Knowing the Real Enemy

In an article in Tikkun last year, Rabbi Michael Lerner argued that “[f]rom the standpoint of the large corporate interests, nothing could be better than to de-fund government or dramatically downsize it, because then it can’t constrain their economic power.” (“After the Health Care Legislation,” April 5, 2010).

And now Corey Robin, writing in The Nation, challenges the claim — which he dismissively calls a “right-wing idea” — that “the market equals freedom and government is the threat to freedom” (“Reclaiming the Politics of Freedom,” April 6). What’s more, he equates a belief in free markets to a prescription to “let the men of money decide.” In response, Robinson proposes a liberal counter-framing: “change the argument from the abstractions of the free market to the very real power of the businessman.” For example: “Without a strong government hand in the economy, men and women are at the mercy of their employer….”

These writers have things exactly backward. All power that is wielded by corporate interests and employers is exercised with the help of government.

Lerner and Robin take a decidedly naive liberal view of the historic role of government in the corporate economy. Their real enemy is not so much the Right as the genuine Left. Historically, Marx’s view of the state as “executive committee of the ruling class” is much closer to the truth than the liberal view of it as a “countervailing power.”

As New Left historian Gabriel Kolko argued in The Triumph of Conservatism, the main political force behind the Progressive Era regulatory agenda was big business. The corporate economy, even before Progressive regulatory legislation, was virtually a creature of the state. The economic model of large national manufacturers serving a continent-sized market was the direct result of land grants and other direct subsidies to the railroad system, that hammered the country together into a single national market. The pooling and exchange of patents — government-enforced monopolies — was a powerful tool for the leading firms in an industry to cartelize their market. And the industrial tariff was called — with good reason — “the Mother of Cartels.”

Even against this post-Civil War background, the big manufacturers were still unable to maintain stable oligopolies. Purely private attempts at creating trusts, at the turn of the century, were failures. Overleveraged and unstable, big trusts like the Standard Oil cartel immediately began losing market share to smaller, more efficient and less indebted companies. Hence, according to Kolko, big business turned to the state to create stable regulatory cartels. Although the Clayton Act is conventionally referred to as antitrust legislation, according to Kolko it was its unfair competition provisions — which outlawed destabilizing price wars — that first made possible stable oligopoly markets. FTC regulations that put it into execution, by prohibiting below-cost pricing as an unfair trade practice, acted as a structural support for administered pricing based on cost-plus markups.

FDR may have attacked an “economic aristocracy” in his political speeches, as Robin says. But when it came to concrete economic policy, economic barons like GE’s Gerard Swope and the Business Advisory Council were firmly in control. The National Industrial Recovery Act, far from being a left-wing social democratic constraint on corporate power, would have created a corporatist economy on the fascist model. The NIRA authorized boards controlled by the big players in each industry to restrict output and establish prices at whatever level was necessary to guarantee a “reasonable profit.” So the big industrial corporations would have operated with the cost-maximizing incentives of a public utility or Pentagon contractor, on the same cost-plus accounting model that gave us the infamous $600 toilet seat.

Today so-called “intellectual property” plays the same protectionist role for global corporations that the tariff did for the old national industrial giants. Like the tariff, IP is a restriction on who is allowed to sell some good in a market, which enables the “owner” to mark up prices to far above free market levels. The dominant corporate players in the global economy are in industries that rely heavily on IP monopolies for their business model: entertainment, software, biotech, pharma and electronics.

It’s big business interests, contrary to what Robin says, that see the market as a source of constraint. He’s entirely correct that “conservatives fear above all else… any challenge to that power, any inversion of the obligations of deference and command, any extension of freedom that would curtail their own.” But the market — the genuine, freed market, without subsidies, without anti-competitive protections, without rents on state-enforced artificial scarcities — is exactly the challenge to corporate power that big business interests fear.

As former ADM chief Dwayne Andreas put it: “The competitor is our friend. The customer is our enemy.” And as he also helpfully explained, “There isn’t a free market in anything, anywhere in the world.”

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