Schumpeterian Liberalism

Liberal bloggers Bradford Plumer and Ezra Klein recently challenged the totemistic status of small business, Mom-n-Pop, and Main Street. When small businesses can afford to pay decent wages and benefits, more power to them. But in general, small businesses “pay their workers less, offer fewer benefits, are much, much harder for unions to organize, and are often more dangerous places to work. They’re rarely more innovative, and they aren’t the really the ‘motor’ behind job growth…”

Eric Husman, of GrimReader blog, summarized their position this way: “It’s not that they are against Small Business, it’s just that they are in favor of those things that characterize Big Business. Returns to Scale? Check. Market power? Check. Bureaucratic and unionized? Check? Okay, you are an acceptable small business!”

I think the liberal attitude toward big business can be summed up as Schumpeterian. Schumpeter argued that it was only large managerialist corporations run by central planner types that could afford technological innovation, because they had the market power necessary to administer prices and sell above marginal cost, and thus recoup outlays for R&D. For liberals, likewise, it’s the large, bureaucratic businesses that are most likely to be able to afford to be “progressive” because of their market power.

A certain kind of liberal, as a result, tends to distrust any alternative to conventional managerial-professional ways of doing things.

That’s why you see people like Jaron Lanier and Chris Hedges who think it’s “progressive” to defend “intellectual property rights” against Internet culture, and people like Michael Moore who think it’s great for GM to own half the economy so long as its workers have lifetime job guarantees with union wages.

The same people instinctively react to garage factories as “sweatshops” and see any kind of decentralist alternative to the centralized corporate-state nexus as just another version of neoliberalism in sheep’s clothing (hence Tom Frank’s bristling at all criticisms of Taylorism and Weberian rationality by proponents of networked organization or Enterprise 2.0). They tend to favor a “regulated utility” model where a handful of giant organizations are guaranteed reasonable profits, and in return take good care of their serfs. That model applies whether it’s Michael Moore’s GM of ca. 1948, or the Big Three network gatekeepers regulated by the Fairness Doctrine.

A lot of this probably results from the origins of 20th century liberalism as an ideology. Liberalism, or “Progressivism” as it was known at the turn of the 20th century, was the ideology of the managerial-professional classes that arose to run the new large organizations that mushroomed into existence in the late 19th century. The first corporate managers were mostly from an industrial engineering background, and saw organizations as processes to be rationalized in the same way as the production process. From there it was only one more step to seeing society itself as a process to be rationalized by professional managers, and calling for politics to be replaced by administration. Hence the Progressive agenda. So it’s only natural that their ideological descendants today are more than a little suspici0us of any major undertaking that’s not supervised by “properly qualified authorities.”

One question worth bearing in mind is WHY the big guys can afford to be progressive, and whether the same market power might just be putting the little guy at a competitive disadvantage where he CAN’T afford to be progressive. Neo-Marxist James O’Connor’s thing about the competitive sector providing the tax base to subsidize monopoly capital is relevant here.

Another thing to bear in mind is what a faulty model the regulated monopoly is for controlling costs, when both regulators and regulated share the same unquestioned assumptions about the normal way of organizing an enterprise. Monopoly and restricted competition is a source of cost, not only because of the rate of profit, but because of managerialism and bureaucracy. And the government, in “regulating” the prices monopolies can charge, generally takes that form of Weberian/Taylorist bureaucracy (mission statements, bureaucratic work rules, job descriptions, stovepiping of functions) as the natural way of doing things.

I’m far less interested in the kind of “competition” between a larger number of conventional capitalist corporations that share the same organizational culture, than I am in opening up competition from the kinds of unconventional entities currently hampered by regulation: low-cost, cooperative, self-organized, small and agile bodies like Colin Ward describes in his history of the mutual welfare state.