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Neo-Feudalism and the Invisible Fist
The surest sign that a market is free is that it is competitive; there should be a rich variety of products provided by a vast number of firms, a situation which affords entrepreneurs many opportunities to enter the market and workers many places to sell their labor. And when we waltz into our local Wal-mart, that is what we seem to see. Alas, it is an illusion of competition rather than the reality. For example, if you want eyeglasses, you can go to Pearl Vision, or Lenscrafters, Sears Optical, JC Penney, Target, Macy’s, Sunglass Hut, or buy frames from 25 different manufacturers. Surely choice and competition prevail in this market. But no. All of these are one company, the Italian conglomerate Luxottica. And as with glasses, so also with so many other products. Most of our beer—even some that try to pass themselves off as “craft” beer—is provided by just two companies, ImBev of Belgium or the South African Brewing Company. Proctor & Gamble provides 75% of razors, 60% of detergent, 50% of feminine pads, etc. Even what few companies remain in each market often engage in collusion rather than competition. Wal-mart, for example, appoints one company as a “category manager” to allocate shelf space for all the “competing” companies.
So how did we get to a situation where the “freedom of markets” has come to mean “servility” and corporate control? Lynn recounts this history, but those who expect a neat tale of “conservatives” versus “liberals” (Lynn prefers the term “progressives”) will be disappointed. Rather, the two cooperated to produce the servile state. In our colonial history, open markets were the means to escape the network of feudal dependencies that governed European systems. In the open market, small landowners and laborers could freely trade their produce and gain independence. Hence, the early Republic kept a watchful eye on the corporate and financial powers. But that care began to break down with the Civil War, as the government directed millions to industry, and the corporations were able to free themselves from control of the states and gain new privileges, even becoming, in a bit of Supreme Court legislation, “legal persons.” For the rest of the century, the “Robber Barons” consolidated their hold on industry after industry to become the dominant force in society and government.
But one by one, the “owners” were stripped off. It began in the Carter administration with deregulation of the airline and trucking industries, the prototype for further deregulation. It was continued under Reagan, who offered few institutional changes but made it clear that his administration would not enforce the anti-trust laws, and he made open war on the unions. But the so-called “Reagan Revolution” was actually consolidated under Bill Clinton with NAFTA and the deregulation of the financial industry. With the “democratization” of the stock market, the general public came to believe that equities were better than savings, and they began to view themselves as little moguls, their interests identified with the large investors. The senior managers saw more and more of their pay tied to stock options, which meant their interests were now also more aligned with the large investors. Outsourcing did for both the unions and the engineers. Only the large investors and their financial backers remained in effective control of the corporate structures, and only their interests would count.