Alright, so the title is a little sensationalistic, but the author David Korten isn’t some left-wing conspiracy theorist. For one, he was a professor at Harvard Business School, and started his career helping set up business schools in low-income countries. He believes in business, but as he explains in the introduction, traveling around the world opened his eyes to the ways in which globalization and the massive expansion of international corporate power is detrimental to small business, democracy, and the environment.
He points to several ways in which perfectly free markets inherently fail (p. 96):
- fair competition: Left alone, winners eat losers, get bigger, and crowd out future competition. A perfectly free market is guaranteed to become monopolized in a short time.
- moral capital: a market without rules is a market without trust. This reduces efficiency and incurs unnecessary costs of lawyers, private security and other defensive measures. Also, regulation is what keeps companies from selling drugs to kids and enslaving children.
- public goods: things like basic scientific research, public security and justice, education, roads and national defense are necessarily ignored by the free market because once they’ve been initially paid for, they’re freely available to everyone. Why pay for something that you’ll get anyway? Because if everyone things that way then nobody gets anything.
- full-cost pricing: actors in free markets cut costs and increase profits by externalizing costs. Without regulation forcing companies to, for example, pay for cleaning up pollution, they’ll save money and increase profits by dumping pollution into the environment where everyone else will have to pay for it.
- just distribution: a market in which economic power is unequally distributed will devote more and more resources to producing unnecessary luxuries and less to the things everyday people need to get by. The logical end of a perfectly free market is one in which 95% of people live with the bare minimum to survive and produce astronomically expensive toys for the top 5%. Are we really that far from this situation in 2010?
And some other interesting ideas that don’t quite fit neatly into a narrative:
- Imperialism is a mechanism for transferring income from the middle to the upper classes (p. 36). The upper, business-owning class reaps all the profits, but the middle class pays the costs in taxes. Case-in-point: the Iraq War. American taxpayers fund a $750 billion war, and all companies get cheaper oil, some like Halliburton getting hundreds of billions in contracts at the top. This is the justification for a graduated income tax. Capital-owners require vastly more public resources not only to protect their factories, land and capital at home, but to send the military out to protect their interests (cheap labor and materials) abroad, to say nothing of their externalized costs (a degraded environment, less security) the public has no choice but to pay.
- “Dirty Jobs”, while an enjoyable show on Discovery, is pretty appalling when you compare a white man’s “dirty job” cleaning port-a-potties to the children mining in Africa and handling toxic waste in China to support the American way of life. (p. 39)
- GDP does not equal well-being. When a corporation lays off 40,000 employees, their profits and stock price go up, increasing the GDP, but it’s ridiculous to assume that somehow makes the country better off (p. 46).