In Defence of Big Business

by | Sep 9, 2024 | POLITICS

The failure to distinguish between economic power and political power leads people to believe that large corporations have grown through coercion.

Many people distrust Big Business: Big Tech, Big Pharma. Big Oil, even Big Grocers – any large corporations. They believe these companies have grown big by exploitation and coercion that they are able to perpetuate due their sheer size. Therefore, these people think the government should control these companies’ size to ensure “fair competition” and to prevent monopolies. The reaction to the recent antitrust ruling against Google is an example.

A judge concluded that Google has intended to monopolize the internet search engine market by paying companies such as Apple and Samsung for using its search engine as the default in their devices. The writer of a National Post opinion piece construes such payments as “coercion” because Apple, Samsung, and others accepted Google’s offer and because the users of Apple and Samsung devices often accept the default search engines – but not by force. The writer and the commentators relish the prospect that using the (non-objective) antitrust laws, the government could cut Google to size, prevent it from “bullying” others, and dictate what search engines the company employs.

Those distrustful of Big Business fear that large corporations grow too “powerful” and therefore can coerce and control us to do business with them, to buy their products and services, and to prevent us from competing with them. However, that fear is misplaced. Corporations, small or large, in free and semi-free countries (absent government intervention) don’t have the power to coerce. They cannot prevent anyone from acting or to force them to act against their will.

As Ayn Rand has observed, the only power business has is economic power: the power to produce and trade, which depends on its ability to obtain the voluntary co-operation of others through persuasion. Google grew big because it developed and sells products and services others find valuable, whether its search engine and other products or its advertising space. Apple hardly coerces consumers and companies to buy their products, either. Buyers do so because they value Apple products more than the price they pay for them. Similarly, Amazon became the leading online retailer because its customers appreciate the value it provides (such as convenience, selection of products, speed of order fulfilment) more than that of competitors.

Only the government possesses political power: the power to use physical force, or the threat of it, to restrain and punish those who initiate it.

The failure to distinguish between economic power and political power leads people to believe that large corporations have grown through coercion.

Although government cronyism exists in a mixed economy, Big Business – large corporations – is not inherently immoral. On the contrary, absent government favors and protectionism, companies grow large because they act morally. It means that they are productive: they continually develop and produce goods and services that customers value. They are just: their trade with others (customers, employees, suppliers) is voluntary and mutually beneficial. They respect the individual rights of others: they do not initiate physical force, including deception and fraud. (Accepting government subsidies and tax credits in a mixed economy is not immoral, as long as one keeps advocating for free markets and for reducing government interference).

To the extent they act morally, companies can continue to grow, either through economies of scale (diminishing unit costs with increasing volume of production) or increasing quality, or a combination of the two. These translate into lower prices or higher quality, higher demand, increased production, a larger market share, and higher returns on investment – as Google, Apple, Amazon, and many others have shown.

The anti-Big-Business types envision the successful large corporations as lazy “fat cats” that stop innovating and jack up their prices once they achieve a dominant market position. This vision does not correspond with reality: a large market share can only be maintained by continually providing more value to customers through innovation.

Only with the government’s help – protectionism and cronyism – could Big Business coerce: to prevent competition from entering its markets, charge artificially high prices, sell subpar products, and to provide lousy customer service. Examples for this cannot be found among successful large corporations (when they don’t perform, they get bought and turned around), only among those who avoid competition under government license or tariff protection (such as the taxi industry before Uber and the U.S. tobacco companies), or those who agree to pay bribes to influence government decisions.

Instead of condemning Big Business, we should appreciate large corporations for producing the material values we need and want.

But we should condemn the government for initiating force to interfere in markets. It taxes us to subsidize favored companies, sells influence to those willing to pay, and regulates business in various ways, which leads to negative outcomes to all. Thanks to government interference in markets, products are poorer, there are shortages (think of the current housing crisis), prices are inflated, unemployment persists, and investment flees to freer jurisdictions.

We should also demand – when we are still free to speak – that the government uses its political power appropriately: to protect our freedom to live, produce and trade, against the initiation of physical force by others.

Jaana Woiceshyn taught business ethics and competitive strategy for over 30 years at the Haskayne School of Business, University of Calgary, Canada, where she is now an emerita professor.How to Be Profitable and Moral” is her first solo-authored book. Visit her website at profitableandmoral.com.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

Related articles

No spam. Unsubscribe anytime.

Pin It on Pinterest