Linking Equity (Justice) with Efficiency (Reason): Remembering John R Commons
Annavajhula J C Bose, PhD
Former (Economics) Professor, SRCC, DU
Today (October 13) marks the 163rd birth anniversary of John R Commons (1862-1945). This piece is a homage to him as a working people’s economist.
Workers are interested in equity as life is unfair to them whereas their employers are hooked to efficiency in terms of cost minimization or productivity enhancement. Free market economists factor in the employer sense of productive efficiency into their best organizing of economic activities by the market efficiency idea. The labour economist Arthur Okun’s imaginary idea of the big trade-off between equity and efficiency is drilled into the minds of the modern introductory economics students. How this idea is bombed as a fallacy both in microeconomics and macroeconomics is unfortunately unknown to the students as they do not do real-world heterodox economics in general and History of Economic Thought (HET) paper in particular.
John R Commons, who can be known through the Labour Hall of Fame in the United States and whose substantial contributions to economics can now be known only via HET education, needs to be celebrated as the quintessential one who had pioneered how equity can be linked to efficiency for the sake of improving the conditions of work and life for working people. I craft a story in his honour as follows.
We live in a corporatist society, that is, a society of group interests projected by each group’s elites. And the dominant corporatist elites—the corporates aided by the governments—have debased democracy into “factories of interest devoid of responsibility”.
Voltaire (1694-1778), the great French Enlightenment writer, and his contemporaries had believed that reason was the best defence against the arbitrary power of monarchs and the superstitions of religious dogma. It was the key not only to challenging the powers of kings and aristocracies but also to creating a more just and humane civilization.
While the emphasis on reason has therefore become one of the hallmarks of modern liberating thought, the contemporary rational society, however, bears little resemblance to the democratic visions of the great 17th and 18th century radical humanist thinkers such as Voltaire.
Our ruling elites—the power elite—justify themselves and their apathies and absurdities leading to atrocities in the name of reason, but all too often their power and their methodology is based on specialized knowledge and the manipulation of rational “structures” rather than reason. Today the link between reason and justice has been severed and our decision-makers, bereft of a viable ethical framework, have turned rational calculation into something short-sighted and self-serving. The result is that we live in a society fixated on rational solutions, management, expertise, and professionalism in almost all areas, from politics and economics to education and cultural affairs.
The cult of expertise is one of the defining characteristics of today’s rational elites. The division of knowledge into “feudal fiefdoms of expertise” has meant that general understanding and coordinated action are increasingly difficult and often looked upon with suspicion, as evidenced by our systems of education which reward the specialist and disdain the generalist. It has also resulted in a fracturing of society into smaller and smaller and increasingly insulated professional groups.
While the emergence of professionalism has paralleled the rise of individualism over the last two centuries, the result has not been greater individual autonomy and self-determination, as was once hoped, but isolation and alienation. There is a fundamental incompatibility between democracy and contemporary rational governments and companies. Because rationalism has been reduced to a system of unilateral management and administration, it is at bottom incapable of amicably guiding human affairs. The great schism between the participative principles of democracy and the top-down practices of modern rational governments and companies has brought about not only widespread public frustration and anger, but also a general contempt among the ruling elites for the citizenry, including the vast majority of visible and invisible working people.
While the ruling elites cooperate or pretend to cooperate with the established representational systems of democracy, they do not value people’s experiences. And they do not believe in the value of the public’s contribution. Nor do they believe in the existence of a public moral code.
This portrayal of politics of social macrocosm, by inference, holds good for the politics of the social microcosm inside the modern factories. The high road participative and collaborative solutions do not take off and sustain themselves and instead what rules the roost is the low road mean Hobbesian solution based on fear and punishment, making the life of man on the shopfloor on the receiving side, “poor, nasty, brutish, and short”, if not lonely. Technological and organisational innovations are brutally forced on labour with unquestionable managerial prerogatives, thereby resulting in work intensification, emotional exhaustion and poorer employee wellbeing.
The reason versus justice trade-off in the world of work is, thus, nothing but efficient labour versus just labour. The former is to inhumanely squeeze the most out of labour via workplace rationalisation by means of flexible automation, Just-in-Time/Agile Manufacturing and Inventory Control, and Total Quality Management techniques and the like. The latter is an expression of a desperate need to at least get back to how the great American economist and social scientist John R. Commons had put his justice-permeated institutional economic science in the service of labour welfare.
How the field of Labour Economics and Labour Relations “must have a future” by factoring in concerns of workplace equity as also social equity, or to put it differently, how it can pursue its basic purposes to “humanize, stabilize, professionalize, democratize, and balance the market system”, in times of freewheeling neoliberalistic globalisation wherein competition among workers has increased just as competition among firms has increased, with each firm ruled by rational corporate dictators for the sake of efficiency, is, therefore, an open-ended question to be answered by the avantgarde HRM researchers.
The lighthouse that can influence the HRM (Human Resource Management) researchers to resolve the reason-justice trade-off, is none other than John R. Commons, the pioneer of labour economics and labour relations. He had contributed in one way or the other to practically every piece of social and labour legislation in the 20th century. Either directly or through his students and colleagues at the University of Wisconsin he had made his mark on such diverse aspects of labour as apprenticeship, job safety, factory inspection, social security, unemployment compensation, unionism, collective bargaining, civil service, and—not the least—the administration of labour law—all aspects which have gone with the wind of neoliberalism all over the world over the last three to four decades.
John Commons had put his economics as a social science in the service of improving the conditions of labour as he understood better than most not only that injustice hurts working people, but also that the alleviation of injustice is essential to the stability of the society as a whole. His key concepts in both theory and practice were equity, bargaining, reasonableness, pragmatism and institutionalism (in terms of collective action in control, liberation and expansion of individual action).
By equity is meant fairness and trust for employees in the employment relationship. Organisational justice research has demonstrated that employee perceptions of fairness at work influence a range of significant employee and organisational outcomes, including satisfaction, job performance, and organisational citizenship behaviour. Bargaining is the best way to achieve equity in the workplace and in public policy, because bargaining resolves conflict from positions of equality, not from command and obedience. Reasonableness tempers bargaining power with social intelligence and reason.
Pragmatism or experiential learning is preferred to revolutionary utopianism in formulating policy in the face of divergent perceptions and perspectives. Institutionalism underscores the reality that individuals function or want to function economically mainly through unions, corporations and the like. Which is a view opposite to the view of the mainstream economists who imitate physical sciences and treat individuals as atoms and molecules!
Unlike Commons, mainline economists as hyper-rational theorists have desocialised economics, and have shown no interest at all in making democracy as a building block of the subject of economics and economic policy. The same holds good for the ‘bullshit’ of business ‘gurus’ and practitioners in respect of changing workplace administration to resolve efficiency-equity trade-off even as industrial democracy has come to be seen as essential, following the 2007-8 financial crisis and Great Recession, and more recently due to the impacts of COVID-19. Workplace democracy via cooperatives is neither a pipe dream nor utopian theory. It is the alternative to the existing free enterprise as a collection of shareholder-dictatorships.
To conclude, without the conservative radicalism of John R. Commons as the beacon light to resolve the antagonism between the rational corporate elites and the justice-seeking worker-underdogs, the HRM policy makers anywhere in the world have not and will never effectively grapple with the reason versus justice issues inside the factories. And, similarly, rational authoritarian governments, even if they are democratically elected, cannot earn genuine legitimacy without building trust with their people, and without meeting the social justice aspirations of people at large outside of the factories by falsifying the mainstream economic growth-inequality trade-off. “The spectre of powerful autocratic states that parasitically mimic democracy, while in reality eviscerating its core, should alarm us”, now.
In light of this, it is high time introductory economics students understood that Pareto efficiency as the gold standard of mainstream economists’ market efficiency ignores equity and distribution and implicitly favors the disgusting status quo of inequality. Students frustrated with mainstream economics may use expletives against it. And a respectable macroeconomist such as Dean Baker is friendly with them: “If we want to, we can structure the market differently.” He explains this through six episodes on How to Unf★ck America, endorsed by the Institute for New Economic Thinking: How to Unf★ck Intellectual Property; How to Unf★ck Unemployment; How to Unf★ck CEO Pay; How to Unf★ck Finance; How to Unf★ck Employment; and How to Unf★ck Inequality.
This is a good way of unlearning and learning introductory economics, before turning to History of Economic Thought (HET) as the best way of knowing a wealth of diverse ideas. To the HET wealth belongs the amazing scholarship of John Rogers Commons in terms of two huge volumes of Institutional Economics: Its Place in Political Economy, published by Routledge.
It is a pity that Labour Economics and HRM courses are offered in the world without any reference to John R Commons. “Historical amnesia is a dangerous phenomenon not only because it undermines moral and intellectual integrity but also because it lays the groundwork for crimes that still lie ahead.”— Noam Chomsky.
References
Andre Spicer. 2018. Business Bullshit. Routledge.
Dylan Paauwe. 2020. The ‘Free Market’ is a Collection of Dictatorships: Here’s How We Create a Genuinely Free Economy. https://www.opendemocracy.net, February 13.
Eurofound. 2020. Industrial Democracy. European Observatory of Working Life.
https://www.ineteconomics.org/perspectives/videos/unf_ck-america
Jack Barbash. 1989. John R. Commons: Pioneer of Labour Economics, in Monthly Labour Review Online. 122 (5). May.
John Ralston Saul. 1996. Power vs. the Public Good: The Conundrum of Individual and Society. The 1996 Hagey Lecture. University of Waterloo.
John H. Summers. 2006. The Deciders. http://www.nytimes.com
Mario Negre et al. 2019. Dismantling the Myth of the Growth-Inequality Trade-Off. German Development Institute.
Peter Soderbaum. 2020. One Paradigm or Many? Toward a Democracy-Oriented Economics. WEA Commentaries. 10 (4). December.
Scott London. 1996. Book Review: Voltaire’s Bastards by John Ralston Saul. http://www.scottlondon.com/reviews/saul.html
Susanna Baldwin. 2006. Organisational Justice. The Institute of Employment Studies. UK.
William Anthony Jackson. 2013. The Desocialisation of Economic Theory. International Journal of Social Economics. Pp. 809-825.
William E. Scheuerman. 2020. Why Do Authoritarians Win?, in Boston Review. July 8.
