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 When these laws were finally repealed, workers were hampered by other state interventions, such as land engrossment, patents, government-backed banking cartels, and tariffs.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

He is attracted to alternatives to the standard "master-and-workman type of industrial organization" and discusses at length profit-sharing arrangements, pointing out both their advantages and disadvantages. (On a related issue, see this and this.) But these too leave him unsatisfied.

Thus he foresees the emergence of "self-governing combinations of workers," which, while not without problems, would avoid most of the drawbacks of traditional firms:

Evils like those arising from antagonistic interests [between master and workman], cannot arise where there are no antagonistic interests. Each cooperator exists in a double capacity. He is a unit in an incorporated body standing in the place of employer; and he is a worker employed by the incorporated body. Manifestly, when, instead of an employing master, alien to the workers, there is an employing master compounded of the workers, the mischiefs ordinarily caused by piece-work can no longer be caused.

He elaborates how cooperative organizations would encourage productivity, cut costs, and permit the division of larger profits. For instance:

Resentment against a foreman, who ranks some above others, no longer finds any place. Overlooking to check idleness becomes superfluous: the idling almost disappears, and another cause of dissension ceases. Not only do the irritations which superintendence excites decrease, but the cost of it decreases also. . . .

For Spencer, this would signify the pinnacle of social evolution:

Here we reach a form in which the coerciveness has diminished to the smallest degree consistent with combined action. Each member is his own master in respect of the work he does; and is subject only to such rules, established by majority of the members, as are needful for maintaining order. The transition from the compulsory cooperation of militancy to the voluntary cooperation of industrialism is completed. Under present arrangements it is incomplete. A wage-earner, while he voluntarily agrees to give so many hours work for so much pay, does not, during performance of his work, act in a purely voluntary way: he is coerced by the consciousness that discharge will follow if he idles, and is sometimes more manifestly coerced by an overlooker. But under the arrangement described, his activity becomes entirely voluntary.

Slave and Slave-Driver

"So long as the worker remains a wage-earner," Spencer concludes, "the marks of status do not wholly disappear. For so many hours daily he makes over his faculties to a master, or to a cooperative group, and is for the time owned by him or it. He is temporarily in the position of a slave, and his overlooker stands in the position of a slave-driver."

Spencer acknowledges that "the practicability of such a system depends on [personal] character," but he anticipates that the existing successful cooperatives "might be the germs of a spreading organization. . . . [T]he growth would become increasingly rapid; since the master-and-workmen type of industrial organization could not withstand competition with this cooperative type, so much more productive and costing so much less in superintendence."

Of course, Spencer's prediction could—and should—be tested: by freeing the market and ending all state-based privileges, each one a remnant of the militant type of society. Libertarians should hope that Spencer is proven right, since individualists more than anyone will see the merit in any arrangement which minimizes the chance that one will be subjected to the arbitrary will of another—even in consensual relationships.

Sheldon Richman is editor of The Freeman, where this article originally appeared.