Corporate welfare: Big government the GOP loves

Photo above: Occupy DC marching on K Street in Washington, D.C., blocking all traffic. (AM Remington-Flickr)

The Obama administration announced Tuesday a new government initiative to steer the economy. Under the plan, entrepreneurs will be able to apply for a special legal status that will place them under a whole new class of government rules and regulations. Effective immediately, for example, Americans will no longer be able to hold individuals acting under that status personally responsible in court for their actions.

The plan, White House Press Secretary Josh Earnest said, “will create better economic outcomes for more Americans than the free market can provide.”

Haven’t heard about this new big government social engineering program anywhere else? There are two reasons for that. First, because the legal status I just described – “incorporation” – isn’t new; it’s been around for centuries. And second, because contrary to their supposedly principled stand against government programs that intervene in the free market, capitalists are fine with corporations.

Big government for every business

The modern corporation owes its existence to a basic principle that not even the American right dares to dispute: entrepreneurs can’t survive in the free market without big government stepping in.

That, after all, is the entire point of limited liability: protecting businesses from consumer demands. In a free market, consumer demand is what supposedly what makes economic actors productive and responsive; if you try to rip me off or put me in danger, I can stop buying your product, and I can even sue you if the violation is egregious enough. But in corporate capitalism, I can no longer hold you personally responsible; I can only sue your corporation, and your personal assets are no longer at risk.

Historically, the rationale for this double standard is uncontroversial. Bureaucrats and legislators decided that the free market wasn’t working, and that the government needed to step in to shield businesses from the consequences of their actions. They also decided that it was just too complicated to figure out who was personally responsible for the various illegalities and disasters that businesses are involved in, and that it’d be easier just to hold some abstract “corporation” responsible.

A fundamental transformation

The typical right-wing response to all of this: incorporation is a good idea! It helps entrepreneurs take risks, and it makes the law a lot less complicated.

And that may very well be true, but it’s beside the point. After all, the left has a lot of proposals that we think could improve the general welfare and make the law less complicated; but these are always off the table, capitalists insist, because the government shouldn’t meddle in the economy.

It’s ironic, because the corporation is a greater government intervention in the market than anything the left typically proposes by an order of magnitude. Obamacare, for instance, was just a series of industry-specific regulations and tax code adjustments. Obama’s free community college proposal is just one of thousands of targeted subsidies already in existence. To get at a leftist proposal as ambitious and transformative as the corporation, you’d have to start talking about something on the order of granting workers control of the means of production.

That’s not a bad idea either! But as long as it’s considered completely out of bounds of the scope of permissible government intervention, there is zero reason why capitalists should continue to tolerate the corporation.

Socialism for the rich

That said, the reason why capitalists in general – and the rich in particular – continue to champion the corporation is obvious: it’s profitable.

Never mind that consumers lose their ability to meaningfully impact business decisions when big government prevents them from having their day in court. Never mind that limited liability creates an enormous systematic advantage against small businesses and entrepreneurs; in corporate capitalism, when businesses ventures aren’t limited by risk, they’re only limited by access to capital.

So while the occasional contrarian Libertarian or heterodox “anarcho-capitalist” (lol) might take up this critique, you’ll never see the Kochs build a policy center around it, you’ll never see Cato go to the mat lobbying Congress about it, and you’ll never see Reason.com devote a regular column to it. It turns out that the capitalists are generally fine with socialism – just not the kind of socialism that can help anyone but the rich.