I still lived in Ukraine when the union of coal miners in the Donbass region launched a strike demanding higher wages at a time of rapid inflation. This was in the early 1990s, the first years of Ukrainian independence. The timing couldn’t be worse for the barely surviving industries that depended on coal-generated power, as the rest of the country struggled to stay warm in the winter. The miners did get their pay hike. It affected the cost of heating, power, metals, and just about everything else in the country. As the prices went up, the overall gain for the miners was zero but everyone else’s lives became even more miserable.
The Donbass miners felt they were cheated and went on another strike. Well-positioned to hold the country by the throat, their union demanded one wage hike after another. The cycle repeated over and over, still leaving the miners with no gain but driving all others, especially the pensioners, into abject privation.
Before long, other unions demanded higher wages, supported by angry workers envious of the “privileged” status of the Donbass coal miners. In an overstretched economy, new pay hikes ended up driving consumer prices through the roof. The wage race was as irrational as cutting a hole in the back of a shirt to patch a tear in the front, but such is the nature of collectivist pressure groups that can’t help but fulfill their purpose of extracting privileges for themselves at the expense of everyone else — even in the face of an imminent economic catastrophe.
They got their wish. Soon everyone became a millionaire, walking around with bags full of money because their pockets could no longer fit the huge wads of cash required to buy a loaf of bread, whose cost was now in the thousands. And even that money they had to spend fast; by the end of the week it was worthless. My friend invested part of his rapidly dwindling savings into a pearl necklace for his wife, half-joking that someday they might be lucky to trade it for a warm meal.
We all learned a new word, “hyperinflation.” It equalized everyone, including the Donbass coal miners.
One by one, factories started to shut down. The ones that stayed open began to pay workers with their own products. A neighbor who worked at the knitting factory brought home boxes of socks and stockings instead of money. A mother of two, she spent weeks trying to barter the socks for food and other things her family needed, which made her apartment a “sock exchange” and her a “sock broker.” My other neighbor worked at a fertilizer plant; he wasn’t so lucky. His plant simply closed. Barter was now the law of the land; people and businesses mostly traded in goods, often in complicated multi-party combinations. But the preferred currency was, of course, the U.S. dollar, which was a sign of progress, given that only a few years earlier, owning “capitalist currencies” could result in a visit from the KGB.
The Donbass coal miners also lost their jobs as their customers either had to shut down or pay them with socks. The little good that came out of their strikes amounted to exposing the philosophical link between trade unionism and communism, and showing why communism doesn’t work. It also taught me four things everyone needs to know about inflated union wages, especially those extracted by holding a gasping nation by the throat:
1. Inflated union wages are a form of forced redistribution of wealth. They use government protection to suck other people’s money in, without giving anything back.
2. Inflated union wages are futile. They lead to inflated prices; the union members do not become richer but everyone else becomes poorer.
3. Inflated union wages produce an economic monster that ravages the country and eventually consumes its own creators. In richer nations it moves slower due to the abundance of nourishment; in poorer nations it quickly destroys economies, causing massive and unwarranted suffering.
4. Inflated union wages are immoral.
I now live in the United States, where inflated union wages have already priced the American steel industry out of existence, making the Pittsburgh Steelers an anachronistic reminder of the city’s industrial past. Next is the American auto industry, which has become a gigantic union-run welfare agency whose byproduct happens to be automobiles.
An article by Brent Littlefield in PJ Media describes the reasons: “An unbelievable $1,500 of the cost of each domestic vehicle pays for UAW (United Auto Workers) health insurance. That’s more than was spent on the steel. As a result, Americans shop elsewhere: U.S. automakers produce less than 50 percent of the vehicles Americans now buy.”