Competition, and the faith we place in competition to benefit us all and to disperse power throughout the economy, is the critical blind spot that lies unexamined within capitalist doctrine, and it looms large in our economic policy, an elephant that completely crowds out everything else in the room. It is the plot twist in our free market story, laid bare by Rana Plaza ‒ the collapsed building and the pile of bodies. It is a truth sitting buried underneath the neoliberal monolith that has come to circumscribe all that is relevant to public policy.
We have steadfastly ignored the reality of corporate power, especially when it comes to regulating big companies. It even feels like a betrayal of free market ideology to single out big corporations – there is something unsophisticated about failing to appreciate the benefits of bigness when everyone knows that globe-spanning multinationals are more efficient than local businesses, don’t they? But this terra incognita is exactly where we must step if we are to gain purchase on the crises that threaten our society and planet. Nothing should be taken for granted ‒ even, or especially, the role of the most significant and substantial actors in the industries over which they claim their dominion.
One blind spot – so how hard can it be to see clearly past it? Extremely hard.
As I found out when I opened Pandora’s box, behind that one blind spot sit six free market myths that urge us to reconsider any attempt to recalibrate free market competition. One or more of these myths is at play whenever free market logic is called into question, and the myth usually wins.
So here they are, six commonly accepted myths which, as we shall see, have roots in eighteenth-century economic thinking, laid out and ready for a fresh evaluation in the cold, hard light of the twenty-first century.
- Myth #1: Free markets are competitive.
- Myth #2: Companies compete by trying to best respond to the needs of society.
- Myth #3: Corporate power is benign.
- Myth #4: We already control corporate power with antitrust.
- Myth #5: The law requires companies to maximize financial value for shareholders.
- Myth #6: We are all shareholders; we all benefit from corporate focus on shareholders’ interests.
Remarkably, these myths ‒ mere stories about how the economy might theoretically work ‒ have been enshrined in the law and in business practice. And the flipside of these arguments – that government and society are inefficient, wasteful, bureaucratic and not innovative – becomes the justification for non-intervention in the market. In this book we will take each of these myths in turn to reveal the reality that is currently being obscured. Free market competition does not disperse power, it creates power. In fact ‘competition’ has come to be synonymous with market domination. Companies compete for power, for the benefit of their shareholders, in ways that harm society. There are many types of corporate power that allow the powerful to choose how to shape the economy and society in their interests. Modern antitrust does little to constrain corporate power and, instead, condones it. Corporate directors need not maximize shareholder returns ‒ the law is being wilfully misinterpreted to our collective detriment. This is doubly damaging because most shareholders are already wealthy.
There have been many attempts to debunk the principles of ‘neoliberalism’ – the overarching ideology that these myths serve to reinforce. The challenge is to do something with the insight that things do not need to be ‒ and should not be ‒ this way. We need to act on the knowledge that we are being governed by a defunct system of beliefs that is driving us off a cliff.