The Economics of Striking

Picture courtesy of Wired.comEven though I might be flying dangerously close to the sun, I want to broach the topic of what an absolute waste of time, money and energy striking is. Just once more. If this topic bores you, well… read this anyway, maybe I can un-bore you?

I had a reply to my “shrinking pile of cash” analogy (here if you want to familiarise yourself with it) from a well learner-ed economist (he has a masters in finance! Hectic shit!) who works in the financial industry. Lets call him John. We shall call him John because that’s his name. It would be strange to call him something else, wouldn’t it? No, you are right. We should call him Nancy.

Nancy said:

Dave! Lets really take a look at this whole striking thing because its evident that its a big sticking point for you. Ultimately i agree that everyone needs to pull together but sometimes the scales are not properly weighted.

To view this from an economic standpoint, you must see the strike as a suspension of production while workers and their employer argue about how to divide the surplus from their relationship (the value of the output is always greater than the wage cost, hence the employer-employee relationship). The big problem with primary sector industry is that this surplus can be easily defined. Modern economic theories of strikes assume that at least one side has private information about the surplus, viewing the lost production as a cost of extracting information. The time needed to extract the information is also dependent on the information expectation of the employees which is exacerbated by the unsophisticated nature of the labour as seen through unrealistic demands.

You’ve quantified the pile of money upfront (100) but what if it was only known by one party? Would the other party realise that the cost of extracting this information decreases the surplus as you’ve put it? We also forget that its not the fat cats at the top that do the mining (for example) its the guys in the mine shafts. So, given that the mined product can pay enough surplus to buy the fat cats S500′s but not enough to buy bread for the extractor there is a seriously unbalanced relationship.

Don’t get me wrong I’m a capitalist by nature and trade, who puts the inner communist in the corner facing the wall… He may shout out every now and again, and he’s not always wrong. I completely understand the implications on the economy of above inflationary wage increases and investor nervousness but how do you balance the employee employer relationship when its so clearly tilted?

Firstly, a BIG thank you to Nancy for educating us! Much appreciated buddy!

Now, lets translate this into something we can all understand. As I understand it Nancy, you are saying that we should assume that the strikers don’t know how big the pile of cash is, and they also don’t realise that by striking, they are causing the pile of money to shrink. This is probably correct. I’d hazard a guess that there has never been a rock driller at the bottom of a mine shaft who has ever seen a spreadsheet detailing the costs and profits of a mine. I don’t think a computer would work where he works, and I don’t think he would work where a computer works, their worlds are very far apart.

BUT! Should he actually know how much surplus there is, do you think that would change his behaviour? I would guess that it would make no difference at all. And it’s because he sees the Fat Cat in his S500, living a much grander life, and its because of this that the rock driller would still demand a million bucks (preferably Kudu), an overseas holiday and a pay increase. They would insist on this because the unions (with their communist tendencies) cannot justify the disparity between the fat cat and the rock driller. They say why should Mr Mine Boss have such a wonderful life in the sunshine, while you Mr Rock Driller piss on your boots underground. There is no consideration for the fact that they are cows, and Mr Mine Boss is a walrus. (Read this if you don’t know what I mean). If the rock driller had the knowledge and the ability to be Mr Mine Boss, then he should apply for the position and stop being a rock driller.

Here we start leaning towards the Stephen Grootes belief of if you don’t want to work, give the job to someone who will. There are too many people in South Africa going hungry because they can’t get a job. If you are unhappy with what you have at present, quit. Let someone with less happily take your position while you find something better to do.

The employer-employee scale will never be equal and never be seen as far by those at the lower end. Like being on a see-saw, its much more fun to be up at the top, feet dangling, feeling like a soaring eagle, than being at the bottom, huddled up to the handlebar, with your knees touching your chin… The difference here is that the fat cat at the top will not easily come down, and the miner at the bottom can’t just push with his legs and reverse positions on the see-saw…

Striking and unions serve a purpose in every economy. This purpose is not to drain the economy though. They should be doing something to better the economy, thereby creating more surplus rather than less, and therefore more money for everyone. Nancy, put your inner-communist back in the corner, and find a way for us all to make some money!