One of the greatest shortcomings of modern economic teaching is economists’ tendency to depoliticize the discipline, failing to portray the economy as the battleground that it really is. Grounded in the myth of human rationality, economists’ emphasis on the “efficiency” of the economy, which, as we are told, is only made less so by “government intervention” feels more like a justification of the current orthodoxy rather than a well-reasoned policy prescription.
The supposed “welfare loss” caused by government intervention (the shaded triangle between the pre-tax supply and the post-tax supply) is, above all, designed to equate “the government” with “bad” in the minds of economics students. This, of course, isn’t to say that the government cannot be inefficient or wasteful (it can). But such thinking is part of a larger tactic to diminish the role of the government in advancing social welfare.
The enshrinement of certain economic protections, such as child labor laws and the right to certain forms of leave, would never have been provided for had such measures been “left” to the private market. And yet we are told by economists that government interventions that make these policies a reality inevitably result in a “welfare loss”. But for who? The economy is and has always been a battleground. Here’s why.
Why Business Means War
As I have written elsewhere on this blog, much of the current economic orthodoxy — based on neo-classical logic — idealizes if not flat-out fetishizes the “free market” (even the term “free” in “free market” reinforces a particular way of thinking). Much of this discourse centers around the idea that, left to its own devices, the free market will inevitably lead to economically optimal outcomes (whatever that means).
One of the greatest shortcomings of modern economic teaching is economists’ tendency to depoliticize the discipline.
As the story goes, with each actor pursuing their own self-interest, we should supposedly arrive at a natural equilibrium in which suppliers provide goods and services at exactly the rate at which consumers demand them, thereby eliminating the need for “government intervention”. But why should we believe that a “self-regulating market” would give rise to businesses that compete with each other to the benefit of consumers rather than, say, themselves?
As it turns out, competition is actually quite bad for business, given how much of the economy is still a battleground. What I mean by this is that in order for a company to survive in the modern economy, it must not only be profitable at the business level (able to take in more revenue that it spends on costs while also meeting owner or shareholder(s) demands), but it must also be more profitable than its competitor(s), at least within certain high-stakes industries.
Such thinking is part of a larger tactic to diminish the role of the government in advancing social welfare.
This isn’t to say that two or more competitors can’t co-exist (Pepsi and Coke, Visa and MasterCard, McDonalds and Burger King, etc.), only that it is generally in the interests of one company to “beat out” its competition. If it is able to do so, it can then “capture” the profits of its former competitor(s), which is why corporations often strive to achieve monopoly or semi-monopoly status within the market.
From Economic Power to Political Power
The idea of commerce as war, which is actually adopted in business literature, largely contrasts with that of the idealized “free market” in which businesses merely respond to consumer demand as if they were passive entities. In real life, businesses not only have autonomy, but the pursuit of their self-interest almost always translates into a search for market power. This, in turn, shapes the reality of consumers, who actually tend to be the more passive ones.
What this means is that the companies who come out on top will often use their market power to rig the rules of the game in their favor. It has long been documented that corporations and other special interest groups, including trade associations, have a much easier time organizing to protect their financial interests than the mass of loosely organized consumers and/or workers.
Businesses not only have autonomy, but the pursuit of their self-interest almost always translates into a search for market power.
For example, corporations and other special interest groups might, of course, flat out lobby the government to pass laws that benefit them, such as lowering corporate tax rates. Another crowd-pleaser is looser regulations, especially in terms of safety or environmental protections that have historically benefited workers. Protectionism is also back in vogue, although who this will actually benefit remains to be seen.
Smaller coffers for the state also means a weakened ability to not only pass laws that limit corporate power, but a weakened ability to enforce them, particularly in the realm of antitrust or competition law. Around the turn of the 20th century, starting with the Sherman Antitrust Act in the United States and later adopted by other Western countries, governments began to regularly break up monopolies and cartels, although such laws have been weakly enforced since about the 1980s.
Corporations and other special interest groups might, of course, flat out lobby the government to pass laws that benefit them.
It should be clear by now that this is precisely why the myth of the “free market” is so powerful. It not only distracts us from the reality of how businesses actually operate — with companies constantly seeking to outdo their competitor(s) in order to increase their hold over the market — but it also “allows” corporations to pursue monopoly status under the guise of the “efficiency” of the free market.
The Economy is An (Intellectual) Battleground
Clearly, corporations and special interests use their economic power to directly advance not only their political interests, through lobbying for example, but, with the same token, their ideological ones as well. This mismatch between theory and reality reveals how much of the economy is a battleground, intellectually speaking, in which certain ideas clearly win out or take precedence over others (which is, if you’re wondering, why economists can never agree on anything).
We see this not only in the discipline of economics, but in academia more widely, in which academics or even entirely university departments might be influenced by corporate interests. This can take place, for example, through donations, sponsorships, or research grants either funded directly by corporations themselves or those affiliated with them through “foundations”.
Corporations might, for example, try to suppress the publication of results that portray their activities negatively. Historically, this has been the case with the tobacco industry, which attempted to cover up findings linking smoking to lung cancer. Conversely, if such negative results are published, corporations might try to contradict them with opposing findings in order to create public confusion, as we also saw with the fossil fuel industry.
Funny how we rarely publicly question “private market intervention” in government or government-funded institutions.
When the government reduces its funding for public institutions such as universities, the private market is often all too happy to step in (funny how we rarely publicly question “private market intervention” in government or government-funded institutions). Although this seems to be particularly true of science, medicine and technology, the reduced funding in the humanities certainly leaves the door open to more corporate funding.
The intellectual battleground hardly stops at academia, however. Corporate or special interests often go on to fund other “idea marketplaces” such as the media or think tanks. The latter in particular tends to recruit graduates of “elite” universities that confer upon them a sense of legitimacy, which also has the added benefit of shielding them from scrutiny over their sponsorship. It is also not by accident that billionaires such as Amazon’s Jeff Bezos come to own the newspaper The Washington Post. I mean, hell, one only has to look at the current controversy over Elon Musk and X, formerly Twitter, to recognize that billionaires clearly have a stake in controlling the public discourse.
Winners and Losers
The economy, much like the discipline that attempts to describe it, is and always has been a battleground because it clearly creates certain “winners” and “losers”. The “winners” are the corporations and their affiliates that are able to carve out an ever-larger slice of the economic pie, while the “losers” tend to be everyone else: small businesses that cannot compete with these corporations, taxpayers whose public money is no longer used to counter these monopolies, and workers and consumers who struggle to collectivize and thus have their demands met in the face of big business. The “intellectual monopolies” that are created can often be just as powerful as their economic counterparts, which is why the need for free public discourse has never been more important.