Following up my initial response to Lane Kenworthy, I decided to approach the question from a different direction and ask “Would we be better off without corporations?”. That is, I’d like to consider a society in which all large enterprises were publicly owned. There would still be room for owner-operated private businesses, worker-controlled co-operatives, partnerships and perhaps some other forms of business I haven’t thought about. I won’t get into disputes about whether this would constitute socialism, except to say that it would be radically different from any version of capitalism we’ve seen so far.
I’m also going to reverse the burden of proof implicit in Kenworthy’s approach. I start from the assumption that the expansion of corporate power under the neoliberal (or market liberal) policy package of privatisation, financialisation and deunionisation that has prevailed since the 1970s has been bad for most of us.
Given that neoliberalism is a term that’s often used loosely, I’ll try to be more specific about the adverse effects that can be tied specifically to the resurgence of corporate power.
The most obvious is the growth in inequality that has coincided with the rise of neoliberalism and corporate power. Virtually every aspect of neoliberal policy reform from increasing capital mobility to union-busting to flattening of tax scales has contributed to increased inequality. Moreover, they all reinforce each other.
?So, if we can do without for-profit corporations without incurring significant economic costs, we should.
I started looking at this on a sector-by-sector basis but then realised I would need to write a whole book in reply. So, over the fold, some disorganized thoughts
First, the privatisation of public utilities that was a central feature of late C20 neoliberalism should be reversed. Public utilities delivered a wide range of services successfully, and, in most cases, with steady improvements in productivity over time
By contrast, despite some extravagant initial claims, the outcomes of privatisation have been, at best, ambiguous, and at worst disastrous. Massive fortunes have been made by individual kleptocrats and by financial corporations, but the existence of these fortunes makes the rest of society worse off not better. Ignoring these windfalls, there is no clear evidence of net social benefits from any large-scale utility privatisation program of which I am aware. Even in rare cases where public utilities may have been so badly run that privatisation represented an improvement, the correct response would have been to reform the business not to sell it.
The end of corporations would clearly eliminate most of the financial sector. But even if some private corporations were to be retained, the case for eliminating most of the financial sector, and nationalising much of the rest, is strong. Beyond the basic functions of taking deposits and making loans (which could be handled by co-operatives or publicly owned banks) there is no reason to suppose the activities of major financial institutions and markets is socially beneficial. Much of it relies either on tax fraud (politely called minimisation) or regulatory arbitrage (taking profitable risks and relying on regulators for rescue when things go wrong).
The same is true of private corporations in sectors like education and health, which typically involve a lot of public money. The clearest cases include for-profit universities in the US, which exist primarily to rip off public programs like Pell Grants, and for-profit prisons. Not every for-profit business in the human services sector has been as bad as the University of Phoenix and Serco. But I’m not aware of any successes so clear as to overcome a presumption in favour of direct public, or publicly-funded non-profit provision.
As far as energy is concerned, the malignant activities of companies like Exxon, long the main promoter of climate denial, provide a good argument for public ownership of energy resources as the default. The obvious model here is Norway’s Statoil (now Equinor), still majority publicly owned and highly successful.
Next manufacturing. Public enterprises have done a perfectly adequate job in large-scale manufacturing industries, such as steel and motor vehicles. Still, there would probably be room for some private firms.
?Retail, hospitality and similar industries are probably not suited for public ownership. But they can be provided perfectly well by small businesses.
The most complicated case is that of the information technology companies that now account for much of the value of corporate assets in the US (Apple, Microsoft, Google/Alphabet, Facebook/Meta and Amazon). Of these only Apple has any real claim to have produced anything truly innovative (even if some of it was first invented at Xerox/PARC). So, we are faced with the general problem of encouraging innovation to which I will return in later post.
The others were in the right place at the right time to capture network and scale economies. It’s clear they aren’t doing much to justify their profits. Microsoft in particular is just collecting rents on products developed decades ago by copying others. The search for advertising revenue leads both Facebook and Google to make their products much less useful than they should be. We could certainly do better, even if it’s hard to say precisely how.