Corporatism masquerading as Liberty

I have been meaning to write something on faux Libertarians of the corporatist ilk for a while. However, since I switched to forecasting mode instead of advocacy, I have tried to leave the political element out of my posts as much as possible. I’ll leave the politics to those who enjoy it; I don’t. But, I think this is an important topic so I am going to give it a go here.

If you do a search for the word ‘liberty’ on the Internet, invariably you find the Wikipedia entry for that word. I think the definition used there is a good one. Here’s what Wikipedia says about Liberty:

Liberty is the concept of ideological and political philosophy that identifies the condition to which an individual has the right to behave according to one’s own personal responsibility and free will. The conception of liberty is influenced by ideals concerning the social contract as well as arguments that are concerned with the state of nature.

Individualist and classical liberal conceptions of liberty relate to the freedom of the individual from outside compulsion or coercion and this is defined as negative liberty.

What you will notice is there is nothing in this definition regarding corporations. It is all about individual liberty and the freedoms of individuals. Individuals are born with innate, natural and inalienable rights to liberty that are self-evident. This philosophical view of humankind gained currency during the enlightenment and is now universally accepted. It also underpins the very concept of democracy and is the origin of the founding of the United States of America.

For example, the U.S. Declaration of Independence begins [highlighting added]:

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

As always, I have to note that the writer of the Declaration was a slaveholder in a country in which government killed the indigenous population. So, there is certainly a gap between the high-mindedness of this wonderful document and actual events on the ground. Don’t let that detract from the aspirational quality of the words.This is exactly what individual liberty is all about.

On the other hand, a corporation is a societal construct codified into legal existence to further the mutual interests of individuals. A corporation is “an artificial being, invisible, intangible, and existing only in contemplation of the law,” according to Chief Justice Marshall in the Dartmouth College Case of 1819. Trustees of Dartmouth College v. Woodward, won by Daniel Webster when the state of New Hampshire attempted to turn the college into The University of New Hampshire, was an early American test of eminent domain-type property seizure.

A corporation has no inalienable or natural rights. Nevertheless, it is the fact that corporations represent a group of individuals that allows the ‘corporatist’ to claim that these fictional legal entities should enjoy the same natural and legal liberties and rights with which individuals are born.

Let me be bold here: The ‘Corporatist’ is a kleptocrat masquerading as a believer in liberty. He uses terminology based in liberty to construct an ideology solely as a means of furthering the gains of a specific strata of society allied with the corporatist and at the expense of other strata, by coercion if necessary.

Remember my post on kleptocracy from 2008? If not, here are the four methods Jared Diamond says ruling elites use to maintain power:

  1. Disarm the populace, and arm the elite.
  2. Make the masses happy by redistributing much of the tribute received, in popular ways.
  3. Use the monopoly of force to promote happiness, by maintaining public order and curbing violence. This is potentially a big and underappreciated advantage of centralized societies over noncentralized ones.
  4. The remaining way for kleptocrats to gain public support is to construct an ideology or religion justifying kleptocracy.

I broadened the argument on this in my year in review in 2009. Please read The year in review at Credit Writedowns – Kleptocracy to get a fuller perspective. Here’s the statement from that post I want to concentrate on:

The last (and perhaps most important) issue [of the four ways elites maintain power], in my view, has to do with the unabiding faith in free markets that many now have. It is with religious zeal that these so-called Libertarians defend the primacy of markets over all else when in reality common sense would tell you that those with the greatest influence and money will always be at an advantage without some check on that influence and power.

This is the corporatism, the faux Libertarianism, to which I refer. The logic goes like this:

  1. Individuals have inalienable rights to freedom. This is a fundamental right that all individuals have and efforts by government to undermine these rights must be resisted at all costs.
  2. Corporations are groups of individuals which have banded together for mutual benefit. In so doing, they can express their individual natural rights more effectively than they could as individuals.
  3. As such, corporations must retain the same rights as individuals legally in order to allow those individuals the corporation represents to express there natural rights. Therefore, the same resistance to denying the rights of individuals must also be transferred to the corporations which represent them.

This logic will take you much further in furthering the aims of corporations, the point being that corporations, businesses, should enjoy the same rights that individuals have.

That is not to say that businesses should not have rights. They should; and we should grant them as much liberty as is reasonable and warranted. But let’s be clear, corporations are not individuals; they are collections of individuals. Often, individuals hide behind this collective using the corporate veil to shield themselves from sanction for behaviour that abuses individual liberties. In a very real sense, the rights and liberties of businesses and individuals often come into conflict. A real libertarian would always favour the individual in that conflict. A corporatist would favour the corporation. That’s the difference.

Let me give you an example. Say I was walking down the street in Louisville, Kentucky and saw a cute little shop that sold Kettle Korn. For those of you who don’t know kettle korn, it is salted and sweetened popcorn that was brought to the U.S. by German immigrant farmers in Pennsylvania, Maryland and into the Midwest over two hundred years ago. In Germany, popcorn is sweet not salty like it is in the U.S. So, I see this store and I am thinking, “They have Kettle Korn in Kentucky? Wow, who knew. I love this stuff. Let me go get some.” Here’s the problem: the owner of the store has a business policy that no black people are allowed inside. Mind you, this isn’t a government policy because government discrimination based on race or ethnicity is illegal in the United States. But, this business owner doesn’t want Blacks in his store. So when I enter, he tells me to leave because I am violating his store’s liberty to choose its own policies.

I would say the individual liberty trumps the business liberty in this case, especially since the owner is violating his own government’s business policy as well as societal norms. A corporatist would say that the business owner wins since it is his business. Again, that’s the difference.

There are lots of other examples of corporatism at work in the U.S. legal system regarding property rights in particular. My November 2009 post “New York to use eminent domain to build a basketball stadium” showed the New York State Court of Appeals ruling that the Atlantic Yards basketball project can go forward as planned, dislocating the residents in the Brooklyn, NY area where the stadium is to be built. The decision means that government can evict you from your own home, seize your property, and give you what it believes is a fair price without your consent to build a sports arena, ostensibly for the public good but certainly for state and private profit.

This and other cases like it are occurring because of the decision in Kelo v. City of New London, Conn. If a state or local government deems a private project – funded by private monies and profiting private enterprises – to be in the public interest, it can seize your property to allow this project to occur. In the New London case, residents were evicted to make way for a luxury hotel and up-scale condos, from which private developers would profit handsomely. Kelo was an outrageous example of cronyism completely at odds with the ethos of the Dartmouth College Case of 1819. Because of Kelo, government can now abuse its power to enrich specific private interests. That’s corporatism at work.

Corporatism has nothing to do with liberty. It is all about power and coercion. It’s about favouring the big guy over the little guy, the more well-connected over the less well-connected, the insider over the outsider. And in society that means favouring large, incumbent businesses over smaller businesses, new entrants or individuals. How does deregulation and free market ideology fit into this?

“Obviously, if some always have more power and wealth than others, there is never a situation in which the economic playing field is level. Moreover, it is axiomatic that those with the means and access will always have greater influence over government than those without. So, in a very real sense, the socioeconomic elite of any advanced, stratified society will always have disproportionate control of the economic and political system.

“Now, I happen to be a Libertarian-minded individual, so I have nothing against the free markets or the concept of limited government and deregulation. Freer markets and more limited government are my preferred ideal. However, I am a realist. I understand that markets are never truly free and government fulfils a necessary function.

“So, when you hear someone talking about getting government out of the way and allowing the free markets to work, you should be thinking about the influence and control this would naturally engender.

“Think crony capitalism

“In fact, I would argue that the deregulation and free market capitalism that these individuals refer to is really crony capitalism in disguise. I will explain.

“When I think of deregulation, I think of two related but distinct concepts. The one is the actual de-regulation, which is the permission of economic actors to compete in markets previously unavailable to them by order of legislation or de facto government intervention and coercion. The other is regulatory oversight, which is the maintenance of specific rules of engagement under threat of penalty on economic actors by government. De-regulation and regulatory oversight are related concepts but they are not the same.”

This favouring of large corporate interests is what Bill Black has been calling Deregulation, Desupervision and De Facto Decriminalization. Dylan Ratigan calls it corporate communism. Ron Paul calls it corporatism. I am calling it kleptocracy. Whatever label you put on this ‘thing’, it is not about liberty at all. It is about entrenching the interests of a select few at the expense of the rest– and that has nothing to do with liberty.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.