The private versus the public: living with the hierarchical system

Societies that are most vulnerable to economic piracy need countervailing forces to protect them from those who deliberately pursue actions intended to maximise their own gain at the expense of the welfare of us all.

This point is often not considered by free marketeers, given that they are driven by efficiency and profit more than anything else. The efficiency debate should be called what it is – a Darwinian strategy where the strongest take all the gains, thus ensuring they become even stronger.

This, in essence, is the logic of extreme marketeers; so, one must not be confused by the economic catch phrases that are often a cover for greedy pursuits. Excessive power in markets or politics should be curtailed, but even by our own standards of what is a good society, our system of political and economic institutions fosters a hierarchy.

The big conglomerates are seen as a necessity for scale, the concentration of large forces of capital and technology and, of course, the maximisation of production assets for efficiency and cost effectiveness. At least this is what is preached, if not promised. There may be some truth in this, but if we only consider things that look good, we may obscure our view of things that look bad.

Ayn Rand’s book, Atlas Shrugged, projects the ideal type of the heroic corporate figure who espouses objectivism and the power of individual creativity to mitigate the oppressive, restraining rules of the overreaching State. Rand’s hero, John Galt, is a saving figure who is depicted as a ‘necessity’ against the totalitarian collective. Rand, if anything, has had greater influence than economic theory, as she has socialised the idea of a heroic corporate baron, considering the number of books she continues to sell.

Rand’s influence on American Libertarians has been gripping. These groups are calling on exploited ‘burger flippers’ to get back to slave wages after a sort of downing of tools. US workers who have received unemployment compensation since the advent of the Covid-19 pandemic have elected to stay home and be with their families (rather than go back to work) until unemployment support expires.

Businesses that need labour desperately are now outcompeting each in terms of offering workers good wages and other benefits. Clearly, the Covid-19 crisis has shown workers that they have latent power that they could use effectively if they were better organised.

There has been a counterpoise to the corporate hero since long before Rand became famous.

We need to understand, as Thorstein Veblen noted a long time ago, that, while the corporation may be portrayed as an enterprise that, among other things, seeks welfare for all, it is a machine that engages in the game of market power and, in the end, also seeks political power – directly or indirectly.

The same “robber barons” about whom Veblen opined had too much power, and Rand turned them into heroes of productive necessity. Yet Veblen saw their talents at production and the surge in conspicuous consumption as wasteful – attacking the marginal utility theory as being a cover for unproductive capital. Perhaps Veblen was the first economist who sought to develop the sociology of businesses as institutions within markets and understand their power.

There should be no surprise, then, to see how this plays out with the philanthropic pursuits of the Koch Brothers, where securing maximum profits for the oil enterprise and the pipelines that transport the oil requires a tough attitude not only in the markets but also in politics.

The earlier pioneer of this method was the founder of Standard Oil, the corporate baron John D Rockefeller. It was none other than Ida Tarbell, who, in a series of articles in McClure magazine around 1904, systematically unpacked the political economy of the large corporation, which effectively turns itself into a political machinery that uses its resources and market power to shape politics – solely for its own benefit.

Hierarchical models may be logical but they often land us in trouble if we cannot tame the beast that we permit to grow too big and too fast. Just think of Facebook, Google and Amazon – initially small things that have become giant machines of surveillance and control, as well as monopoly platforms.

It was the erudite and autodidact Lewis Mumford, who most young people would not recognise today as a pan-intellectual, who noted that 5 000 years ago when the first hierarchical models of civilisation emerged – the Egyptian and Mesopotamian empires – that a distinct arrangement of power and control had emerged. In these civilisations, State, political and economic power were concentrated in the hands of a few.

These days, hierarchical power is distributed and when political power coexists symbiotically with economic power, a web is created where hubs of hierarchy throttle any countervailing force seeking to curtail its excesses. Legitimately arranged State power, appointed through democratic means, can go rogue. This has manifested in South Africa in the form of State Capture, where the State is held captive by self-gain interests or embedded piracy.

This piracy is no different from the piracy of corporate barons. What is public is turned private. State resources are subjected to political entrepreneurship. This means that the guise of public benefit belies what one cannot see – State resources feeding the gluttony of political entrepreneurship. The political entrepreneur aspires for the same wasteful pursuits of the corporate baron: conspicuous consumption and glorification of status.

State hierarchical systems and often the obscurity of their inner workings provide fertile ground for turning State assets into targets of enterprising thieving, if not waste.

We have a strange habit of democratising politics but not democratising the hierarchy, especially if doing so would work against us. This paradox in democracy has to be addressed if faith in hierarchical democracy is to be restored.