By Gary Chartier
Professors Horwitz and Shapiro both raise helpful, thoughtful questions about the persistence of hierarchy in a stateless society.
I can’t, obviously, demonstrate praxeologically that there will be significantly fewer hierarchies in the workplaces of a freed market—that we should definitely expect more self-employment and a greater proportion of partnerships and cooperatives in a free economy. But let me note some reasons to think this might be the case.
Large, hierarchical firms seem likely to be beset by the incentive and knowledge problems that complicate the lives of state central planners.
The larger an organization, the more likely it is that managers will lack crucial information. This is both because there will be multiple layers separating various actors with relevant information (with institutional pressures impeding accuracy) and because there will be no system of prices encoding the information and usable for calculation.
In addition, the principal-agent problem besets large firms at multiple levels, fostering inefficiencies as workers—whether senior managers or front-line employees—seek their own goals rather than firm profitability.
Thus, it seems fairly clear that, all other things being equal, the smaller and flatter a firm is, the better the information available to participants will be. The more production decisions are based on actual market prices rather than on simulated intra-firm transfer prices, the more efficient and responsive to reality they’re likely to be. And the more a worker has skin in the economic game, the more likely she will be to make prudent, efficient, customer-responsive decisions.
It might seem, then, that smaller, flatter firms could be expected to out-compete larger, more hierarchical ones. But we don’t see lots of smaller, flatter firms in the marketplace. Does this mean that, contrary to expectations, larger firms really are more efficient?
Whether this is so will depend in significant part on empirical questions that can’t be sorted out a priori. But it does seem as if several factors in our economy might tend to help large firms ignore the diseconomies of scale that would otherwise render them unsustainably inefficient. Tax rules and regulations tend to encourage capital concentration and thus increased firm size. Subsidies reduce the costs inefficiently large firms might otherwise confront—and large firms can more readily mobilize the resources needed to enable them to extract wealth from the political process than small firms. And workers often lack access to the resources needed to start firms precisely because of state-sanctioned theft and state-secured privilege. Eliminating these factors seems likely to make alternatives to the large corporate firm significantly more viable.
And if they’re more viable, they can be expected to be more common. Freedom from arbitrary authority is a consumer good. Given the disgust and frustration with which many people view the petty tyrannies of the contemporary workplace, I suspect it’s a consumer good many people would like to purchase. At present, the price is high; there are very few opportunities to work in partnerships or cooperatives or to choose self-employment. So the question is: what might reduce the price?
The price is partly affected by the relative frequency of hierarchical versus non-hierarchical workplaces. So eliminating props for hierarchy ought to put more alternatives on the table. At the same time, people often don’t choose such alternatives because of the risks associated with doing so. Saying good-bye to corporate employment means taking responsibility for one’s own medical care and retirement (if, of course, you’re a worker who even has these options in the first place, as many purportedly part-time workers don’t), requires one to front the capital required to make start-up operations possible, and forces one to confront the spectre of unemployment if one’s start-up business fails. But medical care and retirement are associated with corporate employment primarily because of the current tax system; and medical care, in particular, would be more affordable by far in the absence of state regulation and state-driven cartelization, so that the challenge of caring for one’s health in connection with a mutual-aid network, say, would be much less daunting than at present. Start-up capital would be more available if state-confiscated resources were marketized and state-engrossed land available for homesteading, and less necessary, in any case, if state regulations didn’t drive up capitalization requirements. And unemployment would be more affordable if state regulations didn’t raise the minimum cost of living, and could be manageable by means of the support offered by mutual aid.
Furthermore, it’s not clear to me that it would be impossible to raise money in equity markets and from investment banks for partnerships, cooperatives, and solo ventures. There are ways to secure investments that don’t involve participation in governance—and of course significant quantities of stock for sale today don’t necessarily come with voting rights.
Thus, people who wanted to opt for boss-free workplaces would find it easy to do so in the absence of state-driven props for hierarchy and state-driven barriers to self-employment and employment in partnerships and cooperatives. And the fact that they did so, so that boss-free options were increasingly visible and numerous, would have consequences for boss-dominated workplaces, too. The availability of alternatives that offered people more dignity, more predictability, more security, and more opportunities for participation in decision-making would exert market pressure on conventional corporate firms, encouraging them to make theoretically boss-dominated workplaces more like those at other kinds of firms. The differences wouldn’t disappear, but they might be meaningfully reduced.
In addition, boss-dominated firms might experience greater pressure to democratize in virtue of unionization. To the extent that the state’s bargain with unions has been, all things considered, bad for collective action in the workplace, eliminating state labor regulation could open up opportunities for Wobbly-style direct action that could increase unionization and offer workers resultingly more extensive workplace protection. Again, even in non-unionized firms, there would be market pressure to mimic at least some features of unionized firms, both to avoid losing workers to those firms and to forestall union organizing efforts.
Moral suasion typically shouldn’t be seen as the primary driver of social change. But active advocacy on behalf of workplace dignity and fairness could obviously lead to changes in social norms and expectations that would further reduce the perceived legitimacy of bossism and encourage the flourishing of alternatives.
A free society wouldn’t and couldn’t eliminate investor-owned or boss-dominated firms—nor should it, not only because direct, violent interference with these patterns of ownership and control would be unjust but also because workers might often benefit from the ability to shift risk onto employers and investors. But eliminating state-secured privilege and remedying state-sanctioned aggression could create significantly greater opportunities for self-employment and work in partnerships and cooperatives.
- Gary Chartier is a Professor of Law and Business Ethics at La Sierra University, where he also serves as Associate Dean of the School of Business.
- This article originally appeared on Bleeding Heart Libertarian.