PC codes and misrule by bossy central planners

The Folau story misses the big picture: the rise in power of employers over workers.

Illustration: Johannes Leak

The sacking of rugby player Israel Folau over a social media post has missed the bigger picture: the growing power of employers over our behaviour and freedom of expression. Folau, with years of earning millions behind him and an influential cheer squad in the media, will be fine. But millions of ordinary workers have to comply with proliferating “codes of conduct” and “ethics” every day or face getting the sack.

At Qantas, employees must “respect and support human rights”. National Australia Bank staff must “be transparent, responsible and respectful of us, our customers, your colleagues and everyone you interact with online”. These may be fine sentiments, but they have precious little to do with flights or banking.

The share of workers who work for big companies, and therefore who are subject to various codes, has been steadily increasing. Businesses with 200 or more employees employ almost a third of workers, up from 27 per cent a decade ago.

And the pipeline of mergers and acquisitions will ensure it rises further. It’s not only codes, which are typically chock full of politically correct sludge that small businesses wouldn’t have the time or money to write; it’s also pre and post-employment drug tests, or non-compete clauses that attempt to limit workers’ scope to change jobs. Technology is helping businesses to erode what used to be a clear boundary between being at work and at home.

Indeed, the procedures, decisions and hierarchies of large corporations have more impact on our lives, whether you work for one or not, than what emerges from parliaments.

Your wage or salary is fixed by a company. Bus and train timetables are fixed. The prices of the goods and services you buy at the supermarket are, in practice, fixed.

Until recently, the price of milk hadn’t changed for years at Coles and Woolworths. Can you think of a recent instance where you’ve negotiated a price for anything?

Wallabies star Israel Folau leaves a Code of Conduct hearing in Sydney.

Meanwhile, the algorithms that underpin Facebook and Google govern our access to social media and the internet, while Amazon increasingly sets the rules of digital commerce. Oligopolies offer us “take it or leave it’’ plans. And if you leave it, you won’t have the internet, a mobile phone or a bank account. As big companies absorb larger shares of the workforce, the economy becomes more planned, given that everything that occurs inside companies is a form of central planning.

“We are told that our choice is between free markets and state control, when most adults live their working lives under a third thing entirely: private government,” says Elizabeth Anderson, a professor at the University of Michigan, who says the champions of our economic system ignore reality.

They suffer from hemiagnosia, she says, “like patients who cannot perceive one-half of their bodies, a large class of libertarian-leaning thinkers and politicians … cannot perceive the half that takes place beyond the market, after the employment contract is accepted”.

This half is getting larger all the time. Sure, we have unfair dismissal laws, but few employees have the financial or emotional resources to use them. After all, they need another job and probably one in the same industry.

What’s extraordinary is how our economies are taking on characteristics that were a dream of Karl Marx, and a nightmare ­of Joseph Schumpeter, an economist who pioneered the study of entrepreneurs. Both predicted capitalism would wither away eventually.

Massive limited liability companies were for Marx a springboard to socialism. In the 1950s Schumpeter wrote: “Although (companies) are the product of capitalism, they socialise the bourgeois mind.”

A cursory look at the annual reports of large public companies indicates shareholders’ interests are quite secondary to the pay and prestige of management. It’s funny, then, to see politicians ­accuse each other of being capitalists or socialists when neither term describes what’s happening.

Rugby Australia Chief Executive Raelene Castle speaks to the media about Israel Folau.

The economic principles that animate these debates were written in the 18th and 19th centuries, long before our economies became dominated by massive companies. And they were written by men who by and large detested the limited liability company, which had an early track record of extravagance and corruption.

Adam Smith’s famous pin factory had 10 workers. Coles has 113,000; Walmart employs 2.2 million around the world. For the father of economics, efficiency and economic growth were not the main virtue of free markets. “Order and good government, and the liberty and security of individuals who had before lived almost in a continual state of … servile dependency upon their superiors … were by far the most important of all their effects,” he wrote.

The chief executives of large corporations have more in common with the landlords and aristocrats that Smith decried than the self-employed, independent butchers and bakers he hoped would emerge in a free economy.

The police raids on the ABC and the home of a News Corp Australia journalist last week starkly illustrate some of the problems with government power. But corporate power, which isn’t constrained by democracy, is growing too, in and outside the workplace.

In 2015, of the top 100 governments and companies ranked by revenue, 69 were companies (including 10 in the top 30), according to a list compiled by Global Justice Network. It may be a nice idea but the Liberal Party’s goal of “individual freedom and free enterprise” looks a bit irrelevant when the bulk of people have jobs for large corporations that may sack them for saying the wrong thing on Facebook.

The asymmetry of power between workers and buyers on the one hand, and employers and sellers on the other, may be a better focus for the future.

Whatever we call it, our economy has produced extraordinary wealth for everyone, even if a lot more for some than others in recent years. But when the Treasurer publicly rings up the chief executives of the big four banks to ask if they would please pass on the Reserve Bank’s interest rate cut, it’s time to get real and dump the free market fiction.