Tim Lee is on the right track

Over at TLF, Tim Lee is raising all the right issues in his (incidental) discussion of the reasons why Libertarians have trusted big corporations more than big government. That’s something of an understatement–Libertarians have generally suspected big government of the worst possible things, while bending over backwards to make excuses for corporations when they do something that trespasses individual freedoms.

Amartya Sen in Development as Freedom noted that Libertarians have a habit of making certain informational exclusions, seeing the importance of procedural freedoms (freedom of the press, for example), and ignoring the lack of substantive freedoms (freedom from involuntary starvation, for example). I see the same pattern in Tim’s post–the issues he raises are right, but there’s information missing. My goal in this post is to supply the missing information, so you can judge for yourself whether corporations pose the risk I think they do. To be clear, I am no fan of big government, but am concerned right now with the freedoms that are being destroyed by corporations. Sometimes government and corporations are acting in concert, against individual freedoms, but it’s almost always clear who’s in the driver’s seat when that’s happening. So at a certain point, the choice of big government or big corporations is just a tactical decision of those who would oppress.

So, Tim says in his post:

During the 20th Century, policy debates often centered on power struggles between governments and corporations. The capital-intensive nature of a lot of industries meant that in many cases, policies that reduced government power often meant that corporations had a large influence over peoples’ lives. As libertarians, we pointed out the advantages of this arrangement: first and foremost, you have a choice about which businesses to patronize, but no choice about whether to deal with the government….. And of course, the government is a couple of orders of magnitude bigger than the largest corporations, so even if raw “bigness” is your only concern, concentrations of government power should concern you a lot more than concentrations of corporate power.

I think that accurately describes the Libertarian mindset of the 20th century. But is Tim really right about government being bigger than corporations? In the strictest sense, yes, in that no corporation comes close to the size of the American government, easily the world’s largest. But, in general, there are corporations whose gross income surpasses a great many countries, even very large countries:

Corporate Empires

“Of the 100 largest economies in the world, 51 are corporations; only 49 are countries. Wal-Mart–the number 12 corporation–is bigger than 161 countries, including Israel, Poland and Greece. Mitsubishi is larger than the fourth most populous nation on earth: Indonesia. General Motors is bigger than Denmark. Ford is bigger than South Africa. Toyota is bigger than Norway.”

So some corporations are bigger than governments, and it’s also fair to say that some corporations are bigger than most governments. Even more significant though, is that corporate power is increasing while national government power is on the wane. An excellent book that describes the process whereby economic regions are becoming more powerful as nations are becoming less so is Allen Scott’s Regions and the World Economy, (Oxford University Press, 1998). So as corporations are gaining power the national sovereign state is losing power, with power devolving to economic regions, which are even less able to counterbalance corporate power aggregations than national governments are.

Globalisation has given corporations a virtually unlimited domain of action; they can operate globally while governments are normally limited in their jurisdiction by national boundaries. If a corporation doesn’t like the environmental, or labor rules is country A they just pick up and go to Country B.

The line between large corporations and large governments is becoming increasingly blurry, with governments basically seeing their duty to align themselves as closely as possible with the goals of the corporations, against the interests of their own people. A prime example of this would be present day China, and therefore it is no surprise that the IP Central crowd fawn over China, and heap criticism on India. But our own country is becoming more and more like China every day: a state run for corporations, not for people. That’s also seen with the passage of freedom restricting laws like the DMCA, which was passed at the request of the RIAA and the MPAA, even though it was never popular.

Why are libertarians almost totally incapable of finding fault with the actions of any corporation, however bad or freedom depriving that action is? This is especially troubling because libertarians say they value individual freedom, yet much of what is done by large corporations destroys that individual and his freedom.

I had asked that question some time ago, and found a very convincing answer in the wonderful book Development as Freedom by Amartya Sen, in his description of the “informational exclusions” made by libertarians. Basically they want so very much to believe that the simple extension of procedural freedoms will solve all the big problems, that they are unable to process information which contradicts this. Such information does not exist, can not exist, and is of necessity excluded.

Tim Lee is on the right track

2 thoughts on “Tim Lee is on the right track

  1. There is a fundamental difference between big governments and big corporations.

    Big corporations get bigger by providing a something useful to individuals while governments get bigger by taxing them, at times providing what they think what’s best for you.

    The coercion comes (and often why the coprs. become big in the first place) is because they get in bed with government.

  2. Deane:

    You are right that the things that many corporations produce are important, and that corporations provide a livelihood for many, too.

    However, some corporations are in a position to exert control over markets, media and/or the government. They are usually able to do this because they’ve become extremely large, and cozy with those who should be regulating them. So, quite a few bad things happen that would never happen, if we really lived in an environment where market forces worked they way they should.

    As Adam Smith said:

    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. 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.

    Just a few examples:

    In alliance with the government regulators, through a process called regulatory capture, a corporation can act to do things that are very bad for many, while being protected by the government. Here’s an example of that:


    Or corporations can form an alliance (trade group) that prevents another corporation from bringing a healthier product to market. Here’s an example of that:


    However, when corporations get very big, they can do things that the ordinary corporation couldn’t dream of doing.

    For example, they can destroy the environment, and then create a web of lies that prevent ordinary market forces from being brought in to correct that behavior. Here’s a story about that:


    Or, a group of corporations can collude to influence lawmakers to make a very unpopular law a reality, and then start their own system of vigilante justice against those people:


    Or a group of corporations can collude to keep their special type of spying legal, when those pesky representives of the people start to get “uppity”:


    Or a monopoly corporation can censor speech it doesn’t like:


    So, 95% of corporations do great things, but the very large ones or the ones with special friends in government work very much against the public interest, just as Adam Smith observed long ago:


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