Last week I discussed whether we should boycott Amazon, prompted by the recent New York Times article alleging cruel treatment of employees at the online retail giant. The media commentary on Amazon’s “bruising workplace” continues. In this weekend’s Financial Post, Peter Kuitenbrouwer discusses “whether tyranny really is a sustainable management formula.” Accepting the Times article at face value, he writes that Amazon is hardly unique: “From William Randolph Hearst, the founder of Hearst newspapers, to Jack Welch, the chief executive at GE (known to ‘rank and yank’ his employees) the annals of capitalism brim with tales of hard-hearted, obsessive megalomaniacs.” In that list, Kuitenbrouwer includes also the late Steve Jobs, who was known for his temper and public berating of employees.

While the observation of cruel, harsh managers throughout the history of business is accurate, to suggest that “tyrannical” bosses are the product of capitalism is mistaken. Such a suggestion stems from not understanding what capitalism, or tyranny, means. Many people confuse a mixed economy, the prevailing social system, with capitalism. In a mixed economy system, government regulation of markets creates imbalances of supply and demand, such as unemployment (oversupply of labor) or a shortage of labor. Capitalism, on the other hand, is a free market system, where government plays no role in the economy. Under capitalism, government’s only function is to protect individual rights against those who initiate physical force or fraud.

Tyranny—the cruel and oppressive treatment of others by those in positions of power—is not possible under capitalism. While governments in mixed economies and in socialist systems regularly initiate physical force against their citizens—they forcibly collect taxes, confiscate property, and jail or execute dissidents, etc.—under capitalism, government cannot initiate force. It can only use force in retaliation against those who initiate it, such as common criminals, terrorists, or foreign governments.

Bosses oppressing employees by using force is not sustainable under capitalism and neither should it be in a mixed economy. Since government’s role in capitalism is to protect individual rights, any employer using physical force against employees—such as locking up the factory or the warehouse to keep workers working, or using “enforces” to push workers into factories about to collapse (as happened in Bangladesh)—would be prosecuted and punished. And since capitalism is a system of full employment, workers do not experience the financial pressure to keep working companies that do not treat them well. Jobs can be always found elsewhere.

This is not always the case in mixed economies, where governments’ interference in the markets—including the labor market—distorts the balance of the supply and demand, leading to fluctuating economic cycles, with high unemployment at one extreme and a shortage of labor at the other. Unstable job markets and the chances of long-term unemployment in mixed economies pressure workers to continue working for companies that do not treat them well. But the economic power of companies should not be confused with political power held by governments. Even in a mixed economy (unless the government is corrupt), companies cannot force employees to work for them: employees are free to quit when they deem that they are not getting value for value.

So where can we find capitalist systems where bosses’ and workers’ are traders of value? Unfortunately, nowhere. Capitalism, “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned,” does not exist in any country at present. Individual rights are not fully recognized anywhere in the world, and governments interfere with markets to a varying extent. The closest to capitalism was a brief period in the United States since its founding until the First World War. Today, Hong Kong and some other Asian economies have freer markets than the rest of the world, but the recognition of individual rights varies.

If we want productive workplaces where individual rights are respected and employers and employees trade value for value, productive input for appropriate compensation and just treatment, the best approach for the long-term is to advocate free markets and capitalism through any means open to us.

2 COMMENTS

  1. Thanks for the article.

    Claims are based on standard neo-Marxist teachings, particularly fixed-pie economics and drive-to-the-bottom ethics that come from the view of humans as incapable and untrustworthy. That’s from denial of the mind, which facilitates judgement for life and support of the good as life-fostering. (We know of course Marxism’s record of exploitation of workers, and suppression of dissent such as of critics of Lysenko by Stalin, which worsened the USSR’s dire food problems.

    I question your listing of executives accused of a bad reputation.
    Jack Welch cut out rot in GE, he eliminated layers of management, he took responsibility for unethical behaviour in a Wall Street financial outfit (saying that while he did not know what was going on, as CEO he was ultimately responsible).
    Perhaps Steve Jobs was harsh sometimes, but he insisted on quality, which is why Apple is doing so well today (having got over his arrogance of decades ago).

    And Bill Gates was accused of harshness in meetings, but in his writings advocated getting facts.

    Would be better if Jobs kept harsh comments private, but I think CEOs who are fair and accept feedback will be tolerated by employees who have those values.

    http://www.amazon.com/The-Myth-Robber-Barons-Business/dp/0963020315 rebuts many claims about entrepreneurs of many decades ago.

    • Thanks, Keith, for your comments. Please note that the listing of “harsh” executives was by the Financial Post’s Peter Kuitenbrouwer, not by me. I don’t know much about William Randoph Hearst, so can’t comment, but I know that Jack Welch accomplished a lot for GE. Steve Jobs also was a great innovator and wealth creator. They could have only accomplished what they did by focusing on facts, not by berating people or being “cruel.”

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