Our Supposed Dystopia

By Dominic Pino

Thursday, August 24, 2023

 

Tyranny, Inc., by Sohrab Ahmari (Forum Books, 288 pp., $28)

 

Sohrab Ahmari’s Tyranny, Inc. is not a screed against wokeness. It’s not a book about tech companies working with government to censor certain political views. It’s not about ESG or DEI initiatives or C-suite progressivism.

 

No, Ahmari sees tyranny in something much more mundane: employment.

 

Corporations are tyrannical in their capacity as employers of workers, according to Ahmari. This claim is not related to any cultural issue of the moment. A hyper-progressive CEO can be just as guilty of this sort of tyranny as an archconservative one.

 

What Americans are living in now, writes Ahmari, is the “political economy of dystopia.” The workplace is a series of traps and restrictions, enforced by tyrannical employers through coercive contracts. Employees who challenge their bosses are consigned to private arbitration processes in which they are trampled upon and silenced. Private-equity firms have sucked the life out of every once-vibrant corner of American life, from newspapers to fire departments to department stores. Corporations get away with anything through the bankruptcy process, even if they aren’t actually bankrupt, and continue the cycle of erosion of productive capacity that has gone unchallenged for decades. He recounts genuinely awful anecdotes of abusive employers and of employees who tried to fight back.

 

Unlike authors of other books of economic nostalgia, Ahmari is very clear about what he considers the good old days to be: the “three glorious decades” after World War II. It was then that the U.S. had something approximating social democracy, he says. “The U.S. variety was never as comprehensive as Europe’s, and it would be more apt to talk of socially managed capitalism — or better yet, political-exchange capitalism — in the American context.” Whichever term is used, Ahmari believes it was better than what went before it and what came after it, and he wants it back.

 

What was good about 1945–75, according to Ahmari, were the consequences of the New Deal’s “bolstering labor’s ability to bring collective action to bear against employers’ power.” That meant relatively high rates of unionization, with about one-third of workers as union members. It meant government putting its thumb on the scale in favor of unions and taking a more interventionist role in the economy through regulation. “State support for countervailing power led asset-less workers and asset owners to strike a political compromise,” he writes, and that compromise held until the mid 1970s.

 

Then it was blown up by the “neoliberal counterpunch.” Neoliberalism to Ahmari is an order in which the upper class wholly dominates the middle and lower classes and “law and government abjectly serve the market.” Individualism and liberty are mere illusions because class is the dominating and determinative feature of life. The upper class has neutered the political process, so there is no recourse for the middle and lower classes through democratic institutions. Economics and politics have been reintegrated “on a totally new basis, one in which private profit seeking utterly lords over public politics.” Workers are afterthoughts, and they should be angry about it.

 

There are two groups of people who would dispute Ahmari’s dystopian characterization of the American economy. The first are people who study the American economy, and the second are people who work in it.

 

That firms have power over employees is not news to economists, and it’s not the result of a diabolical plot. In 1937, Ronald Coase wrote “The Nature of the Firm,” for which he would later win the Nobel Prize. The paper asks why there are “islands of conscious power,” i.e., firms, in a competitive market economy. Why is it that central planning seems necessary within firms when it doesn’t work at a nationwide level?

 

Coase answered that there are costs associated with allocating resources through market prices, what economists now call “transaction costs,” and firms exist to minimize them. If firms didn’t exist, each employee would have to contract with every other employee and every manager and every supplier; instead, the firm acts as a central contracting agent. That means employees need to sign only one employment contract with the firm, and the firm then has power to tell the employees what to do.

 

Employees also have power: the power to quit. Economists Armen Alchian and Harold Demsetz emphasize that power in a 1972 paper on what they call “team production.” You don’t calculate a firm’s productivity by adding up the productivity of each employee individually. Employees work in teams, and their productivity is intertwined. Amending Coase’s argument, Alchian and Demsetz say that firms exist to develop ways to monitor employee output and reward it. If they fail to do so effectively, they are likely to see employees leave.

 

Ahmari pooh-poohs this pairing in U.S. labor relations, writing of the “downright depraved way it equates the employee’s ‘power’ to quit with the boss’s right to dismiss him.” But according to a July 2022 report from the Pew Research Center, 60 percent of U.S. job-quitters in the previous year saw real wage gains when they found a new job. And the U.S. job market has plenty of turnover, with 2.5 percent of workers changing employers, on average, every single month. Millions of workers regularly use the power to quit as an effective way to raise their compensation.

 

The U.S. labor market’s greater flexibility compared with more social-democratic European labor markets is a source of national strength. Only petrostates and tax havens have higher average incomes than the U.S., the U.S. takes less of that income from its citizens as taxes, and the U.S. has higher average income growth than Europe. Economist Niklas Engbom found in a January 2022 paper that countries with more fluid labor markets see higher life-cycle wage growth for workers. That’s because a more flexible labor market makes it easier for a worker to find the employer that most highly values his skill set. Since workers know this, they have more incentive to develop valuable skills. That virtuous cycle results in the United States’ having higher life-cycle wage growth than nearly every other country in the OECD, Engbom found.

 

Americans also take advantage of independent-contracting work that removes the strictures of traditional employment. About 50 million Americans do independent work in one form or another, most not full time. Contrary to media spin, most independent workers are not in the “gig economy,” and about 90 percent have health insurance. When polled, independent workers express high job satisfaction, and most full-time independent workers say they would not prefer traditional employment if given the chance.

 

For an example of an alternative labor-market arrangement, look to Sweden. The Swedish government has, in effect, delegated its labor-regulatory power to two cartels, the employers’ association and the trade-union association. They negotiate nationwide collective contracts that cover nearly all Swedish workers and set wages, benefits, and work rules. (This is why Sweden does not have a minimum wage, for example.) Sixty-five percent of Swedish workers are union members, and nonmembers are still covered by collective agreements in their industry. Foreign-born workers are effectively locked out of much of the private sector by the agreements. Solidarity strikes are permitted and can paralyze industries that have nothing to do with labor conflicts. Employment outside the system is prohibited in nearly all cases.

 

As Swedish labor-market researcher Charlotta Stern has written, this system works well enough for Sweden, which has a “central zone” of institutions that know they will have to work with one another again and therefore exercise power responsibly. Swedes regularly see hourly wage growth of about 2.5 percent per year. But there’s an awful lot of coercion going on, with two cartels (backed by government) effectively running the Swedish labor market, in a way that would make most Americans uncomfortable and ought to make Ahmari especially uncomfortable. And Americans are accustomed to being the global leader in output and innovation, not being, well, Sweden.

 

Unions in the U.S. are little more than progressive activist groups, so it makes sense that most workers want no part in them. Ahmari cites a CNN report that references a recent Gallup survey noted by countless mainstream journalists, which shows U.S. public approval of unions at the highest level since 1965. Like most of those other journalists, Ahmari doesn’t seem to have scrolled down to where Gallup asked nonunion workers whether they were interested in joining a union. Only 11 percent said they were extremely interested, and 58 percent said they were not interested at all. (Ahmari writes in the acknowledgments of his book that an interview with an SEIU organizer “helped guide the final chapters.”)

 

Ask American workers how they’re faring in our supposed dystopia, and most say they’re doing all right. A March 2023 report from Pew finds that only 12 percent of American workers say they are not satisfied with their jobs overall, and 51 percent say they are extremely or very satisfied. Upper-income workers are more satisfied, at 57 percent, but 45 percent of lower-income workers are extremely or very satisfied with their jobs.

 

Sixty-seven percent of all workers report being extremely or very satisfied with their relationships with co-workers, and 62 percent say the same of the relationship with their manager or supervisor. Seventy-eight percent say they are treated with respect all or most of the time, and 62 percent say their contributions at work are valued.

 

While Ahmari shakes his fist at the system from his nice house in Florida, most working Americans seem oblivious of the tyranny that he sees in everyday employment. Perhaps it’s false consciousness among the proletariat — or maybe Americans know their economic situations better than Ahmari does.