Would we be better off without corporations? (edited)

by John Quiggin on July 5, 2022

Following up my initial response to Lane Kenworthy, I decided to approach the question from a different direction and ask “Would we be better off without corporations?”. That is, I’d like to consider a society in which all large enterprises were publicly owned. To be clear, I’m talking about corporations in the ordinary sense of the term, with large numbers of shareholders and employees, not about the (relatively recent) use of company structures to produce tax benefits and limited liability for small businesses. There would still be room for owner-operated private businesses, worker-controlled co-operatives, partnerships and perhaps some other forms of business I haven’t thought about.

I won’t get into disputes about whether this would constitute socialism, except to say that it would be radically different from any version of capitalism we’ve seen so far.I’m also going to reverse the burden of proof implicit in Kenworthy’s approach. I start from the assumption that the expansion of corporate power under the neoliberal (or market liberal) policy package of privatisation, financialisation and deunionisation that has prevailed since the 1970s has been bad for most of us.

Given that neoliberalism is a term that’s often used loosely, I’ll try to be more specific about the adverse effects that can be tied specifically to the resurgence of corporate power.

The most obvious is the growth in inequality that has coincided with the rise of neoliberalism and corporate power. Virtually every aspect of neoliberal policy reform from increasing capital mobility to union-busting to flattening of tax scales has contributed to increased inequality. Moreover, they all reinforce each other.
?So, if we can do without for-profit corporations without incurring significant economic costs, we should.

I started looking at this on a sector-by-sector basis but then realised I would need to write a whole book in reply. So, over the fold, some disorganized thoughts

First, the privatisation of public utilities that was a central feature of late C20 neoliberalism should be reversed. Public utilities delivered a wide range of services successfully, and, in most cases, with steady improvements in productivity over time

By contrast, despite some extravagant initial claims, the outcomes of privatisation have been, at best, ambiguous, and at worst disastrous. Massive fortunes have been made by individual kleptocrats and by financial corporations, but the existence of these fortunes makes the rest of society worse off not better. Ignoring these windfalls, there is no clear evidence of net social benefits from any large-scale utility privatisation program of which I am aware. Even in rare cases where public utilities may have been so badly run that privatisation represented an improvement, the correct response would have been to reform the business not to sell it.

The end of corporations would clearly eliminate most of the financial sector. But even if some private corporations were to be retained, the case for eliminating most of the financial sector, and nationalising much of the rest, is strong. Beyond the basic functions of taking deposits and making loans (which could be handled by co-operatives or publicly owned banks) there is no reason to suppose the activities of major financial institutions and markets is socially beneficial. Much of it relies either on tax fraud (politely called minimisation) or regulatory arbitrage (taking profitable risks and relying on regulators for rescue when things go wrong).

The same is true of private corporations in sectors like education and health, which typically involve a lot of public money. The clearest cases include for-profit universities in the US, which exist primarily to rip off public programs like Pell Grants, and for-profit prisons. Not every for-profit business in the human services sector has been as bad as the University of Phoenix and Serco. But I’m not aware of any successes so clear as to overcome a presumption in favour of direct public, or publicly-funded non-profit provision.

As far as energy is concerned, the malignant activities of companies like Exxon, long the main promoter of climate denial, provide a good argument for public ownership of energy resources as the default. The obvious model here is Norway’s Statoil (now Equinor), still majority publicly owned and highly successful.

Next manufacturing. Public enterprises have done a perfectly adequate job in large-scale manufacturing industries, such as steel and motor vehicles. Still, there would probably be room for some private firms.
?Retail, hospitality and similar industries are probably not suited for public ownership. But they can be provided perfectly well by small businesses.

The most complicated case is that of the information technology companies that now account for much of the value of corporate assets in the US (Apple, Microsoft, Google/Alphabet, Facebook/Meta and Amazon). Of these only Apple has any real claim to have produced anything truly innovative (even if some of it was first invented at Xerox/PARC). So, we are faced with the general problem of encouraging innovation to which I will return in later post.

The others were in the right place at the right time to capture network and scale economies. It’s clear they aren’t doing much to justify their profits. Microsoft in particular is just collecting rents on products developed decades ago by copying others. The search for advertising revenue leads both Facebook and Google to make their products much less useful than they should be. We could certainly do better, even if it’s hard to say precisely how.

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1

Lane Kenworthy 07.06.22 at 10:12 pm

Thanks for these thoughtful comments, John. Response coming soon.

2

J-D 07.06.22 at 11:46 pm

Cross-posting my comment from John Quiggin’s own blog:

If it’s true that the effects of the establishment of the corporate form were, on aggregate, negative, it would be interesting to know more about how, historically, it came to be established and to be spread. Come to that, even if it’s not true that the effects were negative, it would still be interesting to know more about the history.

3

Lane Kenworthy 07.07.22 at 3:49 am

Because I wanted to include some graphs, I’ve posted the response on my webpage: https://lanekenworthy.net/2022/07/06/would-public-ownership-be-better-response-to-john-quiggin.

4

TM 07.07.22 at 9:36 am

The Covid pandemic, the Ukraine war, and Climate Change have caused and are causing supply chain interruptions, energy and food supply interruptions, and have made the urgency of the renewable energy transition more widely understood than before (not that it shouldn’t have been obvious already…). I expect that states will adopt a far more interventionist approach to the economy. They will have little choice I think, although policymakers still appear naive and clueless and frankly may not be up to the task, which would really be too bad for our nice little civilization.

How the new economix regime will look is still very unclear. But Renationalisation is not off limits any more, although perhaps not in the way JQ would have hoped:
https://www.nytimes.com/2022/07/06/world/europe/france-edf-renationalization.html

5

Matt 07.07.22 at 9:57 am

This is a blog post, so it’s unreasonable to expect that much detail or care, but I feel like so much is mashed together here that it’s a lot less helpful than it should be. For one thing, the equation of “corporations” with “large enterprises” (and then contrasted with co-ops and partnerships) is strange. The large majority of corporations are small, closely-held firms. If your target is large firms, you should just say that. If your target is the corporate form, you should say that, and not equate it with “large enterprises.”

Next, of course, large corporations existed before modern “financialization”, and could conceivably exist after it. If the target is financeialization, that should be focused on, with “corporations” or even “large enterprises” being misleading, again. No doubt there is lots of ground for good reform here, but to equate attacking financialization or “neo-liberalism” with attacking “corporations” or with advocating public ownership is to skip a lot of steps, and is therefore probably question-begging.

Another bit where it seems like you’re helping yourself to too much is to move from “private corporation” in the education sector or health care to “for profit”. Those are not the same, of course. The system of Catholic hospitals (and others) in the US and other countries are private and typically organized as corporations, as are private universities in the US (and elsewhere), but they are not-for-profit. Perhaps you mean to exclude those, but they are absent from the above, and need to be considered if you’re going to get an accurate picture.

Finally, I think you’re being overly generous to most publicly run large enterprises, outside of so-called “natural monopolies”. Which state run automobile industries do you think have been especially successful or innovative? Are they parasitic on private industry? There are lots of very serious difficulties with publicly managed firms outside of fairly narrow areas (and in those too, but they seem easier to balance there.) Many of these are helpfully discussed by Joe Heath and Wayne Norman in their paper, “Stakeholder Theory, Corporate Governance, and Public Management”, reprinted in Heath’s book, Morality, Competition, and the Firm. I think these difficulties are worth taking much more seriously than seems suggested here, even given the blog post nature of the claim. Certainly, you can’t legitimately move from “the government/state does a better job of running utilities” to “the government/state will do a better job of running an airline”, let alone the whole automobile industry, or search engines, or mobile phones.

6

Matt 07.07.22 at 10:02 am

even if it’s not true that the effects were negative, it would still be interesting to know more about the history.

There’s a good – not great, but good, and also short and readable book – on this called The Company: A Short History of a Revolutionary Idea, by Micklethwait and Wooldridge that addresses this topic to a fairly good degree. Interestingly, it’s probably weakest in the period that John is most interested in, but in that it helps show that the history and purpose of corporations (somewhat oddly usually called “companies” in the book – a reason was given for this but I didn’t find it that plausible and don’t remember it now) is much broader than is suggested in the post. That seems pretty important to me, at least.

7

MisterMr 07.07.22 at 11:26 am

@Lane Kenworthy 3

From your blog:
“In the first period, we see the expected downward slope” [USA]
“In the second period we again see the predicted downward slope. ” [USA]
” As in the United States, we see a downward slope for the post-WW2 era” [Denmark]
“After 1980 the pattern runs in the wrong direction” [Denmark]

If one had to look at this data without any preconception, and considering also that the USA is way bigger than Denmark (so that Denmark’s data are more likely to reflect spurious dynamics than the whole USA), the natural deduction would be that there is in fact a strong relationship where when public employment falls inequality rises, but there are also other factors than influence inequality and apparently cause the only reverse relationship in Denmark post 1980.

8

Trader Joe 07.07.22 at 11:58 am

Your analysis seems to only consider the role of a corporation as an economic form or organization when its primary purpose initially was as a legal form to both assign and protect liability. To the extent that governments were responsible for operating all of the sectors you suggest – how would individuals (or groups of individuals) hope to seek redress for the multitude of commercial errors or wrongs that would inevitably still be committed.

It seems to me that government intervention against corporation is an important check and balance (even if it if doesn’t always operate as we’d choose) that would be neutralized absent the corporate form.

To take a recent relevant example, who orders the government run baby formula factory to shut down when its found to be producing toxic product? Some other branch of government? Who intervenes when they say nyet? Perhaps the Flint, Michigan water system is an example of how that works.

9

Jake Gibson 07.07.22 at 12:50 pm

Sadly, government monopolies are as bad if not worse, than any other monopoly.
Strong antitrust and taxation laws that discourage consolidation and excessive growth seem like a better solution.

10

Jake Gibson 07.07.22 at 12:56 pm

Sadly government monopolies are at least as bad as any other monopoly. Anti-trust and taxation laws that would strongly discourage consolidation and excessive growth seem to be a better option.

11

Aardvark Cheeselog 07.07.22 at 2:09 pm

The Five-Year Plans of the early Communists are synonymous with Government interference wrecking the performance of economies, at least in popular imagination. Without trying to argue that “Socialism didn’t fail in Russia, it was failed,” I think it’s obvious that the Soviet planners tried too hard. Every beer kiosk and bakery doesn’t need a Five-Year Plan but the Soviet bureaucrats forced them to go through the motions anyway, and then forced them to fake evidence that they were meeting targets.

If the first Five-Year Plan had focused just on large industries and excluded agriculture and services (hell, probably if the first 3 or 5 Five Year Plans had done that), possibly there could have been setting of achievable goals and even achievement of some of them, instead of a gigantic exercise in lying.

Galbraith pointed out 60 years ago that defense contractors are basically pure parasites organized for the looting of the public fisc. A corporation that has no customers except government ought to be a government agency, staffed with civil servants under political control. There are probably more sectors in the economy where that’s true now, after 30 years of “right-sizing government” by hiring out the work of civil servants to be done by private employees. I mean beyond the privatization of things like utilities and public transit. There are whole agencies of the Federal government in the US that are losing the expertise to fulfill their functions, because the civil-servant experts who know that stuff are not being replaced.

12

J, not that one 07.07.22 at 5:09 pm

I don’t think this is exactly off-topic: I was surprised to see the question of private ownership framed as “corporations.” This seems like an old-fashioned way of thinking. What about entrepreneurship, understood broadly as the creation (and persistence) of new firms outside the established “corporate establishment”? This can hardly be dismissed as a kind of pathology that should and can be marginalized and eventually recognized as illegitimate, but I’ve seen it discussed as such. Is it actually incorporated into the idea of “corporation,” or is “corporation” meant to refer to only some firms?

13

JimV 07.08.22 at 2:46 am

When I joined GE Large Steam Turbine, there were 1000 engineers working on design and design automation, and 1000 engineers working on research and development; and GE had a whole corporate department called Research and Development. There was a lot of emphasis on education and training, including Masters and Phd programs affiliated with local universities.

Welch took a wrecking ball to all of that in the 1980’s. Every office that had Research or Development (e.g., Materials Development) in its name had to go. (One last office was saved for a while by changing its name to Advanced Design.)

I think GE was a good, worthwhile corporation in the 1960’s and 1970’s (which is as far back as my direct knowledge goes). It employed some people who made famous contributions to design technology, such as Coffin (the Coffin-Manson Formula), Larson (the Larson-Miller Parameter), and Campbell (the Campbell Diagram). It started with people like Edison and later Steinmetz. The problem was that it had a hierarchical structure, in which sociopaths like Welch could rise to the top, and impose their own wills. I guess it is the problem of any dictatorship.

I agree that large corporations headed by people like Welch are bad for society, and I am past ready to try something else. It is not so much the size–a big organization can do a lot of good things, like employ Steinmetz to formulate mathematics of power generation and transmission, and get young engineers Masters degrees and Phd’s while they are working, and allow its engineers to work on and head ASME committees–as the way they are directed. One person, Welch, took an asset of our society and destroyed it.

14

Tzimiskes 07.08.22 at 12:51 pm

Back when I was getting my MBA and had academic library access I found this topic extremely interesting and did as much reading on it as I could. It was far enough removed from my coursework and I had no ambitions to go further in academia so I never did anything with all the reading I was doing, but I did do a lot of it.

My basic take on all of it is that you have to get a bit more granular than simply public ownership vs private. I think it pretty clearly is the case that big privately owned businesses are bad, but it’s also the case that having a lot of small start ups growing into medium sized businesses is good.

My ideal system would be one where key industries are nationalized, notably finance, but the rest of the business sector has formalized stakeholder capitalism institutionalized. Brief outline would be a system where finance could be obtained following clear rules from nationalized financial institutions, people could grow their businesses up to a certain small size more or less as we do now, but as the business grows stakeholders besides ownership gain increasing rights within the corporation. Basically formalized governance rules so that beyond a certain number of employees or income employees, government, or other stakeholders get an increasingly large share of voting rights. There would be some formalized rules to compensate investors and owners for their loss of rights within the corporation. When the company reaches a sufficient size shareholders would be bought out completely and the business transitioned to either employee or public ownership.

Basic thing here is that new start ups are often innovative, but in reality people are doing this to become millionaires, not billionaires. They’ll take the billions if the system allows but it isn’t necessary to the system functioning. Goal is to create a system where people who are good at it keep creating new businesses that create value, but they can’t just collect rents from one good idea forever because of network effects. If they really want to make big money they have to keep creating new businesses which then are transitioned to public or employee ownership with the employees or public rather than the investors benefiting from network and scale economies.

Lots more to create a fully functioning set of institutions. But I got away from the basic point I was trying to make to talk about my own obsessions. Where I was trying to go is that I don’t think a sector by sector approach really gets at the benefits and cost of each model. It’s definitely a bad thing that private individuals are capturing rents from network effects and economies of scale, but it is also the case that private enterprise is far better than the state at identifying new opportunities. The question is to take seriously the advantages and disadvantages of different institutional types and ask if it’s possible to build institutions that maximize the advantages while minimizing the downside. I don’t think you can get at this by lumping everything together, you need to identify which stage of a businesses development different sorts of institutions are beneficial, at what size the downsides begin to outweigh the upsides, and take a sector by sector approach to ask if this particular sector exerts power over other sectors in a way that warps the system as a whole (finance, fossil fuels, utilities, and social media jump out as sectors where large externalities impose costs on others and where rents from scale and network effects swamp any gains from the innovation of private individuals leading to an easy conclusion that these types of business should not be private).

15

Adam Hammond 07.08.22 at 2:37 pm

Breaking up AT&T turned out to be a huge public good, even though AT&T still exists as a (truly awful to interact with) corporation. I am willing to accept your assertion that corporations are detrimental to the public. I wonder how much of the detriment is from monopoly power. What other elements of large corporations are harmful? And do we believe that massive public enterprises are immune to caused by monopoly?

16

Seekonk 07.08.22 at 8:03 pm

I agree that we would be better off without corporations. (I’m surprised that our plucky risk-takers don’t consider it pusillanimous to hide behind the corporate veil.)
Can we also get rid of tax havens and bank secrecy?

17

Petter Sjölund 07.09.22 at 12:44 pm

Sadly government monopolies are at least as bad as any other monopoly.

This is an argument you hear a lot, but it seems to me to be contrary to all evidence. I grew up in a country where electricity, telecom, tv, radio, chemists, healthcare, public transport and mail were all government monopolies, and since they were privatised the main results are higher prices and reduced service, and these are not even monopolies now, but private companies competing in a market. I’m sure there are examples to the contrary, but as a general principle government monopolies surely seem to be a superior way to run basic services.

18

Fake Dave 07.09.22 at 1:18 pm

I’m all for socializing, nationalizing, or democratizing most major for-profit corporations. I especially think that any “global” business needs to be broken up into units small enough for local regulatory regimes to handle. Predatory megacorps are a major threat even to rich societies.

We don’t want to slay the beast only to become it like the Bolsheviks did, but protecting apnd feeding it the manner of Mussolini, Franco, or Putin is no better. The Chinese model in particular shows that it is possible for multinational capitalism to exist symbiotically with an imperious and unaccountable party-state bureaucracy. Much of the “free” world has moved in the same direction.

Corporate lobbying is the flip side of government regulation. Sometimes public sector agencies have a much stronger profit motive than we like to admit, so simply adding a veneer of state ownership might not actually fix the problem of anti-social corporate decision-making.

19

marcel proust 07.09.22 at 9:40 pm

Adam Hammond@15: Breaking up AT&T turned out to be a huge public good

Even after netting out the loss of Bell Labs?

Tzimiskes@14: Basically formalized governance rules so that beyond a certain number of employees or income employees, government, or other stakeholders get an increasingly large share of voting rights. There would be some formalized rules to compensate investors and owners for their loss of rights within the corporation. When the company reaches a sufficient size shareholders would be bought out completely and the business transitioned to either employee or public ownership.

I don’t know the details of the evolution of Herb Gintis’s opinions and only know at second hand what I am about to pass on, so a grain of salt. Through much of his career he was some sort of Marxist; my understanding is that he eventually moved away from this and later on, perhaps only since leaving UMass-Amherst and affiliating with the Santa Fe institute, he concluded that a serious problem with public or employee owned corporations is that most people are not entrepreneurial and, in particular, are overly risk averse (presumably for the economy to function well if they dominated ownership). I’ve never been sufficiently motivated to chase this down — it’s too far from my own interests — but it does seem relevant and might be worthwhile for someone more motivated to bother with his arguments for this position.

20

Chetan Murthy 07.09.22 at 10:49 pm

Seekonk: the corporate veil. Foo. If corporations are allowed to exist, then their aggregate harm from year N, needs to be charged to them (in the form of reparation-like taxes) in aggregate, in year N+1. And this should be on top of the normal taxation of all individuals (corporations are persons, riiiiiiight?) that we all pay to participate in society.

This madness of “privatize the gains, socialize the losses” is all well-and-good on a case-by-case basis, but in aggregate, they need to pay for the damage they do, and not “in the long run”: tomorrow.

21

Ivo 07.10.22 at 8:32 am

“Public utilities delivered a wide range of services successfully, and, in most cases, with steady improvements in productivity over time

By contrast, despite some extravagant initial claims, the outcomes of privatisation have been, at best, ambiguous, and at worst disastrous.”

What is the best available evidence for these claims? If challenged whether either of these is true, what do you refer someone to?

22

Hidari 07.10.22 at 8:48 am

@9

There’s a link somewhere (which I have now lost, but was reading it recently) to where the Chinese Govt. got their idea that small businesses consist of 7 people or less. And apparently, this comes from a tendentious reading of a letter by Engels, which could be interpreted that way.

You might think the ‘less than 7 is good, more than 7 is bad’ rule is simply Communist scholasticism. But clearly, you need some kind of division line, or else you end up arguing that someone running a one-person business (selling things on Ebay, say) is bad because they are essentially exploiting themselves (‘I am my own proletariat…and my own bourgeoisie!’). Which seems like a ridiculous position.

It’s noticeable that even in Communist Cuba they have recently re-legalised small businesses (restaurants etc.) with apparently good results.

And that captures a basic ‘folk’ belief. Most people generally speaking think that small businesses, and the ability to set up small businesses, is a good thing, at least in the abstract. And why not? As Weber argued many years ago, these small-scale examples of ‘capitalism’ if you want to call it that, are more or less ubiquitous in human history. The Roman Empire wasn’t capitalist, but Romans still had money. They still had shops. They still had banks.

So it’s big business, especially of course corporations which are the problem. When the Labour Party of 1945 got into power they promised to (and did) nationalise coal, steel, the motor industry, but no one (apart from loons like Hayek) thought this was going to end up with your local corner shop being run by the State.

Likewise the Labour Party, and indeed, all parties until the Thatcher counter-revolution, believed in industrial planning, for the good reason that this was a good idea, and not doing so is a terrible idea. There is a direct line between the Thatcherite coup d’etat, and the moral, political and financial wasteland that the ‘United’ Kingdom now finds itself in, which is why no one is going to do anything about it. To do anything about it would acknowledge that Thatcherism was a bad thing, and none of the intellectual or financial/corporate elite are prepared to do that. So the British crisis will continue (cf also the American crisis, personified by Trumpism).

So, yes, Five Year Plans are indeed a good thing, as long as they stick to their appropriate place: major industries, and the general position of the country, conceptualised as an agglomeration of businesses. Indeed, if the government is not prepared to do that, what’s the point of elections? You end up with what you now have in the US and the UK, with essentially the same domestic (and, therefore foreign) policies, which amount to ‘we give big business literally everything they ask for and then hope for the best’) and people’s intellectual energies are then taken up by vapid and pointless culture wars and identity politics.

But to change this would involve a huge counter-propaganda movement. Three generations now have been brought up to believe that ‘public is bad, private is good’, such that even terrifying totalitarian corporations like Amazon and Facebook are viewed with a certain affection by the public as opposed to the fear and loathing they should engender. Doubtless the collapse of capitalism caused by global warming and the oncoming eco-geddon will have to go much further before people are jolted out of this dangerous delusion.

23

reason 07.10.22 at 1:10 pm

OK – I have a somewhat nuanced view of this. I have worked in all of public businesses, national corporations and multi-national behemoths (which really this discussion doesn’t actually address). Like some others I tend to be suspicious of monopolies, not only from the point of view excessive profit, but also because of the danger of monopsony. But I really, really like the idea of public options – of businesses that are non-profit, no-frills and dedicated to providing a service to all of the public. Around these, I see no reason to stop their being innovative niche providers. If these were widespread I see a number of advantages.
1. Preventing excessive profiteering
2. Providing a supply of good, secure but not necessarily very well paid jobs that act as a sort of automatic stabilizer, also regionally.
3. Providing a training ground for skilled workers.
4. Helping to prevent wage erosion.
5. Reducing the fragility of essential service provision.

Note – none of these things will really be captured by the simple macro charts in Lane Kennworthy’s reply.

24

reason 07.10.22 at 1:33 pm

oops I made a small error that changes the meaning:
Around these, I see no reason to stop THERE being innovative niche providers.

25

John Quiggin 07.11.22 at 7:10 am

Matt @5.
1. I thought I was pretty clear that I was using “corporations” in the ordinary sense of the term, and not in that of company law, but I’ve spelt it out

  1. Important to note that I’m not claiming that the state will do better in particular industries, just that it will do well enough that we can do without big corporations if we choose. Renault and Qantas seem like pretty good examples for the cases of cars and airlines. Plenty of others.

Ivo @21 I’ve written a great deal about this, which you can find with your preferred search engine. My book Zombie Economics has a chapter with a lot of references

26

John Quiggin 07.11.22 at 7:12 am

As regards innovation, there are lots of possibilities. One is for the state to take over the role of venture capitalists, providing support to lots of startups and buying out the successes. There would be plenty of failures, but if you look at either the dotcom boom or the current flood of money into crypto and blockchain, the bar for improvement has not been set very high.

27

John Quiggin 07.11.22 at 9:19 am

I’m planning a more detailed rejoinder to Lane Kenworthy’s thoughtful response. But the core of our disagreement is simple. Lane writes “Here too social scientists tend to agree that other developments — globalization, technological change, a shift to “shareholder value” corporate governance, financialization, and union decline — were the key contributors to the rise in inequality.”

Whereas Lane presents these as a set of independent causes pushing in the same direction, I see all of these developments as part of the same neoliberal package, that can only be countered by a radical reduction in corporate power. Given that regulatory responses have failed, it’s time to think about attacking the problem at its source by getting rid of corporations.

28

Zamfir 07.11.22 at 10:11 am

JQ, the Renault example does raise a question: how would nationalization work?The Renault case can hardly be replicated on a broader scale…

This is not a small detail, I think. The government could take over large corporations at roughly commercial terms, like Mitterand did decades later. The effect of such a policy on inequality is far from certain. You don’t make rich owners less rich if you add another buyer for their stock.

If reduction of inequality is not the goal, then we are back to the standard arguments for public control. Those arguments clearly work for healthcare or education. Or utilities, or arguably airliners, but not particularly well for car manufacturers or a whole host of other businesses. For most stakeholders like customers, workers or suppliers, the state-owned Renault was just another company. Not much different from Peugeot or the later privatized Renault. Not good, not terrible (as they said about a famous state-owned utility :-) ) .

On the other hand, if the intention is to pay much less than commercial terms, then Renault is a misleading example. Its expropriation was not anticipated, and did not create a strong precedent for the future.

29

nastywoman 07.11.22 at 10:36 am

@Given that regulatory responses have failed, it’s time to think about attacking the problem at its source – by getting rid of corporations.

but getting rid of corporations will not attack the problem of inequality at ‘it’s source’
(GREED) – as it doesn’t matter much if a ‘corporation’ or just millions of individual greedy speculators push inequality up to high heaven (hell) – as right
NOW! –
at this moment –
‘the Bubble of Everything’ is bursting –
(with the Housing Bubble in Australia)
and nobody knows if it will be as devastating as in 2008?
BUT one thing is for sure – that everybody who does NOT have to liquidate in this (Deja- Vue-Bust) will come out even unequally RICHER – being a corporation or just some very… may I say ‘clever’ individuals’ – who play the (unregulated) game far better than even a lot of ‘corporation’.

Or in other words if we could get rid of the utmost simple:
‘Buy Low – Sell High’ – we could get rid of Inequality –

Right?

30

Matt 07.11.22 at 11:40 am

Thanks, John. I guess I think “corporation in the ‘ordinary sense'” is more or less hopelessly confused and not very useful as an analytic category. If something is going to improve public understanding it needs to be clear, but the “ordinary sense” here is anything but that. That actually seems to me to come out in the post at several points, not least in the contrast you yourself make with “partnerships and co-ops”. Those are mostly fairly small. (Of course, there are a handful of large co-ops, but most are not.) So, if you say that we should get rid of corporations, but allow co-ops and partnerships, that certainly sounds like you’d prevent the person who wants to, say, set up a coffee shop in a neighborhood, organizing it as a corporation (as any reasonable person would) and hiring a few employees to work for her, from doing so, requiring instead that she set it up as a partnership or a co-op, even though that would likely be much less desirable to the proprietor and the people who would work there. As it is, it’s confusing. There are lots of other examples, too. It will help a lot to be careful and clear here.

I’m not quite sure I understand the example of Renault. Right now, the French government has less than a 20% stake. The cars seem okay, but better respected now than in the past (when, I think, the government had a higher stake.) But there have been a number of scandals, too. I don’t think it’s obvious – I think the opposite is probably true – that Renault was better when there was more state control. That seems likely to be so for Qantas, too. It’s pretty hard to compare airlines over large amounts of time, given highly different regulatory structures, but are you very sure that it did a better job for most people before it was privatized? (Most views about the quality of airlines in the past are based on fantasy, but I can’t say anything about pre-privatization Qantas first-hand.)

31

reason 07.11.22 at 3:22 pm

One simple rule that I like to combat financialisation is – Limited Liability means Limited Leverage. I think if shareholders are protected from liability, they should at least be forced to risk largely their own money.

32

steven t johnson 07.11.22 at 4:43 pm

Random provocations?

The idea that breaking up AT&T was a good thing assumes that today’s telecommunications landscape is perfect and delivers great value for low cost. And that the inordinate costs paid by consumers are the only possible way this perfect system could have been built. And that the laws on telecommunications do not in any way grant privileges. None of this is convincing. But then I don’t think deregulating airlines was terribly successful. And not regulating passenger travel on trains and buses has fared even worse.

Public is always worse than private? Don’t think this is true, but this is a very common excuse completely impervious to mere facts. Government is your enemy is not a conclusion but an imposition, in my view.

Friedrich von Hayek is a Serious Person in the view of all right-minded people trained in the Final Science of Economics. (See passim Jason Brennan…yes, that’s a joke!) People who are genuinely people rather than cranks may tentatively concede von Hayek was just possibly wrong but the idea that history has refuted The Road to Serfdom in a definitive way, unlike the supposed refutations of Karl Marx, is simply unthinkable by normal minds.

Sorry, but Lane Kenworthy’s attempt to find the Golden Age in some other countries’ past forgets that without explaining why the Golden Age went away is a useless project. My best information is that the Nordic countries’ owners are just as tired of democracy/social democracy as this country’s owners are. The graph showing how Denmark’s inequality is increasing I suspect reflects that.

Thank God that lies and phony statistics could power an industrial war against Nazi Germany. If it weren’t for that, the Five Year Plans would have been a total catastrophe. (Trotsky may have been right that he could have done it better but that’s not a blanket dismissal of Soviet industrialization as mere fraud.)

I did not know that multiyear business plans were nonsense dreamed up for movies about entrepreneurs. I thought even smaller businesses had projections for all sorts of things. But then I tend to think entrepreneurial vigor is quite common, so common as to be in no sense whatsoever a limiting resource. (Herb Gintis sounds like another example of the sad rule that most people who want to replace Marx with their work, don’t.)

33

John Quiggin 07.12.22 at 6:40 am

Matt @30 You seem to be the only person having difficulty with the term “corporation”. Can I suggest that you translate it to “large corporation, excluding close corporations, non-profits organized as corporations etc”.

On Renault and Qantas, reread my comment. I’m putting the burden of proof on those who might want to argue that we need for-profit corporations if we are to have cars and airline services at reasonable cost. I’m not claiming that public enterprises are better, just that they have been good enough – Qantas certainly was, IMO. If you have evidence to the contrary, point to it. If you don’t like my burden of proof, don’t engage.

34

John Quiggin 07.12.22 at 7:08 am

Zamfir @28 The underlying idea (not novel, of course!) is that corporations in general, and the financial sector in particular, form a powerful force promoting inequality in all dimensions. If they are essential to the operation of a modern economy, then egalitarians are stuck with that fact and have to fight on unfavorable terrain. But, if we can do without them, then we can nationalize them, and tax away the excess wealth and income of the former owners. So, the point of the post is to ask whether we can in fact do without them.

Getting from the conclusion that corporations are dispensable to the outcome of actually dispensing with them is another matter, of course. But the possibility of radical change, for better or worse, is much more open now than at any time in the past 40 years or so.

35

nastywoman 07.12.22 at 8:35 am

@’But the possibility of radical change, for better or worse, is much more open now than at any time in the past 40 years or so’.

if it’s for ‘worse’ -(or should we call it ‘trump’ as a synonym for everything stupid greedy) it will NOT be worth it.
And that’s what I’m mainly afraid of . as I always thought that ‘the people’ sooner or later would learn from their mistake of adopting ‘Right-Wing Racist Science Denying Warmongering World Views’ –
but NOW –
as their (Economical) World is collapsing
again –
they
again blaming anybody else
than themselves –
AS it is a lot easier to just blame ‘Right-Wing Racist Science Denying Warmongering Idiots
or
Biden
or
Corporations
or
THE FED –
than y’alls desire to join any getting rich (fast) scheme – as y’all just can’t bale THE FED
or Biden and not even ‘Right-Wing Racist Science Denying Warmongering Idiots
if you go for: I will take the easy money – together with ALL the other gamblers of the world in order to FIRST BOOM and then BUST – the worlds economy.
AS after every Bust there is just the next Boom again – and so it’s ALL about who has to liquidate FIRST.

36

nastywoman 07.12.22 at 10:29 am

and about @32
‘My best information is that the Nordic countries’ owners are just as tired of democracy/social democracy as this country’s owners are’.

that’s ‘…awkward misinformation’ – as who are ‘the owners’ of ‘Nordic countries’?!
And please don’t tell me it’s just: ‘The Dudes who have the most Dough’ or
‘The Dudes who have the utmost Political Power’ – such believe is just the silly believe of silly Anglo-Americanos who believe that
‘money –
or
political power’
is
‘everything’ –
while in reality Charli D’Amelio owns the world.
https://youtu.be/5OYFwMNgvzc

as such

37

nastywoman 07.12.22 at 10:44 am

‘while in reality Charli D’Amelio owns the world.
https://youtu.be/5OYFwMNgvzc

WAIT!
That was just a silly effort to compare the few followers of the dudes who still believe that the few dudes who still believe in the complete rule of money and power – rule the world to the BILLIONS of followers who just follow the rule of Charli while actually TOTAL and ABSOLUTE STUPID CHAOS rules -(and NOT only in Trumpland) as I just had a telephone conversation with the ‘Deutsche Post’ -(which once was a pretty organised and well structured governmental corporation) BUT since it became a ‘private’ corporation has become such a deserter that they even can’t find the letter anymore a friend in the homeland send to me THREE F… WEEKS ago.
(AND the same goes for the (privatised) DEUTSCHE BUNDESBAHN which once worked too!)

38

Zamfir 07.12.22 at 11:36 am

@JQ, the tax seems to do the heavy lifting in that proposal. Is the nationalization really adding something to that?

As a thought experiment: suppose we had the political support for a 5% or 10% wealth tax, and the means to prevent evasion. Large shareholders might have to liquidate some of their shares every year to pay the tax.

What should the government do with the proceeds of that tax? They could invest some or all of it in the stock market, that would be your proposal just with reversed order. It could end up something like Temasek in Singapore, the world’s most socialist place where the state owns most of the means of production. That seems to work, but it’s not an obvious win for equality either

39

Rapier 07.12.22 at 6:34 pm

The modern business corporation is the leading organizational model of the entire world. No corporations, no modern world. No modern world, and probably 7 billion less people so I’d say “better off” would be a pretty hard case to make.

40

John Quiggin 07.13.22 at 1:26 am

Rapier @39 “No corporations, no modern world.” That is, indeed, the proposition we are discussing. But you are supposed to defend it, not merely assert it.

Zamfir @38 “suppose we had the political support for a 5% or 10% wealth tax, and the means to prevent evasion. ” But the first assumption implies that we have already rendered the corporate sector politically powerless and the second that we have shut down most of the financial sector.
The idea that we can leave capitalism running as is, and rely on the tax-transfer system to deliver socialist objective was central to the policy debates of the mid-2oth century, for example in Crosland’s Future of Socialism, and it is pretty much what Lane Kenworthy is arguing in his critique. The experience of the last 50 years runs against this idea, in my view

41

Zamfir 07.13.22 at 12:01 pm

China is the relevant example there, I guess? Their introduction of private enterprise was gradual and deliberate. It tried very hard to limit the accrual of political power to the new rich people. And the CCP has some means to resist alternative political power that I really don’t wish to see in my country.

Even so, the political pull of rich people in China is massive nowadays. Perhaps less than in western traditionally-capitalist countries, but not by orders of magnitude, and it might actually be worse. In addition, it’s state-owned companies exert their own corporate power (as does Statoil/Equinor, etc). Not so obviously different from the malign influence of Exxon.

From that Chinese example, and , it seems to me that it is very, very difficult to render the corporate sector politically powerless, or the private corporate sector, or private rich individuals. Full 20th century communism achieves that, but that is not in the same ballpark as the government owning Qantas and Renault. Its track record is not good.

Once you leave some spaces for private enterprise, then those spaces will create concentrated private wealth, and that wealth can marshall ambitious people to work for it. The Mars family is richer than god and a source of political evil, from making candy bars of all things. Renaissance Technologies, another notorious source of political evil, employs just a handful of people, it’s hardly a “corporation” in the colloquial sense of the OP.

42

nastywoman 07.14.22 at 4:49 am

‘Once you leave some spaces for private enterprise, then those spaces will create concentrated private wealth, and that wealth can marshall ambitious people to work for it’.
– and as America just doesn’t like to sacrifices the individual for the common good
it is some really unpleasant Individuals who are beating every corporation in being –
major
EVIL.

43

nastywoman 07.14.22 at 5:07 am

and in conclusion – we would be much better off with Charli’s corporation than Tucker GreenwaldTrumpCorp.

44

nastywoman 07.14.22 at 5:09 am

AND isn’t my homeland the only country on earth where ‘citizen united corps’ are –
‘people’?

45

anon 07.14.22 at 5:39 pm

Eventually getting rid of huge monopolistic/oligarch corporations is a worthy long-range goal. Until then we try to take measures that, we hope, help small producers fighting the big guys.

During the summer we buy as much of our produce at local farmers markets. Where we alive there is usually one close by almost every day. We support local small businesses like coffee shops and restaurants instead of the big chains. We only buy fair-trade products like coffee and chocolates. We donate to local homeless shelters and food pantries.

Those things may cost us more but as empty nesters living in a small home with no mortgage we feel it’s worth it.

46

John Quiggin 07.15.22 at 2:38 am

Zamfir: the problem is difficult, but not impossible, as the Great Compression in mid-C20 showed. Restricting the financial sector to the basic business of narrow banking (taking deposits and lending them out) is central. But as long as there are big corporations, a substantial financial sector will be needed, and will always seek to break down social control, as happened over the course of 1960s and 1970s

47

Peter T 07.15.22 at 12:06 pm

Thinking historically, all complex societies drift towards oligarchy, as command over whatever passes for wealth has a positive feedback. The countervailing force is competition from other societies, with a concomitant need for popular support. The apogee of this was the post-war period, with mass armies supported by industrial mobilisation against perceived existential threats. Those were the underpinnings of the Great Compression. The threat is now less and the technology has moved on. The trick is to find some lever other than ‘share the wealth or we let those other people kill you’. I don’t myself have an answer.

48

steven t johnson 07.15.22 at 2:28 pm

The Great Compression required the Great Depression and WWII and the existence of the USSR to impel it. Thus it does not appear to me to serve in any way as a model. There have been previous examples of extensive public ownership of large enterprises (especially in infrastructure.) But almost all of them kept a capital market. Even more significantly I think, land was not nationalized. (Even China’s reprivatization of land after Deng meant that land was rationalized in a way private land ownership never would have allowed…plus even that is more limited than market enthusiasts really like.)

49

nastywoman 07.16.22 at 10:47 am

OR –
in other words:
https://youtu.be/4jIQ2GbRegk

50

engels 07.16.22 at 11:15 am

The trick is to find some lever other than ‘share the wealth or we let those other people kill you’.

A more direct one springs to mind.

51

steven t johnson 07.16.22 at 1:41 pm

Walter Scheidel’s The Great Leveler is relevant and instructive I think.

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