“What good are shareholders?” ask Jay W. Lorsch and Justin Fox in the latest edition of the Harvard Business Review. The authors grapple with some of the most pressing and recurring issues surrounding the relationship between the many people who “own” a given company and the few who actually run it.
“[A]lthough many top managers pledge fealty to shareholders,” the two point out, “their actions and their pay packages often bespeak their loyalties.” So how can we “make capitalism function better,” creating equitable results whereby execs respond to the interests of people who own shares? Market anarchism boldly posits that we simply cannot make “capitalism,” as such, function better — that free markets and capitalism are very different things, and that only the former can produce the fair results that society as a whole ought to strive for.
Most “work” today amounts to not much more than pushing paper through the raveled and shambolic bowels of layered corporate bureaucracy. It’s administrative protocol that doesn’t actually create anything of value. And quite contrary to the corporate economy’s myth of efficiency and logical coherence, its wastes and structural confusions are only allowed to endure on the strength of state-granted privileges that too many champions of “free enterprise” fail to acknowledge. As the non-profit Saving Communities articulates the point, “The idea that big corporations are efficient while big government is inefficient is a glaring example of Orwellian doublethink.”
Market anarchists have long argued that both “Bigs” — government and business — share most of the same operating principles, that they are more similar than different. That ought to come as no surprise, though the reason it is true is most often bedimmed by American political dialogue’s false dichotomy of private sector versus public sector. Because of a vast system of subsidies and barriers to market entry, huge and ungainly corporate actors are immunized from genuine free market competition in the form of smaller, nimbler and more adaptable business models.
Discussing the problems that accompany separation of ownership from control in the contemporary corporation more than ten years ago, economics scholars Franklin Allen and Douglas Gale suggested that more legitimate competition is able to remedy some of the common obstacles to efficiency.
Market anarchists also advocate for decentralized and genuinely open competition, in contrast to the rigged system of monopoly capitalism that prevails today. It isn’t just that law governing the corporate form allows managers to steer companies away from shareholders’ actual goals, but that the incentives that would naturally unite ownership to control are completely undone by the present system.
Without favoritism to big business in the form of, for example, preferential land grants, patent monopolies, energy and transportation subsidies, and regulatory barriers, the multinational leviathans would simply crumble under their own weight, unable to compete with more horizontal competitors.
All of the privileges (amounting to welfare for the rich) removed, the big companies that dominate commerce today just wouldn’t make practical sense from an efficiency standpoint. Instead of blaming competition for corporate dominance, then, market anarchists have attempted to demonstrate that indeed the lack of true competition and free markets is to blame. Whatever “competition” we have now finds the deck stacked from top to bottom for the chosen economic interests, who’ve lobbied hard at the seats of government for their perquisites.
Intellectuals are going to be debating issues of corporate governance, incentives and efficiency for a long time to come while the giant multinationals continue to cozen a profit through global capitalism. Those issues resolve themselves, though, if we find ways to remove or undermine corporate privilege, cultivating real free markets of voluntary exchange and cooperation.