March 8, 2011

Capitalism = Corporatism = Oligopoly = Rentier Stagnation


In theory capitalism was supposed to unleash such innovation and efficiency that in every sector the optimal combination of quality and quantity would soon be achieved. Capitalism was also supposed to tear down all barriers to marketplace entry, and all these innovations and efficiencies would eventually become standard practice (IP was never meant to do anything but give a particular innovator a temporary advantage, as a finite reward for his innovation).
What was the result of this supposed to be? If all went according to theory (if everyone really acted as a good capitalist, a fair competitor), each sector would eventuate in the sale of undifferentiated commodities. Since no one would be able to charge more for his product than his competitor did for the identical product, the price of everything would fall to cost. This is capitalism’s inherently declining rate of profit. Profit is in fact supposed to wither to the bare minimum necessary to keep business functional at all. That’s what would have happened by the 1970s in most sectors, and by today in all of them, if capitalism functioned in reality the way it does in theory.
But as we know it never functioned this way in reality. In practice, there’s no such thing as a “capitalist”, if the definition of that is one who competes and wants to compete according to the textbook rules. In practice, no competitor ever competes for a single day longer than he has to. The moment he achieves sufficient leverage to use his market muscle to engage in every kind of anti-competitive behavior and in particular to get support from the government goon, he does so. This is what I call the Rule of Rackets. In practice all capitalists are actually aspiring racketeers.
So in capitalist reality the tendency has always been toward oligopoly and monopoly. This was always desirable for profitability reasons. And since modern capitalism’s profit rate reached its dead end, oligopoly has become a necessity if firms are to remain profitable at all. By now capitalism is not just in a struggle for power, but a struggle to survive. This is related to the fact that it’s also no longer possible for capitalism to rob one population and/or resource base, achieving a capital accumulation, in order to market to another consumer base. All consumer bases are now exhausted, and there are no new resource bases. The only enclosure left is the terminal one, restoring feudal calcification. So this too dictates stagnant oligopoly as the only order which can still extract profit.
I contend that corporations have always been the main instrument of this drive toward oligopoly, and they have been the only significant modern form of it. It would have been difficult if not impossible for Oil Age economic actors to achieve oligopoly if not for the way the corporate form tilted the playing field and rigged the markets. Cheap, plentiful oil in itself would have been a radically democratizing force. (Who knows? Perhaps textbook “free markets” could even have thrived.) Only a severe artificial restriction on economic freedom could ever have enabled oligopolies to cohere. This artifice was the corporation.
Similarly, modern technology, whatever its other issues, would have been a tremendously liberating egalitarian force if not artificially enclosed and controlled. The corporate form was the main mode of this enclosure.
In all ways legally and politically possible, corporations have monopolized the vast bounty and freedom which fossil fuels and the modern human mind held in potential. Privatization of public commons like the resources of the earth, including fossil fuels, is at one, physical extreme. The radical extension of the IP regime to the point that it constitutes a new enclosure of a potentially infinite public commons is at the other extreme of intellect and spirit. In both cases, and all in between, there’s been little of private individual involvement. In every case I can think of, the corporate form is preferred. Certainly if the genius of capitalism could conceive of a non-corporatized way to compete, someone would be doing it.
Not only is the corporation the most efficient wealth-extracting machine. By design it’s forbidden to do anything but all it can to maximize its extractions. According to the responsibility of management to shareholders, a corporation is required to subvert the rules of capitalist competition. If the more effective expenditure for short-term gain in lobbying for anti-competitive legislation or regulatory treatment, that must be chosen over longer-term research investment. Same for the mergers and acquisitions and offshoring which we know are so destructive and serve no purpose even from the “capitalist” point of view, but which can accomplish a short-term goosing of the stock price.
It’s clear that in reality capitalism always seeks oligopoly; that corporatism is the only viable form of oligopoly under the conditions of the Oil Age and now energy descent; and therefore that capitalism is synonymous with corporatism. And as corporations become dominant, and as they’re purely artificial, the sum result is that corporatism is a command economy, every bit as much as that of the Soviet Union.
And what’s the result of this command economy devoted to unproductive extraction? Even as permanent mass unemployment becomes politically normalized, and we’re bombarded by vicious “austerity” assaults and their accompanying deficit terror propaganda, corporations continue to report record “profits”. These profits are all fraudulent. They’re the result of straight accounting fraud (all bank “profits”, for example), the fraudulent return on looting the taxpayer (the Bailout, Pentagon budgets, and all other corporate welfare), and cannibalization – cutting jobs, “consolidation”, spin-offs or M&A money shuffles, tax scams, etc. I don’t know how many years it’s been since I saw a corporation of any significant size report an actual profit, and the looting regime has only become more brazen since the intentionally triggered crash. What we’ve seen since 2008 has been nothing but disaster capitalism, disaster profiteering, disaster looting, disaster rioting. That the banks, or any corporation, are paying dividends at all under depression circumstances is proof that they serve no constructive social or economic purpose and therefore shouldn’t be allowed to exist at all. Who can possibly argue a rationale for corporate profit-taking, dividend-paying, and cash-hoarding even as they cut jobs and government slash spending? On its face, if nothing else this proves the corporate worthlessness. It proves they existentially comprise a bottleneck preventing the solution of any of civilization’s problems. They comprise a roadblock against the further evolution of civilization. 
Corporations are responsible for all of this, and all of this is their characteristic activity. They are oligopolist and rent-seeking by design.
So it follows that if we wish to economically liberate ourselves, whether we dream of economic cooperation or of true markets (I don’t claim the two are necessarily incompatible), either way we face the same enemy and the same imperative. We must break corporate power. At the very least we must radically restrict corporate prerogatives and abolish all corporate constitutional “rights”. Better, we should abolish corporations completely. We no longer need even original-style corporations. We can maintain whatever infrastructure we still need democratically. Things like railroads and canals were always built as joint public-private enterprises anyway, with the corporation’s main role being to parasitically extract the profit after the public pays for everything and does all the work. Most R&D today is in the same category. Democracy doesn’t need corporations, and cannot coexist with them.
The American revolutionaries sensed all of this. They were leery of federalized corporate chartering power, and of corporations in general. They experienced at first hand the aggressive monopoly of the British East India Company. They saw Thomas Hutchinson try to make his sons and cronies the monopoly distributors of price-dumped tea.
So they physically dumped it instead, and then kept corporations out of the Constitution.
Today we know how right they were, and how pathetically our own vigilance has flagged. If we’re to take back our country, we’ll have to reinvigorate the original spirit of the constitution and the revolution. Among other things, that means smashing the corporations. Shattering that blockage may in itself be sufficient to liberate our polities and economies, letting us resume our freedom and prosperity. It is certainly necessary.


  1. Read Econned by Yves Smith. You always have salient points but passion can make one exaggerate. The analysis of barriers to entry is accurate, but I think you go too far equating the old Soviet Union with current American corporatism.

    Comment by Natalie Golovin — March 8, 2011 @ 9:41 am

    • Maybe the magnitude of the barriers isn’t the same, but the command economy nature of the system is just as complete, even if the corporatist commander still leaves a little bit more formal* slack in the system than the communist one did.

      * That is, leaving out the Soviet black market. But if I and others are right about the import of policy like the Stamp mandate and the Food Control bill, we’ll soon be driven into the same de jure formal control regime as that in the USSR.

      Comment by Russ — March 8, 2011 @ 11:01 am

      • Russ, along these lines, I’d include the educational system. Its privatization via state capitalism has yielded pretty much the same results as the Soviet/command system for consumer products: underpaid workers doing arguably-unnecessary jobs poorly:

        The taxpayers of Pennsylvania pay $30 million every year to Data Recognition Corp (DRC) to develop, print and score these tests every year.

        In May of 2009, the Pennslyvania Department of Education (PDE) signed a $200 million contract with DRC to create and administer the Keystone High School Graduation Exams.

        The tests are scored by temporary workers with no training in education in what some have described as “sweat shop conditions.”

        For supervisors, pressure is extreme to create a bell curve so that no matter how well schools or students are actually doing, a certain percentage will ALWAYS be on the wrong end of that curve. Psychometricians predetermine what these curve will look like. Supervisors just change scores to get the desired results so that they will get paid.

        The structural difference between Soviet methods and current US methods is that American culture not only tolerates, but blesses—and not only blesses, but lionizes—the crony elite intentionally inserted to skim profit off of all social and anti-social activities, including but not limited to the pointless destruction of war, the make-work of educational testing, the cruelty and human degradation of the world’s largest per capita prison population.

        Ya gotta keep rewarding the “job creators”!!

        Comment by Lidia — March 8, 2011 @ 12:47 pm

      • The US really no longer has anything that can be called a humanistic education system. One may or may not become truly well educated, but that’s either an accident or because one is essentially self-educating within the system.

        All the system really wants to do is generate serviceable corporate cogs, and they can do that just as well corporatizing the schools and turning them into another embezzlement conveyor belt.

        Yet another bipartisan policy.

        Comment by Russ — March 8, 2011 @ 3:34 pm

      • Yes, but the heartbreaking part is that corporations require fewer and fewer American “cogs”. Life as a cog is at least a simulacrum of life; now people don’t have even that.

        Which, on the bright side, will bring them ’round, but only after a lot of pain and Orwellian cognition problems as they remain in the sado-masochistic embrace, hearing how it’s only their fault if they can’t keep food on their families in the richest, most “free” country on Earth.

        Comment by Lidia — March 8, 2011 @ 4:22 pm

      • Unfortunately, maybe that’s the school many people really need. It sure looks like they’re going to refuse to learn from the history books or the blogs, or from the steady deterioration of their own position, short of disaster.

        Comment by Russ — March 8, 2011 @ 6:29 pm

  2. When one looks for answers to some of the apparent contradictions in actions vs proclamations of politicians, the impasses are formidable to say the least. For insight into at least some of these apparent contradictions, I suggest you take a look at Jeff Gates book ‘Guilt by Association. How deception and self-deceit took America to war’. Jeff had a rather distinguished career as counsel to the US Senate Committee on Finance (1980-87; he has written several books related to the advantages of employee stock options, ownership solutions and democracy, etc. The book I mention above has an endorsement by Noam Chomsky on the front cover (paperbook) “Breathless just reading it”. I could go on to describe it further, however, I will just mention that he claims that he is currently working on a book/project which he calls the ‘Criminal State’. This book was copyrighted in 2008; I anxiously await his next book (you may also after reading this one). Jeff also has a website – http://criminalstate.com.

    Comment by William Wilson — March 8, 2011 @ 2:59 pm

    • Thanks, William.

      Comment by Russ — March 8, 2011 @ 3:35 pm

  3. If humans would just behave using the “Golden Rule” instead of letting gold rule. If only…

    Comment by Johnny D. — March 9, 2011 @ 10:11 am

    • I was just thinking, as I read the quote I used in the sociopath post, about the judges who ruled that workers “freely” enter contracts:

      If a judge like that, or anyone else who supports the corporate ideology, now found himself on trial having to defend his life, and he was asked, “Do you consent to be judged according to the standard by which you judged others?”, how many would say yes?

      The answer would condemn him either way.

      Comment by Russ — March 9, 2011 @ 10:42 am

  4. This probably sounds really stupid and naive, Russ, but if we all just treated each other with decency and respect, wouldn’t things be different? What if we just decided to no longer be greedy? For the life of me, I can’t figure out why it is not that way.

    Comment by Johnny D. — March 9, 2011 @ 4:53 pm

    • The problem seems to arrise from the idea of people thinking like pleasure maximizing agents that only care about getting ‘whats theres’. This subversion of virtue to temporal desires seems to be at the heart of the modern world’s problems.

      Caught up in all the flashing lights and how pretty everything looks? How surprised should we be? Do we even have discussions about real morality anymore since people have started to deviate from the old religious systems (which definately had their flaws).

      Scientific reductionism has made us think the world is cold and ugly. I think we need some more idealism directed towards what many seem to be grasping at: a world we live in where people treat each other like human beings, as an end in themselves and not instrumentally.

      Comment by Transcent — March 9, 2011 @ 5:09 pm

      • Well to finish up my 2nd thought:

        ‘he who believes nothing is ready to believe anything’

        The superficiality of our world is both a cause and a result of a lack of wisdom.

        Comment by Transcent — March 9, 2011 @ 5:11 pm

      • Science doesn’t make the world look cold and ugly. Only people who don’t understand science think that, people who make the world a reflection of the coldness and ugliness inside themselves and use science as their justification. Any justification would do. There were plenty of amoral hedonist Romans.

        Comment by reslez — March 9, 2011 @ 8:27 pm

    • Not at all, JD. It’s a beautiful thought, and I don’t think it’s impossible, although I don’t have a clear road map for how to get there. But we can at least start among ourselves.

      The world will never be perfect, but it could be much, much better. Most of what’s driving all this nastiness is really just a small motor of wickedness.

      Transcent, you’re right that we need a new ideal. (That’s four places now I’ve found myself saying that or agreeing with it today.) Hopefully we can help contribute to that here, and at the project you’re working on.

      Comment by Russ — March 9, 2011 @ 5:56 pm

    • The Psychological and Evolutionary Roots for Resource Consumption by Nate Hagens, posted at The Oil Drum explains the neurochemistry of addiction/greed. It’s physioloigical, an artifact of our species having evolved in an energy-scarce environment. With free energy and stores filled with addictive food, toys, booze, etc. it’s literally human nature to be overcome by our dopamine reward pathway.

      Few people are endowed with adequate second order consciousness to think about why they act like addicts, and then curb their destructive behaviors. That’s the way the corporations want us to be anyway. (Bernays)

      Gabor Maté has had several deeply interesting interviews with Amy Goodman in which he explains how our early postnatal development sets us up to become addicts:

      Stress-Disease Connection
      ADHD, Bullying and the Destruction of American Childhood

      A few quotes:

      The conditions in which children develop have been so corrupted and troubled over the last several decades that the template for normal brain development is no longer present for many, many kids…the conditions for child development that hunter-gatherer societies provided for their children- which are the optimal conditions for development- and are no longer present for our kids…the way we raise our children today in this country is increasingly depriving them of practices that lead to well-being in the moral sense.

      ……Just as the general conditions for childhood development are lacking, so are the conditions for empathy and insight. See, there are parts of the brain- in the pre-frontal cortex, right here in the front of the brain- whose job it is to regulate our social behaviors. They give us empathy, they give us insight, they give us attuned communication with other people. They give us a moral sense. Those are the very conditions that, according to this Notre Dame study, are now lacking. So a lot of kids are now growing up without empathy, without insight into others, without a sense of social responsibility. Bullying is just an example of that.

      …the human brain does not develop on its own. It does not develop according to the genetic program. It depends very much on the environment. The essential condition for the physiological development of these brain circuits that regulate human behavior, that give is empathy, that give us a social sense, that give as connection with other people, that gives a connection with ourselves, that allows us to mature- the essential condition for those circuits, for those physiological development is the presence of emotionally available, consistently available, non-stressed, attuned, parenting, caregivers.

      George Mobus is another who blogs about what he terms sapience at http://questioneverything.typepad.com/

      His recent post ‘Past the Point of No Return’ gives a good sense of his analysis. On his left sidebar are links to his sapience series which delves into brain structure. He mentions the ‘grandmother hypothesis’, which connects to the Gabor Maté quotes above.

      Comment by AR — March 9, 2011 @ 6:46 pm

      • Thanks for the links, AR. I used to read Mobus, years ago. I’m glad to hear he’s still blogging about sapience.

        One of the most malevolent aspects of this system is how it seeks to overwhelm the brain with material stimuli which trigger and enforce addiction patterns.

        Part of what I’m trying to figure out is how to combat consumerism and the whole hedonism ideology without coming off as a fanatical puritan.

        Or maybe, on the contrary, such a Spartan call could be effective to a disillusioned people looking for something radically different?

        Either way, the collapse and/or forcible impositions of the system itself is going to be forcing more and more addicts into withdrawal, or at least into “substitution” down the consumption chain, to use economic jargon.

        Comment by Russ — March 10, 2011 @ 5:38 am

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