Neo-Feudalism and the Invisible Fist

by John Médaille on August 27, 2010 · 17 comments <span>Print this article</span> Print this article

in Economics & Empire,Politics & Power,Writers & Poets

invisible fist

“The sleekest revolutions,” notes Barry Lynn, “are won not at the barricades but in the dictionary.” To control the terms of a debate is to control the outcome. This is certainly true of the term “free market,” a term which has come to mean almost its opposite, and hence a system which is manifestly unfree. The claim that our markets are not free is a serious one, and should only be made on serious evidence, just the kind of evidence that Barry Lynn provides in Cornered: The New Monopoly Capitalism and the Economics of Destruction.

The surest sign that a market is free is that it is competitive; there should be a rich variety of products provided by a vast number of firms, a situation which affords entrepreneurs many opportunities to enter the market and workers many places to sell their labor. And when we waltz into our local Wal Mart, that is what we seem to see. Alas, it is an illusion of competition rather than the reality. For example, if you want eyeglasses, you can go to Pearl Vision, or Lenscrafters, Sears Optical, JC Penney, Target, Macy’s, Sunglass Hut, or buy frames from 25 different manufacturers. Surely choice and competition prevail in this market. But no. All of these are one company, the Italian conglomerate Luxottica. And as with glasses, so also with so many other products. Most of our beer—even some that try to pass themselves off as “craft” beer—is provided by just two companies, ImBev of Belgium or the South African Brewing Company. Proctor & Gamble provides 75% of razors, 60% of detergent, 50% of feminine pads, etc. Even what few companies remain in each market often engage in collusion rather than competition. Wal Mart, for example, appoints one company as a “category manager” to allocate shelf space for all the “competing” companies.

Another sign of a free market is the expansive space it provides for entrepreneurs. But from 1948-2003, self-employment in America dropped from 18.5% to 7.5%. Indeed, among developed nations only Luxembourg has a lower rate of self-employment than we do. There has been a new “enclosure” movement, as the spaces that used to be occupied by small retailers, farmers, and manufacturers have been colonized by the conglomerates.

So how did we get to a situation where the “freedom of markets” has come to mean “servility” and corporate control? Lynn recounts this history, but those who expect a neat tale of “conservatives” versus “liberals” (Lynn prefers the term “progressives”) will be disappointed. Rather, the two cooperated to produce the servile state. In our colonial history, open markets were the means to escape the network of feudal dependencies that governed European systems. In the open market, small landowners and laborers could freely trade their produce and gain independence. Hence, the early Republic kept a watchful eye on the corporate and financial powers. But that care began to break down with the Civil War, as the government directed millions to industry, and the corporations were able to free themselves from control of the states and gain new privileges, even becoming, in a bit of Supreme Court legislation, “legal persons.” For the rest of the century, the “Robber Barons” consolidated their hold on industry after industry to become the dominant force in society and government.

Liberals like Teddy and Franklin Roosevelt didn’t have a problem with the trusts per se, they just wanted them more tightly controlled by the government. In the “progressive” view, there was a correct “scientific” technique of management, one that could be more easily applied when industries were gathered into the large corporate collectives. The New Deal evolved a system that was actually a continuation of Herbert Hoover’s associationalism,which placed the management of the economy in “super-cartels” and was related to the system used in Italy under Mussolini. But the Hoover/Roosevelt vision at least provided for a variety of quasi-owners of the cartels: workers, engineers, managers, the government, and small shareholders were all protected by institutional arrangements. And the corporations themselves were to be the guardians of our industrial base and a tool in foreign policy.

At this point, you have a quasi-feudal system with a series of mutual rights and obligations between varies interests and classes. There would be a relative abundance for all, wealth for a few, all directed by a combination of benevolent government and corporations with a broad social mandate, and subject to the influence of a variety of “owners.” But one by one, the “owners” were stripped off. It began in the Carter administration with deregulation of the airline and trucking industries, the prototype for further deregulation. It was continued under Reagan, who offered few institutional changes but made it clear that his administration would not enforce the anti-trust laws, and he made open war on the unions. But the so-called “Reagan Revolution” was actually consolidated under Bill Clinton with NAFTA and the deregulation of the financial industry. With the “democratization” of the stock market, the general public came to believe that equities were better than savings, and they began to view themselves as little moguls, their interests identified with the large investors. The senior managers saw more and more of their pay tied to stock options, which meant their interests were now also more aligned with the large investors. Outsourcing did for both the unions and the engineers. Only the large investors and their financial backers remained in effective control of the corporate structures, and only their interests would count.

What were these interests? Under the guidance of Milton Friedman, the corporation was converted from a system of governance charged with a broad social mandate into a private property whose “one and only one social responsibility” is to “increase profits.” But profits can be increased by strip-mining a company as much as by investing in it. And that is what has happened, as manufacturing firms converted themselves into trading conglomerates, outsourcing production to third-world countries but maintaining control at the center. Hence, it is no surprise that “American” cars are merely American shells slapped over a collection of foreign-made parts. Even an “American” product like the Boeing 787 is 90% foreign made. Recognizing only one of the many necessary goods of a firm, the corporation is converted from a protector of our industrial base into its destroyer, so that today we are a nation that makes far less than we consume, and will soon be forced to adjust our consumption to our means.

Friedman also redefined “free market” to mean “unregulated.” But this is nonsense, since markets are social institutions which are made by rules. For example, when Jay Gould decided to monopolize the building materials market in New York, he forbade his railroads to carry products from any competing company. As the “owner” of the railroads, he was “free” to do so, but did this make a free market? Clearly not. Only the imposition of the Common Carrier rule on the railroads freed the market from Gould’s personal control. Without proper rules, the “invisible hand” becomes an invisible fist, crushing all opponents. All social interactions are rule-bound. The only interesting question is whether the rules will be written by force or by reason.

Lynn also documents how the new feudalism makes the economy more vulnerable and fragile, as concentrated production introduces multiple choke-points, and small failures shut down whole industries. Indeed, a failure at one or a few factories can poison a whole nation. We are seeing an example of this in the 380-million egg recall. But the real destruction is political and social. As corporate “persons” gain more rights, real persons are effectively disenfranchised. Our politics degenerate into debates over trivialities, with passion over an issue inversely proportional to its importance.

Calling it “neo-feudalism” is unfair, to feudalism. At its best, that was a system of mutual rights and obligations which ensured a decent standard for all. The quasi-feudalism of the New Deal demanded a certain degree of servility, but also some fixed rights. The neo-feudalism is more like serfdom with declining opportunities and increasing debts for all, but especially for the young. The neo-feudalists are willing to promise better opportunities, but only to the degree it would not interfere with their wealth and their control. But they can no longer deliver what they promise, because they have been beaten at their own game by the Chinese and the Russians, and have become subordinated to foreign masters. And the rest of us along with them. The Chinese have set up a parallel trading system, and there is little anybody in the WTO or the West can do about it. After all, there is a limit to the quarrels we can pick with the people who hold the mortgage on our house and who lend us $2 billion/day to keep they whole thing going, at least for a little while longer.

This is an interesting and important book. I had not really intended to read it, since I thought I was generally familiar with the thesis. But Barry Lynn has done a careful job of research and thoughtful job of working out the implications. It is nothing less than the mechanics of Belloc’s Servile State. But Belloc thought such a state would at least be stable; it is not. We will soon, and very soon, be required to rebuild the social order. It will be of great use to understand how we get here, and Lynn goes a long way toward sorting that out.

{ 17 comments… read them below or add one }

avatar Brandon August 27, 2010 at 7:27 pm

Excellent review, John. I need to read Mr. Lynn’s book.

avatar Wessexman August 27, 2010 at 8:15 pm

Excellent review and what looks like a very promising book. Very Carsonite if I may say so ;).

“Calling it “neo-feudalism” is unfair, to feudalism.”

Darn I was going to make the same point. European feudalism obviously had its downsides but it had a role for personal relationships, mutual obligations as well as faith, honour, duty and virtue, not to mention the social and individual benefits of long held familial and landed wealth, that corporate-capitalism largely lacks. As a traditionalist Englishman I see the squirarchy as embodying the best of the old feudal system without many of the downsides as well as being a balancing element in a distributist system. It is the greatest shame that the English squirarchy was both undermined and seduced by the Whig magnates and became active participants, bystanders or at best half-hearted opponents to the expropriation of the common land and English peasantry when they could have been their leaders.

But anyway your last few paragraphs bring me back to an important point about the current social system. It is without a doubt in a bleak position and yet it still hangs in and has done for decades. But more specifically from your comments my point is that many today, at least in Australia where I currently reside, do not properly feel society to be fragmenting and declining. Even when they are closely involved in social breakdown they often seem to think these are great times, as if the internet, ipods, plasma screen tvs and whatever else the technocrats decide to bestow on us are tokens of unprecendented wealth(although as Bonald pointed out the real wealth of nations is its virtue and laws and not its material prosperity.).

avatar T. Chan August 27, 2010 at 10:17 pm

But more specifically from your comments my point is that many today, at least in Australia where I currently reside, do not properly feel society to be fragmenting and declining.

“They don’t know what they’re missing.”

avatar Steve K. August 27, 2010 at 10:57 pm

When the money runs out, Wessexman, the whole tower of lies will come crashing down and they will have ample cause to revise their opinions about what passes for society today. That moment is not far off.

avatar Wessexman August 28, 2010 at 2:45 am

Don’t get me wrong, I do think society and culture have declined greatly. I’m simply fascinated how it manages to hang on without completely breaking down into total anarchy and despotism and even that quite a lot of Westerners genuinely feel we are living in great times(even when they are mostly greatly and negatively effected by our social fragmentation and decline.). They are deluded by consumerism, globalisation and the technocratic/materialist/scientistic mindest into seeing these are great times despite the fact they are almost all negatively effected by its obvious, and not so obvious, flaws and crises. Hence society does not only hang together but maintains a thin veil, which though is often pierced and always frayed, of vitality, particularly at the more material and crudely economic levels.

avatar Anon August 28, 2010 at 7:25 pm

This sounds awfully like several critiques the Austrian school makes of the current economic situation. They tend to consider Friedman a sell-out.

avatar Jon Cook August 29, 2010 at 8:10 am

John, nice article, but my socialist friend says that you’re missing a piece to the puzzle. Rather than the issue being the size (and thus power) of the corporations, it is that government has allowed (and encouraged) corporate power to grow without enabling the natural counter-balancing power to grow: worker solidarity. Size isn’t bad, just one-sided size is bad. If we had as much union power as corporate power, our current situation wouldn’t be so dire. I don’t completely agree with my socialist friend, but it is a perspective worth considering, and there is some truth in it I think. He often likes what I point him to on FPR but he thinks y’all have a blind spot against “size”.

avatar John Médaille August 29, 2010 at 10:56 am

Anon, That very interesting. Could you direct me to these Austrian critiques? I would be very interested in reading them.

Jon, I think that was precisely Barry Lynn’s point, even if my review didn’t make it clear. The network of quasi-owners was indeed a counter-balancing force.

avatar Rob G August 29, 2010 at 2:11 pm

~~He often likes what I point him to on FPR but he thinks y’all have a blind spot against “size”.~~

I know some conservatives who say the same thing. But it seems to me that beyond a certain point ‘bigness’ must entail a certain amount of unhealthy compromise. To put it another way, you can get only so big if you want to remain moral in your dealings, since the accumulation of ever more wealth and power tends to corruption, whether in government or in corporations. Or in unions, for that matter.

avatar Wessexman August 29, 2010 at 6:18 pm

I always thought it was more a principle rather than a blind spot, indeed it seems like it is the most important binding principle at FPR. It does seem like your socialist friend rather misses the whole point of FPR, Jon.

Trying to juxtapose many massive, competing interests like big gov’t, big business and big labour is unlikely to work as it removes the accountability and connectedness of these organisations who will end just serving the interests of those in charge of them. It seems like trying to catch a stray bear by setting loose a lion and a tiger. Only through smaller, more federated and sustainable organisations can a satisfactory balance be achieved.

Size is bad. That is a generalisation of course, I’m no fundamentalist localist myself and there are a few things that need to be done at higher levels and there is room for federation and such but you get the point; excessive size and centralisation, which is really beyond quite a modest level by today’s standards, does tend to cause many problems without providing the solutions in anywhere near a sufficient ratio.

Also the government didn’t allow corporations to take over, it created them, fueled them and still does. Remove state subsidies and supports to corporate-capitalism and it would collapse.

avatar Chris_Harrison August 30, 2010 at 4:17 am

Wessexman wrote:
“… at least in Australia where I currently reside, do not properly feel society to be fragmenting and declining. Even when they are closely involved in social breakdown they often seem to think these are great times, as if the internet, ipods, plasma screen tvs and whatever else the technocrats decide to bestow on us are tokens of unprecendented wealth(although as Bonald pointed out the real wealth of nations is its virtue and laws and not its material prosperity.).”

Wessexman, I would point you to Benedict Anderson’s excellent sociological/historical work, _Imagined Communities_ for a good explanation of this phenomenon. With the destruction of REAL communities coming to its conclusion, we have largely substituted IMAGINED communities in their place. Thus, the repeated clarion calls over the wonder of Facebook, Twitter, and all other social media, and how the interconnectedness they engender is such a wonderful thing. Except that interconnectedness is wholly imagined — most of it is with people whom we never have face-to-face dealings with anymore, and it is so fleeting that it can be abandoned at a moment’s notice, and thus places no mutual obligations upon those engaging in the “relationship”.

avatar Schofield August 30, 2010 at 10:06 am

And the only antidote to being left with a virtual world of Imagined Relationships to complain in is to fight for Real Relationships by pursuing genuine democracy in the community and workplace.

avatar Steve K. August 30, 2010 at 11:53 am

“John, nice article, but my socialist friend says that you’re missing a piece to the puzzle. Rather than the issue being the size (and thus power) of the corporations, it is that government has allowed (and encouraged) corporate power to grow without enabling the natural counter-balancing power to grow: worker solidarity. Size isn’t bad, just one-sided size is bad.

What does your friend do for a living Jon Cook? Is he an academic? I have worked many years in one of the largest bureaucracies in the world, and I can say that size does matter. Beyond a certain size, no organization can be effective at any task other than furthering its own existence. The belief otherwise is the tell-tale of man with little to no actual experience working for one.

avatar Ovidiu Hurduzeu August 31, 2010 at 1:13 am

“Even when they are closely involved in social breakdown they often seem to think these are great times, as if the internet, ipods, plasma screen tvs and whatever else the technocrats decide to bestow on us are tokens of unprecendented wealth(although as Bonald pointed out the real wealth of nations is its virtue and laws and not its material prosperity.).”

People derive satisfaction from what Unabomber in his Manifestp would call “surrogate activities”. These surrogate activities do not satisfy their needs autonmously but by their functioning as part of the System. The fundamental rule in the USA (at least) is “Follow the system!”. Just see how people behave when they attend the never-ending “meetings” in any big corporation. Everything is formalized, sugar-coated, politically correct – ten times worse than the Party meetings I had to attend in Communist Romania. At least, we DID NOT BELIEVE what the communists would say. In Corporate America people still believe, still want to climb the corporate ladder; they still believe they have a say in how the company is run, they still believe in the virtue of big business. This is the real problem. It is a mental one. Communism collapsed when everybody, even the Party did not believe in the system any longer. It does not matter how bad things are as far as people would continue to “follow the system” and feel very good about it. It’s no longer the system who imposes abstract relations on people. It is the “happy slaves” themselves who cannot survive in a natural, “face to face” environment because they feed on abstraction. That is why distributism seems distant and “unnatural” in such a society.

avatar Jon Cook August 31, 2010 at 8:40 am

Steve K, Oh he has experience all right, and wouldn’t argue with your empirical observations. He’d just say that just because you haven’t seen it doesn’t mean it’s not possible.

avatar Wessexman August 31, 2010 at 7:10 pm

Isn’t that what socialists have always said? I don’t think they have a good track record in this area. Anyway it is pretty universal that beyond a certain size organisation tends to cause problems at a geometrical rate and grant solutions at an arithmetical rate.

Chris and Ovidiu I didn’t mean to suggest many people are completely satisfied with the system. There is this curious doublethink where they both experience a lot of the system’s problems but do not consider that it is responsible for them and even are taken in by its propaganda into considering it a good system. This is despite the fact that if they really considered their own experiences of it they would probably think again.

avatar Dave Taylor September 1, 2010 at 5:29 am

Thanks John, for your very helpful digest of Barry Lynn’s book, “Cornered”. This theme reminds me of Chesterton’s Songs of Education III: “For mother is happy in greasing a wheel/ For somebody else, who is cornering Steel”. Not a word one hears very often now.

Ovidu says: “In Corporate America people still believe, still want to climb the corporate ladder; they still believe they have a say in how the company is run, they still believe in the virtue of big business. This is the real problem. It is a mental one. … they feed on abstraction”.

Yes; but in St Paul’s model of society, the Mystical Body, it is hardly to be expected that the arms, legs and digestive system will do the thinking. Most of life operates on the basis of trust and obedience.

The mental problem surely lies in those who are supposed to do the thinking but actually (given their over-specialised and pendantic education) haven’t the experienced imagination to be able to complete the cycle of thought [i.e. use all three parts of the brain in the linguistic - emotive - imaginative group. It is not so much that "they feed on abstraction" as that they cannot reverse the abstraction back into an image they are not already familiar with]. Again, “read all about it” in Chesterton: this time in “Orthodoxy” ch.2.

Incidentally, “cornering” works by taking profits as percentages rather than added value; adding percentages can be shown to be a way of adding logariths, MULTIPLYING the acquired value they represent.

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