The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (16 page)

This nursing home is the exception, not the rule. Those who live off their capital rarely understand that their own prosperity could be enhanced by engaging their workers and nurturing their capacities. To do so raises two risks. Acknowledging workers’ capabilities would threaten management’s claim to elevated status. More dangerously, a different management stance could embolden workers to challenge Procrusteanism.

Every once in a while, CEOs of major corporations call for improvements in the educational system. These entreaties are usually nothing more than an ideological expression of their preference for more privatization—in this case, of education. Other executives recognize that a better educated working class can pay healthy dividends. However, even here, the understanding of what education means is limited. The business vision of better education means little more than an improved ability to follow written directions or to write reports for higher management in a clearer manner. A deeper view of education—in the sense of a better ability to make critical decisions (especially with regard to working conditions)—is the furthest thing from their mind.

My students confirm this impression. Each semester I question them about their job experience. Invariably, they tell me that their employers are from the “we-don’t-pay-you-to-think” school of management. Their employers just want them to shut up and do what they are told.

Seeing workers as little more than literate beasts of burden has one advantage; it serves to inflate managers’ sense that their absolute authority is justified. Besides, people in high places naturally prefer to believe that their own success is due to their own hard work, not to the drudgery of others.

In this chapter I have tried to trace the connections between this comfortable view of the world and economic theory. In order to craft an
ideology that justifies the current economic system, economics has gone out of its way to avoid dealing with work, workers, and working conditions. In the process, economists have generated serious misperceptions about the world that help to solidify a harsh Procrustean discipline.

Despite all the pundit talk about the need to accept Procrustean discipline, the talking heads inevitably forget to mention one factor: just as Procrustes deformed his victims, the market economy warps the creativity as well as the expectations of the people who fall under its sway. Even practicing doctors must submit their medical judgment to the authority of less trained administrators or insurance clerks, resulting in delays and denials that threaten the health and safety of patients.

Justifying the Neglect of Working Conditions

All too many economists refuse to consider anything they cannot derive from the discipline’s utility-based micro-foundations as “scientific.” Economists, however, limit their concept of utility to the useful or pleasurable effects of consuming marketed goods, thereby excluding any consideration of the labor process or any non-market factors that affect the quality of life.

The marginalization of work in economic theory is remarkable. Economists realize that in the real world the labor process is necessary for the production of the commodities that provide utility, but their theory holds that what workers do on the job is devoid of utility. Frank Knight, an early leader of the Chicago School and one of the most thoughtful economists of his day, justified the intentional neglect of what he called “sentimental” costs of work:

We have no concern with the pains or subjective sacrifices involved in production, since it is not at all in terms of such “costs” that the entrepreneur makes his calculations on the basis of which he decides whether to
produce the good or on what scale. He takes account of sentimental costs only insofar as they influence the outlays he must make to secure the services necessary to production. That is, he is concerned only with the price measure of his costs. Their magnitude in some other aspect will not influence his decision. Pains and sentimental repugnancies are undoubtedly influences in limiting the supply of some sorts of services and raising their price, but in the aggregate they form a relatively unimportant element, and no one now contends that there is any tendency for the prices of productive services, still less of final goods, to bear any correspondence with these magnitudes. The relation between them is a separate inquiry, pertinent perhaps to an evaluation or criticism of the competitive economic order, hardly so to an explanation of its workings.
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As we have seen, economists presume that work is simply the absence of leisure, and that only the duration of time on the job creates a negative utility. People are free to adjust their hours of work to maximize their utility per hour of work, as if a worker had the choice to take off from work forty minutes early in order to maximize today’s utility. Unemployment, even during serious depressions, reflects an increased preference for leisure over work.
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This strange, new conceptualization of the economy revolutionized the way economists saw human beings. No longer were workers a class of people who sold their labor to persons who owned capital. Under this new consumption-oriented interpretation of the world, classes disappear altogether. Everyone—bosses, workers, or the unemployed—only exist as consumers or investors, all of whom attempt to maximize utility. According to the logic of the theory, workers should forget about working conditions and just work hard in order to take satisfaction in the consumption that the modern economy offers.

Everything is turned on its head. The workplace disappears, and the workers—actually their wives in much of the popular literature at the time this theory first appeared—suddenly show up in the marketplace with omnipotent powers. Business meekly follows their demands, providing exactly what consumers want.

At first, this thinking emerged in academic economic theory. Then, some leading intellectuals began to push a popularized line of thinking, explicitly counseling workers not to see themselves as exploited members of the lower class. Instead, they advised workers to look beyond their immediate working conditions—no matter how horrible—and see themselves as equal participants in a consumer society.

Writing early in the twentieth century, Simon Patten, considered at the time a progressive economist, expressed this view in his book,
The New Basis of Civilization
. Patten rhapsodized, “The worker steadily and cheerfully chooses the deprivations of this week in order to secure the gratifications of a coming holiday.” Patten was unusual. At least he acknowledged workers’ deprivations. For Patten:

[Workers’] zest for amusement urges them to submit to the discipline of work, and the habits formed for the sake of gratifying their tastes make the regular life necessary in industry easier and more pleasant…. Honesty, application, adaptability through much pain, become his assets in his new bond with society.
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By this intellectual sleight of hand, economics reconceptualized the mass of often surly workers into an obedient collection of contented consumers, aspiring only to shop in elite venues such as Neiman Marcus. We might say that economists hoped to transform potentially revolutionary Marxists into Neiman Marxists.

More recent economic textbooks offer a slightly different description of the relationship between labor and capital than Patten’s, adding that growing productivity of labor should show up in higher wages. Higher wages, in turn, allow workers to enjoy more commodities. Textbooks continue to tell this story even though hourly wages corrected for inflation have been flat for more than thirty-five years, despite enormous increases in productivity.

One implication of this theory is that as workers’ affluence increases, the utility of more leisure should become stronger relative to the accumulation of more commodities. At that point, hours of work should begin to decline—another outcome that has yet to occur. The
average work week in non-agricultural occupations has increased from 38.1 in 1980 hours to 39.1 in 2005.
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Because more women have been entering the workplace, the average number of working hours per family has grown more dramatically. Between 1979 and 2000, the typical middle-income wife in families with children has added an average of over 500 hours of work—the equivalent of more than three months of work per year.
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The fact that families are devoting more hours to work does not necessarily refute economic theory. Nothing can refute economic theory. Whenever facts do not follow the logic of their theory, economists can rely on their ingenuity to find explanations. They can always conjecture that preferences have changed. Perhaps, for some reason, leisure is less desirable today than it was in earlier times, thus people would choose to work longer for more commodities. Edward Prescott, a Nobel Prize–winning economist, even suggested that workers in the United States should work more hours because taxes were lowered, increasing the advantage of work.
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Labor’s position in society is deteriorating despite higher productivity. As noted earlier, hourly wages in the United States have been stagnant for more than three decades, despite dramatically higher productivity. The preferred explanation is that many workers lack the requisite skills—such as the skills of a successful hedge fund executive.

At the same time, medical care—certainly a commodity that should have considerable utility—is becoming increasingly unaffordable. All the while, economic theory warns that tampering with the Procrustean economy threatens incalculable harm.

A Brief Rebuke from Adam Smith

Ironically, Adam Smith treated the importance of consumption far less reverentially than Patten. Smith saw the clientele of fancy shops as foolish victims of a “deception which rouses and keeps in continual motion the industry of mankind.”
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He asked:

How many people ruin themselves by laying out money on trinkets of frivolous utility? What pleases these lovers of toys is not so much the utility, as the aptness of the machines which are fitted to promote it. All their pockets are stuffed with little conveniences. They contrive new pockets, unknown in the clothes of other people, in order to carry a greater number. They walk about loaded with a multitude of baubles … some of which may sometimes be of some little use, but all of which might at all times be very well spared, and of which the whole utility is certainly not worth the fatigue of bearing the burden.
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The rich are not the only people who fall for this ruse. Smith considers the lot of “the poor man’s son, whom heaven in its anger has visited with ambition, when he begins to look around him, admires the condition of the rich.”
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Smith’s poor man’s son behaves according to Patten’s vision:

To obtain the conveniences which these afford, he submits in the first year, nay in the first month of his application, to more fatigue of body and more uneasiness of mind than he could have suffered through the whole of his life from the want of them. He studies to distinguish himself in some laborious profession. With the most unrelenting industry he labours night and day to acquire talents superior to all his competitors.
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Smith’s imaginary worker realizes his mistake, even after he has succeeded in earning a comfortable life:

But in the languor of disease and the weariness of old age, the pleasures of the vain and empty distinctions of greatness disappear. To one, in this situation, they are no longer capable of recommending those toilsome pursuits in which they had formerly engaged him. In his heart he curses ambition, and vainly regrets the ease and the indolence of youth, pleasures which are fled for ever, and which he has foolishly sacrificed for what, when he has got it, can afford him no real satisfaction.
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Sadly, few of Patten’s more modern workers will even get to discover the hollowness of the “deception” that Smith described. More than a few will fall prey to what Smith called “their absurd presumption in their own good fortune,” expecting to enjoy a prosperous life.
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As Mark Twain recalled in his autobiography, “We were always going to be rich next year. It is good to begin life … poor and prospectively rich.”
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Like Twain’s family, many workers today may live their lives deluded by the dream of the imaginary success that will bring them happiness. Most workers, however, will reject a more serious deception promoted by economic theory—that working conditions are irrelevant. Unlike economists, workers do take a keen interest in working conditions.

The Working Day

In the nineteenth century, the length of the working day was perhaps the most contentious issue for labor:

Before World War II workers’ demands for shorter hours were often advanced with greater fervor than demands for higher wages. The shorter-hours movement galvanized organized labor. It was the spark that helped found the first national labor union in the 1860s and the American Federation of Labor in the 1880s, the major issue in the steel strike of 1919, and remained important into the 1930s.
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Workers fought long and hard to limit the hours of work. Some workers lost their lives in the struggle, most famously in response to the executions following the Haymarket Square demonstration of 1886 and the Homestead Strike of 1892, when Carnegie increased the working day from eight to twelve hours while attempting to break the union.

Despite their general disinterest in working conditions, mainstream economists passionately opposed the demand for a shorter
working day. They insisted that the length of the working day resulted from a voluntary bargain between individual workers and employers. “Coercion” by organized groups of workers (that is, unions) would be egregious. Similarly, any legislation restricting business in these transactions would be a serious violation of the laws of political economy. In such polemics, economists became strangely silent about utility maximization. As the renegade economist John Kenneth Galbraith once observed: