Archive | November, 2007

Thanks to Anon2 for pointing me to David Ellerman’s online book Property and Contract in Economics: The Case for Economic Democracy. Thus far I’ve only looked at (really just skimmed) the first 40 or so pages out of 184, so I can’t yet say how much of it I’ll end up agreeing or disagreeing with, but I can see already that this is an important book that left-libertarians should be reading.

Briefly, here’s what I’ve gotten out of it so far. Both defenders and critics of capitalism (where by “capitalism” Ellerman seems to mean not the market economy per se but the separation of labour from management) assume that the ownership of the means of production automatically brings with it presumptive ownership of the product. Hence defenders of capitalism tend to infer the legitimacy of the capitalists’ ownership of the product from the presumed legitimacy of their ownership of the means of production, while critics of capitalism tend to infer the illegitimacy of capitalists’ ownership of the means of production from the presumed illegitimacy of their ownership of the product. But as Ellerman (who, ironically enough, looks like Uncle Sam and has worked for the World Bank) points out, ownership of the product of, say, a factory is determined by a contract between the factory owners and the workers, not by the mere fact of who owns the factory. (After all the workers own a crucial means of production too – namely themselves.) If we think in terms of the factory owner hiring workers, then it will seem natural to regard the factory owner as having first claim on the product, minus whatever he agrees to pay the workers. But if we think instead in terms of the workers renting a factory, then it will seem natural to regard the workers as having first claim on the product, minus whatever they agree to pay the factory owner.

All of the above is absolutely right, and shows that “capitalism” in the sense of free markets and private ownership of the means of production doesn’t necessarily entail “capitalism” in the sense of managerial hierarchy and the wage system. This is welcome news for those, like me, who seek lefty-style worker empowerment within the context of libertarian economic laissez-faire – and it raises natural questions about what, exactly, determines the relative strengths in bargaining power between owners of labour and owners of capital, and whether the prevailing balance is mainly the result of free markets, government intervention, or other. (As my regular readers will know, I think capital’s dominance stems primarily not from free markets but from government intervention plus “other,” the other being socio-cultural stuff.) Ellerman’s points also lend support to Kevin Carson’s critique of the presumption that labour contracts must be interpreted in term favourable to the owners of capital.

Now from what Ellerman has said so far, my impression – which may or may not turn out to be right – is that he is about to go on to argue that because self-ownership is inalienable and indivisible, contracts to rent oneself out (which is how Ellerman describes labour contracts) are not legitimate even though contracts to rent out inanimate objects like property are perfectly fine – so that contracts whereby labour hires capital are permissible while contracts whereby capital hires labour are not. Thus capitalism conflicts with self-ownership, and workers are after all entitled to their “whole product” – though they may legitimately have to pay the owners of capital out of it.

Anyway, whether or not this is what Ellerman is going to argue, it’s something that somebody might argue, and indeed arguably something that various folks historically have argued (isn’t this after all more or less what William Godwin means when he distinguishes the legitimate “empire to which every man is entitled over the produce of his own industry, even that part of it the use of which ought not to be appropriated to himself” (emphasis added) from the illegitimate “faculty of disposing of the produce of another man’s industry”), so let me say what initially strikes me as right and wrong about it.

Libertarians are divided over the precise nature of service contracts. For some libertarian theorists, when I make a contract with you to perform some service, you thereby acquire a right to my service, and may legitimately compel its performance. This position, taken to its logical extreme, implies the possibility of my conferring upon you a right to any and all of my future services – a slavery contract – and a number of libertarian thinkers, most notably Robert Nozick and Walter Block, have indeed drawn that conclusion and defended the libertarian legitimacy of voluntary (that is, initially voluntary) slavery.

Other libertarian theorists – including Murray Rothbard, Randy Barnett, and your humble correspondent – regard moral autonomy as inseparable from moral personality, and so hold that I have no power to grant you any right to compel my services. On this view, contracts over inalienable services, in order to be legitimately enforceable, must be founded on or translatable into contracts over alienable goods. Thus if you pay me $50 to weed your garden, what you acquire is not a right to compel me to weed your garden, but rather a right to get your $50 back, plus damages, if I don’t weed your garden.

On this interpretation, it will be quite true that contracts to “rent oneself out” or “rent out one’s labour” will not be legitimate, at least if understood as granting to the employer an unconditional right to direct the employee’s labour.

But it doesn’t seem to follow that employment contracts per se are illegitimate; for can’t the factory owner (assuming, as Ellerman is willing to do, that the owner’s claim to the factory is legitimate) reason as follows?

“This factory, and the raw materials in it, are my property, and I allow the workers to use it only on certain conditions, which are spelled out in the contract. The workers are taking stuff that I own and rearranging it to make new stuff; I agree to allow them to do this, on condition that I get to keep what they make – and they agree to this stipulation, on condition that I pay them an agreed-upon amount. So the contract concerns only alienable goods; the employment contract doesn’t involve renting people or renting people’s labour, it merely concerns conditional transfers of inanimate objects. Now just as the money I pay them is theirs only on condition that they do what they agreed to – for otherwise I acquire a right, not to compel their service, but to reclaim my money – so the factory equipment and raw materials are theirs to use only on condition that they again do what the agreed to, namely, turning over the products to me. If they don’t, my claim to the equipment and materials reverts back to full force, and they have in effect been using my property without my permission. You don’t get a right to the improvements you made in something if it was someone else’s property at the time.”

Hence while I agree that the prevailing system of wage contracts is both undesirable in itself and unlibertarian for “thickness” reasons (e.g. it draws support from statism logistically, props up statism psychologically, and is wrong for some of the same reasons that statism is wrong), I can’t see that wage contracts in their current form are per se a violation of libertarian rights.

Those, anyway, are my preliminary reactions – to a work I’ve only read the first bit of, and that in a cursory fashion – so I’m not sure how applicable my remarks are to Ellerman’s position or, if they are, what responses he might already have developed. I definitely plan to read further and more thoroughly, but I wanted to alert my readers to this fascinating book (I’m sure some of you know about it already, but I reckon many won’t), share some initial thoughts, and invite my readers into the conversation.

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In related news, Kevin Carson has posted some more chapters (see here and here) of his book on the managerial irrationality of statism-dependent hierarchically structured firms. Enjoy!