As a friend of mine said to me last week, it seems the economic team advising Obama has an unfortunately limited imagination. This limitedimagination leads to a limited range of kinds of responses, as all aretied to "getting back to where we were" or "recovering,"–even in thelanguage used there are metaphors of recreating a past, or healingsomething like a hurt shoulder–recovering after bypass surgery– instead of creating a different kind of future.
One of the things I hope to do, blogging here over the next month, istry to be imaginative, and hopefully learn from the readers here abouta much greater range of ideas about how we might choose to organizeour economy: how we organize how things are made, how people are paid, and how risks are punished and rewarded. I think our short term solutions and responses ought be tied to long term structural protections against similar crises.
Recently, much of my thinking has involved antitrust policy. Instead of imposing after-the-fact regulations on corporations, why not pass a new antitrust policy that limits the size to which companies can grow? Current antitrust law limits a variety of anticompetitive behaviors, like price fixing, and is focused on consumer welfare and market manipulation. But antitrust could become a tool for limiting size qua size, not just size when it becomes anticompetitive. It would require a major overhaul, but in the long term a size-based antitrust policy might actually be simpler than the complicated and often unworkable measures of market share and examinations of inchoate consumer needs.
Why? Because economies of scale, which work well for creating widgets, are very dangerous when it comes to influencing political decision-making. Political power amassed by concentrated financial power leads to serious distortions in political decision-making, so that Congress can pass absurd, non-responsive legislation that gives illogical copyright extensions, dangerous environmental licenses, and tax breaks to those who least need it. Antitrust law now limits anticompetitive behavior as between companies within an industry; it could limit corporate power in the political sphere by creating a default maximum size.
Basically, we might want to use antitrust to create collective action problems for business–coordination difficulties and freerider threats–such that companies would be more likely to spend their energies on productive behavior instead of on political influence to modify the rules of the game. I recognize that this would lead to some less efficient production of goods in some areas, but that the cost of this inefficiency is worthwhile.
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We enable corporate charters to make us healthier and happier. We believe that without corporate charters, and limited liability, people would not take risks and invest in inventions and infrastructures that improve our lives. There is nothing necessary or innate about the particular corporate form that is now the norm; it is only worth keeping as long as it serves our collective purposes, and we should constantly be remodeling it to ensure that it does serve those ends.
So when it turns out our creation is making us less healthy, happy, and secure, we ought consider tinkering with the shape and size. Efforts to limit corporate power over political processes via campaign finance reform have had limited successes at best (except perhaps public funding programs–but that’s a different article).
The connections to the current crisis are obvious: a new antitrust policy, one that takes scale into account, would protect against any corporation becoming to big too fail. It would also protect against some of the systematic lobbying, direct and indirect, of Congress by the major companies. But it might also lead to a society where more people are closer to having a meaningful voice in the company in which they work, which itself has positive political side effects; as John Stuart Mill argued 150 years ago, it is hard work to take a cog in a machine and turn him into a citizen a few days a year, but if someone, in their personal, professional, and familial life is accustomed to making judgments and exercising power, the leap to being a collective political decisionmaker is not so great.
Antitrust is not the only solution, but its a kind of solution that I’d like to hear more about. This crisis ought to cause us to rethink the nature of the institutions we want to exist, not simply the after-the-fact behavior regulations of those institutions. (While the difference between institutional shape and regulation may sound semantic, I think its not, and in debating institutions in terms of What They Are instead of What They Can Do will lead to a productive, collective conversation about what we value, and the kind of world we want to live in.)
As Teddy Roosevelt said, "The great corporations … are the creatures of the State." If these creatures are causing massive instability, inequality, or environmental ruin, then we ought modify them. Importantly, this is not an anti-corporate argument (to be anti-corporate actually buys into the reification of the corporation as it currently exists.) I happen to think corporations serve incredibly valuable social purposes. But those values are radically limited if we stop understanding the corporate form as deeply flexible, putty in our hands if we want it to be–a flexible tool for human, democratic, societal ends.
