Tyler Cowen tries to argue in his latest book Big Business that big businesses are in reality not the villains they’re often made out to be and, in fact, deserve our praise. While the book presents strong counter-intuitive arguments about the good that big business does in America, I suspect readers skeptical of large private enterprise will walk away unconvinced. In the big picture, critics of big business are still likely to assume that some combination of more regulation, smaller businesses, and public ownership would be a superior alternative to the status quo.

In a huge ecosystem of large corporations, Cowen emphasizes that a fair assessment needs to look at the “net net” of the total impact of big business and not just the worst offenses. Cowen acknowledges the salesmen swindling low-information customers, dentists recommending more appointments than necessary, and pharmaceuticals striking shady deals with doctors to dish out addictive drugs. But his underlying thesis is that we need to look at the net effect.

The Good

While admitting these egregious offenses, Cowen claims “the propensity to commit fraud is essentially just an extension of the propensity of people to commit fraud.” He points to a survey showing that 53% of people admitted to lying in their online dating profile. One study estimated that we tell an average of nearly two lies per day and most often those are to people we are the closest to and not total strangers. Another showed 31% of people having completely fabricated information on their resumes and 76% “embellished the truth.” Indeed, when we look at big business in the modern economy we often evaluate things as they are and think of alternatives as we wish to be. It’s worth considering the possibility that big business is no more dishonest than we are as individuals.

In fact, Cowen argues that big business is incentivized to be even more honest than individuals or small companies. Because they have an (inter)national brand to uphold, big businesses are more incentivized to avoid the PR disasters that come from customer negligence in a world of viral social media. Further, there is evidence big businesses are more likely to treat their workers better than their mom-and-pop counterparts.

The NFL can shamefully exclude Colin Kaepernick because of his politics, but often overlooked is the idea that the profit motive can be a positive force for social justice. Cowen points to our national reckoning with sexual assault to argue that private business can be a better force for good in these regards than the public alternative. Allegations against men in the entertainment industry were met with swift action – think of Kevin Spacey, Jeffrey Tambor, etc. – while a man with a long history of unambiguously immoral treatment of women sits in the Oval Office. Roy Moore only barely lost in the Alabama Senate race. Market forces can be seen as a villainous determinant to cut corners and exploit people unfairly, but it can also be a force for social justice under some circumstances. As Sam Hammond argued in Liberal Currents, corporate capitalism and social justice are not always opposing forces.

Too many arguments in favor of scrapping the entire system assume that a radically redefined economic system and culture will mold to their ideal reality. But what happens when we put government in control of every industry and Donald Trump is the one running that government? Fox News is an easy target for the ills of profit-driven media, but would an entirely publicly-owned media landscape just mean Trump hires Roger Ailes to run PBS?

Cowen spends the majority of the book tackling the common criticisms of big business: CEO pay, the financial industry, big tech companies, and corporate influence over government. The gravity of these statements need to be analyzed through his “net net” framework and does add counter-intuitive arguments to the conversation, even if not always entirely convincing.

CEOs today work in a more demanding environment, he argues, needing to steer through a globalized economy full of public relations issues, foreign investment, and regulatory know-how. How important is leadership to a company’s performance? The top 4 percent of corporate performers are responsible for the entire increase in the U.S. stock market since 1926. Cowen offers evidence that these higher demands are borne out by higher performance. For example, Chinese firms could improve their productivity by 30 to 50 percent by bringing management quality up to the standard of Americans, Indian firms 40 to 60 percent. One study says a company’s leader accounts for 5 to 6 percent of the value of a company. Under this backdrop, Cowen believes higher pay is warranted under the greater demands.

An important stylized fact is that the main driver of inequality is not from changing pay scales within firms, but changing pay scales between firms. In other words, superstar firms that are torching the competition with higher productivity are paying all of their workers better, and Cowen believes this rise of superstar firms is thanks in large part to good CEOs.

The benefits of the financial industry are not always obvious for the typical citizen but Cowen tries to paint a brighter picture. He points to the role of credit in supporting the country’s biggest projects and the strong correlation between prosperous countries and the health of their financial sectors. American venture capital, he believes, is the envy of the world and funds some of our greatest success stories – without ever expecting a bailout. The American banking system is more fragmented than any other high-income country in the world, and the proliferation of smaller banks during the Great Depression shows “breaking up the banks” is no guarantee in preventing catastrophe.

Contemporary tech companies give us unparalleled power at our fingertips, often for free. The cost of privacy has become the common public rallying cry but Cowen still believes their value to each and every one of us far exceeds the cost. We’ve become so accustomed to free email, free mapping, one-day shipping, and reliable spreadsheets that it’s easy to only focus on what appears to be corrupting market power. But only recently did companies like Kodak, Myspace, General Motors, IBM, AOL, and Blackberry seem to be too dominant. The image of too-powerful tech titans complicates our appreciation for the value of these companies, in Cowen’s mind. The common criticism of brain-rot through the internet and smartphones is strikingly familiar to the doomsday predictions of yesteryear about the opera, rock and roll, and the novel.

The election of Donald Trump shows the hold of big business on government is not nearly as strong as portrayed, Cowen believes. Business leaders most often state their priorities to be predictability, more open immigration, and free trade – a clear opposite to Trump’s policies. The $3 billion companies spend annually on lobbying is pennies compared to the $200 billion they spend on advertising. Farm subsidies – one of the most offensive instances of crony capitalism in the Federal budget – only accounts for $20 billion a year out of a $4.4 trillion budget.

In Search of a Better Alternative

But to all of the good of businesses, a skeptical outsider would rightly point out that these realities exist within the current system. What if we lie on our resumes because it’s a brutal rat race economy? Or we lie on our dating profiles because the market economy conditions us to be self-interested and cut corners to get ahead? It’s true that Monsanto supplies the food that keeps me alive, tech giants allow me to communicate with my family, and big pharmaceutical companies produce drugs that fight infections. Every prosperous society has indeed depended on a well-oiled financial system. And the dignity of work that employers give us through jobs is indeed important. But why are these actions necessarily being done in the most optimal way?

Feudal lords could be given credit for the food given to peasants or the dignity their work provides, tyrannical leaders for military protection, and the DMV for making sure our roads are safe. Skeptics of the market economy believe that we could have a world that is more prosperous, more egalitarian, and more ethical under a different regime. Just as an anarcho-capitalist would refute gratitude towards roads or a public school education with “well, the private sector could do it better,” any critique of the status quo asserts a superior alternative outside big business.

Incrementalists who criticize big business may just want more regulation or more support for small business, while radicals prefer more public ownership. I sense that many of Cowen’s observations on the goods that big business provides will fall on deaf ears to skeptics whose prior beliefs are that we could have an even better regime.

Of course, Cowen is up against an insurmountable foe in many of those skeptical arguments. Critics of the status quo can struggle to find strong counterfactuals in order to prove there is a better system out there. Saying that “culture and economy would shift under a different system to one where we’d all be moral, not run the rat race, cut corners, or tolerate pollution” is a tough argument to prove or disprove when it is so hypothetical.

In Cowen’s (wonderful) podcast, he always asks the guest about their “production function” – what habits/routines the guests do to ensure their highest productivity. In a recent Ezra Klein Show podcast episode about workism, Ezra brings up how an inevitable part of capitalism is the encouragement to always maximize productivity…even doing something like meditation or wellness as a means to counteract the toxins of modern life. But it’s still under a framework of “optimizing” time. Can this cultural reliance on “productivity” actually make us miss the point, even when we appear to be cognizant of mindfulness? For an infovore like Cowen, the current culture and system gives him every opportunity he can to learn and explore new things. But for the vast majority of us, are smart phones instead just giving us a bigger portfolio of addictive distractions from more important matters?

As a response to skeptics, Cowen points to data he believes reveals that – despite our self-reported disdain for tech and working – we love our smart phones and love working. He says that the fact Americans work longer hours now than they did in 1950 shows we necessarily like our jobs better. But what if we are just being motivated to “keep up with the Joneses” and none of the extra work is actually making us better? Similarly, he argues few people actually leaving Facebook despite all the public criticism shows that people like it a lot more than they let on. But the powerful network effects and addictive qualities of social media are not always the easiest thing to shake off. It seems a far jump to assume these facts necessarily reveal strong-willed rational decision-making. It’s not encouraging that the people who designed the notification mechanisms for phone apps don’t let their own children use them.

So Why the Hate?

The last chapter of Big Business addresses a lingering question: If big business is so good, why does everyone seem to hate it? While the vast majority of the population loathe the post-Citizens United saying that “corporations are people,” Cowen believes we indeed do anthromorphosize corporations. In fact, projecting human qualities onto our outside world is how we have long attempted to understand and relate to it. In all of recorded history, civilizations have told stories of the weather and natural forces as gods with faces, arms, and legs. “When it comes to our cars, our ships, and our pets, we give them names, talk about their loyalty, and feel abandoned or let down if they disappoint us.”

It is this humanizing fact that makes us inevitably disappointed by corporations’ performance. We want them to be our fuzzy friends that take care of us but in the end they are actually just … “faceless” corporations. It presents a case that we will never be grateful enough for what big businesses do for us. Cowen says hating corporations is like hating your parents – the people who give you everything but also enforce rules. This might be true…but again, couldn’t oppressive feudal landlords fit the same description?

 

It’s important to view any analysis of big business in “net net” terms by focusing not only on the most outrageous failures, but the tremendous good big business brings to our lives. To these points, Cowen does a service by providing under-appreciated defenses of the most common shortcomings of big business. I agree with Cowen’s point of view and think big business needs more appreciation. In the end, skeptics may be impossible to sway as they rely on non-falsifiable hypotheticals. But a better appeal to their stronger arguments would likely leave a stronger impression on the critics of big business.

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