Why the ‘unequal bargaining power’ argument against free choice is problematic

9 November 2023

Liberalism advances freedom of choice in all its manifestations. Any person must be allowed to make any decision they wish, provided this does not coercively nullify anyone else’s freedom of choice. One of the most forceful arguments against this proposition from the left – usually in the field of contract – is that there is often an inequality of bargaining power between the parties to an agreement, which tends to nullify the ‘freedom’ underlying the ‘choice’ made by the ‘weaker’ party.

This is a vapid argument, devoid of insight.

Meme

Richard Dawkins coined the term ‘meme’ to effectively mean an idea that spreads gradually through imitation. This is distinguishable from something spreading on the strength of persuasion. South Africans’ use of the word ‘eish’ to express annoyance is an example of a meme – nobody was convinced that eish is ‘better’ than a sigh and a roll of the eyes. It just ‘caught on’.

The notion that ‘unequal bargaining power’ is a ‘problem’ and a justification for limiting freedom of choice is also a meme. Despite this being a theory from outside of liberalism, many liberals simply parrot it as if it is biblical. Nobody convinced them – the narrative has just become so common that they pick it up without realisation.

Vapid argument

Of course, there is an inequality of bargaining power. There is always an inequality of bargaining power, without exception, because the ‘equality’ at play here is an entirely fictitious phenomenon.

No two people anywhere are alike, in skill, charisma, or intelligence, and certainly not in wealth, perceived social station, or support networks. Even two of the poorest people in a given community, if they were to enter into negotiations with one another, would not have ‘equal bargaining power’, as one might have charismatic negotiating skills so superior that they would ride roughshod over their peer.

Simply because there is an inequality of bargaining power does not mean the choice is nullified. This must be so, for if we accept that inequality of bargaining power does nullify choice, then no choice, in any context, ever, has been made validly.

Indeed, by deciding for other people that they do not have equal bargaining power – or that bargaining power must be an overriding consideration in any exercise of individual agency per se – virtually every choice the individual makes can be set aside on the basis of ‘fairness’.

An opportunistic, not principled, argument

One must also realise that those who seek to elevate the argument of ‘unequal bargaining power’ to the status of principle do not concern themselves with the abstract notion of unequal bargaining power. Instead, they want only one result.

Allow me to explain.

We agree that, generally – and this is by no means always true – an employer has more ‘bargaining power’ than a lone employee, especially if the job does not require a relatively scarce skillset.

We agree, then, that employees should be able to band together, in trade unions, to increase their bargaining power collectively.

Here is the rub.

At some point of collective organisation, the employees’ bargaining power starts to exceed that of the employer. A COSATU-affiliated union striking against a small business is an evident example of the employees being more powerful than the employer.

With this, the aforementioned ‘we agree’ goes out the window, because here the leftists who insist on this argument most fiercely stop caring about ‘unequal bargaining power’.

If we are dealing with an abstract principle in this context, the next step would be for us to consider how we can increase the employer’s bargaining power to rival that of the collectivised labourers. But we never take this step. Somehow, bargaining power is only a problem when the employer in particular has more of it.

Undue influence

Related to this is the commonly accepted idea in contract law that a coerced or unduly influenced contract is not a valid one.

If an employer wants to add a new provision into staff contracts, and the employees generally oppose it, the employer is not, under any circumstances, allowed to victimise the employees as a result.

The employer cannot stand outside her employees’ offices with a placard that insults them or guilt-trips them. The employer cannot make herself unavailable to her staff to frustrate them into conceding. The employer cannot delay salary payments or take excessively long to grant her staff access to the working premises (thus making them late for work). If an employer does any of this and secures ‘agreement’ from her staff, any court will strike down the agreement as invalid, because the ‘agreement’ was secured through undue influence.

This is as it should be.

Somehow, however, when employees do the exact same thing, and secure ‘agreement’ from the employer, it is generally believed that the ‘contract’ should be upheld.

We saw this recently in Tshwane where, several years ago, municipal workers secured an unaffordable salary increase on the back of a strike, which today, predictably, simply cannot be paid. Now, the employer – Tshwane – is ostensibly in the wrong for not giving effect to a valid wage increase agreement.

So, staff are, apparently, allowed to hold insulting placards that intimidate or guilt-trip their employer, they are allowed to make themselves unavailable through a stayaway, and they are allowed to engage in a go-slow that delays their work. They are allowed to secure ‘agreement’ from employers through undue influence. They can do this, we are told, because it helps them elevate their bargaining power.

But, in fact, it seems, it increases employee bargaining power far beyond that of employers.

Do not get me wrong: I am not advocating that we need to somehow rebalance the scales. To me, the very premise of trying to have ‘equality of bargaining power’ is nonsensical.

Respecting choice

As decent people – but as liberals in particular – we need to respect the dignity, agency, and responsibility of individuals, which must mean that we allow those individuals to falter, to bind themselves to less-than-ideal agreements, and to fail in their endeavours.

The unassailable reality remains, despite any perceptions about bargaining power, that no person would enter into an agreement if they believed they would benefit more by not entering into it. That they enter into it is evidence that they believe they will benefit, and it is their belief, not the beliefs of do-gooder politicians and social activists, that must win out in the end.

We – and the state in particular – are third parties who stand outside the agreements that others conclude. We have no skin in the game. Regardless of the relative bargaining power of the parties to those agreements, it is they who hold the most relevant information and ultimately have to take responsibility. We need to mind our own business.

Martin van Staden is the Head of Policy at the Free Market Foundation. He is pursuing a doctorate in law at the University of Pretoria. For more information visit www.martinvanstaden.com.

This article was first published by Daily Friend on 2 November 2023