Capitalism is Pro Market, Not Pro Business

Olly Neville May 21, 2013 4
Capitalism is Pro Market, Not Pro Business

Defenders of capitalism have a tough challenge on their hand, especially as so many labour under the mistaken belief that the current corporatist system we have is somehow reflective of a free market society. Many on the left attempt to take the reigns in fighting for consumers and workers while the right are left to defend every twisted manoeuvre of big business and exploitative corporations.

Libertarians need to remember that we are nowhere near a free market society, and we should not end up defending the rich and powerful who obtain their position due to the state.  The corporatist system we have sees those with power use their money and influence to sway politicians and politics in their favour. Regulations and taxes create barriers to entry empowering the position of entrenched business. Special deductions, agreements and state favouring give powerful firms advantages their small counterparts don’t have. Why do you think big financial institutions were the big donors to both the Romney and Obama campaigns? Why do we have a Business Secretary in the Cabinet but not a Consumer Secretary?

With big business pulling the strings to tip their scales in their favour capitalists must realise that these people are not on our side. Far from being the ruthless free marketers that the left point them out to be, big businesses are often the ones calling for regulations. Big businesses are the ones supporting the regulatory monolith that is the European Union,  while small business leaders are more likely to be the Eurosceptics of the business world.

Monopolies almost only ever occur when state enforced barriers to entry mean that no one else can enter the market, let alone afford to compete. Previously competitive markets boil down into oligopolies as new entrants are kept out whilst former competitors merge or are bought out. Just look at the banking industry; only 1 new bank in the last 150 years, and when Metro Bank was set up the founders came out to say that the weight of regulation was almost an overwhelming barrier to them getting into the industry.

When competition is removed there is no requirement to be efficient. Standards drop, costs rise. Without completion there is no threat to keep prices low. Consumers get worse products at higher prices. But it isn’t just western consumers that lose out. With a limited number of employers comes less competition in other areas. Firms don’t have to be as attractive to employees; it’s not like there are other jobs available they can take, especially in today’s economic climate. Oligopsonies mean that a small number of big firms can buy their produce from a large number of buyers, pitting them against each other and so cutting costs. Look at supermarkets in the UK that screw over small farmers or the US tobacco industry where three firms (Altria, Brown & Williamson, and Lorillard Tobacco Company) buy around 90% of all tobacco grown in America. A limited number of buyers or employers means conditions and pay for employees can be pushed down. It is not the ruthless free market that leads to low pay, poor conditions and awful disasters for the world’s poorest. Whilst the employment that multi-national corporations have provided have been a fantastic way for third world countries to grow themselves (just look at Singapore, Taiwan or China), the fact that they do not operate in a truly competitive manner means that on the way to progress far too many get hurt or used far too badly. The ends may be good, but the means could be so much better.

Far too many on the right find themselves defending big corporations without acknowledging or even realising that they are not a product of capitalism or representative of it. Take the multi-nationals example. Too many would stop at pointing out how western business investment has been a huge force for growth in the third world without even acknowledging the horrors many workers have faced. We must not fall into the trap of defending ‘the bad guys.’ If politics is PR then backing the corrupt, the exploitative and the ruthless just because we think they are on our side is one of the most obvious own goals around. The greedy executives of the current system are not capitalists themselves. They use the state to keep out competition, then exploit workers and screw consumers to pay themselves ever more. It is not okay, nor is it in our interest to defend the fat cats, the bankers, the chief executives who give themselves golden hand shakes at the same time as cutting pay for their staff. Capitalists should be proud that big business isn’t a result of our system. I certainly wouldn’t want to be defending an ideology that saw so much power and wealth concentrated in the hands of so few. Yet this is the trap that too many people fall into.

Markets and business are two separate things. Businesses are parts of it but there is so much more to a market than just the firms that operate with in it. Businesses can take off themselves on the most part, we don’t need to pander to their needs. Who we do need to be looking out for are the consumers and the employees. They are the vulnerable ones, not big business. Consumers want lower prices and higher quality, employees want higher wages and better working conditions. They should be natural fans of free market capitalism. Competition in selling forces business to compete either on price or quality, while competition in employment forces business to offer higher wages or better working conditions. Who takes the hit for producing higher quality goods at lower price or paying workers more with better conditions? The fat cats. They may not like it, but if they want to stay in business they would have to. Many would try not to if we brought in a free market system but those would be the ones going bust.

Too many on the right see the left attacking the greedy and corrupt at the heads of big business and see it as an attack on free markets, resolutely jumping in to defend some of the most disgusting people in business today. For god’s sakes bash the bankers – their greedy use of the state got us into this mess. Tear into the chief executives who pay Bangladeshis 21 cents an hour to work in collapsing factories. It’s disgusting. Of course it’s disgusting. The rich and the powerful, or rephrased – the greedy and the corrupt. The elite are not our friends or our allies, they do not want freedom, or growth. They love using the state to crush opposition or completion, using the state to benefit themselves at the expense of the consumer. That is not capitalism – a system of voluntary exchange where competition benefits consumers at the expense of business. They would love the poorest in the world to stay poor so that they can pay them scraps. That is not libertarianism – a positive, caring philosophy that acknowledges free markets in many parts primarily because of the huge benefit they provide to the worst off in society.

Don’t be pro business – in today’s corporatist society business and the state are at times inseparable. Big business can showcase the very worst in state power and human corruptibility. There is no bigger evidence of how power can transform people than the elites of different markets. Who fiddle even now as people round the world burn. Business always wants to gain at the expense of the consumer and the employee. The state allows it to. Often misguided action taken by government to help consumers or workers has instead allowed businesses to consolidate power. Unintended consequences of taxes and regulations sees centralisation in markets. Naive or corrupt politicians have ended up helping business at the expense of the rest of us.

But do be pro market. The only way to stop business gaining at everyone else’s expense is to bring in competition. Competitive markets take away power, they stop workers and consumers alike being taken for a right by monopolists. They force innovation, lower prices, better conditions. They take the pay of the fat cat and put it in the pocket of the worker, or keep it in the pocket of the consumer.

You can never beat big business with the state. For one, big business makes more money and can attract the smarter minds to outfox and outwit state action. The unintended consequences of state action far more often help business than the consumer. For another, while there may be some state actors who keep their honourable intentions when they get in, there are far too many others, conscious of it or not, who are swayed by the glitz, glamour and riches of the business elite.

Capitalists, libertarians and free marketers do themselves no favour by defending the elites. We don’t promote our ideas, we don’t make ourselves look good and we aren’t even fighting for our own ideology. Fight for consumers, fight for workers, fight for the little guy; back the market, not the corporatist. Don’t fight for business, fight for capitalism. One day, eventually, we might just get it.

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  • Matthew Edward Cooper

    ‘Corporatism’ means something entirely different to what this writer is talking about.

    • Daniel

      Is corporatocracy a better word?

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  • Daniel

    Good article. Perhaps a better title for it is “Capitalism is not Corporatism”. The free market should be pro business but not pro market interventionism or pro intellectual property on which many monopolistic corporations depend. Libertarian Stephen Kinsella have done a thorough job in demolishing intellectual property rights.

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