Reflections of an Institutional Economist: Charles Whalen, Part III

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This is the third of a four-part series in which the author reflects on four decades of studying and working in the institutionalist tradition of economics. Dr. Charles Whalen is a visiting scholar at the Baldy Center for Law and Social Policy, University at Buffalo, and served as the 2018 president of the Association for Evolutionary Economics, an international organization for economists and other social scientists seeking to advance the institutionalist tradition. Whalen's remarks are summarized in four parts: Beginnings; The Nature of Institutional Economics; John R. Commons’s Continuing Relevance; and Assessing the Economy, and will be released each Monday from February 10th to March 2nd, 2020.



Reflections of an Institutional Economist
Charles Whalen[1]

Part III. Reclaiming the “Right to Work” as a Progressive Cause:
John R. Commons’s Continuing Relevance


Today in the United States, a number of members of Congress — including some running for President — support proposals that would establish a job guarantee for all Americans seeking work. Much of the research providing intellectual support for such proposals comes from economists writing in the 1980s about the need for government to serve as an “employer of last resort.”[2]

However, arguments for that policy idea can be traced back much further: John R. Commons, a founding contributor to institutional economics, wrote in favor of government jobs for the unemployed as early as the 1890s. Back then, the “right to work” was a progressive cause, aimed at providing jobs for the unemployed; not until the 1940s did it become associated with anti-union legislation. This blog post illustrates Commons’s continuing relevance by reviewing his argument on government’s role in ensuring jobs for people who are out of work.[3]

In a series of works published between 1893 and 1900, Commons presented the right to work as a logical extension of the right to life and liberty, each of which, he argued, must be secured by government.[4] Drawing on those works, Commons’s argument can be outlined as follows.

First, the right to liberty is not a single right. Rather, it’s “a bundle of rights,” which grants us freedom to do many things, including contract with others, leave one employer and work for another, and establish a new enterprise. The bundle evolves over time, as society recognizes that conditions have changed.

Second, economic conditions in the United States changed considerably during the second half of the 19th century. In particular, Commons argued it was no longer possible for many wage earners to acquire the land, equipment, and financial resources needed to establish a farm or business. Land had become scarce; industrialization made expensive machinery necessary for production; and monopolies made it difficult for modest operations to compete. As a result, wage labor was often the only route to providing for one’s self and family.

Third, the new economic conditions of the late 19th century threatened the right to life and liberty—not only by limiting people’s options, but also by increasing the element of coercion in the employment relationship. When it comes to hiring, and bargaining over wages and other conditions of employment, employers can use persuasion, but they also benefit from a worker’s fear of deprivation. And, since most workers in the 1890s had no option but wage labor, employees were in a weak bargaining position.

As a result, Commons concluded that the “bundle of rights” must be updated to contain the right to work. That right would be defined and enforced by a web of laws aimed at unemployment prevention, unemployment compensation, and public employment. Taken as a whole, Commons saw this web as “the next great human right.”[5]

On the matter of public employment, Commons called for providing the unemployed with the right “to have work furnished by the government.”[6] The thrust of this recommendation was aimed at the loss of employment caused by business-cycle downturns, but Commons also suggested that public employment would be needed to help some displaced workers at all business-cycle stages. In addition, he saw such employment as a wage policy as well as an employment policy: “The right to employment would give laborers steady work throughout the year, and ... abolish involuntary poverty among the able-bodied.”[7]

To summarize: the “bundle of rights” that Commons envisioned would expand the liberty of working people—by reducing coercion and capricious use of power in employment relations, by increasing employment security and economic security, by providing new economic opportunities, and by bolstering incomes. In short, furnishing work for the unemployed was part of his overall aim to “save capitalism by making it good.”[8]

Sometime ago, John Kenneth Galbraith argued that the New Deal was deeply conservative, “because it was intended to preserve the social tranquility and sense of belonging without which capitalism could not have survived—and still will not survive.”[9] In my view, so it is today with the right to work. In fact, today’s challenge is not merely to preserve social tranquility, but also to avert an irreversible ecological crisis triggered by global warming.[10]

A job guarantee isn’t a cure-all. Still, such a policy—especially if accompanied by healthcare and other employee benefits—could be of great help to individuals and communities even in the current period, when the official rate of unemployment is low. Besides, it’s better to put the public-service employment machinery into place during a period of low unemployment—a point that Commons and colleagues made in a 1925 book on preventing and coping with unemployment, which he saw as “the outstanding defect of capitalism.”[11]

The bottom line: the right to work can be reclaimed as a progressive cause—and even Common’s earliest writings remain relevant to our economic challenges and policy discussions.

[1] The author is a visiting scholar in the Baldy Center for Law and Social Policy, University at Buffalo. These remarks were originally prepared for a two-day exploration of institutional economics, convened at Michigan State University, May 16-17, 2019.
[2] See, for example, Hyman P. Minsky, Stabilizing an Unstable Economy (New Haven: Yale University Press, 1986), pp. 308-313.
[3] Over the course of his career, Commons actually produced three arguments favoring government as employer of last resort. The argument here, which was the first to appear in his writings, is what I call the “legal” case for the right to work. Later in his career, Commons also offered “financial” and “historical” arguments. For a more detailed discussion of Common’s legal argument, see Charles J. Whalen, “Institutional Economics and Chock-Full Employment: Reclaiming the “Right to Work as a Cornerstone of Progressive Capitalism,” Journal of Economic Issues (June 2019), pp. 321-340. The other arguments are outlined in Charles J. Whalen, “John R. Commons and Government as Employer of Last Resort: Three Paths to a Progressive Right to Work,” presented on January 4, 2020, at the annual meeting of the Association for Evolutionary Economics, in San Diego, California.
[4] See the following by Commons: The Distribution of Wealth (New York: Macmillan and Company, 1893); “The Right to Work,” The Arena 21: 2 (1899), pp. 131–142; and “A Sociological View of Sovereignty, Part VI,” American Journal of Sociology 5: 6 (1900), pp. 814–825.
[5] Commons, The Distribution of Wealth, pp. 80-81.
[6] Commons, The Distribution of Wealth, p. 81.
[7] Commons, “The Right to Work,” p. 141.
[8] John R. Commons, Myself (New York: Macmillan, 1934), p. 143.
[9] John Kenneth Galbraith, “Franklin D. Roosevelt Recalled as a ‘Superbly Practical Man’.” The Boston Globe March 4, 1983, p. 2.
[10] For a discussion of the role that a progressive right to work could play in addressing today’s economic, social, and environmental challenges, see Whalen, “Institutional Economics and Chock-Full Employment,” cited above. While economic conditions have certainly continued to evolve since Commons wrote on the need for an updated bundle of rights, joblessness—the threat of it as well as the reality—remains among the most serous of all labor problems.
[11] Lewisohn, Sam A, Ernest G. Draper, John R. Commons, and Don D. Lescohier. 1925. Can
Business Prevent Unemployment? (New York: Alfred A Knopf, 1925), p. 52.

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