Under classical conceptions of monopoly, economists and lawyers often interpreted labor unions as unfair barriers to competition. Instead of allowing employers to freely compete for individual workers, their reasoning went, unions forced them to negotiate with a cartel. In the 1920s, an influential Austrian economist, Ludwig von Mises, declared that the entire function of labor unions was to prevent fair competition for wages through the threat of “primitive violence” against strikebreakers.
But under Robinson’s framework, it was not unions that created competition problems in the market for labor; instead, labor markets were anti-competitive by their very nature, except in rare, special cases. In effect, she had reimagined competition policy as a labor-rights issue. The problems she exposed were not the excesses of a few over-the-top corporate behemoths, resolved with a few breakups and spinoffs. Monopsony, Robinson’s argued, is endemic to the labor market and demands an ongoing regulatory response throughout the economy.
By the time Robinson published her landmark book, she was already partnering with another genius at Cambridge, John Maynard Keynes, on what would become “The General Theory of Employment, Interest and Money,” published in 1936. Though the byline went to Keynes, the book was the product of a collaboration between him, his closest aide, Richard Kahn, and Robinson. It would revolutionize economics, providing a new intellectual justification for government budget deficits, relief aid and jobs spending. Like Robinson’s work on competition, it emphasized that full employment, another ideal of classical economics, was not a normal product of the market, but rather a rare, special case. A large majority of the time, Keynes and Robinson argued, governments would have to spend money and run deficits to ensure that everyone who wanted a job could have one.
As “The General Theory” guided policymakers through the 20th century, Robinson’s work on competition reached a wide audience, but largely through its influence on John Kenneth Galbraith, who incorporated her ideas into his own best-selling books. But with the rise of Milton Friedman in the 1970s, the economics profession once again began invoking the natural harmony of the free market as the cure for social evil. Robinson died in 1983 without ever enjoying the public recognition her male friends received.
Today, however, her ideas are enjoying a remarkable renaissance. The renewed influence of “The General Theory” has been evident in the series of multi-trillion-dollar stimulus bills signed into law over the past year. And a continuing revival of interest in monopsony may prove equally potent. A growing body of empirical literature indicates that Robinson’s conceptual insights were correct: Intensifying corporate concentration has suppressed worker wages over the…
Read More: Opinion | The Woman Who Shattered the Myth of the Free Market