10 Leaders The EconomistJanuary 27th 2018(^2) The soft power of patient and consistentdiplomacy is vital,
but must be backed by the hard power that China and Russia
respect. America retains plenty of that hard power, but it is fast
losing the edge in military technologythat inspired confidence
in its allies and fear in its foes.
To match its diplomacy, America needs to invest in new sys-
tems based on robotics, artificial intelligence, big data and di-
rected-energy weapons. Belatedly, Mr Obama realised that
America required a concerted effort to regain its technological
lead, yet there is no guarantee that it will be the first to inno-
vate. Mr Trump and his successors need to redouble the effort.
The best guarantor of world peace is a strong America. For-
tunately, it still enjoys advantages. Ithas rich and capable al-
lies, still by far the world’s most powerful armed forces, unri-
valled war-fighting experience, the best systems engineers and
the world’s leading tech firms. Yet those advantages could all
too easily be squandered. Without America’s commitment to
the international order and the hard power to defend it against
determined and able challengers, the dangers will grow. If
they do, the future of war could be closer than you think. 7
I
N 2016 Misty Ashworth sued
her employer, Five Guys, a
fast-food chain, for sexual ha-
rassment and constructive dis-
missal. But the judge ruled that
her case could not be heard in
court. When she started the job,
she had agreed to take any dis-
putes with her employer to private arbitration.
Ms Ashworth is not alone. Across private-sector work-
places in America, non-unionised employees are bound by
mandatory-arbitration agreements. In the early 1990s such
agreementscovered only 2% of non-unionised workplaces; to-
day they cover more than half.
The growing use of arbitration is partly an indictment of
America’s courts. Rarely is it in either side’s interests to litigate
for years and at great expense. Arbitration, by contrast, is quick
and flexible. It lets both sides choose procedural hoops they
would forgo in return for a speedy resolution. A neutral third
party then hears the evidence and makes a decision.
Arbitration works well when power is balanced between
the two sides: in commercial disputes between big firms, say.
But the balance between an employer and an employee, par-
ticularly in low-wage occupations, is often anything but even
(see page 57). And whereas the judicial system is designed, at
least in theory, to treat people equally before the law, manda-
tory arbitration puts employees at a further disadvantage.
Arbitration clauses are often hidden in the contractual
small print. Simply acknowledging the receipt of a staff hand-
book can count as a binding agreement to the terms it sets out.
Even if workers do read everything, almost nobody starts a
new job expecting to have to seek redress against their employ-
er. When a dispute goes in front of arbitrators, their decisions
are notsubject to a review and, except in rare cases, cannot be
appealed against. No public records of arbitration are kept.
Even if a worker wins the case, confidentiality provisions can
shield repeat offenders from exposure—as the ongoing wave of
workplace-harassment revelations has shown.
This lack of scrutiny matters, because the incentives of
those who adjudicate disputes are skewed in favour of em-
ployers. Arbitrators are extremely unlikely to come across the
same employee in future cases, whereas repeat business with
the employer is likely. Such a set-up could strain the neutrality
of even the most upstanding arbitrator. Some large arbitration
firms do have a code of conduct, but less scrupulous firms are
not policed at all. Studiessuggest that repeat business is corre-
lated with outcomes that favour the employer.
The scales appear to be tilting even further towards bosses.
Mandatory-arbitration clausesare increasingly paired with
bans on class-action suits bygroups of employees. That raises
the bar for workers to pursue complaints, byensuring that
each must establish—and finance—his or her case separately; it
also lowers the risk that misconduct will damage an employ-
er’s finances or reputation. The Supreme Court is deliberating
whether that violates labour rights. If pastform is a guide, the
court will rule that it does not: judges have consistently treated
mandatory arbitration asjustanother contract.
How to increase the font size
Given that, and the failure of past attempts by Congress to im-
pose bans, mandatory arbitration seems likely to stay. And in-
deed, it does have a part to play. Employers should be broadly
free to contract privately with their workers. A default, low-
cost forum for resolving disputes is a good idea—as long as it is
designed to achieve fair outcomes. Fortunately, decent em-
ployers, ethical arbitrators and sensible regulation can deal
with many of the problems that bedevil arbitration.
For a start, firms should aim to set up a fair process, by seek-
ing informed consent, rather than smuggling arbitration
clauses into unrelated documentation. A narrower interpreta-
tion from the courts on what constitutes consent would help,
as would an opt-outperiod for employees. The clauses should
allow workers to join together and to act collectively.
Arbitrators should be required to disclose conflicts of inter-
est, including whether they have repeat work from the em-
ployer. Options to avoid implicit bias might include manda-
tory rotation of arbitration firms or a system of randomised
selection. A requirement for arbitrators to offer a written justi-
fication of their decision would encourage rigorous thinking.
If arbitrators get the law wrong, employees should be able to
seek judicial review.
Tougher disclosure requirements ought to apply to judg-
ments reached against the firm. Employers would be less toler-
ant of bad behaviour if they were required to disclose to inves-
tors how many settlements they reached and if they continued
to employ repeat offenders. Make such changes, and both em-
ployees and employers could benefit from arbitration without
anyone sacrificing their right to a fair hearing. 7
Mandatory arbitration in America
Shut out by the small print
Mandatory arbitration
United States, use in non-unionised
private-sector workplaces
1992
2017
2%
54%
Millions of American employees have no recourse to the courts
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