No, Joseph Stiglitz, Corporatism Is Not Laissez Faire


Corporatism

This is a reaction to Inequality Is Not Inevitable by Joseph Stiglitz, who among other things has won the Nobel prize for economics.

The problem is that the power system we have today is a mixture of big business and big government. This leads to errors from critiques from conservatives and libertarians in that they see the problems caused by government, but are often ideologically blinded to those caused by business. But similarly, it leads to errors in leftist critiques like this one, in that they see the problems caused by business, but not government. Two things in particular highlight Stiglitz’s lack of understanding here. (And yes, I’m aware of his lofty credentials.)

The first is when he says, “Corporate interests argued for getting rid of regulations, even when those regulations had done so much to protect and improve our environment, our safety, our health and the economy itself.” All too often, larger businesses want regulation, because they know they can afford to absorb its costs, whereas smaller companies (especially entrepreneurs and their startups) cannot. By cooperating with government policymakers, executives of large businesses end up with a regulatory regime that shields them from competition at the expense of everyone else.

The second is the references to bankers as “among the strongest advocates of laissez-faire economics”. This is completely ridiculous, and while I realise that Stiglitz is an hardcore ideologue, he really ought to know better than to say something like this. Our system is nowhere close to being laissez faire. It’s solidly corporatist, with a powerful central government whose policymakers work to advance the interests of corporations large enough to participate in the system of collaboration. The financial system is at the very centre of this web of patronage, and its pulsing heart, the Federal Reserve, is the world’s most powerful public-private partnership. So the last thing bankers want is laissez faire.

The thing that frustrates me about critiques like this is that both sides actually perceive part of the problem, but neither sees all of it. And since conversations between left and right about the power system in our society are shouting matches rather than dialogues, people who should be working together against a common problem of corporatism instead are squabbling like children. Stiglitz refers to TARP, which is a prime example. The Occupy Wall Street movement and the Tea Party movement both initially started as a reaction to bank bailouts. Obviously left and right do not agree on most things, but that sort of corporatism is one of them and it’s arguably the biggest problem of them all.

A final thought, this word “inequality” has become increasingly popular in this era of Bernie Sanders populism. The problem there is that most people talking about it are upset about inequality of outcome, when it’s much more important to care that everyone has a baseline equality of opportunity. Let the wealthy have their yachts — in a system without corporatism they’ll have earned them and saying otherwise is simply class envy. Let the ceiling be sky high, the higher the better! What matters is where the floor is.