Notes for a Debate
By Arnold Kling
On the topic of corporate power. Open to the public. This Friday evening, January 21st. 7:30 PM. Washington Plaza Hotel, 10 Thomas Circle, in NW Washington DC. Frederick Hall.
My notes follow:1. Thinking about organizations.
There are many different kinds of organizations in society. Governments, businesses, nonprofit businesses, charities, churches, clubs, criminal gangs, …
The libertarian perspective is to divide these organizations into those that thrive on the basis of voluntary transactions and those that thrive on threats and intimidation. In general, governments and criminal gangs fall on the “bad” side of the line and corporations fall on the “good” side.
In contrast, I think many people think that certain organizations are inhabited by good spirits and others are inhabited by evil spirits. One particular viewpoint is that good spirits inhabit labor unions, the Democratic Party, crusading lawyers and regulators, etc., while bad spirits inhabit the Republican Party, fundamentalist churches, criminal gangs, and corporations.
I call this good-spirit, bad-spirit approach the enchanted way of thinking about society. If you are deep into the enchanted view, and you imagine that everyone else holds an enchanted view, then the only way you can explain libertarians is by telling yourself that they have a perverse enchantment: libertarians must believe that corporations are inhabited by good spirits, and government is inhabited by evil spirits.
But I prefer to think of myself as disenchanted. I do not believe that organizations are inhabited by spirits. Corporations are not inhabited by good spirits. If you think otherwise, just ask my wife what it’s like dealing with health insurance companies. But government is not inhabited by good spirits, either. Just ask her what it’s like trying on the behalf of her mother to deal with Medicare.
What makes corporations tolerable is competition. When a corporation treats me well and gives me what I want, I give thanks to its competitors.
I tend to give credit to unregulated competition rather than government rules. I do not believe in a wise-referee spirit that inhabits government regulatory agencies. Instead, I see those agencies as subject to capture by large, incumbent businesses. Most of the time, government regulation will thwart competition rather than promote it.
Overall, from the disenchanted perspective, there are no good spirits to protect us from greedy corporations. Instead, what protection we have–and it is far from perfect–comes from competition. I am in favor of any voluntary form of organization that enhances that protection. Consumer watchdog groups, organizations that track and report on the performance of businesses, etc.
2. Exit vs. Voice
In markets, consumers express their preferences through exit. If you do not like something, you do not buy it. If a company gives you lousy service, you stop using that company, and you tell your friends about the bad experience that you had.
Another way to express your preferences is through voice. You can complain, write a letter, and so on. But voice without the option to exit is futile. The health insurance company or the cable company can get away with lousy service because it is so difficult for the consumer to exit. Monopoly or near-monopoly diminishes the exit option, and the consumer suffers.
Nowhere is the exit option harder to exercise than with government. Are there policies that you would rather not support with your taxes? Too bad. Are there services you would rather get from another source? Take what the government gives you.
Government claims to be responsive to the voice option. We live in a democracy, so the government has to listen to “the people,” right? Well, once you reflect for a while, you realize that the voice option is not terribly impressive. Notwithstanding the egalitarian myths, when it comes to exercising voice some or more equal than others. Much more.
When you encounter corporate power that you find frustrating, the best way to deal with it is usually exit. Occasionally, you come across a situation where you think that you can do more, such as form a consumer watchdog group or start a competing enterprise. Often, though, people want to counter corporate power with something more coercive, in the same class as criminal enterprises and governments. Libertarians see that as trying to address the wrong of corporate power with an even worse wrong.