Adam Smith saw it

INTRODUCTION AND BASIC THEORY

Starting off with the Adam Smith quote which concluded my prior post:

The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

I want to outline the reasons why the foremost threat to human liberty in our day comes not from the colossal aggregation of power in the hands of big government, but from the processes which are part of the dis-integration of state power and the consequent rise of non-state entities as powerful autonomous agents.

Primary among these non-state entities would be large corporations, which are are much less transparent, much more globalized, and much less democratized in their structure than the state agencies of Western governments which they are replacing as reservoirs of power. It is worth recalling here that the democratization of the state was a process which slowly evolved over many hundreds of years. The speed with which the modern corporation can move it’s primary resources (those being: capital, information and personnel) across national boundaries to avoid challenges to its power make it quite doubtful that sufficient regulatory limits can be brought to bear on corporate power structures without extraordinarily co-ordinated and sustained attacks on all sources of corporate power.

Those sources of power are ultimately markets, although they are far from free markets. Through a very long process of the bending of rules towards the favoring of large agglomerated and centralized structures, those markets have become very far from ideal or authentic market structures, and many distortions that exist create inefficiencies which themselves are used to create even further market distortions. The World is not flat, but severly tilted, tilted towards those institutions which centralize and consolidate power. As Adam Smith noted, one of the primary means which large financial entities (“dealers” as he called them, corporations as I would call them today) tilt the markets is through regulation. This process happens both in an additive as well as a subtractive process, so that regulations that mitigate against centralisation are removed, and those that assist the process of further centralization are erected. These effects are compounded by the media structures which have themselves become wholly-owned subsidiaries of the corporate power structures and are therefore unable to create substantive public debate about the corporate power structure itself. If authentic market structures were to be created and were sustained, they would be the greatest enemy of these power-concentrating forces:

The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens.

However, there are many forces which oppose these power-concentrating trends, and they are operating simultaneously in different spheres of human cultures. It is the task of those who oppose the further centralisation and consolidation of power to forge networks and interconnections of those devolutionary structures, and reinforce their cohesiveness through network effects. In that way a sustainable, dispersed, decentralized, and resilient financial/economic power structure can come into being. It will be authentically flat, and it’s flatness will be self reinforcing.

The two forces I see as being paramount in this dispersion of power are:

1. The set of ideas of the Enlightenment, which include fundamental rights of man and which are memorialized in documents such as the Bill of Rights and the Universal Declaration of Human Rights,

2. The networks arising out of the creation of the PC as an economic means of production, at once profoundly decentralized and connected as a node in a world-wide network, capable of creating, acting on and disseminating information with extreme rapidity across borders, and not subject to limits or censorship.

Those who would further the centralization and consolidation of power must act with extreme rapidity against both of these forces, to suppress and limit their actions on all fronts, as they clearly see the de-stabilizing influences that both have on their vision of power consolidation.

My next posts on this subject will explore:

1. Examples of this consolidated power in action, as a means on understanding its present mechanicisms, and

2. The key fronts in the conflict between devolutionary and concentrating forces.

Furthermore, in the background of this struggle, there exist two processes, War and the Sustainability Imperative, which, as they both expand, will define the territory on which these forces contend.

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Adam Smith saw it

2 thoughts on “Adam Smith saw it

  1. You recognize here a problem that John Robb does not seem to recognize: that concentrations of power in private hands are equivalent to concentrations pf power in government as far as effects on the individual and the authentic market are concerned. The withering away of the state in favor of a replacement by para-statal private sector entities in fact portends the rise of a new and insidious type of authoritarianism.

    For one thing, the obvious point that in corporate governance, the vote inheres in the share rather than in the individual person, thus allowing de-facto control to reside in the hands of a small number of large investors with interlocking social ties across corporate boundaries. This is a paradigm case of oligarchy.

    Second, securities law requires that corporate entities act to maximize shareholder return regardless of all other values. In this equation there are no “intrinsic” values such as liberty and justice, except at the will of enlightened managers, who have to compete against despotic managers who in turn may show better short-term results and gain at the expense of the longer term (energy policy is an obvious case here).

    Re. countervailing networks, I refer you to the Mondragon Cooperative Corporation, whose website can easily be found with a quick search. Basically what you have here is a Basque cooperative corporation with over 200 subsidiaries and over 20,000 employees, highly diversified and vertically integrated, and a world-leader in fields such as industrial automation, operating on the premise of one person one vote: the best of both worlds of democracy and free private enterprise. Attempts to “clone” the Mondragon example to other entities in outher countries have thus far failed for a number of reasons; however the rise of communications networks may resolve this issue since e.g. the internet enables transfer of detailed knowledge and expertise to a degree that was not possible before. Though, there remains the issue of how to accumulate financial and other productive capital in the present era.

    This posting barely scratches the surface of what is one of the most significant issues of our time. I’ll leave it on this note: The anticipated peak of world oil production is expected to bring about a transition to a slow-growth or no-growth economic condition at least until substitute sources of energy (e.g. wind, nuclear, solar) are able to replace petroleum products for most applications. Minus the factor of growth, global corporations are unable to function in their present form, as their very existence depends upon infinite growth regarldess of market maturity and despite being contained within a finite planet. Thus we have the opportunity to create new forms of business that grow only to a finite size and then are considered mature and stable. I could speculate at length about what these will look like, but am still thinking through these issues and will save the speculation for my own blog (pending) where I’ll be able to post at greater length.

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