In Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It), Elizabeth Anderson argues that beneath the facades of market freedom and contractual equality, contemporary firms are actually akin to authoritarian private governments. While this is a compelling and provocative analysis that sheds important light on the coercive and hierarchical facets of modern workplaces, Abraham Singer wonders whether the rise of the gig economy might demand new concepts for understanding the firm today.
Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It). Elizabeth Anderson. Princeton University Press. 2017.
In Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It), a version of her 2015 Tanner Lectures, Elizabeth Anderson argues that modern workplaces are coercive and hierarchical institutions, a fact that is camouflaged by the facades of market freedom and contractual equality. By privileging the free market, current policy and discourse occlude the actual nature of work, leaving us without a language to articulate the problems it presents. Instead, Anderson urges us to see capitalist firms as arbitrary governments, antithetical to our moral commitments to freedom and equality.
Anderson explains that originally free markets and private property were defended on ‘leftist’, egalitarian grounds. This seventeenth- and eighteenth-century egalitarian defence of markets (espoused by those such as the Levellers, John Locke, Adam Smith, Thomas Paine and even Abraham Lincoln) was premised on a vision of economies dominated by small proprietors and self-employed workers. The market was meant to decompose the feudal and monarchical organisations of crown, church, guild and plantation, thereby freeing people from the social hierarchies and material dependencies such institutions buttressed. This changed with the industrial revolution. By massively altering our ability to capture economies of scale, the industrial revolution recomposed the economy into new sorts of organisations – namely, large businesses and factories. The market failed to effect egalitarian dreams because in the process of this re-composition, social hierarchy found a new economic basis in the inequalities between boss and worker.
The problem is not simply the existence of such inequality; it is that we continue to act like we are in a world of small, self-employed proprietors trading with one another. But the existence of the firm belies this. As Anderson notes, the economic understanding of the firm was launched by Ronald Coase’s insight that it is defined by precisely the supersession of the mechanisms that characterise the market: firms exist because hierarchy is often comparatively more efficient at coordinating activity than price-mediated transactions are. However, the twentieth-century Chicago School law and economics movement deployed free market ideology to essentially erase this insight. Such scholars attempted to reimagine the firm as a nexus of contracts, a catallactic arrangement of individuals organising themselves according to their own desires in a free market. In this view, because workers enter the firm voluntarily and are free to exit as they please, there is no reason to think that authority exists therein: a boss’s order is analogised to a price for a good given by a grocer, which a customer is always free to refuse.
For Anderson, this is the pathology of free market ideology. The insistence upon seeing the world through the lens of free markets makes one unable to see the power dynamics at work (pun intended). There is no authority, no domination, no indignity here: workplaces are just voluntarily-chosen contracts amongst equal and autonomous agents!
Image Credit: The office (John CC BY 2.0)
Thus the language of markets, developed for pre-industrial societies in the name of egalitarian goals, gets used in our post-industrial world to obscure and justify inegalitarian arrangements. Anderson offers her titular concept, ‘private governments’, as an alternative way of understanding firms. Workplaces are ‘governments’ in that they are environments where some have sanction-backed authority over others. Workplace governments are ‘private’ not in the sense that they exist in some ‘private sphere’, but in that their exercise is understood as a concern only for those governing them. Thus, firms are private governments in that management can give sanction-backed commands to workers without justification or accountability.
As always, Anderson’s analysis is as compelling as it is provocative. Still, there are things to quibble with. Is the theory of the firm-as-market as influential in public discourse as Anderson contends? Insofar as Americans accept workplace arrangements as legitimate, I doubt it’s because they don’t recognise the authority therein: most know who’s giving orders at work. What seems a more commonly accepted idea is the theory of the entrepreneur-as-disruptive-innovator. The celebrity of Mark Zuckerberg, Steve Jobs or Bill Gates isn’t due to their being mistaken as contractual equals, but a perception of them as deserving to be in charge, due to some characteristic they possess or some unique contribution they can make. Challenging the governmental nature of work requires engaging with this pervasive idea as well.
Furthermore, are ‘private governments’ as private as Anderson suggests? Publicity and privacy are not just about proximate accountability; larger social and institutional contexts can check and affect decisions, as Anderson observes (45). But then we must note that workplace governments are affected from without by various factors. Anderson doesn’t really get into how market competition and industry structure, for example, obviously shape what decisions will be profitable in any given instant. But this is a vital check on management: managers who ignore the market’s price signals do so at their own peril. Of course, markets can be imperfect, under-regulated or unfair. Such things ought to be remedied. But these shortcomings of market structure are distinct from questions regarding the firm’s relatively unaccountable authority, which is more complicated when we take its competitive environment into account.
Anderson explores various institutional remedies for de-privatising private governments, emphasising the importance of mechanisms for worker influence and control. But there is another option: abolish firms entirely. Anderson dismisses this as implausible (64), but with the transaction-cost-reducing nature of digital technology and the rise of gig economy businesses, this may not be completely true. The Hegelian in me wonders if Anderson is not delivering this lecture at the closing of an economic epoch dominated by firms. Perhaps the grey walls of the supervisor’s lounge, on which Anderson paints her grey philosophy, will be ripped down tomorrow by a Silicon Valley startup. Maybe the Owl of Minerva’s share price is only knowable after the closing bell.
This is likely overstated. Still, just as eighteenth-century free market ideology doesn’t fit a post-industrial-revolution economy, perhaps the language that Anderson introduces is becoming less relevant in a smartphone age. To illustrate, recall the criticisms Uber faced for turning off surge pricing when taxi drivers refused to service airports in protest of Donald Trump’s Muslim travel ban. By lowering the price of a ride, critics argued, Uber was incentivising people to break the cab strike. This makes sense with a traditional firm, where the price is only mediating the transaction between the administered enterprise and the customer. But Uber is not exactly a ‘communist dictatorship in our midst’ (as Anderson describes firms), in the technical sense that drivers aren’t following commands but responding to prices. Consequently, lowering the price was not only an incentive for riders, but a disincentive for drivers to offer a ride. This type of arrangement is becoming more common, but it is less legible if we are interpreting the economy through a framework of private governments.
None of this is to defend Uber or celebrate the gig economy, which certainly presents urgent political and moral dilemmas. But they are different sorts of problems requiring different concepts. With Private Government, Anderson has offered an important corrective to influential libertarian theories by bringing the governmental nature of firms into sharp relief. I only worry that she might be downplaying how distinctive these kinds of governments are, thereby obscuring the conditions they presuppose and the factors that can influence or eclipse them. The stakes Anderson so convincingly elucidates are too high for us to afford to ignore such subtleties.
Abraham Singer is Assistant Professor of Management at Loyola University Chicago’s Quinlan School of Business. His teaching and research focuses on business ethics, political theory and the relationship between the two.
Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics.