One way we often go wrong is when we continue to believe in paradigms that no longer hold. Take, for example, the way markets work in Adam Smith’s conception. Individual entrepreneurs, none of them dominant, decide to produce different goods which are exchanged according to individual preferences and budgets. Or take another paradigm, that of the corporation. Here Smith’s single entrepreneur is replaced by a group of risk takers who commit capital in the production of some good. Each shareholder has a voice in how the corporation is run by managers who are elected and monitored by the shareholders.
These were useful and liberating innovations. Adam Smith showed that economies (and, hence, societies) could be liberated from the grip of monarchs on peoples’ economic lives, and by extension on how people could live. Smith’s market system was in line with the spirit and mission of the Enlightenment to free societies from monarchical rule, religious dogma, and superstition. The corporation also facilitated the spreading of risk over many participants and, thus, moderated the power of concentrated wealth in the pursuit of business opportunities.
In their original conception, markets and corporations were mechanism that allowed the decentralization of economic choices, business risk, and decision making so that societies could take control of their future through economic pluralism and diversity of ideas. These paradigms are now shadows of their original version. Markets still exist but in important areas of the economy they have been captured by powerful corporations which exert inordinate power over their workers, customers, and the creation of new consumer ideas and products. And corporations have been seized by individuals who by virtue of their controlling stakes in the equity of their firms are in unique position to make decisions that reflect their own pursuits.
This dual combination of market and personal equity ownership has cancelled out many of the emblematic and beneficial features of Smith’s markets and corporate form of business organization. If Adam Smith were alive, he would be sad to see that some sort of monarchical order has been reestablished through the back door and in a new form. The new dynasties don’t have names like Bourbon or Habsburg. Their names now are Apple, Amazon, Facebook (Meta), Google, and Microsoft.
These corporate dynasties have not only amassed market power and market capitalization (i.e., value of equity), they have also privatized and monetized an enormous amount of personal information that can be used to affect market and even political outcomes. In his essay “The Use of Knowledge in Society,” Friedrich Hayek, the libertarian economist, had argued that central planning could not aggregate the quantity of information the market can. He spoke too soon. Amazon, Google and Facebook are certainly close to reaching this point as aggregators of information.
So, it is time to consider the consequences the concentration of market power, corporate control, and information in the hands of a few persons can have on our future. And we need to ask “Who is going to decide our future?” That is, how we live, how we socialize, and what we consume. The free development of life styles and cultures is at stake.
Consider the Amazon empire. You can read The Washington Post and any book on your Kindle, have your groceries delivered from Whole Food Markets, order all kinds of consumer goods from Amazon, and then relax by streaming a show on Prime. Oh, I forgot that you can even fly to the space on a Bezos spacecraft. In other words, a big part of our lives can be lived within the ecosystem created and controlled by one firm. Facebook will even transfer you to virtual worlds with its metaverse technology. These firms do not just produce goods, they produce whole ways and styles of life. In the words of former Harvard professor Shoshana Zuboff, “they write the music and we dance.”
As I have written in other posts, central to the evolution of human life and civilization is the creation of new wants. New products and life styles come about through the creative or greedy minds of many different inventors, artistic creators, and visionary entrepreneurs. What happens, however, when this decentralized process collapses to a centralized system controlled by a few players? Even worse, what happens when these players are just single individuals who control corporate empires and vast wealth?
This is already happening. It’s happening through the appropriation of personal data and their manipulation for the purpose of modifying and shaping consumer preferences and controlling the exchange of information among billions of people. It’s happening through predatory acquisitions that capture technologies and talent from startup firms or by killing the competition from them. Advances in Artificial Intelligence will make these corporate empires even more potent in charting our future. So, the question is “how do we decide on these matters?”
As of now democracies have proved to be relatively impotent in preventing people and their personal data from becoming a commodity in the hands of the big tech firms. So, what does it mean to have representative government if it fails to ensure that our future way of life remains the outcome of a pluralistic process? How democracies answer the challenge raised by the rise and hegemony of corporate information empires will have profound consequences for the future of humanity. It will also set the tone for the rest of the world.
A recent survey on the health of democracy around the world showed that the US has exerted a rather negative influence on other democratic states during the last decade. If the US fails to curb the practices of its own players, then the allure of democratic governance will further dim at the expense of pluralism and liberalism in the shape of our future. Doing nothing means that the future of the world is bound to be shaped by profit-seeking private corporate empires in the West and by China’s fast growing technological prowess serving the interests of the Party.
That means our future could very well take shape under the auspices of one or another kind of illiberalism.
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