues of the possessors of
power, endow an individual or a group with power,
social prestige, intellectual eminence or moral
approval above their fellows, there an ego is
allowed to expand. It expands both vertically
and horizontally. Its vertical expansion, its
pride, involves it in sin against God. Its hori
zontal expansion involves it in an unjust effort
to gain security and prestige at the expense of
its fellows.21
Thus it is a basic problem of politics to devise ways to
prevent the force which is an instrument of order on one
level of social organization from becoming the instrument
of either domination or tyranny on the next level of social
^ The Self and the Dramas of History, p. 134.
^ The Nature . . ., I, pp. 225-26.
309
integration. To Niebuhr, this is best achieved by the
coercion of the anarchy of collective self-interest into
some kind of decent order in a balance of power.
The Socialist Issue in Niebuhr’s Thought
The influence of socialism in Niebuhr’s social
ethics is reflected in important elements of his thought.
The socialist issue also is indicative of a major transi
tion in the development of his thought, from a Christian
socialism based on the Marxist view of historical develop
ments and-social strategy, to the acceptance of a mixed
economy and of a pragmatic view of social and political
strategy. Niebuhr's rejection of capitalism and accep
tance of socialism began at the start of his professional
career during the Great Depression.22 The pragmatic
elements of his thought were introduced shortly after
World War II.23
22See, for example, "After Capitalism— What?"
World Tomorrow (Mar. 1, 1933); "Communism and the Clergy,"
Christian Century (Aug. 19j 1953); and "Liberals and the
Marxist Heresy," New Republic (Oct. 12, 1953)-
23Ibid.
310
Prom the beginning Niebuhr's socialism was used
to criticize the sentimentality of liberalism. He writes,
for example, that he does not expect "the conception of
love, held by oligarchs of a civilization, to quality or
challenge the power which they hold." Liberalism's
confidence in social progress based on appeals to love,
reason, and operations of the free market, and its belief
that power politics would eventually pass from the scene,
were all challenged as illusions. On the other hand, he
is critical of Marxist utopianism, which makes Marxism
"incapable of recognizing the relativities in its moral
attitudes and the possibilities of new tyrannies and
injustices in its policies."2^ it is this illusion of the
society, in which all men will be in perfect accord'with
the collective will of society, that came to be, in
Niebuhr's view, a major source of the evil of communism.25
In Niebuhr's emphasis on the social character of
human existence, we may see elements of socialist influence
2^Reflections on the End of an Era, pp. 273f.
25christian Realism, and Political Problems, c. 3•
311
from the earlier period of his career. The economic and
political structures of society are premised in the self
rather than in any supposed scientific view of the move
ments of history. Yet the socialist insight into the
ideological character of man's thought and action is
present in Niebuhr's admonition to Christians to take
economics and politics seriously. In addition, Niebuhr's
view that justice may be achieved only if radical dis
proportions of power are destroyed is a socialist insight.
But while socialism compounds this insight with illusions
about the nature of "revolutionary men," Niebuhr
emphasizes that disproportions of power should be des
troyed in order to establish an approximate equilibrium
of power in the context of democratic government.
At the same time Niebuhr rejects the socialist
approach to human nature. He regards it as too doctrin
aire. He rejects the socialist illusion that human needs,
desires and ambitions may be limited. Niebuhr opposes
the socialist optimistic attitude toward the problem of
26The Children . . ., pp. 74-102.
312
incentive and toward the tendency to unite economic and
political power.
Yet, when social life is not consciously managed
and manipulated, disproportions of power will result.
Society therefore requires such a conscious control of
the various equilibria that exist within it. This task,
for Niebuhr and Commons, falls to government. If govern
ment, however, is to regulate effectively the balance of
labor and management powers, it must attenuate the condi
tions which make possible the occasion for their collusion,
conditions which Niebuhr failed to take account of and
which Commons never foresaw.
Regulation of Management: the Antitrust Laws
American public policy in the regulation of
business is embodied primarily in three statutes: the
Sherman Act of 1890, the Clayton Act of 1914, and the
Federal Trade Commission Act of 1914. This dissertation
will limit its survey of antitrust regulation to the.
Sherman Act. There are two reasons for this. First, It
appears that one of the principal reasons why both the
Clayton and the Federal Trade Commission Acts were enacted
was to modify the older Sherman Act by specifying pro
hibited practices and thereby eliminate any uncertainty
as to the meaning of the Sherman Act's broad language.
Thus the 1914 laws added little to the■substance of anti
trust law, for the specific practices forbidden by Clayton
and the Federal Trade Commission Act could already be
attacked under the Sherman Act as attempts to monopolize
or as conspiracies in restraint of trade. Second, the
materials in the government regulation of business field
is so vast, that the scope of an interdisciplinary study
such as this might be unduly extended. We shall survey
developments under the Sherman Act, therefore, as being
fairly representative of government regulatory practices
with respect to business.
The high degree of power concentrated in the hands
of management has prompted a variety of social controls.
One major alternative, on which heavy reliance has tradi
tionally been placed, is the limitation of business power
through promoting more competitive markets. The chief
instrument has been the antitrust laws, part of a step-by-
step growth in the public control of. business rather than
part of a general philosophy. The enactment of the
314
Sherman Antitrust Act in 2890 symbolized the end of one
era and the beginning of another, marking the end of a
century in which the continent was populated, industry
became national in scope, and new centers of wealth and
power threatened to evade all effective control. It came
at a time when, at the end of the first period of indus
trial development and exploitation, critical appraisals
of the industrial scene led to an uneasiness which was
crystallized in the creation of new instruments of
national power to control and direct significant sectors
of the economy.
Sherman purported to outlaw every form of "con
tract, combination," and "conspiracy" to "monopolize" or
"attempt to monopolize trade or c o m m e r c e . "^8 it provided
^Commons and Associates, History of Labour in
the United States, I, pp. 5-10.
2^The heart of the Law, 26 Stat. 209 (1890), is
contained in the following two sections; Section 1 was
amended in 1937 by the Miller-Tydings Act to legitimize
resale price maintenance:
Sec. 1. • Every contract, combination in the form of
trust or otherwise, or conspiracy, in restraint of
trade or commerce among the several States, or with
foreign nations, is hereby declared to be illegal.
Every person who shall make such contract or engage
in any such combination or conspiracy, shall be
deemed guilty of a misdemeanor, and, on conviction
thereof, shall be punished by fine not exceeding five
315
for three months of court action against violators:
(1) criminal prosecutions brought by federal attorneys;
(2) equity proceedings to enjoin and restrain violations;
and (3) triple damage suits by private parties injured by
the illegal activities of the violators. These broad
terms, neither self-explanatory nor self-enforcing, and
at most a codification of already extant common law,
depended on four factors for a more precise definition of
policy: (l) the meaning attributed to its terms by the
courts as precedent accumulated, case by case; (2) sym
pathy of Justice Department officials and the consequent
degree of vigor with which violators are attacked;
(3) congressional support in providing necessary funds
for enforcement and investigation and in enacting
thousand dollars, or by imprisonment not exceeding one
year, or by both said punishments, in the discretion of
the court.
Sec. 2. Every person who shall monopolize, or attempt
to monopolize, or combine or conspire with any other
person or persons, to monopolize any part of the trade
or commerce among the several states, or with foreign
nations, shall be deemed guilty of a misdemeanor, and,
on conviction thereof, shall be punished by fine not
exceeding five thousand dollars, or by imprisonment not
exceeding one year, or by both said punishments, in
the discretion of the court.
316
supplementary legislation; and (4) the adequacy of the
injunction, dissolution, and criminal decrees for restor
ing competition in cases of successful prosecution.
In the first few decades of its existence, the
combined inadequacy of all four factors in application of
the law to major trusts led to failure of antitrust
policy by default.29 Monopoly is defined by Commons as
"the exclusive privileges of selling goods and services,
and their value is owing to . . . [giving] their owners
the power of limiting the supply relative to the demand,
and thus of keeping the price above the cost of produc
tion. "36 These privileges are "of paramount importance in
modern society where goods are produced, not for direct
consumption by the producers, but for sale and profit. "31.
The Supreme Court's initial applications of the law, how
ever, apparently emasculated its intent by applying its
provisions vigorously to labor instead of to the intended
■^C. p. Edwards, "Can the Antitrust Laws Preserve
Competition?" Readings in the Public Control of Industry,
selected by a Committee of the American Economic Association
(Philadelphia: Blakiston Co., 1949), PP- 8-10, 14-21.
30
Distribution of Wealth, p. 103.
3-^-ibid., p. 105; see also pp. 86-115-
317
targets of the big trusts.32
Moreover, even in its first application to a
typical trust in the leading Standard Oil case,33 the
Court virtually amended the Statute by condemning only
"unreasonable" restraints of trade. This case, setting
forth a faith in the automatic self-correction of economic
maladjustments, rejected a literal interpretation of
Sherman’s condemnation of "every" combination and laid
the foundation for two lines of decisions which were to
dominate antitrust enforcement up to its modern revival.
As enunciated in case law, Sherman Act prosecutions
diverge along two fairly distinct lines.
First, with respect to close consolidations such
as trusts and holding companies, the Act is violated not
by the monopolistic position actually achieved, but the
purposes and methods of combination. The Act was, thus
32This aspect is discussed in the next sub
section, "Regulation of Labor: National Labor Policy,"
infra.
33u. s. y. Standard Oil Co. of N. J., 221
u. s. i (1911).
318
interpreted, less antitrust than anti-predatory prac
t i c e s . ^ The Court tended to view the purpose of Sherman
as prohibiting the coercion of competitors rather than
forbidding control of the market; issues of market control
were essentially irrelevant, so long as no predatory or
other restrictions on competitors were a l l e g e d .35 a s a
result of this rule of reason, there was considerable
uncertainty as to just which practices were predatory
and unfair, precisely what distinguished "good" trusts
from "bad" ones— questions only the Court could answer;
and for some thirty years, the Court condemned no close
combinations in manufacturing.
A second line of cases revealed that in the case
of loose combinations, such as trade associations and
other forms of collusion among competitors, because such
3^See Edward S. Mason, Economic Concentration
and the Monopoly Problem (Cambridge: Harvard Univ.
Press, 1957), PP- 332-50.
35see, for example, the following leading cases:
U. S. v. American Tobacco Co., 221 U. S. 106 (1911);
U. S. v. DuPont de Nemours & Co., 188 Fed. 127 (1911);
U. S. v. Eastman Kodak Co., 226 Fed. 62 (1915); U. S. v.
Winslow, 227 U. S. 202 (1913); U. S. v. United Shoe
Machinery Co., 247 U. S. 32 (1918) and 258 U. S. 451
(1922); U. S. v. U. S. Steel Co., 251 U. S. 417 (1920);
and U. S. v. International Harvester Co., 274 U. S.
693 (1927).
319
combinations imposed unreasonable restraints on competi
tors, the Act was applied with considerable vigor. Pools,
market-sharing, and price agreements among competitors and
similar methods of limiting competition had been held
unenforceable at common law as being in restraint of trade
long before Sherman was enacted. Thus, loose combinations,
in contrast to close consolidations, were given much less
leeway by virtue of the rule of reason, since they fitted
clearly into the common law pattern. Ironically, however,
it was the impossibility of binding recalcitrant parties
to terms laid down by loose combinations that was chiefly
responsible for the search for surer ways to eliminate
competition— through trusts, holding companies, and
large-scale mergers.36
According to these cases, power to control or
even merely to affect the market, rather than abuse of
that power, is the criterion of illegality. Nor must an
agreement include all or nearly all of the firms in a
given market to fall within the ban. The reasonableness
of the rigged prices and good intentions of parties to the
3^See, generally, H. B. Thorelli, The Federal
Antitrust Policy (Baltimore: Johns Hopkins Press, 1955)*
320
collusion are irrelevant.37 One outstanding case in this
area is U. S. v. Socony-Vacuum Oil Co.38 The oil companies
were charged with conspiracy to raise tank car gasoline
prices, and indirectly to raise prices at retail, through
a concerted program of buying "surplus" gasoline from
independent refiners to free the market from the pressure
of the "surplus." The Court ruled that any such agree
ment affecting any part of a market and any manipulaL Lon
of prices is illegal per se. Justice Douglas, for the
majority, emphatically rejected the suggestion that
"reasonable" price fixing might be permitted.
The reasonableness of prices has no constancy
due to the dynamic quality of business facts
underlying price structures. Those who fixed
reasonable prices today would perpetuate unrea
sonable prices tomorrow. . . . Those who con
trolled the prices would control or effectively
dominate the market. And those who were in that
strategic position would have it in their power
to destroy or drastically impair the competitive
system. But the thrust of the rule is deeper and
reaches more than monopoly power. Any combina
tion which tampers with price structures is
3^See, for example, Swift & Co. v. U. S., 196 U. S.
375 (1905); Live Poultry Protective Association v. U. S.,
4 P.(2d) 840 (1924); U. S. v. Potteries Co., 273 U. S.
392 (1927); Appalachian Coals, Inc. v. U. S., 288 U. S.
344 (1933).
38310 U. s. 150 (19^0).
321
engaged In an unlawful activity. Even though
the members of the price-fixing group were in no
position to control the market, to the extent
that they raised, lowered, or stabilized prices
they would be directly interfering with.the free
play of market forces. The Act places all such
schemes beyond the pale. . . . Under the Sherman
Act, a combination formed for the purpose and with
the effect of raising, depressing, fixing, pegging,
or■stabilizing the price of a commodity in inter
state or foreign commerce is illegal per se.39
Moreover, the Court held, evidence of success in raising
prices need not be proved to convict; desire and intent
of the combination to raise prices were enough.
The Extension of the Antitrust
Laws to Oligopolies
In spite of the per se doctrine, each decision
has depended on a case by case examination. Accordingly,
there remained a considerable area of uncertainty as to
the activities of loose combinations. Starting in the
late 1930's, antitrust activity was revived as a key
aspect of public policy regarding industry. Marked by
broader judicial interpretation of Sherman, more ample
congressional support, and more vigorous executive
39
310 U. S. 155■
322
enforcement^ this policy has continued to the present
day.^ Especially important has been the Court's willing
ness to apply economic criteria of market structure as
well as those of corporate behavior and intent; the rule
of reason has been both greatly modified in the new stress
on such economic data as prices and shares of market; and
even avoided in outlawing certain practices and arrange
ments per se in oligopoly as well as monopoly situations.
However, the mere illegalizing of certain practices in
U. S., Congress, Senate, Committee on the
Judiciary, Hearings on Nomination of Thurmond W. Arnold,
75th Cong., 3d Sess. (1938), pp. 3ff.J Thurmond Arnold:
"Antitrust Law Enforcement, Past and Future," Law and
Contemporary Problems, VII (1940), pp. 5-23? and Folklore
of Capitalism (New Haven: Yale Univ. Press, 1959)?
pp. 208, 212; Fritz Machlup, Political Economy of
Monopoly, pp. 181-235> Edward S. Mason: "Methods of
Developing a Proper Control of Big Business," Proceedings
of the Academy of Political Science, New York, Vol. XVIII,
No. 2, Jan., 1939? PP- 40-49; and Economic Concentration
and Monopoly Problem; Walton Hamilton and I. Till,
Antitrust in Action (U. S. Congress, Temporary National
Economic Committee, Investigation of Concentration of
Economic Power, Monograph No. 16 (Washington, D. C.: U. S.
Government Printing Office, 1940); U. S., Congress, Senate,
Subcommittee on Antitrust and Monopoly of the Committee on
the Judiciary, Concentration in American Industry, Committee
print, 85th Cong., 1st Sess., 1957; A. A. Berle, The 20th
Century Capitalist Revolution. Most of these authorities,
however, cite the continued difficulties of enforcement,
and investigation in antitrust litigation.
323
oligopolistic industries has seldom resulted in signifi
cantly more competitive markets.^1 Dissolution of the
dominant firm or firms, or divestiture by them of some of
their corporate assets, would seem to be more effective,*
but such measures have rarely been ordered.
Two leading cases indicate this shift in antitrust
policy. First, Alcoa, found guilty of monopolizing the
manufacture of virgin aluminum and sale of various alumin
um products by controlling 90 per cent of virgin aluminum
production, was ordered split up in a decision handed
ho
down by Circuit Judge Learned Hand. That percentage in
itself, he held, was enough to constitute monopoly; the
mere existence of such monopoly gave the company as much
or more power to fix prices than an illegal combination
among several firms, so that failure to extend the per se
rule of loose combinations to patent monopolies would have
hi
See A. D. Neale, The Antitrust Laws of the U. S.
A_. (Cambridge, England: Univ. Press, i960), pp. 181-82.
For example, in spite of a successful prosecution of the
major cigarette companies by the Antitrust Division, the
industrial and general nature of its practices were l-eft
substantially unchanged; market sharing and price leader
ship, two key factors in the case, appeared to continue
undiminished. See W. H. Nicholls, Price Policies in the
Cigarette Industry (New York: Harper Bros., 1951), c. 28.
^ U. S. v. Aluminum Co. of America, 148 F.2d
416 (1945).
324
been absurd. That monopoly power had not been exercised
or abused, furthermore, was irrelevant. Monopoly, after
all, had not been "thrust on" Alcoa, which rather had
maintained its position and power] Congress had not dis
tinguished between good and bad trusts but had forbidden
all. Intent to monopolize is similarly irrelevant. Thus,
excessive size in itself, measured by share of market, is
Illegal.
The Alcoa case, however, applied only to mono
polies, and not to the far more frequent case of
oligopolies. The Supreme Court, in a decision of equally
sweeping import, explicitly endorsed the Alcoa ruling and
applied it to monopoly by three sellers in the American
tobacco industry.^3 Three leading cigarette producers
were found guilty of having common pricing and purchasing
tactics designed to squeeze other producers by raising
tobacco prices and lowering prices of Big Three
cigarettes. The Court repeated Judge Hand's condemna
tion of monopoly per se and applied it to oligopolists
acting in concert. The mere existence of power to raise
prices and exclude competition, "power to abuse" rather
^ American Tobacco Co. v. U. 5., 328 U. S. 781
(1946).
325
than "abuse of power," is sufficient to bring the case
in the purview of Sherman's ban. This decision had the
effect of greatly simplifying the task of proving anti
trust violations. But while the Court has never dis
claimed the Tobacco case, the history of subsequent cases
indicates a trend of qualifying and softening it.
Certain economists have evidenced misgivings in
the wisdom of unqualified condemnation of market power--
for example, Schumpeter's stressing of the innovating
role of large corporations and the effective competition
provided by new products,^ and John Kenneth Galbraith's
theory that market power could best be checked by organi
zation of countervailing power by those who face dominant
market power rather than by antitrust action.^5 Perhaps
reflecting these misgivings, Supreme Court decisions
following the Tobacco case take other criteria of compe
tition into account. Where, for example, the Court pre
viously had seemed to condemn per se the mere existence
of substantial market power, in a number of cases it gave
hh
This was discussed above; Schumpeter, op. cit.,
pp. 84-85-
k. Galbraith, American Capitalism, pp. 108-
134.
326
weight to the performance of the firms possessing this
power. In the National Lead c a s e ,^6 the titanium industry
was apparently vulnerable on the basis of the market
structure test; there were only four producers, two of
whom made 90 per cent of the sales, and there had been
collusive agreements. Yet the Court rejected the
government's plea that the two dominant producers be
broken up, because it felt that the industry had been
sufficiently competitive in performance.
Similarly, in 1948, a five-to-four Court decision
held that the acquisition of the largest independent
steel fabricated on the Pacific Coast by the Columbia
Steel Company, a subsidiary of U. S. Steel, did not
violate the Sherman A c t . Although the majority care
fully studied the industry's market structure and found
that Columbia's share of the regional market would be
increased to 24 per cent, it refused to be bound by any
statistical measure of market power as a criterion of
■illegality. Instead, it re-emphasized the concept of
^6U. S. v. National Lead Co., 332 U. S. 319
(1947).
47U. S. v. Columbia Steel Co., 334 U. S. 495
(1948).
. 327
reasonableness, stressing Intent in determining whether
the acquisition was an unreasonable restraint.
The federal courts also seem to have adopted a
form of business performance test in connection with the
definition of the relevant market. A determination of
whether trade is being monopolized, whether a firm or
combination has a substantial amount of market power,
often depends on whether the competition of close substi
tutes is assumed to be significant. Schumpeter would
stress interproduct competition and argue that market
power is limited by the actual or potential development
of new products. He would further argue that the posses
sion or expectation of substantial power is necessary to
encourage and protect the innovator. There are others,
however, who would stress market structure and urge a
narrow definition of the relevant market. One writer,
for example, is skeptical of the restraints actually
imposed by interproduct competition; he writes that "inter-
industry competition as an economic force is more apparent
than real" and points out that it is "perfectly compatible
with a fully monopolized industry.In the Alcoa case,
48walter Adams, "The Rule of Reason: Workable
Competition or Workable Monopoly?" Yale Law Journal,
LXIII (Jan., 1954), pp. 363-64.
328
discussed above,^9 Judge Hand refused to consider the
competition of other materials or even of scrap aluminum.
When the district court decree was prepared, however,
following Judge Hand's decision, the district court judge
gave considerable weight to competition between aluminum
and other materials. The court required Alcoa to sever
its ties with Aluminum, Ltd., of Canada, and to license
its American competitors; but the court refused to order
Alcoa divided up into two parts. Interproduct rivalry
is so significant a market factor, the court argued, that
competitive success "can be achieved only by companies
that are rich in resources, and which are capable of
undertaking extensive scientific and market experimenta
tions. At the present juncture, the weakening of any
aluminum producer would lessen the bouyancy of the
industry as a whole."50
Similarly, in the Cellophane case, by a six-to-
three vote, the Supreme Court defined the relevant market
^See p. 324, supra.
5°U. S. v. Aluminum Co. of America, 91 Fed.
Supp. 333 (1950).
329
as including all flexible wrapping materials.51 Du Pont
was thus exonerated from the charge of monopolization.
On the other hand, in the Du Pont-General Motors case the
following year, the Supreme Court reversed course sharply
and adopted a narrow definition of the relevant market.52
Du Pont's sales of finishes to General Motors were only
3-5 per cent of all such sales to industrial users, and
its fabric sales to General Motors were only 1.6 per cent
of the total. But the Court held that the relevant
market was the fabric and finish purchases of automobile
manufacturers. Monopolization of this market was
threatened by Du Font's controlling stock ownership in
General Motors, with Du Pont's consequent power to bar
sales of competing fabric and finish producers.
One observer writes of these recent decisions :
What the courts appear to be reaching for,
above and beyond the range of traditional
Sherman Act violations, is a doctrine of permis
sible power. Some power there has to be, both
because of inescapable limitations to the pro
cess of atomization and because of inescapable
~^U. S. v. E. I. du Pont de Nemours & Co., 351
U. S. 377 (1956).
5gU. S. v. E. I. du Pont de Nemours & Co., 353
u. s. 586 (1957)-
330
limitations to the process of atomization and
because power is needed to do the job the Ameri
can public expects of its industrial machine.
There is no reason, however, to tolerate posi
tions of market power than can be lessened by
appropriate antitrust action unless it can be
shown that this lessening substantially inter
feres with the job to be done.53
Illegal monopoly power to control prices or exclude com
petitors may not be applied as a test until the relevant
market is defined, thereby accepting or rejecting the com
petition of other products as an effective force. Thus,
market power is viewed by the courts with suspicion but
is not necessarily condemned. Some of its forms and
exercises are presumed to be so unfair or to have such
undesirable results that they are outlawed per se. Others,
questioned, may be accepted as permissible if they are
considered inescapable, fair, competitive in performance,
or beneficial. The courts, in determining what is and
what is not permissible, are lodged with great discretion
ary power. And there remains a fairly large area of
53jviason, Economic Concentration and the Monopoly
Problem, p. 387-
331
uncertainty.5^
While antitrust policy has not entirely succeeded
in curbing large concentrations of industrial power, it
would seem that a large measure of success in experiment
ing with governmental regulation can be achieved by
treading a course between too much atomization of indus
try so as to give the 'market the entire task of regula
tion, and too much or exclusive economic planning so as
to deny any regulatory function to the market. There is,
however, the requirement that antitrust prosecution of
oligopolistic power be pursued vigorously, as it has been
recently.55
5^See U. S. v. Aluminum Co. of America, 91 Fed.
Supp. 333 (1950)* In which Judge Knox wrote, "In determin
ing the extent of permissible power that.is consistent
with the antitrust laws In a particular industry, the
following factors are relevant: the number of the firms
in the market; their effective size from the standpoint
of technological development, and from the standpoint of
competition with substitute materials and foreign trade;
national security interests in the maintenance of strong
productive facilities, and maximum scientific research
and development; together with the public interest In
lowered costs and uninterrupted production."
55see, for example, the following news items:
"The Role of Competition," New York Times, Feb. 19* 1961,
Sec. 4, p. 10, col. 2; "Trust Case Raises Big Questions,"
New York Times, Feb. 12, 1961, Sec. 4, p. 6, cols. 1-4;
Newsweek, Apr. 3* 1961, p. 65- New York Times: Mar. 5*
1961, Sec. 1, p. 84, col. 1; Feb. 5* 1961, Sec. 3* P« 1*
332
Regulation of Labor: National Labor Policy
With the ascendancy of the New Deal came organ
ized labor's growth in numerical strength and economic
p o w e r .56 Simultaneous to this development was the enact
ment of two laws, embodying a new national labor policy.
They were specifically designed to eliminate judge-made
antitrust laws from industrial conflicts and leave their
adjustment to negotiative processes supported with
economic w e a p o n s .57 Thus, subsequent judicial construc
tion of these Acts-~Wagner and Norris-LaGuardia--together
with congressional action effectuated a drastic turn-about
in the heretofore governmental control of labor unions.
For the Sherman Act was hardly three years old,
when the federal government had successfully instituted
col. 1, and p. 1, col. 5; Feb. 25, 1961, Sec. 1, p. 6l,
col. 1; Mar. 5, 1961, Sec. 3* p. 1, col. 8. Los Angeles
Times: Apr. 1.3, 1961, p. 8, col. 1; Apr. 12, 1961, p. 11,
col. 3; Mar. 17, 1961, p. 5, cols. 1-2; Mar. 17, 1961,
p. 5> cols. 1-2.
56
H. A. Millis and E. C. Brown, From the Wagner
Act to Taft-Hartley, Table 1, p. 77, c. 8; Fred Witney,
Government Collective Bargaining (New York: Lippincott,
1951), PP* 247-54, 266-68; Florence Peterson, American
Labor Unions (New York: Harper Bros., 1952), pp. 27-34,
Table 1, p. 62.
•^National Labor Relations Act (Wagner), 49 Stat.
449 (1935); Norris-LaGuardia Act, 47 Stat. 70 (1932).
333
its seventh proceeding against a union, enjoining its
strike activity as violative of the Act's prohibi-
tions.58 Under modern developments, as we saw in the
preceding chapter, unless a combination or conspiracy
with employers can be proved under the Allen Bradley rule,
all labor activities are exempt from antitrust acts. This
non-application in the labor market is recognition of the
fact that there are essential differences between price
fixing and monopoly control in product markets and such
phenomena as labor agreements, collective bargaining, and
strikes by workers.59
The antitrust laws are not satisfactory apparati
for solving many labor problems— maximum hours of work,
job security, workers' grievances, other working condi
tions, for e x a m p l e . They do not define "monopoly1 ' or
5&u. 5. v. Workingman1s Amalgamated Council, 5^
Fed. 99^- (E. D. La., 1893) (petition filed on March 25,
1893, and injunction issued on the same day against a
strike of transportation workers). Affirmed, 57 Fed. 85
(C. A. 5, 1893).
-^Paul h . Douglas, "Wage Theory and Wage Policy,"
International Labor Review, XXXIX (1939}, P> 3^2; Harry-A.
Millis, "The Union in Industry," American Economic Review,
XXV (1935), pp. 6-7.
^E. A. Rolie and R. A. Lester, Wages Under Nation
al and Regional Collective Bargaining, pp.
"restraint of trade"; nor does Sherman set forth any
criteria for determining their existence. Do unions
restrain trade when they restrict employers by seniority
rules, grievance procedures, definitions of normal work
ing hours and holidays, and all other non-wage provisions
of a typical labor agreement? Do such practices as wage
fixing, domination of a labor market by a single employer,
or agreement on labor market policies by employers con
stitute "monopoly" which would subject employers to
penalties under an extension of the antitrust acts? How
would the extent of injury, for which treble damages can
be collected under the Sherman Act, be calculated and
assessed if any of the above were deemed violations?
Moreover, as a practical matter, regulation of
labor and formulation of labor policy by utilizing the
antitrust laws seems reckless and quixotic. Except to
the extent that they subject union-employer combinations
to criminal and civil suits and exempt all other labor
activities from their scope, the antitrust laws are not
geared to deal with specific industrial disputes; nor are
they coordinated with other labor statutes in pursuit of
national labor policy. Felix Frankfurter and Nathan
335
Greene write:
They do not provide for negotiation, mediation,
compromise, arbitration, or adjustment--the
tools fashioned by experience for labor contro
versies. Their enforcement is not confined to
the Department of Justice or any other single
agency. Their method of extensive litigation,
with or without temporary injunctions and
restraining orders, is wholly unsuited to the
crisis situations involved in labor disputes
and the limited financial resources of labor
organizations.6l
They are not administered by the expertise of the N. L. R.
B.; it is at least highly questionable that our judiciary
is adequately equipped to deal with an area which is
highly fired with delicate and grave questions of social
policy.^2
Patchwork litigation, regulation, and policy
making would result from superimposition of antitrust
63-Felix Frankfurter and Nathan Greene, The Labor
Injunction (New York: Macmillan Co.,' 1930), pp. 47ff*
62The N. L. R. B. is so organized, equipped and
staffed with trained and experienced experts, that it is
able to make complete and systematic investigations of
the issues involved in a particular labor dispute; that
it is better able to apply the secondary prohibitions
of the Taft-Hartley Act, for example, in a uniform and
efficient manner; that it Is better able to handle the
great volume of litigation arising in the field.
Historically, at least, experience has shown the
inadequacy of the judiciary in handling matters of
labor relations.
336
laws over state63 and federal labor laws without plan or
reason. How can the Clayton and Sherman Acts, with any
foundation in reason or policy, be added to this milieu
of regulatory language?
The Labor In .junction
If Sherman was for some decades the chief govern
mental regulatory weapon, the injunction has become its
most effective instrument of labor law. Ever since the
start of the twentieth century, organized labor has
pressed Congress for legislative relief from the labor
injunction.64 Over a period of some forty years Congress
has responded with four laws--the Clayton,^ Norris-
La Guardia, Wagner, and Taft-Hartley Acts.66 To realize,
63see Paul Sultan, regarding the state "right to
work" laws, Right-to-Work Laws; Oregon Laws (1939)* c. 2,
p. 7; Wisconsin Laws (1939)> c* 25, p. 33* and c. 57*
p. 77; Busch Jewelry Co. v. United Retail Employees1 Union,
281 N. Y. 150 (1939); People v. Bellows, 281 N. Y. 67
(1939); New York Times, Mar. 22, 1953* P* 73* col. 2.
6^H. A. Millis and R. E. Montgomery, Organized
Labor, c. 11; Witney, op. cit., pp. 270-73*.■
6538 Stat.' 731, 738 (1944).
66gi stat. 136 (1947).
337
however, the true significance of the changes brought
about by these statutes, two questions must be examined:
1. What is the nature of the injunction in terms
of procedural requirements, its scope, and its enforce
ment?
2. What are the objections to applying the
injunction as an enforcement technique to labor disputes?
Because the labor injunction has played such a signifi
cant role in the development of national labor policy,
and because it continues to be a vital instrument of
governmental regulation of labor, we shall examine the
injunction as a legal tool and attempt to answer the
questions posed above.
Generally, there are three classes of injunc-
tions--the temporary restraining order, which usually
issues at the court's discretion ex parte, without
notice or hearing; the temporary injunction, which issues
after there is notice and opportunity to be heard; and
the permanent injunction, based on a full hearing and
decision on the merits.' A case begins with the filing
of a complaint, supported by one or more formulas for
equitable jurisdiction, perhaps by affidavits of
338
witnesses, and by a prayer for injunctive relief.^7 in
all hearings for preliminary and temporary relief, no
jury is empanelled. The judge determines all issues of
law and fact, and he does this merely on the contradic
tions of affidavits presented by both parties, without
opportunity to see or question any of the witnesses.
There may be a direct appeal from the issuance
of an interlocutory order, or it may be collaterally
attacked on appeal from a conviction for contempt. On
direct appeal, the record alone is reviewed, while
review of contempt proceedings only involves a scrutiny
of the court's power in issuing the injunction. Again,
proceedings in contempt are conducted by the judge who
issued the injunction, without a jury, and on affidavits;
punishment is meted out at the discretion of the court.
What, then, is the logic of applying the injunc
tion to labor disputes? Injunctions ordinarily issue only
in extraordinary- circumstances, where there is no adequate
remedy at law for threatened injury to property rights.
^see, generally, Frankfurter and Greene, op. cit.,
cc. 1, 2, 3; Witney, op■ cit., c. 3; Walsh, op. cit.,
cc. 9, 11; Millis and Brown, op. cit., pp. 7~l4, 485~96;
Millis and Montgomery, op. cit., pp. 629-40.
339
The inadequacy may be caused by a number of situations:
financial irresponsibility of the putative defendants,
probability that a greater number of suits would have to
be brought, difficulty in determining the identity of
parties defendant, impossibility of measuring and ade
quately compensating for the loss if sustained.68 Indus
trial disputes frequently involve one or more of these
circumstances. And the extension of the injunction to
labor has been characterized as "America's distinctive
contribution in the application of law to industrial
strife."69 its wide and repeated use in this area has
made "the extraordinary remedy . . . the ordinary legal
remedy, almost the sole remedy.Moreover, it has been
the federal courts which have "given the labor injunction
its farthest reach of application."7^
The objections to applying the injunction as an
enforcement weapon in labor disputes, then, are fourfold.
First, it deprives the accused of certain Constitutional
^Frankfurter and Greene, op. cit., pp. 5^-55•
69Ibid., p. 53.
7QIbld., p. 52,
71Ibid., p. 87.
340
procedural guarantees. Trials for contempt are summary,
without a jury, and by the offended court which punishes
at its discretion.7* ^ To answer this objection on techni
cal grounds, that such trials and punishment are only
contempt cases, is to overlook the realities of the situa
tion. The fact is, that in such cases, courts have
commonly punished according to the opprobriousness of
the act committed.7^
A second objection to the labor injunction is the
blanket form which it takes.7^ It is issued on a blanket
complaint which abounds in generalities and lacks detail
and specificity, and on the basis of highly biased affi
davits by both sides of an often bitter labor struggle.
These vague and harassing restraining clauses has found
its widest use in the federal courts. In one case, for
720utstanding among the cases pointing up this
fact is the famous U. S. v. United Mine Workers, contempt
adjudged, 19 LRRM 2079 (D. C. D. C., 1946), fine for con
tempt imposed, 19 LRRM 2086 (D. C. D. C., 1946), affirmed,
330 U. S. 238 (l947)f a second contempt fine imposed, 77
Fed. Supp. 563 (f>* C. D. C., 1948), affirmed, 338 U. S.
871 (1949)- See Richard Watt, "The Divine Right of Govern
ment by the Judiciary, " University of Chicago Law Review,
XIV (1947), p. 409j and Comment, Michigan Law Review, XLIX
(1947), p. 469j for a discussion of these cases.
73see Frankfurter and Greene, op. cit., p. 191-
74Ibid., p. 3; Millis and Brown, op. cit., pp. 12-
14; Witney, op. cit., pp. 5O-51. J 53-56.
341
example, the writ was directed against eighteen named
defendants "and all other persons combining and conspir
ing with them, and all other persons whomsoever."75
Another aspect to the dragnet restraining clause
is the method of proof. Affidavits, at best, are untrust
worthy methods of proof: affiants are highly prejudiced
and so are more prone to "load" these statements, untested
by cross examination, with falsehoods and half-truths;76
the court has no opportunity to observe the demeanor of
these witnesses. Moreover, "the unvarying tenor and same
ness of phrasing in affidavits submitted from case to
case raise more than a suspicion that conformity to legal
formula rather than accuracy of narrative guides oaths."77
Perhaps the greatest objection to the injunction
is that it has struck down lawful action in its sweeping
prohibitive clauses.7® While it may be argued that many
of such broad injunctive commands were modified on appeal,
the crucial point is that these modifications were made
75in re Debs, 158 U. S. 564, 570 (1895)•
"^Frankfurter and Greene, op. cit., p. 68; Witney,
op- cit., pp. 55-57-
77prankfurter and Greene, op. cit., p. 71-
"^Millis and Montgomery, op. cit■, pp. 1636-37-
342
only after the strikes had been broken.79
The Clayton Act represented the first congression
al attempt to curb judicial injunction powers. It failed.
Indeed, Section 16 of that law considerably broadened the
area in which unions might be enjoined from their activi
ties by permitting private persons and not only the govern
ment to seek injunctions. These developments were sharply
reversed by the Norris-LaGuardia Act. Adopting for the
first time the principle of collective bargaining as the
national public p o l i c y ,^0 the Norris Act forbade a court
from issuing temporary or permanent orders in cases aris
ing out of a "labor dispute" from striking or picketing,
regardless of objective, legality under prior federal
79 "in an evenly balanced, bitter, long-drawn out
labor struggle, an edict of the court, leveled at the
strikers, shakes the morale of the workingmen. This is
not the purpose of an injunction although it is frequently,
and perhaps generally, the purpose of the employer who
seeks it. . . .
"The moral effect of an injunction in such cases Is
tremendous. At once it gives the impression in the com
munity that the strikers have violated the law. The court
seems to have taken a hand in the struggle. This Is the
laymen's vieWw^The injunction, thus shaping public opin
ion, Is often decisive." Judge Howard, Wood Mowing and
Reaping Machine Co. v. Toohey, 114 Misc. 185, 196-97
(1921). See also Frankfurter and Greene, op. cit., c. 2.
8°Section 2, Norris-LaGuardia Act.
343
legislation, or identity of the party petitioning for
relief.®-1 - Moreover, persons engaging.in clearly unlawful
conduct, such as violence, arising out of a "labor dis
pute," were immunized from the federal injunction unless
five specified procedural requirements were met. Even so
assuming, a temporary restraining order of five days' dur
ation could not issue without notice to the other party,
nor might such an order or temporary injunction issue
without the posting of "adequate security" by the petition-
ftp
ing party.
While the Wagner Act reaffirmed the policies set
down by Norris,®3 the Taft-Hartley Act repealed them in
three areas: (l) where an unfair labor practice has been
committed; (2) where the attorney general invokes Section
208(b) because a strike will "Imperil national health or
safety"; and (3) where the attorney general invokes Sec
tion 302 (c) because an unlawful payment has been made to
On
Section 4, which is enforced by Section 5 of
the Act.
Q^section 7-
®®See, generally, Millis and Brown, op. cit.,
cc. 2-7*
344
an employee r e p r e s e n t a t i v e .84 ip^g fj_rst of these excep
tions seems to have most effectively revitalized the labor
injunction.
When a union commits an unfair labor practice, the
N. L. R. B.,.as before, may issue its own cease and desist
order and seek an injunction in a federal court to secure
compliance with its orders.85 Additionally, the Taft-
Hartley Act allowed the Board to apply to the federal dis
trict courts for an immediate injunction in advance of its
hearing and decision.88 But perhaps most importantly, in
all cases involving secondary activities outlawed by the
sweeping bans of Sections 8(b)(4)(A), (B), (C), and (D),
when preliminary investigation gives "reasonable cause to
believe" that the charge was true and that formal action
should be started, it becomes mandatory to seek an
84as to employee unfair labor practices, (Section
8(b), enforced by Section 10), see Millis and Brown,
ibid., pp. 441-81; on national emergency strikes (Sections
206 to 210), see Millis and Brown, pp. 574-86; and
Witney, op. clt., c. 21; on unlawful payments (Section
302 (a) through 302(g)), see Millis and Brown, pp. 561-68.
85sections 10(c) and 10(e).
^section 10(j). For a discussion of cases
involving injunctions issued under this provision, see
Note, Illinois Law Review, XLIII (1948), p. 231.
345
injunction, pending final decision by the Board.87
These mandatory injunction provisions must be
considered along with the administrative organization of
the Board and General Counsel. Completely revising the
Wagner arrangement, Taft-Hartley puts the General Counsel
in complete control of the administrative and prosecuting
arm of the agency, while the Board constitutes the judi
cial arm.88 The Board has no voice in determining whether
87section 10(1) (emphasis supplied). That Section
additionally provides that "the district court shall have
jurisdiction to grant such injunctive relief or temporary
restraining order as it deems just and proper, notwith
standing any other provision of law." (Emphasis supplied.)
Thus, by virtue of the Italicized words, the Norris-
LaGuardia Act was nullified.
For a review of cases arising under Section 10(1),
see Frank H. Blumenthal, "Mandatory Injunctions and the
NLRB," Labor Law Journal, II (1951), P- 7-
No discretion is permitted the General Counsel,
once he determines that the charges have merit, to decide
whether the matter is urgent enough to warrant immediate
injunction. Moreover, there is a complete lack of any
standard to guide the courts In their determination of the
propriety of the issuance of a temporary Injunction. See,
e.g., Douds v. Wine, Liquor Distilling Workers' Union,
75 Fed. Supp 447, 449 (D. C. S. N. Y., 1948).
88lhe relevant provisions are Sections 3 and 4.
This bifurcated Board probably reflected a common criticism
leveled at federal administrative agencies--that the NLRB,.
for example, was "prosecutor, judge, and jury," that the
separation of functions was not properly maintained. See
Kenneth’ Culp Davis, Administrative Law (Minneapolis: West
Publishing Co., 1951), c. 10, for an excellent analysis
of this problem; see also Millis and Brown, op. cit.,
pp. 416-17*
346
or not unfair labor practices should be prosecuted. This
means that the General Counsel has the authority to apply
for injunctions even before the Board finally issues its
order. The General Counsel, then, by securing prelimin
ary injunctions, can execute policy which the Board may
later repudiate. With such a division of authority, unity
of policy, it would seem, is not easily achieved.
The more serious effects of these discrepancies,
however, are twofold. First, it matters not who applies
for the preliminary injunction. Once it issues, it must
be obeyed. It breaks the picketing, boycott, or strike,
possibly even the union where the stakes are high. Sub
sequent reversal of the decree, whether coming a year or
a week after its issuance and a full hearing, is of no
Oq
avail to the union. y Second, once a court sustains the
General Counsel and issues the injunction, the Board is
placed In an extremely difficult, If not unfavorable,
position. Should it accept the Board's ruling, and so
relinquish its prime function as an expert administrative
®9see, e.g., Douds v. Local 1250, Retail Whole
sale Department Store Union, 170 F.(2d) 695 (C.A. 2,
1948).
body? Or should it overrule the court, to which it must
ultimately go to enforce its own orders?
The stated purpose of these new injunctive provi
sions is to provide an expeditious means of relief to
supplement the "cumbersome" proceedings under the Wagner
and Norris Acts. Moreover, experience under those laws
"has shown that by reason of lengthy hearings and' liti
gation . . . it has sometimes been possible for persons
violating the act to accomplish their unlawful objective
before being placed under any legal restraint."90 While
the decree may achieve a prompt cessation of the unfair
practice charged, the complete absence of any standard in
the Act to guide the courts in their determination of the
propriety of the issuance of a temporary injunction is a
serious defect.91- in view of the questionable efficacy of
9°U. s., Congress, Senate, Senate Report No. 105,
80th Cong., 1st sess., 19^7* p* 27.
9-^Only in those cases where the regional officer
petitions for an ex parte temporary restraining order is.
this broad discretion limited by requiring a finding of
"substantial and irreparable injury;" just how effectively
this would in fact limit a court is another question.
Otherwise, the Act merely provides that upon application
of the Board or regional officer, the court after notice
may grant such relief "as it deems just and proper."
Sections 10(j) and 10(l).
3^8
the labor injunction itself, it would seem that there
should be some attempt to limit its application in labor
disputes.
The Taft-Hartley and Landrum-Griffin Laws
Governmental labor policy, then, has shifted with
greater labor power from the promotionalism of the Wagner
Act to regulation by the Taft-Hartley and Landrum-Griffin
Acts. Our analysis of these latter labor laws will be
limited to a summary survey. The scope of this disserta
tion requires only that the Taft-Hartley and Landrum-
Griffin Acts be etched out to indicate the great extent
to which government regulates labor union power. This is,
however, not to deprecate the importance of these laws.
On the contrary, they are vital in their function of
policing the labor-management equilibrium.
While Taft-Hartley. carries forward the basic rights
to organize and bargain collectively, the law is, as a
whole, premised on the proposition that unions have become
so powerful that legislative action to redress the balance
is required. Labor’s economic weapons are, therefore,
349
drastically curtailed in at least three respects: (l) the
Taft-Hartley Act outlaws secondary pressures entirely;
(2) a union may not require the discharge of an employee
if the employee had paid his initiation fee and had kept
his dues paid up; (3) a union may not strike to force a
company to bargain with the striking union after the
N. L. R. B. had certified a different representative; and
(4) the law forbids any jurisdictional strike over work
92
assignments.
The Taft-Hartley Act's provisions also intruded
upon two areas heretofore untouched by federal regulation.
In one, it appears to case doubt on the wisdom of placing
unqualified reliance on free collective bargaining. The
body of precedent built by the N. L. R. B. regarding bar-
gainable issues is implicitly ratified; the manner in
which negotiations are to be conducted is regulated some
what; 53 the duty to bargain is imposed on unions and
92The relevant provisions of the Taft-Hartley Act
are: secondary pressures, Section 8(b)(4)(A) and (B);
employee discharge, Section 8(b)(2); strikes to compel bar
gaining Section 8(b)(4)(c); and jurisdictional disputes,
Section 8(b)(4)(D).
93See Werne, ibid., pp. 155-56, 163-73, 223-28;
Millis and Brown, ibid., pp. 452-53; Archibald Cox, "The
Duty to Bargain in Good Faith," Harvard Law Review, LXXI
(1958), p. 1401.
350
bargaining procedure at reopening or expiration of an
agreement is specified. In addition, the Act provides for
a means of settling disputes in critical industries which
affect the national health or safety, in authorizing an
eighty-day injunction against such a strike--although it
offers no method to resolve the underlying problem.94
In a second area, Taft-Hartley intrudes in the
function of contract administration by providing that
suits for violation of collective bargaining agreements
are made enforceable contracts, and where remedy might
have been sought in private negotiation or arbitration,
courts are now thrust into an area deemed, since the
establishment of the N. L. R. B., too complex and volatile
for judicial remedy; and the voluntary system of grievance
arbitration is jeopardized.95
The Labor-Management Reporting and Disclosure
Act of 1959* or Landrum Griffin,96 represents an even
9^See Cox, "Strikes and the Public Interest,"
Atlantic Monthly, Feb., I960, pp. 48-51*
^Section 301. See Textile Workers of America v.
Lincoln Mills of Alabama, 353 U. S. 448 (1957); and Benja
min Aaron, "On First Looking into the Lincoln Mills Deci
sion," University of California, Los Angeles, Reprint No.
88 (1959); Millis and Brown, op. clt., pp. 500-513*
9673 stat 519*
351
further extension of federal regulation of internal union
affairs. Problems of internal union relationship are
federal by virtue of the federal laws by which labor
enjoys its present power. This fact was recognized long
ago by Commons:
It has doubtless appealed to some people who con
sider the employer's position more powerful than
that of the union, that the employer should be
compelled in some way to deal with unions, or at
least to confer with their representatives. But
if the State recognizes any particular union by
requiring the employer to recognize it, the State
must necessarily guarantee the union to the extent
that it must strip it of any abuses it may prac
tice. 97
Thus, while it is important to maintain labor union power,
there arises a danger that the Institution so created and
vested with power may attribute to itself a value apart
from its objectives, or that it may be used for the
advantage of those who control it rather than for those
whom it was designed to serve--a danger urgently pointed
to by N i e b u h r .9$ Public policy should minimize the danger
9^Final Report, United States Commission on Indus
trial Relations (Senate Document No. 415* 64th Cong., 1st
Sess.j Washington, D. C.: Government Printing Office,
1915)* p.'374.
9®An Interpretation of Christian Ethics, p. 155;
The Nature . ♦ II, p. 255*
without impairing unions' ability to perform functions
beneficial to the economy--to bargain effectively with
employers, to maintain self-government free of rigid regu
latory requirements.
Landrum-Griffin regulations may be divided into
three areas. First, by means of reporting and disclosure,
it imposes performance of certain fiduciary obligations
on union officials in handling financial affairs of the
union; there are also bonding requirements and qualifica
tions to be met for election to o f f i c e .99 Second, Landrum
Griffin attempts to guarantee internal democracy by means
of rules regarding admission and expulsion of members, a
set of comprehensive requirements for conduct of union
elections, by rules to ensure the right to dissent and
other participation in union affairs, and, by relying on
individual members to enforce the union officials1 duties
by judicial litigation. Presumably, these provisions
secure control by the members, and respect for individual
oq
y S e e F. J. Dugan* "Fiduciary Obligations Under
the New Act,u Georgetown Law Review, XLVIII (1959)* p. 277
Benjamin Aaron, "The Labor Management Reporting and Dis
closure Act of 1959, Part I," Harvard Law Review, LXXIII'
(I960), p. 851.
353
and minority rights.1^0 The third area of regulation,
perhaps the Law's most controversial provisions, further
extend and add to the Taft-Hartley restrictions on union
concerted economic activities in aid of unionization.
This was done with respect to secondary pressures, includ
ing hot cargo clauses,1^1 an& recognition, organizational,
I ("JO
and consumer picketing. ^
Although it is too early to be able to analyze the
effects of Landrum-Griffin's provisions, it is clear that
the net effect of all laws applicable to labor is a sub
stantial measure of regulation of labor unions. Niebuhr
recognized, prior to Landrum-Griffin's passage, the need
100See E. J. Hickey, Jr., "The Bill of Rights of
Union Members," Georgetown Law Review, XLVIII (1959), P*
226; P. C. O'Donoghue, "The Bill.of Rights— Responsibili
ties of Its Beneficiaries," Georgetown Law Review, XLVIII
{1959), P- 257J and Jerome Powell, "The Bill of Rights —
Its Impact Upon Employers," Georgetown Law Review, XLVIII
(1959), p. 270.
101See Guy Farmer, "The Status and Application of
the Secondary Boycott and Hot Cargo Provisions," George
town Law Review, XLVIII (1959), P* 327; David Previant,
"The New Hot Cargo and Secondary Boycott Sections: A
Critical Analysis," Georgetown Law Review, XLVIII (1959),
p. 3^6; Aaron, "The Labor Management Reporting and Dis
closure Act of 195.9, Part II, " Harvard Law Review,
LXXIIT (i960), p. 1086.
lO^See Aaron, ibid.; T. J. Ryan, "Recognition,
Organizational, and Consumer Picketing," Georgetown Law
Review, XLVIII (1959), P- 359-
354
for new legislation, such as the financial and internal
democracy provisions of the Landrum-Griffin Act:
Much new legislation will be offered, intended
to control and check the power of the unions.
Some of the legislation will be very necessary,
as for instance laws to supervise the scrutiny
of the welfare funds. These funds have grown
tremendously and constitute a temptation to
crooked labor leaders; there must be govern
mental supervision.103
It would not be too difficult to require by law
secret elections in all unions. Such a law would
greatly improve the quality of our labor unions
without weakening them. Union shops do rob the
workers of the one weapon against badly run
unions, which is their right to leave the union.
But leaving a union is not in any case the ideal
way of remedying abuses in it, just as leaving
a church usually does not help very much in giving
a church new vitality. What is really needed is
the establishment of genuine democratic rights
inside the union.104
On the other hand, labor power, a necessity of justice,
makes weakening of labor union power, such as proposed
by the state "right to work" laws,-*-05 dangerous to the
economy's health. Too, labor is an interest group, a
situation in which self interest has a legitimate role;
103"Hoffa and the Teamsters," p. 137.
104"rphe Republicans and Labor," Christianity and
Society, XII (Summer, 1947)* p. 8.
-*-°5sultan, op. cit.
355
but if its interests are only to seek more and more, with
scant regard for the economy and without reference to
broader values, the requirement of government restraint
becomes an equal necessity of justice.
The Tripartite Advisory Group
By these regulatory practices government attempts
to protect the community against irresponsible exercise
of power by the "quasi-sovereign satrapies" of bit business
and big labor. But short of vigorous application of the
antitrust laws to large corporate organizations, the most
serious danger, that of labor-management collusion in the
area of prices and wages, appears to be virtually
unaffected. Some likely directions of development of
explicit control can be seen in the kinds of actions
which provoke congressional inquiry and the suggestions
which flow from these inquiries. Concern with the wage-
price spiral has led to congressional investigations of
administered prices and to suggestions that proposed
price and wage changes in certain industries be reviewed
by a public advisory body before becoming
356
effective.10^ Commons, in fact, had made precisely
this suggestion some time ago.
The need, as Commons saw it, is the establishment
of an advisory committee chosen from labor, management, -and
public or consumer groups to plan and negotiate acceptable
national and long-range standards which are enforced by
the government agency involved. The "public" representa
tives, who he felt should be disinterested experts, should
seek to mediate between the competing interests of labor
and management. It is urgent, however, that the com
mittee's function be defined as supplementary, that is, a
group of experts helping the parties at interest to develop
sound practices. Reasonableness in these circumstances
!06u. s., Congress, Senate, Hearings, Subcommittee
on Automobile Marketing Practices, Interstate and Foreign
Commerce Committee, 84th Cong., 2d Sess., 1956] U. S.,
Congress, House, Hearings, Subcommittee No, 3, Select
Committee on Small Business, 84th Cong., 1st Sess. (1956)
and 85th Cong., 1st and 2d Sessions (1958); U. S.,
Congress, Senate, Subcommittee on Antitrust and Monopoly
of the Committee on the Judiciary, Concentration in
American Industry, Committee print, 85th Cong., 1st
Sess., 1957* G. C. Means, "This Recession is Different;"
Estes Kefauver, "The Manipulated Price Rise," The Nation,
June 28, 1958, pp. 578-81; R. J. Barber, "Other Kinds
of Price-Fixing," The New Republic, Apr. 24, 1961, pp. 9~
10; T. K. Quinn, "The Lamp Bulb Stranglehold," The New
Republic (Feb. 27, 1961), pp. 9~10-
357
refers to the best possible practices rather than the
average. What is lacking in regulatory procedures is
adequate planning. As Commons points out, man is the
planful, volitional actor in social and economic affairs;
he has choices, and in making these, exercises his influ
ence in channeling the same continuing flow of events
along one available course rather than another.^67
The Kennedy Administration in 1961 inaugurated
such as advisory planning committee in the labor-manage-
ment area; the executive order establishing the group
directed it to study and recommend "policies that may be
followed by labor, management, and the public which will
promote free and responsible collective bargaining,
industrial peace, sound wage and price policies, higher
standards of living, and increased productivity."108 one
Labor and Administration, pp. 382-424,' 136-37;
Final Report, United States Commission on Industrial
Relations, pp. 171-230; Industrial Goodwill, pp. 183-86;
Economics . . ., pp. 270-77; Commons and Andrews,
Principles of Labor Legislation, pp.. 475-82.
108»Kennedy Names Labor, Management Advisers,"
Los Angeles Times, Feb. 17, 1961, p. 1, cols. 2-3-
Public members were named as follows: Clark Kerr,
Ralph McGill, George Taylor, Arthur Burns, and David
Cole.
358
Administration economist indicated that one of the com
mittee's key functions will be to attempt to fix broad
outlines of national wage and price policies.169 yet,
this committee's recommendations would appear to have
little force and effect if its standards are not to be
enforced by the appropriate government agency.
The tripartite body, whose policies are enforced,
appears to supplement government regulation best in that
it might meliorate any tendency of government to extend
itself into economic affairs on a scale that would destroy
the ability of labor and management to function as inde
pendent going concerns.HO
The Relevance of the Pragmatism of Niebuhr
and Commons to Government Regulation
For Niebuhr and Commons, the central problem of
government is to coerce the anarchy of conflicting human
l°9paui a. Samuelson, on NBC-TV program "Meet the
Press," Mar. 5> 1961; Raskin, "Trouble Shooter on the New
Frontier," New York Times Magazine, Feb. 12, 1961, p. 12;
Sumner Shlichter, "The Responsibility of Organized Labor
for Employment," American Economic Review, XXXV (May, 1945),
p. 206.
116j3er]_ej Power Without Property, pp. 124-40.
interests in labor and management into an equilibrium of
these vital forces, in order to create an approximately
just society. The drives of human society require regula
tion and control, lest their conflict leads to anarchy,
or tyranny, or both. Yet a balance of power is ineffec
tive, unless government can attenuate the conditions which
make collusion between labor and management possible.
We have surveyed some of the instruments of government
regulation. Judicial interpretation has brought close
combinations, loose combinations, and, in recent years,
oligopolistic combinations within the purview of the
antitrust laws. National labor policy has been etched out
in two major laws, Taft-Hartley and Landrum-Griff-in, and
in the revival of the labor injunction; in these instru
ments government regulation of labor unions is fairly
complete. But unless the antitrust laws are vigorously
applied to large corporate organizations, the most serious
possibility of labor-management collusion in wages and
prices is virtually unaffected.
Commons has suggested that an advisory committee,
with labor, management, and public members, be convened
to formulate national industrial policies; these policies
360
would be enforced by an appropriate government agency.
Whether this course is taken, or another is chosen, the
systems of thought of neither Niebuhr nor Commons requires
that any specific course be taken. For both systems are
essentially pragmatic. All social programs are relative
in the light of the value orientation of each theorist:
for Commons, liberty, security, justice, equality, and
"other great goals;" for Niebuhr, the absolute claim of
the Gospel, which refers to love, justice, equality, and
brotherhood.
The pragmatism of Commons stems from a deep faith
in the possibility of human intelligence for working out
the problems of social conduct. It is in the context of
the social process that both mind and selves are developed.
Commons's attention to the problems of social control, and
his definition of an institution as "collective action in
control, liberation, and expansion of individual action"
may be taken as suggestions of his pragmatic approaches to
these issues. In any case he agrees with Niebuhr in
pointing out that individual self-interest is too powerful,
^•^Institutional Economics, p. 842; Economics . . . ,
pp. 262-63.
361
too ignorant, or too immoral to promote the common good
and promote values such as justice, which are beneficial
to all of society, without the compulsion and administra
tion of government.
For Niebuhr pragmatism is not an ultimate prin
ciple. Love remains the ultimate source of both direction
and judgement of human events. It is the love of the
Cross that reveals to man the responsibility of his life
and the depth and pervasiveness of selfishness. Man is
required to make responsible economic and political deci
sions, and by using and developing adequate political
economic structures, to attempt to establish justice within
the framework of freedom. Niebuhr writes:
For to understand the law of love as a final imper
ative, but not to know about the persistence of the
power of self-love in all of life but particularly
in the collective relations of mankind, results in
an idealistic ethic with no relevance to the hard
realities of life. To know about the power of self-
love but not to know that its power does not make
it normative is to dispense with ethical standards
and fall into cynicism. But to know both the law
of love as the final standard and the law of self-
love as a persistent force is to enable Christians
to have a foundation for a pragmatic ethic in
which power and self-interest are used, beguiled,
H£?The Distribution of Wealth, p. 91-
362
harnessed and deflected for the ultimate end of
establishing the highest and most inclusive pos
sible community of justice and order. This is
the very heart of the problem of Christian poli
tics: the readiness to use power and interest
in the service of an end dictated by love and
yet an absence of complacency about the evil in
herent in them. No definitions or structures
of justice can prevent these forces from getting
out of hand if they are not handled with a sense
of their peril.H3
The proper relation of government to economic
life presents problems which cannot be solved "once for
all;" the "contrasting perils" of anarchy and injustice,
arising from "too little and too much equilibrium of
economic power," or from "too much or too little social
control of it," must be considered in the light of each
new situation and technical development. The political
economy requires the best possible distribution of power
for the sake of justice and the best possible management
of the equilibrium for the sake of order. Democracy is a
methodcf finding proximate solutions for these vexatious
problems. Niebuhr asserts that we must allow for "a great
variety of pragmatic approaches" to the problems of
112
"Christian Faith and Social Action," Christian
Faith and Social Action, ed. J. A. Hutchison, p. 241.
•^^The Children . . ., p. 115*
363
economic life. We must weigh the effects of each type
of governmental action, neither assuming that all are
necessarily bad nor all necessarily good. At the same
time, he writes.
We must be careful to preserve whatever self
regulating forces exist in the economic process.
If we do not, the task of control becomes too .
stupendous and the organs of control achieve
proportions which endanger our liberty.H5
Commons agrees with this assessment:
The political government . . . remains, as it
should, the instrument that protects the general
interests of the public .... [Yet,] the Indus
trial government of the nation must become main
ly a voluntary government, for its success in the
long run will depend not on [governmental] power,
but goodwill. H6
115Ibid., p. 76.
•^^Industrial Goodwill, pp. 184-86.
CHAPTER VII
SUMMARY AND CONCLUSIONS
The Modern Political Economy
Modern American industrial society is character
ized by two huge complexes of power. On the management
side, there has been a significant concentration of wealth
and power. Corporations have been permitted to grow so
large, that their economic strength would vastly outweigh
the strength of any individual enterprise. Many companies
have become virtual trusts for perpetual accumulation of
wealth; their acquisition of assets, In so far as they
were not distributed by way of dividends, has been per
mitted to increase to vast amounts. Corporate power is
manifested in a community in a number of ways: a com
pany's application of its capital and resources; its
capacity to offer or withhold jobs; its utilization of
various community services, supplies,, and raw materials;
its dividend and other financial policies; its capacity to
364
fix and administer prices.
On the labor union side, growth of power has been
concomitant with the growth of industry on a nation-wide
basis. In many unions, particularly those in the oligo
polistic sector of the economy, there has been a centrali
zation of functions and control. With the erosion of union
ideals and the decline in union militancy has come a change
in the type of union leader, who has become a highly
skilled administrator and political "boss" of a personal
political machine. Acquisitive impulses have perhaps been
stimulated by the changing patterns of unionism, and in
some instances, unions have even joined with management
in their quest of an increased share In the nation's
wealth. Finally, there has been a decay of union demo
cracy; union government has become typically authoritarian.
An examination of two aspects of the labor
monopoly issue in Chapter IV resulted in three conclusions.
First, it was concluded that multi-employer bargaining
reflected the national scope of industry and the parallel
growth of unions. Second, it was pointed out that
multiple employer bargaining was not necessarily harmful
to the public weal, but that it rather tended to enhance
366
healthy labor-management relations because of Its suita
bility for handling national industrial problems. Third,
it was also discovered that labor markets are not similar
to product markets. In this connection, it was pointed
out that different conditions obtain in each type of
market, but also that (l) unions are not so much profit
as they are political organizations, and (2) wage deter
mination is essentially pragmatic in unionized markets.
Yet, it cannot be doubted that unions represent a signi
ficant power bloc in the economy.
Collective bargaining between labor and management
is essentially a contest of power, in which each party
attempts to secure the other party's agreement on its own
terms. A variety of factors, economic, political, social,
and psychological, ultimately effect the result. As
labor and management confront each other across the bar
gaining table, settlement or agreement depends on each
party's willingness to agree on the other's terms, which
in turn depends on the cost--in terms of money as well as
prestige or status, and principle^-to each party of
disagreeing on the other's terms relative to the cost of
agreeing on them. The factor of economic strength, in
367
addition to that of skill as a negotiator, is crucial to
the outcome.
The power of labor unions'"has often been described
as a counter-force, or balance, to the power of management
in the economy. Four questions may be raised regarding
the equilibrium theory. First, to attempt to define
"balance,” on the basis of which equality or inequality
is to be determined, is virtually an impossible task.
Second, if equality were achieved, a stalemate might
result, whirh might in turn lead to uncreative develop
ment. Third, size alone may not be the soundest basis for
establishing and measuring the content of power. Fourth
and perhaps most seriously, the question may be raised,
can the power of giant corporations be rendered innocuous
by simply pitting it against giant power of labor unions?
Fundamental in modern industrial society is a large area
of mutuality of interests between labor and management.
Collaboration in this area may easily spill over to
collusion, in which the parties join to engage in various
practices in order to advance their mutual interests;
labor and management become a unitary economic force, to
the detriment of the consuming public and the public
368
interest.
Labor-management collusion may take various forms.
One of the more flagrant forms is exemplified by the
Allen Bradley case, in which union and company join to
create a business monopoly, in order to control a given
market. Labor union prosecution under the antitrust laws
has been limited to this specific type of case; union
demands made in the course of collective bargaining nego
tiations and imposed by economic power is protected
activity, unless the demands were instigated by employers
or by non-employee groups to achieve .market control and
power to fix prices.
There are other more subtle forms of collusion.
Unions in the oligopolistic sector of the economy may
seldom meet determined opposition to demands for wage
increases. The company, relieved of market pressures by
the phenomenon of price leadership or the administered
price, will make wage concessions and pass the high wage
increases on as an increase in price. Thus union and
company join to exploit the consumer. In other instances
of collusive activity, unions may invest their funds--
either directly from their treasuries or as trustees of a
369
pension fund--in such a manner as to place themselves
in positions of control of companies.
One restraint on union-management collusion
appears to be interproduct competition. Another possibil
ity is a vigorous enforcement of the antitrust laws. The
developments in recent years with respect to antitrust
enforcement have been encouraging, in that oligopolistic
combinations have been brought within the purview of the -
laws. Conditions conducive to a wage-price collusion may
be attenuated by a break-up of the large corporage
combines. What are the prospects for this? The land
mark Tobacco case extended antitrust prohibitions to
oligopolies. But, as one writer puts it, "it seems to be
the better opinion that antitrust will not succeed in
eliminating . . . restrictive [practices] as may result
from [oligopolistic] industrial structure. . . . For,
the Federal Supreme Court, ever since the Tobacco case,
has been qualifying and softening the effects of that
decision. Another reason for holding to this view is the
problem of remedy. A. D. Neale writes:
"^Neal, op. cit., p. 181.
370
It is no good telling the businessman to stop
"conspiring" if all that is meant by "conspiring"
is reacting intelligently to the situation in
which he finds himself. How can he make deci
sions independently if the very structure of his
industry makes him and'his main rivals inter
dependent? . . . To put matters right . . .
means altering the structure itself. . . . But
even if the courts, against the weight of author
ity, were prepared to treat the concept of con
spiracy elastically, it seems very doubtful that
they would ever adopt the drastic remedy of dis
solution in a case that turned on an extreme
legal interpretation.2
A third possibility remains. The power of Labor
unions might be reduced. In the Taft-Hartley and Landrum
Griffin Acts, and in the labor injunction, government may
be said to have the adequate means for this task. How
ever, if the theory of an approximate equilibrium of
labor-management power is deemed desirable public policy
which government should enforce, then the undercutting of
union power may be undesirable. Union power, to begin
with, Is not everywhere uniform; there exist wide varia
tions in union strength in diverse areas. These facts
and others enumerated in Chapter V underline the precari
ousness of labor union power. We shall tentatively leave
this problem and return to it at a later point in the
2Ibid., p. 182.
chapter.
Having summarized one source of our data, the
political, economic, and legal, we now turn to an examin
ation of the contributions of Commons and Niebuhr.
The Contributions of Commons
The contributions of Commons to the area of
labor-management power relationships may be viewed as
primarily two: (l) a theoretical economic framework
within which these relationships may be examined and
analyzed; and (2) a framework of values and goals which
may be realized in the social process.
With respect to the first of these contributions,
there appears to be in Commons's economic theory an all-
inclusive quality to his various categories. All acting
is performance, avoidance, or forbearance; all institutions
are collective action in control of individual action; all
transactions are managerial, bargaining, or rationing.
Commons's system is built from analyses of actual social
relationships and encompasses ideas of the meaning of
group control and group action in modern industry. It
deals with ideas by which men in their group relations
372
seek answers to problems in the social process. Bargain
ing between socio-economic groups, he argues, has tended
to replace individual expressions of power in industrial
society. Like Niebuhr, he does not feel that untrammeled
interaction of powerful interested collective organizations
adds up automatically to socially responsible action. It
is rather the democratic state which regulates and to a
large measure determines the rights of bargaining groups.
Primarily through appropriate government administrative
agencies, a modicum of reason and order may be brought to
a social process largely governed by power considerations.
Commons's approach to the theoretical economic
framework delineates two aspects: (l) the concept of
economic man; and (2) a market mechanism. His concept of
economic man is summarized in the following passages:
[The social process] with the billions of valua
tions, in the billions of transactions [moves]
forward on that energy which we call the will.-'
The will is always up against something. It is
always performing, avoiding, forbearing, that is,
always moving along lines, not of least resis
tance, . . . with a purpose looking toward the
future A
^The Legal Foundations of Capitalism, p. 18.
4Ibid., p. 79-
373
Man, then, is an active, participating creature who formu
lates plans and works to carry them out. Moreover, he has
the power to give direction to events.
In addition, man is a system of relations; he Is
at once a participating part of the collective action, and
a product of the social process in which all collective
action occurs. After all, Commons writes,
. . . this is an age of collective action. Most
Americans must work collectively as participants
in organized concerns in order to earn a living.
In this collective process, persons engage in
collective bargaining--for this is the way indi
vidual wills meet and become a part of the collec
tive will. . . . The three principal kinds of
collective economic action in the twentieth cen
tury are corporations, labor unions and political
parties.5
These concepts of man contrast sharply with the mechanis
tic classical views.
Commons's market mechanism is dependent on insti
tutional strategy, particularly Involving the three great
institutions of the modern economy--the corporation, the
labor union, and the political party. Commons was impa
tient with the rigid determinism of classical supply and
demand laws, especially when industrial social evils were
^Economics of Collective Action, p. 2-3.
374
defended as the inevitable consequence of the laws. To
replace this rigid determinism. Commons suggests a great
number of new tools for analysis of the economy. Basical
ly, there is the transaction to describe the activities
of and relations between persons. Five principles of
economic action are postulated to help determine the out
come of a transaction:
1. Sovereignty determines the degree of power
and legal support one will have in a transaction; there
are three types of power, physical, economic, and moral,
which help determine the direction of activity.
2. Scarcity refers to negotiations over prices
and quantities.
3. Efficiency deals with the conversion of
natural resources to commodities useful to man.
4. Futurity refers to expectations, planning.
5. Custom refers to a similarity of behavior
that may be expected to continue substantially unchanged
in the future.
In the context of such a construct of institution
al strategy, there is a minimum of determinism and a
maximum of choice in economic action. Reasonableness,
375
then may be seen as central, for unless economic decisions
and choices are reasonable, the goal of serving the com-
mon good will not be achieved in economic action. The
task of determining, ultimately, what is reasonable is
given to the judiciary, and particularly to the Federal
Supreme Court.
We are led, then, to the second major contribution
of Commons to economic theory, namely, the goals which his
system is intended to serve. For Commons, the goals of
economic action are social, rather than individual, in
contrast to classical theory. Justice is basic, along with
liberty, security, equality, and order. In Commons's sys
tem there is no dualism of ethics and economics. Chris
tianity provides the ethical perspective. He is appalled
at the sight of the "godlike" being crushed out of man
because of social injustice and inequality. In spite of
man's self-centeredness, there is a moral potential in man
to achieve the goals of justice, equality, liberty, secur
ity, and order.
With respect to injustice and inequality in the
social order, Commons decries the fact that the church has
not taken a greater lead in social reconstruction.
376
However, it would seem that Commons places too great a
burden of blame on the church for this failure. While
he recognizes the gap between Christian ideals and actual
earthly achievements, he apparently fails to understand
that, as Niebuhr points out, men, on the whole, know that
they ought to do good rather than evil. The church is
itself a human institution and may be corrupted, just as
men may be corrupted.^
In any case an economic system should be expected
to ensure the highest possible degree of justice. In the
realm of labor-management power relationships, Commons
postulates a constitutionalism, a system of checks and
^Niebuhr writes: "Every genuine passion for
community and social justice will always contain a reli
gious element within it. Religion will always leaven
the idea of justice with the ideal of love." Moral Man
and Immoral Society, p. 80.
"Pur.ther, the religious sense of the absolute
qualifies the will-to-live and the will-to-power by bring
ing them under the subjection of an absolute will, and by
imparting transcendent value to other human beings, whose
life and needs thus achieve a higher claim upon the
self.'1 Moral Man and Immoral Society, p. 63-
"Yet it must be regarded as inevitable that reli
gion, and especially a religion which apprehends the truth
about man and God by faith alone, should be used as the
instrument of human arrogance. . . . It becomes, rather,-
the vehicle of the pretension that the finiteness and sin
of life have been overcome." The Nature and Destiny of
Man, II, p. 129-
377
balances to protect the rights and Interests of each
party. This industrial constitutionalism grows out of
negotiations of trade union agreements, which are actually
constitutions. Certain piowers, those of rationing and
managing, are reserved to management. These powers, how
ever, are subject to employee and union rights, which
include a definition of wages and how they may be changed,
hours, seniority, vacations, holidays, sick leave, and
the like. A judicial machinery is also established for
the disposal of grievances.
In assessing these contributions of Commons's
thought, some aspects of his theory requires adjustment
to events which have unfolded since the conception of his
theories. Implicit in his theory, for example, is a con
viction of almost automatic beneficence in the institu
tions he describes. It is what may be described as an
internal beneficence arising from the institutional expan
sion of the individual's capacity for freedom and effec
tiveness, and an external beneficence generated by the
positive results for the community from bargaining and
negotiation, with checks and balances upon organized
group power. These checks and balances are automatically
378
called Into play as unions and corporations deal together
within a web of working rules. This complex of events is
to yield freedoms at a price reasonable for the community.
Perhaps Commons would have been less confident
concerning these potentialities, had his experience and
study continued into the recent period of nation-wide col
lective bargaining. We have already examined some of the
problems he did not foresee, particularly union develop
ment. One outstanding example is the possibility of
union-management collusion. If corporations are placed
on one side and unions on the other, the one to maximize
profits and the other to maximize wages and working
conditions, It may be apparent at once that these power
complexes actually complement each other. Both groups
are given the right under law to withdraw from the market
if they deem the price offered for their products and
services inadequate, and the bargaining activity between
them produces prices and wages that approximate a sort
of practical justice. But the consumer does not have the
same opportunity to withdraw from the market if exorbitant
prices reflect too large a profit and/or too high a wage.
Generally speaking, the consumer, having less bargaining
379
power than either labor or management, is more often
than not the party who is trapped in the labor-management
vise.
Perhaps, too, Commons might have redefined the
potentialities of administration in government as that
fourth branch of government which promised orderly pro
gress. He might have seen that the administrative agency
does not so easily mediate the power conflict as it
yields a measure of ground to the powerful groups involved.
As it stands, Commons's total thought, for all
its perceptiveness and wisdom, reflects the inevitable
impress made upon the man by his time and its problems.
If Commons saw the business corporation in historic pers
pective as the strategic instrument of human purpose that
it has been in democratic industrial society, he observed
that instrument in its first power thrust, when labor
organization was weak and government's dominant policies
were cast in the philosophy of minimum intervention. In
this perspective, he could feel that a better balance of
group power, when unions should bargain as equals with
corporations, would yield inevitable beneficial improve
ments; that government action, complementing such
voluntarism and proceeding with the participation of the
380
parties-at-interest, would promote the general welfare.
He could write about a theory of goodwill which would
harmonize the rival powers, a theory based upon "recipro
city" and "mutual concession;"7 in labor-management rela
tions, the theory would lift the quality of the relation
ship above the level of naked power to a level of mutual
ity and harmony of interests, so as to yield fruits of
improved social conditions and a higher quality of justice
O
in society.
Recent socio-economic events, however, have not
squared with his forecasts. Today it is organized labor
^'fhich has been functioning in its first power thrust; and
government has increased its interventions. It is now
evident that mediation of the power conflicts between
labor and management does not follow as directly as
Commons believed it would when group power had achieved
better balance.
One may agree with Commons that modern society
is a complex network of group organizations, each of which
^Industrial Goodwill, pp. 19-20.
8Ibid., pp. 28-29, 35-
381
expands, liberates, and controls individual action. But
the controls raise problems that are not obviated by the
concomitant liberations and expansions,. For this reason
it has become increasingly evident that the individual
must possess established safeguards against the powers
which are vested in all the groups through which the
individual functions. For it would appear that in the
modern context, it is the individual's rights and personal
ity which require protection against multiple powerful
group pressures.
We may also agree, with Commons, that a free man's
pursuit of self-interest does not automatically add up to
the general welfare. At the same time, however, we may
disagree with his view that the untrammeled interaction
of powerful interest groups adds up automatically to
socially responsible action.
Yet, these questions do not prove incompatible
with the theory Commons offers for understanding the
dynamics of American enterprise. He accepts the reality
that problems continuously arise. The framework he
projects is for their resolution rather than for their
solution. Perhaps his major contribution lies in his
impressively documented demonstration that the central
382
group organizations of society, the corporation, the
union, and the democratic state, represent great social
inventions. They are interrelated inventions, no one of
which can long endure without the others. His analysis
of group associations in society remain, therefore,
substantially valid. Apparently, inherent in these groups
is incessant conflict among them, as well as interdepend
ence; inherent, too, are the mechanisms for orderly
settlements and adaptations to changing conditions.
Commons thus remained always concerned with the
dynamics of adjustment among organizations. He postulated
no fixed or final answers to any of society's problems.
We are the beneficiaries, then, of a pragmatic economic
system which may be adapted to modern industrial society.
The Contributions of Niebuhr
There are three major contributions Niebuhr makes
to the area of labor-management power relationships: (l)
his thought on the essential nature of man, (2) the immense
complexity of human motives, and (3) the relation between
morality, self-interest, and power in society. These,
however, must be viewed as an integrated whole, in order
383
to appreciate their validity. His doctrine of man may
be summarized in the following passage:
The obvious fact is that man is a child of nature,
subject to its vicissitudes, compelled by its
necessities, driven by its impulses, and confined
within the brevity of the years which nature per
mits its varied organic forms, allowing them some,
but not too much, latitude. The other less obvious
fact is that man is a spirit who stands outside
of nature, life, himself, his reason, and the
world.9
Man, then-, is a unique mixture of spirit and nature. He
is in nature, yet he transcends it. The spirit is limited
by nature, and nature is spiritualized.
The human spirit reflects the image of God and
stands outside the self and the world in its capacity of
self-transcendence. If man is to understand himself, he
must "begin with a faith that he is understood from beyond
himself, that he is known and loved of God and must find
himself in terms of obedience to the divine will."10 In
his faith man may relate himself to God without pretend
ing to be God, and accept his distance from God without
believing that his evil nature is caused by his finiteness.
9fhe Nature . . ., I, p. 3*
lQIbid., p. 15.
384
At the same time man is a sinner, not because of
his finiteness, but because he refuses to admit his
creatureliness. Man's ambiguous and contradictory posi
tion at the juncture of freedom and finiteness, of spirit
and nature, produces in him a condition of anxiety.
Anxiety may be overcome, theoretically, by perfect faith
in the ultimate security of God's love; but perfect faith
for man is not an actual possibility. To the extent that
he cannot trust God's love, he seeks security by his own
deeds, pretending to be self-sufficient in triumphing over
his finiteness and limitations. "The Christian faith,"
Niebuhr asserts, "can make no greater contribution to
the organization of man's life than its interpretation of
the root of this inordinancy:"^ namely, by recognizing
that man's freedom and destructive power, his dignity and
misery, constitute a dialectical unity; by recognizing
that man's creative capacity to shape social harmonies is
constantly endangered by his temptation to use this capa
city for selfish ends.
One of the most important expressions human
■'•■'■"The Christian Faith and the Economic Life of
Liberal Society," Goals of Economic Life, ed. A. D. Ward,
p. 445.
.385
anxiety takes in the realm of the political economy is
the will-to-power. Because man is both nature and spirit,
his requirements are qualitatively heightened. Niebuhr
writes:
Man being more than a natural creature, is not
interested merely in physical survival but in
prestige and social approval. Having the intel
ligence to anticipate the perils in which he
stands in nature and history, he invariably seeks
to gain security against these perils by enhanc
ing his power, individually and collectively.12
To overcome social anxiety, man seeks power over his
fellows, attempting to subdue their wills to his, lest
they come to dominate him. The struggle for economic and
political power is perennial. The tragic paradox of the
quest for power and security is that power, the main
instrument of security, can itself never guarantee secur
ity. Niebuhr writes:
The more man established himself in power and
glory, the greater is the fear of tumbling from
his eminence. . . . The will-to-power is thus
an expression of insecurity even when it has
achieved ends which . . . would seem to guarantee
complete security. The fact that human ambitions
know no limits must therefore be attributed ....
to an uneasy recognition of man's finiteness,
weakness, and dependence, which become the more
apparent the more we seek to obscure them. . . .
2The Children . . . , p. 20.
386
There is no level of greatness and power in which
the lash of fear is not at least one strand in the
whip of ambition.13
The more power an individual and group has, the
more its life impinges on other life, and the more wisdom
is required to bring it into some decent harmony with
other life. Justice and community in labor-management
relations are only achieved by coercing the anarchy of
collective self-interest into a degree of order by a
balance of powers. Such an equilibrium best prevents
domination of one life by another. It is the task of
government'to "organize the vitalities of human existence
that a 'commonwealth' will be created out of the conflict
ing forces and interests in human life," a task which has
"never been achieved in history without setting force, as
the instrument of order, against force, as the instrument
of anarchy.In America, for example, Niebuhr writes,
. . . the workers . . . learned not only to set
the organized economic power of the trade union
against the organized power of finance and indus
try but also to organize politically. Through
their political power they sought to enforce their
demand that the community establish minimal social
securities and that it intervene in the economic
~^The Nature . . ., I, pp. 193~9^-
l4Ibid., II, p. 266.
387
process whenever it seemed possible and desir
able to do so in the interest of welfare.15
Yet, Niebuhr's balance of power theory and his
assumption that government might best administer the
equilibrium, are subject to the same criticism as the
identical theories of Commons. The failure of Niebuhr
and Commons to account for the possibility of collusive
activities by labor and management, and their confidence
that might mediate the conflict by simply enforcing laws,
are the most serious shortcomings of their respective
systems of thought.
Niebuhr's assessment of the strength of group
egotism, however, appears to be valid. The power struggle
among groups is far more intensive than that among individ
uals, because of the tendency of groups to express both
the virtue and selfishness of their members. One conse
quence of modern industrial society has been to thwart
the achievement of personal security and satisfaction of
basic human aspirations, particularly for groups.
Frustrated individuals strive to fulfill themselves
^-5 "The Christian Faith and the Economic Life of
Liberal Society," op. cit■, pp. 436-37-
388
vicariously by projecting their egos to the level of a
group ego. The two elements of collective strength are
sacrificial loyalty and frustrated aggressions. Thus
inter-group power struggles in the political-economic
realm are more contentious and ruthless because of the
unselfish loyalty of the members of groups. Society
merely accumulates the egoism of individuals and trans
mutes their individual altruism into collective egoism,
so that the egoism of the group has a double force. No
group acts from purely unselfish motives, and economics
is bound to be a contest of power.
In this context of social conflict and endless
strife, Niebuhr introduces the ethical means by which man
may transcend the conflict. Man's transcendent faith in
God may free him from the need for having illusions about
human nature. The Christian, Niebuhr argues, lives in a
deeper dimension than the realm in which the social power
struggle takes place. Yet It is the relevance of this ■
deeper dimension which in Niebuhr's thought is often
ambiguous and unclear. At times he writes that such a
transcendent faith is an ideal possibility; at other times
he writes as though man may truly transcend the
389
vicissitudes of life and at least approximately achieve
a goodly measure of security in God's love by means of
his grace. This would appear to be an unresolved point
in Niebuhr’s thought.
Niebuhr postulates universal friction, rivalry,
and competition for power; the best that one can hope for
is a temporary respite from overt conflict in a balance
of power that is managed by government power. But lust
.v ■
for power cannot be normative if man is also a being who
transcends himself indeterminately and may be saved as
love draws him beyond self-love. While love for Niebuhr
can never be fully embodied in any human motive or action,
it remains relevant as a standard for both motive and
action. It is relevant because we are judged by it and
because we may approximate it. Love, moreover, provides
the foundations for a final standard against which inter
est and power can be measured, harnessed, and utilized for
the ultimate end of creating a community of approximate
justice and order.
The self is so deeply involved in the conflicts
of men, that it cannot be truly objective and discriminat
ing. At this point love may moderate the pursuit of
390
interest by creating a spirit of contrition which can
break some of the pride of the contestants and introduce
conditions necessary to perceive the fragmentary character
of human values and goals. The relation of love to the
realities of life in Niebuhr's thought appears to be, in
the context of the possibilities of human regeneration, a
source of deep insight.
At a more proximate level, reason and morality
qualify and mitigate the struggle over power by tempering
power with justice. All ideas of justice are both negated
and fulfilled by love. Justice is in part an embodiment
of love wherever there are complex human relationships.
Yet, every idea and structure of justice is capable of
being corrected and raised to a higher level by love.
Justice always involves an element of calculation of
interests. It has to do with permanent obligations and
with impartial methods of determining rights and inter
ests. Justice is at the same time never far from equality.
Equality is an essential aspect of justice, in the sense
of impartiality in determining needs and rights.
Although justice does not involve a legalistic effort to
impose quality on society, it should keep all unequal
391
conditions under rigorous criticism. Niebuhr asserts
that "equality as a pinnacle of the ideal of justice
implicitly points toward love as the final norm of jus
tice; for equal justice is the approximation of brother-
16
hood under conditions of sin."
As applied to public policy, Niebuhr points out
that justice may be viewed from two perspectives. All
legal enactments are, on the one hand, instruments of the
conscience of the community, seeking to subdue the poten
tial anarchy of forces and interests into a tolerable
harmony. They are, on the other hand, merely explicit
formulations of tensions and equilibria of life and power.
Niebuhr writes:
The more positive contradiction to brotherhood
in all schemes of justice is introduced by the
contingent and finite character of rational
estimates of rights and interests and by the
taint of passion and self-interest upon calcula
tions of the rights of others. Even the compara
tively impartial view of the whole of a society,
as expressed particularly in the carefully guarded
objectivity of its juridical institutions, parti
cipates in the contingent character of all human
viewpoints.^7
l6The Nature . . ., II, p. 254.
17Ibid., p. 256.
392
In attempting to apply the absolute ethics of
Niebuhr's system to the reality of economics, Niebuhr
sometimes appears to be uncertain of these applications,
and even seems to contradict himself. For example, he
often repeats the fact that persons and groups In society
might be less unjust if they only recognized the inevitable
moral ambiguity of their decisions and actions. Yet, the
truth of this statement Is diluted by Niebuhr's assertion
that :
Power cannot be evil of itself, unless life it
self be regarded as evil. . . . According to
Christian faith perfect power and goodness are
united only in God. But this is not because
life is inherently evil, but because all power
in history is partial.18
The crucial problem in Niebuhr's thought seems to
be the translation of his ethical norms to concrete
economic and political situations. It is true, for
example, that norms like equality become in the economic
arena objects of endless contention, rationalization, and
self-deception. What, it may also be asked, does the
norm "justice" mean in practical terms? What are the
■ ’ ■^Editorial, Christianity and Society, VTII
(Winter, 19^3), P- 10.
393
standards by which to determine what is "due" labor or
management in the collective bargaining situation?
Yet, it is true that in actual life no clear
distinctions between moral principles and strategy can
be made. This is why Christian convictions which deal
only with ultimate principles and exclude strategic issues
tend to become wholly irrelevant. The further one moves-
from a principle which is clearly related to the command
ment of love to detailed applications in particular situa
tions, the more hazardous the decision becomes. This does
not mean that we must not and cannot make clear-cut
decisions on the basis of principle. The issue of jus
tice, which is hidden in every political question, must
not be obscured; the pretensions of transcending the frail
ties of man should be avoided. Niebuhr appears to be
right in pointing out that ideally, a democratic society
is best preserved by a religious quality of life which
regards our economic decisions as of great importance,
even while recognizing the incapacity of men to arrive at
a purely rational, or purely moral, or purely Christian
solution of any perplexing problem.
394
The Niebuhr-Commons Approach to Social Power
The essential consequence of the Niebuhr-Commons
approach to social power is that the relationships between
all groups, including labor and management, must always be
economic and political as well as ethical. Their rela
tions, that is, will be determined by the proportion of
power each group possesses as much as by any rational and
moral appraisal of the comparative claims and needs of
each group. From a Christian standpoint, at least, the
structures, systems, laws and conventions by which partly
selfish and partly unselfish men are united in large-
scale cooperation and conflict cannot be regarded as evil.
The order and justice which is achieved must be looked
upon as an approximation of a loving community, under
conditions of sin. And achieving justice while preserv
ing freedom in a technical society can only be accomplished
on a pragmatic level. The validity of a course of action
or an idea is only determined by proximate solutions,
rather than by any final, fixed answers. As Niebuhr
writes, "we have to move from case to case and from point
to point in achieving justice while preserving freedom in
395
a technical society.
With respect to the problem of labor-management
collusion, and the apparent inadequacy of government
regulatory weapons to deal with the collusion, Niebuhr
and Commons, not having foreseen the problem, can provide
no answer. They do, however, provide an ethical and
economic framework within which solutions may be sought.
Each type of government action must be weighed in the
light of the values of love, justice, equality, and
freedom.^
Niebuhr and Commons, then, assess the economic
and social process in largely congruent ways. Commons, by
implication in much of his thought, and by specific men
tion in some of his writings, acknowledges with Niebuhr
that the relation of Christian ethics to economic life is
not limited to its specific application of moral and social
nortns.^ For it also expresses the meaning of human
■^"Plutocracy and World Responsibilities, "
Christianity and Society, XIV (Autumn, 19^9 )> p. 8.
on
vNiebuhr, Moral Man and Immoral Society,
pp. xxii-xxiii.
^Commons, Social Reform and the Church.
existence in terms partly involving and partly transcend
ing life itself. That is, the task in labor-management
relations is to recognize the spiritual possibilities in
them, acknowledge their limitations clearly, and be
sensitively alert to the great temptations of power and
sin in them. Niebuhr's ethical system, along the main
stream of Christianity, is particularly suitable.to these
tasks. While affirming the significance of man's life on
earth and the worth of material goods, he also insists
that the "final pinnacle of meaning transcends all possi
bilities of history. It is also recognized that physical
O Q
survival may be bought at too high a price.
Economic means of gain and of efficient produc
tion should not therefore be exalted into final ends and
norms of human existence. A quantitative increase of
life's comforts, securities, and technical efficiencies
which are the basis for all human achievement does not
necessarily result in an increase in cultural, spiritual,
or other higher achievements. In fact, there is no
22"The Spiritual Weakness of the Third Force,"
Christianity and Society, XIV (Summer, 19^9)> p. 6.
measure of economic security which can avert the "basic
insecurity of human existence, finally symbolized in the
fact of death."^3 preoccupation with such securities as
technical efficiency and material abundance in a culture
incapable of coming to terms with life's basic insecurity
through faith will condemn that culture after Christ's
proscription of the rich fool. It is to reveal the
tentativeness and fragmentary nature of our achievements,
as well as to point to the highest possible goals and
values, that Christian faith functions in the economic and
social order.
^^Niebuhr, "The Christian Faith and the Economic
Life of Liberal Society," p.. 456; see also "The'Next
Twenty Years," Fortune, LVII (Jan., 1958), p. 190.
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BIBLIOGRAPHY
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1948.
U. S. Congressional Record. Vol. XCIII.
U. S. House of Representatives, Subcommittee No. 3> Select
Committee on Small Business. Hearings. 84th
Cong., 1st Sess., 1956; 85th Cong., 1st and 2d
Sessions, 1958.
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Creator Chang, Donald Mark (author)

Core Title Ethical And Economic Aspects Of Labor-Management Power Relationships In The Thought Of Reinhold Niebuhr And John R. Commons

Degree Doctor of Philosophy

Degree Program Religion

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag OAI-PMH Harvest,religion, general

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Robb, J. Wesley (committee chair), Seifert, Harvey (committee member), Sultan, Paul E. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c18-249127

Unique identifier UC11358109

Identifier 6201314.pdf (filename),usctheses-c18-249127 (legacy record id)

Legacy Identifier 6201314.pdf

Dmrecord 249127

Document Type Dissertation

Rights Chang, Donald Mark

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA