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December 12, 2008



The left are the real friends of "big business" through regulation, unionization, nationalization and bail-outs.


Good comment. On other sites I have argued consistently that where the Republicans in America go wrong (and as a consequence have unambiguously worse economic performance) is that they think the interest of the economy and the interests of capitalists are one and the same. The Democrats are not much better, but don't tend to do what individual capitalists want them to and so the balance of interests that an economy represents are less disturbed.


if what you say is true, why has the GOP in America (which is in the pocket of big firms) consistently de-regulated (or refused to enforce regulations - particularly health and safety and environmental regulation).


Besides which Kit, I wonder what you mean by the "Left". Left and right belong to a black and white single-dimentioned world.


Do not worry it is The end of capitalism: Ponzi and Marx are still alive

Very few dare to admit an inconvenient truth: the system does not work if you always privatize profits and socialize losses and inequality rises. It's a major capitalism's flaw to be fixed to avoid Ponzi's schemes and Marx's overproduction crisis. Hopefully the Ponzi Finance will not get another bailout. It's true that the time has come to save capitalism from the capitalists, incompetence and frauds

Andreas Paterson

Speaking as a neo liberal hating leftie, I don't particularly have a problem with big business. The entry cost for many businesses has got to the stage where development of a product requires considerable initial outlay and that is only possible with the economies of scale available to a large business.

It's not necessarily regulations that are the problem, it's a simple question of complexity. For example, in the 80's any bedroom programming enthusiast could produce a computer game that could make it's way onto the high street. In more recent times computer games have huge teams of animators, story writers, graphic artists, programmers and designers.

The problem I do have with big business is corruption, shareholder ownership means that governance is too diverse to ever really influence the management as a result rewards for senior management bear no relation to the contribution they actually make to the business.

The other issue is that neo liberal policies are very much in the interests of the financial community who have taken advantage of unrestricted movement of capital to make vast rewards for themselves before leaving us to clear up their mess.


I your point understand that what is good for free markets might not be good for capitalists.

But I'm not understanding the difference you are making between capitalism and free markets. I thought allocating resources through free markets was an essential attribute of capitalism. I thought the organization of the economy where we have the government step in and socialize the big mistakes of capital owners was corporate socialism.

Could you lay out what you see as some good working definitions so I can understand exactly what you mean?


OneEyedMan. You thought wrong, which is precisely the point Chris is addressing. Capitalism is a system of ownership, once which requires private capital investment, normally the money coming from either people at the top of the firm or elsewhere entirely.

Capitalism, specifically, seeks to maximise profits, and thus bigger capitalist firms are drawn towards oligopolies and cartels.

Markets are a system of exchange and distribution, they set prices and aggregate demand. In order to be effective, they need to maximise competition, have easy entry for new players. If effective, profits are reduced down to a minimal level, barely above the returns you'd get from a bank account.

Thus capitalism in its purest form doesn't like the profit minimising effective market. And markets don't care how a firm is owned, merely whether it competes effectively.

A socialist firm operating within a market economy is perfectly normal--there are many cooperative, mutual and partnership ventures; if you lve in the UK, you'll likely be aware of John Lewis/Waitrose, and might be aware that the mutual building societes are weathering the current storm farily well, whereas those that demutualised (encouraged to do so for ideoligcal reasons by a former Govt) have been at the centre of the crisis.

Capitalism as practiced currently in the US and corporatism are flip sides of the same coin. Central planning socialism, with corporatism and nationalisation, is one (failed) type of socialism.

Effective competing cooperatives, small to medium firms, etc, mutually owned by employees and similar, is a different type of socialism, with a philosophical heritage that predates Marx and was strongly favoured by JS Mill, the economist who created the analytical tool now known as homo economicus.

Socialism and capitalism are systems of ownership. Markets and command/control are systems of distribution and exchange.

Each of the former can operate within each of the latter, I'm a market socialist, a term I first encountered when Chris used it here on this blog, but it's something I've believed in wince I first read Mill and (independetly)found out how John Lewis et al are organised.


I take issue with you on a couple of points.

Capitalism seeks to maximise capital. It does this by balancing growth against profit.

For the capitalist, capitalism is a system of production to this end. It has many implications for ownership structure and creates the opportunity for owners to turn the direction of the organisation to different ends.

A capitalist system can therefore be subverted to eg consumerist or socialist ends, but one should not confuse cause with effect.

A properly capitalist society has a sufficient and sufficiently diverse range of ownership structures which enables it to resist subversion to any one particular end paradoxic to any stated aims (such as war by the military-industrial complex, slavery by the financial-shareholder interest, mental illness by big pharma-science, mass ignorance by life-long learning institutes, widespread boredom with corporate entertainment etc).

As someone who self-describes within a narrower context I think you may be being less than fair and less than objective.

I tend to agree that there is an underrepresentation of mutualist organisations within our current society which has lead to it tipping, but my ideal is to find an lasting balance rather than an exclusive type.

Bob B

"The entry cost for many businesses has got to the stage where development of a product requires considerable initial outlay and that is only possible with the economies of scale available to a large business."

Microsoft and Google - to name but a few companies - started out as small.


«It’s awkward for the right because demands for a bail-out gain legitimacy from the fact that unemployment is a really nasty thing. But if unemployment benefits were (much?) higher, job loss would sting less and the bail-out would be easier to oppose. This shows that redistributive policies, far from being the enemy of free markets, can in fact be their allies because they reduce support for ad hoc interventions.»

But the problem is that better welfare benefits are the enemies of "free markets" (I mean of course the political interests of the business elites) as it strengthens the political and economic bargaining hand of low wage and middle class workers, by removing a huge source of worry. Indeed the government of the UK itself is rather worried by that too:

«He said that benefit claimants needed to compete for jobs with migrant workers, many from Eastern Europe. He went on: "We cannot reasonably ask hard-working families to pay for the unwillingness of some to take responsibility to engage in the labour market."»

But not for rich doctors of course:

«Health minister Lord Warner told the BBC's Today programme the change was necessary as competition for jobs grew. "What we have done is make sure that we are becoming more self-sufficient in training our own doctors," he said. "There has been a 70% increase in the number of medical school intakes over the last seven or eight years and we have to find and ensure that there are post graduate specialist training posts."»

Overall the story is that employers of low wage workers, of which the NHS is one (and thus indirectly but clearly elderly rentiers), love low and difficult to obtain unemployment benefit as this results in a buyer's market for labour.

Also, the middle-aged or elderly rentiers who drives politics in the UK detest scroungers, as a matter of class hatred, of spite towards the less fortunate. If you can stomach it (there are several Modest Proposals involving final solutions for benefit claimants in the comments) consider this nice example of the culture of spite towards the unfortunate:


From the same source another gem:


These are rather common views...They buy votes.


«Capitalism is a system of ownership,»

There is a lot of confusion about completely different concepts, like the industrial system, private property, the free markets, capitalism and so on, which are often conflated.

In particular capitalism is not a system of ownership: it is a political system where who controls capital have paramount political power and make the rules.

Actually to be more proper, capitalism is where the owners (rather than the controllers of capital) make the rules, but capitalism strictly defined has not been dominant in the western world for a long time (arguably for 80-90 years).

These definitions matter greatly as they obscure what works and what does not.


«Republicans in America go wrong (and as a consequence have unambiguously worse economic performance) is that they think the interest of the economy and the interests of capitalists are one and the same.»

But in their world view the interests of the top 1% of productive, deserving winners are the interests of the USA, and the bottomost 80% of parasitical, exploitative loser vermins simply don't matter or should be treated like they deserve.

Not much different from Dixie or southern american disregard for the darker skinned two legged mammals as untermensch (un-people).

Or those of the English for the exploitative, deceitful irish in the 19th century:

«"The great evil with which we have to contend is not the physical evil of the famine, but the moral evil of the selfish, perverse and turbulent character of the people." (36.) In 1848 Trevelyan was knighted for his services in Ireland.»
«The lead story in the August 30th, 1847 edition of the English newspaper, the Times said, "In no other country have men talked treason until they are hoarse, and then gone about begging for sympathy from their oppressors. In no other country have the people been so liberally and unthriftily helped by the nation they denounced and defied." (37.) In another edition: "They are going. They are going with a vengeance. Soon a Celt will be as rare in Ireland as a Red Indian on the streets of Manhattan... Law has ridden through, it has been taught with bayonets, and interpreted with ruin. Townships levelled to the ground, straggling columns of exiles, workhouses multiplied, and still crowded, express the determination of the Legislature to rescue Ireland from its slovenly old barbarism, and to plant there the institutions of this more civilized land."»


«confusion about completely different concepts, like the industrial system, private property, the free markets, capitalism and so on,»

Sometimes more than confusion there is just intent to prevaricate; my favourite example is the implicit conflation of "free markets" with "competitive markets", where of course most free markets are or become far from competitive, and competitive markets usually are so only because of regulation.

But the well paid sycophants of the market bullies talk only about "free markets" as in these the bullies can have their way without interference.


"Congress has - probably accidentally and temporarily - heeded the advice of free market economists and voted against bailing out auto makers. And stock markets have reacted badly."

How does anyone know that this fall was due to the "accidental and temporary" decision of Congress?

Larry Teabag

During booms, capitalists speak the language of the free market. In the down-times they are statists to put Polly Toynbee to shame.

Kevin Carson

Andreas Patterson:

What you say about economies of scale and initial capital outlays is the received wisdom from Alfred Chandler and J.K. Galbraith.

But the Sloan model (capital-intensive, with product-specific machinery, large-batch production, and "push" distribution) is only one alternative model, and it predominates in the U.S. mainly as a result of government subsidies to large scale and centralization.

The other model, which exists in Emilia-Romagna among other places, integrates general-purpose machinery into small scale craft production for the local market, geared on a just-in-time basis to actual orders. And its existence proves the received wisdom to be purest buncombe.

Some particular products (like heavy engine block cars on the post-WWII model and large jet airliners) require high levels of capitalization. But those are products that likely wouldn't exist if manufacturers weren't able to externalize much of the production cost on the taxpayer and then find ways to force the public to buy them. For example, it's hard to imagine much of a market for the heavy IC engine block had not government subsidized the automobile-car complex on nearly the same scale as the military-industrial complex, and systematically reengineered society to destroy walkable communities. Instead, industry would be focusing mainly on light electrically-powered vehicles, or light IC vehicles (Ford's first Model T plant cost around $500,000 in today's dollars), for the small minority of people who lived outside walking distance of light rail. And the jumbo jet simply wouldn't have been feasible had not heavy bomber orders enabled the aircraft industry to fully utilize the expensive machine tools required. The jumbo jet is something we wouldn't even need, absent the centralization of markets and a business model centered on "business travel" rather than teleconferencing.

One of the central purposes of the regulatory state is to artificially raise the capital outlays required to do business, in order to shut small competitors out of the market.

Absent all these state aids to large scale and centralization, the economy would look a lot more like something imagined by Ralph Borsodi or Lewis Mumford. And it would be a lot more "progressive" and "left-wing" than the society we live in now, which was parodied so effectively in *Brazil*.

Kevin Carson

Blissex: You're getting your causality backward. Monopoly power has never emerged from an unregulated market. The corporate economy as we know it is almost entirely a creation of the state. Had it not been for the land-grant railroads, tariffs, and the patent system, there wouldn't even have been any national-scale corporations around to have a go at forming trusts at the turn of the 20th century. And as the New Leftist writer Gabriel Kolko describes it, the private trust movement was a failure. The grossly inefficient and overleveraged US Steel and Standard Oil began losing market share, as soon as they were formed, to smaller and more agile competitors.

It was then, according to Kolko, that big business turned to the "Progressive" regulatory state as a way of restricting price competition and stabilizing oligopoly control of markets. In other words, having failed to create stable cartels through the private sector, big business turned to creating cartels through the state. In particular, the "unfair competition" provisions of the Clayton antitrust act created a favorable atmosphere (backed up by FTC regulations) for trade associations to define price cutting as an unfair business practice and thereby make stable price administration more feasible.

The main function of big government, from the beginning, has been to subsidize the operating costs of big business and protect it from market competition. To paraphrase Roy Childs, liberal intellectuals have been useful idiots for the Fortune 500.

Derek Wall

'Monopoly power has never emerged from an unregulated market.'

The ignorance of defenders of the free market is astonishing...given economies of scale monopoly tends to emerge.

Take a look at some of the work on commons regimes/open source/social sharing for an alternative to top down command economies and top down command markets


Good comment.

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