It can be said that from a socialist perpective employment is attacked of the grounds that hierarchy is wrong and that renting (means of production) is wrong.
I’d like to post about the thirds ground that was formulated by David Ellerman, who accepts both renting (of means of production) and hierharchy (as a delegation of authority), and is about alienation of labor.
I hope that, for start, everybody recognizes that science fiction is only that- fiction, and that human actions are de facto inalienable. These are two short chapters from Ellerman about employment being fraud:
“Voluntary Acts Between Knowledgeable Consenting Adults”
Liberalism, and particularly libertarianism, argues that at least a prima facie case can be made for allowing any voluntary acts between knowledgeable consenting adults. Does the de facto inalienability argument rule out any such voluntary acts between consenting adults? The (surprising) answer is “No” [at least not at the underlying noninstitutional level].
Understanding this answer requires a keen appreciation of the difference between the institutional (de jure) overlay and the underlying non-institutional (de facto) realities. The de facto inalienability argument does not rule out the de facto transfer of labor since it takes that to be impossible in the first place. What it rules out is the institutional overlay of the employment contract superimposed on the reality where labor has in fact not been transferred. What the argument excludes is at the institutional level, not at the underlying non-institutional level. It forbids the legal validation of an inherently unfulfillable contract. It does not forbid any non-institutionally described voluntary acts between knowledge consenting adults.
Nozick pointedly uses the expression “capitalist acts between consenting adults” [1974, 163]. The adjective “capitalist” is institutional so Nozick is not simply arguing for allowing voluntary acts between knowledgeable consenting adults. He is arguing for certain institutional superstructures to be laid over those voluntary acts. Nozick, with admirable consistency, argues not only for “capitalist acts” but also for the slavish acts involved in the voluntary self-enslavement contract [331]–as if there were no problem for a person to de facto fit the legal role of a non-person. The abolition of the employment contract, like the abolition of the self-sale contract, does not infringe on the freedom to make (non-fraudulent) contracts; it only restricts the “freedom” to make inherently unfulfillable and naturally invalid contracts.
The employment contract is, like the self-sale contract was, a subtle fraud vouchsafed by the legal system itself. Yet the point about “voluntary acts” can be illustrated by considering a simple fraud. There are widgets and cheap pseudo-widgets, and it is difficult to tell them apart. A buyer B legally buys a widget from the seller S and pays its price, but S transfers a pseudo-widget to B to “fulfill” the contract. There is a mismatch between the legal transfers and the factual transfers. In this case, there are two ways to restore a transfer matching:
- change the factual transfers–S furnishes a genuine widget to replace the pseudo-widget–or,
- change the legal transfers–rewrite the legal contract as a contract to buy a pseudo-widget–which may or may not be agreeable to B.
The point is that there is no fraud involved if B knowingly agrees to the rewritten contract to buy the pseudo-widget for the same money (the price of a real widget).
If the same de facto transfers could be carried out with no fraud involved, then what is the point of a fraud? The point is that–without the fraud–the defrauded party would very likely not agree to the same de facto transfers. For example in a democratic firm, Labor might not want to make a gift of the profits to Capital.
What in fact is ruled out by the prohibition against frauds? No voluntary acts between knowledgeable consenting adults are prohibited. It is the mismatch between the legal transfers and the factual transfers to fulfill the contract that is prohibited. In the example, the voluntary act of knowingly exchanging the price of a genuine widget for a pseudo-widget was not prohibited.
While the de facto inalienability argument does not rule out any voluntary acts between knowledgeable adults, it does rule out “capitalist acts between consenting adults.” The employment contract involves a transfer mismatch. But, since labor is de facto non-transferable, there is only one way to remedy the mismatch, namely rewrite the legal transfers in some fulfillable form.
Consider the simple model of the employment firm involving the parties Labor and Capital. In the non-institutional factual description of the transfers, the non-labor inputs K and a sum of money M (e.g., the wages wL) are factually transferred from Capital to Labor, and Labor produces the outputs Q and factually transfers them away (say) to Capital.
Let us now rewrite the contracts to fit these realities of “capitalist production,” and let us further suppose that both parties knowingly agree to these new contracts. Then there would be no fraud. What do we have? Not an employment firm, but an example of worker-managed production possibly with transactions at non-market prices. The non-labor inputs K have been legally purchased by Labor from Capital, and the outputs Q have been legally appropriated by Labor and sold to Capital. The net payment $M goes from Capital to Labor. If the transfers were at market prices then $M = $pQ – rK, but parties may knowingly agree to exchanges at non-market prices. Or such non-market transactions can be interpreted as a market transaction followed by a voluntary gift.
For instance, Labor could knowingly agree to buy K and sell Q all for the net payment of the money $M = $wL. That, in effect, is the market transaction with the net payment $M = $pQ – rK followed by the voluntary gift of the profits pQ-rK-wL = p from Labor to Capital. And that, in effect, is what the fraudulent employment contract induces Labor to do in conventional production. In a democratic firm, if the workers want to knowingly donate their profits to Capital or any worthy cause, they are free to do so.
These points serve to mark the non-consequentialist nature of the de facto inalienability critique of the employment contract. With a different legal overlay, the same de facto transfers could knowingly and voluntarily take place without involving any fraud. This also serves to emphasize that there is no inherent conflict between the de facto inalienability argument and allocative efficiency or Pareto optimality (applied to non-institutionally specified states of affairs).
In a simple garden-variety fraud, it is presumably always possible to ascertain that the de facto transfer does not correspond to the agreed-to legal transfer, e.g., to tell the difference between a pseudo-widget and the genuine article. The “beauty” of an institutionalized fraud like the employment contract is that there is no de facto transfer that fulfills the contract; in effect, there is no genuine widget to contrast with the pseudo-widget. The pseudotransfer of labor (i.e., voluntary co-operation with the employer) has been accepted for centuries by the legal authorities themselves as fulfilling the contract. The “discovery” of the fraud thus requires extensive analysis together with heavy use of intuition pumps like the case of the criminious employee to see that labor is not de facto transferable after all. And any responsible scholar and respected businessperson–being embedded in the institutions of the employment system–has every incentive not to make that discovery.
Voluntarily Following Orders
The analysis has emphasized the property structure of production, but the same remarks can be applied, mutatis mutandis, to the parallel governance structure of production. In the employment relation, the worker W decides to do X because the employer or boss B says to do X. Here again, the problem does not lie in the factual reality of W choosing to do what B says; the problem lies in the legal overlay.
In the employment relation, the reality, namely a rather one-sided form of voluntary co-operation between autonomous decision-making individuals, is legally interpreted as B “employing” W with B as the sole decision maker. B is the “head,” W is the “hand.” The head makes the decision and then employs the hand to carry out the decision. The hired hand is the conductor of B’s intentions, the instrument of B’s will; it has no “head” of its own.
In terms of the legal transfers between W and B, the employment contract transfers the use-rights over W’s time, the direct control rights over W’s services, to the employer B. It is a transfer, not a delegation, of decision-making authority. But the factual transfers cannot match that legal transfer. Short of some part-time robot concoction, W remains the de facto decision-maker over W’s actions. All W can do is to voluntarily co-operate with B by deciding to do as B says.
The facts cannot be changed to eliminate the mismatch (science fiction aside); human decision-making capacity is not de facto transferable. The legal contract should be rewritten in a non-fraudulent form to fit the facts. The legal relationship between W and B is then one of delegation, not an alienation or transfer of decision-making capacity. W and all of W’s colleagues in the work process (including B) are the decision-makers; B acts as their delegate or representative. B’s decision initiatives are taken in the name of the whole group, in the name of the governed. When the workers decide to do X because the boss B says to do X, that would legally as well as factually be their decision–even when X is not a crime.
Similar remarks apply to vote selling. The inalienability critique argued against W being permitted to sell his or her vote to B so that it became B’s vote. There was no inalienability critique of W casting W’s vote as B says. That may indicate what Hutcheson called a “weak mind” but it would not pretend to alienate the de facto inalienable capacity for decision-making.
Would the abolition of the employment contract impair workers’ freedom? Workers would not be prevented from performing the same (non-institutionally described) voluntary acts as before, namely deciding to do what B says. But criminals are today denied the “contractual freedom” to voluntarily contract into the legal role of an instrument, the de jure role of a non-decision-making non-responsible tool employed by the employer. With the abolition of the employment contract, that “contractual freedom” would also be denied to all de facto responsible decision-making persons.
Ellerman’s complete position can be found in his book Property and Contract in Economics