“But I detect that the criticism [of big businesses] is increasingly out of date, and that large corporations are ever more vulnerable to their nimbler competitors in the modern world – or would be if they were not granted special privileges by the state. Most big firms are actually becoming frail, fragile and frightened – of the press, of pressure groups of government, of their customers. So they should be. Given how frequently they vanish – by take-over or bankruptcy, this is hardly surprising. Coca-Cola may wish its customers were “serfs under feudal landlords”, in the words of one critic, but look what happened to New Coke. Shell may have tried to dump an oil-storage device in the deep sea in 1995, but a whiff of consumer boycott and it changed its mind. Exxon may have famously stood out from the consensus by funding scepticism of climate change (while Enron funded climate alarmism) – but by 2008 it had been bullied into recanting.”
Matt Ridley, the Rational Optimist, page 111.
He’s right, of course. While Hollywood moviemakers may delight in using bosses of large firms to be villains, which is rather ironic, given the importance of big entertainment firms like Time-Warner, Disney and Sony Corporation to the movie industry in recent years. The actual track record shows, as Ridley says in this excellent book, that firms have a far shorter shelf life than government agencies. This is hardly surprising. There is, in government, no negative feedback loop with a failed agency or an agency that has outlived whatever reason for its original existence. As we see time and again, a government agency will often look for new things to justify its continued existence, arguing for larger budgets, more staff, and so on. With business, on the other hand, any firm that does not adapt to the constant shifts of consumer habits will die.
Here’s more:
“Half of the biggest American companies of 1980 have now disappeared by takeover or bankruptcy; half of today’s biggest companies did not even exist in 1980. The same is not true of government monopolies: the Internal Revenue Service and the National Health Service will not die, however much incomptence they might display. Yet most anti-corporate activists have faith in the good will of the leviathans that can force you to do business with them, but are suspicious of the behemoths that have to beg for your business. I find that odd.”
After having read and watched anti-business folk for years now, I don’t perhaps find this attitude as odd as Ridley does. The hatred of business is, in my view, a product of centuries of crappy, anti-reason philosophy and a fear of freedom that this has generated.
Hollywood isn’t really anti-business. It just knows that business villains are going to be popular with its main target audience – poorly educated people young people.
Also, big business is a politically correct villain for Hollywood. They can’t use ethnic mobsters any more (that’s demeaning), the Soviet empire is defunct, Muslim terrorists would constitute insensitive “stereotyping”, Bond-style evil geniuses aren’t really believable, so other than the occasional drug cartel what sort of universal villain is left? Right: multinational corporations and rogue government agencies. Personally, I prefer the latter (especially if you delete the word “rogue”!), but as Pete says most of Hollywood’s target market finds the former more believable. Nothing personal; it’s just business.
But back to Ridley’s point (and I do need to read his book), he’s only partially correct. I assume he’s right that half of the largest companies from 1980 have disappeared, but without doing any research on the point I would bet that most of those have simply been absorbed into larger, even more powerful companies. Their ability to command governmental “special privileges” hasn’t vanished, it has merely been transferred into other hands. Changing the name over the door doesn’t change the reality of their power.
Bankruptcy permits the power of large businesses to dissipate (as well as transferring their physical assets into more capable hands), but unfortunately today the cleansing effect of bankruptcy has been eliminated for the largest “too-big-to-fail” companies. General Motors (and especially the United Auto Workers union) is even stronger than ever, and even more able to extract governmental favors to the detriment of its competitors (to say nothing of the taxpayers, of course). The same is true for the largest Wall Street firms. The US Treasury is now, for all practical purposes, a wholly-owned subsidiary of Goldman Sachs. That’s not good for the rest of us.
The “military-industrial” complex that Eisenhower warned about has now become the “big business-government” axis. That idea is certainly not original with me, but it’s nonetheless true and is even more dangerous than in Eisenhower’s day. The increasing concentration of power into that axis is highly detrimental to our liberty, and even our safety. For Ridley to downplay it isn’t helpful.
^^^What Laird said.
There are some on the libertarian “left” (if there is such a possible thing), Kevin Carson is a good example, who oppose “big business” on principle. I like big businesses as a concept and think they are essential for a late Middle Period economy. But there is considerable criticism we can direct at current big businesses. Many have noted, e.g. Peter Oborne’s stuff on the political class, how members of that class transition seamlessly between corporate positions, government, NGOs, etc, all of which supposedly distinct bodies can be seen as one large cartel, all part of a Harvardesque soft fascist model. Anecdotally, my own intense dislike of being in the corporate culture is that it’s just too damned much like communism.
Until and unless a major discontinuity occurs, I think we can expect to see more of this trend as the Middle Period draws towards its close. I strongly suspect that this century is going to be the most tyrannical in human history, as a single, unified, global system entrenches itself, with the nominally separate forms of corporatism- state, big biz, charidees and NGOs, tranzi bureaucracy etc all joined into one. But to be more optimistic, that model may be entirely dead by the end of the century, or even well before. This century is going to be just as unpredicatable and chaotic as all the previous ones 🙂
Laird, Matt Ridley makes it clear that there are issues when governments bail out/protect private firms. In which case, such firms cease to be the freestanding firms as referred to in the quote. He is well aware of that issue.
Johnathan, I’m sure that’s the case. However, it’s not apparent from the quotes provided, to which I was responding. As I stated, I haven’t read his book and can’t comment on the entirety of it.
If big business is bribing government to get favours, then according to Murray Rothbard’s description of bribery, it is the bribee (the government) that is at fault. The business is just operating according to the best interests of its shareholders, as it should.
Of course, to the extent that Ian B is right that government and big business are all the same people, this confuses matters.
I will not comment on Carsonism (I wasted years of my life on that).
As for corporate welfare – the biggest example (that makes everything looks very small) is government welfare to the “banks” (really the entire financial industry) by sweetheart (low interest rate) loans from the Federal Reserve and so on.
This did NOT start with the crash – it has been going from the start.
However, some Fed Chairman have been worse than others.
Paul Volker (in spite for all his faults) was miles better
than Alan Greenspan.
Alan Greenspan took corporate welfare to a whole new level.
What Rob said: “…it is the bribee (the government) that is at fault.”
With respect to our governments, we are the shareholders, if that’s not stretching the analogy too far. But our governments have come to see us as customers, and many of us have bought into that. So, naturally, they offer us an increasing variety of products and services, targeted at specific market segments. (I hope that’s not violent rhetoric.)
You started it, Tedd:-)
Laird, actually the point is apparent from the quotes provided, although of course Ridley was describing the contrast between government and free market business as it should be.
In the first part of the quote, he said: “that large corporations are ever more vulnerable to their nimbler competitors in the modern world – or would be if they were not granted special privileges by the state.”
And by “special privileges”, I am sure that involves things such as bailouts and the rest. So I think your initial complaint about the quote is unwarranted. Ridley knows that point, and he alluded to in the quote. No need to nit-pick here!