Inflation for the union

Given the number of posts I have already written and the amount of material I would still like to mention from Friedrich A. Hayek's essay Can We Still Avoid Inflation?, it may be best to read the essay for yourself. I preface the following excerpt with a warning that I have a hard time understanding the benefit of labor unions. I know of many stories of how poorly labor used to be treated and the battles fought to influence management, but I see labor unions as another body to concentrate and misuse power by a few individuals in the name of a group. Now that my biases are on the table, I want to share a taste of what Hayek has to say about inflation and the influence of labor union policies.

Before I proceed with this main point, however, I must still say a few words about the alleged indispensability of inflation as a condition of rapid growth. We shall see that modern developments of labor union policies in the highly industrialized countries may there indeed have created a position in which both growth and a reasonably high and stable level of employment may, so long as those policies continue, make inflation the only effective means of overcoming the obstacles created by them.

This certainly describes the situation we find ourselves in today. Perhaps we will still yet see widespread bargaining agreements were labor unions agree to decreases in pay and benefits, but it will not come without much wailing and gnashing of teeth. It is also unlikely to find management that is ready to stand up for the future of the company and not give unfulfillable promises to labor to appease the current groans for more.

I hope my feelings on the matter are plain enough. The continuation of the paragraph from Hayek adds more fuel to the fire.

But this does not mean that inflation is, in normal conditions, and especially in less developed countries, required or even favorable for growth. None of the great industrial powers of the modern world has reached its position in periods of depreciating money. British prices in 1914 were, so far as meaningful comparisons can be made over such long periods, just about where they had been two hundred years before, and American prices in 1939 were also at about the same level as at the earliest point of time for which we have data, 1749. Though it is largely true that world history is a history of inflation, the few success stories we find are on the whole the stories of countries and periods which have preserved a stable currency; and in the past a deterioration of the value of money has usually gone hand in hand with economic decay.

I do not have the data to back this up, but it appeals strongly to the sense of logic that I have developed throughout my life and my experiences.