Monday, August 2, 2010

Trust, power and status

Continuing my critique of the "corporations as great threat" nonsense, one of the basic confusions one sees is the equating of pro-market with pro-business with pro-corporate.

The important distinction here is between free enterprise (allowing commerce to flow freely due to low transactions costs: particularly minimal barriers to entry and well-defined and enforceable property rights) and private enterprise (making money from privately-owned assets). "De-regulation"—lowering barriers to entry and other transactions costs—restrains the power of corporations because it maximises the level of competition they face. It is regulatory interventions that raise transactions costs (including barriers to entry) that typically increase corporate power by reducing the competition they face. So, being in favour of low transaction costs (particularly barriers to entry) is not about "trusting" corporations, it is about not trusting them. Indeed, minimising the need to trust power-holders (including, of course, officials).

What I object to about the "corporations as great threat" nonsense is precisely its notion that there are institutions and power-holders that are worthy of trust because they are inherently virtuous (in deliberate contrast to corporations, whose portrayal as inherently vicious makes anti-corporate politics clearly the path of virtue). That is the wrong dynamic. The question is: what restrains power, what makes it responsive to the wishes of others?

But, of course, if one is in the status-and-power game, it is much preferable to express things in terms of the wickedness of others and so the (stated or implied) virtue of "people like me"—particularly "people who think like me" since then agreement becomes a matter of selling a sense of virtue, and one with minimal cost.

Purported monopolies of virtue are no better (and, indeed, can be rather worse) than other monopolies.

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