Labor Struggle in a Free Market
(posted by Kevin Carson)
One of the most common questions raised about a hypothetical free market society concerns worker protection laws of various kinds. As Roderick Long puts it,
In a free nation, will employees be at the mercy of employers?… Under current law, employers are often forbidden to pay wages lower than a certain amount; to demand that employees work in hazardous conditions (or sleep with the boss); or to fire without cause or notice. What would be the fate of employees without these protections?
Long argues that, despite the absence of many of today’s formal legal protections, the shift of bargaining power toward workers in a free labor market will result in “a reduction in the petty tyrannies of the job world.”
Employers will be legally free to demand anything they want of their employees. They will be permitted to sexually harass them, to make them perform hazardous work under risky conditions, to fire them without notice, and so forth. But bargaining power will have shifted to favor the employee. Since prosperous economies generally see an increase in the number of new ventures but a decrease in the birth rate, jobs will be chasing workers rather than vice versa. Employees will not feel coerced into accepting mistreatment because it will be so much easier to find a new job. And workers will have more clout, when initially hired, to demand a contract which rules out certain treatment, mandates reasonable notice for layoffs, stipulates parental leave, or whatever. And the kind of horizontal coordination made possible by telecommunications networking opens up the prospect that unions could become effective at collective bargaining without having to surrender authority to a union boss.
This last is especially important. Present-day labor law limits the bargaining power of labor at least as much as it reinforces it. That’s especially true of reactionary legislation like Taft-Hartley and state right-to-work laws. Both are clearly abhorrent to free market principles.
Taft-Hartley, for example, prohibited many of the most successful labor strategies during the CIO organizing strikes of the early ’30s. The CIO planned strikes like a general staff plans a campaign, with strikes in a plant supported by sympathy and boycott strikes up and down the production chain, from suppliers to outlets, and supported by transport workers refusing to haul scab cargo. At their best, the CIO’s strikes turned into regional general strikes.
Right-wing libertarians of the vulgar sort like to argue that unions depend primarily on the threat of force, backed by the state, to exclude non-union workers (see here and here). Without forcible exclusion of scabs, they say, strikes would almost always turn into lockouts and union defeats. Although this has acquired the status of dogma at Mises.Org, it’s nonsense on stilts. The primary reason for the effectiveness of a strike is not the exclusion of scabs, but the transaction costs involved in hiring and training replacement workers, and the steep loss of productivity entailed in the disruption of human capital, institutional memory, and tacit knowledge.
With the strike is organized in depth, with multiple lines of defense — those sympathy and boycott strikes at every stage of production — the cost and disruption have a multiplier effect far beyond that of a strike in a single plant. Under such conditions, even a large minority of workers walking off the job at each stage of production can be quite effective.
Taft-Hartley greatly reduced the effectiveness of strikes at individual plants by prohibiting such coordination of actions across multiple plants or industries. Taft-Hartley’s cooling off periods also gave employers advance warning time to prepare for such disruptions, and greatly reduced the informational rents embodied in the training of the existing workforce. Were such restrictions on sympathy and boycott strikes in suppliers [not] in place, today’s “just-in-time” economy would likely be far more vulnerable to disruption than that of the 1930s.
But long before Taft-Hartley, the labor law regime of the New Deal had already created a fundamental shift in the form of labor struggle.
Before Wagner and the NLRB-enforced collective bargaining process, labor struggle was less focused on strikes, and more focused on what workers did in the workplace itself to exert leverage against management. They focused, in other words, on what the Wobblies call “direct action on the job”; or in the colorful phrase of a British radical workers’ daily at the turn of the century, “staying in on strike.” The reasoning was explained in the Wobbly Pamphlet “How to Fire Your Boss: A Worker’s Guide to Direct Action“:
The bosses, with their large financial reserves, are better able to withstand a long drawn-out strike than the workers. In many cases, court injunctions will freeze or confiscate the union’s strike funds. And worst of all, a long walk-out only gives the boss a chance to replace striking workers with a scab (replacement) workforce.
Workers are far more effective when they take direct action while still on the job. By deliberately reducing the boss’ profits while continuing to collect wages, you can cripple the boss without giving some scab the opportunity to take your job.
Such tactics included slowdowns, sick-ins, random one-day walkouts at unannounced intervals, working to rule, “good work” strikes, and “open mouth sabotage.” Labor followed, in other words, a classic asymmetric warfare model. Instead of playing by the enemy’s rules and suffering one honorable defeat after another, they played by their own rules and mercilessly exploited the enemy’s weak points.
The whole purpose of the Wagner regime was to put an end to this asymmetric warfare model. As Thomas Ferguson and G. William Domhoff have both argued, corporate backing for the New Deal labor accord came mainly from capital-intensive industry — the heart of the New Deal coalition in general. Because of the complicated technical nature of their production processes and their long planning horizons, their management required long-term stability and predictability. At the same time, because they were extremely capital-intensive, labor costs were a relatively modest part of total costs. Management, therefore, was willing to trade significant wage increases and job security for social peace on the job. Wagner came about, not because the workers were begging for it, but because the bosses were begging for a regime of enforceable labor contracts.
The purpose of the Wagner regime was to divert labor away from the asymmetric warfare model to a new one, in which union bureaucrats enforced the terms of contracts on their own membership. The primary function of union bureaucracies, under the new order, was to suppress wildcat action by their rank and file, to suppress direct action on the job, and to limit labor action to declared strikes under NLRB rules.
The New Deal labor agenda had the same practical effect as telling the militiamen at Lexington and Concord to come out from behind the rocks, put on bright red uniforms, and march in parade ground formation, in return for a system of arbitration to guarantee they didn’t lose all the time.
The problem is that the bosses decided, long ago, that labor was still winning too much of the time even under the Wagner regime. Their first response was Taft-Hartley and the right-to-work laws. From that point on, union membership stopped growing and then began a slow and inexorable process of decline that continues to the present day. The process picked up momentum around 1970, when management decided that the New Deal labor accord had outlived its usefulness altogether, and embraced the full union-busting potential under Taft-Hartley in earnest. But the official labor movement still foregoes the weapons it lay down in the 1930s. It sticks to wearing its bright red uniforms and marching in parade-ground formation, and gets massacred every time.
Labor needs to reconsider its strategy, and in particular to take a new look at the asymmetric warfare techniques it has abandoned for so long.
The effectiveness of these techniques is a logical result of the incomplete nature of the labor contract. According to Michael Reich and James Devine,
Conflict is inherent in the employment relation because the employer does not purchase a specified quantity of performed labor, but rather control over the worker’s capacity to work over a given time period, and because the workers’ goals differ from those of the employer. The amount of labor actually done is determined by a struggle between workers and capitalists.
The labor contract is incomplete because it is impossible for a contract to specify, ahead of time, the exact levels of effort and standards of performance expected of workers. The specific terms of the contract can only be worked out in the contested terrain of the workplace.
The problem is compounded by the fact that management’s authority in the workplace isn’t exogenous: that is, it isn’t enforced by the external legal system, at zero cost to the employer. Rather, it’s endogenous: management’s authority is enforced entirely with the resources and at the expense of the company. And workers’ compliance with directives is frequently costly — and sometimes impossible — to enforce. Employers are forced to resort to endogenous enforcement
when there is no relevant third party…, when the contested attribute can be measured only imperfectly or at considerable cost (work effort, for example, or the degree of risk assumed by a firm’s management), when the relevant evidence is not admissible in a court of law…[,] when there is no possible means of redress…, or when the nature of the contingencies concerning future states of the world relevant to the exchange precludes writing a fully specified contract.
In such cases the ex post terms of exchange are determined by the structure of the interaction between A and B, and in particular on the strategies A is able to adopt to induce B to provide the desired level of the contested attribute, and the counter strategies available to B….
An employment relationship is established when, in return for a wage, the worker B agrees to submit to the authority of the employer A for a specified period of time in return for a wage w. While the employer’s promise to pay the wage is legally enforceable, the worker’s promise to bestow an adequate level of effort and care upon the tasks assigned, even if offered, is not. Work is subjectively costly for the worker to provide, valuable to the employer, and costly to measure. The manager-worker relationship is thus a contested exchange. [Samuel Bowles and Herbert Gintis, "Is the Demand for Workplace Democracy Redundant in a Liberal Economy?," in Ugo Pagano and Robert Rowthorn, eds., Democracy and Effciency in the Economic Enterprise.]
Since it is impossible to define the terms of the contract exhaustively up front, “bargaining” — as Oliver Williamson puts it — “is pervasive.”
The classic illustration of the contested nature of the workplace under incomplete labor contracting, and the pervasiveness of bargaining, is the struggle over the pace and intensity of work, reflected in both the slowdown and working to rule.
At its most basic, the struggle over the pace of work is displayed in what Oliver Williamson calls “perfunctory cooperation” (as opposed to consummate cooperation):
Consummate cooperation is an affirmative job attitude–to include the use of judgment, filling gaps, and taking initiative in an instrumental way. Perfunctory cooperation, by contrast, involves job performance of a minimally acceptable sort…. The upshot is that workers, by shifting to a perfunctory performance mode, are in a position to “destroy” idiosyncratic efficiency gains.
He quotes Peter Blau and Richard Scott’s observation to the same effect:
…[T]he contract obligates employees to perform only a set of duties in accordance with minimum standards and does not assure their striving to achieve optimum performance…. [L]egal authority does not and cannot command the employee’s willingness to devote his ingenuity and energy to performing his tasks to the best of his ability…. It promotes compliance with directives and discipline, but does not encourage employees to exert effort, to accept responsibilities, or to exercise initiative.
Legal authority, likewise, “does not and cannot” proscribe working to rule, which is nothing but obeying management’s directives literally and without question. If they’re the brains behind the operation, and we get paid to shut up and do what we’re told, then by God that’s just what we’ll do.
Disgruntled workers, Williamson suggests, will respond to intrusive or authoritarian attempts at surveillance and monitoring with a passive-aggressive strategy of compliance in areas where effective metering is possible — while shifting their perfunctory compliance (or worse) into areas where it is impossible. True to the asymmetric warfare model, the costs of management measures for verifying compliance are generally far greater than the costs of circumventing those measures.
As frequent commenter Jeremy Weiland says, “You are the monkey wrench“:
Their need for us to behave in an orderly, predictable manner is a vulnerability of theirs; it can be exploited. You have the ability to transform from a replaceable part into a monkey wrench.
At this point, some libertarians are probably stopping up their ears and going “La la la la, I can’t hear you, la la la la!” Under the values most of us have been encultured into, values which are reinforced by the decidely pro-employer and anti-worker libertarian mainstream, such deliberate sabotage of productivity and witholding of effort are tantamount to lèse majesté.
But there’s no rational basis for this emotional reaction. The fact that we take such a viscerally asymmetrical view of the respective rights and obligations of employers and employees is, itself, evidence that cultural hangovers from master-servant relationships have contaminated our understanding of the employment relation in a free market.
The employer and employee, under free market principles, are equal parties to the employment contract. As things normally work now, and as mainstream libertarianism unfortunately take for granted, the employer is expected as a normal matter of course to take advantage of the incomplete nature of the employment contract. One can hardly go to Cato or Mises.Org on any given day without stumbling across an article lionizing the employer’s right to extract maximum effort in return for minimum pay, if he can get away with it. His rights to change the terms of the employment relation, to speed up the work process, to maximize work per dollar of wages, are his by the grace of God.
Well, if the worker and employer really are equal parties to a voluntary contract, as free market theory says they are, then it works both ways. The worker’s attempts to maximize his own utility, under the contested terms of an incomplete contract, are every bit as morally legitimate as those of the boss. The worker has every bit as much of a right to attempt to minimize his effort per dollar of wages as the boss has to attempt to maximize it. What constitutes a fair level of effort is entirely a subjective cultural norm, that can only be determined by the real-world bargaining strength of bosses and workers in a particular workplace.
And as Kevin Depew argues, the continued barrage of downsizing, speedups, and stress will likely result in a drastic shift in workers’ subjective perceptions of a fair level of effort and of the legitimate ways to slow down.
Productivity, like most “financial virtues,” is the product of positive social mood trends.
As social mood transitions to negative, we can expect to see less and less “virtue” in hard work.
Think about it: real wages are virtually stagnant, so it’s not as if people have experienced real reward for their work.
What has been experienced is an unconscious and shared herding impulse trending upward; a shared optimistic mood finding “joy” and “happiness” in work and denigrating the sole pursuit of leisure, idleness.
If social mood has, in fact, peaked, we can expect to see a different attitude toward work and productivity emerge.
The problem is that, to date, bosses have fully capitalized on the potential of the incomplete contract, whereas workers have not. And the only thing preventing workers from doing so is the little boss inside their heads, the cultural holdover from master-servant days, that tells them it’s wrong to do so. I aim to kill that little guy. And I believe that when workers fully realize the potential of the incomplete labor contract, and become as willing to exploit it as the bosses have all these years, we’ll mop the floor with their asses. And we can do it in a free market, without any “help” from the NLRB. Let the bosses beg for help.
One aspect of direct action that especially interests me is so-called “open-mouth sabotage,” which (like most forms of networked resistance) has seen its potential increased by several orders of magnitude by the Internet.
Labor struggle, at least the kind conducted on asymmetric warfare principles, is just one subset of the general category of networked resistance. In the military realm, networked resistance is commonly discussed under the general heading of Fourth Generation Warfare.
In the field of radical political activism, networked organization represents a quantum increase in the “crisis of governability” that Samuel Huntington complained of in the early ’70s. The coupling of networked political organization with the Internet in the ’90s was the subject of a rather panic-stricken genre of literature at the Rand Corporation, most of it written by David Ronfeldt and John Arquilla. The first major Rand study on the subject concerned the Zapatistas’ global political support network, and was written before the Seattle demos. Loosely networked coalitions of affinity groups, organizing through the Internet, could throw together large demonstrations with little notice, and “swarm” government and mainstream media with phone calls, letters, and emails far beyond their capacity to absorb. Given this elite reaction to what turned out to be a mere foreshadowing, the Seattle demonstrations of December 1999 and the anti-globalization demonstrations that followed must have been especially dramatic. There is strong evidence (which I discussed here) that the “counter-terrorism” powers sought by Clinton, and by the Bush administration after 9/11, were desired by federal law enforcement mainly to go after the anti-globalization movement.
Let’s review just what was entailed in the traditional technique of “open-mouth sabotage.” From the same Wobbly pamphlet quoted above:
Sometimes simply telling people the truth about what goes on at work can put a lot of pressure on the boss. Consumer industries like restaurants and packing plants are the most vulnerable. And again, as in the case of the Good Work Strike, you’ll be gaining the support of the public, whose patronage can make or break a business.
Whistle Blowing can be as simple as a face-to-face conversation with a customer, or it can be as dramatic as the P.G.&E. engineer who revealed that the blueprints to the Diablo Canyon nuclear reactor had been reversed. Upton Sinclair’s novel The Jungle blew the lid off the scandalous health standards and working conditions of the meatpacking industry when it was published earlier this century.
Waiters can tell their restaurant clients about the various shortcuts and substitutions that go into creating the faux-haute cuisine being served to them. Just as Work to Rule puts an end to the usual relaxation of standards, Whistle Blowing reveals it for all to know.
The Internet has increased the potential for “open mouth sabotage” by several orders of magnitude.
The first really prominent example of the open mouth, in the networked age, was the so-called McLibel case, in which McDonalds used a SLAPP lawsuit to suppress pamphleteers highly critical of their company. Even in the early days of the Internet, bad publicity over the trial and the defendants’ savvy use of the trial as a platform, drew far, far more negative attention to McDonalds than the pamphleteers could have done without the company’s help.
In 2004, the Sinclair Media and Diebold cases showed that, in a world of bittorrent and mirror sites, it was literally impossible to suppress information once it had been made public. As recounted by Yochai Benkler, Sinclair Media resorted to a SLAPP lawsuit to stop a boycott campaign against their company, aimed at both shareholders and advertisers, over their airing of an anti-Kerry documentary by the SwiftBoaters. Sinclair found the movement impossible to suppress, as the original campaign websites were mirrored faster than they could be shut down, and the value of their stock imploded. As also reported by Benkler, Diebold resorted to tactics much like those the RIAA uses against file-sharers, to shut down sites which published internal company documents about their voting machines. The memos were quickly distributed, by bittorrent, to more hard drives than anybody could count, and Diebold found itself playing whack-a-mole as the mirror sites displaying the information proliferated exponentially.
One of the most entertaining cases involved the MPAA’s attempt to suppress DeCSS, Jon Johansen’s CSS descrambler for DVDs. The code was posted all over the blogosphere, in a deliberate act of defiance, and even printed on T-shirts.
In the Alisher Usmanov case, the blogosphere lined up in defense of Craig Murray, who exposed the corruption of post-Soviet Uzbek oligarch Usmanov, against the latter’s attempt to suppress Murray’s site.
Finally, in the recent Wikileaks case, a judge’s order to disable the site
didn’t have any real impact on the availability of the Baer documents. Because Wikileaks operates sites like Wikileaks.cx in other countries, the documents remained widely available, both in the United States and abroad, and the effort to suppress access to them caused them to rocket across the Internet, drawing millions of hits on other web sites.
This is what’s known as the “Streisand Effect”: attempts to suppress embarrassing information result in more negative publicity than the original information itself.
The Streisand Effect is displayed every time an employer fires a blogger (the phenomenon known as “Doocing,” after the first prominent example of it) over embarrassing comments about the workplace. The phenomenon has attracted considerable attention in the mainstream media. In most cases, employers who attempt to suppress embarrassing comments by disgruntled workers are blindsided by the much, much worse publicity resulting from the suppression attempt itself. Instead of a regular blog readership of a few hundred reading that “Employer X Sucks,” the blogosphere or a wire service picks up the story, and tens of millions of people read “Blogger Fired for Revealing Employer X Sucks.” It may take a while, but the bosses will eventually learn that, for the first time since the rise of the large corporation and the broadcast culture, we can talk back –- and not only is it absolutely impossible to shut us up, but we’ll keep making more and more noise the more they try to do so.
To grasp just how breathtaking the potential is for open-mouth sabotage, and for networked anti-corporate resistance by consumers and workers, just consider the proliferation of anonymous employernamesucks.com sites. The potential results from the anonymity of the writeable web, the comparative ease of setting up anonymous sites (through third country proxy servers, if necessary), and the possibility of simply emailing large volumes of embarrassing information to everyone you can think of whose knowledge might be embarrassing to an employer.
Regarding this last, it’s pretty easy to compile a devastating email distribution list with a little Internet legwork. You might include the management of your company’s suppliers, outlets, and other business clients, reporters who specialize in your industry, mainstream media outlets, alternative news outlets, worker and consumer advocacy groups, corporate watchdog organizations specializing in your industry, and the major bloggers who specialize in such news. If your problem is with the management of a local branch of a corporate chain, you might add to the distribution list all the community service organizations your bosses belong to, and CC it to corporate headquarters to let them know just how much embarrassment your bosses have caused them. The next step is to set up a dedicated, web-based email account accessed from someplace secure. Then it’s pretty easy to compile a textfile of all the dirt on their corruption and mismanagement, and the poor quality of customer service (with management contact info, of course). The only thing left is to click “Attach,” and then click “Send.” The barrage of emails, phone calls and faxes should hit the management suite like an A-bomb.
So what model will labor need to follow, in the vacuum left by the near total collapse of the Wagner regime and the near-total defeat of the establishment unions? Part of the answer lies with the Wobbly “direct action on the job” model discussed above. A great deal of it, in particular, lies with the application of “open mouth sabotage” on a society-wide scale as exemplified by cases like McLibel, Sinclair, Diebold, and Wikileaks, described above.
Another piece of the puzzle has been suggested by the I.W.W.’s Alexis Buss, in her writing on “minority unionism”:
If unionism is to become a movement again, we need to break out of the current model, one that has come to rely on a recipe increasingly difficult to prepare: a majority of workers vote a union in, a contract is bargained. We need to return to the sort of rank-and-file on-the-job agitating that won the 8-hour day and built unions as a vital force….
Minority unionism happens on our own terms, regardless of legal recognition….
U.S. & Canadian labor relations regimes are set up on the premise that you need a majority of workers to have a union, generally government-certified in a worldwide context[;] this is a relatively rare set-up. And even in North America, the notion that a union needs official recognition or majority status to have the right to represent its members is of relatively recent origin, thanks mostly to the choice of business unions to trade rank-and-file strength for legal maintenance of membership guarantees.
The labor movement was not built through majority unionism-it couldn’t have been.
How are we going to get off of this road? We must stop making gaining legal recognition and a contract the point of our organizing….
We have to bring about a situation where the bosses, not the union, want the contract. We need to create situations where bosses will offer us concessions to get our cooperation. Make them beg for It.
But more than anything, the future is being worked out in the current practice of labor struggle itself. We’re already seeing a series of prominent labor victories resulting from the networked resistance model.
The Wal-Mart Workers’ Association, although it doesn’t have an NLRB-certified local in a single Wal-Mart store, is a de facto labor union. And it has achieved victories through “associates” picketing and pamphleting stories on their own time, through swarming via the strategic use of press releases and networking, and through the same sort of support network that Ronfeldt and Arquilla remarked on in the case of the pro-Zapatista campaign. By using negative publicity to emabarrass the company, the Association has repeatedly obtained concessions from Wal-Mart. Even a conventional liberal like Ezra Klein understands the importance of such unconventional action.
The Coalition of Imolakee Workers, a movement of Indian agricultural laborers who supply many of the tomatoes used by the fast food industry, has used a similar support network, with the coordinated use of leaflets and picketing, petition drives, and boycotts, to obtain major concessions from Taco Bell, McDonalds, Burger King, and KFC. Blogger Charles Johnson provides inspiring details here and here.
In another example of open-mouth sabotage, the IWW-affiliated Starbucks union publicly embarrassed Starbucks Chairman Howard Schultz. It organized a mass email campaign, notifying the board of a co-op apartment he was seeking to buy into of his union-busting activities.
Such networked labor resistance is making inroads even in China, the capitalist motherland of sweatshop employers. Michel Bauwens, at P2P Blog, quotes a story from the Taiwanese press:
“The factory closure last November was a scenario that has been repeated across southern China, where more than 1,000 shoe factories — about a fifth of the total — have closed down in the past year. The majority were in Houjie, a concrete sprawl on the outskirts of Dongguan known as China’s “Shoe Town.”
“In the past, workers would just swallow all the insults and humiliation. Now they resist,” said Jenny Chan, chief coordinator of the Hong Kong-based pressure group Students and Scholars against Corporate Misbehavior, which investigates factory conditions in southern China.
“They collect money and they gather signatures. They use the shop floors and the dormitories to gather the collective forces to put themselves in better negotiating positions with factory owners and managers,” she said.
Technology has made this possible.
“They use their mobile phones to receive news and send messages,” Chan said “Internet cafes are very important, too. They exchange news about which cities or which factories are recruiting and what they are offering, and that news spreads very quickly.”
As a result, she says, factories are seeing huge turnover rates. In Houjie, some factories have tripled workers’ salaries, but there are still more than 100,000 vacancies.”
The AFL-CIO’s Lane Kirkland once suggested, half-heartedly, that things would be easier if Congress repealed all labor laws, and let labor and management go at it “mano a mano.” It’s time to take this proposal seriously. So here it is — a free market proposal to employers:
We give you the repeal of Wagner, of the anti-yellow dog provisions of Norris-LaGuardia, of legal protections against punitive firing of union organizers, and of all the workplace safety, overtime, and fair practices legislation. You give us the repeal of Taft-Hartley, of the Railway Labor Relations Act and its counterparts in other industries, of all state right-to-work laws, and of SLAPP lawsuits. All we’ll leave in place, out of the whole labor law regime, is the provisions of Norris-LaGuardia taking intrusion by federal troops and court injunctions out of the equation.
And we’ll mop the floor with your asses.
July 24th, 2008 at 10:17 pm
Kevin:
1. What do you believe is the legal content of a “right-to-work” statute, and
2. Should scab hiring, in your view, be illegal?
July 25th, 2008 at 12:07 am
Mona: I don’t believe scab hiring should be illegal by any means. And as I understand it, a right-to-work law legally prohibits labor contracts that establish a union shop. That is, they directly interfere in the right of free contract by prohibiting management from negotiating a contract with the union, which includes among its terms the requirement that workers have to join the union within a certain period after being hired. They also require the union to represent everyone, whether or not they pay dues.
Absent right-to-work laws, in unionized workplaces labor and management would be free to negotiate union shop clauses, or not, as they agreed.
July 25th, 2008 at 12:50 am
Needs proofreading. E.g., “injuction” is wrong, and I think there’s a “not” missing from ‘Were such restrictions on sympathy and boycott strikes in suppliers in place, today’s “just-in-time” economy would likely be far more vulnerable to disruption than that of the 1930s’.
July 25th, 2008 at 9:53 am
This is really quite excellent. The point about the wage labor contract itself being contested ground, where each party tries to get the most for the least, is particularly insightful. There’s no doubt that we as a society are continuing to work through the old authoritarian arrangements of yore, and essays like this more us in a more liberated direction step by step.
July 25th, 2008 at 10:59 am
I would like to thank the author for a truly enlightening post. I had never though of it that way. I have always been acutely aware of the asymmetric relationship between labor and management, and I had believed that this asymmetry justified state intervention, even though I was extremely uncomfortable with the anti-libertarian ramifications. This post resolves the dilemma for me by providing a viable alternative to state intervention.
July 25th, 2008 at 12:51 pm
Thanks for pointing out the errors, PML.
Jeremy: Thanks. It only gradually dawned on me just how unbalanced a moral filter most people were using to evaluate the respective utility-maximizing behaviors of capital and labor. If you go to most mainstream libertarian venues and complain about your boss trying to squeeze out more work for the same amount of pay, the response you get usually ranges from a terse “So if you don’t like it, go somewhere else” to “What do you expect–he’s in business to make a profit, isn’t he, you little whiner?” On the other hand if you complain about how lazy or demanding your employees are, you’re a lot more likely to get commiseration about how hard it is to get good help these days, and how anyone who doesn’t fill up every second of paid work time with the maximum possible level of exertion is the moral equivalent of a thief.
At Libertarian Underground, Paul Birch explicitly compared workers who tried to get the maximum pay for the minimum work to robbers; I can pretty well guess how he’d react if anyone made the same comparison to a capitalist enterprise (like an oil company) engaged in price gouging.
Chris: Thanks to you, too. The main drawback with such strategies is that so many people are still in the habit of waiting for some authority figure to come along and save them–itself a cultural holdover from the decades in the mid-20th century where a “union” was some institution sanctioned by the NLRB, with professional stewards and all, rather than something workers in a workplace did for themselves.
July 26th, 2008 at 5:52 am
Mr. Carson, with regard to open-mouth sabotage, most employers have explicit policies that make it a condition of employment that employees not share proprietary information or bad-mouth the company to people outside the company. Is it your view that employees are not obliged to adhere to those conditions? Why not?
July 26th, 2008 at 7:28 am
Like Bruce Braugh commented on UO, I can’t disagree with the facts, because, well, they are facts, but on the weighting and implications.
So a line of thought inspired by this and the Scott Adams Turtle post from a member of the managerial class.
The hardest thing for an organization, and the thing most necessary for it’s continuity, is to develop and maintain good first line leadership. This is especially important when it reaches the level where everyone no longer knows everyone else (it is commonly thought that this level is around 150 people).
In a world where all know that they hold the monkey wrench, and both the legal and cultural restrictions to use it have gone away, the power of this first line leadership becomes amplified beyond the point of ensuring continuity to the becoming essential for organizational survival. The person that can keep the wrenches on the nuts and out of the gears becomes immensely valuable.
So I postulate that although you will probably see some severe beat downs up and down the line, especially at the very top (either literally or figuratively or both), when the dust settles, the trend will still be that economy-wide gains will still go disproportionately to this leadership class. And even more to people who have the ability to be a leader of leaders.
(note: I don’t pretend to have the ability to succeed in the management class in such a regime; I would have to go back to working for a living, but I think I would do ok.)
July 26th, 2008 at 9:43 am
Kolohe — it may well be that under the model Carson has in mind it is not practical to run organizations much greater than 150 or so (certainly it might well be impossible to go very far beyond 10,000). As someone who has worked on both sides of the 150-person line, I can tell you that looks like no great loss to me.
If the effect of Carson’s proposal is that large companies become unmanageable and are forced to become groups of smaller companies contracting with one another, that would probably be a net win for labor (and probably for management, though most would never notice or admit it). Arguably it’s the way the economy has been going anyway. In a world of sub-150-person companies, would there be a union movement? Or would a need for a union simply be a sign that a company was ill-managed and ready to die?
(Note — Personally, I try only to work in places where the managers are friends of mine and where I can hold a meaningful fraction of the stock; I think that makes me part of the evil reactionary management class on whom this is all meant to hate, so my comments should be disregarded as such.)
July 26th, 2008 at 9:53 am
Kolohe — also, I can’t help but note that you’re assuming a fixed and small supply of such leaders, or at least very low elasticity of supply. If these people get disproportional gains, after all, you’d expect a proliferation of them and for that supply to drive their wages down. Is there reason to believe that such a shortage exists and is permanent? Or are other mechanisms preventing them from being trained and recruited in adequate numbers to drive their wages down?
I’m inclined to agree that the supply is small and fixed — that’s why I think Carson’s proposal would make large companies impossible, and why I view the New Deal labor rules as an attempt to make large companies practical at a time when large companies were considered the be-all and end-all of national greatness. But it seems to me that there is room for an alternative view that something (what?) is artificially keeping the supply of capable corporate leaders low and so keeping their share of the pie over-large.
July 26th, 2008 at 11:01 am
This is a splendidly interesting post, one of the most stimulating I’ve read on the web in years. Thanks so much.
July 26th, 2008 at 2:04 pm
Nowadays (and for the last several decades) the union representatives who sit down to negotiate a contract with a corporation are all lawyers. We can assume they are to the left of the average lawyer. Yet still, they feel some cultural pressure to imitate the manners of the lawyers who are sitting across the table from them. Like any human beings, they are concious of their social status, and they are concious of how those they regard as peers are evaluating their social status. The union lawyers may be to the left of many of the peers with whom they attended law school, but still, they were introduced to a particular world view while they were in law school. Such people as these will likely always be uncomfortable with Wobbly tactics. The labor movement needs to be pushed forward by its radicals, or its not going any where at all.
July 26th, 2008 at 2:12 pm
Kolohe, you wrote:
“the trend will still be that economy-wide gains will still go disproportionately to this leadership class.”
If this is inevitable, why hasn’t the trend to inequality manifested in the same ways in other advanced economices, such as Japan and Germany? They have nothing like American levels of income inequality.
I haven’t looked at this issue in 9 or 10 years, but I know that as recently as the late 90s, labor in Germany was taking nearly 100% of all productivity gains (in the form of increased wages), meaning that the percent of national income going to labor was increasing, and the percent of income going to capital was decreasing.
I recall, in the fall of 2002 there was a large anti-IMF and anti-trade demonstration in Washington, DC. After which the CEO of Deutche Bank had an editorial in the New York Times, in which he argued that income inequality was always a domestic issue, and could never be blamed on trade. Do you take issue with his assertion that income inequality is always a domestic issue?
July 26th, 2008 at 2:42 pm
Grant Gould, wrote:
“If these people get disproportional gains, after all, you’d expect a proliferation of them and for that supply to drive their wages down. Or are other mechanisms preventing them from being trained and recruited in adequate numbers to drive their wages down? …I’m inclined to agree that the supply is small and fixed ”
Personally, the whole “leadership” thing seems a little melodramatic. From what I’ve seen, people are quite fluid about what roles they’ll take on. These are personal transformations that I witnessed:
1.) In 2005, a young man is working as a designer at a web design firm that is owned by his older sister and her husband. The husband is known as controlling and angry. The young man’s work is considered mediorce. The company itself churns out websites using out-of-date technologies from the 1990s. The young man then gets a chance to work at a new firm, so he quits and goes to the new job. The new place is chaotic and badly run, but the chaos gives the young man the chance to experiment with new ideas that he has been reading about. A year later his brother-in-law dies of a heart attack. His sister asks the young man to return to the old firm. The young man returns to the old firm on the condition that the firm update the way it does things. The management soon realizes the young man has become a great designer. The young man becomes art director and, essentially, a member of management.
2.) In 2007 a young woman is in a miserable relationship and depressed. She needs a job but is unmotivated to get one. She is offered a job as an office assisstant with a non-profit, but doesn’t pursue it. Then her boyfriend dumps her. She then takes the job at the non-profit. She is now remarkably different than she was just a month before. With great energy and focus, she organizes the office, re-organizes the non-profit’s website, and becomes the main writer for that web site. She undertakes to organize the efforts of everyone who is contributing any kind of work, volunteer or paid, to the non-profit. She informally becomes the most effective manager on the team.
I don’t know how much value anecdotes like this have, but I think such incidents as this influence our opinions about what the overall supply of leadership is. My sense is that there is a lot of leadership potential out there, and most of it is kept supressed by existing structures of authority.
July 26th, 2008 at 8:04 pm
[...] Labor Struggle in a Free Market by Kevin Carson [...]
July 27th, 2008 at 12:35 am
Kevin B. O’Reilly: I can’t say about such contracts from personal experience, because I live in a right-to-work state where all employment is at will, and I’ve never signed a job contract in my life.
I’m sure there’s something in most employee manuals in these parts to the effect that it’s company policy for us to respect confidentiality, and that we’re expected to do it. But as far as I’m concerned, they can expect in one hand and shit in the other and see which one fills up first. If I felt obligated to obey everything that was stated as a company policy, it would pretty well negate every point I made about the workplace as contested terrain.
Now, if I were working for a business that was actually owned and managed by a flesh and blood individual, or a partnership of such individuals, I’d probably feel obligated to honor the terms of any employment contract. But when it comes to the typical American large corporation, I feel no such obligation because nobody in the management hierarchy of such an entity has any legitimate basis for their authority, for reasons that are discussed in this post: “Public” vs. “Private” Sector
July 27th, 2008 at 1:01 am
Kolohe: As Grant Gould suggests, the first-line leaders you talk about are probably tasked with the impossible. The agency problems of trying to extract labor from a disgruntled work force will raise the costs of large, hierarchical, authoritarian enterprise, and cause it to lose out to competition from smaller firms with high degrees of worker self-management and profit-sharing.
Nell: Thanks very much.
Jackson: Good point about the effect of professional culture. I suspect something like that helps to promote regulatory capture, as both regulators and regulated are staffed by the same kinds of men in suits who are familiar with the same kind of institutional culture Paul Goodman described. Likewise, the tendency of cooperatives to take on the same organizational style as capitalist enterprises in the same industry when they get beyond a certain size: they hire professional managers who don’t know any other way of doing things.
July 27th, 2008 at 11:00 am
“Now, if I were working for a business that was actually owned and managed by a flesh and blood individual, or a partnership of such individuals, I’d probably feel obligated to honor the terms of any employment contract. But when it comes to the typical American large corporation, I feel no such obligation because nobody in the management hierarchy of such an entity has any legitimate basis for their authority, for reasons that are discussed in this post: “Public” vs. “Private” Sector.”
Dear Kevin,
This was a superb post in countless ways. I have already sent a copy of it to a leftist friend of mine who am trying to win over to a pure anti-state left-libertarian-type position.
However, while I sympathize with the conclusion you arrived atin the above-quoted comment regarding “open mouth sabatage,” I would like to push back with respect to your argument for getting there in this case.
Specifically, I don’t see why some one person should have to be the allodial owner of a given tangible object, for that object to count as owned.
Let’s suppose I am the legitimate unitary owner of object X (i.e., there is no co-owners, it is unencumbered with easements, covenant restricts, leases, or liens). Let us further suppose that a group of people (1-200) get together for a common purpose and form an association, Massive Assed Company, Inc. (the “Corporation”) which their respective rights and obligations inter se to be governed by Articles of Incorporation and By-Laws (collectively, the “Organizational Documents”). These Organizational Documents confer upon various parties either by name or the functional office or status which they occupy the rights and obligations to do certain things with such property as may thereafter be transferred to the Corporation as a entity (whether by deed or by bill of sale). When you add up all of the respective rights and obligations, all of the various rights and obligations that would appertain to unitary ownership by some one person are fully accounted for (use, possession, exclusion, and transfer, liability for any use thereof which would constitute trespass, nuisance, or what have you with respect to the property of others, etc.). Because of this fact, this is not one of those Flying Dutchman type situations where the Corporation itself can become this sort of free-floating actor incapable even in theory of being leashed and controlled by its putative “owners.”
Let’s suppose further that the duly-constituted Board of Directors thereafter appoints officers, who subsequently hire you and several others as a employees pursuant to a written contract of employment which includes among its terms a Duty of Loyalty, which provides inter alia that until such time as you and your fellow workers tender your respective resignations you may not “bad mouth” the Corporation, on penalty of forfeiting your respective claims to such wages as you may already earned but not yet been paid.
Suppose further, that I transfer object X to Massive Assed Co., Inc., and all of the rest of the assets of the Corporation are likewise the product of free transfers to the Corporation as an entitey from their prior, unitary owners.
If you do not like how much you are getting paid, is it really your contention that you can continue to both use the assets of the Corporation and receive wages therefrom while practicing “open-mouth sabatage”? In what sense is it the case that “nobody in the management hierarchy of such an entity has any legitimate basis for their authority”? Isn’t the free consent of all of the 1-200 original associates (plus their successors and assigns) to the Organizational Documents which provide for the delegation of authority with respect to the use of the Corporation’s assets a sufficient basis for “authority” to enter into employment contracts?
To be perfectly clear, I’m not saying that the situation which I have set forth above even resembles the sorts of situation faced by employees of most collosal corporations today (for reasons you have ably set forth in your work). My only point here is to try to defend in principle the idea that duly-formed organizations can under appropriate conditions be the owner of various goods (which the constituent rights and obligations carved up by agreement), can enter into valid and binding contracts with those outside the organization, and can both sue and be sued as such. In other words, I don’t think it’s advisable to categorically reject the juridical personhood of organizations and institutions just because you quite-rightly both despise the established order and are firmly committed to the realization of a petty bourgeousie utopia of small-scale farmers, craftsman, artisals, shopkeeps, and cooperative assocations thereof.
Cheers,
Araglin
July 27th, 2008 at 5:15 pm
Araglin, that is an interesting argument and I look forward to Kevin’s response. Do please also feel free to develop your point into a full-blown post on the Forum.
July 27th, 2008 at 8:52 pm
Thanks very much, Jackson. I too look forward to Kevin’s response.
July 28th, 2008 at 12:55 am
Thanks for the thoughtful comment, Araglin.
I don’t know if my response is anything worth looking forward to, given my near incoherence at this hour of the night. The best answer I can come up with is tentative.
First, I think it’s possible to have a certain amount of slippage at each step in your process, even when all the t’s are crossed and alll the i’s dotted, so that you end up at a point where the lines of connection to the original founding authorities are attenuated to the point of meaninglessness. If management today solemnly claims its authority as stewards of shareholders, even though shareholders exercise no meaningful control and management in fact acts as de facto residual claimant in using the corporation primarily as its own means of support, I think it’s fair to describe the corporation (as I did in the post linked in the comment above) as a mass of unowned capital controlled by a self-perpetuating oligarchy, using shareholder power only as a legitimating ideology in the same way Soviet industrial management justified its authority with respect to workers’ power.
The tension is heightened by management’s appeal to “shareholder equity” and “customer service” to justify its own policies, while commanding workers to engage in practices directly in opposition to the interests of both shareholders and customers, and in fact serving the primary purpose of lining management’s own pockets.
And getting back to the specific issue of open-mouth sabotage, a contract to keep secrets is arguably repugnant when the subject matter is fraudulent or tortious actions by management. I’m not saying this makes up the majority of the subject matter suitable for open-mouth sabotage; but there’s enough of it going on in most corporations, and it’s damaging enough, that an asymmetric war based only on whistleblowing of this kind would probably be devastating to a majority of corporate employers.
At some point, the real basis of authority in the will of the original founders has become so attenuated, compared to the customers’ present-day right to know how their sausage is made, that the latter becomes an overriding interest.
I don’t think it’s entirely flippant to quote Jefferson’s quip about the Earth belonging to the living. Regardless of whether directors and management are selected in accordance with all the bylaws of the corporation, which were duly established by the rightful authority of long-dead persons, the fact remains that an oligarchy is *today* exercising authority which–although exercised in the name of shareholders–is in fact accountable to no living person, and exercised completely in the interests of those who have it.
Second, as you suggest, your hypothetical scenario doesn’t as far as I know describe the origins of many actual corporations surviving today. It does describe the origins of the kind of early joint-stock corporations at issue in the Dartmouth College case, where the shareholder really was something analogous to a modern partner. But modern corporation law almost entirely destroyed this model of corporate formation. The following is an excerpt from Ch. 3 of my org theory ms:
“The result, by the early twentieth century, was a common legal understanding in which ‘the modern stockholder is a negligible factor in… management,’ and in which a sharp distinction was made between the status of ‘investor’ and ‘proprietor.’ The shift was encouraged by the rise of public securities markets. Until the 1890s, public issues of stock were rare and public trading (outside of railroad stock) almost unheard of. In an environment in which the issuance of stock was still largely private and associated with the formation of joint-stock companies, it was more plausible to regard investment in a corporation as equivalent to buying into a partnership. The creation of public equity markets, in which shares were commonly acquired by those with no direct role in the formation or governance of the firm, and bought on an anonymous market rather than issued directly to the shareholder by the firm, made the cultural holdover far less tenable. It became virtually impossible to maintain with a straight face the earlier ‘trust fund’ doctrine of Dartmouth and other decisions, in which the shareholder was a partner with absolute property rights in the governance of the corporation. By the turn of the century, the board of directors was clearly coming to be seen as the agent, not of shareholders, but of the corporation as a separate entity.”
July 28th, 2008 at 7:17 am
Somewhat off-topic: I think it is dangerous to confuse the interests of a corporation’s top executives with that of the shareholders. To the extent that shareholders have an interests as a class of people, the executives have contrary interests. Every penny paid to the CEO is a penny that is not paid to the shareholders. Back in the 1950s the phrase “class conflict” usually referred to the conflict between the unions and the management. But there is also a class conflict between the upper executives and the shareholders. The upper executives are still workers, hired hands, just like the janitors that sweep the floors. In an era when the upper executives might ask for $20 million and a private jet, or possibly bankrupt the company, as with Enron, then one has to be blind not to see that different interests motivate the upper executives, compared to the shareholders.
Personally, I find it worrisome that upper executives have a relatively easy time ignoring the wishes and interests of shareholders, especially when the firm is large and the stock is widely distributed. It’s rare to see a board take a strong stand against upper management - so rare that is always headline news when it happens. Empowering share holders to be able to act like the actual owners of a firm would be a major improvement of corporate governance.
As to this:
“Duty of Loyalty, which provides inter alia that until such time as you and your fellow workers tender your respective resignations you may not “bad mouth” the Corporation”
Sometimes loyalty to a corporation necessitates criticising it in harsh terms.
A separate issue is technology that a corporation owns. There may be technical secrets that a company does not want shared. I’ve signed Non Disclosure Agreements and I’ve never violated them. Still, I can think of many, many actions that a group of workers could take against a corporation, and such actions would not be the kind of things that a company could protect itself against with agreements. For instance, workers could agree among themselves that when they go out to lunch at lunch time, they will, afterwards, go home and not come back for the rest of the day. Depending on the firm, this could deliver quite a sharp shock, and it certainly sends a loud message to the management. At that point the management has the choice of either firing everyone or giving into worker’s demands in exchange for a promise of no future walk outs. Depending on the industry and the situation of the firm, there are situations where the management would do quite a lot to avoid unexpected walk outs.
July 28th, 2008 at 10:53 am
[...] again, Kevin nails it: If management today solemnly claims its authority as stewards of shareholders, even though [...]
July 28th, 2008 at 11:09 am
I think it’s entirely appropriate. And what I take from your post, Kevin, is the need to get away from this rather outmoded but persistent understanding of the meaning of a labor contract that just perpetuates cryptofeudalist values. That’s tantamount to letting the dead rule us with their organizational prerogatives. It is those unequal expectations just below the surface of popular consciousness that are far more damaging than how the contract itself is written.
July 28th, 2008 at 2:20 pm
As usual with Kevin’s writing, this post is both exhaustive and thoughtful. It is useful to point out that Adam Smith recognized the asymmetric nature of labor contracts. The “masters,” he noted, could hold out longer than the workers, and could more easily combine and coordinate their efforts. When unions engage in asymmetric “warfare” they are merely leveling the playing field. Wages are not, in the final analysis, set by relationships of supply and demand, but by power relationships. This is certainly the only way to explain the extraordinary salaries of the upper tier of executives, especially the ones who sit on each others boards. Further, these boards cannot be considered representatives of the putative “owners,” but constitute a third class with their own interests, interests quite apart from either the owners or the workers. In the end, the interests of owners and workers are closer to each other than either are to the interests of the managers.
But no matter, so long as there is a distinction between ownership and use, there will be chronic labor problems with no obvious solutions. Further, there will be tremendous agency problems between owners and managers, managers and workers, and workers and owners. The best that can be done in such a situation is to balance, insofar as possible, the power relationships between the parties. Normally, and especially for the last 40 years, those relationships have favored first the owners over the workers and more recently the managers over either.
July 28th, 2008 at 6:58 pm
John Medaille, do you have a link or a book reference for that Adam Smith quote?
July 29th, 2008 at 1:37 am
Jackson: Good point. Actually, management is in a double bind for the reason you discuss. Insofar as management refrains from defining duties in detail by contract, it widens the scope of possible struggle based on the incomplete nature of the contract. But at the same time, it’s in management’s interests *not* to try to define duties too closely by contract, because it will increase the number of possible handles for working to rule.
And your point about the interests of the company being at odds with the interests of management is also a good one. One of the arguments Luigi Zingales has made is that basing management’s authority entirely in its alleged representation of shareholders actually enables them to screw over not only workers but shareholders, by expropriating the equity resulting from human capital which is not represented in ownership, and thereby gutting long-term productivity.
Jeremy: Your point about the coloring of contract by feudal culture is well-taken. A literalist fixation on contracts, stripped of all the “draperies of human decency” (or whatever Burke said) would be a step forward from the present cultural holdovers from the age of status. If the contract were seen as the sole source of all management’s authority, and it was deprived of the aura of sanctity dating from master-servant days, workers would probably be able to use the contract as a weapon more effectively than the bosses could.
John Medaille: Nice to see you over here. Being comparatively well-versed in Catholic theology, you might know something about a doctrine I vaguely recall hearing about, “covert something-or-other,” which says that a person who is stolen from has a right to take matters into his own hands and take back the value of what was stolen, when he is denied any other form of justice. It seems like it would have a bearing on this general topic.
July 29th, 2008 at 6:27 pm
Jackson: I believe Mr. Medaille is referring to comments in V1, Ch. 8 of Wealth of Nations, where Smith writes:
Paragraphs 1.8.11 and 1.8.12
July 29th, 2008 at 6:55 pm
Great essay, Kevin.
July 29th, 2008 at 7:12 pm
[...] Labor Struggle in a Free Market [...]
July 29th, 2008 at 7:55 pm
Mean Joe Spleen, thanks much for tracking down that quote.
July 29th, 2008 at 11:56 pm
Thanks, Belinsky.
July 30th, 2008 at 5:45 am
[...] Another great new article by Kevin Carson — Labor Struggle in a Free Market. [...]
July 30th, 2008 at 8:45 am
Kevin Carson: Labor Struggle in a Free Market…
We give you the repeal of Wagner, of the anti-yellow dog provisions of Norris-LaGuardia, of legal protections against punitive firing of union organizers, and of all the workplace safety, overtime, and fair practices legislation. You give us the repea…
August 13th, 2008 at 9:31 pm
AOTP is famous! This article just got linked to by Jesse Walker at Hit & Run (I’m surprised nobody from there’s left comments yet):
http://www.reason.com/blog/show/128080.html