December 18, 2005

Economics question

When you read American business history of the 19th and early 20th Century, one thing that immediately jumps out at you is that businessmen didn't behave in the constructive fashion you'd imagine from reading modern libertarian websites. Back in the good old days before the Supreme Court decided to enforce the anti-trust laws in 1911, businessmen hated competing. Their first priority was often to form a cartel to keep prices up and wages down.

My son and I were discussing why early 20th Century miners' strikes, especially in the Rockies and the Pacific Northwest, were so often ding-dong battles with extraordinary levels of violence on both sides.

Here are my guesses: First, in contrast to today, when mining is mostly a low excitement business concentrating on squeezing left over bits of valuable ore out of the vast amounts of worthless rock, in the early days of industrial-scale mining in the newly settled West, the big strikes offered enormous amounts of money to their owners, if they could avoid sharing much of the wealth with their workers. This meant the upside for winning a strike was huge, since the owners of a motherlode could afford to pay much more than the typical owner.

Second, a union's worst fear is competition from elsewhere. Either the owners will react to union demands for higher wages by moving the business somewhere else or other companies, perhaps in other countries, with lower wage structures will outcompete the unionized business. But a motherlode is more site specific than just about any other kind of business. Unlike a factory, you can't build another motherlode somewhere else.

Third, there's no other work in town besides the mines and supporting service businesses like saloons. So, wages aren't bid up by competition among factory owners. Mines were often in company towns where the mineowner monopolized all the retail outlets as well. Similarly, this makes mineowners more likely to form monopsonistic cartels to drive down wages.

Fourth, safety and working conditions are bigger issues in mines than just about anywhere else, giving miners a non-wage issue to organize around.

Fifth, miners are tough and brave. They have to be to go down in the ground. Plus, they had a lot of experience with high explosives, which made them formidable when push came to shove.

Sixth, going down in the ground together bonds miners like soldiers going into battle together, providing them with more solidarity and making them less likely to to sell each other out by scabbing.

Do these reasons make sense?

My published articles are archived at -- Steve Sailer

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