Privatizing Sovereignty, Socializing Property: What Economics Doesn’t Teach You About the Corporation

This post is part of a series on the Methods of Political Economy.

David Ciepley – 

We imagine we live in a bourgeois capitalist economy, in which the means of production are owned by natural persons, the “capitalists” of capitalism.  On this, the Marxist economist, the liberal economist, and the neoliberal economist agree.  But we do not.  Ours is a corporate economy.  Overwhelmingly, the means of production are owned, not by natural persons, but by abstract legal entities—corporations.  Marx was thus right in predicting that the fetters of bourgeois, individually-owned property would be burst asunder to be replaced by socialized property.  But it is not at the level of the state that productive property has been socialized.  It is at the level of the corporation.  It is, notes Paddy Ireland, “capitalism without the capitalist.”  The implications of this are manifold and take us outside the confines of what conventional economics can illuminate.

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From Territorial to Functional Sovereignty: The Case of Amazon

Frank Pasquale

Economists tend to characterize the scope of regulation as a simple matter of expanding or contracting state power. But a political economy perspective emphasizes that social relations abhor a power vacuum. When state authority contracts, private parties fill the gap. That power can feel just as oppressive, and have effects just as pervasive, as garden variety administrative agency enforcement of civil law. As Robert Lee Hale stated, “There is government whenever one person or group can tell others what they must do and when those others have to obey or suffer a penalty.”

We are familiar with that power in employer-employee relationships, or when a massive firm extracts concessions from suppliers. But what about when a firm presumes to exercise juridical power, not as a party to a conflict, but the authority deciding it? I worry that such scenarios will become all the more common as massive digital platforms exercise more power over our commercial lives.

A few weeks ago, the Friedrich Ebert Stiftung (a think tank affiliated with the Social Democratic Party in Germany) invited me to speak at their Conference on Digital Capitalism. As European authorities develop long-term plans to address the rise of powerful platforms, they want to know: What is new, or particularly challenging, in digital capitalism?

My answer focused on the identity and aspirations of major digital firms. They are no longer market participants. Rather, in their fields, they are market makers, able to exert regulatory control over the terms on which others can sell goods and services. Moreover, they aspire to displace more government roles over time, replacing the logic of territorial sovereignty with functional sovereignty. In functional arenas from room-letting to transportation to commerce, persons will be increasingly subject to corporate, rather than democratic, control. Continue reading