The rise of the “private government”

I have always found it odd (read totally inconsistent) that people rail against government intervention as if it is a blight on our freedom, but ignore the ‘governance’ of workplaces by capital, who seek every way possible to destroy our freedom and initiative unless it is serving to advance their bottom line. We ignore the benefits of collective goods and laws that protect us, but turn a blind eye to the on-going, minute-by-minute, repression in the workplace. I was reminded of this again as I was reading a new book that came out in May 2017 – Private Government: How Employers Rule Our Lives (and Why We Don’t Talk About It) – by American philosopher Elizabeth Anderson. She studies that way in which corporate America serves in effect as a “private government” minutely and vicariously controlling our daily working lives yet many of us still accept the construction that this is the ‘free market’ operating. It is when the word ‘free’ loses all meaning. I especially like her use of the term “private government” to reinforce the hypocrisy of the elites and the inconsistency of those (workers included) who call for small ‘government’ as if that is the exemplar of freedom.

In the Introduction (by Stephen Macedo) we read that the book is a:

… call for a radical rethinking of the relationship between private enterprise and the freedom and dignity of workers.

The book is the outcome of two lectures that Elizabeth Anderson delivered at Princeton University in March 2015 under the guise of the Tanner Lectures on Human Values.

Obert Clark Tanner was an American philanthropist and academic who the series is named after said at the inception that he hoped “these lectures will contribute to the intellectual and moral life of mankind”.

The first of the lectures was When the Market was ‘Left’ (March 4, 2015) – argued that:

… the free market political and economic theory – originated as an egalitarian and progressive agenda – as a free society of equals … [but] … in the nineteenth century that free market thinking drifted away from its earlier egalitarian moorings …

The argument is that the “free market egalitarianism” of Adam Smith and Thomas Paine was predicated on their hope that:

… freeing up markets would dramatically expand the ranks of the self-employed, who would exercise talent and judgement in governing their productive activities, independent of micromanaging bosses.

This would be within a social environment where “public education” was expanded and there was (in Paine’s vision set out in his political tract Rights of Man and its sister volume Rights of Man, Part the Second, Combining Principle and Practice ) “a system of universal social insurance, including old-age pensions, survivor benefits and disability payments for families whose members sould not work” and more.

The onset of the Industrial Revolution ended those hopes as:

… opportunities for self-employment shrank dramatically … [and] … dramatically widened the gulf between employers and employees in manufacturing.

This breach between the original conception of a ‘free market’ and the subsequent “reality” created:

… a symbiotic relationship between libertarianism and authoritarianism that blights our political discourse to this day.

In other words, when proponents of the free markets advance their claim that it tantamount to individual liberty and choice they are appealing to a conception that is long dead.

What emerged was anathema to the original conception.

The ‘free market’ construct is a myth that retains some sort of currency in the political debate but has no credibility in intellectual discourse.

The second lecture – Private Government (March 5, 2015) – built on that analysis.

Elizabeth Anderson believes that the evolution of the modern workplace has been a history of dictatorial imposts on the freedom of workers in an environment where corporate lobbying to minimise legislative protections of the same has been fierce.

What has evolved is a web of “arbitrary and unaccountable ‘private governments’ and ‘dictatorship’:

Most workers in the United States are governed by communist dictatorships in their work lives. Usually, those dictatorships have the legal authority to regulate workers’ off-hour lives as well – their political activities, speech, choice of sexual partner, use of recreational drugs, alcohol, smoking, and exercise … most employers exercise this off-hours authority irregularly, arbitrarily, and without warning … only about half of U.S. workers enjoy even partial protection of their off-duty speech from employer meddling.

We might question her terminology “communist”. The sort of dictatorship she is describing doesn’t fall into what I would call a ‘communist’ regime but then that would be quibbling and missing the main point.

The concept of “private government” arises because workers “are subject … to authorities that can order them around and impose sanctions for noncompliance”.

This workplace despotism leads her to conclude that “Libertarians and free market economists and politicians wrongly equate ‘freedom’ with private enterprise, ignoring the reality that for most workers, employment in large firms brings with it subjection to arbitrary power that extends beyond their work lives”.

It is clear that “the security of private property depends on a strong state” but then “so too do many forms of freedom”.

In an interview relating to her book – Where Despots Rule (June 29, 2017), Elizabeth Anderson noted that:

The history of democracy is the history of movements to make government a public thing; that is, to make it the business of the governed – transparent to them, attentive to their interests, accountable to the public.

Private government is rule by authorities who tell the governed that the rules to which they are subject are none of their business, that they aren’t entitled to know about how their government operates, that they have no standing to insist that their interests be taken into account in how they are governed, that their rulers are not accountable to them.

By US law, the default constitution of the workplace is a private government, rather than a public one. Managers run a government that is kept private from the workers they govern.

In her book, she cites examples of the extent to which capital micromanages the workforce. One case is where toilet breaks are curtailed and workers are required to wear nappies while they work to soak up the urine.

Her argument, while US-centric, generalises to workplaces around the world, although the web of legislated protections of workers differs across different nations.

The Anglo-world, in particular, has been at the forefront of dismantling worker protections and allowing these “private governments” to increase in power.

The problem, however, is not new.

Essentially, Karl Marx was the first writer to put the concept of “private government” into historical context.

He clearly understood that the concept of a ‘market’ is a social construct with embedded power relations.

The ‘labour market’ is where workers and capital meet to determine nominal wage rates and employment.

However, the concept of a market for ‘labour’ is somewhat of a misnomer because if we try to analyse the transactions that occur in this arena in terms of a simple exchange of use values essential insights into the operations of the economy are obscured.

In what way can we differentiate the ‘labour market’ from markets for goods and services?

The standard mainstream economics textbook analysis of the labour market, which dominates the public debate when it comes to discussions about unemployment, welfare payments, the impact of taxation etc, makes no distinction between exchanges between labour and capital and the use by firms of other productive inputs.

Many years ago (around 1968), the then Economics editor of The Financial Times, Samuel Brittain made this statement, which reflects the viewpoint still held by most economists today:

If the price of bananas is kept too high in relation to the price required to balance supply and demand there will be a surplus of bananas. If the price of bananas is below the market clearing price there will be a shortage. The same applies to labour. If the price – i.e. the wage – is too high there will be a surplus of workers, i.e. unemployment. If it is kept too low there will be a shortage of workers … Workers do sell their services just as banana producers sell their bananas.

In other words, the essential insights into how the labour market operated could be gleaned by studying any market exchange.

The ‘free market’ proponents use this flawed logic to assert that the advancement of freedom requires less government legislation about wages and conditions and more control over trade unions etc who seek to undermine the ‘freedom’ of the worker to negotiate, one-on-one with their employers.

Many people buy this flawed logic.

In 1974, American sociologist Harry Braverman noted that the characteristic feature of capitalism was that the workers only sell their capacity to work (referred to by Karl Marx as “labour power”) to the capitalist in what we now term to be the labour market.

Workers are not typically enslaved under capitalism (in the meaning of the word ‘slavery’) nor do they sell what we might call labour services.

Following Marx, Braverman argued that the major challenge facing the capital is to ensure the ‘labour power’ they purchase becomes a flow of ‘labour services’ (or simply labour). This observation suggests that the capitalist firm faces a control problem pertaining to how the managers extract work from the potential they have bought.

Braverman wrote (pages 57-58):

When he buys labor time, the outcome is far from being either so certain or so definite that it can be reckoned away, with precision in advance. This is merely an expression of the fact that the portion of his capital expended on labour power is the “variable” portion, which undergoes an increase in the process of production; for him the question is how great that increase will be. It thus becomes essential for the capitalist that control over the labor process pass from the hands of the worker into his own. This transition presents itself in history as the progressive alienation of the process of production from the worker; to the capitalist, it presents itself as the problem of management.

[Reference: Braverman, H. (1974) Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century (New York: Monthly Review Press, 1974).]

In modern terms, the firm agrees to pay a wage to the worker for a given working day (which itself might vary according to various rules). At that point in the exchange the firm has purchases the labour power, which is the capacity to work. No actual labour services have been purchased in that transaction.

The task of management then is to organise, muster and deploy that labour power in a controlled way to ensure that for the time the worker has agreed to work they are delivering the desired flow of labour services to the firm.

It is in that way that the firm ensures they produce enough output from the labour power purchased, which upon sale, will return the funds outlayed on wages (and other materials the workers use) and leave a sufficient residual – profits – which will satisfy the objectives of the owners of the firm.

A study of the modern labour market therefore has to be conducted within the context of the primacy of managerial control and the need for the capitalist firm to maximise the flow of labour they gain from the labour power they purchase.

We might ask as American sociologist Michael Burawoy did in 1978:

Why is control necessary?

The answer is to be found in the observation that the objectives of workers and firms are rarely – substantively – the same. Marx considered the relations between those who sell labour power (the workers) and those who buy it (the capitalists) to be fundamentally “antagonistic” or adversarial.

We might summarise this basic conflict by assuming that workers will typically desire to be pay more for working less and capitalists want to pay the least for the most flow of labour services.

We could frame this tension in more complex ways and, indeed, Marx and his followers have done that.

Everything firms do is to maintain their control function or their capacity as purchasers of labour power.

In terms of the ‘bananas’ analogy, Marx noted that we seek ‘use values’ when we enter market exchanges. In the bananas market, I might enter the shop hand over money to the fruit merchant and then we, respectively, consume the “use value” of the transaction (me the banana, the fruit shop the money) after the transaction is over.

There is a separation of the “use value” and the “exchange value” (the price) in a simple commodity exchange.

But in the labour market exchange, the worker is forces to produce “use value” for the employer (the flow of labour power) as part of the transaction. There is no separation.

This, in the context of conflictual motivations (class conflict) sets up the need for these “private governments” that Elizabeth Anderson elaborates upon.

In that context, Micheal Burawoy suggests that:

… the essence of capitalist control can only be understood through comparison with a noncapitalist mode of production.

[Reference: Burawoy, M. (1978) ‘Towards a Marxist Theory of the Labour Process: Braverman and Beyond’, Politics & Society, 8, 3-23. If you have access to Sage Publications you can download the Full Paper.]

By which he means that to understand the true nature of the capitalist labour market a student has to have some appreciation of historical arrangements for labour prior to the onset of capitalism.

His main comparison is in detailing the transition from Feudalism to Capitalism. His comparison between these two systems of production allows us to highlight the differences and the purposes of these differences in relation to the basic challenge of capitalism – to extract labour services from purchased labour power in a conflictual context.

Under feudal relations, the worker (a serf) tills the land their lord has provided them with for some part of the week. They are allowed to consume the production that arises from that work. This production allows the serf to survive and provide for their family.

For the remaining days in the week, the serf tills the lord’s land and all of the labour expended can be considered surplus to that required to maintain the survival of the serf and his/her family. The goods and services produced in this part of the week are expropriated by the Lord for his/her own use.

Burawoy noted the crucial characteristics of this system of production are that:

• Necessary labour (that required to maintain survival of the worker) and surplus labour are separated in both time and space.
• The serfs have possession of their own means of subsistence as they work – that is, they farm and consume their own product.
• Serfs undertake this work independent of the lord.
• Surplus labour (that is, the work expended on the Lord’s own land) is transparent and the lord expropriates it through extraeconomic means (that is, by dint of his status in the system as lord).

The contrast to the capitalist mode of production, which in historical terms succeeded the feudal system is stark. The essential characteristics of that system are:

• The necessary and surplus labour are not separated in space and time. The worker appears to work say an 8-hour day for a certain hourly wage, which blurs the distinction between the two types of labour.
• The workers do not possess the means of production and hence the means of subsistence. A defining feature of capitalism is that the capitalist owns the productive means and the worker, while free to choose which capitalist to work for, has to work to survive. Survival requires the worker agree to work for, say 8 hours to get the wage which might be equivalent to 5 hours of production.
• The capitalist controls the work process and the worker has to provide labour services within that control system.
• The surplus labour is conjectural – that is, there is no extraeconomic authority based on feudal politics, social position etc to ensure that surplus production occurs. The creation and expropriation of surplus labour becomes an economic struggle that unfolds within the workplace

All of this is going on within the labour market. Every day, workers are producing goods and services which consumers and firms desire, but in doing so they are producing both necessary and surplus labour.

The production of surplus labour, which manifests as profits if the surplus value embodied in these goods and services is successfully sold, maintains the capitalist social relations. It allows the owner of capital to retain his/her position of power and at the same time ensures the worker has to return each day in order to survive.

Under feudalism, the lord remains so as a consequence of the manorial politics (the extraeconomic means) irrespective of the surplus output.

The final point to appreciate in this overview is that the hidden nature of the surplus labour under capitalism creates the need for managerial control, which aims to ensure that surplus value is created but that the system does not make it obvious that workers are working longer than necessary to maintain their existing living standards.

There have been some great analyses of the evolution of this controlling function.

Marglin wrote the 1974 classic article – What do bosses do? which undermined the neo-classical theory of the firm. You can also read the 1975 follow-up – What Do Bosses Do? Part II.

The brilliant research by Stephen Marglin which came out in 1974 – What Do Bosses Do?: The Origins and Functions of Hierarchy in Capitalist Production – shows that the rise of factory production and the division of labour that came with it:

… was the result of a search not for a technologically superior organization of work, but for an organization which guaranteed to the entrepreneur an essential role in the production process, as integrator of the separate efforts of his workers into a marketable product …

Likewise, the origin and success of the factory lay not in technological superiority, but in the substitution of the capitalist’s for the worker’s control of the work process and the quantity of output, in the change in the workman’s choice from one of how much to work and produce, based on his relative preferences for leisure and goods, to one of whether or not to work at all, which of course is hardly much of a choice.

[Reference: Stephen Marglin (1974) ‘What Do Bosses Do? the Origins and Functions of Hierarchy in Capitalist Production, Part I.’, The Review of Radical Political Economics, 6(2), 60-112.]

See also Marglin’s 1975 follow-up – What Do Bosses Do? Part II.

Similarly, the wonderful article – The Origin of Job Structures in the Steel Industry – by Katherine Stone and published in 1973 is worth being acquainted with.

It was part of an overall research program that several economists and related disciplines were pursuing as part of the radical economics that was being developed at Harvard and Amherst in the early 1970s.

One of the major strands of this research was to understand labour market segmentation and how labour market structure, job hierarchies, wage incentive systems and more are used by the employers (as agents of capital) to maintain control over the workforce and extract as much surplus value (and hopefully profits) as they can.

It challenged much of the extant literature which had claimed that factory production and later organisational changes within firms were technology-driven and therefore more efficient. The Harvard radicals found that to be unsustainable given the evidence.

They also eschewed the progressive idea that solving poverty was just about eliminating bad, low pay jobs, an idea which had currency in that era. They showed that the bad jobs were functional in terms of the class struggle within capitalism and gave the firms a buffer which allowed them to cope with fluctuating demand for their products.

It also allowed them to maintain a relatively stable, high paid segment (primary labour market) which served management and was kept docile via hierarchical incentives etc. I was reminded of this literature when I read a recent paper from Dutch-based researchers on the way firms have evolved in the neo-liberal era of precarious work.

[Reference: Stone, K. (1973) ‘The Origin of Job Structures in the Steel Industry’, Radical America, 7(6), November-December, 19-66.]

Please read my blogs for more discussion on these studies:

1. Capitalists shooting their own feet – destroy trust and layer management.

2. Rejecting the TINA mantra and the second ‘Gilded Age’.

What interested me about Elizabeth Anderson’s book was how she extends this notion of control into all aspects of the workers’ lives.

Capital has gone further than Marx would have ever envisaged in tying down the free will of the workforce.

She documents the widening oppression of these “private governments” where (see Interview) workers are not only “Being humiliated, harassed, and abused by managers” and are “subject to dangerous work conditions” but are also (among other things):

… being penalized for off-duty conduct that has nothing to do with on-the-job responsibilities, being pressured to support management’s political causes …

In Australia, there are regular cases of workers being sacked for putting something up on their social media site.

There is all this talk about protecting “the brand” yet workers do not share in the largesse associated with “the brand”.

One shortcoming of the book is that her analysis tends to focus on low-paid, factory workers and service sector workers. She fails to capture the way in which the previously protected, primary labour markets (see above) are increasingly fragment (contracting out, outsourcing etc) and the control of such workers extended through micromanagement.

An example of this?

Just work in an Australian university these days!

Conclusion

I will extend this work some more when I come to consider trends in low-wage work and the intervention of ‘private welfare agencies’.

There is a good article in the Jacobin Magazine last week (June 30, 2017) – Cleaning Toilets for Jesus – in this regard.

The series so far

This is a further part of a series I am writing as background to my next book with Joan Muysken analysing the Future of Work. More instalments will come as the research process unfolds.

The series so far:

1. When Austrians ate dogs.

2. Employment as a human right.

3. The rise of the “private government”.

The blogs in these series should be considered working notes rather than self-contained topics. Ultimately, they will be edited into the final manuscript of my next book due in 2018. The book will likely be published by Edward Elgar (UK).

That is enough for today!

(c) Copyright 2017 William Mitchell. All Rights Reserved.