In 1961 Ayn Rand delivered a lecture titled “America’s Persecuted Minority: Big Business.” The speech was subsequently printed in her 1966 book Capitalism: The Unknown Ideal, chap. 3.
In the intervening years the notion of big business being a persecuted minority has been scoffed at by friends and foes alike. Today’s politics of social media titans raises the question once again.
The scoffers, however, seem not to have read Rand’s article, as she clearly makes a distinction between economic and political power. The former is the power of production and trade, the creation of goods and services that customers buy voluntarily. As a result of multiple exchanges offering better and cheaper products, businesses grow large and efficient without government aid or privilege. Economic power is the power of a positive reward, not coercion.
The latter is the power of a government gun—initiated coercion—and Rand in her article demonstrates its use with the (Republican enacted) nonobjective antitrust laws that coerce businesses to bow to government edicts, for example, to hand proprietary patents over to competitors (Alcoa Aluminum) or even to send executives to jail for practicing what the government required their businesses to do a few years earlier (GE, Westinghouse, and other electrical equipment producers). Political power is the power of fear and punishment.
These victims of antitrust laws are indeed minorities and they are persecuted by the laws’ irrationality.*
In his study on the origins of The State (chap. 2), sociologist Franz Oppenheimer uses the two terms, economic and political, to identify the fundamental means of satisfying our desires: work and robbery. In The Myths of the Robber Barons, historian Burton Folsom makes a distinction between market and political entrepreneurs, the former succeeding by work, by satisfying customer needs and wants through economic power, and the latter by robbery, by enjoying the political power of government pull and favors. His book gives examples of both types of entrepreneur.**
In our interventionist mixed economy of government by lobby, most businesses, especially big businesses, enjoy government-granted privileges and just as often suffer coercive punishments, which means government commands, through various laws and regulatory rules, to grant favors to some and assign harm to others. Who get what usually depends on how much money is contributed to political coffers.
As I wrote in an earlier post, we must follow (or rather find) the government intervention before evaluating businesses, especially social media. Today’s titans enjoy not just monopolistic protections of the Federal Communications Commission, but also Section 230 of the Communications Decency Act.
Many, if not most, businesses over the years have been mixed with both economic and political power, especially since the beginning of antitrust in 1890. Social media possess a great deal of economic power because of their millions of satisfied customers whom they have worked hard to satisfy, but they also enjoy political power that makes them monopolistic in the traditional sense of monopoly as a government-granted privilege. Social media enjoy an exemption from liability that empowers them to censor at will and at the government’s bidding.
The solution to these monopolies and their monopolistic practices is not to break them up using antitrust laws, but to repeal their privileges, meaning Section 230 and ultimately the FCC act.
The correct name for current practices is not “crony” or “political” capitalism or “corporate liberalism,” but corporatism or, as it is sometimes called, corporativism (1, 2).
Like the collectivistic organic theory of society, corporatism relies on an analogy to the human body and derives its essence from guild socialism. Corporate groups in society, so the theory goes, are like organs in the body that function together for overall health and flourishing. Thus, guilds or corporate groups—labor, employers, and local governments—are the separate organs that work together using parliamentary or democratic methods to provide a well-functioning and harmonious (socialist) state. A strong central authority is the final arbiter.
Corporatism was mostly associated with Mussolini’s Fascist Italy, though as Ludwig von Mises points out (chap. 7), Italy quickly adopted the German pattern of socialism, namely nominal private property ownership with total central control and little attention to the corporate groups. Communist China and post-USSR Russia are said to be corporatist states today, because some private property and market transactions exist, along with a large number of organizations regulated in near total fashion by the central authority.
As Mises wrote, the Italian fascists preached “corporativism as the new social panacea” by resurrecting guild socialism from the “dust-heap of discarded socialist utopias.” Such utopias, however, as in Italy always progress quickly to authoritarianism with the worst rising to the top (Hayek, chap. 10, and here).
It is still not quite correct to call the United States a corporatist state. Yes, we have many businesses, laborers and their unions, and local and state governments vying with one another for the national government’s attention and rewards. But it is not organized in the way the older corporatists would have wanted it, and the explicit goal of participants has not been to establish socialism, at least until recently. The interventionist economy for decades has been nothing more than pressure-group warfare, but interventionism, unless eliminated by establishing laissez-faire, always leads inexorably to socialism or fascism.
The other terms used to describe the United States—crony and political capitalism—are not correct because the country today is not capitalist, as in laissez-faire capitalism. And the people who use the terms, usually advocates of socialism steeped in Marxist fallacies, want to slander capitalism with the labels by supposedly exposing the exploiter capitalists as seeking nothing more than profits to ultimately establish their own dictatorship.
Gabriel Kolko (p. 3), himself not an advocate of free markets, prefers “political capitalism” because big business in the late nineteenth and early twentieth centuries sought to stabilize the alleged “inherently unstable” capitalistic competition by partnering with government to pass appropriate controlling laws and regulations. He also adds the correct observation that this view is essential to American conservatism, hence the title of his book The Triumph of Conservatism.
“Corporate liberalism” refers to large corporations as a prominent elite, cooperating with government to lead the way to establish a socially liberal agenda, though social, as opposed to classical, liberalism goes by the better name of progressivism. From about 1880–1930 early progressives were advocates of democratic socialism; their followers from the 1930s to the present are more or less explicit Marxist socialists (1; Applying Principles, pp. 36-39, 110-13).
Senator Josh Hawley, a conservative, has just published a book titled The Tyranny of Big Tech and uses the term “corporate liberalism” throughout to describe our current plight. He also recommends using antitrust laws to break up social media.
The most correct term, however, to describe the United States today is fascism. The fascist state may have what appears to be private property and a free market, but it is in name only, because the entire economic and social worlds are controlled and regulated by the government.***
In nearly all cases, big businesses in such a system exhibit an abundance of political power, but they must tow the party line to acquire and use such power or be punished.
Big businesses that are persecuted minorities, as Ayn Rand wrote, earned their bigness through the economic power of creating wealth and satisfying large numbers of customers, not through government aid, favors, pull, party-line towing, or privileges at the expense of competition.
* See Dominick Armentano’s Antitrust and Monopoly for a discussion of the deleterious economic effects of antitrust policy and a review of prominent cases.
** See Gabriel Kolko’s The Triumph of Conservatism for examples of early political entrepreneurs lobbying for the likes of antitrust, income tax, and regulatory agencies.
*** Fascist Italy and Nazi Germany inherited industrial economies, which gave them a veneer of capitalism. See Gunter Reimann’s The Vampire Economy.
