David Brian Robertson, Capital, Labor, and State: The Battle for American Labor Markets from the Civil War to the New Deal. Lanham, MD: Rowman and Littlefield, 2000. xxii + 297 pp. $75 (cloth), ISBN: 0-8476-9728-2; $22.95 (paperback), ISBN: 0-8476-9729-0.
Reviewed for EH.NET by William A. Sundstrom, Department of Economics, Santa Clara University. January 2002
In this book political scientist David Brian Robertson (University of Missouri, St. Louis) offers an account of American labor exceptionalism that, perhaps unsurprisingly, appeals to the uniqueness of American political and legal institutions. Contrasting American and European labor law and regulations during the late nineteenth and early twentieth centuries, Robertson argues that the constitutional separation of powers -- in particular federalism and the commerce clause -- and antitrust law were the fundamental sources of U.S. distinctiveness. Although there are many points on which one might challenge Robertson's evidence or interpretation, economic historians interested in labor or political economy will find much to sink their teeth into here.
Robertson begins with a useful comparative overview of labor law in the United States and Europe during the late nineteenth century. A strength of the book is its attention to labor law broadly defined: not merely laws relating to unions and bargaining, but also the regulation of working conditions, workers' compensation, and unemployment and health insurance. Robertson offers evidence suggesting that as late as 1900 U.S. labor law was overall no less developed or interventionist than the laws in developed western European countries. Furthermore, union density (union membership as a percentage of the workforce) was not significantly lower in the United States.
Still, the book's underlying theme is that labor law in the United States was ultimately shaped by the country's core legal and political institutions. (In this sense it would be a misreading of Robertson to infer that the development of labor law was historically contingent, despite the similarities across countries around 1900.) The national government was constitutionally constrained to regulate only interstate commerce, while the states were of course unable to restrict interstate trade. The consequence, in Robertson's view, was that labor market regulation was largely left to the states, but political competition between states inevitably led to a race to the bottom, as stringent regulation would put local firms at a competitive disadvantage in interstate trade.
U.S. antitrust law reinforced the laissez-faire orientation of U.S. labor law. In Europe, Robertson argues, labor unions and government management of labor relations were accepted by employers because they could help stabilize cartels by standardizing labor costs and conditions across firms. In the United States, antitrust efforts busted the cartels and fostered the merger movements, leading to large corporations and concentrated markets. Having no use for unions to help coordinate and enforce cartels, large American corporations tended to view them as an unnecessary evil and adopted various union avoidance strategies: production shifting across plants to break strikes, deskilling technological and organizational innovations, and welfare capitalism (chapter 4). These strategies involved scale economies, and were largely unavailable to smaller firms. Instead, small employers formed the vanguard of active anti-union efforts: the open-shop movement. All considered, "Anti-trust probably made American labor market exceptionalism irreversible" (p. 115).
Robertson's race-to-the-bottom thesis reverberates in current debates over international trade and labor standards. Economists have, of course, raised doubts about the theoretical and empirical validity of the race-to-the-bottom idea, so it would be of obvious interest if Capital, Labor, and State could make its case convincingly. What is the evidence? Robertson gains some leverage examining the exceptional U.S. industries in which labor-market regulation or unionization was particularly successful. These included the railroads, where of course federal regulatory oversight was established under the Interstate Commerce Commission. In the building trades, where markets tended to be highly localized and insulated from trade, employers could use unions to regulate local competition, much along the lines of the European corporatist model. Negative examples are instructive as well: In bituminous coal mining, for instance, an 1897 agreement between the United Mine Workers (UMWA) and Midwestern coal operators failed under competitive pressure from anti-union West Virginia mines. Indeed, Robertson includes a lengthy 1903 quotation from UMWA President John Mitchell that nicely summarizes the difficulties competitive federalism posed for labor unionists and reformers (p. 71).
Other aspects of the argument are less compelling. For example, Robertson suggests that state-level workers' compensation laws tended to be weak and inadequate, again reflecting political competition and a race to the bottom (chapter 9). He cites recent work in this area by Fishback and Kantor (1998), but his interpretation seems to be at odds with the evidence they present: the terms and generosity of these programs actually varied considerably across states, a heterogeneity that hardly seems consistent with the cross-state uniformity that a race to the bottom would imply. Similarly, under the Social Security system, unemployment insurance and welfare benefit levels are set by the states and also vary significantly. More generally, Robertson takes it for granted thatinterstate competition would disfavor firms in states that adopted a more regulated regime or more generous social benefits. Yet there were persistent interstate differences in social spending as well as wages, for example between the northern and southern regions (see Wright 1986). These regional differences did not place northern firms at a competitive disadvantage during the first half of the twentieth century, at least in most industries.
The claim that antitrust and corporate mergers killed any hopes of cooperation between capital and labor by obviating the use of unions to stabilize cartels seems to rest on Robertson's perception of corporations as monopolies in the U.S. Steel or Standard Oil mode. But in most industries mergers resulted in a number of oligopoly firms that competed fairly vigorously, if not over price then over products and market share. Is it not possible that such firms would also have greatly benefited from collusion, and that such collusion might have been enforced or stabilized by unions? Pattern bargaining in the postwar automobile industry might be cited as an example.
Read as an account of American exceptionalism, Capital, Labor, and State is incomplete because it never really tests its thesis against alternative explanations, such as mass immigration, internal mobility, individualistic cultural values, or racism. As I have noted, early in the book Robertson establishes rather convincingly that American labor law really was not exceptional before 1900, and thus one might question accounts of exceptionalism that rely on longstanding national differences such as mobility or national character; these should have shaped labor institutions earlier on. But the same objection would apply to Robertson's thesis as well, resting as it does on the distinctiveness of the American system of government going back to the Constitution.
As a political history, Capital, Labor, and State is more interested in the positive than the normative, but it is clear that Robertson's sympathies lie with the European corporatist model, in which the law provides "a fabric of worker protections," and labor and capital cooperate in setting wages and working conditions. Of course, those advantages have to be paid for, and Robertson is essentially silent on the costs to consumers and economic efficiency of permitting or even promoting cartelization. He does acknowledge those critics who blame rigid labor-market regulations for Europe's high unemployment and slow growth during the 1980s and 1990s, but he questions whether U.S. performance during the same period can be attributed to more flexible, free-market labor institutions, and notes the costs of those institutions in terms of inequality and job insecurity.
Where Robertson faults federalism, with its checks and balances that have served to limit the centralization and regulation of markets, admirers of American laissez-faire might see evidence of the enduring wisdom of the federalist system. It is a virtue of David Brian Robertson's stimulating historical interpretation that both sides of the debate will find much to learn and ponder.
References:
- Fishback, Price V., and Shawn Everett Kantor, "The Political Economy of Workers' Compensation Benefit Levels, 1910-1930," Explorations in Economic History 35 (April 1998): 109-139.
- Wright, Gavin, Old South, New South: Revolutions in the Southern Economy since the Civil War (New York: Basic Books, 1986).
William A. Sundstrom is Associate Professor of Economics at Santa Clara University. His research interests include the history of U.S. labor markets and racial discrimination. His recent publications include "Discouraging Times: The Labor Force Participation of Married Black Women, 1930-1940," Explorations in Economic History 38 (January 2001): 123-146.
Copyright (c) 2002 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net; Telephone: 513-529-2850; Fax: 513-529-3308). Published by EH.Net (March 2002). All EH.Net reviews are archived at www.eh.net/BookReview.