In a week when the Tories were accused of wanting to shrink the state back to a size not seen since the 1930s, the Guardian ran a series of articles on "taming corporate power". These initiatives might appear to spring from opposite directions politically, but restraining the state and restraining corporations are two sides of the same neoliberal coin. Both assume that the object of their disaffection is tractable (the managerialist fallacy), even though the "size of the state" (meaning public expenditure as a share of GDP) is largely determined by factors outside government control, such as economic growth, and corporations are already constrained by law. For all their rhetorical radicalism, both are blind to the nature of the neoliberal state.
History suggests that the state will remain much the same size as it has been over the last 60 years, even if its benefits are more unequally shared in future. The 35% figure projected by the OBR on the basis of George Osborne's "plan" could be briefly achieved through rapid economic growth, as occurred in the late-90s, but it can't realistically be achieved through cuts in a depressed economy. All developed economies spend around 40% of GDP on public services, with variations from this mean reflecting fluctuations in the economic cycle and differences in accounting treatment (e.g. whether healthcare is categorised as public or private) more than policy. Advocates of the shrunken state are deluding themselves when they hopefully imagine that "we would be closer to the United States than we are to much of Europe". While the theory of "trickle down" has been comprehensively disproved by the passage of time, the theory of "crowding out" persists because it cannot be tested in a Western democracy without provoking social breakdown (cf Chile under Pinochet for an experiment in a developing economy).
The demand that we tame corporate power ignores the gradual increase in the state's control over corporate activity in developed economies since WW2. To suggest that corporations are beyond the control of society, and that this requires that we reinforce the state, both exempts the state from responsibility for corporate abuses and supports its insatiable demand for more authority. There is an echo here of the myth of the oblivious king, who would restrain his evil ministers if only he could be made aware of the people's suffering. Though the vulgar interpretation of neoliberalism equates it with free markets and deregulation (which suits its advocates as much as its enemies), the myth of untramelled corporate power distracts from the reality, which is the increasing interdependence of business and the state. The focus on a moralistic explanation - that the problems of the modern economy are the work of evildoers in suits (or chinos) - also distracts from the realities of class power. Naturally there is no suggestion in the Guardian's campaign that taming corporations will entail questioning the allotted roles of capital and labour.
The Guardian series kicked off with a thundering denunciation from the pulpit by George Monbiot: "Do you wonder why ... parties of the left seem incapable of offering effective opposition to market fundamentalism, let alone proposing coherent alternatives?" (The word "coherent" is Guardian house-style, much beloved of Martin Kettle, suggesting a reasonable centre some way short of the left). The Reverend points the finger: "If so, you have encountered corporate power – the corrupting influence that prevents parties from connecting with the public, distorts spending and tax decisions, and limits the scope of democracy". Among the usual hippy-dippy madness ("we need a directly elected world parliament"), Monbiot suggested that limited liability should be reformed: "It socialises the risks that would otherwise be carried by a company’s owners and directors, exempting them from the costs of the debts they incur or the disasters they cause, and encouraging them to engage in the kind of reckless behaviour that caused the financial crisis" (limited liability was introduced in 1855, so a causal link to 2007 is stretching it).
The somewhat more sane Larry Elliott drew parallels between today's corporations and the trade unions of the 70s (a classic manoeuvre of "third way" triangulation): "So what is the difference between the trade unions in the 1970s and the big corporations today? If anything, the banks, the multinational tech companies and the giants of the energy sector are even more powerful than the unions were four decades ago" (lest we forget, corporations were also more powerful than unions in the 70s). His remedies ranged from the sensible (mandating country reporting of revenue and tax), through the ideological (the managerial state), to the amusingly quaint (re-reading the 1977 Bullock report on industrial "co-determination", which remains a dreamy pin-up for many social democrats). The patronising background to this last recommendation was revealed in the editorial that summarised the series, which sought to broaden the reform campaign through "the activities of the better trade unions" [my emphasis]. I hope they wipe their feet before they come in.
Elliott also banged the same company law drum as Monbiot: "But limited liability is a privilege not a right, and in return for granting it society should get something back in return". Limited liability reflects the company's role as a distributor of wealth, not its creator. Though it might encourage more entrepreneurialism (i.e. risk-taking), there is little actual evidence for this (you can still personally lose everything if you make a bad business decision). The chief protection it provides is for stockholders (the providers of capital) against the incompetence or dereliction of managers (the agency problem). The case against limited liability does not propose an alternative but insists rather on a fairer distribution of gains in return for the dispersal of risk. In practice, this is the same as levying more corporation tax, a point made explicit by Will Hutton in the Observer. The subtext of the Guardian series is that limited liability is a "perk" whose threatened reform might be used as a lever to implement a more effective transnational tax system, and to generally encourage greater tax morale. There is no change in power: capitalists will still own capital, managers will still manage, workers will still work (if they're lucky).
The same theme of rights entailing responsibilities (a classic neoliberal vector for reform) was continued by Prem Sikka: "We face a decision: we can have democracy and accountability, or rampant corporate power with enormous private wealth and power concentrated in the hands of a few business executives – but we can’t have both". This is a false dichotomy. Though not everyone has the power of a firm, and individual firms differ hugely in the scale of their power, the multiplicity of firms within an economy (which is a consequence of technological variety and functional specialisation) produces a plurality that is as "democratic" as the stage-managed practice of electoral representation. This plurality obviously shades towards oligarchy in economies dominated by a particular sector (including the "resource curse" of financial services in the UK), and its ideology is essentially hierarchic and authoritarian, but it remains one of the few institutional forms that hinders the anti-democratic impulses of the state.
Where there is a real tension between the firm and democracy is not at the societal level but within the firm itself. A central paradox of liberalism is that it promotes the multiplication of mini-dictatorships in the cause of freedom. The liberal criticises corporate power for wiping out the "little battalions" (the independent bookshop, the self-employed artist), but routinely ignores the case for workers' control (an alternative that is definitely not "coherent" in Guardian-speak) outside of mimsy cooperatives and nostalgia over episodes now safely consigned to history, like the Upper Clyde Shipbuilders work-in. Coincidentally, the week also saw the announcement of Alan Rusbridger's retirement from the role of Guardian editor, with many articles noting the need for his successor to pass an "advisory" staff vote (only advisory to avoid "the historic chaos that dogged journalist rule at Le Monde", according to Peter Preston). As Peter Wilby noted, this exercise in democracy is skin-deep: "the notion that a proletarian uprising could derail a carefully planned corporate strategy is for the birds".
A head of steam is clearly building around the issue of corporate tax avoidance: Ireland's abandonment of the "double Irish" dodge under EU pressure, Osborne's announcement of the "Google tax" (which Hutton correctly noted is a name-and-shame manoeuvre to get CFOs to restrain egregious avoidance), the criticism of Jean-Claude Juncker etc. Cynics might assume that some of this is just convenient misdirection to obscure the passage of TTIP, but there is also a broader recognition that unpopular abuse by US corporations must be tackled by the EU to avoid tariff protection becoming a populist vehicle for the nationalist right. As part of the Guardian series, Nesrine Malik advocated "single sales factor apportionment" (i.e. unitary taxation), but this doesn't address IP (intellectual property), which is increasingly central to tax dodging and the accumulation of wealth (IP is a more important aspect of TTIP than the much-maligned ISDS, which is in danger of being hyped to the level of paranoid fantasy). Once again the purpose is not to challenge the power dynamic, but to increase the price of social tolerance.
Aditya Chakrabortty made the transactional relationship of the corporation and society clear: "no more something for nothing", which generalises the more specific point about limited liability and the implication that "privilege" is justified if there is a social benefit, a quid pro quo. He also advocated the "social licensing" approach proposed by CRESC in The End of the Experiment. The Mancunians' analysis starts from a clear-eyed appreciation of the neoliberal state's history: "The free market experiment ... created an environment [of] ... large companies calcifying around the apparatus of the state, lobbying hard for the release of ever more low return but safe public activities". Unfortunately, it then starts to get a bit teary-eyed and emotional: "business and community are in a relation of mutual dependence because all business exists under a social contract whereby the corporation should offer responsible behaviour in return for the privileges which allow market access and secure profit taking. This is especially so in the foundational economy where the privileged business gains a local monopoly on the household spend of an immobile population in communities and user groups".
The foundational economy is those sectors where natural monopolies predominate (railways, comms infrastructure etc) or where there are legislated monopsonies, such as local government. This is nostalgia for the high era of public ownership (but more British Rail than British Leyland) and assertive municipalism, even if there is logic in the distinction: "we argue that a large part of the economy (more than one third) is sheltered from competition; while growth and jobs are socially meaningless objectives when the income gains from growth are captured by the top 10% of households by earnings and because low wage jobs spread welfare dependence". The problem is that this approach reinforces the neoliberal ideology that sees the relationship of society and business as a transaction between distinct entities, rather than a class relationship, in which rights always entail responsibilities and you can abuse us if you pay sufficient weregild.
Central to this ideological frame is the idea of corporate personhood, which has become a "thing" in recent years despite having been established in principle since the mid-nineteenth century. The libertarian right are happy to advocate it as a corrective to state power, while the centre and soft left are happy to accentuate its perils as a contrast to the benevolence of government. This has reached a pitch of lunacy with the response to the US Supreme Court's recent judgements extending constitutional rights to corporations, with the speculation that if firms can enjoy first amendment rights to free speech and religious belief, they might soon lobby for second amendment rights - i.e. bearing arms. Given that the police and military already do a fine job of cowing workers and imposing favourable trading terms abroad, I can't really see the case for private armies outside of the specialist "contractors" who do the state's dirty work in torture chambers.
In fact, the prominence of corporate personhood shows that in the era of globalisation firms remain embedded within societies. Though we fear them becoming stateless and beyond the law, this independence is a legal fiction used to protect their owners' privileges within a territorial jurisdiction. Similarly, limited liability is better understood as the socialisation of risk - i.e. dispersing the cost of failure among other firms and ultimately consumers in a given society - rather than a global get out of jail free card for bad guys. Without the nation state there is neither corporate personhood nor limited liability. In other words, these "grants" are attributes of the state. The Guardian ("a privilege not a right") wants to put up the price for the sale of these "liberties". In advancing its case, it paints a picture of rapacious corporate power, with the state as a victim of "encroachment" and "capture", when the reality is closer to an elephant impassively supporting a swarm of ticks. This hyperbole ignores the centrality of the state in neoliberal practice and gives credence to the claims of the right that it is possible to "shrink" it.
In theory neoliberalism privileges competition, markets, freedom and entrepreneurialism. In practice it delivers monopolies, commercial secrecy, regulation and rent-seeking, all of which depend upon the power and agency of the state. Increasingly, this is what the French sociologist Loic Wacquant has termed a "centaur state", a liberal head on an authoritarian body: "the ongoing capitalist 'revolution from above', commonly called neoliberalism, entails the enlargement and exaltation of the penal sector of the bureaucratic field, so that the state may check the social reverberations caused by the diffusion of social insecurity in the lower rungs of the class and ethnic hierarchy as well as assuage popular discontent over the dereliction of its traditional economic and social duties". In this context, our failure as a society to move beyond vicious hatred and internecine conflict is less a reflection of man's fallen state than the necessary modus operandi of advanced capitalism. In other words, UKIP and the Front National are simultaneously unwanted (because destabilising) and convenient (because normalising) symptoms of authoritarian drift.
According to Wacquant, "the penalization of poverty splinters citizenship along class lines", which explains the continuing centrality of class (and immigration as a proxy for class) in political debate. Thus "neoliberalism is constitutively corrosive of democracy", in the sense that it undermines the classic liberal belief that democracy can reconcile competing class interests. This corrosion of democracy does not arise from the depredations of untamed corporate power, which is merely symptomatic, but from the operation of the state. The neoliberal era has not just seen the enormous growth of the penal sector, but the relentless socialisation of self-discipline, the expansion of surveillance, and the use of exaggerated threats (paedophiles, drugs, Islamists) to justify ever greater authoritarian control. A disturbing aspect of the last decade of state torture is that it was done semi-publicly and thus gradually normalised. Abu Ghraib and Wikileaks were evidence of insufficient state regard for concealment, more than the conscience of whistleblowers. Just as the Snowden revelations did not lead to outrage, so this week's Senate report on CIA torture has prompted just another shoulder-shrug. We have been dulled, in part by our acceptance of commercial surveillance, from cookies to CCTV (for our "convenience and protection").
In this light, the approach of the Guardian's writers is misguided, ignoring the role of the neoliberal state and suggesting that if we can just get corporations to recognise their social responsibilities all will be well. But there is no basis for believing that corporations, as entities whose sole raison d'etre is profit-making, actually have social responsibilities, beyond obeying the law (which includes paying tax). If it has any meaning, "social responsibility" concerns the reconciliation of the interests of the individual (including the corporate "person") and the collective, which is a matter of politics. The corruption of democracy is being driven by the state, not by corporations. The latter are beneficiaries and willing helpers, but their approach is purely instrumental. Real existing corporate power (tax avoidance, privatisation, rigged markets etc) is the product of the state, not some nerd genius in Silicon Valley or a smooth lawyer in The City.
The true believers in the inadequacy of democracy are in Whitehall and Westminster and their cause is essentially one of class interest. As Benjamin Selwyn noted: "Neoliberalism is about re-shaping society so that there is no input by workers' organisations into democratic or economic decision-making. Crises and austerity may not be intentionally sought by most state leaders and central bank governors, but they do contribute significantly towards pursuing such ends". Their ideological confreres in the media present the world through a national lens, which applies as much to the internationalists at the Guardian (forever publishing global league tables) as the xenophobes at the Express. As Selwyn continued, "The problem for these commentators is that their economic analysis takes as its starting point the national economy, rather than class relations". Taming corporate power is not the same as taming capital, but then the latter is strictly off the agenda.
In hegemonic political debate, the state - as the container of the nation - is a given, with talk of its shrinking largely limited to "discretionary" expenditure on the working class. Even the occasional grumble about the cost of Trident or mortgage interest relief is a distraction from the real questions that should be asked about the extent of state power and its symbiotic relationship with business. As capitalism seeks to commodify more and more of life, so the state intrudes more and more on privacy and interposes itself more and more in social relations. The working class remains characterised as unreliable and incoherent, whether in the form of union militants or UKIP bigots. Amoral corporations are presented as immoral delinquents who need to undergo a Scrooge-like transformation of sentiment. They must be made better "persons" through state management. The problem is not the limited liability of corporations, or even the limited liability of bankers, but the limited liability of the state.