From: Lisa Dusseault (lisa@xythos.com)
Date: Mon Oct 23 2000 - 18:58:06 PDT
Good grief. This is one of the stupidest articles I've ever seen on
democracy and corporations and free trade.
> -----Original Message-----
> http://www.theatlantic.com/unbound/polipro/pp2000-06-15.htm
> WHO OWNS CAPITALISM?
> by Jack Beatty, June 15, 2000
>
> Humanity is becoming ever more profoundly dependent on the
> corporation, not
> only for the means of production (that has been true since the Industrial
> Revolution), but also for the technology of communication, the ganglia of
> social connection.
Why does the author think we are we more dependent on the corporation for
the technology of communication? And what does the author mean by "the
corporation", as if it was one indistinguishable mass? This kind of
rhetoric serves to turn "the corporation" into "the enemy" by turning a
population of different things into an indistinguishable mass, much as
labels like "the japs" did during WWII and "commies" did during the cold
war.
In fact, we are dependent on corporations for communication, but there are
so many options we're hardly dependent on any one. I can send a message via
fedex, email (possibly encrypted). I can pick up the phone and leave voice
mail. I can record my voice in a .wav file and send it (again possibly
encrypted). I can send something physical or virtual out of the country to
some foreign service that could ensure my anonymity before sending my
message back into the country. I can get in my car and deliver a message
personally. None of these options were as easy or inexpensive in the
past -- and some of these options didn't exist 30 years ago. We have
unprecedented liberty of communication, precisely because our messages
aren't limited to paper, and because we don't have to send physical messages
through a government-run service.
> A letter through the post connects one to government. A
> message conveyed by e-mail connects one to a corporation. The gain in
> convenience comes at a price in autonomy, perhaps not payable for decades
> and then only imperceptibly.
Bullshit. Since I can choose to encrypt email easily, since I can get an
email account from Hotmail or Yahoo or my employer or my ISP or run my own
mail server with strong security, email provides much, MUCH greater
autonomy. (Even assuming the author were correct about the "imperceptible"
and delayed price in autonomy -- who the fuck cares given the massive
convenience of near-instant email now?) Bzzt.
> In America's commercial civilization, Madison
> wrote in The Federalist Papers, the power of government might
> prove a lesser
> threat to liberty than the excesses of freedom.
I checked http://lcweb2.loc.gov/const/fed/fedpapers.html, and this cannot be
a very accurate restatement of anything written by Madison. Specifically,
Madison never refers to the "excess[es] of freedom" or "threat to liberty".
He does talk about freedom, but more in the way of maximizing it than
worrying about its excesses. I wish the author had been more specific about
what Madison meant, because the reference is so vague but so strongly
emotionally charged.
> The "cookies" planted by
> Internet companies to spy on our purchases as we click from site
> to site are
> just that kind of excess.
The cookies planted by internet companies are there for convenience. The
proof of this is how inconvenient it is to use any session-tracking site
with cookies turned off. Nevertheless, we have complete freedom to turn off
cookies in our browsers. (Unix-like systems are better than Windows-based
systems at this because you can save your cookies to a temporary location
that gets erased when you quit the browser). Moreover, a number of
corporations produce products allowing you to interoperate with cookie-based
sites while hiding your identity (Zero Knowledge, e.g., creates
pseudo-identities for you). So are these "Internet Companies" so evil if
they allow complete choice of either convenience or anonymity (and sometimes
both)?
> If this subversion of individual liberty by
> economic freedom tokens the future, then the American political
> imagination,
> so long fixated on government's threat to private life, must
> change with the
> times. Madison's system of checks and balances protects us from
> government,
> but in the "privatized" society of power without accountability
> toward which
> we seem to be heading, what will protect us from the corporation?
The choice not to use the product of a corporation protects us from it.
(Note that we do not have the same choice w.r.t. a government or the product
of a government agency, short of moving to another country.)
> Government intervention to restore a balance of power between the
> corporation and society is rarely the model for today, when nation-states
> whose authority stops at their borders have neither the power nor even the
> jurisdiction to check globalizing corporations.
a) This is wrong. There is still plenty of government intervention.
Anybody who fantasizes that government intervention is decreased (let alone
"rarely the model") has not tried to run a corporation. Globalizing
corporations are subject to more regulations, not less.
Globalization may even be leading to greater intervention. I'm pretty sure
the EU said they were going to stop the AOL merger with Time Warner. The
merger between Air Canada and Canadian Air was subject to NAFTA scrutiny.
For a rough long-term comparison, think what the Hudson's Bay Company or the
East India Company was able to do. With so little government intervention
that they could wage war against other peoples, with no minimum wage, with
in fact sovereignty over areas as large as the entire USA, with complete
control over all communications and settlements within those territories, I
think we can clearly say that no company has anywhere approaching that kind
of power today.
b) Even if this was right, the author does not prove that less government
intervention would be a bad thing.
> Moreover, should its journey
> from Rotarian lubricity to real-world trend continue unimpeded,
> "privatization" will weaken governments' hold on the levers of
> countervailing power within their borders and jurisdictions (a point well
> made by Benjamin Barber, a Rutgers political theorist, in an as yet
> unpublished paper). Will it take Henry Adams's nightmare -- some form of
> world government -- to create transnational countervailing power?
> History is a poor guide to the unprecedented.
Yes, continued privatization will weaken governments hold on the levers of
power. Given the nature of politicians, many people think that's a good
thing.
The author also does not consider any of the advantages of privatization
such as increased choice (freedom) and reduced price.
> The difficulty of establishing international standards for the corporation
> in the absence of international authority was the crux of the debate over
> granting normal trading status to China, recently concluded in
> the House and
> about to begin in the Senate. The debate has raised a fundamental
> question:
> Why, through the China deal and the WTO do we export only part of our
> economic system?
Well, it seems we have a choice: we can export only part of our economic
system, or none. Trading with China increases the prosperity of Americans
particularly by decreasing prices of goods we buy, and increases the
prosperity of Chinese mostly by increasing their wages and wage
opportunities. Again, that's the upside that the author has ignored.
Consider instead what the US has done with Cuba. Has that improved their
lot in life or that of Americans? Cutting off international trade only
makes everybody worse off, and hasn't seemed to improve the situation much.
Embargoes sometimes work, but open trading and improving lifestyles seems to
work more reliably.
Note that the WTO is working to establish international standards which did
not exist before. Again, I'll contrast this to the past: were there any
international standards regulating Standard Oil or the Hudson's Bay Company?
Did North American or Australian aboriginals benefit from any protections
from the rapacity of invading corporations or colonialization? If the
author wants more international standards, he should be happy about the WTO.
On the other hand, the author should consider carefully what he's asking
for. Above he asked if an international government would be required to
provide the kind of protection he seems to want against corporations. I
wonder if he would be happy to be given protection against corporations,
only to be subject to every whim of an all-controlling government. Those
governments which have most restricted corporations in the past, perhaps to
the point of banning capitalist activity, have been the most restricted,
unpleasant, even fatal countries to live in.
Those who want to force China or other countries to meet our standards
should ask themselves what gives them the right. Wouldn't China have just
as much right invading the US to bring us the benefits of central planning
and freedom from insidious corporate control?
> The right to collective bargaining is part of our system.
> Prohibitions on child and slave labor are part of our system.
> Regulations of
> the hours and conditions of work -- these are not exogenous filigree, but
> part of our system. American capitalism has evolved to include
> them. Yet we
> export the kind of "wild capitalism" we have not seen in this
> country for a
> hundred years, leaving CEOs free to project their laissez-faire fantasies
> onto the blank page of the global economy.
The USA does not, and cannot, export capitalism. Although it is true that
the USA promotes capitalism in foreign countries, it specifically puts
pressure on foreign countries to have the same kind of rights and
prohibitions that exist here. The USA does not encourage "wild capitalism".
Further, many global corporations are trying to encourage and help foreign
governments to have less "wildness". Believe me, companies trying to
extract resources in some parts of South America would love to see a little
greater rule of law and security there. Software companies are trying to
encourage countries over the world to have better intellectual property laws
and more effective tracking down of piracy. Shipping companies have long
combatted sea-based piracy in similar manner. Since it is to a global
company's advantage to have peace, security and affluent customers
worldwide, I cannot see who is exporting "wild capitalism".
The rights, prohibitions and regulations that the author values are luxuries
that we enjoy in this country. They are not luxuries that other countries
can always afford to grant or enforce. Although I hold in some esteem those
people and organizations that encourage greater personal freedoms and rights
in countries such as China, I'm glad we stop short of going in with guns to
enforce them. To turn the tables, the USA would hardly be happy if the EU
took strong action to force the US to abolish capital punishment, for
example.
> You're to blame for this. Your pension fund drives corporate behavior.
> Corporations seek to break the carapace of domestic regulation and so earn
> greater returns for you by opening plants in the union-free, low-wage,
> hard-governed developing world.
I'm to blame for this. My pension fund gives corporations money which they
can redistribute, in the form of wages and purchases of
land/services/resources, in the developing world. My consumption allows
goods to be manufactured in areas where before only subsistence farming was
available. My purchases fuel factories in locations where workers now have
an additional choice of employment opportunities, and yet are not forced to
take those opportunities if their previous lifestyle was preferred.
Not only that, but as their standard of life improves, they will likely then
choose to live under regulations which keep air clean, keep kids in school,
limit working hours, improve working conditions, and so on -- and they will
have the prosperity to be able to afford those choices. All because of my
pension fund.
I feel so awful :)
> The promise of the twenty-first century is to move from ownership
> -- already
> nearly 50 percent of us own stock -- to control. More and more
> the system is
> truly becoming "ours." The democratization of investment is fast
> bringing us
> to the point where we can begin to take responsibility for
> capitalism, which
> for the past two hundred years has been happening to humankind like fate.
> Countervailing power, that is to say, may arise not through political
> intervention from outside the economic system, as it did in the New Deal,
> for example, but from within the economic system itself, through the
> democratization of ownership.
Since corporations feel that their primary duty to shareholders is to
increase shareholder value, this is pretty well accurate. It may be that to
some shareholders, ethical corporate behaviour is of value, and they're
willing to sacrifice some economic gain to that end. Note that in many
cases the two values will coincide, but in some cases they do not.
> The managerial revolution of the mid twentieth century
> effectively separated
> ownership of the corporation from its control. But the hostile takeover
> movement of the 1980s, when the owners began to rise up against
> underperforming managers, signaled the end of that separation and the
> beginning of something new -- the replacement of managerial with
> pension-fund capitalism.
It's unclear what hostile takeovers has to do with the replacement of
managerial with pension-fund capitalism. The author implies that hostile
takeovers led to pension-fund capitalism, but does not actually state this,
let alone prove it.
In fact, hostile takeovers led to underperforming managers being replaced by
successful ones. Theoretically this should lead to better management, thus
better shareholder value. It has nothing to do directly with pension-fund
control.
> A contradiction haunts pension-fund
> capitalism: in
> its restless drive for higher returns it undermines the jobs of
> the men and
> women who hold the pensions. The twenty-first century will test
> whether that
> contradiction will stand.
Great, another undefended statement -- that pension-fund capitalism
undermines the jobs of men and women who hold pensions (although at least
this time the author acknowledges the upside, that the pension-holders are
getting higher returns).
The chain of reasoning, if I can reconstruct it, seems to be that:
1) Pension funds which own stock in a company pressure it to be profitable
2) Companies under pressure to be profitable seek to reduce costs,
3) Companies seeking to reduce costs sometimes seek locations with reduced
labour costs
4) Locations with reduced labour costs are frequently in other countries
besides the USA
5) The creation of jobs in these foreign countries takes away from jobs in
the USA.
Blaming pension funds is probably unnecessary since most companies seek to
be profitable anyway, but we'll let that stand.
The strongest critique I can think of for this chain of reasoning is that
job creation has increased in the USA as a result of NAFTA, GATT and other
free trade agreements. There is strong consensus among economists about
this point, and in fact proofs that free trade will only increase the
benefits of all states involved. So few Americans with pensions should be
worse off.
Americans with pensions are in fact better off: not only do their pension
funds produce higher returns giving them greater prosperity late in life,
they're probably benefitting already from the international trade that
exists. They pay less for clothing sewn in Pakistan than they would if
Americans had to be paid to do the job. That means greater purchasing power:
for the same salaries, Americans benefit from a higher standard of living.
Not only that, but they are likely to be making better wages creating
software which is sold worldwide, than they would making clothing. So their
salaries are likely to go up. This may mean some emotional discomfort, if a
job change is necessary, but overall life improves.
Finally, the author has now started to ignore those in foreign countries.
If jobs were indeed being taken away from rich Americans and given to poor
foreigners -- well, wouldn't that be nice for those poor foreigners? His
earlier concern for workers in foreign countries has now vanished.
> The end of the separation of ownership from control of the corporation has
> had a political echo. A President of the United States notorious
> for setting
> policy by the polls put forward a plan in his 1999 State of the Union
> Address that would have instantly made government the biggest single
> investor on Wall Street.
> Clinton suggested investing surplus
> money from the
> federal budget in the stock market, and using the proceeds to save Social
> Security. Conservatives attacked as Bolshevism the idea of using
> a fraction
> of Social Security money for public investment in the private sector, and
> the Clinton Administration has said little about it since. But the cat was
> out of the bag. Government investment, as conservatives rightly
> fear, would
> almost inevitably introduce government influence or -- why not
> admit it? --
> even government participation in control. Decisions fraught with public
> consequences about where to locate plants, about the effects of production
> on the environment, about wages, benefits, hours, health
> insurance, product
> quality and safety, pensions, and prices -- hitherto private
> decisions like
> these would now be made with public participation. Democracy would at last
> have caught up with capitalism.
Possibly an increase in government investment in private corporations would
have led to government control. However, if exercised, that control would
most likely cost big: decreased effectiveness, decreased profitability. The
government would be wiser to be a silent investor. Otherwise, pork-barrel
politics would surely be even stronger, causing poor decisions to be made
(about where to locate plants, about the effects on the environment) because
of interference from government.
> This was not utopianism. This was very nearly practical politics. Fearing
> Republican caricature -- "Imagine the folks who run the Post
> Office running
> Wall Street" -- the Gore campaign has said nothing about
> Clinton's plan. But
> the issue will come up again should the corporate grip on our
> investor-driven politics -- its results measured in jobs lost to
> free trade
> and downsizing, in health and pension benefits cut back, and in wages
> lagging increases in productivity -- grow intolerable. Pension funds,
> whether private or public, are a latent force for world-historic change.
"Corporate grip on investor-driven politics" is nearly meaningless. Who
drives politics, investors or corporations? Does the author imply that
corporations control investors? I've never seen that, no matter who the
investors are -- individual people, pension funds, mutual funds or
government. Does the author mean that investors drive politics? Well,
that's true, because investors are individual people, pension funds, mutual
funds and government -- each of these entities has some ability to affect
government through voting (individuals only), lobbying and
politically-related funding.
Next the author implies that the corporate control on politics has caused
jobs to be lost to free trade and downsizing, benefits cut back, and wages
lagging productivity. However:
- Jobs overall have not been lost to free trade and downsizing, they have
just been moved around. Overall, jobs have moved to areas with higer
salaries and benefits. Unemployment is ridiculously low.
- Benefits have not been cut back. In order to attract people in such a
tight job market, companies are offering good benefits. I was offered a job
at a company with a concierge!
- Although our measures of productivity are coarse and controversial, it's
quite possible that productivity is increasing faster than wages. That
would mean that the difference is going into the pockets of investors.
American investors, pension holders, etc. Right on.
Well, that's the article. Overall, the author used an immense quantity of
emotionally-loaded phrases in order to hide weak or completely broken links,
and at times complete leaps of logic. The author's ignorance of economics
is, although typical, unconscionable in a journalist who writes about
pension funds, world trade and politics. The public's ignorance of
economics only allows that kind of soap-box harangues to continue. Worst of
all, I deplore the false concern for citizens in foreign countries which
allows anti-free-traders to on the one hand condemn free trade on the false
basis that global corporations take advantage of those poor people, but on
the other hand completely ignore the benefits of additional job
opportunities and increased prosperity in those countries. That kind of
put-on-for-debating-only charity disgusts me.
Lisa
This archive was generated by hypermail 2b29 : Mon Oct 23 2000 - 19:01:23 PDT