Big Corporations vs. Capitalism

The answer is that companies sometimes are so successful and grow so big–thanks to free market capitalism–that they undermine free market capitalism.

Back in the 19th century, Karl Marx, observing the course of the Industrial Revolution, predicted that Capitalism would eventually collapse due to its “internal contradictions.”  Specifically, as companies in the various industries competed with each other, the weakest would go out of business and only the strongest would survive.  Where there were once many companies producing and selling a product, in time there would only be a few, or only one.

The winners–either singly or in an alliance of the top companies called a “trust”–would then be in a position to squelch any further competitors, either by undercutting them in the marketplace or by simply buying them through mergers and acquisitions.  In attaining a “monopoly,” in which the trust or the dominant company is the only provider of the product, the industrialists could be free of the market’s role in pricing, enabling them to charge whatever they want, unrestrained by competitive pressures and the law of supply and demand.

Thus, free market economics would lead to the abolition of the free market.  With that “internal contradiction”–and Marx identified others–wealth would be concentrated into fewer and fewer hands.  In an inevitable economic crisis, the privately held monopolies would fail, dragging down the entire economy and social order with it.  Whereupon the people would rise up and seize the means of production for themselves.  The new socialist order would simply substitute state monopolies for privately-owned monopolies, operating them for the good of the people instead of for the personal aggrandizement of the wealthy owners.  But it would simply exchange one monopoly for another, with both of them repudiating the free market.

Now Marx did not factor into his calculations the rise of true collective ownership in the stockmarket, or the way the free market would create so much wealth that the workers too would attain a lifestyle and a level of prosperity formerly associated only with the bourgeoisie, or the effects of political and economic freedom.  But it looked like he was right about capitalism turning into anti-capitalism, as big trusts–the Oil Trust, the Railroad Trust, the Steel Trust–began to dominate America’s economy in the late 19th century.

But then the Republican Party, led by President Theodore Roosevelt, took up the cause of “trust-busting,” passing laws against anti-competitive activity and price-fixing, in some cases breaking up monopolies and overly-dominant businesses. The motive was to save capitalism and to preserve free market economics.

In today’s economy, technology companies such as Google, Amazon, Apple, and Facebook surely deserve their success.  The creativity of their founders, the way they have marshaled technology to enhance our lives, and the impact they have had on society as a whole are marvels.  But their very size and dominance threatens to undermine the social and economic system that allowed them to thrive.

The conservative online magazine The Federalist explains how in an article by Rachel Bovard entitled It’s Time For Congress To Get Serious About Big Tech’s Threats To Individual Rights.

Conservatives have long complained about the political bias of big tech.  Facebook and Twitter are communication tools designed to promote the exchange of ideas, but with their de facto monopoly on social media, they can adjust their algorithms to censor, deplatform, and marginalize ideas they do not approve of.  (Notice that the big corporations are not only anti-conservative in their economics but also in their political and social beliefs.)

Bovard writes about that, but she goes on to also detail how these companies are also, in one of her headings,  “Using Market Power to Crush Innovation and Competition.”  She tells how these companies have sometimes heard investment proposals from smaller businesses, only to then steal their ideas by making the product themselves.  Google uses its position as virtually the only search engine for the entire internet to manipulate searches so that they favor Google products.  Amazon, of course, has cornered the market on on-line shopping, manipulating prices and eliminating competition accordingly.

She also writes about the ways big tech violates our privacy, accumulating a vast amount of information about each of us–by reading our emails, tracking our location, and getting access to our purchases.  The ostensible purpose is to manipulate us more easily with targeted advertising.  But, as Bevard says, “In this bizarre legal landscape, Google has a right to your medical record, but you don’t.”  The scale of this mass surveillance is totalitarian and defies the values of a free society.

She also exposes big tech’s complicity with China, which manufactures many of the products big tech sells to us, even to the point of co-operating with that Communist country’s suppression of democracy and human rights abuses.  Again, the big corporations are undermining political, economic, and personal freedom.

Bovard concludes, referring to the Congressional hearings,

The sheer scope of Big Tech’s massive influence and unprecedented power over individuals as well as society is becoming frighteningly clear. Efforts to force this hearing into the frame of “private companies versus the government” or “appropriate or inappropriate uses of antitrust law” are distractions in the face of what lawmakers should be focused on: investigating the intersection of innovation and power, and discerning what is merely commerce versus what is a collective corporate action to change the nature of a democratic society and a free people.

Illustration from Amazon.com