Page 10 - The Economist Asia January 2018

The Economist January 27th 2018
10 Leaders
2 The soft power of patient and consistent diplomacy is vital, vate. MrTrump and his successors need to redouble the effort.
but must be backed by the hard power that China and Russia The best guarantor ofworld peace is a strong America. For-
respect. America retains plenty ofthat hard power, but it is fast tunately, it still enjoys advantages. It has rich and capable al-
losingthe edge in militarytechnologythatinspired confidence lies, still by far the world’s most powerful armed forces, unri-
in its allies and fearin its foes. valled war-fightingexperience, the bestsystemsengineers and
To match itsdiplomacy, America needsto investin new sys- the world’s leading tech firms. Yet those advantages could all
tems based on robotics, artificial intelligence, big data and di- too easily be squandered. Without America’s commitment to
rected-energy weapons. Belatedly, Mr Obama realised that the international orderand the hard powerto defend it against
America required a concerted effort to regain its technological determined and able challengers, the dangers will grow. If
lead, yet there is no guarantee that it will be the first to inno- they do, the future ofwarcould be closerthan you think. 7

Mandatory arbitration in America
Shut out by the small print

Millions ofAmerican employees have no recourse to the courts
N 2016 Misty Ashworth sued firms do have a code of conduct, but less scrupulous firms are
Mandatory arbitration Iher employer, Five Guys, a not policed at all. Studies suggest that repeat business is corre-
United States, use in non-unionised
private-sector workplaces fast-food chain, for sexual ha- lated with outcomes that favourthe employer.
rassment and constructive dis- The scales appear to be tilting even further towards bosses.
1992 2%
missal. But the judge ruled that Mandatory-arbitration clauses are increasingly paired with
her case could not be heard in bans on class-action suits by groups of employees. That raises
2017 54% court. When she started the job, the bar for workers to pursue complaints, by ensuring that
she had agreed to take any dis- each must establish—and finance—his or her case separately; it
putes with heremployerto private arbitration. also lowers the risk that misconduct will damage an employ-
Ms Ashworth is not alone. Across private-sector work- er’s finances or reputation. The Supreme Court is deliberating
places in America, non-unionised employees are bound by whether that violates labour rights. If past form is a guide, the
mandatory-arbitration agreements. In the early 1990s such courtwill rule thatitdoesnot: judgeshave consistently treated
agreements covered only 2% ofnon-unionised workplaces; to- mandatory arbitration as just anothercontract.
day they covermore than half.
The growing use of arbitration is partly an indictment of Howto increase the font size
America’s courts. Rarely is it in either side’s interests to litigate Given that, and the failure of past attempts by Congress to im-
foryears and at great expense. Arbitration, by contrast, is quick pose bans, mandatory arbitration seems likely to stay. And in-
and flexible. It lets both sides choose procedural hoops they deed, it does have a part to play. Employers should be broadly
would forgo in return for a speedy resolution. A neutral third free to contract privately with their workers. A default, low-
party then hears the evidence and makes a decision. cost forum for resolving disputes is a good idea—as long as it is
Arbitration works well when power is balanced between designed to achieve fair outcomes. Fortunately, decent em-
the two sides: in commercial disputes between big firms, say. ployers, ethical arbitrators and sensible regulation can deal
But the balance between an employer and an employee, par- with many ofthe problems that bedevil arbitration.
ticularly in low-wage occupations, is often anything but even For a start, firms should aim to set up a fair process, by seek-
(see page 57). And whereas the judicial system is designed, at ing informed consent, rather than smuggling arbitration
least in theory, to treat people equally before the law, manda- clauses into unrelated documentation. A narrower interpreta-
tory arbitration puts employees at a furtherdisadvantage. tion from the courts on what constitutes consent would help,
Arbitration clauses are often hidden in the contractual as would an opt-out period foremployees. The clauses should
small print. Simply acknowledging the receipt of a staff hand- allow workers to join togetherand to act collectively.
bookcan count as a binding agreement to the terms it sets out. Arbitrators should be required to disclose conflicts of inter-
Even if workers do read everything, almost nobody starts a est, including whether they have repeat work from the em-
newjob expectingto have to seekredressagainsttheir employ- ployer. Options to avoid implicit bias might include manda-
er. When a dispute goes in front of arbitrators, their decisions tory rotation of arbitration firms or a system of randomised
are not subject to a review and, except in rare cases, cannot be selection. A requirement for arbitrators to offer a written justi-
appealed against. No public records of arbitration are kept. fication of their decision would encourage rigorous thinking.
Even if a worker wins the case, confidentiality provisions can If arbitrators get the law wrong, employees should be able to
shield repeatoffendersfrom exposure—asthe ongoingwave of seekjudicial review.
workplace-harassment revelations has shown. Tougher disclosure requirements ought to apply to judg-
This lack of scrutiny matters, because the incentives of mentsreached againstthe firm. Employerswould be less toler-
those who adjudicate disputes are skewed in favour of em- antofbad behaviouriftheywere required to disclose to inves-
ployers. Arbitrators are extremely unlikely to come across the torshowmanysettlementstheyreached and iftheycontinued
same employee in future cases, whereas repeat business with to employ repeat offenders. Make such changes, and both em-
the employer is likely. Such a set-up could strain the neutrality ployees and employers could benefit from arbitration without
ofeven the most upstanding arbitrator. Some large arbitration anyone sacrificingtheirright to a fairhearing. 7