Big Business: Good for America?

Writing at Fareed Zakaria’s GPS blog at CNN.com, the Peterson Institute’s Gary Hufbauer and Martin Vieiro undertake to defend big business as “good for America,” contending that the recent backlash against it is “based on three common misconceptions about major U.S. corporations.”

Hufbauer and Vieiro argue that Americans misunderstand the importance of big business in innovation, that Americans’ ideas about “small places with big ideas” are a bit too sentimental.

Their case, a fairly standard and oft-repeated one among apologists for neoliberalism (i.e., neocolonialism) and corporate globalization, maintains that innovation and technological advancement require huge amalgamations of capital and worldwide scale. As the story goes, big business — ostensibly “better placed to capture economies of scale and scope” — are more capable of efficiently integrating all of the moving parts necessary to compete in the global economy.

According to this account, “the Bigs” achieved their size and ascendency through the sacrosanct traditions of free enterprise, serving consumers in ways that the old mom-and-pop simply cannot. But as physicist Brian Greene recently remarked in a radio interview, “Our explanations have to meet our observations.” The narrative related by these champions of big business would be compelling enough but for a fact completely disregarded in their column — that the “competitiveness” they recount is nowhere to be found among big business.

Though you wouldn’t know it from reading Hufbauer and Vieiro’s ode to the giant multinational, big business benefits from myriad forms of anti-competitive, state-granted privileges that screen it from the “small places” the authors play down. From regulatory barriers to the “informal economy” of the home, to direct and indirect subsidies and suffocating intellectual property laws, big business doesn’t have to compete.

Partly to blame for the authors’ misconception, is historical accident; as various incarnations of state socialism and communism took root around the world in the 20th century, popular discourse took the form of a false dichotomy comprised of capitalism on the one hand and state socialism on the other, with all of those pesky nuances rendered inconvenient to the rhetoric divide.

The apostles of the former half of that dichotomy, capitalism, exalted “American free enterprise” as the apparent concretization of libertarian principles. The latter half, socialism, was reduced to describing complete management of economic affairs by the state, abandoning earlier and subtler notions of the idea that were quite consonant with free market ideas.

One such earlier conception, that of individualist anarchist Benjamin Tucker, saw socialism as emerging as a matter of course from “the principle laid down by Adam Smith … namely, that labor is the true measure of price.” Neither dictates nor regulations were necessary, Tucker argued, to secure for labor its due, provided, that is, that no dictates or regulations were erected to favor powerful business interests.

In the capitalism of his day, Tucker saw a political economy quite apart from the laissez faire we have been conditioned to attribute to his era. So too is the version of “global free enterprise” we’re looking at today very thoroughly suffused with the weighty intrusions of coercive authority, giving us the overgrown deformities that Hufbauer and Vieiro praise.

Corporations’ lionized “economies of scale” would be hard pressed to remain intact and viable without constant viands provided by the unwitting taxpayer. Instead of “smother[ing] [big business] with honey,” as Hufbauer and Vieiro recommend, we would do well to see what happens if all of that “honey” — special privileges shaped in Washington — were withdrawn and replaced with a real free market.