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Free Enterprise vs Corporatism
This
article began as a comment on Paul Craig Roberts' Jan.27 OpEd News article,
"How Ron Paul Could Win". Jeff
Rock replied that "Ron Paul's economic policies are draconian", as Mr. Paul
favors a libertarian laissez faire economic policy that, theoretically, allows
"the free market" to do its virtuous work. But Jeff, and I, observe that the conditions under which a
free market can function no longer exist in the real world, so laissez faire in
fact generates corporatism and plutocracy, not individual liberty. Market freedom may have motivated
primitive capitalism's struggles against landed aristocracy, but mature
capitalism is a privately governed oligarchic beast not much different from the
feudalism it overthrew.
Adam
Smith's idealized free market was made up of very large numbers of small
businesses, small tradespeople and craftsmen and merchants and farmers, cottage
industries, and a newly emerging class of small scale (by today's standards)
factories. Small scale is critical to the viability of "free"
markets. If one participant fails, he is too small to affect the industry
in which he produces. Other participants immediately replace his market
share. The economy keeps going, and the failed entrepreneur can try try again,
because his personal failure did not bring down the economy, and there is still
a fully functioning economy for him to go back to work in.
In
today's world we have transnational corporations that control more financial
and economic resources than all but the largest nations. We have private
megabankers issuing all the money as loans, with most of the people (and our
governments) in debt to the bankers. If one of these corporate giants fails,
the economy as a whole is wounded. These participants are WAY too big to
be "free market" players whose personal success or failure has no
noticeable effect on the markets in which they operate. Too big to fail is too big for a "free"
market.
"Corporates"
are "collectives" of large numbers of people who all cooperate towards a single
purpose. A "nation" is also a
corporate body, whose individual members accept "government", towards achieving
the corporate purposes of the whole nation. Adam Smith's free market was populated by individual human
beings who personally feel and are "disciplined by" the consequences of their
actions, not by enormous corporate collectives. Smith's "Wealth of Nations" was written explicitly AGAINST
the corporate-government collusion of his era called "mercantilism", which
Smith correctly saw as politically empowering some market participants at the
expense of the others, to the detriment of the nation as a whole.
In
a collective the rewards and costs are necessarily distributed by human political
decisions, because the governors of the collective are the people who directly allocate
the work and receive the revenues and distribute these costs and benefits to
the members. The political or
corporation governors might try to distribute the rewards and costs according
to somebody's idea of what the various members of the collective "deserve", but
this kind of highly corruptible human evaluation is supposed to be ELIMINATED
in a free market where "the invisible hand" makes all these allocations.
And
as everybody knows by now after seeing bankrupt Wall St bankers once again paying
themselves $megamillion "bonuses", political allocations are almost always
corrupted by self-serving interests.
The closer you are to the source of the money, the greater portion of it
you take for yourself. Bill Black
calls this a "criminogenic environment" that virtually guarantees there will be
accounting control fraud to disguise looting of the company by its managers and
other employees who are in on the fix.
In
a real free market the small businesses' customers directly pay the owners by
buying their wares. A customer
"allocates" his spending to whichever individual business he happens to
prefer. Hundreds, thousands,
millions of individual consumers, acting independently of each other,
effectively determine which businesses flourish and which flounder and
fail.
In
a free market it is consumers, not corporate managers or politicians, who
allocate resources and reward and punish business behavior. Failing business people are strongly
motivated by personal loss of income to adapt their behavior to the preferences
of the marketplace. Consumers
"discipline" businesses, and business people accept and respond positively to
the discipline or they suffer the consequences of business failure and personal
financial ruin.
People
succumb to temptation. Billions of
dollars of corporate revenues that make possible 10s of millions of dollars of employee
"bonuses' proves to be irresistible temptation. Human nature responds to circumstances and opportunity and
discipline. This is what drives
individuals to work and innovate and prosper in Adam Smith's free market. Small business owners personally
receive the business's sales revenues which, after paying workers and suppliers
and expenses and taxes, become the owner's personal income. There are no vast pools of other
people's money laying around to take as "bonuses".
Corporatism
concentrates access to and control over enormous amounts of money and power in the
hands of managers who are supposed to allocate according to the long term good
of the collective. But in the
first place, managed economies are notoriously prone to expensive error because
managers cannot predict the future, and big moves in the wrong direction are
far more costly for the economy than are a small business's small scale
personal follies.
And
in the second place human nature drives managers to take the money for
themselves, because it is right there, and they figure out ways to "justify'
their taking it. Any "market
theory" that fails to acknowledge these intellectual and moral failings of
human nature is fantasy if it is naive ignorance; or it is deception if it is
preached knowingly. We know very
well what behaviors and consequences will be generated by "deregulating"
corporatized markets, because we are currently looking at those criminogenic behaviors
and suffering those collapsing economy consequences.
Partisans
enjoy constitutional freedom to preach "free markets" when markets are
decidedly not free, but believing that these mega-companies are working in a
free market is a delusion no different than believing that a comparable size
nation like Venezuela is a free market participant. Everyone recognizes
that Venezuela is large enough and powerful enough to "legislate"
what it allows and doesn't allow within its borders.
This
is the opposite of Adam Smith's free market, where no player is big or powerful
enough to "dictate" what happens within its market. Each
individual enterprise is "subject to" market discipline. None of them is dominant enough to "administer"
discipline.
We
must recognize that gargantuan transnational banks and companies behave more
like independent sovereign nations like Venezuela, not like free market
businesses competing within an economic environment that is "free" of dominance and control
by any human being or legalized collective of human beings. Control by a group of human beings is
called "government", and behemoth corporations do indeed "govern" the
industries and economies and nations within which they operate.
Free
market participants, by contrast, govern only their own personal behavior, and
enjoy or suffer the personal consequences according to the un-coerced choices of
the market's myriad "governors', the consumers. A functioning free market, if such a system can actually
exist in the real human world of greed, ego and power, truly is a form of
economic self-government where individual choices are coordinated into a
functioning "economy" by the workings of the free market's "invisible hand".
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