Is time up for the unions?

Madsen Pirie of the Adam Smith Institute argues that unionism made itself redundant in the modern wo

YES says Madsen Pirie

The past three decades have brought major changes in the structure and role of trade unions in the UK. In 1979, membership of British trade unions stood at 13.3 million, but this has since fallen to below eight million. During the 1970s, the unions were strongest in the manufacturing industries and dominated areas such as shipbuilding, car-making and coal-mining. Today, their greatest strength is in the public sector.

In the 1970s, strikes managed to defeat two attempts by governments to bring unions within the law by revoking their unique extra-legal privileges. Their leaders regularly visited Downing Street to discuss what government was and wasn't permitted to do. Unions regularly brought critical industries to a halt through strike action. It was the decade of the three-day week, power cuts and, finally, of the Winter of Discontent.

Since then, trade unions have played a much-diminished role in national affairs. No longer able to take a central position in making the economic decisions that govern the country, unions have responded in two ways. First, they have become "service" organisations, supplying their members with help and information on their financial affairs, including advice on pensions. Second, some unions have reverted to what they see as their core role of trying to raise the living standards of their members through wage bargaining.

It is part of trade-union lore that workers banded together to secure better deals for their members by means of collective bargaining and industrial action. But it is not universally accepted that they raised the standard of living of working people by doing so. Some have suggested that they gained a better deal for their members at the expense of non-members: union-negotiated wages can be higher because non-unionised labour lacks the same degree of representation with management.

It has also been suggested that union wage rates push up the cost of labour, forcing companies to use less of it. Where private firms might have employed more labour, they now turn to machinery instead, seeking productivity increases to offset higher labour costs. An example of this is London Underground's increasing use of machines to top up Oyster cards or sell Tube tickets instead of manned ticket booths. The unions oppose these machines because they cost jobs, even though they save time and money for travellers.

Labour is a production cost and any increase in it that cannot be offset will result in higher- priced output. In a competitive market, this will threaten a firm's sales and ultimately its survival. There is a limit to what firms can concede without endangering their viability. The exception is government, because it does not face the same type of competition, and does not, except under extraordinary circumstances, face bankruptcy.

Other analysts have suggested that market conditions have done more to raise living standards than has collective union action. Some non-unionised activities have experienced huge wage increases based on comparative scarcity rather than on industrial muscle. This has been evident in areas such as domestic help, the rewards for which have increased far more quickly than wages generally.

It might well be those same market conditions that have accounted for the decline in union membership. There have been changes in productivity that have lowered the demand for old types of labour. Giant firms that were easily unionised have given way to smaller, more dispersed production that lacks the same concentration of labour. The shipyards, steelworks and mines are largely gone. Even the car-making plants are now mostly foreign-owned and highly mechanised. These changes, coupled with a rise in demand for part-time and temporary work, help explain the decline in union membership.

The employment legislation of the 1980s was probably a factor, too, which made it harder for militants to gain power or to exercise it with their previous gusto. That legislation may have caused, and certainly coincided with, a huge reduction in days lost through industrial action. From having the worst strike record in Europe, Britain went on to have one of the best. It is no surprise that a renewed union militancy is generating calls for more legislation to control it. The odds must be high that soon at least half the workforce will be required to vote in favour of a strike before one can lawfully be called.

It is easy to conclude, looking over the history of the trade union movement, that it has done more harm than good to Britain. Union militancy contributes to overseas buyers placing orders in places with more reliable delivery dates. Unionised working practices may have priced some British goods out of world markets. And yet, even without union activity, the spread of international trade might well have achieved similar results.

The one decision that undoubtedly did make a big difference to Britain was that of the unions to move from bargaining about wages and conditions for their members into the realm of political activity. They took with them a commitment to socialism that led to the nationalisation of large parts of British industry. That, in turn, created the sclerotic, loss-making state industries that held back Britain's econo­mic progress for so many years.

Britain eventually learned that socialism just doesn't work. It tries to substitute a preconceived and artificial order for the spontaneous interplay of individuals responding to supply and demand. The years it took to learn that lesson were a wasted time of lost opportunities in which improvements in living standards were held back and Britain slipped inexorably down the international league tables.

The power of the unions to make political change is much less than it was, and at least some of the damage it did has been reversed by privatisation and the restoration of market incentives. But there remains a good case for suggesting that Britain would have been far better off had it not undergone that process in the first place.

Madsen Pirie is president of the Adam Smith Institute

NO says Roy Hattersley

The world is changing and the trade union movement must and will change with it.

Indeed, the changes have already begun. The unions know that in much of the economy they no longer possess the strength to - in the words of their detractors - "hold the country to ransom". In the 1960s, the pay policy of the British Motor Corporation was changed by a strike that ended with the workers marching back to Longbridge singing "Blow the victory bugles, boys, we beat the BMC". In the 1970s, the National Union of Mineworkers first forced the National Coal Board to defy the government and agree a wage increase way outside "national guidelines", and then provoked Edward Heath into fighting the "Who governs Britain?" election - which he lost.

Never again. No doubt Margaret Thatcher still believes that the reduction in the doleful statistic "days lost in industrial disputes" is the product of her industrial relations "reforms". In fact, it is the result of another of her achievements - the collapse of manufacturing industry.

A thousand men - working in the same factory and party to the same pay agreement - not only processed enough power to impose their will on their employers; they were united by the feeling of solidarity that is essential to collective action. A nation of computer planners, homeworkers and call-centre telephonists fearing that their jobs will be exported to India reacts to inadequate pay offers quite differently. Only in the public sector - the health service, local government and social security - and in what amount to public utilities - BA, the BBC and the railways - is mass action possible. And in those industries, a strike does less damage to an intransigent management than to the families that are dependent on their services. Trade unions have learned - and, during the next year or two, they need to remember - that their ultimate success depends on public support. Over three decades on, their reputation still suffers from the memory of shop stewards turning patients away from hospital gates and gravediggers refusing to bury the dead.

So, despite all the newspaper talk about another "Winter of Discontent", there certainly should not be - and probably will not be - a major campaign of disruption in protest against government cuts. But that does not mean trade unions have lost their purpose and importance. Even in the days when strikes were fashionable and potentially effective, some of the unions' greatest successes were achieved by argument rather than aggression.

Romantics speak in awed tones of the 1926 General Strike. The heroism of the miners and their families is not in doubt but, for most of them, the months of near-starvation ended with the very wage reductions they had fought to prevent. Ironically, few union banners celebrate the quiet victory of 1907. That year, the Trades Union Congress, meeting in Bath, called for the introduction of an old-age pension - five shillings a week for every man aged 60 or over. A year later, the government - worried about both its popularity and its House of Commons majority - introduced a modified version of the TUC's proposals. The first duty of a modern union is to win the argument for a fairer society, not least among its own members.

Forty years ago, when I was a parliamentary secretary at the ministry of labour, a distinguished union president told me that he would fight to the death to prevent legal aid being made available to workers who appeared before industrial tribunals. Representing the wrongfully dismissed was the unions' job. To deprive them of that duty could only contribute to the growing belief that they were out of date. Since then, the wheel has turned full circle. Clearly, we should implement in full the social chapter of the Maastricht Treaty. But even its acceptance in modified form - combined with the legislation of the past ten years - provides workers with many of the rights for which the unions struggled for a century. Far from making the unions redundant, it has given them a new and essential role. They have become the watchdogs of fair employment practices and the guardians of the minimum wage. Taking a company to court on charges of racial or gender discrimination is far less heroic than "marching for jobs". But it is much more effective.

This leaves unanswered a question that will grow more insistent as cuts bite ever deeper: in the modern world, is a strike ever justified?

It is, but only if three rules apply. The first and most obvious was laid down at the end of the General Strike by Robert Smillie, a past president of the Miners' Federation of Great Britain: "There ought never to be a stoppage by our people . . . as long as they can secure fair terms by negotiation." He meant that three-quarters of a loaf, without the pain of a walkout, was better than gambling on getting it all after weeks of hardship and bitterness.

The second rule is the requirement, essential to the declaration of any "just war", that there must be a realistic prospect of victory. And even when those two criteria are met, a third consideration is essential. What effect will the stoppage have on the men and women who rely on the striking workers?

I understand why the caring professions resent what they regard as the exploitation of their dedication. And I sympathise with the argument that respect does not pay for groceries. But unless the unions and their members act on the principle that we are "members one of another", their future will be in doubt. For they are, and have always been, more than organisations for securing an annual pay increase.

British trade unions possess a clear view of the sort of society that they want to build. Neither anger nor frustration should provoke them into forgetting that long-term goal.

Roy Hattersley was deputy leader of the Labour Party from 1983-92

This article appears in the 11 October 2010 issue of the New Statesman, Melvyn Bragg guest edit