Doing Business

Traditionally the choices have been three.

• The unregulated society: in which business acts after its own interests and meets with competition others who conflict with its interests
• The regulated society: in which business is dominated so that necessarily choice of action is delimited and freedom to do business and competition are controlled.
• The middle way of interventions: wherein a regulator (usually a Nation State Government) is intrusive into unregulated business, so as to ameliorate the harsher social consequences which arise out of an untrammelled free market

In practice, concerning Choice 1, (unregulated business): it has merely acted to shunt from pole position regulated controlled activity down the economic and social class ladder.

What I mean is that in societies where business is relatively unregulated employers have built up their large companies as closed-off organisations, within which employees to a greater or lesser extent are exposed to command and control.

Employers’ command and control is seldom much less oppressive inside their organisations than that carried on by Nation State Governments which choose as their model a regulated controlled economy

Freedom and choice and opportunity pertaining to unregulated business models are enjoyed chiefly by the persons who own and run businesses under this model

Necessarily it is argued, according to traditional thinking, these owners/operators are compelled to control and command their employees so that their companies are able to perform in the most effective efficient way against their competitors in the free marketplace.

Normally speaking there is inside any business organisation which is operating within an unregulated economy a hierarchy of control by which those high up enjoy lesser degrees of direct oppression and control whilst those low down bear greater degrees of these.

These degrees of direct oppression in the main correspond inversely to the extent that:

• a) Any economic business or society is unregulated, and
• b) Any business employee is presumed by his/her employer to hold a stake of some kind in the business. (This is why a senior manager will receive higher wages and obtain to a higher degree of status, often also having lower graded employees to control and direct. Such a higher grade employee will be presumed to have a greater stake in the organisation (and so also have more to lose from dismissal) than those whom he controls and directs.)

Logically then, inside this traditional model, the low graded employees are those most directly oppressed because they are those most controlled and directed, and are considered to hold least stake in the organisation.

(This critique of mine is not Marxist; it is in fact how business operators perceive the socio-economic reality, and their perception is justified by them, by their approving it as being a ‘natural order’ of things. Such an conception has a utility to them not unlike the concept of Divine Right for kings in days before industrialisation)

Their argument is classically expressed as being in accord with ‘human nature’, and its leverage is normally brought in to play so as to justify hierarchical organisation based on privilege and dominion.

The simple psychology behind this ‘human nature’ argument proposes that men and women who carry no responsibilities will be those most likely to act irresponsibly. This inductive generalisation is based on premises that include preconceptions that:

• Lowly graded employees need closer managing so as to function well
• They will naturally evade their tasks otherwise
• The general mass of them are not suited to taking on bigger roles
• They have poor self-regulatory powers
• They will do no more than they are made to do
• They have little initiative and few and basic employable skills

These then are the employees seen as having least stake in a business, and they are considered to be those employees who are most liable to act irresponsibly.

The concept of ‘having or not having a stake’ in a venture is essential to the upholders of the ‘human nature’ argument. Having a stake, so the pitch runs, confers responsibility and energises ambition to improve oneself; which all engender that self-regulation and other ‘virtues’ prized by employers.

Having a stake then allows employees greater freedom; but only to opt for ambition, responsibility and self regulation, in favour of the employer.

Conversely, those employees of the least consequence in any business are thus those who will receive most control and direction.

(Normally-speaking and collaterally, lowly graded employees also obtain least wages. This is because their lowly status, without stake, is normally perceived to warrant lower levels of trust and to incur higher levels of risk for employers. The class of lowly workers is also normally present in an organisation in far greater numbers than the number of higher-status employees who direct them

More later on how this factor of ‘greater numbers’ tends towards being another wage depressing factor)

On the other hand, an employer who is allowing privileged high-grade employees a modicum of stake in his company, intends them to accept his ‘gift’ as a stimulus that encourages them to act responsibly towards him and his company; and so nurture the interests of the business. The actual degree of anticipated loyalty/responsibility accepted and acted upon by an employee will be commensurate proportionately to the rank, status and reward that employer ‘gifts’ to employees.

These arguments so far are nothing more than standard thinking.

A sense of responsibility then, it is expected, can be awakened and reinforced in the minds of some select employees by reason of the bundle of rewards they obtain from the employer in exchange. Thus a deal is cut between higher-grade employees and the employer.

Employees of higher status normally obtain higher wages, but not only as a result of their acceptance of ‘the risks’ involved in, and ‘the burden’ of, their positions and responsibilities; indeed and moreover, their very rewards (so it is understood) act to ‘tie them into’ their employment and business organisation. The arrangement has similarities with the methods used by early Victorian Industrialists who provided their workers with ‘Tommy Shops[i]’ and ‘tied-cottages[ii]’.

Thus arises a belief that an employee’s loyalty is conditional upon his persuasion to self-interest, and that this can be generated in him by the enlightened self-interest of his employer providing to him adequate inducements. Although bearing upon the privileged employee also are those pressures arising out of forebodings and concerns at the thought of his losing such gifted indulgences.

And so even the favoured higher-grade employee remains straitened; controlled by his employer’s will and power. It is his sense of the risks involved in being dismissed which delineates for him the opportunity cost of him stepping out of line.

[i] A Tommy Shop was owned by the employer. The employer paid his employees wages in tokens which were accepted only at his Tommy Shops in exchange for foods and domestic goods. An employee was thus tied-into buying at the Tommy Shop, which were not unknown to charge higher prices than free-marketplace shops.

[ii] A tied-cottage was a house owned by the employer; who was able to hire and fire at will. When an employee was fired he and his family lost also their tied-cottage and were thus destitute on the streets.

The original article is located at our anomalist design blog: http://blog.anomalistdesign.com/doing-business/