When Adam Smith wrote The Wealth of Nations, the world was a very different place than it is now. Yes, people pursued their own interests then, just as now; that was actually one of Smith's major premises.
In Smith's world, an individual best practices self-interest by providing value to others, so others will provide what s/he seeks. An entrepreneur succeeds by offering the best product at the best price. An employee succeeds by working productively and intelligently. An employer succeeds (attracts good employees) by treating them with dignity, paying well, and supporting their professional growth.
But our world has become horribly deformed -- a funhouse mirror image of the world experienced and described by Smith. Numerous forces have raised barriers to market entry, paralyzed the invisible hand, created concentrations of power worse than Smith's worst nightmares. Thus, capitalism as practiced today bears almost no resemblance to Adam Smith's capitalism.
By instituting a few well-chosen policy intitiatives, our new President -- he of the Magic Populist Bully Pulpit -- can reverse much of this structural damage.
As a former lawyer, I think in legal categories: Antitrust, Corporations, and First Amendment. Details below.
I'm getting tired of arguing about the bailouts and recovery plans. And the more long-term progressive policies that everyone is hoping Obama will turn his attention and talents to once he gets the fires put out.
Yeah, I know they're important. And yeah, I understand the fierce urgency of now. I'm just tired of talking about them.
So I decided to go a little further below the surface for this diary. I've always had a tendency toward radicalism, not in the sense of being particularly far left on the political spectrum, but rather in the sense of seeking the root causes of things. And it seems to me that a lot of the economic and societal ills we're trying to treat could instead be cured if we rebuild the system so that it can work better on its own, without our having to constantly be bringing in everything from band-aids to major surgery 24/7/365. A wellness approach, so to speak.
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If you've ever read Adam Smith, his ideas make sense, in a theoretical sort of way. At its heart, his message is a populist one. It says that anyone who doesn't like the goods that are available, or doesn't want to work for any of the available employers, can start their own business instead. And if they can do it smarter or faster or more imaginatively, then they'll triumph over the others.
Power to the people.
Much of the Republicans' success in the Message Wars stems from the fact that they still act as if the capitalism Smith described is the capitalism we have today. Many free-market proponents actually believe this. And many prominent Rethuglicans still romanticize capitalism as though they believed it, even though they know their lyrical paeans are a load of crap.
But our capitalism is NOT Smith's capitalism.
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CORPORATE PERSONHOOD
Smith's advocacy of a free market presupposed that each indivdiual was merely one drop in a sea of individuals, and that any person's actions within the marketplace would carry as much power as any other. He was fundamentally opposed to concentrations of power, whether in private or governmental hands.
It is true that at that time, joint stock companies existed (such as the Dutch East India Company), the predecessors of our modern corporations. Smith "grudgingly admitted" that for large endeavors such as banking and transportation (car manufacturing?), such concentrations of capital might be necessary. (Smilarly, in today's global market, there are industries in which large corporations may be necessary to survive the battle with competitors in other countries.)
But as a general principle, he objected to the joint stock companies because they were "unlimited" in four important respects: lifespan, size, power, and [lack of] accountability (due to the bifurcation of ownership and management). Their potentially perpetual existence led to continuing growth and accumulation of capital and profits, which could too easily be mismanaged or used to bad purposes, and the limited liability of absentee, non-participating owners prevented the invisible hand from exercising the powerful influence that it exercised over small farmers, artisans and shopkeepers who ran their own businesses and were accountable to their community (which was also their customers).
The only differences between 21st-century mega-corporations and 18th-century joint stock companies are: (1) the mega-corporations are much more numerous and prominent players in the nation's economic life than were the joint stock companies, and (2) all of the things Smith hated and feared about them have increased by orders of magnitude.
Prescription #1: Restrict the concept of personhood as applied to large corporations. I know some here believe the concept should be eliminated altogether, but I'm (reluctantly) with Adam Smith in believing that in some circumstances they are necessary evils. But that doesn't mean we can't tighten the definition of personhood as applied to these decidedly non-human entities, or attach some accountabilty requirements to an organization's choice to take on that form.
Creative incentivization is the key. Obama the Candidate talked about giving tax breaks to companies that create jobs here rather than those who ship jobs overseas. The same philosphy could be applied to companies that seek to operate in multiple states rather than remaining homegrown, or those in which the person who runs the company is not the majority stockholder -- or maybe reward companies in which the majority of the voting stock is held by employees. I don't know. I'm not a corporate financing expert. But there are configurations out there that would serve this purpose.
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ANTITRUST LAW
Am I the only person who is terrified at the idea of Microsoft buying Google?
Back when I was in law school, I took several antitrust courses. It was the most fascinating area of the law for me. Sadly, I had the great misfortune to graduate from law school in 1982. You know, Reagan? In those days, antitrust lawyers were being laid off, not hired. Antitrust law was obviously dead.
Or so we thought at the time. That was before (after a brief resurrection under Clinton) we saw what antitrust law looks like when it is REALLY dead, as it was for the past eight years. Dead and shipped off to an undisclosed secure location in some obscure corner of hell.
Honest to God, there have been times in the past few years when I would hear a radio report of some merger that was taking place and my jaw would just hang open in disbelief. Not only were the FTC and DoJ not preventing the merger, but there was never even any mention that it was being considered. In George Bush's America, if you want to merge, you merge. None of this pesky government stuff. The two largest corporations in the banking/petroleum/pharmaceutical industry (one of which is the largest because it is the result of the merger of the second and third-largest companies last year) want to merge? No problem! The bigger the better!
But antitrust law is not only about mergers. It is also about monopolies and (oligopolies) that are insulated from competition by the fact that the barriers to entry in a particular industry or market are too strong for a newcomer to have a realistic chance of making it.
My to-the-right-of-Eric-Cantor brother insists that there is no such thing as barriers to entry, because you can always find the means, and the capital backing, if you have a good enough idea. I suppose he would point to Linux as a great example that even Microsoft can't insulate itself from competition. But you and I know that while there are exceptions to every rule, companies the size of GM and Microsoft are not particularly amenable to challenge by a newcomer. Yeah, maybe literally it's not impossible, but functionally, it is.
The good news is, my President believes in antitrust law.
"We're going to have an antitrust division in the Justice Department that actually believes in antitrust law. We haven't had that for the last seven, eight years," Obama said [in Pendleton, OR].
And so do his appointees.
Prescription #2: Give antitrust enforcement some teeth.
And that leads us smoothly to the third topic . . . .
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FIRST AMENDMENT
This one has two sub-topics that are relevant to my purposes here: media and the right to petition.
I really don't need to say anything about the problems of the corporate media here; if there is any group of people in this country who are brilliantly informed on this issue it is all of you, and the demise of Nova M has only underlined the problem. I'm just going to add in one little nuance to tie the usual discussion more directly to my topic:
Everything Adam Smith feared about the concentration of power in corporations is raised to a power of two when a handful of those corporations operate all the media that most people in this country ever see. I cannot think of anything that perverts the Bill of Rights more than what is happening in the mainstream media today.
Prescription #3: I don't care how we do it. Restricting the number of broadcast licenses that can be held by a single owner, divestiture of the media conglomerates, re-instituting some version of the Fairness Doctrine that will pass Constitutuional muster. I don't care. But something must be done to stop this cancer that is killing the body politic and eating out the brains of our populace.
The second First Amendment issue is the right of the people to petition their government.
Just as the existence of a law prohibiting gender discrimination in the workplace did Lilly Ledbetter no good if the statute of limitations ran out 18 years before she discovered she was being discriminated against, asserting that the people have a right to petition their government does no good if the voices of the people are consistently drowned out by the voices of lobbyists paid by corporate and industry PACs.
Really, I'm turning livid sitting here typing this. How dare those sons of bitches claim for their soulless greed machines the fundamental rights that our founders fought to secure for you and me???
OK, I'm not going to give a prescription this time, because I think Obama was way ahead of me on this one. I'm just going to urge everyone to keep the pressure on him to keep his promise to change the lobbyist culture that infests our federal government.
And now, having worked myself into a tizzy, I will calm myself by leaving you with this memento of one of our happier days. (It takes about 20 seconds to get to the main event.)