In the academic discussion of liberalism, the corporation is generally ignored.
The character of the corporation is rarely up for discussion. It’s completely absent in the entire economics profession. In political science, it is generally ignored.
That’s the take of Evan Jones of the University of Sydney Department of Political Economy.
Why do liberals in the liberal arts ignore corporate power?
“In economics, it’s partly a matter of methodological preferences,” Jones said in an interview earlier this month. “You can’t put the corporation in a mathematical form. The status in economics is in the elegance of abstractions. Hence, the preference for theorizing the perfectly competitive market. So, there is a methodological issue here.”
“There are people within economics that one would call industrial organization specialists. They spend their lives trying to understand the history of antitrust and work toward effective utilization of antitrust law. But they have always had low status in the profession. They are marginalized. There are optional courses. And in some universities, those courses have disappeared completely.”
“There is this general tendency to eradicate the study of power in their subject. It is a kind of a feel good notion. You don’t want to look at the nastiness, the way the world works. The label Ivory Tower is an accurate description of what people do in universities. It is good to see that some significant legal academics at law schools in the United States are looking at how you redress corporate power. There is a Canadian – Joel Bakan – who wrote a book titled The Corporation: The Pathological Pursuit of Profit and Power. He also did a documentary film about it. This had a significant impact. But the academics generally continue to ignore it.”
“In the last couple of decades, we have had senior executives of banks overseeing financial advice divisions which have used people to criminally draw unsuspecting elderly people or disadvantaged people to part with their savings, even to take out loans to invest in supposedly secure investments, but behind the scenes they are in fact high risk investments and all the dough disappears. That received a great deal of press discussion. But the people who oversaw that activity are completely immune.”
We have had a similar public issue here in the United States. Coming out of the 2008 financial crisis, no major bank executives were criminally charged. It became a political issue. There is a lot of activity here. There are criminal prosecutions of big corporations. There are major tort law firms bringing major cases against corporations. But these types of prosecutions have been weakened significantly. Top executives are generally not prosecuted. We see the rise of deferred and non prosecution agreements and a decline in corporate plea agreements. Give us a comparison – U.S. versus Australia – corporate power and corporate corruption.
“I’m quite admiring of that activist element in the United States and am staggered that it continues in the face of corporate lobbying and corporate funding of Congress. But there is literally no equivalent in Australia. The regulators here are utterly complicit. You need people versed in corporate structures and behavior to work at the regulatory authorities and be prepared to work there for lower salaries if necessary. But you just don’t get those people. Rather, the revolving door is in the other direction. Young capable people from the regulators are bought off by the companies and the banks.”
“In the economics profession, corporations existed on the margin of the syllabus in optional courses called industrial organization or some such. In the core of the syllabus of course the corporation didn’t exist. Something called ‘the theory of the firm’ was a travesty of intelligence.”
“As I mentioned, the twin imperatives of methodology – you can’t put the corporation into an equation – and ideology – the feel good desire to obliterate or ignore power in the analysis – combined to push real world analysis to the periphery.”
“Then came reinforcement for the libertarian push, pushing the line that although any particular corporation was massive, there was always potential competition, and thus the eradication of the big corporation’s power, hiding in the wings.”
“First was the influence of Schumpeter, and his ‘creative destruction.’ Even though Schumpeter wrote this in the 1940s, and he was at Harvard, I think it took a while to take off in policy influence. Then, after that came Baumol’s ‘contestability theory.’ Just so much palaver. This had a big impact on policy makers in Australia, implying — let corporate power alone, as it is ephemeral.”
“There was also the Virginia School – James Buchanan and others – similar story.”
“Real liberals, at best, continued to put their hopes in assertive antitrust policy. Others withdrew into pure wishful thinking or ignored the elephant in the china shop completely. One of the first breeds, William G. Shepherd, continued to work valiantly for the cause.”
“If you haven’t interviewed him already over the years, it may be highly instructive to do so, on his insider understanding of the potential for antitrust and of training economists, for the good fight. He is emeritus at UMass Amherst.”
“One of the bigtime advocates of traditional and forceful antitrust policy was Walter Adams. I was at Michigan State University when he was in full flight. He was a brilliant man. I took one course from him, but I was too immature to appreciate it. I suspect that Adams died a very frustrated man.”
[For the complete Interview with Evan Jones, see 34 Corporate Crime Reporter 44(13), November 16, 2020, print edition only.]