But James Livingston is nothing if not a contrarian, and he's here to tell you that TBTF and the monopoly power of big banks and big corporations did not cause the Great Recession - and that their very size and scale is a good thing. As he notes, opposition to concentrated economic power has a long pedigree in American political culture. It found its first spokesperson in Thomas Jefferson, and it galvanized the Populist and anti-trust movements of the late 19th and early 20th centuries, when corporate capitalism became the organizing principle of the American political economy. On this view, big is bad and small is beautiful. Big distorts the self-regulating market and undermines democracy, while small creates jobs and provides the material foundation for democratic pluralism.
There's no doubt that economic power translates more or less directly into political power. We've known that since Aristotle, and as a man of the Left Livingston does not seek to deny this elementary fact. What he does object to is the idea that small economic units are inherently better or more efficient than large ones, and that a smallholder economy is synonymous with democracy while large, corporate formations are not.
We hear a lot about "job creators" today, and it's an article of faith among most people, regardless of their political persuasion, that small businesses are the engine of job growth. Even James Livingston concedes this ostensible fact when he answers "yes, they do" (21) to the question "don't small businesses create most of the new jobs?" He comes back with the counterargument that most of those jobs generated by small businesses disappear within two years. That's true; small businesses fail at a very high rate. But the Bureau of Labor Statistics, the agency which keeps track of this kind of economic data, recently refined the way it measures the relationship between job creation and firm size. The new data, which covers the period from 1990 through March 2011, shows that large businesses created new jobs at a much higher rate than small ones. As Floyd Norris of the New York Times reported,
Over that entire period, employment at large companies — defined as those having at least 500 employees — rose 29 percent, while employment at smaller companies rose by less than half as much.
At small companies, defined as those with fewer than 49 employees, the total number of jobs rose by just 10.5 percent over the period. Had the entire private sector grown at that pace, rather than rising by more than 19 percent, as it actually did, there would have been nearly eight million fewer people with jobs last March, and the unemployment rate would have been around 14 percent.
And as Livingston points out, jobs at small businesses often aren't very good: "the little guys in every line of business are the employers who are most likely to be union-busting fanatics because, unlike large corporations, they can't pass their labor costs on to the final consumer in the prices of their products; so the jobs they create tend toward the minimum wage variety." (21)
So what about the political virtues of an economy organized around small businesses? As I noted above, the vision of a smallholding economy based upon the wide diffusion of property ownership runs deep in the American grain, and has even survived a century of corporate capitalism. There's no doubt that corporate power poses a threat to democratic government - just look at what the Supreme Court's decision in the Citizens' United case has done to increase the influence of "Super PACs" in the current presidential election.
But again, Livingston makes the perhaps counterintuitive claim that corporate capitalism was the economic precondition for the explosion of democratic participation and desires in the 20th century, both in the US and around the world:
"By any measure, the twentieth century, the age of the giant corporation, was a much more democratic moment [than the 19th century], when women and minorities were finally enfranchised in the broadest possible sense of that term - gaining the right to vote, to be sure, but also entering the mainstream of the culture. The twentieth century was also the the moment of a dispersal of power from the state to society, when the regulation of markets began to be shared between public agencies like the Federal Trade Commission and private organizations like large corporations and trade unions. This, too, was a democratic promise that couldn't have been made in the nineteenth century; for it taught ordinary people to be aware of their rights, their powers, and their obligations in a new kind of public sphere, where non-governmental organizations (NGOs), all kinds of associations, became the rule."(24)
Besides, Livingston argues, breaking up the TBTF banks and financial institutions will do nothing to address what he sees to be the real cause behind the financialization of the US economy over the last 30 years. But once again, we'll bracket that question for now as we work through the next two Ms.
Questions for discussion:
What do you make of Livingston's defense, from the Left, of corporate capitalism and big business?
Should we break up the TBTF banks? If so, why? If not, what's the alternative?