Symposium on Free Market Fairness, Exploitation

Reply to Elizabeth Anderson: Part II, Workplace Democracy

[Editor’s Note: This essay is part of a symposium on John Tomasi’s Free Market Fairness. For an introduction to the symposium, click here. For a list of all posts in the symposium, click here.]

Elizabeth Anderson accepts the central thesis of Free Market Fairness: the set of basic economic liberties should be thickened beyond the orthodox high liberal set. Nonetheless, Anderson believes that this thickened set of basic economic liberties should be heavily regulated. In this post, I reconstruct and examine Anderson’s argument regarding economic liberty in the workplace.

Anderson’s argument:

II. THAT: the economic rules of workplaces within market democracy should be heavily regulated.

II.1) The exercise of some categories of basic liberty, unless that exercise is heavily regulated, will create structures of hierarchy in domains within which structures of hierarchy are objectionable.

II.2) The private ownership rights of market democracy, unless heavily regulated, will create structures of hierarchy within the workplace.

II.3) The workplace is an area in which structures of hierarchy are objectionable.

II.4) Workplaces within market democracy should be heavily regulated.

As before, let’s stipulate throughout that should be “heavily regulated” means should be more heavily regulated than in my classical liberal scheme. I have no settled view about I.1), so I grant it arguendo. But what of II.2)?

According to II.2), the scheme of economic liberties I defend in FMF, unless more heavily regulated than I would allow, will create objectionable hierarchies in the workplace. Now, it may appear that Anderson and I have a significant disagreement here. Indeed, to borrow a phrase, in her post Anderson “reserves special opprobrium” for my suggestion that individual workers have rights to decide for themselves many of the terms and conditions on which they are willing to work—including questions about wages, hours to be worked, and many but not all questions about conditions (for example, market democracy allows workplaces to be regulated for safety in some cases). By contrast, Anderson denies that workers have these rights. Instead, she argues that for extensive labor regulations, including regulations setting maximum hours and minimum wages and, apparently, much more.

Note: In his contribution to this symposium, Samuel Freeman suggests that I misunderstand labor regulations, such as those setting maximum hours. According to Freeman, “The restriction on hours is not a restriction on workers but on employers from exercising duress over workers.” Anderson appears to share this view. But when did we agree to evaluate regulations solely by considering the (alleged) intentions of the advocates of those regulations? Rules that limit work hours, whatever the intentions of their advocates, do restrict the ability of individual workers. After all, such workers may, for their own reasons, wish to work more hours than stipulated by the regulation.  A worker who wishes to work more than the mandated maximum may not have the opportunity to work more at his job because his employer may not be able to afford the mandatory overtime pay stipulated by the regulation. Or that hours-regulation may force that worker to apply for, commute to, and negotiate a schedule for some second job. So maximum hours rules clearly impinge upon the formal rights and liberties of working as I describe them in FMF. (Such regulations may also impinge on the economic rights of business owners, but I leave that aside.)

Now, Anderson says that without such restrictions and regulations, workplaces will become sites of tyranny and domination. She claims that entry-level workers in particular have few employment options. So employers can effectively compel such people to endure all manner of abuse in the workplace. Supervisors may prohibit workers from urinating during work hours, spy on them in the bathroom, forbid them from speaking foreign languages, fire them for their sexual orientation or their political beliefs, forbid them from complaining, and require that they wear certain kinds of clothing. Without heavy regulation, workplaces become psychologically and physically hazardous to the workers.

Of course, when Anderson claims that labor markets generate these bad effects she is making (broadly) empirical assertions. Some readers of this blog, no doubt, would reject Anderson’s reading of labor history and her description of the plight of contemporary wage-laborers in America. Some might point out that, in a competitive market, companies must compete against each other to hire and retain the most competent workforce. Further, there is some evidence that companies that do well in the long haul tend to be ones that think hard about ways to make the experience of work personally meaningful to their workers. And, even on the assumption that the interests of management is hostile to the physical and psychological well-being of their workers, the fact that workers have a right of exit puts a significant limit on how bad that alleged physical and psychological abuse in the workplace can be (a point many readers emphasize in the comments section to Anderson’s essay).

Fortunately, to assess my argument for economic liberty in Free Market Fairness, we have no need to settle such empirical debates. For in that book, I seek to answer a different kind of question. Abstracting from the complicated facts of particular societies, my hope is to identify the institutional forms that might best express the commitment of citizens to live together as free and equal self-governing agents. My main thesis, of course, is that market democratic regime-types—democratic laissez-faire and democratic limited government—express that moral commitment more completely and more attractively than do social democratic ones—liberal socialism and property-owning democracy. So my argument is an exercise of normative identification that is conducted at the level of ideal theory.

Of course, Anderson is free to object to my interpretation and application of ideal theory, the argument for which I set out carefully in my book (203-215). But Anderson has stated no such objection. So if we are to interpret Anderson’s critique to be assessing my arguments, her objections must be interpreted as running on the same level of abstraction on which my arguments run.

Viewed that way, however, it seems that Anderson and I agree yet again. After all, I can easily imagine sets of (historically possible) background conditions within which the individual liberties of working that I defend could in fact leave workers vulnerable to coercive abuses of the sorts that worry Anderson. Imagine, for example, an economy in a phase of long-term contraction, with a low base of capital, in which workers effectively have no choice but to keep their current job, no matter how nasty. It could happen. In such unfavorable background conditions, the market democratic regime types I defend, perhaps, might not realize the moral standard that I call free market fairness. Indeed, things might possibly even turn out as bad as what Anderson describes. But this is no objection to my view. Unfortunately, there may well be social conditions in which the lofty moral ideals of free market fairness cannot be achieved.

However, I can also imagine sets of (historically possible) background conditions within which the individual liberties of working that I defend would in fact not leave workers vulnerable. Instead those liberties would free them to live the fullest possible lives together, each according to his own values. Imagine, for example, an economy in a period of long-term expansion, with a large base of capital, in which workers can easily find work elsewhere if the terms and conditions of their current job no longer satisfy them. That could happen too. In such conditions, my market democratic regime types would realize all the moral requirements of free market fairness.

Now I suppose that Anderson could deny this. She might claim that market economies always lead to reduced capital accumulation and long-term economic contraction. Thus the right to decide for oneself how many hours to work could never be morally valuable to citizens. But such a claim seems highly implausible. And, anyhow, Anderson makes no such claim.

So, at the level of ideal theory, Anderson’s claims about existing working conditions in America do nothing to impugn my arguments for thick economic liberty.  Viewed through the lens of ideal theory, Anderson’s claims give us no reason to believe that the economic liberties of market democracy, unless heavily regulated, will create (read: will create even under the most favorable but realistically-possible background conditions) structures of hierarchy in the workplace.

However, there is a different way to interpret II.2). And this interpretation brings us to the heart of the matter. For this reading would indeed generate a split between Anderson and market democracy.

Anderson sometimes indicates her personal approval of workplace democracy. Within democratic workplace structures, workers directly make management decisions themselves, or elect representatives to serve as managers and supervisors.

According to II.2), recall, the private ownership rights of market democracy, unless heavily regulated, will create structures of hierarchy within the workplace. What if Anderson does more than personally admire democratic workplaces? What if she is so taken with that workplace form that she insists that every workplace must be structured that way? In non-democratic or “wage-labor” relations, let’s say, workplace managers are chosen (or promoted through the ranks) by owners and other superiors, rather than being elected by the workers to represent them. In such workplaces, the workers take their orders from the managers, but the managers do not take their orders from the workers. In a technical sense, at least, wage-labor relations are hierarchical. So perhaps the phrase “structures of domination” in II.2) refers to any workplace structure that is non-democratic.

Now, the market democratic regimes that I defend in FMF, even viewed through the lens of ideal theory, do indeed allow wage-labor (among other forms of workplace organization, including democratic ones). Interpreted this way then, I must accept premise II.2). The thick economic liberties of market democracy create structures of hierarchy in the workplace.

So it turns out that the entire weight of Anderson’s argument against market democracy falls on premise II.3). We must hold constant our interpretation of “structures of hierarchy” to mean (nondemocratic) wage-labor. So, to object to market democracy, Anderson must claim that non-democratic workplaces are objectionable. And the regulations that she must advocate are regulations that would forbid workplaces organized that way.  So, at the level of ideal theory, justice requires the prohibition of wage-labor. All workplaces must be democratically controlled.

Does Anderson really wish to defend this extreme thesis? It doesn’t look like it. Anderson writes: “I’m not arguing that workers intrinsically prefer “meaningful work” in workplace democracy, as social democrats suppose, over maximum pay, which Tomasi prefers.” She is referring here to the second main argument of FMF, where I defend an interpretation of the difference principle based on the idea that workers are more appropriately empowered by increases in their pay rather than by regulations imposing democratic work structures on them all (p 184-192). So that looks promising.

But in a footnote to that sentence, Anderson observes that workers in Germany have a strong appetite for a say in management. She then says: “such preferences [presumably, whether to prefer higher pay or more workplace democracy] may be endogenous to the bundle of rights constitutive of the employment relation in a given country.” So she seems ambivalent.

Allow me to suggest that Anderson needs to decide.

Anderson opens her contribution to this symposium with the brave statement that she is willing to sign on to the new research program that I call market democracy. She then aggressively criticizes institutional features of market democracy. But, as I hope to have demonstrated, none of her arguments has traction against my market democratic proposal. So Anderson has no reason to jump ship. No reason, that is, unless Anderson is willing to assert that justice requires the prohibition of wage-labor.

If that is Anderson’s considered view, it seems unattractive. After all, the question here is not whether Anderson (or you, or I) would prefer to work in a democratic workplace. Nor is the question whether Anderson (or you, or I) think the lowest paid class of workers should prefer to work in places structured that way. The question is what respect for citizens requires in this area.

In Free Market Fairness, I argue that justice requires that our social institutions show respect for citizens as responsible authors of their own lives. Choosing whether to join a democratic workplace (that may offer lower pay) or a non-democratic workplace (where pay may be higher) seems to me a choice that we should seek to empower individual citizens to make for themselves. Democratic workplace requirements would deny workers a choice that many workers might reasonably make: namely, to choose a job that pays a higher wage rather one that offers the experience of democratic control. And many citizens might reasonably make that choice, not out of greed or moral stupidity, but as an expression of their own values and in pursuit of a life plan that is precious to them.

I will be sad if Elizabeth Anderson decides to jump off the market democratic ship. But there is only one idea in sight that could give her reason to do so. This is the idea that justice requires that we deny citizens the freedom to decide for themselves what type of workplace structure best accords with their deep values and life plans.  I would be sadder still if Anderson thinks liberalism requires so severe a restriction on the economic liberty of workers.

I reply next to Dierdre McCloskey on “Factual Free Market Fairness.”

  • Andrew

    “Now I suppose that Anderson could deny this. She might claim that market economies ALWAYS lead to reduced capital accumulation and long-term economic contraction.”

    I think Anderson’s argument is attacking Tomasi’s ideal theory. I take her to be arguing that Tomasi’s ideal theory foreseeably engenders, e.g., structures of
    hierarchy in the workplace. Whereas, in the above Tomasi quote, he states that to attack his ideal theory, Anderson might claim that “economies ‘always’ lead to…” However, I don’t see why we can only talk about “always” (or necessity) and “possibility” in ideal theory. Asking whether a theory foreseeably engenders, e.g., hierarchy in the workplace (not that it always or necessarily will happen) seems to be a perfectly legitimate question for an ideal theory.

    Anderson’s criticism is similar to Thomas Pogge’s criticism of Robert Nozick in “Realizing Rawls.” Pogge argues that Nozick is primarily concerned with the goods and ills that his theory (and the government his theory supports) brings about (cf. Tomasi’s “always” statement) whereas Rawls is concerned also with the goods and ills that his theory foreseeably engenders. For example, Pooge argues that Nozick’s theory does not directly bring about a feudal society or slave economy but it foreseeably engenders one.

    I think Tomasi therefore sidesteps Anderson’s argument. The question is “Does Tomasi’s ideal theory foreseeably engender, e.g., hierarchy in the workplace?” And I don’t see why this question cannot be answered in ideal theory.

    • John Tomasi

      Thanks for this interesting suggestion, Andrew. Let’s agree that we should decide as a matter of principle what level of abstraction from the facts is appropriate to argue on, and not pick an ideal test (or reject one) because of what we hope it to yield. Now, how do you see you “foreseeably engender” criterion working? Is history the test of foreseeability? If so, are all public property regimes out because, historically, they led to state socialism? Or do you see “foreseeably” a criterion to be filled out by economists? But then, which economists? Deirdre McCloskey? How do we decide? Again, thanks for calling attention to this extremely important question.

  • CFV

    Prof. Tomasi,

    Although your main argument “is an exercise of normative identification that is conducted at the level of ideal theory.”, and Anderson reply should be “at the same level of abstractation” to be successful, I doubt that you do not take into account some facts in your ideal theorizing.

    For example, you say: “Market democracy sees economic growth as an antidote to the problem of worker vulnerability in postindustrial societies” (Cf. FMF, 110).

    Thus, it seems to me that this whole question of democracy in the workplace critically depends on your view on what the facts of economic growth are:

    1. If, and only if, there is economic growth, the private ownership rights of market democracy will not create structures of hierarchy within the workplace.

    Conversely,

    2. If, and only if, there is economic stagnation, the private ownership rights of market democracy, unless heavily regulated, will create structures of hierarchy within the workplace.

    In the post, you also acknowledged this possibility: “Imagine, for example, an economy in a phase of long-term contraction, with a low base of capital, in which workers effectively have no choice but to keep their current job, no matter how nasty. It could happen. In
    such unfavorable background conditions, the market democratic regime types I defend, perhaps, might not realize the moral standard that I call free market fairness. Indeed, things might possibly even turn out as bad as what Anderson describes.”

    But then, you say “… this is not an no objection to my view.”
    I failed to see why.

    Even more, suppose we are now entering an era of slow or no economic growth. Perhaps because we ate all of our low-hanging fruits: http://www.amazon.com/The-Great-Stagnation-Low-Hanging-ebook/dp/B004H0M8QS?tag=bleedheartlib-20

    Given that (gloomy) picture, you seem to concede that it might not be possible to realize the moral standards of free market fairness, but still be possible to realize the High Liberal moral standard of workplace democracy.

    If that’s true, then free market fairness as a moral ideal would, ironically, be like the owl of Minerva, that “takes its flight only when the shades of night are gathering.” (Cf. Hegel, Philosophy of Right, preface: http://www.marxists.org/reference/archive/hegel/works/pr/preface.htm).

    Cheers.

    • John Tomasi

      Hi CVF, sorry for my slow reply, i’m just catching up on things now. did you happen to see the reply to McCloskey that I posted yesterday? Did that post help answer the question you ask above?

      • John Tomasi

        ooops, “CFV.”

        • CFV

          Prof. Tomasi: thanks for your reply. I did see your reply to McCloskey yesterday. But I was unable to see how that help answer my question. I understand free-market fairness is a normative position. However, you seem to take into account some facts in your ideal theory, especially, facts about economic growth. My question is, in short, what happen when there is economic stagnation? In that case, it seems that there is no “antidote” to “workers vulnerability” and it might not be possible to realize the moral standards of free market fairness.
          Cheers,
          Carlos F. Véliz

  • As always, I remind that for some of us, freed markets are the most reliable path to workplace democracy, and labour legislation one of the chief obstacles to it.

    • Oh, terrific. This new comments system deletes links.

      Well, the link was to http://all-left.net

    • Ben Kennedy

      I agree – a government “reform” that purports to improve the lives of workers can only happen if the society can afford to pay for it. As Tom Woods points out, the reason there is child labor in Bangladesh is not because it is a nation of terrible parents – it is because the families need the income to not starve. Nor would anyone expect to see US factories filled with children should child labor laws in this country be repealed. Regulations force people to receive compensation they may not want, or even worse make the cost of employing them too high so that they can’t work at at all.

    • John Tomasi

      hi roderick, by “freed markets” do you mean that workers would have the (formal) right to seek work in a non-democratic workplace or in a democratic one? what do you think of my suggestion that, to achieve this, citizens need thick private economic liberty?

  • Damien S.

    ” Rules that limit work hours, whatever the intentions of their
    advocates, do restrict the ability of individual workers. After all,
    such workers may, for their own reasons, wish to work more hours than
    stipulated by the regulation.”

    Certainly. And many workers might wish to give up that freedom, so as to be able to avoid being economically coerced into conditions they wouldn’t like. Is there any way of accommodating both those who want maximal individual short-term freedom and those who think giving away some freedoms will make them better off?

    Does Tomasi think there should be a right to sell oneself into slavery, or is that restriction on contract acceptable? And if the latter, then haven’t we moved from principle to hagging over the price? A requirement for democratic workplaces could be seen as a prohibition on wage-slavery. And besides, the democratic workplace could always choose to do what one person says, while the undemocratic workplace can’t easily become democratic…

    • John Tomasi

      Hi Damien, I don’t think slave contracts are enforceable because such enforcement would violate rights that I believe are inalienable (such as the right to religious liberty, and others). So market democracy is more a classical liberal view than a strict libertarian one (Hayek and Friedman rather than Nozick or Rothbard.). thanks for your comment.

  • SimpleMachine88

    Your objections to empiricism noted, I think that a discussion of things like minimum wage law could use an S/D graph. The deadweight loss may be so great that workers are receiving lower compensation. I do think our answers varies greatly according to the slope here.

    A reasonable compromise would be to allow regulations where there’s some combination of a low market price and low deadweight losses. The debate should be what this value is. I thought BLH was accepting that there is some price of labor that is too low even if it is the market price- “free exchange”.

    Price fixing can raise real wages, under certain circumstances, or A NIT can be used as an alternative to keep people above this value to avoid price fixing. Also, you can alter the slope by raising worker productivity by increasing education or having good infrastructure, etc (basically, just running the economy good).

    There should be some economics involved in “Free Market” fairness, yes?

    Another point is that producers don’t just employ workers, they also, you know, produce things. These things are then consumed by other workers. Regulations inhibit production, reducing real wages across the economy. A less regulated economy will have higher GDP growth which means higher real wages, and higher demand for labor. Consumers are not irrelevant in this debate between capital and labor. When you factor that in, that weakens the case for regulating.

    • John Tomasi

      hi simple machine, you say: “I thought BLH was accepting that there is some price of labor that is too low even if it is the market price- “free exchange”.” I suppose that on this, as on many other issues, people in the bhl movement have different views. In FMF, i defend an institutional form called “democratic limited government” that includes a publicly-funded safety net. That net is justified from the economic concern about labor price that you mention. Again, tho, others may see this differently. thanks for your comment.

      • SimpleMachine88

        Thanks for the reply. Apparently, I am incapable of arranging three letters in order when posting :(. I didn’t mean to suggest that I belong to a splinter “Bleeding Libertarian Heart” movement.
        http://www.youtube.com/watch?v=gb_qHP7VaZE
        I hate the Romans as much as you do!

  • SimpleMachine88

    Your right to point out that Anderson’s thinking taken to its conclusion is “All power to the Soviets!” A market requires multiple sellers and buyers.

    Take it at the company level,
    Take company A (unionized) and company B (non-unionized) that both produce the same product. The union raises company A’s costs, which causes it to be uncompetitive against company B, which causes company A to no longer exist. Or the union just agrees to the same wages as company B, and then what’s the point. Company A cannot be unionized if company B isn’t.

    Sure, there’s all sorts of sand in the wheels of commerce, but over the long term, that’s what you’re going to get. This is basically why private sector unionization is going down.

    Take it at the industry level,
    The industry is unionized, there’s no competition for wages, there is no free market, and this industry is engaged in rent seeking. Or in other words, shut up and buy a Ford Pinto.

    Consumers may just not buy from this industry, because its products all suck because of the lack of a market, or if they really have to (because we really need cars, even terrible ones), it’s coming out of the pockets of all the workers in every other industry. So it’s not like you’re really helping workers in general.

    Personally, call me Red, but I’m in favor of one big union. Of course, we already have this union, and it’s called “The Union”, Lincoln saved it, and you vote in elections over how it should be run. This probably is not what the wobblies meant.

    I’d accept this union doing certain things like levying taxes to pay for pensions, or HSAs, or public education. You know, normal government stuff. I might, might, even support some price fixing to set minimum wages. It doesn’t make any sense to do it at a lower level than everyone, because competition will just drive it out of existence. Or it’s found a nice little corner it can rent seek from.

    If you were to design an organization for improving things for workers in general I think the absolute last thing you’d design would be what we call a “union”. Strikes, walkouts, labor immobility, huge deadweight losses, corruption, nepotism, payment based on seniority or status within the union rather than merit, etc are just too big a price to pay for benefits that are provided in a completely absurd and haphazard way. A janitor working for the UAW gets 100k, but anywhere else gets 20k!? This is insane.

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