Column by Jim Davies.
Exclusive to STR
In a lively exchange in the Guardian comments section recently, a strong bias was revealed to the effect that government is needed to prevent corporations running wild and tyrannizing the world. That's one of the elderly fictions that is still thrust down the throats of trusting children in government schools, to assure them that government is not surplus. Typical was this from one writer, who intended it in context to be a highly scornful and sarcastic description of life in a zero government society:
“So there will be no private military contractors (mercenaries), militias, paramilitaries, private security agencies, monitoring, watching, controlling, arresting and killing on behalf of the corporations that'll be running everything and have lots of property to protect.
“There will be simply billions of free individuals peacefully trading with each other.”
Seems the writer hadn't come across Burton Folsom's Myth of the Robber Barons yet, nor the ten minutes Milton Friedman recorded with the same title, so I thought to suggest here some reasons why no such thing will happen: why corporations would not come to do in a free society what government does now.
First, there will be no free, zero-government society at all until a universal education program has been completed, in which everyone learns the nature of human beings as self-owners, and of government, and why the two are irreconcilable. Everyone will learn that to initiate force is the only moral wrong. Everyone will repudiate government in all forms. Those working for government will therefore quit, and until they do, government will continue. So the premise that government has vanished rests upon everyone having repudiated its method of working.
Second, should any aggression re-appear anyway, a free-market justice industry will pounce upon it far more efficiently than the present, constipated government justice system ever could. Trouble will be nipped in the bud.
Third, companies will compete without hindrance or help from government, there being none to provide either. It will be extremely difficult for any of them to grow to dominance in their market, for monopolies persist only with government favors. Their only path to prosperity will be to please customers better than their rivals do. Some will, but not for long, Nimble competitors will outperform them. Just read how, right now, three bright teenagers out West are challenging the might of Hertz and Avis. Consider that, even with today's massive government support, of the 30 firms dominant in 1963 (by being among the Dow 30), only 10 were still so listed in 2003, a mere 40 years later.
Fourth, any use of violence on competitors would devastate the thugs' market share. They will be selling to a market of people who have all renounced force and know how to boycott.
It's worth illustrating some of that by considering the case of the richest “robber baron” of them all: John D. Rockefeller. His appalling crime was to build a business empire that dominated the market in oil, by progressively reducing its price. He twisted nobody's arm to buy his products; if you preferred whale oil, you could still buy it--but you'd have to pay much more, and eventually face hostility from the save-the-whales movement. Now, there were certainly many such barons who did make fortunes by buying government favors – especially the builders of railroads. But John D. competed primarily by meticulous business management and excellence in performance. Government rewarded him by breaking up his company.
Fifth, no matter the government-school fables about long-dead barons, take a look at the top companies of today. Boeing makes fine aircraft, on which we can fly for fair fares. Caterpillar makes earth movers, to build highways on which we drive. Coca-Cola refreshes everyone. GMC makes the cars, in competition with many others among whom we can freely choose if we prefer. Hewlett Packard, Intel and IBM serve us with computers at ever-increasing performance per dollar. Microsoft makes them work efficiently, McDonald's feeds us in a hurry, Walmart works night and day to sell us quality goods at minimum price, and Walt Disney helps entertain us. I don't see any of those holding a gun to our heads. There are others, less wholesome perhaps; Exxon which joins with others in a cartel to keep fuel more expensive than it need be, Citigroup that is part of a banking cartel, and so on; these can twist our arms because government has helped them exclude competition from their rings. But as a group of 30, they do little or nothing over which we need to lose sleep.
Sixth, let's each reflect on our experience of dealing with corporations. We agree that the big ones are closely intertwined with government – that we're in a fascist situation. So firms have huge power to do harm if they so wish – their own financial resources, plus the armed and costumed thugs in government. How much harm have they actually done you?
I can call to mind a mixed experience. Of those with whom I most frequently trade--grocers--it's been very positive. The local stores are branches of large companies, but they compete in terms of quality and cost. They offer an enormous range of products and their prices are affordable. Their service is excellent; one (Hannaford's) has a policy that if you buy something that proves unsatisfactory, return it for a double refund! They give you twice your money back!
So my experience of retailers has been good. Now, that may be because they relate well to my good looks, natural wit and charm, to what you Colonials call my “English accent” (as if there could possibly be such a thing) and suave, mature je ne sais quoi – but I think it's much more likely plain old greed. They want me to buy something, so they are nice. It works.
Medical care, despite the heavy burden of overheads the government imposes on providers, has also been in my experience very good. The prices are far too high, but that results from half a century of government interference and insurance.
Car maintainers are rather pricey and not always truthful, but usually do a good job – except when they use government inspection laws to require work I would not choose to have done.
Utilities are overpriced and inflexible. I like paying bills in an unusual way, and one of them (Fairpoint) refused to let me. They have a government-mandated monopoly, so there is nothing I can do about that, and I hate it. My electric company was more accommodating.
Insurance is horribly expensive and hard to shop around, and twice over the years I've been rear-ended and had to claim on the other guy's policy. Both times, it was like pulling teeth.
Easily the worst class of trading partner is the banking industry. Banks are really loathsome institutions, in bed with government all the way – even to the extent of complying with the absurd Community Reinvestment Act, which required them to write mortgages for people clearly unable to repay them; so triggering the current Great Recession. Their service gets more hidebound every year, they routinely make use of our money without interest, and even fall over at the least push, should the IRS demand our account be frozen – long before any judicial finding has been made. I avoid them whenever possible, but it's not always possible.
Now, hasn't your experience been rather similar to mine? That the closer a firm is to government, the less pleasant it is to deal with? And vice versa?
From this pattern I see no indication at all that once government is removed, any company will be less obliging than those with the least political involvement today. When firms compete for business, they have to please the customer, or go under. That's the glory of capitalism. Expressed in Adam Smith's words, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
A final thought: after government has evaporated, corporations will not be quite the same as today. Existing ones may keep their names, but the way they are now chartered means that all of them are creatures of the state – in accord with the fascist Mussolini's dictum “All within the state, nothing outside the state, nothing against the state.” Corporations are created expressly by permission of government, so as to serve its interest—i.e., to be milked for revenue and controlled for the sordid pleasure of the controllers. But when there is no state, all those trappings will vanish. The “corporation”--if it chooses to retain that title--will be no more than a voluntary association of friends or business partners, each with a share in its success or failure. It will be capitalist, but in the pure sense, no longer “state capitalist.”
As such, its whole purpose and direction will revert to what it should always have been: a business enterprise with the purpose of making money for shareholders by providing goods and services to customers so well designed and priced as to attract them to buy. And you don't attract customers by shooting them, or even by shooting your rivals.