How Can We De-Corporatize?

Sculpture, Art, Breadline, Bronze, Depression, 1930

Image Source: Pixabay

The 25-year asset bubble has caused a crescendo of corporatism, as large corporations, their values swollen by asset price inflation, have sought to impose themselves on our lives. Their interaction with the left of politics has been especially poisonous, with “corporate-woke” schemes generated by top management threatening to eliminate the interests of the shareholders who are nominally their masters. Is this our future, or will we find a way to defeat it?

Adam Smith warned us about large corporations. He was strongly in favor of capitalism, but not of large monopoly companies: “Since the establishment of the East India Company, the other inhabitants of England, over and above being excluded from the trade, must have paid, in the price of the East India goods which they have consumed, not only for all the extraordinary profits which the company may have made upon those goods in consequence of their monopoly but for all the extraordinary waste which the fraud and abuse inseparable from the management of the affairs of so great a company must necessarily have occasioned.” He could have been writing today — about Alphabet Inc. (Nasdaq: GOOG), for example.

In the nineteenth and early twentieth centuries, huge agglomerations of capital in large corporations were inevitable. The economies of scale, in both manufacturing and marketing, in mass-producing automobiles and organizing a nationwide chain of dealers to sell them were so great that even the enormous “fraud and abuse” of 1950s General Motors and the United Auto Workers’ collusion was not sufficient to prevent the company being market-dominant, enormously large (576,667 employees in 1955) and extremely profitable. When “Engine Charlie,” Wilson told the Senate Armed Services Committee in January 1953: “What’s good for America is good for General Motors, and vice versa” he was pretty well correct, both quantitatively and qualitatively.

Technology has moved on since Engine Charlie’s day. There are no longer such gigantic economies of scale available from mass production; computerized manufacturing enables us to produce goods in much smaller batch sizes, satisfying a broader range of consumer desires. There are no longer great economies of scale in distribution; Internet ordering and order processing enable even small manufacturers to service customers all over the world. Only in marketing are the economies of scale still vast, perhaps even larger than in Engine Charlie’s day, as the Internet allows ever louder voices to drown out small sellers and quell unpopular minority opinions, in a way that was impossible in 1953.

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(The Bear's Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of "sell" recommendations put ...

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