European Tribune - Community, Politics & Progress.

Why Americans should reject U.S. market capitalism

by Jerome a Paris
Sat Apr 29th, 2006 at 07:28:06 AM EST

William Pfaff has a great article today, with the explicit title of "Why Europe should reject U.S. market capitalism" which I recommend that you read in full.

He reminds us that the current market ideology is just that, an ideology, and that it is thus a political choice, that has nothing inevitable about it and can be reversed. He traces its origins to the combined influence of Milton Friedman (monetarism), Van Hayek (rejection of totalitarism, associated with socialism and too powerful States) and Ayn Rand (the selfishness of superior people against the mob and the weak is a good thing).

This is what underlay the transformation of American corporate culture, and of the American business corporation from an institution with national identity, constrained to reconcile interests of owners, employees and community, into the modern global corporation, effectively controlled by its managers and mandated to the single objective of producing "value" for stockholders, while handsomely rewarded its executives.
This change transformed labor into an anonymous commodity and put both blue-collar and white-collar staff into competition with an effectively unlimited global labor supply, resulting in employment insecurity, reduced or static wages, diminished or eliminated benefits and pensions, and the destructive social pressures of falling living standards.
In the United States, the new model of corporate business has evolved toward a form of crony capitalism, in which business and government interests are often corruptly intermingled, the system resistant to reform because of the financial dependence of both major political parties on contributed money.

As I said, read it all. My only quibble is with the title of the article. I have used my proposal for an amended title as the title for this post...

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Why Americans should reject U.S. market capitalism | 24 comments (24 topical, 0 editorial, 0 hidden)

Myths (4.00 / 6)

the most important point of the article is that he nails down the two basic myths and the main narrative that configure the present "there is only one economic policy that will make you free and make society richer: the right-wing, neoliberal one".

This general myth is based on two myths and one basic narrative as he explains and from there a network of smaller narrative, myths even pure histories or false descritpion make the building of the present elite economic thought. Of course he has no space to explain thos eother myths, and narratives and their interconnections as you normally do (jerome)

William Pfaff has already shown that he is very good at properly describing the situation trting to prevent any given narrative to influence its own thinking. He has a personal ability to descipher and clarify the single units that are relevant of a general and more global network.

He is generally excellent.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sat Apr 29th, 2006 at 08:20:11 AM EST

Ideology or religion? (4.00 / 7)

I think Pfaff is right to use language appropriate to theological discussions at several points in his essay because this mindset bears many of the marks of a religion. Worship of the almighty "Invisible Hand" has spread far and wide.

What frightens me is the success this new faith has had in catechizing many younger Americans who don't so much accept this creed as assume it is the only possible belief system. This process began back in the 70s when I was in school as many of the "free market" evangelists went out two-by-two into the colleges and professional schools to attack Keynes and spread their "truth."

When I read through threads on dKos like those in response to the energy diaries, most of the comments seem to fall either into the purely solipsistic category or the "market as divine" slot. A true progressive, social orientation is fairly rare.

by goinsouth (imgoinsouth@gmail.com) on Sat Apr 29th, 2006 at 08:26:36 AM EST

reject U.S. market capitalism (none / 0)

Excellent article...I saw Fran reference this morning, and so am glad yo have front-paged it. I liked this especially:

(...) In the United States, the new model of corporate business has evolved toward a form of crony capitalism, in which business and government interests are often corruptly intermingled, the system resistant to reform because of the financial dependence of both major political parties on contributed money.(...)
Europe, one would think, should be looking for social and economic evolution on its own terms. It is perfectly capable of doing so, as a modern industrial society that in aggregate terms is larger and wealthier than the United States, as well as less shackled by obsolescent ideology and entrenched special interests - its problems with union corporatism notwithstanding

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Sat Apr 29th, 2006 at 08:51:39 AM EST

Re: reject U.S. market capitalism (none / 0)

PS: J ~ cross-post this at Booman and Dkos (if you haven't already...)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Sat Apr 29th, 2006 at 08:53:14 AM EST
[ Parent ]

Re: reject U.S. market capitalism (none / 0)

will do later on DK. Done on BT. As I won't be around, I hope some of you can participate in the comments over there. Thanks.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Apr 29th, 2006 at 09:24:57 AM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 3)

I hope you put this into dKos form too. Americans, of course, are particularly subjected to/by the neo-liberal ideology. In fact, we're brainwashed to the point that it's hard to even have a public debate on these matters.

by andrethegiant on Sat Apr 29th, 2006 at 09:08:42 AM EST

Re: Why Americans should reject U.S. market capita (none / 0)

I'll do it later tonight.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Apr 29th, 2006 at 09:19:18 AM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 9)

I think he is a little deficient in his knowledge of history. The rule of big corporations and their alliance with government to the detriment of the working classes goes back much further than he states.

First we had the transnational firms like the Dutch East India Company and similar ones in England. Not only did they span the world and impose slave or near slave conditions on workers in the colonies, but their corporate policies were backed up by the military power of their home countries.

Moving on in time we had the big rise in the mills and mining industries in the UK in the 19th Century. Once again laws were put into place to insure that workers had no effective economic strength.

Finally, we come to the late 19th Century in the US which he thinks in unique. The term "robber barrons" was invented then, not now. The current period is being called the "second gilded age". The current period is an echo of what happened before. Names like Rockefeller, Frick and Carnegie are still talked about.

As I have said before what changed each time the rise of organized labor. In most cases this was a bloody battle. Some famous incidents in US history (such as the Homestead strike) had national guard shooting at striking workers. In other cases Pinkerton men did enforcement while the police stood by (Ford Motors).

What has happened currently is that the labor movement has been weakened since the 1970's and consequently all the defects of an overly strong commercial sector have re-emerged.

If European workers want to protect themselves from predatory transnationals then they should preserve and enlarge their organized labor movement.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sat Apr 29th, 2006 at 09:12:33 AM EST

Re: Why Americans should reject U.S. market capita (4.00 / 6)

Jérôme, Thanks for drawing our attention to Pfaff's little essay. It is valuable most of all, in my view, for these paragraphs

Advocates of the new model capitalism, and the globalization project that goes with it, like to present it as an expression of historical necessity, rooted in classical economics and embodying irrefutable laws. It is progress itself, they say. Those who do not conform to the rules of modern market capitalism, and do not offer the human sacrifices of lost employment and diminished living standards that the market demands, will fall by the wayside of history.
This is simply untrue, although most of those who say it undoubtedly believe it.
The new American and British market capitalist model, which dictated deregulation of industry and privatization of state enterprises in the 1970s, and globalization of international markets in the 1990s, exists as a result of free political decisions and ideological choices that were anything but inevitable. History may one day describe them as having been perverse and socially destructive.

rdf,

I agree entirely with your criticisms and I think one might add others to yours. That should not diminish the value of the central idea contained in the paragraphs I've cited. The failure to grasp that is, in my view, at the very heart of what Americans are failing now to understand--that includes élite opinion and office-holders as much as it does the average American.

Thus, the excellent reformulation Jérôme highlights in his title is so very apt.

One wonders whether Pfaff has read and simply forgotten the history which you interject. It is in Zinn's A People's History of the United States, and the Hammonds'The Village Labourer, among other places too numerous to list here.

Why, I wonder, should Pfaff limit himself to so timid a hope that, "History may one day describe them as having been perverse and socially destructive. " ?

I should much prefer that "History" not wait for "one day" and instead frankly and forcefully describe as perverse and destructive that which manifestly is so.

In the longer term, for Europeans to embark on this project, instead of conforming to the currently received wisdom concerning the globalized economy, would serve the international interest as well as that of the European Union.

That observation, while not news to Europeans--especially the "political class" among them and many fairly astute and aware average people, is something which the American opinion "leaders" would do well to consider and keep in mind.

Though, why Pfaff, again, timidly, finds it necessary to use the word "might"---

It might even prove a service to the United States, whose future is now jeopardized by economic error and excess, as well as unachievable global political and military ambitions.

(emphasis added/P.)

I cannot understand.

There's more to the development of our present political and economic mess, of course, than can be resumed by Hayek, Ayn Rand and monetarist thinking. For the roots of all of these, as rdf's reply indicates, are far older.

Another element--or two--are the combination of a renewed blind faith in rational reason--odd as that may seem alongside the effort to discredit Darwinian natural history--coupled with much more sophisticated and faster means of mass communication.
Thus, error, founded in poorly worked rational thought is far more quickly spread and accepted than was possible in Hayek's or Rand's lifetime.

There is a marvelous and thoughtful book on the pernicious capacities of a blind application of rational reasoning available in both english and french in John Ralston Saul's book, Voltaire's Bastards

http://en.wikipedia.org/wiki/John_Ralston_Saul

We are now as much the prisoners of reflexive credentialism and the reign of expert opinion and professionalisation of everything-- so that when our common sense opposes nonsense which is backed by the authority of professionals and experts, we tend to discount our own common sense and favor what is in fact inferior in quality.

[ In asserting that, it's important to distinguish between the blind application of rational reasoning--which Saul describes and opposes--and the use of rational reason in the modest, piecemeal and constantly questioning manner, a manner which brings certain universal moral precepts and plain practical goodness and mercy into the application of reason--something which the practitioners of the Inquisition allowed themselves to forget in their zeal to see God's will done on earth. ]

That, too, is hardly understood among American opinion leaders, who could do with a huge dose of genuine modesty.

Much of what is correct and worthy in Pfaff's article are precisely the sort of things I hoped to point up in my posts on economic fatalism and on historicism--which run in support through and through the essence of what Pfaff argues.

"In the interest of democracy, repressive actions were taken; In order to preserve democracy, repressive actions were taken"

by proximity1 (proximity1-at-free-dot-fr---end-o'adresss) on Sat Apr 29th, 2006 at 10:31:39 AM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 3)

more on what Pfaff left out--

Though he's to be much commended for observing that

Advocates of the new model capitalism, and the globalization project that goes with it, like to present it as an expression of historical necessity, rooted in classical economics and embodying irrefutable laws. It is progress itself, they say. Those who do not conform to the rules of modern market capitalism, and do not offer the human sacrifices of lost employment and diminished living standards that the market demands, will fall by the wayside of history.
This is simply untrue, although most of those who say it undoubtedly believe it.

he confines himself merely to a consideration of some of the how of the (re-)rise of these fatalistic views, and offers nothing on why it amounts to a fundamental mistake to have accepted (consciously or not) what is integrally assumed in Hayek's and Rand's beliefs: namely, that economic liberty and political liberty are in fact or are somehow to be considered as separate and distinct sorts of things. And that, moreover, it is the supposed economic liberties which must, of right, always trump the "political" ones whenever and wherever these "conflict".

Part of--maybe most of--that fault rests, I believe, in the mistaken notion that it is in the main democracy which depends on as its subordinate, a more fundamental liberty which is distinctly economic by nature.

As others have argued, this is mistaken in both respects. Liberties are not subject to such easy dissection into 'political' and 'economic', since all economic views imply some political order or other a priori.

Moreover, this is not only true in a theoretical sense, it is no less true in the most practical everyday living sense. Without the existence of some social order--families at the most basic level--humans do not exist in the first place. Thus, free markets come second, not first, in precedence to social orders--which are at the same time political orders as well. From that, it appears that there is no such thing as a free market in any sense unless there is some sort of just political order to create and protect the supposed free market.

If it is accepted that economic theories are primary in importance and that obedience to them should and must determine whatever social and political arrangements the economic notions require, then eventually not only political freedom shall be sacrificed but, with it, economic freedom since not only does economic freedom depend on political freedom, it is, moreover, simply a variant manifestation of political freedom.

As Ernest Hemingway put it, far more succinctly, "Yes [the rich are different], they have more money."

"In the interest of democracy, repressive actions were taken; In order to preserve democracy, repressive actions were taken"

by proximity1 (proximity1-at-free-dot-fr---end-o'adresss) on Sat Apr 29th, 2006 at 11:45:33 AM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 2)

Without the existence of some social order--families at the most basic level--humans do not exist in the first place.

brunoken linked in a comment here to this review of Ayn Rand's Atlas Shrugged. Your point above reminded me of this from the review:

from the impromptu and surprisingly gymnastic matings of the heroine and three of the heroes, no children -- it suddenly strikes you -- ever result. The possibility is never entertained.

Further on in the excellent review, there's this:

Randian Man, at least in his ruling caste, has to be held "heroic" in order not to be beastly. And this, of course, suits the author's economics and the politics that must arise from them. For politics, of course, arise, though the author of Atlas Shrugged stares stonily past them, as if this book were not what, in fact, it is, essentially -- a political book.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Apr 29th, 2006 at 12:49:36 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 2)

...what is integrally assumed in Hayek's and Rand's beliefs: namely, that economic liberty and political liberty are in fact or are somehow to be considered as separate and distinct sorts of things....
...free markets come second, not first, in precedence to social orders--which are at the same time political orders as well. From that, it appears that there is no such thing as a free market in any sense unless there is some sort of just political order to create and protect the supposed free market.

My ellipsis above swallows an extended discussion, but I'd like to note that Hayek devoted much of his intellectual labor precisely to the understanding of the relationships among social orders, law, political orders, and economics. He did not regard markets as a primary domain. You do not say otherwise, but could perhaps be read as suggesting it.

For an appreciation of the depth of his inquiry, I recommend The Constitution of Liberty (the title of which illustrates Hayek's talent for overlaying clear insights with an opaque surface -- the book isn't about constitutions in the U.S. sense, but about fundamental structures in a broad sense). It is about societies, not markets.

Hayek's insights could easily be turned against the shallow free-market drivel common today.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Sun Apr 30th, 2006 at 03:13:52 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (none / 0)

My ellipsis above swallows an extended discussion, but I'd like to note that Hayek devoted much of his intellectual labor precisely to the understanding of the relationships among social orders, law, political orders, and economics. He did not regard markets as a primary domain. You do not say otherwise, but could perhaps be read as suggesting it.

Your critical comment is, I'm afraid, correct and justified--to the point that much later, as I was reading some references to Hayek, I even thought, before I'd read your reply, "that was an unfair impression I left." And it reflects what I'm afraid are my own unfair impressions of Hayek's views on economic liberty as having primacy over other liberties. Maybe that impression comes from what I've read and heard from those--mainly libertarians-- who are such fans of Hayek and who I fault for seeing only individual (read economic) liberties as important and, moreover, as the basis for all other liberties.

I'm pleased to be corrected in that false impression; and I apologize for having left it in my post. I think Hayek's title, if it's he who chose it, is perfectly apt for its purpose. I haven't read The Constitution of Liberty but thanks to your reply, it's now on my list.

"In the interest of democracy, repressive actions were taken; In order to preserve democracy, repressive actions were taken"

by proximity1 (proximity1-at-free-dot-fr---end-o'adresss) on Tue May 2nd, 2006 at 01:28:58 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 4)

Excellent article, and how much good it does to read this in an established newspaper like the IHT!

It's short and very full. It's interesting how much importance he gives Ayn Rand as a myth-builder.

This stood out for me: in his opinion, Europe is

less shackled by obsolescent ideology

than the US. There's something there, I think, for us to pick at. "shackles", "obsolescent", and "ideology" are all good attack words. And turning the tables is what they did, by stealing the notions of inevitable progress and of reform. But, you know, "inevitable progress" and "reform" are kind of dated concepts...

And, finally, how I like this (echo of some points I made in pissed-offness on brunoken's excellent diary):

In the longer term, for Europeans to embark on this project, instead of conforming to the currently received wisdom concerning the globalized economy, would serve the international interest as well as that of the European Union. It might even prove a service to the United States, whose future is now jeopardized by economic error and excess, as well as unachievable global political and military ambitions.

There are things I'd like to bold there, but nothing stands out more than anything else. It's all good, solid-state good.

Thank you, William Pfaff.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Apr 29th, 2006 at 09:17:21 AM EST

Re: Why Americans should reject U.S. market capita (4.00 / 3)

Good stuff.

To which I would add what I'd call the "Friedman-Fukuyama" syndrome. The belief that the search for the perfect society is over. The US has finally figured out the magic formula. Message to the masses: think no more; it's all been figured out; from now on all we need to worry about is tinkering at the edges. And soon enough the whole world will be like us.

Note how globalization is not described as an ideology but as a natural force. To be against it is to be against gravity. In other words, it's not to be wrong; it's to be stupid. Friedman, indeed, never misses a chance to infantilize his "opposition" (such as it is) with his smelly glibness.

Oh one more thing.
Pfaff is exiled in Paris; Friedman lives in DC (heart of the empire). Pfaff has 0 Pulitzers; Friedman has 3.

I think that's why Pfaff didn't go with Jerome's title. Maybe he's given up on the US changing its ways (absent a major crisis).

by Bernard Chazelle (Bernard Chazelle) on Sat Apr 29th, 2006 at 12:38:28 PM EST

Re: Why Americans should reject U.S. market capita (none / 0)

I doubt Migeru will agree with the characterisation of Hayek and I await his rebuttal with interest. Of course, should the rebuttal not live up to expectations then it brings the tarring and feathering of the Hayekens ever closer... ;-)

by Metatone (metatone [a|t] gmail (dot) com) on Sat Apr 29th, 2006 at 03:52:31 PM EST

Re: Why Americans should reject U.S. market capita (4.00 / 3)

I don't know if the mistake coms from Pfaff or from Jerome, but it's not "Van Hayek", but "Hayek" (possibly a crossover with "von Mises"). Anyway, Metatone wants me to rebut this

He traces [the] origins [of the current market ideology] to the [among others] influence of Van Hayek (rejection of totalitarism, associated with socialism and too powerful States)

Pfaff/Jerome are, of course, referring to Hayek's The Road to Serfdom [I recommend the "external links" to abridged versions at the bottom of the wikipedia article], whose main thesis is basically that socialism lays the groundwork for fascism. In other words, for Hayek economic planning not only cannot work economically, but it leads to certain habits being spread among the general population and the ruling political/technocratic class which make it easier for society to devolve into authoritarianism and ultimately totalitarianism.

Considering the historical context in which the book was written, namely the immediate aftermath of WWII, what Hayek is doing in it is explaining to himself and others how nazism happened, and how to avoid a repetition in the future. Another excellent contemporary book on the subject is Erich Fromm's Escape from Freedom.

I can't muster a refutation of Hayek's argument, and my own personal ideological evolution attests to this, for as I mature politically I move from socialism to anarchism, but that is another story. The only real argument I have "against" it is that, having a hammer, Hayek sees everything as a nail. Hayek being an economist, he looks for an economic culprit for fascism, namely economic planning. Fromm, who was a social psychologist, finds psychological culprits for fascism (a futile attempt at rolling back recently gained freedoms and so recovering recently lost securities).

As we know but free-market fundamentalists seem to have forgotten, maybe on purpose, economic planning is not the only way that the government can influence economic life, and good regulation is essential to a healthy market economy. In many ways, Hayek and especially his followers throw out the baby with the bath water. In the end, for Hayek the market is not the be-all and en-all, but just an efficient mechanism for price-setting.

Probably not the rebuttal that metatone wanted.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Sat Apr 29th, 2006 at 04:48:40 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 2)

Damn, you've admitted the key point, Hayek throws babies out with bathwater...

[Puts the tar and feathers away, crosses Migeru off the list.]

by Metatone (metatone [a|t] gmail (dot) com) on Sat Apr 29th, 2006 at 05:23:09 PM EST
[ Parent ]

Nitpick (none / 0)

Hayek's name (see wikipedia article) was Friedrich August von Hayek.

Pfaff correctly refers to him once as von Hayek, again as Hayek, which is much more usual.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Apr 30th, 2006 at 04:27:22 AM EST
[ Parent ]

Re: Nitpick (none / 0)

Oops, bigmouth me.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Sun Apr 30th, 2006 at 04:30:00 AM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (none / 0)

"In the end, for Hayek the market is not the be-all and en-all, but just an efficient mechanism for price-setting. "

Perhaps that's a little to over-simplified?

But now I'm afraid to comment with a flat assertion since clearly some review and correction is in order for my faulty notions of F.A.v H.

I better leave it at that for the moment.

"In the interest of democracy, repressive actions were taken; In order to preserve democracy, repressive actions were taken"

by proximity1 (proximity1-at-free-dot-fr---end-o'adresss) on Tue May 2nd, 2006 at 01:52:34 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 4)

[From the Booman thread, since it seems relevant here:]

I count Hayek as a far deeper and more flexible thinker than Friedman, and as utterly unlike Rand. In saying this, I recognize that there are many people whose thinking has been influenced by all three. I do think, however, that negative influences from Hayek are largely based on simplistic and debased derivatives of his ideas.

Hayek's thinking is characterized by a profound respect for law and decentralized human social orders regulated by law. He was neither an anarchist, a conservative, nor a rigid ideologue. His profound skepticism regarding strong, lawless state power was shaped by his witness of the mass murder that grew from this during his lifetime. His aims, I believe, were entirely directed toward the common good.

There is no point in expending intellectual effort to understand why one's policy preferences differ from Rand's. It is worth considering why they differ from Hayek's -- what we have learned that he didn't know, and what misperceptions may have set his views askew.

A major fact to remember in evaluating his work: When he refers to "socialism", he means the term in the early- to mid-20th century sense, that is, the economics and (he argued) associated governance of states like the Soviet Union. Detailed central planning failed, and for reasons he articulated. This "socialism" is quite unlike the variety of socialism that has widespread support today.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Sun Apr 30th, 2006 at 02:38:30 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (none / 0)

It is worth considering why they differ from Hayek's -- what we have learned that he didn't know, and what misperceptions may have set his views askew.

Agreed.

So, as you've so well expressed it, I'm curious, where would you recommend we look for such critiques and later developments to his views ?

"In the interest of democracy, repressive actions were taken; In order to preserve democracy, repressive actions were taken"

by proximity1 (proximity1-at-free-dot-fr---end-o'adresss) on Tue May 2nd, 2006 at 01:57:34 PM EST
[ Parent ]

Re: Why Americans should reject U.S. market capita (4.00 / 2)

[From the Booman thread:]

...the modern global corporation, effectively controlled by its managers and mandated to the single objective of producing "value" for stockholders...

There is a curious perversity in the standard interpretation of the "objective of producing 'value' for a corporation's stockholders", a perversity which I have never seen mentioned. It stems from two widely neglected facts:

First, that the more widespread the holdings of a corporation's stock, the more its effects on the general populace are, in fact, effects on its stockholders, and

Second, that the practice of holding diversified portfolios of stocks can make the success of one corporation at the expense of another a net detriment to its own stockholders, through their holdings of the other corporation's stock.

To illustrate this, suppose that everyone in a population held a completely diversified portfolio of stocks. In this simple, limiting case, maximizing value delivered to a corporation's stockholders would coincide with maximizing social utility -- a transaction that lost two units of value for a corporation yet added three units of value to another (whether to a supplier, customer, or competitor) would in fact increase value delivered to that corporation's shareholders. Likewise for suitably efficient tradeoffs of profit in exchange for general environmental and social benefit.

To the extent that the real world has something in common with this idealization, the standard concept of maximizing value for shareholders is actually misconceived: it mandates actions that do not, in fact, maximize the value that the stockholders receive. Indeed, this holds true to some substantial extent in the world as it is today.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Sun Apr 30th, 2006 at 02:34:28 PM EST

Why Americans should reject U.S. market capitalism | 24 comments (24 topical, 0 editorial, 0 hidden)

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