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From Capitalism to Corporatism

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This post From Capitalism to Corporatism appeared first on Daily Reckoning.

In the 1990s, it was common to ridicule the government for being technologically backward.

We were all gaining access to fabulous things, including the web, apps, search tools and social media. But governments at all levels were stuck in the past using IBM mainframes and large floppy disks.

I recall the days of thinking government would never catch up to the glories and might of the market itself. I wrote several books on it, full of techno-optimism.

The new tech sector had a libertarian ethos about it. They didn’t care about the government and its bureaucrats. They didn’t have lobbyists in Washington. They were the new technologies of freedom and didn’t care much about the old analogue world of command and control. They’d usher in a new age of people power.

Here we sit a quarter-century later with documented evidence that the opposite happened. The private sector collects the data that the government buys and uses as a tool of control.

It’s determined by algorithms agreed upon by a combination of government agencies, university centers, various nonprofits and the companies themselves. The whole thing has become an oppressive blob.

Money Flows to Power

Here is Google’s new headquarters in Reston, Virginia:

image 1

And here’s Amazon’s proposed HQ2, in Arlington, Virginia:

image 2

Every major company that once stayed far away from Washington now owns a similar giant palace in or around D.C., and they collect tens of billions in government revenue.

Government has now become a major customer, if not the main customer, of the services provided by the large social media and tech companies. They’re advertisers but also massive purchasers of the main product too.

Show Me the Money

Amazon, Microsoft and Google are the biggest winners of government contracts, according to a report from Tussell. Amazon hosts the data of the National Security Agency with a $10 billion contract, and gets hundreds of millions from other governments.

We don’t know how much Google has received from the U.S. government, but it’s surely a substantial share of the $694 billion the federal government hands out in contracts.

Microsoft also has a large share of government contracts. In 2023, the U.S. Department of Defense awarded the Joint Warfighter Cloud Capability contract to Microsoft, Amazon, Google and Oracle.

The contract is worth up to $9 billion and provides the Department of Defense with cloud services. It’s just the beginning. The Pentagon is looking for a successor plan that will be bigger.

Actually, we don’t even know the full extent of this but it is gargantuan. Yes, these companies provide the regular consumer services but a main and even decisive customer is government itself.

As a result, the old laughingstock line about backward tech at government agencies is no more. Today government is a main purchaser of tech services and is a top driver of the AI boom too.

It’s one of the best-kept secrets in American public life, hardly talked about at all by mainstream media. Most people still think of tech companies as free-enterprise rebels. It’s not true.

The same situation of course exists for pharmaceutical companies. This relationship dates even further back in time and is even tighter to the point that there is no real distinction between the interests of the FDA/CDC and large pharmaceutical companies.

Consumer Preference Doesn’t Matter

In this framework, we might also tag the agricultural sector, which is dominated by cartels that have driven out family farms. It’s a government plan and massive subsidies that determine what is produced and in what quantity.

It’s not because of consumers that your Coke is filled with a scary product called “high-fructose corn syrup,” why your candy bar and danish have the same and why there’s corn in your gas tank. This is entirely the product of government agencies and budgets.

In free enterprise, the old rule is that the customer is always right. That’s a wonderful system sometimes called consumer sovereignty. Its advent in history, dating perhaps from the 16th century, represented a tremendous advance over the old guild system of feudalism and certainly a major step over ancient despotisms. It’s been the rallying cry of market-based economics ever since.

What happens, however, when government itself becomes a main and even dominant customer?

The ethos of private enterprise is thereby changed. No longer primarily interested in serving the general public, enterprise turns its attention to serving its powerful masters in the halls of the state, gradually weaving close relationships and forming a ruling class that becomes a conspiracy against the public.

The Old Binaries Have Broken Down

This used to go by the name “crony capitalism,” which perhaps describes some of the problems on a small scale. This is another level of reality that needs an entirely different name. That name is corporatism, a coinage from the 1930s and a synonym for fascism back before that became a curse word due to wartime alliances.

Corporatism is a specific thing, not capitalism and not socialism but a system of private property ownership with cartelized industry that primarily serves the state.

The old binaries of the public and private sector — widely assumed by every main ideological system — have become so blurred that they no longer make much sense. And yet we’re ideologically and philosophically unprepared to deal with this new world with anything like intellectual insight.

Not only that, it can be extremely difficult even to tell the good guys from the bad guys in the news stream. We hardly know anymore for whom to cheer or boo in the great struggles of our time.

That’s how mixed up everything has become. We’ve clearly traveled a long way from the 1990s!

Monetary Corporatism

Of course in 1913, we saw the advent of a particularly egregious public-private partnership with the Federal Reserve, in which private banks merged into a unified front and agreed to service U.S. government debt obligations in exchange for bailout guarantees. This monetary corporatism continues to vex us to this day, as does the military-industrial complex.

How is it different from the past? It’s different in degree and reach.

The corporatist machine now manages the main products and services in our civilian life including the entire way we get information, how we work, how we bank, how we contact friends and how we buy.

It’s the manager of the whole of our lives in every respect, and has become the driving force of product innovation and design. It’s become a tool for surveillance in the most intimate aspects of our lives, including financial information and listening devices we’ve willingly installed in our own homes.

It’s become a main curator and censor of our news and social media presence and postings. It is in a position to say which companies and products succeed and which ones fail. It can kill apps in a flash if the well-placed person does not like what they are doing.

It can order other apps to add or subtract to a blacklist based on political opinions. It can tell even the smallest company to comply or face death by lawfare. It can seize on any individual and make him a public enemy based entirely on an opinion or action that runs contrary to regime priorities.

In short, this corporatism — in all its iterations including the regulatory state and the patent war chest that maintains and enforces monopoly — is the core source of all the current despotism.

COVID: A Trial Run

It obtained its first full trial run with the lockdowns of 2020, when tech companies and media joined in the ear-splitting propaganda campaigns to shelter in place, cancel holidays and not visit Grandma in the hospital and nursing home.

It cheered as millions of small businesses were destroyed and big-box stores thrived as distributors of approved products, while vast swaths of the workforce were called nonessential and put on welfare.

This was the corporatist state at work, with a large corporate sector wholly acquiescent to regime priority and a government fully dedicated to rewarding its industrial partners in every sector that went along with the political priority at the moment.

The trigger for the construction of the vast machinery that rules our lives was far back in time and always begins the same way: with a seemingly inauspicious government contract.

How well I recall those days in the 1990s when public schools first started to buy computers from Microsoft. Did alarm bells go off? Not for me. I had a typical attitude of any pro-business libertarian: Whatever business wants to do, it should do.

Surely it’s up to the enterprise to sell to all willing buyers, even if that includes governments. In any case, how in the world would one prevent this? Government contracting with private business has been the norm from time immemorial. No harm done.

And yet it turns out that vast harm was done. This was just the beginning of what became one of the world’s largest industries, far more powerful and decisive over industrial organization than old-fashioned producer-to-consumer markets.

These gigantic for-profit and public trading corporations became the operational foundation of the surveillance-driven corporatist complex.

What to Do?

We’re nowhere near coming to terms with the implications of this. It goes way beyond and fully transcends the old debates between capitalism and socialism. Indeed that is not what this is about.

The focus on that might be theoretically interesting but it has little or no relevance to the current reality in which public and private have fully merged and intruded into every aspect of our lives, and with fully predictable results: economic decline for the many and riches for the few.

This is also why neither the left nor the right, nor Democrats or Republicans, nor capitalists or socialists, seem to be speaking clearly to the moment in which we live.

The dominating force on both the national and global scene today is techno-corporatism that intrudes itself into our food, our medicine, our media, our information flows, our homes and all the way down to the hundreds of surveillance tools that we carry around in our pockets.

I truly wish these companies were genuinely private, but they’re not. They’re de facto state actors. More precisely, they all work hand-in-glove and which is the hand and which is the glove is no longer clear.

Coming to terms with this intellectually is the major challenge of our times. Dealing with it juridically and politically seems like a much more daunting task, to say the least. The problem is complicated by the drive to purge serious dissent at all levels of society.

How did American capitalism become American corporatism? A little at a time and then all at once.

The post From Capitalism to Corporatism appeared first on Daily Reckoning.

This story originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.


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