Values

CHAPTER 8

The best form of efficiency is the spontaneous cooperation of free people.

-- Woodrow Wilson

What has this book been about?  On the surface it's been about the law of contract, employment, self-employment, the nature of the firm, doing business and how we choose to regulate and control these things.  But these are just technical issues, which overlie a deeper issue.  This book is really about our values, about how we choose to define ourselves as individuals, particularly in the work situation in a seemingly complex world.

One objective of this book has been to look at how in the past we have thought of ourselves in the work and broader social contexts and how these contexts affected the way we have defined ourselves as individuals.  By looking at our past we can better understand our present.

For most of human history, it has been thought that social stability and order required that the individual be subservient to the greater good of the collective.  Class consciousness and class structures required people to be happy with the station into which they were born.  "Others" who were powerful by accident of birth, wealth or physical capacity made decisions that controlled society.  Social cohesion required all to accept their station and its duties.

POLITICAL FREEDOM

But then ideas of democracy and social equality took hold.  Every person, it was argued, is born equal and entitled to equal rights and equal treatment.  Nations exist for "the people" and not for the privileged -- that is what democracy means.  We have taken this to heart -- and so we should.

We have learnt that, for a human society to be effective, successful and unified, it does not need to be "controlled" by a few powerful people at the top (even though it may need political leaders).  In fact, the reverse is the case.  Democracy diffuses power.  Everyone in some way, however seemingly minor, becomes a player in the decision-making processes.  And out of this emerges structure, order and stability.  It's far from perfect, forever changing, often tenuous but always striving for perfection -- even though we know that perfection is probably unattainable.

In this environment of diffused power, institutions are always challenged.  Decisions are always open to challenge.  Social stability is a conundrum.  Social stability means not being static but being in a state of constant movement.  But, somehow, out of this constant movement, humans create order.

But societies that diffuse power, unlike command societies, don't have the appearance of simple, solid social structures into which we easily fit.  Instead, democratic societies are big, complex and hard to fathom.  It's hard to work out how a free society works and where as individuals we fit.  But it does work and we do fit.

And it works and we fit because, in democracies, in free societies, where the powerful are constrained, the individual is supreme.  All individuals are supreme.  What matters in such societies is the personal happiness and fulfilment of each individual.  The collective is made up, not of a hierarchy which dictates to those below, but of a collection of individuals, moving, shifting, chasing;  finding their own values, their own meaning, their own purpose and place;  securing their own contentment.  But, oddly, it's not a social structure driven by selfishness.

Humans are an odd cluster of contradictions.  For societies to operate, logic would seem to dictate that individuals should consciously put the collective's need above their own.  Simple logic would suggest that this defines selflessness.  But this is not the case.  In fact, a counter-intuitive logic applies.  A society that focuses on individuality in fact strengthens itself and achieves community.  When humans are allowed the freedom to be intensely individual, they strive also to be social.  We crave the company of our fellow humans.  We find and define ourselves by the people around us -- our families, our friends, our clubs, our churches, and the many and varied institutions in which we congregate for mutual self-interest.  We find ourselves by being intensely individual but in the same instant intensely social.  Culture is thus created, not by the efforts of the few geniuses we so often admire, but by the millions of small creations of each individual brought together because we choose to come together.  We humans create order out of this.

ECONOMICS

It is the same with the way we run our economies.  We have learnt the same lessons as we have with democracy.  Economies do not become successful by being command-driven.  No-one masterminds the whole.  No-one is an earthly economic god.  Instead, the individual is supreme.  Individuals decide how and when they spend their money.  Individuals determine the food they buy and the clothes they wear.  As individuals, we strive to look after our own economic needs.  But as individuals we also strive to look after the economic needs of those around us, and those that depend on us or who need our aid.  And the more we are left to look after our own economic needs, the more we find we can do it.  Somehow, order emerges from what might otherwise be considered the inevitability of chaos if command structures were not in place.  The contradictions of human nature are in play.

Free-market societies have learnt the subtle game of enabling the free economic individual to flourish without letting any individual dominate.  We have learnt that for any individual to be free, no other individual can dominate.  Free-market societies have learnt that to achieve this it is necessary to underpin economic life with a very specific type of structural control.  But it's control which has one principal and narrow objective -- namely, to allow each individual their economic freedom but prevent any individual denying that same freedom to any another.  This requires carefully crafted laws that never lose sight of this central objective.  It requires institutions and people who understand this objective and who can apply crafted law in conformity with it.  This is the economic management process of monopoly prevention.  Our laws allow each individual to aspire to and achieve great wealth.  But our laws must ensure that anyone who achieves wealth and economic might cannot use that might to prevent other individuals from also aspiring to and achieving individual wealth.

This is a difficult task.  But when successful, societies move forward and can do so in spectacular ways.  And from this comes order, an order which is a miracle of human ingenuity, an order in which no-one dominates but in which everyone is involved, more or less, on their own terms.  This is why the commercial contract is so important and why the commercial contract has been referred to so often in this book.

THE COMMERCIAL CONTRACT -- FREEDOM

This book has spent a great deal of time explaining, discussing and praising the commercial contract, because the commercial contract is a bedrock of our personal economic freedoms.  It must be understood that to damage the commercial contract is to damage our personal economic freedom.  It must be protected also because it is the bedrock for successful, free, open market economies.

The commercial contract is an everyday experience for each of us.  When we buy candy from a store, we have engaged in a commercial contract.  No-one makes us buy the candy.  No-one forces us to buy the particular candy we have chosen.  The purchase is, in fact, the most basic expression of our individuality and of our freedom.  There is no control over us.  Yet we have engaged in a human action involving a contract which protects our individuality and freedom.  The commercial contract ensures that we cannot be forced to buy the candy but that, if we do buy it, what is advertised on the wrapper must be what is inside the wrapper.  Our choice is protected.  Because we have bought that piece of candy nothing requires us to buy another piece of candy or anything else in the store.  The seller of the candy has no rights over us other than our obligation to pay for the candy.  And as far as the commercial contract is concerned, anyone who engages in the contract is equal, no matter what the colour of their skin, their religion, their comparative wealth, their political power, their sexual preference or any other matter.  Whether the shop owner has equal wealth to us, or is a powerful retail baron or corporation, does not matter, because for the purposes of the commercial contract we have equal power.  The commercial contract plays one principal role, that of ensuring equality and fairness between us.

In this sense the commercial contract is value-laden, but not value-laden in the way we normally think of values.  Rather, the commercial contract is value-neutral and that is it's most important value.  The value that the commercial contract has for us is the social value that we are all equal.  It may be thought odd to conceive of a contract having a social value but it's helpful to think of it this way.  It helps us to understand the role the commercial contract plays in society in protecting each individual.

The commercial contract protects us because it doesn't care who we are or what we do.  It has no emotional attachment to us but is emotionally neutral.  But it is this emotional neutrality that enables the commercial contract to treat us all as equals.  The commercial contract is devoid of feeling, which is why it can treat each of us as equals.

And this is what makes a free-market economy hum -- because it is controlled, run and organised through layers of fast-moving, interconnected commercial contracts.  There is no overseer.  There is no master controller.  The candy we purchase from the store is purchased by the storekeeper using a commercial contract.  The delivery is made by means of a commercial contract.  The manufacturer purchased the ingredients through the commercial contract.  The advertising was organised through a commercial contract.  The paper to wrap the candy was obtained through a commercial contract.  And throughout this ongoing, fast-moving process, the commercial contract never changes.  It remains at all stages value-neutral with respect to the choices individuals make.  It neither knows nor cares who the parties to each contract are.  All it must care about is its own integrity to its value neutrality.

In this process, the commercial contract forms an essential and necessary part of the bedrock of free societies, free markets and free economies.

FREE BUT NOT FREE?

But, oddly, even where societies are not free democracies, if the commercial contract is protected, those societies can still have hugely successful and strong free-market economies with widely distributed wealth.  Freedom has seeming contradictions.

How can economic freedom exist without political freedom, it may be asked?  But it can.  Political freedom and economic freedom are not dependent upon each other;  whether or not that is good or bad!  Such is the power of the commercial contract that, as long as it is respected, economic freedom can be preserved even when political freedom is restricted.

But the care and management of the commercial contract is a difficult task -- one which is easily damaged by any government which does not understand that that is one of its primary roles.

THE POWER OF THE INDIVIDUAL

Quite obviously this book considers the commercial contract to be of immense importance.  The value-neutrality of the commercial contract makes it incredibly difficult for any single person or group in a society to economically dominate a society or the individuals in society.  If protected and layered with other anti-monopoly devices, particularly the prevention of monopoly economic power being garnered by the state itself, absolute economic power in a society is thwarted by the commercial contract.  Economic power in a free-market society exists, but monopoly power is thwarted by other countervailing and competitive economic powers.

The result is that where the commercial contract prevails, the most powerful economic unit in society is the consumer.  In this sense, a free market economy is the expression of economic democracy, where individuals, as consumers, cast their economic vote many times in every day -- and, unlike in political democracy, they always get what they vote for.  The economic ballot paper is the commercial contract.

But the focus this book is the fact that, unfortunately, these lessons have not been learnt in our working lives.  This is a principal message of this book.  Humans have learnt that we create social order when political freedom prevails.  We have learnt that we create economic order when economic freedom prevails.  But we have not learnt that order is created in firms when working freedom prevails.  We humans are slow learners, it would seem!

EMPLOYMENT -- A TROUBLESOME CONTRACT!

When it comes to our working lives, that is, the process by which most of us earn a living, the dominant ethos of the twentieth century has been that the lessons of the free market and the value-neutral commercial contract do not and cannot apply.  When we have thought about the firm -- that is, the entity that creates our goods and services -- we assume that all the rules that make for democracy, for free markets, for free economies and for the supremacy of the individual cannot apply.  We have assumed (and largely continue to assume) that within the firm, the value-neutral features that make up the commercial contract are of no relevance.

We see the firm as having to be the old, hierarchical, class-based structure that has been so solidly rejected in our normal, non-working daily lives.  And this is dependent on the employment contract.

It is the employment contract that declares that one person, the employer, is more powerful than the other person, the employee.  The employment contract is a contract about the legal and institutional cementing of inequality.  This is not some figment of the imagination.  The entire purpose of Chapter One was to present the evidence of what the employment contract is as determined by law.  And there is no question that, on the evidence, the employment contract is a legal device in which the employee hands over to the employer the right of the employer to control the employee.  But this situation occurs only inside the firm.  And, strangely, we have done this and accepted the outcome, hardly questioning the contradiction between life within the firm and life outside it.

And this idea of the firm is not limited to profit-making private companies.  In fact, the firm is a general idea for any human organisation that functions to provide goods or services.  This includes public service organisations, government-owned instrumentalities, not-for-profit charities and so on.

We now generally believe that economies function best with minimal intervention from a central command.  We know that economies function best when central bodies create and enforce frameworks that ensure the value-neutrality of the commercial contract and all that goes with it.  Yet, within the firm, the dominant assumption is that the firm must be driven by a single vision and orders from a central command.  The mechanism is the employment contract.

At the level of society at large, we understand that culture is created by the interplay of the values of free people.  Laws and government provide the frameworks within which the values of free people can mix.  We recognise that attempts by individuals or groups to impose values on the collective are exercises in intellectual, cultural and personal arrogance.  In democracies, arrogance has become a personal liability for aspiring political leaders.  Yet, within the firm, we continue to believe that people cannot be free and must instead bend, be bent or at least cajoled into accepting the culture that has been determined from the top.  Cultural arrogance is a dominant hallmark of the firm made possible by the employment contract.

We assume these things about the firm because that's the way it seems always to have been.  Without thinking, we reach deep into core, human tribal roots and pull out a most basic of human instincts, the desire of one individual to control others, and assume that this must be the structure through which the firm must operate.  We give this notion its full legal form by insisting on the employment contract.  The employment contract tells us that we must suppress our individuality in favour of the higher needs of whoever are the "tribal chiefs" in the firm.  The employment contract instructs us that we have to be loyal to the system of the firm rather than hold true to our own individual integrity.  The employment contract instructs us that, when we work, our identity, our world view, our sense of self-worth is determined by our place within the firm, and that the firm, like a wise and benevolent chieftain, will protect and look after us.  In this we are supposed to feel comfortable, relaxed, at ease and at peace.

This may be right.  This may be proper.  This may be acceptable.  This may be the way things have been done for a long time.  But is this the only way?  Does this not contradict what we have learnt about political freedom?  Does this not contradict what we have learnt about economic freedom?  Does this not contradict what we have learnt about the pathways to personal fulfilment?  The evidence set out in this book suggests that employment is contradictory to our other normal freedoms which we hold dear.

Societies have moved on and continue to move away from our tribal roots.  We have moved on from the idea that central benevolent bodies will protect us if we relinquish our individuality in exchange for blind loyalty.  In free societies, in all other aspects of our daily lives, it is the ability to experience and express our individuality that has become one of our most cherished values.  And the release of individuality, counterbalanced and constrained as it is by the free release of everyone else's individuality, is what brings political, social and economic well-being along with order to our societies.  Employment works against this trend.  Demonstrating this point has been a primary goal of this book.

But is employment illegitimate?  Oddly enough, the answer is "no"!

Within society at large, we allow individuals to do their thing.  And that applies equally to firms.  If individual firms wish to follow the path of employment, we do, and must, allow them to do so.  If the suppression of individuality and the imposition of central control is the route firms wish to pursue, then they have that right to do so.  Firms that choose the employment route must accept, however, that the state will apply its employment regulation against them as a consequence.

However, neither the state nor society has the right to impose the employment model on to all firms.  Yet this is what occurs.  Through our labour regulation institutions, our taxing authorities, our work safety laws, our academic concepts of the firm and our views of how the firm should be regulated, we have created a paradigm which presupposes employment as the only model for the firm.  Almost by default we insist on imposing employment as the required model.  For an individual firm not to seek employment as its internal structure is to confront mighty and powerful institutions of the state.  To seek not to use employment constitutes a serious challenge to the existence of those institutions and is often the cause of oppression by them as a consequence.

In addition, the enforcement of employment is powerfully supported by prevailing cultures of management.  Managers of firms are themselves mostly employees operating within the cultural and legal authority levels created by the myth of the employer.  Managers mostly see themselves as benevolent masters, and when managers get together they reinforce the benevolent master culture among themselves.  For any individual manager to buck this culture either within an individual firm or within a given society is to challenge a powerful cultural norm.  Only some individuals confront the norm and only occasionally!

A VALUES REVOLUTION AT WORK

But change is happening and it is a powerful force.  This is another key message of this book.

The change is driven by individuals who see freedom in their political, economic and social lives as being normal, expected and a right.  The employment paradigm of firms and regulators grates against these expectations of freedom.  And people are responding.

A revolution, a very quiet revolution, is under way.  It is a revolution without a banner, anger or mass demonstrations.  It is a revolution where millions of individuals working in employment-structured firms, through their personal behaviours, reject the crushing of their individuality.  These are the people this book has referred to as "independent employees", people who are trapped within the contract of employment but who have personal independence in their souls.  Management has had to respond to this by trying to create systems and processes which allow scope for individuality but retain "control".  Within employment structures this creates tension.  Indeed, managers themselves are part of this revolution and this tension -- also insisting on their individuality and often encouraging the individuality of others.

But the process of change that is occurring is not thought of in this context as being about individual freedom.  In fact, the people who are carrying out the change think of what they are doing as just a matter of being sensible, practical and respectful of themselves and others.  In fact, people sense that there is something wrong inside firms but feel unable to pinpoint it.  In reality, the problem lies in the core structure of the firm created by the employment contract.

But the revolution is more than just one of attitudes.  Increasingly, the employment contract itself is being rejected.  And this rejection of the employment contract now constitutes a substantial part of the world of work.  More and more, individuals are using the commercial contract as the method of engaging in work, thereby replacing the employment contract.  The people who do this have had many names tagged to them:  freelancer, self-employed contractor, independent worker, own-account worker and so on.  The term used in this book is "independent contractor".  Chapter Two case-studied the independent contractor sheep shearers in Queensland, and found that the attitudes of independence and personal freedom are not just theoretical but real and living human values.  And it's becoming clear that, in many societies, making use of the commercial contract accounts for somewhere in excess of one-fifth of workforces.  This worries the employment regulators and the employment institutions because they have difficulty understanding the change, seeing it in conspiratorial terms as a threat to them and their familiar institutions.

But the use of the commercial contract as the guiding value-neutral structure, both within firms and between individuals, is an inevitable consequence of the development of free societies and free people.  The shift to the commercial contract challenges state institutions only if the institutions act aggressively against it and try to destroy it.  In fact, the commercial contract in the workplace is perfectly adaptable to the regulatory requirements relating to work safety, taxation, anti-discrimination and so on.  The only area where it is not adaptable is state attempts to destroy the commercial contract itself.

For the firm, the unanswered question is how to accommodate individuality inside the firm and yet still retain internal control.  On this issue there is a mental block.  If the firm is not commanded and controlled from the top, surely chaos will be unleashed?  But chaos is not the inevitable outcome -- as we have seen in our understandings of how democracies and free markets work in general terms.  In fact, a high degree of order and structure can be created in firms by using the commercial contract.  This was the point of Chapter 7, which demonstrated the emergence of what can be called "markets in the firm".  If the "controllers" of firms conceive of themselves as encouragers and protectors of a system of commercial contract transactions inside firms, the way to create order while enabling individuality becomes clear.  Initially the process seems complex and certainly is counter to basic human instincts to control.  But it's perfectly feasible and is being done.

Democracies and free markets represent a higher order of human organisational achievement than do command and control.  The key structure is the unleashing of individuality balanced by devices which frustrate monopoly.  And democracies and free markets have developed high-order laws, systems and institutions to achieve this structure.  Every firm is capable of doing internally what free societies have achieved externally to the firm.  But it's not an easy path because it is not a familiar path.  It's not a well-known path partly because it is not recognised in the realm of academic study.  But it is a better path that leads to better outcomes -- both for the firm and for the people who work in, or more exactly the people who work with, the firm.

This has huge importance for the individual.  Working in the firm as an employee is often a frustrating and debilitating experience relieved only by the freedom achieved outside of the firm.  This should not be the everyday human experience of the firm.

Working in, being part of, or interfacing with the firm as an individual can and should be an uplifting personal experience.  For many people it is.  Many people do find rewarding experiences working inside the employment firm.  Some people can enjoy the apparent security of command and control.  Many people learn to use the firm to achieve their own ends.  But many people also go one step further and become their own firm.  Being your own firm and economically interacting with, supplying services to, and receiving services from, other firms is the ultimate expression of economic individuality and independence.

This drive for economic freedom is very powerful because economic freedom allows the individual to find the mental space to discover spiritual and personal values of significance.  By design and structure, the employment firm seeks to impose an identity on individuals, but it is an identity decided by the firm, not the individual.  This command way of dealing with individuals is increasingly being rejected.

People want to define themselves.  Free political and free economic societies provide the structures within which individuals can define themselves.  Firms are under pressure to do the same and it is employment which is the great stumbling block.  Consequently, employment, although it is unlikely to die in the immediate future, is under challenge from the drive for individuality and freedom.  This is the ultimate message of this book.  Human individuality joined with freedom is an unstoppable human force.

It is for this reason that independence will inevitably herald the death of employment.