Just how free is our free market?

Supporters of free enterprise über alles would be well advised to take a broader look at society. This would enable them to see that although competitive free enterprise may be a necessary condition for civilised society, it’s certainly not a sufficient one.

For one thing, men at the cutting edge of free enterprise don’t believe in competition. Quite the opposite, they’d like to nip it in the bud by bankrupting every business but their own.

A free entrepreneur par excellence usually can exist today only in a start-up mode, or else at the level of a corner sandwich shop. Once his business has become successful, his thoughts gravitate towards putting an end to competitive activity. He wants to put the competition out of business.

At that end of economic thought he is greeted with a fraternal embrace by his brother the democratic bureaucrat who, for his part, used to believe in pluralism while he was clawing his way up the party ladder. Now he has reached the top, pluralism means only one thing to him: a threat to his position. The modern brothers instantly recognise their kinship and have no difficulty in striking a corporatist partnership.

Free enterprise in the West today occupies about the same slot as it did in Lenin’s Russia during the New Economic Policy (NEP). Faced with an economic collapse and mounting famines, Lenin allowed most of the service sector as well as some small-scale manufacturing to go private. But what he described as the “commanding heights of the economy”, which is to say banks, heavy industry, foreign trade, large-scale manufacturing, exploration and control of natural resources, remained firmly in the hands of the Bolsheviks.

Replace ‘Bolsheviks’ with ‘the bureaucratic corporatist élite’, and today’s situation in the West isn’t a million miles away. For all the Sherman Acts and Monopolies Commissions in the world, big business has to gravitate towards monopoly – one of the few things Marx got right. That is, he was right in his observation but not in his explanation.

A modern businessman has a psychological need to achieve total control of his market in the same way, and for the same reasons, that a modern politician wishes to achieve total control of his flock. Class has no role to play here – one of the many things Marx got wrong.

Modern man prays at the altar of uniformity, and he melts down any class differences until they are reduced to quaint idiosyncrasies. Every class of philistine modernity tends to gravitate towards an amorphous middle. In today’s Britain, for example, the differences between ‘the proles’ and ‘the toffs’ seldom go deeper than the clothes they wear.

What also drives the modern ‘free’ businessman towards monopoly is the same utilitarian impulse that paradoxically drives many aristocrats towards socialism: they know that putting the clamps on the socially dynamic strata of the population will prevent any serious competition appearing. Here the entrepreneur’s longings converge with those of his employees who tend to act as a collectivist bloc.

Their motivation is old-fashioned envy coupled with the deep-seated belief that it’s possible for some to rise only at the expense of others falling. By the same token, the ruling bureaucracy has a vested interest in keeping businesses as large, and consequently as few, as possible for this will make control easier and more total.

In short, the only people who do believe in unvarnished free enterprise are big businessmen waiting to happen, those who are still climbing towards the summit and don’t want their rope cut. Once they’ve got to the top, they’ll realise the error of their ways and start acting accordingly.

Another dynamic at work here is a tendency towards the globalisation of business, closely following a similar trend in modern politics. Like modern life in general, business tends to lose its national roots. In the absence of protectionist tariffs, known to be counterproductive at least since the time of David Ricardo, an aspiration to monopoly drives a big business towards foreign expansion ad infinitum, which is another form of protectionism but one that doesn’t provoke retaliation in kind.

This megalomania, along with a tendency to dissipate ownership by financing expansion through stock market flotation, leads to a situation where ‘free enterprise’ becomes neither free nor entrepreneurial. The ‘capitalist’, Marx’s bogeyman, is eliminated in philistine modern societies as efficiently as he used to be shot in nihilist ones.

Most international corporations are neither run nor controlled by capitalists, if we define the breed as the owners of capital (or of ‘the means of production’). That type, rather than having been created by the Industrial Revolution, was killed by it, albeit by delayed action.

Today’s captains of industry don’t necessarily own the capital of which they dispose, and they don’t live or die by their success or failure. The risks they venture are usually taken with other people’s money, and they stand to gain untold fortunes by achieving success, while personally risking next to nothing in case of failure. If they fail, they take the king’s ransom of redundancy and either move on to the next bonanza or, should they so choose, retire to a paradise of philistine comfort.

Qualities required for a rise through modern corporations are different from those needed in the early stages of the Industrial Revolution. They are, however, close to those required for careers in government bureaucracies.

This is partly due to the growing disparity between the ever-expanding outlook of the management and the ever-narrowing outlook of the specialists who make the products. In the old days, someone who designed bridges could advance to the next rung in his company by demonstrating ability. Once he got there, he continued to design bridges, but with added responsibilities.

People at the top rung would thus come from the same stock as those several steps below, although their duties would be different. Not so modern corporations. Growing specialisation creates a different situation: the people in production represent a different breed from those in the boardroom. The latter are hardly ever drawn from the former.

Most leaders of giant modern corporations come from legal, sales or marketing, rather than manufacturing, backgrounds. Curiously, when Marx wrote Das Kapital, the gulf between workers and management could still be bridged by hard work and ingenuity. The industrial conditions imagined by Marx were in fact a self-fulfilling prophecy: it’s only when some of his ideas were acted upon that an unbridgeable chasm appeared between the corporatist management and the narrowly specialised labour force.

Even as the governments of philistine modernity grow more corporatist, so, tautologically, do actual corporations. A new élite is thus formed, and it’s a homogeneous group whose members are indistinguishable from one another regardless of whether their original background was business or politics. Hence the ease with which they switch from the corporate to the government arena and back, especially if they come from the international end of either.

The spiritual father of the breed was Walter Rathenau, Managing Director of German General Electric in the 1920s. One of the leading theoreticians and practitioners of corporate socialism, he prophesied that, “The new economy will… be… a private economy [which] will require state co-operation for organic consolidation to overcome inner friction and increase production and endurance.”

Here was the original politician cum tycoon, and there was poetic justice when he was murdered in 1922, 11 years before his dream became a reality in Germany, and by the same people who made it so.

As ever, my interest here is primarily linguistic and taxonomic.

The old terms, such as ‘capitalist’, ‘proletarian’ or ‘worker’ no longer mean much and certainly nothing of what they meant a century ago. Witness Starmer’s difficulty when he was asked to define ‘working people’ (those he promised, falsely, would be exempt from his extortionist tax hikes).

Although Starmer isn’t a bright man, even he sensed that 19^th century terminology sounds like a ludicrous anachronism in the 21^st century. And because he isn’t a bright man, he couldn’t propose a non-Marxist lexicon to justify his Marxist longings. Mind you, that task may defeat even cleverer people than him.