Human-Scale Business - American Reformer

A Review of Sohrab Ahmari’s Tyranny, Inc.

At the climactic moment of “The Third Man” (1949) Harry Lime (Orsen Wells) stands atop a Ferris wheel with his friend Holly Martins and threatens to throw him off. What would it matter? The people on the ground appear to be ants, mere dots. What would it matter if there was one less dot? It’s not personal; it’s business, it’s about the numbers, and one dot more or less, hardly affects the numbers at all.

Sohrab Ahmari is concerned about these kinds of things. Me too. I am a businessman, but I’ve got my doubts. I don’t know when they started. Maybe it was the cotton-candy-colored vapes at the neighborhood gas station, positioned about two feet below my eye level at about the eye level of a fourth grader. Maybe it was the pornographer who practically lives in my house, on my son’s phone, dm’ing him with pictures via Facebook and Snapchat. Or maybe it was when Disney purchased a gambling ring. Nothing says family values like addiction and regressive social behavior. For Sohrab Ahmari, it was private equity.

Ahmari’s new book Tyranny, Inc. exposes a number of problems in the free market, especially ones that have arisen in connection with private equity. Take Bruce Miller. He had a career at the classic American retailer Sears, which followed the classic American path. He began by sweeping the floors. He worked his way up to keeping the stockroom and then doing alignments and tire changes. He was a get-there-early-and-stay-late kind of employee. Eventually, he had a pension, which he used to put a down payment on a house. Everything was great until, Eddie Lampert took over Sears through a complex scheme involving mergers, hedge funds and other nefarious dealings, as Ahmari recounts. The “Lampert regime” stripped operations down and cheapened things up, squeezing and stretching Miller and his coworkers, until finally there wasn’t much left for Lampert to do except sell off a few remaining assets and close the doors, leaving Miller with a mortgage in foreclosure. Miller was just a dot from where Lampert stood.

From this case and others like it, Ahmari deduces his most important claim: the free market is not really as free as we thought. Often it is outright coercive, especially for customers and employees. The cause lies in the unequal distribution of power. Asset-rich employer-owners can coerce asset-poor employees by virtue of their superior economic position. The solution is to help the relatively powerless by strengthening their collective bargaining ability. Ahmari calls this a strategy of “countervailing power”. The historical origin of this problem lies in Reagan-era Neoliberalism, which deregulated much of the economy and made collective bargaining more difficult. The solution, he says, is social democracy, especially a more robust regulatory regime and a re-energized union environment.

There are a number of things to appreciate about Ahmari’s work. First, he disentangles social conservatism from economic liberalism. This is the assumption behind his critique of neoliberalism, which he argues, spread the principles of market liberalism into every sphere of culture. Second, he is not a utopian. Every generation of liberals and progressives concoct a scheme to make the world perfect, and every era of history disproves them. Ahmari is a conservative and a realist. Coercion will never go away, he says. Rather, it must be ameliorated by a separation and balance of economic power. There is something very American in that proposal. Finally, Ahmari is concerned for the economic stability and security of all classes, not just those who are able to pull their bootstraps tight enough.

Nevertheless, there are a few issues. Ahmari builds his case by means of case studies, but for every case he names, a counterexample is easily at hand. Second, Ahmari writes in the high-pitched tones of contemporary journalism, which leads him to indulge in a Manichean dichotomy between management and labor. Finally, high turnover rates and historically low labor force participation rates belie his claim that workers are chained to their jobs against their will.

However, there is a bigger problem still. If business is big, Ahmari’s solution is to make government and the unions bigger. It’s a kind of economic-political arms race. Whoever builds the bigger, more powerful legal-bureaucratic weapon can hold the other at bay. It’s deterrence by mutually assured economic stagnation. It may work, but I doubt it will be happy.

It will not be happy because it doesn’t solve the Ferris wheel problem. Consider a lesson from Max Weber. Bureaucratic effectiveness requires strict administration by rules and a deemphasis on all personal considerations. For all the gains in effectiveness and control achieved by bureaucracy, there is a corresponding cost in depersonalization. While bureaucratization develops first in capitalism, Weber recognized that it is not restricted to businesses. It is applied in all social institutions. That’s why we have both “The Office” and “Parks and Recreation”. These shows lampoon the comic banality of depersonalized bureaucracies in both private business and public agencies. The problems Ahmari describes are real, but they are not limited to the private sector.

Take the Ferris wheel as a metaphor for bureaucracy. The bigger the bureaucracy, the farther down a manager-officer has to look to see anyone on the ground, and the more they look like little dots when he can see them at all. It doesn’t matter if the bureaucracy is Sears or the Teamsters. Coercion and depersonalization happen in all organizations, and the bigger the organization the more serious the negative externalities. This is why people complain about “the Swamp” or Big Business or Big Government or Big Anything. Simply growing one Big bureaucracy to combat another Big bureaucracy seems unlikely to restore the humane, and human-scale economy that Ahmari wants.

That’s not all. Gargantuan bureaucracies breed a class of elites whose interests and values are more like each other than the people they represent. The labor chiefs Ahmari wishes for, will likely ski the same slopes, dine at the same clubs, and attend the same charity auctions as the CEOs and legislators he despises. Eat the Rich will be the new shabby chic.

Ahmari has identified a problem in the free market system. He is not wrong; he just hasn’t drilled down far enough.

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