American big business has never had it better. The profits of the S&P 500 are at record levels, and large corporate brands are worth more than ever before. Thanks to the 2017 tax cut, they get to keep more of those profits—a windfall that they have overwhelmingly used to buy back their own stock, raising its value and further enriching their executives and the tiny affluent minority of Americans with significant stock holdings.
Ordinary Americans aren’t doing quite as well—and they aren’t too happy about it. In polls, they say corporations are too big and too influential. This discontent stems from the widespread realization that the gains from economic progress have gone increasingly to a tiny slice of the population—and, more recently, from the fear that our lives are being controlled by a shrinking number of super-rich plutocrats.
But to Tyler Cowen, a libertarian blogger and economist at George Mason University, the worrisome thing about corporations is precisely that they’re unpopular. “I have a complaint about America today,” he writes in the first pages of his new book, Big Business: “we don’t love business enough.” The book is the latest in a line of apologia for the status quo by centrist and conservative authors hoping to stem the growing backlash against our rich-get-richer economic system. But even Cowen, who has one of the sharpest minds, and pens, in the conservative economics realm, has a tough time defending the indefensible.
Big Business doesn’t try to systematically compare an economy built around large, lightly regulated corporations against some meaningful alternative. Instead, it takes up a number of complaints that people have raised about corporations and attempts to rebut them one by one, switching between modes of argument every few pages. Cowen leans especially heavily on a few common rhetorical strategies in defense of the current order. The first is essentially tautology: businesses are really important, so they must be good; otherwise, why would they be so important? “All of the criticisms one might mount against the corporate form . . . pale in contrast to two straightforward and indeed essential virtues,” Cowen writes: “First, business makes most of the stuff we enjoy and consume. Second, business is what gives most of us jobs.” But in any society at any point in history, people got stuff from and worked for some institutions; logically speaking, that cannot be evidence of the merit of those specific institutions.
This strategy is particularly evident in the chapter “Is Work Fun?” Here Cowen argues that, instead of complaining about being exploited by companies, workers should feel lucky to have jobs that are productive and fulfilling; and we know those jobs are productive and fulfilling because people work a lot. Weekly working hours rose from 1950 to 2000, “hardly a sign of work falling out of fashion.” We should thank our corporate masters, because work gives us the satisfaction of being paid, and “it is corporations that are the ultimate creators and source of that pleasure.” In short, Cowen looks at people trapped in a system and interprets their behavior as an endorsement of that system. Prison sentences have grown longer and more numerous since 1950, too; should we infer that people have grown fonder of being locked up? Americans are working more today, but for many that “choice” is a result of wage stagnation, health care inflation, and the shrinking social safety net.
This discussion of work also demonstrates the second common rhetorical technique of Big Business: changing the topic. Instead of responding to the leading critiques about our top-heavy economic system, Cowen repeatedly takes aim at imagined adversaries whose complaints range from beside the point (“Work isn’t fun”) to bizarre. He counters concerns about corporate fraud by noting that people lie more often than businesses, as proven by . . . online dating profiles. It’s an absurd comparison. When a guy lies about his height on Tinder, his date is disappointed. When too-big-to-fail megabanks like Wells Fargo and HSBC engage in widespread fraud, millions of people lose their homes and millions of dollars get funneled to drug gangs and countries that support terrorism.
When it comes to work, everyone understands that it will always have pluses and minuses, whether you work for a Fortune 500 company, a small business, a nonprofit, or (like Cowen and I do) a public university. The real complaint about work today is that the fruits of ordinary people’s labor are increasingly being claimed by employers and their shareholders, even as jobs become increasingly precarious and contingent. For three decades after World War II, hourly wages rose in virtual lockstep with labor productivity; since 1973, productivity has continued to climb at the same rate, but wages have been almost flat. Should we love that?
Big Business fails to answer the question. Astoundingly, inequality appears only once in the book, when Cowen argues that it is driven by superstar firms paying their employees more than the competition. (This is hardly a plausible reason for the skyrocketing income share of the very rich; the typical Google employee is very well paid, but is not in the 1 percent, and the median Amazon employee makes less than $30,000). Cowen doesn’t discuss inequality of wealth at all; he points out that U.S. stock markets tend to go up, but doesn’t mention that only 10 percent of all households own a record-high 83 percent of all stock.
When it comes to concentrated corporate power, Big Business rolls out its third rhetorical device: markets solve everything. Are you concerned that Amazon is too powerful? Not to worry; its strategy is “perpetually low prices, followed by taking in insanely large amounts of business and using data collection to outcompete [its] rivals on the basis of cost and quality service”—all good for consumers. Similarly, “Google cannot charge higher prices than the status quo ex ante, because users would go back to previous methods of advertising.” And Facebook? “Again, there is plenty of competition and rivalry for the market.” In Voltaire’s parody of Leibniz, Pangloss’s argument was that if a better world were possible, God would have created that one instead. Here, it is the iron laws of economics that ensure that we live in the best of all possible worlds, where businesses are always delivering better products and services at falling prices.
This all-purpose appeal to basic economic theory, however, has two major defects. First, the simplistic theory is wrong: the leading research on mergers since the 1980s concludes that they tend to raise consumer prices, in direct defiance of the sunny predictions of conservative economists’ preferred models. Second, it largely misses the point. To stick with Google and Facebook for a moment, our primary concern isn’t that they are ripping off advertisers by charging high prices (and thereby reducing the supply of advertising below its optimal level). We worry that their dominance of the ad business is destroying the journalism industry; that they are amassing a frightening amount of information about each of us, which could be misused not only by the companies themselves but also by insurers, employers, identity thieves, or Russian hackers; that they have established choke points on the flow of information to hundreds of millions of people, providing a convenient way for the Russian government to disrupt our democracy (which Cowen disputes); that they have created powerful tools for spreading extremist views that facilitate atrocities all over the world; and that their business models are based on addiction and produce widespread anxiety as collateral damage.
The technology behemoths only illustrate the more general problem with corporate concentration: not high prices, but the power to make important decisions on behalf of society as a whole. Already, a few companies—meaning a few people, given their governance structure—could determine, if they so wished, what ideas are meaningfully accessible to the general public and how much privacy we are entitled to. The inexorable march of technology will give corporations even more say over important issues; in the not-too-distant future, businesses will decide, for example, how far we can fine-tune the genes of unborn children, and which parents will be able to afford to. Do we trust a few fantastically rich people, constrained only weakly by market forces and their personal reputations, to make these kinds of choices for all of us? Cowen seems uninterested in the question. “For better or worse, corporations are being asked to achieve more social goals, even social goals that we might associate with government,” he writes. Later, he notes, “We also rely on business to regulate speech, for better or worse.” For better or worse: it’s as if the choice between being ruled by elected officials or by plutocrats is basically a toss-up. It is fashionable to belittle politicians, but the central argument for democracy is that it provides a mechanism that ensures that the people making important decisions are selected by and accountable to all citizens. Democracy, by the way, is another word that appears only once in the book. It deserves more love.