On efficiently implementing corporatism

The main idea: a corporatist system where only corporations of a certain minimal market cap would be allowed to operate any economic activity at all would be a great improvement over straight socialism.

0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 26.09.2022, and the current version may have been updated several times from its original form.

 

1 The system

1.1 The efficient implementation of a truly corporatist economic system requires publicly-listed firms acting as clearinghouses of their own shares, as discussed previously.

1.2 Now that one’s market cap is an actionable datum, you can put all the weight of the world on it. Only firms of at least X value are allowed to operate and serve the market. The X would be such as to allow the operation of no more than a couple dozen firms in the whole country. The end.

1.3 X would be enforced by establishing the appropriate lower limit to the price the firm is allowed to post for their shares. You cannot pay any less and - if your shares are perceived as being worth less - you suffer a run and are liquidated.

1.4 I have no good way to allow new firms to grow into the limit, but a decent attempt would be to foresee a lower Y limit where you would be allowed to operate, as long as you sustain a relatively high growth rate such as to lead to the X limit within no more than a few years.

1.5 Surely, delivering all economic activity into the hands of a handful of megacorps would create monstrous, vertically-integrated behemoths that make everything from tomatoes to cars. These would be highly bureaucratic organisations, highly susceptible to capture from entropic forces, although at least still subject to a bit of market discipline from both competitors (such as they are) and shareholders.  

1.6 In practice, I don’t think any particular market would be serviced by more than one firm, as even a middle-sized country would have so many goods and services to provide that competing head on would be silly. Competition would be of the monopolistic form, with sets of not so close substitute products vying for the same consumer dollar. If we go by the rule of thumb of three firms being able to coordinate, each market would see firms colluding to set prices and limit quantities to a great degree.

1.7 Last, but not least, you could do worse than having your political system run by the council of Chief Executives of these firms. Indeed, given the very dynamic shareholding situation created by the each-firm-its-own-clearinghouse model as per 1.1 and the issue of corporate government by AGM being obsolete as per the linked post there, it is unlikely that shareholders would have anything to do with the selection of these Chief Executives at all. 

 

2 The original rationale

2.1 I originally designed this very simple system based on a certain, very libertarian understanding of regulation. By that understanding, regulation is but a tool used by incumbents to keep competitors down and ensure higher than normal profit rates for themselves.

2.2 By that model, the need to limit competition wreaks havoc across the whole economy, hobbling firms large and small alike. Sure, your tiny start-up competitor is smothered, but you yourself are operating at far from full efficiency. Even though for you this is a rational price to pay for limiting potential competition, for society as a whole this is a double loss.

2.3 So, if you can make sure that the big fish are protected from competition whilst being able to themselves operate at full efficiency, you’d get a Pareto-improvement on the default setting of ever-increasing regulation, with cascading failures that eventually lead to full socialism.

2.4 Now, I no longer subscribe fully to that model of regulation. Yes, it is obvious that big firms and entrenched interests use the revolving door to hit potential competitors in their infancy, but this does not mean that regulation (such as it is) serves no purpose.

2.5 In the absence of regulation, one can postulate justice to be carried out by way of citizen juries. What makes one think that such juries of Johns and Bobs would be able to decide on highly complex, technical issues related to electromagnetic spectrum separation, risk of cancer that is acceptable from lack of catalytic converters, etc.

2.6 Such juries I now expect to rule very conservatively in issues where a technology’s benefits are to be weighted against a probabilistic health risk. I’d expect nearly all rulings to go in favour of holding diesel engines to be carcinogenic. The EPA has regulated diesels nearly out of existence, but at least we got them for a century.

2.7 So, the self interest of a bunch of big fish coalesces around state capture and regulation as a pre-emptive tool, which grants them immunity for legal action as long as operations conform to these rules. No firm was even fined for damages when operating within the regulatory envelope.

2.8 Now, I don’t know of the right cut-off between health risk and technological benefits, and have no idea of which system could provide a society-wide choice near the optimum. I think the unbridled jury would err too much on the side of caution, but don’t know how far away from the optimum regulation lands us. So, I can no longer claim honestly that regulation serves no good at all, despite it being an obvious tool designed to smother competition.

2.9 Nevertheless, by optimising another tool such as to limit competition, regulation would be left freer to deal with matters of the right amount of tech. I have no doubt that regulation as informally decided by a couple dozen megacorps would skew far in the direction of permissiveness (assuming it would even exist), which I suspect would be overshooting the optimum, but I have no model I can use to confirm this intuition.

 

3 The current rationale

3.1 In my model exploring the implications of the High and Low vs. Middle model of political conflict, I predicted that the HL coalition gravitates towards full socialism as its ultimate desideratum.

3.2 Efficient corporatism should be a very acceptable substitute, as it fulfils the same criteria as full socialism when viewed from the lenses of the High. For the rest of us, it should be rather clear how infinitely preferable such a system would be to socialist misery.

3.21 Now look, I’d be lying if I didn’t admit that I also rely on this system to temper some of the least palatable facets of modern consumerist societies, as caused by the characteristics of market demand. Key among these are the tendency for deafening and intrusive marketing campaigns that devolve into virtue signaling, the presence of an inordinate amount of minute variations of the same basic product, or the devotion of huge intellectual energies into minutely improving products that cause almost no gain in utility.