CAN A DIVISION OF LABOR BETWEEN EGALITARIAN THEORIES OF JUSTICE AND BUSINESS ETHICS BE JUSTIFIED?

There are, of course, many ways a sociologist or anthropologist of academia might try to explain this pervasive neglect by political philosophers of organizational and governance issues at the level of business firms within markets. Philosophers tend to lack knowledge of the business world (as Rawls seems to confess in the passage discussed earlier) and typically have a less-than-enthusiastic opinion of it. But it may also be possible to justify the neglect—that is, to show why organizational and governance issues for business firms are not the kind of thing that theories of justice are meant to evaluate (beyond indicating some general limits for permissible business practices—excluding things like indentured servitude or human rights violations). Or, to put it another way, it may be possible to articulate and justify a clear division of labor between theories of justice on the one hand, and both normative and empirical questions about business ethics and market regulations on the other. And there have been at least three kinds of justifications for this division of labor in the egalitarian literature: 1) the “basic-structure-first” argument, 2) the “overall-distribution” argument, and 3) the “business institutions as objects for non-ideal theory” argument.

THE RELATIONAL TURN: STATUS, NOT STUFF

An explicit debate between distributive and relational forms of egalitarianism has emerged in the twenty-first century.^{Footnote 18} After years of heated controversy among egalitarians on the “equality of what?” question, Elizabeth Anderson suggested in a famous article that egalitarians had forgotten to ponder a more basic question: “What is the point of equality?” (Anderson Reference Anderson1999 emphasis added). In her view, this question had been largely ignored by contemporary egalitarians, who focused instead on unequal distributions arising from ethnic or socioeconomic origins, natural talents, even geographic considerations and nationality, all of which are mostly matters of chance and, therefore, morally arbitrary. This late twentieth-century discussion had come to be known as “luck egalitarianism,” and its theories of justice concentrated on the problems of identifying, condemning, and compensating for unlucky and unfair distributive outcomes.^{Footnote 19} But in so doing, according to Anderson, most of its proponents had come to neglect a more traditional aim of egalitarians: the eradication, or mitigation, of unjust social hierarchies. For relationalists, equality is not primarily about neutralizing the effects of luck in the distribution of goods; rather, it acts primarily as a measure of the quality of relationships between persons (Anderson Reference Anderson2008; Fourie Reference Fourie2012; Rosanvallon, Reference Rosanvallon2011). The root ideal or “point” of equality, from this perspective, concerns the value of relationships that are, to borrow Samuel Scheffler’s definition, “unstructured by differences” of rank, category, power, or status (Scheffler Reference Scheffler2010, 225).

The distinction between these two strands of egalitarian theory is subtle. Obviously, both unequal relationships and unequal distributions are important for all egalitarian theorists. And not all of the nuanced distinctions between the distributive and relational approaches are crucial to making some connection between egalitarian normative theories and normative theories of business ethics or corporate governance. For the rest of this article, when I discuss “relational egalitarianism,” I have in mind theories that share the following three commitments.

1. 1. The primacy of social equality. The primary goal of egalitarianism is to promote “social equality”—that is, the possibility of individuals relating to each other as equals. Principles of equality require more than an equal “distribution of stuff,” whatever “stuff” is deemed most important (wealth, opportunities, capabilities, or the like). A commitment to equality stands negatively against unjust hierarchies and positively for the flourishing of relationships among equals. Of course, this doesn’t mean that the “distribution of stuff” does not matter. An equitable distribution of material (and other) resources is often required to secure social equality; the distribution, however, is a tool for achieving such a goal, not the end in itself (O’Neill Reference O'Neill2008; Schemmel Reference Schemmel2011).

2. 2. Social relations as the sources of inequalities and injustices. Social relations, not bad luck, are the main sources of inequalities and injustices. Following Marx’s view that societies express the sum of interrelations of individuals and groups (Marx Reference Marx1953/1993, 265), relational egalitarians attempt to recognize how human action is embedded in these complex social and economic “interrelations” or “structures of relations,” and they see these as the primary sources or causes of material inequalities (Kibe Reference Kibe2011, 3; Garrau and Laborde Reference Garrau, Laborde, Fourie, Schuppert and Wallimann-Helmer2015).

3. 3. The expressive nature of institutions. Institutions are important not only for the role they play in distributing resources but also for their “expressive” roles—that is, for the way that they express, reinforce, and legitimize attitudes and forms of treatment for individuals and groups. These things are important for justice and equality, relational egalitarians argue, in ways that cannot be reduced to their distributive consequences. (Schemmel Reference Schemmel2011; Garrau and Laborde Reference Garrau, Laborde, Fourie, Schuppert and Wallimann-Helmer2015; Néron Reference Néron2014, Reference Néron and Hull2015)

One of the strengths of the relational perspective, according to Anne Phillips, is that it directs attention toward economic relations, “focusing on the power hierarchies involved in particular wage contracts or the social disrespect involved in particular consumer relations, and arguing that these are as important in the delineation of an egalitarian society as the distribution of material resources” (2008, 456). Markets and firms can promote and formalize various types of relations—from voluntary, mutually beneficial exchanges to classic cases of exploitation through hierarchical command structures in which individuals will not see each other as free and equal.

One of the first things to notice about the three relationalist commitments is that they plow right through the three kinds of barriers or excuses, discussed earlier, that seem to keep distributive egalitarians from engaging with the intricate details of markets and firms. First, from the relational perspective, there is no point in worrying about whether corporations are or are not in the “basic structure.” On this view, all real relations in real organizations and institutions are subject to principles of justice. Second, relationalists will be unimpressed with the idea that injustices can simply be corrected, after the fact, with redistributions of primary goods in ways that satisfy principles of distributive justice. Their reasons are twofold: 1) even if a just distribution is achieved, this will not erase the fact that, in many cases, such an outcome may have been the result of very exploitative or demeaning interactions among the individuals engaged in economic processes and commercial exchanges; and 2) even more important, without examining the way firms and other organizations function, we can only treat the symptoms of ongoing injustices rather than eradicate their sources. Finally, relationalists will be disinclined to retreat to a realm of ideal theory, where full compliance with principles of justice is presumed. Their focus will be on the features of the real world in which injustices, including those perpetuated by seemingly just legal frameworks (e.g., the statutes of corporate law or labor law), are ongoing. Anderson, for instance, explicitly argues that the relational approach can give us tools for a non-ideal study of inequalities. It does not start with the ideal of a perfectly just society; instead, it aims to diagnose unjust hierarchies such as group subordination, social stratification, oppression, and powerlessness (Anderson Reference Anderson2009, Reference Anderson2010).

In short, although most of the philosophers who have identified with this relational approach to egalitarian theory have not engaged in a detailed inquiry into the structure of corporate governance, they must surely sympathize with Rawls’s suggested research project, discussed at the beginning of this article, concerning the viability of more democratic business firms, and the hypothesis that such economic organizations might be crucial to the “long-run prospects of a just constitutional regime” (2001, 178–79).

So what, exactly, are the features of modern firms and markets that should provide the most important and difficult challenges for relational egalitarians? The sections of this article that follow consider two fundamental, indeed defining, institutions of the modern economy: first, hierarchically structured business firms; and second, competitive or adversarial markets involving these firms (as well as other individuals and organizations).

EQUALITY WITHIN A HIERARCHY? AUTHORITY OVER EQUALS?

It is common in business ethics textbooks to draw a distinction between the set of ethical issues that firms and their managers face as they compete in the marketplace, and a different set they must confront from within the firm. As John Boatright puts it:

Let us begin with this second feature: the challenge of identifying issues and grounding egalitarian norms for the organizational context, which should clearly be fertile terrain for relational-egalitarian theories. Boatright provides a few more details to map out this organizational terrain for business ethicists (emphasis added):

Boatright is not saying anything here that would be controversial for most economists or corporate lawyers. His statement draws on the foundational understanding of the rationale and justification for firms and for the exercise of managerial authority that began with Ronald Coase’s Economica essay, “The Nature of the Firm” (Reference Coase1937). This core feature survives in mainstream law-and-economics theories of the firm and analyses of corporate law (see, e.g., Williamson Reference Williamson1983; Easterbrook and Fischel Reference Easterbrook and Fischel1991; Hansmann and Kraakman Reference Hansmann, Kraakman and Kraakman2004). It is unlikely that egalitarian political philosophers can be as sanguine about the voluntary nature of these relationships or about whether the requirement to subordinate one’s interests—and perhaps also one’s values or identity or social status—within such arrangements can always be justified. Heath claims that, in contrast to competitive markets relations, which are structured by the decentralized price mechanism, intrafirm interactions are administrated relations that are governed by the rules that structure a hierarchical organization (Heath Reference Heath2007, 368). And this gives managers the power to issue authoritative commands to workers and over the firm’s assets (Ciepley Reference Ciepley2013; Dow Reference Dow2003). The modern corporation is arguably the most efficient economic organization in history, but its efficiency comes not only from Adam Smith’s “invisible hand” but also from the “visible hand,” or boot, of management (Chandler Reference Chandler1977). Liberal egalitarians, who want wealth to be created efficiently through the use of some kinds of markets and some kinds of firms, will have to find a way to reconcile managerial authority and power with norms of equality and justice. This is the challenge that distributive egalitarians have chosen to ignore, but which relational egalitarians must be prepared to tackle head-on. One way to do this is to frame corporate governance as, at least in part, a form of public governance.

Let us consider some of the ways in which corporations could be understood as “political” institutions that matter for justice. We have already seen that corporate structures of governance and management have distributive effects, and rather unequal ones at that. Another way of putting this is that corporate law shifts some important political decision-making authority—about the bundle of resources, wealth, and opportunities enjoyed by citizens—to corporations and their owners and officers, and these decisions are made largely on the basis of their own interests. Another way to see corporations as political entities is to recognize that they have features similar to those of political regimes (Ciepley Reference Ciepley2013; McMahon Reference McMahon1994). This is not an exhaustive list, but as “organizational regimes,” they resemble political regimes by having shared but contested goals and purposes, conflicts, chains of authority and commands, complex collective decision-making mechanisms, and relations of power. Anderson argues that it is, therefore, appropriate in many contexts to treat them as forms of “private” government (Anderson Reference Anderson2008, Reference Anderson2010).^{Footnote 20}

In a groundbreaking recent article, David Ciepley (Reference Ciepley2013) distinguishes three features of corporations as political or “governmental” entities. These include 1) the legal basis of the corporation’s status and right to govern labor and capital; 2) the governance of the corporation, understood as the rules and procedures for allocating power within the firm, along with the rules and procedures for collectively deciding how to deploy labor and capital; and 3) the management of the corporation, understood as the task of deploying labor and capital (141). As Ciepley astutely notes, the first feature suggests that corporations are governmental in provenance, meaning of government or derived from government, while the second and third ones suggest that they are governmental in operation, meaning “government-like.” The last two features define the notion of “organizational regime” (Néron Reference Néron2014).^{Footnote 21} Relational egalitarians will want to evaluate all three quasi-governmental roles of firms and their managers according to standards of justice, fairness, and legitimate authority (Anderson Reference Anderson2008; Néron Reference Néron and Hull2015).

Anderson identifies three types of hierarchies: hierarchies of standing, hierarchies of esteem, and command hierarchies (Anderson Reference Anderson2007, 262–263; Anderson Reference Anderson2008, 144–45). Command hierarchies, as forms of managerial authority, require special attention because they represent potential patterns of domination, stratification, and unjust subordination. These patterns are often invisible in the management disciplines, where there is a strong tendency to view management’s authority over employees through the contractual lens of voluntary agreement. We see this even in Boatright’s account, above, where he notes that individuals contract voluntarily through the labor market to become employees, and thereby also voluntarily accept the roles and relationships that go with the job.^{Footnote 22} From this point of view, workers are expected to submit to the authority of managers at the operational level and to accept very minimal powers of decision making. On the standard view, there is nothing unfair or unjust about this: it is part of the bargain workers accepted voluntarily with an eye toward furthering their own interests. Labor contracts and employees’ consent have been interpreted, most notably by judges, to contain implicit provisions of servitude, even if exit is not always an entirely free or “meaningful” option for workers (Orren Reference Orren1991; Forbath Reference Forbath1991).^{Footnote 23} Joseph Heath calls this broad dismissal of relational-justice considerations for employees the “let them eat contracts” view. Even if the contract is not willfully breached by managers (and that can be a big “if,” and one that workers may be powerless to redress), this initial transaction is subject to the same market failures as any other business transaction, the most obvious being information asymmetries, which favor managers, and the firm’s “monopsony power with respect to that individual’s firm-specific skills” (Heath Reference Heath2014, 141). So, according to Heath, “Workers in a shareholder-owned firm are perhaps best thought of as stuck between a rock and a hard place. On the one hand, they are unable to secure the loyalty of management by assuming ownership of the firm. On the other hand, they are unable to take full advantage of the protections offered by the market—if they could, they would be self-employed contractors, not employees” (2014, 140) Heath is arguing here that the unfairness of seemingly voluntary employment contracts can be explained from within the efficiency-based logic and justification of markets and firms. These market failures, along with lying and misrepresentation by managers, actually undermine “the efficiency of labor markets.”

Other scholars, and relational egalitarians in particular, find further issues with the hierarchical command structure of firms. For Ciepley, the labor contract, which includes an “implied-term” duty of obedience, along with duties of loyalty, care, and confidentiality, is “a contract that is more than a contract” (2013, 149). Superiors in command hierarchies sometimes feel free to express disdain, scorn, or indifference toward subordinates. These are not only unpleasant experiences but ones that could lead subordinates to internalize the attitudes expressed by their superiors (Bowles and Gintis Reference Bowles and Gintis1987). There is, as Gregory Dow suggests, a significant danger that workplace stratification will be interpreted on both sides of the divide as being the expression of some deeper truth about the social worth of all the individuals involved (Dow Reference Dow2003, 36).^{Footnote 24}

The relational egalitarian, therefore, asks, What (if anything) can possibly justify the pervasiveness of such corporate hierarchies? One justification is that managers have what McMahon calls “coordination authority,” meaning they are understood to effectively coordinate the supposedly cooperative activity among persons who all recognize that someone needs to coordinate it (McMahon Reference McMahon1994). Many economists would agree that the efficient coordination of organizations is the moral core of the managerial role, but they deny that this requires giving managers authority in a politically significant way. As Alchian and Demsetz famously argued, “Telling an employee to type this letter rather than to file that document is like my telling a grocer to sell me this brand of tuna rather than that brand of bread” (1972, 777). The corporate manager is “the centralized contractual agent in a team productive process—not some superior authoritarian directive or disciplinary power” (Alchian and Demsetz Reference Alchian and Demsetz1972, 778). But this seems a misinterpretation of the nature of the relations between managers and workers. Authority within firms is, as Dow suggests, the control over behavior in the absence of the continual repricing and bargaining that would take place in a market (Dow Reference Dow2003, 94). (Indeed, that is the core insight in Coase’s article explaining the efficiency advantages of firms over markets—the theory that is still the starting point for all mainstream economic theories of the firm today. Firms can be more efficient than markets by avoiding the transaction costs of serial bargaining and contracting [Coase Reference Coase1937].) The tuna consumer is applying market pressure by expressing preferences to the grocer, which the grocer can choose to ignore or not; managers, however, are issuing orders in a unidirectional fashion. As Nien-hê Hsieh argues, the need for good “team work” or efficient coordination in business organizations involves substantial interference in workers’ lives: what they can and cannot do, their main responsibilities, but also how they dress, the general rules of conduct they must follow, their daily and annual schedules, long-term planning, and so on (Hsieh Reference Hsieh2005).

In short, employment contracts seem a world away from the paradigmatic cases of one-off voluntary exchanges within the marketplace. They establish real relationships with potentially significant asymmetries of information, power, and status. Samuel Arnold argues that the need for effective economic coordination requires not only “occupational differentiation,” meaning different workers assume different tasks, but also “occupational inequality,” meaning that different organizational members have unequal packages of powers and authority (Arnold Reference Arnold2012).^{Footnote 25} While Alchian and Demsetz correctly emphasize occupational differentiation as a tool for cooperation and teamwork within firms, they fail to appreciate how it also goes with occupational inequality and potentially problematic relationships.^{Footnote 26}

The relationships that are integral to modern commercial life and economic organizations have been downplayed or ignored not only by the dominant “nexus-of-contracts” conceptions of the firm and of corporate governance (G. Miller Reference Miller1993) but also by libertarian theories of justice, which still, by and large, talk a lot about free markets but not about the corporations that dominate them. Hierarchies in corporate governance and management are strikingly absent from the conversation, as shown by John Tomasi’s widely discussed recent attempt to find more common ground between egalitarian liberals and libertarian conceptions of justice (Tomasi Reference Tomasi2012). In his book, Tomasi criticizes egalitarian liberals for overlooking the morally worthy and fulfilling ways of life available in the world of business, noting, “For many people, commercial activity in a competitive marketplace is a deeply meaningful aspect of their lives” (2012, 182). Unfortunately, his illustrations of this important point typically involve hypothetical examples, like “Amy’s Pup-in-the-Tub,” a small business dedicated to the bathing and grooming needs of pets. He wants to show how economic freedom and blooming commercial institutions are linked to self-authorship for people like Amy. While this may well be true, and important, a full discussion of freedom, well-being, and justice in the modern economy must take seriously the challenge of finding meaning within large, hierarchical organizations and in jobs as a subordinate with little control over one’s day-to-day, or minute-to-minute, tasks and with little room for the exercise of creativity and “self-authorship.” In other words, Tomasi’s exaltation of commercial life goes without any mention of the large modern business firm and its hierarchical structures, let alone of corporate law and governance, the shareholder primacy norm, and so on. And it does not include stories about workers being told what to do, when to eat, how to dress, and how to talk to customers or bosses. In short, it does not include stories about the Amys working at Walmart or Amazon. This style of reasoning based on hypothetical-but-plausible cases involving a few individuals is now common in both libertarian and egalitarian theories of justice. It is supposedly justified by the need for a certain level of abstraction, but it nonetheless leaves us with a skewed account of economic life. When different modes of economic production are examined, we are typically left with examples of basketball stars, friends going camping, or rural entrepreneurs like a hard-working gardener who does better than a lazy tennis player in what looks like a premodern economy.^{Footnote 27}

Of course, the critique of exploitation and alienation in modern work life is at least as old as Charles Dickens, Charlie Chaplin, and Franz Kafka, not to mention Karl Marx. It needn’t be assumed to be specific to capitalism or to limited-liability corporations. It concerns life in large hierarchical economic or bureaucratic organizations. No contemporary theorist of justice seems to envisage a just society that does not involve such organizations, so it would seem to follow that theories of justice have to be able to say something about the kinds of organizational relationships and governance arrangements that are and are not acceptable.^{Footnote 28} It is not the aim of this article to intervene in high-level debates between relational and distributive theorists about the best approach to theorizing about justice and equality. Nor am I suggesting how a well-formed relational theory of egalitarian justice would deal with the challenge of identifying viable models for a just business firm that could also realize the efficiency and distributive goals of a market economy. What can and should be argued, however, is that 1) relational-egalitarian theorists are well placed to dive into the myriad justice issues inside the “black box” of the modern business firm; and 2) demonstrating the ability of these theories to help us clarify and better understand the normative stakes within such organizational settings is a crucial test for these kinds of theories of justice and equality.

CAN BANKRUPTING YOUR COMPETITORS BE “JUST BUSINESS”?

I noted earlier that although very few political philosophers spent much time at all looking “inside” of corporations as they laid out theories of justice, many have, of course, discussed markets, at least in the abstract. Classical liberals and libertarians have embraced them as engines of individual freedom and aggregate wealth (or social welfare) creation. And egalitarian liberals, as noted earlier in this article, have had a much more hesitant, ambivalent attitude toward this means of organizing economic activity, which often seems like a necessary evil.

Given the emphasis by egalitarian theorists on redistributive justice for much of the period since the publication of Rawls’s A Theory of Justice (Reference Rawls1999), the principal worry about markets has surely been their tendency to facilitate an unequal distribution of wealth. But if we dig deeper into contemporary egalitarian theory, we see a broader array of interrelated critiques of, and fears about, the possibility of healthy market relations in a society of free and equal citizens. It is likely that all of these critiques had been articulated by political thinkers (and political writers of both fiction and nonfiction) long before the rather narrow and recent tradition of academic theorizing about justice came to be. So we can list some of these critiques initially without much detail. The guiding question in this article is, Might egalitarian theories that prioritize relationships over distributions provide us with more insight into either the truth or the misguidedness of some of these standard critiques of the market? Before returning to this question, let us look briefly at a (surely far-from-complete) list of liberal-egalitarian worries about markets, beginning with the one discussed much earlier in this article (but otherwise in no particular order):

1. 1. Markets tend to distribute wealth unequally, thereby exacerbating social inequalities that cannot be easily corrected through taxation and redistribution. Even in noncapitalist markets, we can expect the rich to get richer and the poor to get poorer, unless these tendencies are corrected. (See, e.g., Rawls Reference Rawls2001; Young Reference Young2011; Malleson Reference Malleson2014.)

2. 2. With great inequalities in income and wealth, we would be naïve not to expect political inequalities. The wealthy are better equipped than the poor to watch out for their own interests. In Rawlsian language, this leads to an “unequal worth of political liberties,” which is a deep problem for all liberal democrats. (See, e.g., Rawls Reference Rawls2001; Dworkin Reference Dworkin2002; Reference NéronNéron forthcoming).

3. 3. The impersonal, anonymous character of market relations is inherently alienating. (See, e.g., Phillips Reference Phillips2008; Young Reference Young2011; cf. Anderson Reference Anderson2004.)^{Footnote 29}

4. 4. The competitive nature of markets “recruits low motives” and transforms us into egoists who regard others as mere instruments to satisfy our own ends. In other words, markets fail to satisfy a “community” principle that requires social relationships to be organized in such a way that people care about each other (Cohen Reference Cohen2009, 34–35).

5. 5. Similarly, markets are inherently “anti-cooperative.” If justice is, in large part, about how to distribute the benefits and burdens of social cooperation, then it seems odd to expect that a system premised on noncooperative, competitive, winner-take-all relations will find a fair way of distributing the spoils and burdens of economic activities. (See, e.g., Mill Reference Mill2008; Malleson Reference Malleson2014; Cohen Reference Cohen2009.)

6. 6. Moreover, the competition seems unfair when we consider that individuals and groups (from different socioeconomic classes, or from groups defined by differences in gender, ethnicity, ability, and so on) do not compete on anything like a level playing field. They come to the competition with unfair advantages and disadvantages, and market interactions seem most likely to tilt the field even further in favor of those who begin with advantages. (See, e.g., Knight Reference Knight1997; Heath Reference Heath2014.)

7. 7. Similarly, it has been argued that real-world markets do not usually liberate the disadvantaged from the status or discrimination that oppresses them. Instead, according to this version of the critique, the world of business tends to reproduce and reinforce many of the same forms of discrimination and artificial social status. (See, e.g., Young Reference Young2011; Phillips Reference Phillips2008; Sidanius and Pratto Reference Sidanius and Pratto1999; Aiello, Pratto, and Pierro Reference Aiello, Pratto and Pierro2013; Smith Reference Smith2002; Néron Reference Néron and Hull2015.)^{Footnote 30}

Again, this list of egalitarian critiques of economic markets is not meant to be comprehensive or novel in any way. In one form or another, these criticisms have been around as long as there have been apologists for the benefits of free markets. And, of course, every one of these criticisms is controversial, and not just because non-egalitarians may disagree. Perhaps the leading relational egalitarian, Elizabeth Anderson, partly distances herself from criticisms 3 and 7, for example. While the impersonal and anonymous character of market relations is often associated with forms of alienation and disillusionment, Anderson emphasizes that it has the potential to undermine traditional forms of hierarchies and power relations. Markets can represent a credible basis for building a society of equals because they dispense with servile relationships. She contends that “capitalism, by enabling ordinary people to make a living without depending on noblesse oblige, thereby transformed the moral economy of social standing to a more egalitarian and potentially universalizable footing” (Anderson Reference Anderson2004, 352). Well-functioning markets, therefore, can act as hierarchy-attenuating institutions.^{Footnote 31}

I draw attention to these standard egalitarian criticisms of the market in order to make two points. First, debates among political philosophers on these issues would become much sharper if we were to use a less generic and abstract understanding of the properties of real markets—especially those that intersect with the business firm itself (including securities and insurance markets, markets for labor, and the market for corporate control, which is central to corporate governance and corporate law). And second, it is worth pointing out that some of these criticisms seem to fit much better with a relational, rather than a distributive, approach to equality and justice. The point here is not that a relational egalitarian would have to endorse any given criticism; rather, it is a criticism concerned primarily with the way markets structure humans’ relations and also their expressive nature.

Let’s begin briefly with this second claim, about how some of these criticisms (whether they are ultimately justified or not) are more clearly in “the wheelhouse” of relational egalitarians. Criticisms 3, 4, 5, and 7 are about interpersonal and intergroup relations (or conflicts). As such, they are also more likely to be overlooked as fundamental questions of justice or equality by egalitarian theories focused primarily on distributive justice. The combined picture across these related critiques is of markets facilitating human relations that strip away many of the most noble and desirable features of individuals’ humanity. Markets are considered impersonal and anonymous. They are viewed as adversarial, not cooperative. They are said to sanction the treating of others as mere means rather than as ends-in-themselves—or even just as willing partners. They are thought to encourage greed and the pursuit of self-interest. Furthermore, they reproduce other forms of illegitimate hierarchies of status and privilege within the corporate world and assume that these patterns are simply the outcomes of voluntary, “difference-blind” market transactions.

For simplicity, let’s call these the “relational critiques” of market interactions. They involve a number of normative assumptions about what it is for an individual to lead a meaningful, virtuous, and meaningful, or simple “good” life, and they are trying to highlight some desirable or undesirable ways of living that effect, or are affected by, our relations with others. Another striking feature of all of the claims is that they rely heavily on empirical assumptions, from claims about environmental influences on human psychology to sociological claims about the consequences of institutions across large societies and long time horizons.^{Footnote 32} Presumably, there is hard empirical evidence that could be brought to bear on some of these questions in ways that may not have been possible when the various relational critiques of markets were first articulated one hundred and fifty—or even fifty—years ago. That said, it is difficult to imagine usefully testing the empirical hypotheses for the effects of something as general and abstract as “the market” or markets. And yet, it is common in political philosophy texts to be no more specific than that, or to make a claim about consumer markets for goods and services. Examples may be given of a specific market, as in Tomasi’s example of Amy, the small business owner who finds much fulfillment in her entrepreneurial activities. But there are so very many different kinds of markets that we would be unwise to generalize empirical results from particular cases across the board for markets in general.

Recently, a more modest and potentially feasible pursuit of some of these questions of relational justice has emerged in the work of some noteworthy political theorists. This approach does not involve broad claims about the consequences or the legitimacy of all markets—indeed, it takes as a point of departure that markets are a good idea for most goods and services. In books with titles like Why Some Things Should Not Be for Sale and What Money Can’t Buy (by Debra Satz [Reference Satz2010] and Michael Sandel [Reference Sandel2012], respectively, both carrying the same subtitle, The Moral Limits of Markets), the focus is on a relatively small number of specific markets, specifically those catering to reproductive labor, sexual services, organ sales by living sellers, as well as things like ticket scalping, queue jumping, pollution trading, and the selling of skyboxes in sports stadiums.^{Footnote 33} Books like these make cases against allowing markets to structure particular kinds of exchanges. The arguments involve, on the one hand, a mix of normative claims about the good life, about rights and principles of justice or right action, and sometimes about virtue; on the other hand are claims about undesirable consequences, intended and unintended, from using markets to facilitate transactions of these specific types. It goes without saying that both the normative and empirical claims in these relationist critiques are controversial. In a book called Markets without Limits (2016)—which is explicitly a rejoinder to the books cited in this paragraph, as well as to the work of Elizabeth Anderson—authors Jason Brennan and Peter Jaworski (Reference Brennan and Jaworski2016) do their best to question the normative and empirical assumptions of the relationist critics of these particular markets. I contend that this is not the place to evaluate these debates. Suffice it to say that these do, at least, seem like the kinds of debates that are worth having about justice and the market—namely, debates that involve looking in some detail not at “the market” in general but about the workings, justifications, and empirical consequence of particular kinds of markets (and, I hasten to add, of whatever the alternative is to a “marketization” of some kind of exchange). And if relational-egalitarian political theorists wish to take up this challenge in earnest, they will find a tremendous amount of the empirical research by economists, psychologists, sociologists, and others on the workings and outcomes of market and nonmarket mechanisms in many of these specific domains.^{Footnote 34}

Relational critiques 3, 4, and 5, above, all hinge on the competitive and often impersonal nature of markets. Because competition and rivalry are inherent to the concept of markets, one cannot accept the legitimacy and justification of markets (even noncapitalist markets) without in some sense reconciling oneself to the legitimacy and justifiability of adversarial attitudes, strategies, and behavior. The uneasiness that egalitarian theorists have so often revealed with their hesitant and reluctant acceptance of some kind of market economy may have as much to do with a kind of moral distaste with sanctioning (or even encouraging) self-seeking, noncooperative behavior as it does with an uneasiness about the tendency of markets to produce unequal distributions of benefits and burdens. (Something similar might be said about the deliberative models of democracy favored by many of the same egalitarian political theorists in this same period: they “accept” the competitive, adversarial element of electoral politics but lament the inability of elected officials to work cooperatively to promote the common good once they are elected.^{Footnote 35}) Until recently, many prominent theorists in the business ethics community seemed similarly reluctant to embrace the inherently adversarial nature of business, focusing on how virtuous or socially responsible managers might find creative ways to think about the interests of all stakeholders even in circumstances where markets are structured to allow them to pursue their own interests, or those of the firm’s owners, at the expense of other stakeholders.

Around 2005, Joseph Heath began advocating a different approach to business ethics—one that takes seriously the adversarial core of markets and is mindful of rigorous principles that are presupposed within institutions structured and regulated to be competitive rather than cooperative or hierarchically administrative (see Heath Reference Heath2006, Reference Heath2007, Reference Heath2014). Adversarial relations in markets are characterized by several features. First, they require the adoption of noncooperative behavior and attitudes; indeed, in critical circumstances, it is not merely legally and ethically permissible to be noncooperative, it is impermissible to cooperate. Price-fixing or territory-splitting arrangements between competitors in a market are treated as serious criminal offenses. The regulatory prevention of monopolistic powers—whether by not allowing certain mergers, or by actually breaking up a monopoly into separate companies—is a state power that virtually all champions of free markets require. In other words, like sports, democratic politics, and the adversarial legal system, markets are deliberately adversarial (Norman Reference Norman2011). Unlike street fights or competitive races for coolness among teens, markets are an organized and contained rivalry (Martin Reference Martin2013). As Heath (Reference Heath2007) puts it, markets represent a complex social and political attempt to institutionalize collective action problems in which participants fail to cooperate. We typically think that collective action problems are problems that should be solved by cooperation. But regulated markets forbid the kinds of cooperation between competitors that would enable them to solve their collective action problem to the detriment of consumers and society at large. In a well-regulated market society, we want market competitors to try as hard as they can to survive and thrive, and to do this by outperforming their rivals (producing a better product more efficiently and at a better price). Smith’s “invisible hand” produces a positive externality to society when market competitors “defect” rather than cooperate with their rivals. But while this rationale for markets highlights the potential social benefits of competition, it also exposes the morally dubious feature of markets that underlies at least three of the aforementioned “relational critiques.” According to Heath, the “problem is that the beneficial consequences of a competition arise necessarily as a by-product of the competitive activity, while the objectives that the participants themselves seek often seem morally objectionable prima facie” (2007, 363). The deontological underpinnings of most recent egalitarian theories (which often include a commitment to deliberative democracy) presuppose the moral superiority of cooperation. Deontologists like Rawls seem to embrace markets largely on the consequentialist grounds that markets create wealth more efficiently, and perhaps less corruptly, than the alternative of central planning.^{Footnote 36}

If relational egalitarians are to take seriously and, in some sense, embrace, the deliberately and inherently adversarial nature of markets, it does not follow that they must adopt a Panglossian attitude about the justice or justifiability of the behavior and strategies of individuals and organizations in the actual markets in an advanced modern economy.^{Footnote 37} Heath’s (Reference Heath2014) aim was to show that the “implicit morality” of deliberately adversarial institutions like markets gives us powerful tools to criticize real-world business actors on ethical grounds—and, in turn, to recommend stringent legal regulations. He has often called his theory the “market failures approach to business ethics” (Heath Reference Heath2014), because it highlights the shortcomings of almost all actual markets that cannot possibly satisfy the conditions of perfect competition laid out in the first pages of introductory economics textbooks. Most markets exhibit market failures—among them market power for monopolists or oligopolists; information asymmetries between buyers and sellers or employees and employers; negative externalities like pollution that are not factored into the price of the product, and so on—and the exploitation of these market failures can enable individual firms or agents to gain rents without necessarily producing positive, “invisible hand” benefits for society. Moreover—and this is what makes this such a powerful approach to business ethics—most of the business practices that we intuitively recognize as unethical or unjust can be described in ways that reveal the exploitation of a market failure. For instance, poisoning employees or the people living near a factory’s toxic emissions is a negative externality; deceiving and defrauding customers, suppliers, lenders, or employees involves an information asymmetry; producing an inferior product that can reliably be sold for an inflated price typically requires the exercise of market power. Heath’s point is that we don’t need a normative framework alien to markets and business to explain why these practices should be illegal, or why they might be considered unethical: we can do this using the very principles (primarily, the goal of efficiency) that justify the market itself.

This is not the place to explore the merits of this market failures approach as a way to frame issues in business ethics (although it is an approach with which I am broadly sympathetic).^{Footnote 38} It is, however, worth noting some important implications such an approach might have for relational egalitarians. Again, to date, few relational-egalitarian theorists have looked closely at the challenges of conceiving of a market system that does not systematically, or by its very nature, violate their norms for equality and justice. But the world of business provides exactly the sorts of relationships in action which those theories should be able to test. Following Heath, relational egalitarians might want to explore the extent to which the relationships, hierarchies, and roles in business that they find most problematic from the point of view of equality can also be seen to coincide with the exploitation of market failures (or with other related defects in markets that often justify regulation, such as the exploitation not merely of information asymmetries but of asymmetries in processing information, because of predictable cognitive biases and heuristics that enable a seller to get buyers to make imprudent purchases).^{Footnote 39} It would be an interesting result if, for example, most relational problems in market interactions coincided with the exploitation of market failures; and also if the conceptual and normative framework of relational equality gave us a more perspicacious understanding of why those kinds of market transactions are unethical and unjust. It could also be interesting if a closer examination of this question revealed that market transactions involving no clearly exploited market failure could nevertheless be shown to be unjust. Either way, we won’t be able to explore the utility of the normative paradigm of relational justice fully in these contexts until scholars start looking closely at these kinds of questions—and especially until they do so in the context of some specific kinds of markets (and perhaps also considering the “nonmarket” alternatives, or the way the normative quality of the transaction might be improved, for instance, with regulatory reform).^{Footnote 40}

AUDITING RELATIONAL JUSTICE

The “relational critiques” presented early in the preceding section indicate what relational egalitarians identify as the features of unjust or otherwise undesirable markets. Those critiques picked out relations, attitudes, consequences, and so on, of markets and firms that would be sufficient conditions for judging them to be unjust. It is an open question, of course, whether actual markets and capitalist firms do in fact exhibit these features. On the flip side, how might we summarize the qualities of business firms and markets that relational egalitarians would tend to see as necessary conditions for just economic relationships, hierarchical structures, and transactions? Here are some suggestions, from the less demanding to the more egalitarian.

Voluntariness: The first constraint on hierarchical command structures is broadly libertarian and focuses on the importance of voluntary agreement. Command hierarchies should be freely entered without fraud, force, or deception.

Exit: There should also be mechanisms that enable us to reasonably interpret when continued participation by an individual over a long period of time really does constitute implied consent or a reaffirmation of the original choice. Chief among these is the real possibility of exit. Free and equal organizational membership demands that employees and other subordinates in economic relationships be free to terminate the relationship without having to endure significant hardship.

The question of the appropriate criteria for judging when obstacles to easily accomplishing some activity or task X constitute constraints on one’s freedom to X is a perennial one for analytic political philosophers (D. Miller Reference Miller1983). We won’t be able to state precise criteria for when the hardship of exit is sufficient to violate this condition for free and equal membership in an organization. It is easier, no doubt, to recognize when the alternatives to continuing in a job one hates are so inferior that it is better to stay, even if this leaves one vulnerable to exploitation. For most workers, “leaving a job means losing seniority, retirement funds, health benefits, job-specific skills, community ties, and friends” (Moriarty Reference Moriarty2005, 460), not to mention incurring various research costs in finding a new job as well as transition and training costs in making the move from one job to another.^{Footnote 41} It is important also to recognize that the freedom or costliness of exit may have less to do with the structure and relationships of one’s current firm than it does with the possibilities for immediate work of an appropriate sort, a sufficient amount of severance pay or social insurance to bridge jobs, or the affordable availability of retraining or education to meet the challenges of an evolving economy. And the existence of these things may have a lot to do with the generosity of the welfare state and of industrial or macroeconomic policies of the government. Nevertheless, treating employees as free and equal implies that there must be limits on the extent to which managers or companies can exploit or leverage their knowledge of employees’ poor opportunities for employment elsewhere.

Voice: To the extent that there will often be important limits to the freedom of exit from corporations, employment contracts can become less “voluntary” over time, as Heath argued in his “let them eat contracts” dismissal of this problem. This is one reason that relational egalitarians will emphasize the need for workers to be able to gain voice. This is the capacity to participate in and influence corporate decision making, express dissent, and contest corporate policies, without exiting (Hsieh Reference Hsieh2005). From this point of view, it is not enough that managers ought to consider workers’ interests in their decisions. Some form of participation, direct or indirect, ought to be granted to workers (Hsieh Reference Hsieh2005, Reference Hsieh2006).

The dismissal of the “let them eat contracts” view cannot, by itself, justify the dream of workplace democracy raised by Rawls in the passage with which this article began. Relational egalitarians, however, will want to explore the possibility of radical reforms to corporate law, along with the governance frameworks for other kinds of business firms such as cooperatives, so that employees can gain more control over the firm, including its board, and over the labor relations or human resource management. Voice is also a way for employees to gain more control over the management of, among other things, a range of diversity and gender issues and the nature of the organizational culture.^{Footnote 42}

Sphere differentiation: Issues of relational equality connected to the workplace remain even with improvements in the conditions of entry, voice, and exit. This is because all large organizations—and not only economic ones such as corporations—will have hierarchies, role-specific rights and obligations, and chains of command. (This statement is probably a tautology: without these things, there exists only some kind of a group, not participants in an organization.) Given the natural tendency for individuals at the top of a hierarchy to be perceived, and to perceive themselves, as superior to those below, relational justice requires sphere differentiation.

Superior authority should be attached to offices, not persons, and as such ought to be exercised by persons only within the domain of their office (Anderson Reference Anderson2010, 107). It entails that managers cannot claim nonreciprocal authority over workers outside the domain of the corporation’s “jurisdiction.”^{Footnote 43}

Of course, given the centrality of work for so many of us, sphere differentiation might be a very fragile protection. Many workers are tied to the organization they work for in such a way that a sharp differentiation between organizational life and others “spheres” becomes problematic. In many lines of work, from the practice of professions like law and medicine to the playing of professional sports, success and value on the job requires significant constraints on what workers are free to do when they are enjoying what is supposed to be their “private life,” including limits in some cases on freedom of political speech or the choice of recreational activities. In short, nonwork activities can be relevant to one’s status or success at work. And, on the other side of the coin, one’s status at work—in an inferior position on the hierarchical totem pole, for instance—can bring with it a subordinate status in the society at large (Malleson Reference Malleson2014; Néron Reference Néron and Hull2015).

The four requirements discussed so far in no way constitute a comprehensive list of what’s needed for relational justice to develop in the modern economy. Nor are they formulated as the sorts of principles that could settle large-scale institutional design or justification issues. For example, they will not point decisively to a choice between capitalism and socialism, nor will they hint at even a particular model for trade union rights or governance. What they do try to show is why these aspects of contractual and social relations between different individuals and different constituencies or “stakeholder” groups in a firm should be of primary concern to egalitarians. A final relevant feature of justice in the world of business follows from the fact that we cannot expect the above four conditions to be satisfied through the economic and political negotiations that set up markets, businesses, and other kinds of institutions in any modern state, capitalist or otherwise. There are, for example, obvious market failures hampering employment markets, just as there are unavoidable agency problems likely to corrupt the internal governance of business firms and other organizations.^{Footnote 44} For this reason, future relational theories of justice for markets and firms will have to pay particular attention to the role and the details of external standards.

External standards: These are regulatory constraints imposed by government agencies on rights and obligations of owners, managers, and other employees. Such constraints include safety standards; laws prohibiting discrimination and harassment; minimum wages and unemployment insurance; rules limiting the amount of discretion exercised by managers; and measures assuring the presence of strong unions and other ways of enhancing employee “voice” and negotiating power.