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December 24, 2005

Transit Workers Strike: Tehran and New York
Babak Seradjeh  [info|posts]

sandicavahed.jpg The syndicate of the public bus workers in Tehran have called for a public strike. Two days ago, some of their leaders and representatives were simaltanously and separately arrested in their homes on orders of Tehran's prosecutor, while they were waiting for a reply to their lawsuit against those (rumored to have had government's tacit support) who had beaten and injurred some of them in their office a few weeks ago. The call for a strike is the union's basic instrument in playing an important political role, i.e. the protection of the basic freedoms of their members. Such freedoms must be protected, and once they are violated, the violations must be protested. This vital political role of a union is one that is greatly needed both in a civil society, and also in the struggle to reach it.

However, unions also try to play other roles, most importantly in economic decision makings through their political means and pressure instruments such as threatening or staging a strike. These economic roles become stronger compared to the political roles of the union once the society as a whole passes from a state of precarious basic freedoms to a state of predominant and protected freedoms. An example is provided by the recent New York Transit Worker Union's strike to achieve higher wages and a more comprehensive pension plan from their government boss, the New York Metropolitan Transportation Authority. Although the strike was pronounced illegal by the state court, and fines of $1,000,000 a day charged the union and a two-day worth of wages individual workers, the basic freedoms being protected meant that the union members had the right both to discuss the strike before it happened, eventually go on strike, and only when their leaders were declared in contempt of the court, they would face the consequences of their breach of the court terms. This is of course in sharp contrast to the situation encountered in Tehran, where the union members are arrested without prior notice, for unknown and untold charges, in inhumane ways. On the economic side, as I have written elsewhere, the consequences of the TWU strike, and in fact the whole way of running an economic activity through the political channels of a government-controlled authority versus a workers union, yields disastrous consequences.

The political role of the unions in the struggle towards securing the most basic freedoms of their members in particular and the members of the society in general, and their continuing role in protecting those freedoms is hardly debatable. On the other hand, when the unions take it on themselves to do business and affect economic decision makings in an otherwise free market, and the government takes it on itself to perform economic tasks that could be performed by free markets and through voluntary transactions, the consequences are hardly desirable. Politics is the worst way of doing business: It constrains a non-zero-sum game (economy) with zero-sum conditions (politics), resulting in an overall loss for the system as a whole. A liberal mind who understands the importance of the principle of freedom in the well-being of the human society, and the effective allocation of its scarce resources, will support the former, but not the latter.

Comments
Ali Mostashari at December 25, 2005 02:17 PM [permalink]:

I agree with some arguments in the post and disagree with others. I think it is the absolute and unalienable right of unions to strike for their human rights and for the betterment of their wages. A strike is a strategy that is used often against monopolistic entities, when a person with particular skills can't just find a comparable job with a similar company in the same place. Monopolies (like utilities, transit, large automanufatcurers in small cities, Walmart etc. ) are not self-regulated, since they face no competition if the wages they offer are not adequate. Denying union workers to ask for their rights and use their refusal to work as a pressure lever is a crime against their human rights.

Politics doesn't have to a be a zero-sum game, but it can be as can be economics. It depends on the processes used.

So yes, the unions should have an active political voice, and yes unions should be able to defend their rights in a healthy civil society. This is different from government intervention, since it is the stakeholders who arw acting as their own agents.

Babak S at December 25, 2005 03:37 PM [permalink]:

Dear Ali,

I don't think the unions' actions are necessarily any more representative than the government's, "since it is the stakeholders who are acting as their own agents." The union members also have to choose some representatives, and transfer their powers to them. It is in essence a political process like that of electing the government. It is true that because a union's members have their jobs broadly in common, some of their decisions are made with a more united vote, but it is also true that often they find themselves in disagreement with their leaders' decisions and each other, and some votes are taken with low turnout or marginal outcomes. This is the essence of the zero-sum process of politics that is naturally going on inside the unions as well. Stories of such politics are abound.

Unions are not always favoured by workers as a means to achieve their demands or to negotiate their work terms. Most foreign car companies in the US, for instance, are non-unionized and their workers have consistently voted against unionization. Here's one such story: Nissan workers vote 2 to 1 against UAW at Smyrna plant.

Let's think that all workers are unionized. And they all raise their wages by a factor of 2. What will the effect be? Surely nothing! Static equilibrium points are independent of the volume scale of money. (The dynamics is not, and usually such increases in money volume will adversly affect the dynamics of the system towards the equilibrium solution, leading to runaway inflations, etc.) This simple exercise has an important meaning: doing business through unions has the general feature that some should lose for others to gain. That is achieved through inter- and intra-politics of unions. The best the workers can do through unions is in fact to gather under one big union, and form a united front. Does anyone think that is good for the economy? (Hints: Who will be on the other side? What is the most likely action of such a united front? What will be the consequences?)

An Iranian Student (AIS) at December 25, 2005 04:19 PM [permalink]:

I totally agree with Babak's points.

Ali, you say:
"Denying union workers to ask for their rights and use their refusal to work as a pressure lever is a crime against their human rights."

I don't quite understand this sentence. How are the union memebrs denied to refuse to work? Usually nobody puts a gun on their head to force them to go to work in free democratic societies. But if they refuse to work they won't get paid or are fired from that particular job position if they continue they continue this for too long, as would have been the case if they did it individually (At least in the individual case I think it is fairly clear that the motive for deliberately refusing to work is irrelevant-if the reason was other forms of illegal discriminations, the case can go to court. but economically the worker and the company had already agreed voluntarily to a mutual contract ). If they do it en mass the comapany won't be able to afford to fire them all and so takes the case to court and the court has the right to charge fines.
I don't see any violation of anybody's rights in this. Surely you are not saying that they have a natural human right to refuse to work without consequence en mass but not individually?
So such economic actiosn of the unions is not related to the rights of the workers and shouldn't be linked to it. The debate should be in other areas.

Babak S at December 26, 2005 02:53 PM [permalink]:

On the human rights note, I should clarify that I am not suggesting anything remotely close to "denying union workers to ask for their rights and use their refusal to work as a pressure lever" although I doubut that violating the terms of a voluntary contract is a human right in itself. I agree that forming and joining a union is a human right, like the right to form and join a political party. And I accept that it is consistent that unions use their pressure levers, such as strikes, in order to achieve their human rights. In fact the "Tehran" part of the post is all about my support for such rights. In the "New York" part, however, I am suggesting that the "theory" that economic conditions can be improved through politics is largely false and refuted. Indeed attempts in that direction have, throughout history, consistently violated other, more fundamental, human rights: the right to life, and the right to freedom. These are the rights that underlie all other rights, including that to form and join unions.

Ali Mostashari at December 26, 2005 06:45 PM [permalink]:

AIS,

My point was made in reference with the threat of arrest for the transit workers in New York by the NYPD due to a court order ruling the strike illegal.

Babak,

The only way to regulate monopolies is politics. Transit is a monopoly and needs to be regulated, since there is no invisible hand creating competition. The case against Microsoft by the Supreme Court was one where politics ensured economic competitiveness. Politcal pressure is an extrenality that shifts the supply-demand function and brings it to a new equilibrium. Why would you have the right to join unions, but not to use unions to strike? This doesn't make sense.

When unions strike it is often not for freedom, it is for economic rights (that are included in the universal declaration of human rights). Strikes are indeed an economic regulation phenomenon and are often internalized by companies as is the cost of environmental destruction and the tragedy of the commons issue. All three can be integrated into a market economy. Laissez faire capitalism is long dead, even in the U.S. After the blunders of the Chicago School in the 1990s, the dominant interpretation of free markets accepts the positive role of government and civil society in regulating the market.

Markets can be quite powerful tools, when regulated to take into consideration social externalities. Market failures are not less destructive than government failures in many instances. Civil society is an insurance against both.

Another point you raised is the issue of representation. Sure union management represents union members and may not take their needs fully into consideration (as I indictated on your initial post). But the same prevails for corporations, where shareholders defer economic decisions to the company management. And then there are corporations like Enron which show how things can go wrong horribly when noone look sover their shoulder. I would suggest the movie "the corporation". Interesting movie to watch.

In summary, I think it is more balanced if you view markets not as the saviours of mankind, but as useful tools that can be used and abused like everything else (ideas, money, power). The key is to have a society that can have the needs of its constituents met using this tool alongside others.

In my personal view corporate social responsibility and other new initiatives that are the result of political (civil societal) pressure on corporations can create a powerful civil society in which relationships and modus operandi are negotiated among the actors in a way that social welfare is increased equitably.

Ali M. at December 26, 2005 06:48 PM [permalink]:

Sorry for the typos.

An Iranian Student (AIS) at December 28, 2005 01:39 AM [permalink]:

"... I think it is more balanced if you view markets not as the saviours of mankind, but as useful tools that can be used and abused like everything else (ideas, money, power). The key is to have a society that can have the needs of its constituents met using this tool alongside others."

This has nothing to do with "saviours" of mankind Ali and sure it sounds very pragmatic to use these tools to meet the needs of poeple.
One small thing though, this is not what the debate is about.
The whole point is about how to use these tools. They have features of their own and the only way they can be used efficiantly is to follow the inner mechanisms.
Intervening with that mechanism by laws and regulatiosn as you see fit to "meet the needs" only frustrates teh results.

Ali at December 28, 2005 11:42 AM [permalink]:

AIS,

My point is tools are not the goal, meeting social and human needs are. So if the tools cannot meet the needs you either make them compatible with the needs (taking into account their internal mechanisms) or use entirely different tools. Markets are incapable of dealing with externalities, and that is why regulations (environmental, social etc.) allow for internalization of externalities. The "polluter pays" priciple is one that is considered inefficient from a market perspective but deemed necessary from a social perspective.

AliS in Wonderland at December 28, 2005 12:17 PM [permalink]:

I am not sure if I totally understand one of your statements: Specifically I am referring to: " the basic freedoms being protected meant that the union members had the right both to discuss the strike before it happened, eventually go on strike, and only when their leaders were declared in contempt of the court, they would face the consequences of their breach of the court terms."

What I understand from your statement is you are stating: as long as everyone can do anything illegal and suffer the consequences the basic freedoms are protected. MTA workers and their union knew what they are going to do is illegal but they decided to do it (like knowing crossing the red line in an empty crossroads, stealing from others or committing murder is illegal but doing it and accepting the consequences). Is this what you are implying?

Babak S at December 28, 2005 04:53 PM [permalink]:

AliS in Wonderland,

I did not mean that "as long as" everyone can do illegal actions and suffer the consqeuences the basic freedoms are protected. The logical path is the other way around: if the basic freedoms and rights, including the right to be equal before the law, and the right not to be arrested arbitrarily, and the right to be heard before an impartial court, etc. are protected, an illegal action could be decided and its consequences enforced only through a court of law even if the person knows it is illegal beforehand. In fact knowing beforehand whether what you are doing is illegal—or legal—is an important necessary conditiion for the existence of the Rule of Law, which embodies most basic legal rights and freedoms. This is where the contrast with the situation in Tehran becomes clear: the prosecutor of Tehran in effect arrested the union leaders arbitrarily, on no or made-up charges, in fact before any strike.

Ali,

The failures of the market are overrated. I do not disagree with you that there are important instances that the market for a particular good may not be able to provide a different but related service or allocate different but related scarce resources efficiently, due to "free rider" or "public good" effects or else. But I think the role of the markets in helping with such rules and regulations as the reduction of pollution, etc is underestimated. Consider the two scenarios: passing a law banning pollutant emissions above a certain (and often arbitrary) level; passing a law to create a market for the costs of pollutant emissions. The former may be necessary when the pollution is reaching immediately dangerous levels that require swift action that may be beyond the elasticity of the market in the latter; but in other circumstances and when such immediacy is over, the latter scenario creates an impersonal and in that sense objective way of determining the acceptable level of pollution, allocating the costs of pollution reduction on those who are best able to handle them, and at the same time avoid the adverse effects of categorical rules in favour of incremental rules, and allow a larger measure of freedoms in economic activities, and thus most important of all, a stronger economy that is vital to meeting very important social and human needs (which are themselves often personal and not objective). Such markets do exist now, and will be expanding in the coming years. The point is, markets of different kind can play a far more important role in overcoming the failures of other markets, if the right legal framework is developed for them. That is often all that markets need in order to operate properly.

Ali at December 28, 2005 09:07 PM [permalink]:

Babak,

Maybe market failures aren't overrated, maybe you underestimate them due to your pre-disposition :) But your argument supports what I said before. It takes institutions, civil societal groups and the market to have a society that responds to the needs of the people. And these need to influence each other. None of these elements is superior to the others and none functions well without the others either. Markets are mindless instruments driven by human self-interest. The sigma of self-interested efforts does not constitute social interests.

For instance, there are extensive markets for personal landmines in Asia and Africa. And there are corporations making huge profit from this. From a market perspective, this should continue until there is no more demand (if there is no legal ban on personal landmines). If politics were not to interfere with economic decision-making these companies would continue to profit from human misery. This is because the people who buy these landmines aren't necessarily those who are blown up by it. This is where international bans on personal landmines close a market. Same issue with Heroin. Same issue with many other things where self-interest does not regulate itself. Thus the need for institutions and political interventions (extensively done in the U.S., Europe and Japan).

An Iranian Student (AIS) at December 30, 2005 06:06 AM [permalink]:

There is nno debate about tools being mistaken for goals.
The main debate here is that tools have a dynamiocs of their own that one should learn and use to one's own advantage, instead of imposing on'es own wishes on the functioning of the tool that will make it works much less efficiently. When you wait in a cold morning for you car to warm up before you can speed up, you are following this sensible mentality. The same is with markets.

The example you mentioned about pollution syas nothing about free market. The whole idea of free market is based on the premise that transaction are between two parties who willingly enter into it. If there are effects on a third party who has made no voluntary deal with the other two it os completely within the logic of free market to put limitations on such transactions because they in reality and inevitably include more people than those who make the phsyical act of signing a contract. The limitations put on such transactiosn is not something that has been imposed despite the basis of free market.
the point is, as Babk mentioned, that the real need ofr such limitatiosn is much much less than what actually happens under such good intentions when it is done your way. One should not put such limits unless absolutely necessary otherwise more negative effects ensue usually somewhere else (remember the car!)

An Iranian Student (AIS) at December 30, 2005 06:13 AM [permalink]:

I should have added that the thirds parties in this case have to be demonstrably shown to be harmed without their consent.
(Otherwise one can always argue that every transaction has some effect on others)

Ali at December 30, 2005 08:31 AM [permalink]:

AIS, bear in mind that most often the third party isn't even acknolwedged. Sometimes also the lack of information on one party can lead to a trade where willingness is a result of ignorance (the case of cigarette smoking, or workers willingly working in hazardous conditions). That is why in many instances harm is an externality that has to be internalized. Hence punitive damages etc. in court rulings against corporations.

I think we all agree on the principles that markets can be useful when regulated in a way that their internal mechanisms aren't disrupted, while disagreeing on how much regulation would cause unnecessary disruption. I for one support regulation that drives markets to innovate to minimize harm to society and maximize total welfare within the regulated constraints. The guiding principle for this would be the precautionary principle, and the restructuring of the demand-side. Government regulations can result in technological innovations by the private sector that would not have happened without those regulations. Hybrid vehicles are a prime example of this. On the other hand social pressure can result in a change in the market structure. The fair trade movement is a good example on how socially concious consumers can affect the market, forcing companies like Starbucks to trade equitably. In none of these examples did the external pressures on the markets disrupt their functions, they just shifted the supply/demand curves. Here total welfare is not only measured by the $ sign, but by additional attributes that determine the quality of life for people in a society (such as clean air, equitable access etc.)

Going back to the main theme of the discussion, I believe every actor in society has the right to use their political weight to influence economic decision-making that affects their lives directly. Governments have the responsbility to facilitate wealth generation for society, while ensuring that other societal needs are met and harm to the public is minimized. The balance is quite delicate. I would rather err on the side of the public than on the side of wealth generation, but I can see that others may have a different view.

An Iranian Student (AIS) at January 2, 2006 02:22 AM [permalink]:

Ali,

"Sometimes also the lack of information on one party can lead to a trade where willingness is a result of ignorance"

yes, and you know what, sometimes the second party or even the first party ;) are not aware of the harms. (Ever heard the idiom be careful what you wish).
Actually sometimes nobody knows the possible harms or advantages of a certain interaction (or action, or theory, or idea ....), and actually this sometimes is quite often, actually it is most of the time!

The solution is to try to find out whether they are harmful or not (and it costs money and its optimum efficiency is attainable almost solely in the free market), and then let those people know (again the best way to distribute information is in free market, free market fo ideas included), and then let them decide for themselves what they are or aren't willing to do. believe me, and this might come as a surprise to you, but each person cares more about his health and tha of his loved ones than the goevrnment, specialists or even you.

By all means, make consumers socially conscious, but do it by persuading them in a free and competative market of ideas, and its means of distributions. Do not use the power of the state to force it down their throats. That would lead to brain washing with good intentions.

Finally maybe you can explain why you consider "wealth generation" to be the opposite side of "the public".
This extremely narrominded dogma is perhaps the core of all the debates here.

Ali Mostashari at January 2, 2006 01:43 PM [permalink]:

AIS,

Who said wealth generation is opposed to "public interest"? I certainly do not believe this to be the case. But wealth generation alone does not guarantee public interest. The allocation of the generated wealth is crucial. Redistribution of generated wealth is an important component of both serving public interest holositically, and keeping markets efficient.

It is important to remember that unregulated markets tend to drive themselves towards monopolies and oligopolies. Regulations are necessary to keep markets in check both for their own sake and for the sake of the public.

There are public interests that are not met through the "invisible hand". These include social welfare systems that strengthen social cohesion, social services (to orphans, the elderly, the working disabled etc.) and basic science funding (cosmology and abstract math are necessary for human societies even if their products are not $). In my actual work, I am using the power of markets for development in developing countries, so I wouldn't dream of saying they cannot be useful for the public intterest.

As I said I believe markets are extremely useful tools, but like all other tools have to be used carefully.

I do not agree with you that a lay person knows more about what is good for their health than a public health professional. This is because of the information absorption capacity limitation of individuals. The entire field of public health has been founded based on this issue. I hope you are not suggesting that we abolish fields such as public health, public policy etc. because it would mean we are shoviung regulations down people's throats :)

Again, not sure how much we disagree on this, so I don't see how we can go beyond this point other than if a practical case comes along in which we can discuss the details.

My main point of total and absolute disagreement with you that i have discovered so far is the Israeli-Palestinian conflict :) But I think there is ample time to discuss that.

An Iranian Student (AIS) at January 3, 2006 01:40 AM [permalink]:

Dear Ali,

of course a specialist knows more in that speciality, but once a person gets the professional opinion of that specialist he definitely knows much better than than specialist what to do about his life and what is ultimately good for him. Don't you think so?

"These include social welfare systems that strengthen social cohesion..."

You are serious!? LOL! Welfare strengthening social cohesion? Wow!

yes, I know we have our differences in the Israeli /Palestinian issue. Who doesnt have difference of opinion about that issue? ;)

An Iranian Student (AIS) at January 3, 2006 03:05 AM [permalink]:

However, it is needless to say that those on the pro-palestinian side of this universal difference are wrong! ;->


Iranian Freedom fighter at February 6, 2006 12:03 AM [permalink]:

We need a smart revolution. People of Iran need to oppose this oppressive government by staying at home and shout the word "Freedom" from their houses every night. It should start on Thursday 9th of February at 8 pm. And again on Saturday 11th Feb 2006 and every two days from then on. Pass this on to all your friends and relatives within Iran. With the help of the West and all decent human beings around the world, and the effort of the Iranians themselves, We as the community of decent humans around the world should be able to get rid of these murderers ruling Iran by force. Remember, Thursday Night, 9th February 2006 at 8 pm

bgwebmast at February 6, 2007 06:00 PM [permalink]:

There is nno debate about tools being mistaken for goals.
The main debate here is that tools have a dynamiocs of their own that one should learn and use to one's own advantage, instead of imposing on'es own wishes on the functioning of the tool that will make it works much less efficiently. When you wait in a cold morning for you car to warm up before you can speed up, you are following this sensible mentality. The same is with markets.

tliziyns at March 2, 2007 06:10 AM [permalink]:

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