Unions want to join club, not change the rules

Rhodes>Perspective>2014 Archive

IS THE problem with the trade union movement that it is too radical — or not radical enough? As the metal strike drags on, it is common to blame the economy’s problems on the radicalism of trade unions. The finger is pointed not only during strikes: union demands for policy change — such as an end to labour broking — are routinely denounced as left-wing assaults on the economy.

Yet the real problem may be not that unions want to change too much but that they leave far too much unchanged. Much union activity centres on trying to win a bigger share for workers of what present economic arrangements have to offer, rather than trying to change the way business is done.

South Africa’s economy was, in 1994, controlled by an exclusive club; since then, political and union leaders have arguably been interested not in replacing the club with one open to all, but in joining it. While unions have often voiced loud demands for sweeping change, the way they have gone about it speaks more of a desire for a bigger ration of what exists than a search for something new.

One example is the fate of the investment companies unions have established over the past 20 years. Union-bashers have been targeting the investment firms of late, insisting that they are get-rich-quick schemes for union leaders. Like much anti-union venom, this seems to be based as much on prejudice as evidence. While some investment companies have been dogged by allegations of abuse, there is no evidence that they are any more prone to white-collar crime than other businesses. Union officials don’t directly control the companies: “firewalls” between the unions and the companies are designed not only to prevent misuse of money but to avoid conflicts of interest that might persuade unionists to go easy on firms in which they invest, or go after their competitors. And so union investment companies tend to operate much the same as other firms, although their surpluses are used by unions to fund benefits and programmes for members.

But the “firewall” is also a problem because the investment companies do not do what they were meant to do — change the way the economy operates. They have become vehicles for joining the club, not for changing the way it works. When union investment companies began, they were meant to give unions leverage: they were to use their shares to make companies more worker-friendly and more interested in social development. But, because the investment companies operate like other firms, the fact that they invest in firms and sectors has rarely made a difference; this deprives the unions of an important opportunity to begin changing the way in which companies operate.

While the investment companies have brought material benefits to many union members, they are a mixed blessing. One sign that unions have tended to join the club rather than challenge it is that holding office in unions has often become more about gaining access to resources than looking after worker interests. Some unionists believe investment companies have made the problem worse by creating a new cause for divisive contests between people seeing a cut of the action, making the companies a threat to unions’ future. If union investment companies are to justify their existence, they may need to show that they can be instruments for change as well as material benefits.

Maintaining distance between unions and their investment companies to prevent conflicts of interest is essential. But that need not rule out a union role in using investment companies to influence companies. If unions did begin to use their investments to influence companies’ strategies, it is a safe bet that most economists and journalists in the mainstream debate, horrified by growing union influence, would soon begin warning of the end of the market economy as we know it.

But on what grounds can people who claim to believe in markets argue that shareholders are not entitled to use them to influence the companies in which they invest? Isn’t it a key principle of the market system that investors are entitled to a say? Isn’t the fact that investors happen to be unions irrelevant? To claim that only some investors should influence company decisions is to signal that the market economy is, after all, merely a vehicle for the privilege of the few. It is hard to imagine a better way to discredit it.

A greater union role in the companies in which they invest could be a key to growth that includes more of us. There is growing recognition that we need economic compromises — boardrooms where unions have significant investments could be one place in which these compromises are negotiated.

Because a serious attempts by unions to turn their investments into influence could help us towards growth that will be more sustainable and include more South Africans, it is not only union members who should hope that they rise to the challenge of turning investment into a say in decisions.

By Steven Friedman

Picture: Sowetan/Financial Mail

Friedman is director of the Centre for the Study of Democracy.