Corporatism and Power to the People

Connection to the State is what counts.


Much has been said about the Occupy Wall Street protests that began in New York and have spread to various places around the country.  It is easy to poke fun at the protesters, especially when they seem to be struggling for a coherent set of complaints and reforms, or when they live out every parody of radical democracy ever conceived without the self-awareness to recognize it.  What are they trying to say other than that they are unhappy with the status quo and think some sort of radical change is needed?

Underneath all the rhetoric I think there is at least one set of issues that seem to unite many at these protests, even as it too remains somewhat ill-defined.  Many are upset about what they see as the inappropriate power of corporations to control their lives and the direction of the U.S. economy.  This manifests itself as a more specific complaint about the bailouts of banks in the wake of the 2008 financial crisis.

What’s the Objection?

The question is just what is the nature of their objection to the role of corporations and the bailout culture.  To complain about bank bailouts while also arguing, as some have, for student-loan debt forgiveness would suggest the problem is not that government shouldn’t bail out failed investments, only that it shouldn’t bail out failed investments by corporations.  (It would be interesting to see if the Occupiers opposing bailouts also oppose agricultural subsidies and subsidies for alternative energy like wind and solar.)

This point gets to the larger issue at the core of the Occupiers’ criticisms of corporations: Is the problem corporations per se or is it that they align themselves with government?  One other tension we see in these protests is that even as they object to corporate power, they make use of technology and social media that are the products of the very corporate form they critique.  This is not necessarily hypocritical, no more than libertarians using various government-supplied goods that we think would be better supplied by the market.  However, it does suggest that the Occupiers should be asked why some corporate products are good and others not.

In other words, is there a difference between, on the one hand, Steve Jobs and the iPhone he created, which many protesters use, and on the other, Bank of America and the financial instruments it created that led to the bailouts the protesters object to?  I think there is, and it’s the difference between “corporations” and “corporatism” — a difference frequently elided by the Occupiers.

As I think the Occupiers would have to admit, some corporations really do provide goods and services that improve people’s lives.  If so, can they really begrudge the profits made by Apple, Motorola, or other companies that manufacture the products that which make their protests possible and which this generation relies on virtually every minute of the day?  So if the problem is not corporations per se, what is it?

Too Much Power

Perhaps the problem is best phrased as “corporatism.”  The core complaint seems to be that corporations have too much power over people’s lives.  This is a complaint that libertarians should not dismiss;  corporations do have too much power.  But as Sheldon Richman has noted, the only way they get that kind of power is be in cahoots with government.  Corporations, whether Apple or Bank of America, that are forced to compete in a genuinely freed market would have to work to please consumers and would have market power only to the extent that we grant it to them by purchasing their products.  Market power thus granted can also be taken away.  (Ask Borders).

When a bank, an agribusiness, or a even green-energy company like Solyndra gets in bed with the State, that’s when its market power is no long power granted by us, subject to our revocation, but is instead power over us.  This is the corporate-State partnership that the Occupiers, as well as libertarians, should oppose.

In other words, in freed markets the power would rest with the 99 percent of us who buy the products, not the 1 percent who sell them.  In freed markets the power really would be with the people — ours to grant or withdraw as we see fit.  It’s bailouts, subsidies, and monopolies that give the 1 percent power over the rest of us.  Asking for government to rectify this situation would be to give even more power to a smaller group, namely the 535 members of Congress.

If the goal of the Occupiers is to transfer power from the 1 percent to the 99 percent, they need to see that it’s the corporatism that concentrates power in corporate hands and the freed market that puts it back in the hands of the people.



Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

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December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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