Concentrated private power and the decline of democratic agency are at the root of these proxy wars. But there's lots of good news, so please read to the end!
This week, I also included a "what I'm reading" section below with some links to things I've found particularly inspiring or useful lately.
I really enjoy hearing from readers, so feel free to be in touch anytime with thoughts at: hello [at] embodiedecon [dot] com.
“But until a theoretical explanation – based on human choice – for self-organized and self-governed enterprises is fully developed and accepted, major policy decisions will continue to be undertaken with a presumption that individuals cannot organize themselves and always need to be organized by external authorities.” ― Elinor Ostrom, Governing the Commons
An emergent, rag-tag group of conservatives are fighting back against “woke capitalism.” From Elon Musk and Florida Governor Ron DeSantis to former Vice President Mike Pence and West Virginia state treasurer Riley Moore, the growing chorus takes issue with corporations espousing left-leaning positions on social and environmental issues and ESG investors applying shareholder pressure along similar political lines.
When DeSantis signed the bill stripping Disney of its special tax and governance district in Florida, he remarked, “You know, ultimately, this state is governed by the best interests of the people of this state, not by any one woke corporation. We’re not going to let them take over the state.”
This is new political territory for conservatives. What was previously the big business-friendly party, is increasingly striking back to curtail the very corporations they’ve previously courted for campaign contributions using tax breaks, loose regulation, and political protection. They worry that companies like Disney, or Larry Fink’s Blackrock, have amassed too much power to set the cultural agenda – one in which “leftist” values are expressed, not through the political process, but through powerful firms and their leaders. Former Vice President Mike Pence recently called ESG a pernicious strategy, “because it allows the left to accomplish what it could never hope to achieve at the ballot box.”
He is onto something.
While conservatives launch an all-out attack on stakeholder capitalism, focusing their rhetoric on hot-button social issues like abortion and critical race theory, progressives seek to use corporate power in service of their own political objectives. Investors have filed a record high number of shareholder resolutions this year, which often align with politics that are left of center: pushing corporations to take more responsibility for issues like climate change, worker’s rights, and racial equity.
These political proxy wars, fought on the battlefield of corporate governance, illuminate the real problem behind the rhetoric on both sides: companies and their financiers have too much power to set the terms of political debate, and the terms of markets, outside of democratic channels.
On both the left and the right, a reckoning with concentrated corporate power is starting to occur, in some cases forming strange, cross-party bedfellows. For example, a coalition of 48 state attorneys general are suing Facebook under antitrust law for abusing its monopoly power. But few on either side are willing to admit that forty years of failed laissez-faire economic policy, inspired by Milton Friedman and embraced by the elite interests of both parties, is what got us here.
Current critiques of ‘woke’ corporations are not new. They hearken back to Friedman’s early arguments that companies should focus on maximizing shareholder value, lest they become too powerful political arbiters of social questions — questions better left to voters and employees. Friedman felt that unobstructed markets, free of meddling regulators, were the most efficient way of allocating democratic choice. Maximizing shareholder value meant that private individuals could spend their economic rewards in whatever ways they wanted. Here is Friedman in his 1962 book, Capital and Freedom:
“What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game. … The great advantage of the market, on the other hand, is that it permits wide diversity. It is, in political terms, a system of proportional representation. ... It is this feature of the market that we refer to when we say that the market provides economic freedom.”
Friedman’s ideology took root and catalyzed the dismantling of regulatory oversight on large businesses and financial firms. In the 1980s, the Reagan deregulation revolution ensued, and subsequent democrat leaders, like Bill Clinton, expanded this liberalized economic policy across the globe. Practically, this looked like the relaxation of merger standards, the enshrining of Citizens United in the Constitution, and the Bush-Obama bank bailouts, which prioritized the property rights of large financiers over everyone else.
Agencies like the Federal Trade Commission and the Department of Justice, with rich histories of hard-nosed enforcement against monopolists and anti-competitive market dealings, fell under the sway of neoliberal ideology. Notions of economic ‘efficiency’ usurped almost any other public interest objective. Merger challenges ground to a trickle as waves of mergers and acquisitions ensued, and the power of the largest firms across numerous industries swelled. The rise of big tech, and other firms like Disney, were facilitated by this lax merger enforcement and the evisceration of antitrust law. In many ways, the strongest alliance between Republicans and Democrats in these preceding decades was their joint preference for monopolies.
As public enforcement was circumscribed, the role of corporations in society ballooned. Large corporations filled the regulatory vacuum, writing the rules in their favor and dictating more and more of economic, and political, life. By elevating corporations above the law, Friedman, and his conservative allies ultimately ushered in the very outcome they sought to avoid — a corporation elevated to such high political stature that it undermined the countervailing mechanisms of the state and the public altogether.
The corporation, and its backing and shaping by a small group of concentrated financiers, is now the largest influence in global systems. Corporations, not countries, make up 157 out of 200 of the world’s largest economic entities, as measured by revenue in 2018. These corporations now function as para-states, completely untamed by elections, regulators, or the law. And in many cases, they influence or subvert these democratic channels for their own purposes. A new study shows how market power solidifies political power: the average merger involving large public companies is associated with a 30% increase in lobbying spending.
Liberalizing markets and granting them “freedom” was a philosophical – and practical – abdication of responsibility for the fundamental moral, ethical, and political questions about how we should organize terms of trade and public life.
Today, Friedman’s views have reincarnated in libertarian blockchain and cryptocurrency communities, who believed that exchange built on “trustless” technology would allay the worst market failures. These views may be reconsidered on the other side of the current cryptocrash, replete with fraud, unstable stablecoins, and difficult governance questions not easily resolvable through technology alone.
We are drawn to these ideologies because they convince us that we can outsource the hard work of democracy to something, or someone, else – a new technology, an “invisible hand”, a corporation, or even a government through electoral politics alone. The 1970s essay “The Tyranny of Structurelessness” by feminist organizer Jo Freedman, foresaw the pitfalls of this idealism:
“To strive for a structureless group is as useful, and as deceptive, as to aim at an "objective" news story, "value-free" social science, or a "free" economy. A "laissez faire" group is about as realistic as a "laissez faire" society; the idea becomes a smokescreen for the strong or the lucky to establish unquestioned hegemony over others. This hegemony can be so easily established because the idea of "structurelessness" does not prevent the formation of informal structures, only formal ones. Similarly "laissez faire" philosophy did not prevent the economically powerful from establishing control over wages, prices, and distribution of goods; it only prevented the government from doing so. Thus structurelessness becomes a way of masking power.”
As corporate and financial power ascended in this “structurelessness,” co-mingling with the power of the elite political apparatus, the power of average citizens ebbed away into near oblivion. Political processes increasingly seemed rigged and out of reach, leading to the rise of populist candidates promising a return to the past, when people felt some glimmer of autonomy over their lives. People feel powerless today, because the political and economic apparatus has made them so. As conservatives use the smokescreen of culture wars, they will continue to ignore the hard questions of how to democratically structure markets. How to give power back to the people.
A recent book, Democracy by Petition, by Harvard professor Daniel Carpenter, traces the decline of citizen engagement in the political process through an over-looked mechanism: petitioning. Historically, writing a petition was a way for people to publicly air their grievances and to solidify wide political alliances — particularly for groups who didn’t yet have the legal right to vote, like Black and Indigenous Americans and women. Petitioning was a mechanism for ordinary citizens, or non-citizens, to engage in dialogue with office holders.
Today, however, online petitions rarely receive a response and have little influence. The ear of office holders is filled with lobbyists and powerful donors, rather than small groups of regular Americans. It is unsurprising, then, that shareholder petitions have claimed so much ground as mechanisms for instituting political change.
The influential pundit Ben Shapiro has said that corporations should ‘go apolitical again,’ which is, of course, an impossibility. The corporation is fundamentally a political entity, given its license to operate by the state and embedded within society. Conservatives can’t have “free markets” – free of political oversight – without fostering the dominant firms they now find politically distasteful.
Post-1980 methods of governing, influenced by Friedman’s laissez-faire approach, cannot address the problem of dominant firms wielding social and political power in ways that lack democratic legitimacy, as my colleague Matt Stoller has previously pointed out. Likewise progressive investors and stakeholder capitalists cannot be lured by the promise of advancing political aims through private channels alone, bypassing more democratic channels.
The good news is that promising solutions to these challenges are not hard to come by. There is a proliferation of effort around deliberative and participatory democracy. Citizen's assemblies, are small, representative groups of 100-150 people who deliberate on particular policy choices. Paris instituted a permanent citizen's assembly last year, and Ireland used the mechanism to overcome longstanding stalemates on abortion legislation. Audrey Tang's incredible experiments in Taiwan use technology to widen civic engagement in social innovation spending, and the International Observatory on Participatory Democracy works with a network of more than 1000 municipalities in over 95 countries to advance local-level democratic participation. Decentralized Autonomous Organizations (DAOs) seek to experiment with these methods in digital communities. And there are many, many others.
The task ahead is two-fold. People of all political affiliations must rethink the relationship between corporations and democracy itself. And we must ask ourselves what moral values we have abdicated in the marketization of so many facets of modern life. At the same time, we need to collectively take up the hard work of small “d” democracy at all levels of public life, reclaiming public participation in ways that provide people genuine agency over their social and economic futures. This will require moral imagination, and a willingness to reconsider how economic and political power are both allocated and exercised across the economy.
We must challenge concentrated corporate power, while reclaiming our own.
What I'm reading:
• How to Make the Universe Think for Us by Charlie Wood for Quanta
This blew my mind. Let natural (physical) systems do computation for us, instead of hubristically creating neural networks, modelled off the human brain, which need to crunch trillions of data points to calculate what nature does automatically.
• Paradise at the Crypto Arcade: Inside the Web3 Revolution by Gilad Edelman for Wired
Loved his simple distillation of this key fact: "A decentralized technology does not guarantee a decentralized market."
• 'Sweet City': the Costa Rica suburb that gave citizenship to bees, plants and trees by Patrick Greenfield for The Guardian
No further explanation needed...!