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As the ongoing Occupy Wall Street movement enters its fifth week
and spreads to cities around the world
this weekend, it is worth examining one of the central
beliefs animating the disparate group of protestors, namely that
corporations have too much power. While this belief is not
exactly mistaken, it fails to get at the real root of the
problem, which is that governments have too much power.
It is true that certain large corporations enjoy unjustifiable
benefits like protection from foreign competition, unnaturally
high barriers to entry for local competitors, outright monopoly
privileges, preferential tax treatment, taxpayer subsidies, and
so on. Banks in particular have the ability to manufacture
profits practically out of thin air thanks to fiat money,
fractional reserve banking, and legal tender laws. (See
my
review of Chris Leithner’s recent book, The Evil Princes
of Martin Place, for a fuller discussion of some of the ways
in which modern banking is broken.)
But where does this power come from? It comes from governments.
It is governments that enjoy a monopoly on the use of force.
Government actors use this power legitimately when they protect
individuals from such dangers as theft, fraud, assault, murder,
and foreign invasion. They use it illegitimately when they grant
special privileges to influential businesses.
The problem with focusing on corporate power instead of the more
fundamental problem of government power is that it can too
easily lead to the promotion of unproductive or even
counterproductive solutions. Trying to regulate banks to prevent
them from gambling away our wealth will never work when
governments use their monopoly on force to maintain the current
fraudulent banking system and to bail them out with our taxes.
Trying to regulate corporations is pointless when corporations
themselves inevitably grab hold of the reins of regulating
bodies. Campaign finance laws are worse than worthless when it
comes to trying to “get the money out of politics.” When
governments have goodies and privileges to hand out, the
wealthiest, most connected, most entrenched elites will
inevitably get their hands on most of those goodies and
privileges.
The only feasible solution to the collusion of corporations and
government (known as “corporatism” or “crony capitalism”) is for
governments not to have goodies and privileges to hand out. They
must be restricted to using their power to protect individuals
from the dangers enumerated above. In a scenario in which the
only thing governments do is enforce simple rules against things
like theft, fraud, and murder, corporations would be stripped of
all of their power. They could only succeed in such a scenario
through voluntary exchange, by offering goods and services that
people want at a price they are willing and able to pay, a price
that would reflect all the competitive pressures of the free
market.
As Steven Horwitz wrote this week
on The Freeman’s website, “in freed markets the power
would rest with the 99 percent of us who buy the products, not
the 1 percent who sell them. In freed markets the power
really would be with the people—ours to
grant or withdraw as we see fit. It’s bailouts, subsidies, and
monopolies that give the 1 percent power over the rest of us.”
Crony capitalism need not continue forever. We can have a system
in which power really does reside with the people. But this will
only happen if enough of us understand the real root of the
problem and demand a real solution: a drastic reduction in
government power.
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