Big Tech is Like a Danwei

George Pullman built Pullman, Illinois in the 1880s alongside his railroad car factory: a planned community where the company owned the workers’ housing, stores, church, library, and bank. Workers were paid partly in scrip redeemable only at company stores. When Pullman cut wages during the depression of 1893 while holding rents fixed, workers could not cushion the blow by cutting other expenses, because the company controlled those too. They had no recourse and nothing left to lose. The 1894 Pullman Strike paralyzed rail traffic across the country and required federal troops to suppress, which tells you something about what total control eventually produces.

A developer whose business depends entirely on the App Store, a seller whose inventory and customer relationships live on Amazon, or a creator whose audience exists only within a single platform is in an equivalent position: the terms can be changed at any time, the cost of departure is prohibitive, and the entity that provides the housing also adjudicates disputes about it.

What the company town reveals is something market economics tends to obscure: the difference between an employer and an infrastructure provider is a matter of degree, not kind. An employer controls your income; an infrastructure provider controls the conditions under which you can earn, spend, and participate in social life. Pullman did not merely employ his workers: he owned the physical environment in which they lived, which meant that the power relationship extended past the end of the workday into every dimension of daily existence.

Pullman justified all of this in the language of paternalistic improvement. The company town was presented as a planned community designed to give workers superior housing, sanitation, and amenities compared to what they could obtain elsewhere. This was partly true: Pullman, Illinois was better built than most industrial housing of the period. But the justification also framed the absence of collective bargaining as a feature rather than a constraint. Workers who were being improved did not need unions. They needed to trust the judgment of the person improving them. Conveniently, this gave the appearance of converting a power arrangement into a benevolent one.

The Pullman case was not unusual. Coal patches in Appalachia and the Canadian Maritimes operated on the same model: company-owned housing, company stores where scrip could be spent, company control of access roads and community infrastructure. In the post-Civil War South, plantation stores extended dependency relationships across the formal end of slavery, tying sharecroppers to specific land through debt that was nearly impossible to escape without leaving behind the credit, relationships, and community standing that they depended on. Mining camps across Latin America reproduced the same structure under different flags. The company town is a recurring organizational form because it solves a genuine problem for whoever controls it: it makes exit nearly impossible while appearing to be voluntary.

The distinction between short-term dependency and structural lock-in is what keeps workers and developers in arrangements that are getting worse. Short-term dependency is a rational calculation: you stay because the current terms are good enough and leaving has costs. Structural lock-in is different. The costs of leaving have been deliberately raised so that the calculation does not change even as the terms worsen. A platform can worsen its terms incrementally; each incremental worsening is individually insufficient to justify the exit cost, even if the cumulative total is large.

A more extreme form of this appears in the danwei, the work unit system through which Mao-era China organized urban life. The danwei was the unit through which citizens accessed employment, housing, healthcare, food rations, and education for their children. To be removed from a danwei was to lose access to all of these simultaneously. The contemporary parallel is super-apps like WeChat that integrate messaging, payments, healthcare bookings, government service access, merchant discovery, and social identity in a single system. A user whose account is suspended loses not just a communication tool but the infrastructure through which they conduct their civic and commercial life. The Pullman Company controlled the economic conditions of workers’ lives. The super-app, at its most developed, aims to be a danwei.

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Lindsey1942

Almont Lindsey: The Pullman Strike: The Story of a Unique Experiment and of a Great Labor Upheaval. University of Chicago Press, 1942.

Stoller2019

Matt Stoller: Goliath: The 100-Year War Between Monopoly Power and Democracy. Simon & Schuster, 2019, 978-1501183089.

Walder2017

Andrew G. Walder: China Under Mao A Revolution Derailed. Harvard University Press, 2017, 9780674975491.