The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (33 page)

The study of human relations specializes in understanding how business can extract the maximum effort from workers. This field suggests that business fails in its efforts to maximize profits by not fostering relationships built around respect and trust. Despite the research in this field, business still insists on managing by threat and intimidation, rather than nurturing workers.

Researchers in human relations offer a different perspective, understanding employment as a potentially ongoing relationship. This field is not concerned with radical reforms, only with using less overtly Procrustean methods to extract profits. For example, in a symposium on human relations and economics, published in the American Economic Association’s
Journal of Economic Perspectives
, Jeffrey Pfeffer addressed the mysterious disconnect between economic theory and well-understood human relations practices, which promised to make business perform better—not so much from the perspective of workers, but for business itself:

Comprehensive evidence from studies in numerous industries and countries establishes this point and also helps us identify high-performance management practices. Third, in spite of the fact that much of what is required to build engaged and successful organizations is at once well known and not always costly to implement, many, maybe most, organizations have failed to take appropriate actions, thereby, in some sense, “leaving money on the table.”
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The kind of antagonism in the auto plant that Watson described is a perfect example of the more obvious kind of losses that business experiences because of short-sighted understanding of its relationship with workers. Elsewhere, Pfeffer pointed out, “The dominant economic theories are also filled with language not apt to produce trust and cooperation, to put it mildly.”
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After listing a number of prominent examples of economists to prove his point, Pfeffer turned to another widely circulated literature that indicates that in real life economists tend to behave more selfishly than most people. Based on this material, he concludes:

It is scarcely surprising that training that stresses self-interested behavior, rampant opportunism, and conflicts of interest would produce less collaborative behavior on the part of those exposed to the training and the language used to express these ideas.
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Another contribution to the symposium, titled “Paying Respect,” explains how respect, as well as monetary incentives, can encourage workers to perform better. Economists, however, have difficulty taking account of respect because “respect cannot easily be traded in a market.”
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This mild critique of Procrusteanism makes economists uncomfortable because it raises questions about their basic assumptions about human behavior. For example, two economists, one of whom, Edward P. Lazear, was then serving as the chief economist in the administration of George W. Bush, also participated in this symposium on human relations. Their contribution is interesting because it mostly ignores the contributions of the human relations theorists. Instead, they complained, “The issues studied by human resources specialists were of interest to economists, but the approach taken by the non-economists lacked the formal framework to which economists have grown accustomed.”
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Recall that this formal framework explicitly excluded the labor process, emphasizing commercial transactions instead.

These economists suggested financial economics as the “model for personnel economics.” They claimed that just as finance lacked a formal
approach until a few decades ago, personnel economics will benefit from economic formalism.
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Ironically, the article appeared just as the teachings of financial economics was about to push the economy over a cliff.

Earlier, Lazear justified why mainstream economists found past human resource management unpalatable: “It was loose, unfocused, and ad hoc, and lacked the general rigorous framework to which economists were accustomed.”
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Lazear was correct about the absence of a “rigorous framework” in management theory, but forcing the study of human resource management into a Procrustean bed of theoretical rigor drains the subject of any relevance, except as an academic exercise. So, rather than taking seriously the complexity of the human relations literature, Lazear and his coauthor proposed that economists should go ahead and apply their theoretical tools to this subject. In effect, however, their suggestion all but removes the “human” from “human relations.” This formal framework is part of the problem, not a solution.

Economics contributes to the almost universal application of Procrustean management strategies. Professors repeatedly teach students of economics, beginning in introductory classes and continuing through graduate studies, how firms can maximize profits. Unfortunately, the models used to convey this message do not often include the way that business has to make decisions as events unfold in real time—or, in the rare cases when they do, the models exclude the kinds of uncertainty that business faces.

Even more pertinent to this book, these models demonstrate how business should add or subtract labor according to market conditions, with scant attention to long-run consequences. Such models probably depict business behavior somewhat accurately, in the sense that business does tend to buy labor like it does with inanimate inputs. But unlike machines or other inputs, workers have the potential to grow and develop. Driving workers harder rather than building long-term capabilities might produce short-term benefits, but it is at a significant long-term cost.

The workers themselves bear the immediate brunt of these costs. Over time, overwork takes a toll on the system as a whole, damaging
the capitalists’ prospects. However, individual employers have no incentive to lighten the load on their own employees, whom they will replace once they are no longer capable of keeping pace. Here is another example of the self-destructive nature of the system.

Objectifying labor also serves an important psychological purpose for the Procrusteans. The comfort of the prosperous does not depend on the sacrifices of hard-working people who abide by the rules of the game. Instead, the key to prosperity is the knowledge and skill of management. As a result, workers do not deserve to share much of the prosperity. Authoritarian measures—whether directly applied or waiting in the background—become unavoidable to enforce the discipline of this system.

The Subtle Resistance of Control

Earlier, we discussed the widespread perception by economists and employers that workers are objects. The diary of Ralph Miliband, a poor refugee in London during the Second World War who later became an influential academic and the father of a recent British foreign secretary, casts some light on the cultural response to this inhuman attitude. Miliband recorded a “curious combination of kindness, cunning, ignorance, feigned servility and subordination, actual contempt which this particular part of the unskilled working class had for their masters.”
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As a result, even if people in authority expect absolute obedience from the “living objects” they employ, they may only be able to elicit a superficial obedience, which may be nothing more than the appearance of compliance, especially when people are denied trust and respect.

Part of the problem that employers face is that effectively framing their orders is almost impossible. To ensure that a subordinate carries out orders, the employer faces the virtually impossible challenge of conveying them in a clear, complete, and unambiguous manner. Yet commands, even if formalized in a contract framed by expensive lawyers, almost inevitably contain a certain ambiguity.

Anyone involved in a construction job understands the difficulty involved. A cost-plus arrangement gives the contractor no incentive to be efficient. Costs can spiral out of control. A contract for a fixed amount creates an incentive to cut corners, since the contractor will get the money no matter how shoddy the work is—so long as it passes the scrutiny of a building inspector. Nobody could specify the particulars of the job precisely enough to make sure the outcome will be satisfactory for all concerned. Even for people with sufficient knowledge of the project, the time required to make the specifications detailed enough to remove ambiguity would be excessive.

A large literature of legal and economic scholarship has wrestled with what is known as “the principal/agent problem,” exploring ways to structure authority so that underlings feel that their interests coincide with that of their superiors. No one has discovered a formal way to align incentives. If a job were so simple that management could drain its commands of the last drop of ambiguity, then that job would seem to be ideal for a robot rather than for a living, breathing human being. The resulting ambiguity of commands gives subordinates a degree of latitude to exercise their wills, often to the detriment of those who are supposed to be in control.

One of my favorite works of literature revolves around this dilemma. Jaroslav Hasek’s 1912 novel
The Good Soldier Sveijk
is the charming story of a Bohemian soldier caught up in the turmoil of the First World War. Most of the humor of the book arises from Sveijk’s practice of seizing upon ambiguity or hyperbole in the orders that his superiors give him. By taking his orders literally, he is usually able to do whatever he wants. When challenged to explain his absurd behavior, Sveijk unflinchingly boasts of being a lunatic, much to the consternation of his superiors and to the delight of generations of readers. After all, how can employers expect competence from machines, even “living machines”?

Sveijk-like behavior is not restricted to the world of fiction. The same defect that drove Sveijk’s officers to distraction plagues the typical authoritarian relationship. Recall how slave owners had to use heavy equipment because their unfree workers were prone to “accidents.”

While a fictional Sveijk might play the fool, surreptitiously challenging management can be a source of pride, especially when management treats workers disrespectfully. Early in his career, David Packard, a co-founder of Hewlett-Packard, learned something about this almost instinctual desire to subvert control:

In the late 1930s, when I was working for General Electric … the company was making a big thing of plant security…. GE was especially zealous about guarding its tool and parts bins to make sure employees didn’t steal anything. Faced with this obvious display of distrust, many employees set out to prove it justified, walking out with tools and parts whenever they could…. When HP got under way, the GE memories were still strong and I determined that our parts bins and storerooms should always be open…. Keeping storerooms and parts bins open was advantageous to HP in two important ways. From a practical standpoint, the easy access to parts and tools helped product designers and others who wanted to work out new ideas at home or on weekends. A second reason, less tangible but important, is that the open bins and storerooms were a symbol of trust, a trust that is central to the way HP does business.
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Unfortunately, few managers are as sophisticated as Packard.

Real Life Sveijk

An engineer, Stanley Mathewson, reported a classic description of an automobile worker’s finding a loophole in a job description worthy of the good soldier Sveijk:

A Mexican in a large automobile factory was given the final tightening to the nuts on automobile-engine cylinder heads. There are a dozen or more nuts around this part. The engines passed the Mexican rapidly on a conveyer. His instructions were to test all the nuts and if he found one or two loose to tighten them, but if three or more were loose he was not expected to have time to tighten them.

[A supervisor who was puzzled that so many defective engines were passing along the line] discovered that the Mexican was unscrewing a third nut whenever he found two already loose.
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Loosening one nut required less effort than tightening two. A famous railroad manager and disciple of Frederick Winslow Taylor, Harrington Emerson, related a similar incident:

A railroad track foreman and gang were recently seen burying under some ashes and dirt a thirty-foot steel rail. It was less trouble to bury it than to pick it up and place it where it could be saved.
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During his reelection campaign in 2004, Vice President Richard Cheney, now a strict disciplinarian, recalled his own Sveijk-like past. As a young man in the early 1960s, Cheney worked as a lineman for a power company in Wyoming. Because copper wire was expensive, the linemen were instructed to return all unused pieces three feet or longer. Rather than deal with the paperwork that resulted from following orders, Cheney said, he and his colleagues found a solution: putting “shorteners” on the wire—that is, cutting it into short pieces and tossing the leftovers at the end of the workday.
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Workers adopt other creative methods of subverting management’s authority. In one case, pilots at Eastern Airlines reversed the classic strategy of pressuring employers with a slowdown. Instead, they flew at higher speeds, which burned more fuel. Although passengers might have found the shortened flight time convenient, the extra fuel cost undermined corporate profitability.

Work to Rule

Business sometimes unintentionally encourages Sveijk-like behavior by concocting elaborate official policies. The management does not expect people to take these orders seriously; to do so would be too time-consuming. The real purpose of these policies is to allow management
to avoid responsibility. In the event of a bad outcome, management can blame irresponsible workers who failed to obey strict company policy. This practice is especially useful in the case of serious accidents and fatalities on the job.