Sunday, April 19, 2009

Tearing Up the Social Contract: if a contract binds one party and not the other, is it still a contract?

Anyone who has been reading this blog knows how I feel about the 'at will' employment agreement and, even more fundamentally, about the huge imbalance in rights and responsibilities in any dealings between individuals and corporations. So many of the agreements we enter into today are effectively one sided contracts: the individual signing is bound by a tight web of regulation, while the corporation or institution with whom the individual is entering into an agreement is provided with enough loopholes that they can safely match the rate of fire of the Prussian Army through their side of the agreement. This is entirely anti-capitalist, as capitalism is based on the market freedoms of all parties to enter into fair bargains, and also entirely anti-democratic, as democracy is based on equal rights under the law for all citizens.

A week ago now, on his blog Boztopia, Martin Bosworth wrote on just this topic, though he did so in reference to leases, credit cards, mortgages, etc rather than employment agreements. Still, it was very cheering to see someone else thinking the way I do on this issue. Bosworth writes:

"The problem here is this. We go into any deal expecting that the person (or people) on the other side will operate fairly, or at least not try to screw us. We provide whatever we’re providing–a good, a service, a usage of time–and the other person provides something in kind. Everyone gets what they want, so everyone adheres to the deal.

But when one side has all the power and the other does not, the deal is inherently unfair. As I’ve written before, we’ve eroded the social contract between us that presumes both sides play fair. Now, every agreement you sign, from your credit card to a Web site service to a home loan, contains terms in it that are specifically designed to favor one side over the other–and that side isn’t yours.

When you can see your credit card interest rate jump from 8 percent to 29 percent for no fault of your own, when a social networking service can take your content and make money off it without your permission, and when a landlord can raise your rent by 100 percent or more, who can honestly say that there is fairness in the transaction?

Business doesn’t have to be about screwing the other guy. You can make a profit without legally mauling the person you’re contracted to, for, or with. A moral person has the obligation to uphold their end of a bargain, but when the other agent in the transaction goes out of their way to fuck said person, I have a hard time justifying why they should not do the same in return."

Mr. Bosworth is precisely correct. Business agreements (whether they are leases/rental agreements, loans, contracts, or employment agreements) are fundamentally based on the theory that both sides will clearly communicate their expectations of the other and agree to uphold their own responsibilities. The modern interaction between corporate institution and individual employee, debtor, or customer is no longer based on this concept at all. Instead, corporate lawyers include a slough of exceptions by which the institution with which me make our agreement is bound to nothing and we, as individuals, are bound by tight legal chains. Corporations have rights and freedoms far beyond those allotted to individual American citizens, and citizens often have very little resource against corporate power. Even when legal resources exist, economic realities very frequently prevent us, as individuals, from seeing redress. How many of us, in this day and age, can afford to sit out a lawsuit for years while a corporation's legal department runs us in circles?

Contracts are one of the oldest legal mechanisms in history. The ancient Sumerians had contracts before they had real 'government' in the modern sense. The ancient Babylonian government was, for all intents and purposes, created with the express purpose of backing the contracts made by Babylonian merchants with military force if necessary. Ditto the Carthaginian and Roman governments. Yet we have allowed our contract law to devolve to the point where agreements with corporate institutions bear much more resemblance to feudal serfdom than to equitable agreements between equal parties.

The irony is that many of these 'loose agreements' were made deliberately looser under the guise of benefitting the individual signatory. Flexible rate mortgage agreements were designed to allegedly benefit less affluent home-buyers, while the 'at will' employment agreement allegedly exists to benefit the supposed desire for easy mobility among today's younger workforce. In both cases the benefit to the individual that allegedly justified the creation of the looser agreement is almost non-existent when weighed against the increased freedom of a corporate entity to do as it pleases.

American corporations have the power to enforce agreements by which they themselves are bound to nothing. What does this say about American government and American society?

Keep in mind that both political parties are equally guilty in these matters. Neoconservative Republicans and 'pro-business' New Democrats have both strengthened the feudal prerogatives of the American corporation at the expense of the American worker, borrower, and consumer. At the same time, they have removed legal restriction on the behavior of corporations in an irresponsible manner that makes Wall Street today the equivalent of Tombstone, Arizona in the days of Doc Holiday and Ike Clanton. Corporations stalk the streets like gunfighters, doing as they please, while honest townsfolk huddle behind closed doors.

I close with a quote by John Maynard Keynes:

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”

While I believe free-enterprise and free markets are necessary, that is certainly the definition of capitalism advanced by today's fiscal conservatives. Can we really afford that any longer?

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