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Big Business is often the enemy of capitalism

What so many of capitalism’s defenders seem to miss is that just because a large company is doing something legally, that does not mean it is ‘kosher’ capitalism. In Germany in the 1930’s and 1940’s, companies like Krupp and Seimens remained under entrenched private management in spite of the National Socialist German Workers Party coming to power, or more accurately, because of the new overtly anti-capitalist government.

They did this by running their companies in such a manner as to support the objectives of the National Socialists. In return, the state ensured they maintained a privileged position, insulated from upstart new market entrants in their respective fields. These companies, working hand in glove with the state, could ensure that national laws would be adjusted as needed to support whatever business models the entrenched companies liked, and the state could be sure that company strategies would be based servicing the needs and objectives of the Nazi Party, not to mention paying backhanders to leading Party members.

Of course, one does not have to look as far back as National Socialist Germany of the 1940’s to see examples of companies trying to manipulate the state to prop up an entrenched way of doing things: for the last few years the music industry in the United States has been trying to use the law of the land to crush challenges to its old physical media based business models. Rather than running their business in the interests of the state, nowadays in modern democratic statist political systems, large companies spend vast sums on lobbyists and on funding the election campaigns of politicians who might as well have an hourly rate for their services stamped on their foreheads.

Now in Australia, Microsoft looks ready to try and buy themselves some legislation for much the same reasons after an Australian court declined to stop people modifying XBox hardware:

Microsoft would be forced to reconsider selling the Xbox video game system in Australia, or seek changes to the law, following the acquittal in July of a Sydney man alleged to have sold chips that modify a Sony PlayStation 2 to play imported games, Microsoft chief executive Steve Ballmer said yesterday.
“Given the way the economic model works, and that is a subsidy followed, essentially, by fees for every piece of software sold, our licence framework has to do that,” Mr Ballmer said. “If there are aspects that are not allowed, it would encourage us to require a change in the legal framework. Otherwise, it wouldn’t make economic sense.”

As usual a pure laissez-faire solution beckons: if Australia refuses to criminalize innovation and therefore Microsoft declines to sell its XBox Games Consols down under, then simply abolish all the idiotic import restrictions and tariffs currently clogging up Australia’s economy and then… who gives a damn where Microsoft chooses to sell their products: if there is a demand for XBox in Oz, a ‘grey market’ will rapidly appear as capitalist importers across the world buy up XBoxs by the container load elsewhere (such as Taiwan, USA, India) and ship them in themselves.

If that busts MS’s business model, so what? Let them find another one that actually works without the involvement of police around the world to make it succeed.

End of problem.

12 comments to Big Business is often the enemy of capitalism

  • Marty Busse

    This is one of the differences between being a libertarian and being a conservative: libertarians are pro-market, not pro-business.

    In the US, libertarians tend to be seen by their critics as favoring the big mega-corporations. As a former critic who has changed his mind and embraced the libertarian position, it’s great to see an article like this. The next time I hear someoen claiming that libertarians are slaves to big business, I can point them to this article.

  • Walter E. Wallis

    Pity the poor working man – with his employer, his union, and his government all sticking it to him. Oh, and, of course, his church.

  • Mike

    Well, if one considers Australia to be failing to protect Microsoft’s property rights, then MS has every right to do this. Laissez-faire is not letting the state proceed unquestioned. And I hope you would be all for MS lobbying against taxation, trade barriers, etc.

    I’ve seen a lot of denunciation of MS and Big Media in the blogosphere; how they’re evil, stifle innovation, and so forth. What I haven’t seen is a discussion of the proper role of intellectual property in a truly free market. How and why are they wrong, and what’s right?

  • Mike: Well the question is do MS have ‘rights’ that prevent a person altering hardware after they buy it? A court in Australia did not think so. Yes, intellectual property rights matter but ultimately they sold the hardware and it is not really their call what happens to it after that.

    Of course one could make a reasonable argument that it is analogous to hacking a decoder box for a cable system, which I do think is theft, but I am not sure altering an XBox is the same thing.

    I have altered my coffee maker so that it uses cheaper standard filters… does that give the maker the right to sue me because I no longer have to purchase his proprietary filters? What if he said ‘our business model uses the filter paper sales to subsidise our cheap coffee makers, so this guy is undermining our business model… give us a court order to make him stop’. Is THAT okay? I don’t think so.

  • Yeah, and if you watch commercial TV don’t forget your obligation to view the ads. And make sure to read all roadside billboards when you are driving. You’re no better than a thief if you don’t.

  • Mike

    No, I am not in favor of being forbidden to alter the things I buy, obligated to watch commercials, the RIAA hacking people’s computers, etc. But I’d hope there is a line to be drawn somewhere.

  • Mike: I agree, but it is often hard to see where that line should be. Trouble is that ‘the line’ should rarely where the guys with the lawyers and large amounts of cash want it to be.

    The problem with modern democratic states is that the ability to make market distorting laws is essentially for sale to the highest bidder: hence my contention that big business is often (not always) the enemy of capitalism. I have nothing against big businesses per se.

  • T o recycle an old post of mine, see this entry on Corporate Communism. It discusses the inherent inefficiency of large corporations, with some alternative models. The example of the construction industry I give shows that current big-buisness forms are in part a cultural preference – and, of course, ego-boosting empire-building on the part of upper management. In fact, most big mergers fail/lose value – but they represent a shortcut to bigness that these sorts of people fetishize, probably as compensation for other deficits.

    But I think a strict efficiency/ROI analysis of large companies will show that they don’t really serve the interest of investors as well as an equivalent group of smaller co-operating/competing companies. Except for the government factor – the wildcard in this. Big companies have the clout to bend law to their benefit, for the sake of short-term gain, and at the cost of overall enconomic efficiency in a nation as a whole. Truly, an example of the destruction of the commons in terms of the common environment of business law.

  • Paul

    It seems that the argument is essentially one of ownership of the hardware after purchase.
    Buy a software package, and most often, you’re allowed to use it, but you don’t actually own it. The older model of being unable to buy; merely to rent the appliance (in this case, the X-Box), seems to be the preferred model. Just look at how many of the major software vendors are trying to find ways of distributing their product without the use of physical media, thereby maintaining a high level of control over distribution.

  • Dale Amon

    And there are many libertarians who think our concepts of Intellectual Property are an historical anomaly, based on obsolete technologies which made copying difficult and profitable, whereas copying is now simple and not worth the transactional effort of charging for.

    Copyright is already dead. You might find this article of mine of interest.

  • I would refer Dale Amon to Walter Benjamin’s The Work of Art in the Age of Mechanical Reproduction

    btw, when I mentioned renting as the ‘preferred market model’, it may not be preferred from the point of view of the consumer, rather it would be ideal from the manufacturer’s point of view.
    Just thought I ought to clarify that point.

  • Rahil

    You can buy a pre-modified Xbox in retail electronic stores in many countries. It may be the case that it isn’t ethical but US residents are the ones getting ripped off on these games.

    It seems an American should study ‘chipping’ abroad and then he will have an excellent trade when he returns to the USA. I’ll learn how to do the hipping myself and buy bulk chips from Dubai or Singapore. Not only do you get to help somebody out who needs the chip, you also can collect large royalties and present your knowledge.