Who do you imagine said this?

“[Trade-unions] seem natural to the passing phase of social
evolution, and may have beneficial functions under existing
conditions. . . .”

If you
guessed some wily labor leader or social democrat, you are
wrong. British laissez-faire advocate Herbert Spencer (1820-1903)
wrote those words in his Principles
of Sociology (1896). Spencer was
the most prominent and respected individualist philosopher of his
time. To this day his voluminous scholarly and popular writing
remains an important resource for adherents of the freedom
philosophy.

Spencer’s statement, then, may surprise some readers. It
shouldn’t. Our libertarian forebears put the plight of workers at
the top of their concerns. In England feudalism had not
entirely disappeared, many people had been pushed off the land
through enclosure, and true
laissez faire was nowhere in evidence. Neomercantilism, or
what Albert
Jay Nock called the “Merchant-state,” was the rule. For
example, early in the Industrial Revolution worker “combinations”
were outlawed in England and people were not free leave their home
parishes in search of better employment opportunities, something
decried by Adam Smith. When these laws were finally repealed,
workers were hampered by other state interventions, such as land
engrossment, patents, government-backed banking cartels, and
tariffs. To be sure, living standards improved, but to the
extent that government stifled free competition, workers were
deprived of bargaining power and their full free-market reward.

Spencer is famous for setting out a theory of social evolution,
according to which society was moving from the
rigidly hierarchical “militant” type to the open, contract-based
“industrial” type. Society was still in transition and had a
long way to go. (See my “Austrian
Exploitation Theory.” )

Suppressed Competition

Spencer begins his discussion of unions by noting that worker
guilds (like employers) historically preferred suppression of
competition to the uncertainties of market rivalry. He criticizes
the hypocrisy of workers who applaud competition that lowers the
price of bread, but oppose competition that lowers the price of
labor. He also argues that agitation for higher wages, if
successful throughout the economy, would do workers no good because
prices and hence the cost of living would rise as a consequence.
(This analysis requires some assumptions that may not in fact
hold.)

But he also notes that “[u]nder their original form
as friendly
societies—organizations for rendering mutual aid–[unions] were
of course extremely beneficial; and in so far as they subserve this
purpose down to the present time, they can scarcely be too much
lauded.”

Nevertheless Spencer asks: “Must we say that while ultimately
failing in their proposed ends [higher wages], trade-unions do
nothing else than inflict grave mischiefs in trying to achieve
them?”

His response: “This is too sweeping a conclusion. . . . There is
an ultimate gain in moral and physical treatment if there is no
ultimate gain in wages.” For example:

Judging from their harsh and cruel conduct in the past, it is
tolerably certain that employers are now prevented from doing
unfair things which they would else do. Conscious that trade-unions
are ever ready to act, they are more prompt to raise wages when
trade is flourishing than they would otherwise be; and when there
come times of depression, they lower wages only when they cannot
otherwise carry on their businesses.

Knowing the power which unions can exert, masters are led to
treat the individual members of them with more respect than they
would otherwise do: the status of the workman is almost
necessarily raised. Moreover, having a strong motive for keeping on
good terms with the union, a master is more likely than he would
else be to study the general convenience of his men, and to carry
on his works in ways conducive to their health.

He thinks unions are necessary because: “Everywhere aggression
begets resistance and counter-aggression; and in our present
transitional state, semi-militant and semi-industrial, trespasses
have to be kept in check by the fear of retaliatory
trespasses.”

Spencer, however, is not satisfied with this state of affairs.
Recall that he says trade-unions belong to “a passing phase of
social evolution.” Passing to what?

Worker-Owned Firms