Tuesday, 19 February 2008

Big Business and Liberty

by Charles Pooter

Sean Gabb refuses to defend the favourable tax status of non-domiciled foreigners and rails against The City of London and big business in general.

He is right to do so. When libertarians reflexively defend the riches of those who operate within the status quo, they are not defending a free market or liberty, they are defending actually-existing corporate capitalism. The latter is in no way an imperfect approximation of the former.

Those who picture the free society as an ultra-capitalist Tescoville (with cannabis cigarettes available on aisle 5 obviously) are suffering from a degraded vision of low expectations. When they evangelize on behalf of liberty to normal folk in those terms, they should not be surprised when Joe Public prefers statism, which at least gives the illusion of restraining the power of these rampaging corporate behemoths.

Sean argues that limited liability is the source of unwarranted corporate power. But there are are other, even more fundamental ways, in which big business needs the state to survive and dominate. Here are just a few :

  1. Land
    The current distribution of land is historically unjust and morally indefensible. Absentee landlords own vast swathes of land in the UK. Their titles are upheld by the state despite their historical (and current) injustice. The taxpayer covers their massive enforcement costs and large agricultural subsidies are given, based on the amount of land held.

    Without the state and without the ability to externalise the cost of retaining exclusive access to large areas of land, a more flexible system of usufruct rights could evolve, whereby rights over land could only be retained by ongoing occupancy and use. To simplify grossly: use it or lose it.

    When it retains access to land, labour has traditionally shown itself reluctant to become the "human resource" upon which big business is dependent. It will work for wages but the right (and ability) to return to the land prevents "wage slavery". This is why, in countries around the world, land must be enclosed by the state and peasants must be driven into the cities before big business can get the labour it needs on the terms it requires.

  2. Labour
    Even when deprived of the means to obtain subsistence from the land, labour will attempt to organise itself to obtain increased wages and working conditions within the capitalist system. Within a partnership, cooperative or mutual society, labourers can organise amongst their fellows to do so. Within a small business they can bargain directly with their employer. Within a large company, they have no choice but to organise collectively. Without the state there would be no anti-union laws, upon which large companies in particular depend, to keep the workers in line, their costs low and their profits high.

  3. Intellectual property
    "Intellectual property" is a state-privilege granted to individuals or organisations allowing them a monopoly of production on particular goods or services. In theory it creates incentives for the creation of new and useful products. In practice it accrues massive amounts of power and profit to large corporations. These same corporations lobby constantly and successfully for ever increased extensions to the period of time they can retain their state granted privilege. The privilege prevents smaller competitors from entering the market.

  4. Infrastructure
    Big business thrives on state-built infrastructure. The most obvious example is the transport network. Without the state-constructed motorways and railways, big business could not obtain the economies of scale needed to compete against smaller, more agile competitors. It goes without saying that the land for this infrastructure is nearly always stolen using compulsory purchase (US: eminent domain). Without this huge market distortion, business would tend towards smaller, more local enterprises.

  5. Regulation
    Regulation is often described as being anti-business. The public thinks of regulation as a counter-balance to the power of corporations. It is no such thing. Government regulation is shaped by big business. In some cases, the legislation is actually designed by corporations. Regulation entrenches market incumbents and discriminates against smaller business. Who is better able to deal with employment legislation: a single-proprietorship with one employee or a corporation with a hundred-strong "human resources" department? Regulation creates an artificial economy of scale, privileging big business and disadvantaging smaller enterprises. As Rothbard said of FDR's New Deal:
    Every element in the New Deal program: central planning, creation of a network of compulsory cartels for industry and agriculture, inflation and credit expansion, artificial raising of wage rates and promotion of unions within the overall monopoly structure, government regulation and ownership, all this had been anticipated and adumbrated during the previous two decades. And this program, with its privileging of various big business interests at the top of the collectivist heap, was in no sense reminiscent of socialism or leftism; there was nothing smacking of the egalitarian or the proletarian here. No, the kinship of this burgeoning collectivism was not at all with socialism...but with fascism,...a kinship which many big businessmen of the twenties expressed openly in their yearning for abandonment of a quasi-laissez-faire system for a collectivism which they could control…. Both left and right have been persistently misled by the notion that intervention by the government is ipso facto leftish and antibusiness.
In a very real sense, big business cannot be thought of as separate to the state. Big business lives in a symbiotic relationship with government, feeding it with taxes and bribes and extracting privilege. But ultimately this gestalt entity is a parasite. It draws its sustenance from labour: from you and me. We won't kill one half of the parasite without also destroying the other.

I finish with a quote from Sean's post:
A free society is not Tesco minus the State. It is a place of small craftsmen and farmers and traders, of artists and of unlicensed doctors and lawyers, and of others needed if individuals and free associations of individuals are to live well. We cannot say much more than this about the arrangements of a free society. But we can be sure it would have no place for big business as it now is found.


Sean Gabb said...

Sn excellent post in its own right, and most flattering about me.

Charles Pooter said...

Thanks Sean!

Anonymous said...

Great article. In addition, big businesses benefit greatly from lucrative government contracts which are easier to obtain by companies large enough to have concentrated political influence.

I don't think you've made the case that laborers have been driven off rural land into cities to their detriment, though, and infrastructure subsidies might well offer disproportionate benefits to such areas. Government infrastructure subsidies certainly are wasteful, corrupt, and theft-financed, but I don't think they fall into the category of things disproportionately helping big businesses (other than infrastructure construction businesses).

Charles Pooter said...


Thank you for your kind comments.

Good point about Government contracts. Consider it point 6! In fact there are quite a few companies whose income depends entirely on state contacts (cough, *Capita* cough).

I believe Rothbard said that morally it would be legitimate for the workers in such enterprises to "homestead" (seize) these companies' assets, presumably to convert them from being parasitical quasi-state organisations into productive enterprises within a free society.

On point 2: City life may or may not be less desirable in a free society. The point is that enclosures and other acts of historical theft of land by landlords and rural capitalists (which are well-documented) deprived labour of the option of self-sufficiency, in part or in whole. This means that "big business" has a large pool of labour who have no option but to work for wages. This still applies today as these unjust titles are still recognised and enforced by the state (at labours' expense through taxes). It even applies within cities: absentee landlords' property titles are recognised and
enforced by the state (the landords externalise their enforcement costs), inflating living costs, requiring labour to work longer and harder.

As it happens, despite urban sprawl, most of England's land area is rural. You only have to fly into Gatwick Airport to see this. It is still a green, if not so pleasant, land. If England abolished agricultural subsidies and switched to a just system of usufruct property rights I actually *do* think there would be a reasonably large exodus of people from city to country. How the institutions of a free society would cope with that, I'm not so sure.

On point 3: I guess I am on weaker ground here. What I was trying to say, in my inarticulate fashion, is that "big business" does not currently pay the full cost of its business practices. It is my contention (not an original one) that if it did pay the full cost it
would not be able to compete with smaller enterprises, which don't suffer from the internal irrationality of large organisations.