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When is a Private Company No Longer a Private Company? Cronyism vs. Capitalism

When is a Private Company Not a Private Company? A Case Study in Cronyism vs. Capitalism

By Amanda Griffiths

Pop quiz: What do Facebook and 80’s music have in common?

​No, it’s not that both are time capsules for questionable fashion choices and amateur videos. It’s that both have been famously and successfully libeled by the U.S. government for inciting violent criminal activity (despite the fact that the U.S. government has sponsored infinitely more violent crimes than either one). Both times, moreover, the “free speech” left and the “small government” right have been similarly instrumental in the scapegoating.

Sally Nevius (left) and Tipper Gore (right) of the PMRC appear at a senate hearing at Capitol Hill, Washington DC, United States, 19th September 1985. Representatives of the Parents Music Resource Center, senators and musicians testified before the Senate Commerce, Science and Transportation Committee on ‘the subject of the content of certain sound recordings and suggestions that recording packages be labeled to provide a warning to prospective purchasers of sexually explicit or other potentially offensive content’. (Photo by Mark Weiss/Getty Images)

​In the 1980s, the Parents Music Resource Center (PMRC)—co-founded by future second lady Tipper Gore—began a protracted, defamatory campaign blaming the “ills in our society” on popular music. Culminating in a star-studded Senate hearing on “porn rock,” in which music expert Dr. Joe Steussy testified that rock and rap “had as one of [their] central elements the element of hatred”; and Senator Paula Hawkins warned that contemporary music was inducing children to “violent sexual acts, drug taking, and flirtations with the occult,” the firestorm ultimately drove 19 record companies to implement “parental advisory” music labeling policies that flagged popular records for explicit content.

​Myriad artists, from Frank Zappa to Dee Snider to John Denver, offered colorful testimonies in objection. Yet the record companies’ decision was voluntary—insofar as any inducement from a cavalry of high-powered politicians, academics, and lobbyists can be considered “voluntary”.

American musician John Denver appears at the PMRC senate hearing at Capitol Hill, Washington DC, United States, 19th September 1985. Representatives of the Parents Music Resource Center, senators and musicians testified before the Senate Commerce, Science and Transportation Committee on ‘the subject of the content of certain sound recordings and suggestions that recording packages be labeled to provide a warning to prospective purchasers of sexually explicit or other potentially offensive content’. (Photo by Mark Weiss/Getty Images)

​Why did these companies so readily acquiesce to political pressure, even when doing so went against the wishes of the artists they platformed and many of the consumers they served? For much the same reasons as those that today compel Mark Zuckerberg to prostrate himself on the Senate floor and beg for federal regulation in what’s become something of a biannual ritual.

Organizations are driven by the profit motive. But when a central body, which also happens to have the legitimate monopoly on violence and coercion, also has the power to extend and extinguish a corporation’s ability to earn or maintain profits, the profit motive isn’t directed by consumers and creators. It’s directed by the state.

​The bipartisan makeup of the PMRC and its allies is a testament to Democrats’ and Republicans’ long history of reaching across the aisle and working together to tell consumers and creators what’s best for them. (Indeed, this objective is perhaps the only one that can reliably motivate Democrats and Republicans to work together.)

​The decades-old victory in coerced self-censorship also helps contextualize White House Press Secretary Jen Psaki’s far more recent comments that the Biden administration has “increased disinformation research and tracking within the surgeon general’s office” and is “flagging problematic posts for Facebook that spread disinformation.” Psaki’s remarks, followed by President Joe Biden’s outlandish assertion that Facebook is “killing people,” were made during a July 16 press briefing. At the briefing, Psaki also shared the administration’s suggestion that social media platforms coordinate to ban users simultaneously (which sounds like an antitrust suit waiting to happen) and assured reporters that “we [the administration] are helping to get trusted content out there” on social media. (Ms. Psaki did not provide evidence to support her implication that people trust centrally curated content.)

​Suffice it to say that the desire to police public discourse is not a strictly right- or left-wing phenomenon. Nor is it anything new. It’s just a lot harder to achieve in a digital-age democracy, absent social approval—which means that those with the power to police have to make the public sympathetic to their efforts.

​In order to garner public support—and organizational buy-in—for the centralization of private companies, government officials use a classic bait-and-switch technique, blaming organizations for doing what officials think they should be doing instead. Right-wingers argue that social media companies are censoring your speech for all the wrong reasons; and left-wingers argue that the same rubes responsible for getting Donald Trump elected are also responsible for keeping you isolated and double-masked in your apartment, since they’re sharing misinformation leading others to distrust the vaccinations.

​For social media companies, the advantage to believing either one of these narratives is that both make them feel exceptionally powerful. For consumers, the advantage to believing either one of these narratives is that both keep them from feeling powerless. Social media companies get to believe they’re as influential—or more so—than the government. Consumers get to believe that if the government could just get the social media companies to do the right things, everything would be okay.

​The problem with that narrative is that it’s misinformation.

​Much as social media companies might wish to be regulated as public carriers—because it opens up a floodgate of federal funding opportunities; because it makes them too big to fail; and because it allows them to write the rules by which they play and keep others from playing—they are not in fact public carriers. They are under no obligation to host anyone’s content.

​Just because social media companies aren’t public carriers, however, doesn’t mean that social media companies can’t be publicly captured. Government and corporate capture are two hallmarks of cronyism—a system routinely equated with, but ultimately separate from, pure capitalism. While both cronyism and capitalism can exist simultaneously, each is ultimately toxic to the other. Fortunately, cronyism has lost out before—or at least it’s become weakened as capitalism has progressed and exchange has become increasingly decentralized.

​The simplest way to distinguish between capitalism and cronyism is to determine the vector of the profit motive at play. Are corporations and state entities using one another as conduits for their own objectives (such as by lobbying, drafting lopsided regulations, restricting access to certain products, subsidizing certain industries, or regulating prices)? Are state actors using corporations to condition consumers’ objectives (such as by “suggesting”—with the full force of the state’s regulatory power and financial suasion—what products or information to promote or restrict)? If so, there is at least some cronyism directing corporations’ profit motive.

​If, on the other hand, consumers are using the flow of their self-delegated capital to drive corporate behavior; and if corporate members are using their creative capacities to respond to consumers’ desires—whether by acceding to them, challenging them, or innovating upon them—the system is more capitalist. Under such a system, the buyer functions more as a patron than as a consumer (a word that has always given me the unfortunate mental image of an anglerfish waiting slack-jawed on the ocean floor).

​In a capitalist economy, valuation and exchange of capital reflect the interests of creators and patrons (all of whom function as self-owners, and all of whom have equal access to every sector of the market, albeit not equal access to every product). In what I sometimes call a “peak capitalist” economy (a phrase initially and ironically co-opted from Marxist Twitter), valuation and exchange are entirely decentralized and peer-to-peer, with no middleman between creator and patron.

For example, if taxi services reflect a capitalist system—and in truth, taxi services still contain greater vestiges of cronyism—Uber is closer to peak capitalism. A market that has transitioned completely to “peak capitalism” is virtually impervious to the threat of cronyism, whereas mid-stage capitalist economies retain at least some susceptibility to cronyism.

​In a cronyist economy, the valuation and exchange of capital reflect the interests of the state, which holds the monopoly on not only violence and coercion, but base currency as well. The latter element is especially important. Because the state sees itself as responsible for regulating the behavior of creators and consumers, and because the state has both the financial and monetary tools to do so, the state can impede certain practices and players while creating arbitrary and costly shortcuts for others. States, or agents thereof, are the perennial and often invisible middlemen between consumers and creators. (This invisible middleman is present even at the point of transaction itself, insofar as it dictates the units of that transaction.)

​The greater and deeper states’ regulatory footprint extend into the marketplace, the more lucrative it becomes for corporations to further states’ interests, and the more profitable it becomes for states to select winners and losers. Accordingly, corporations profit more from serving the state than they do the individual. That is cronyism.

​Often when people denounce the “capitalist” bogeyman, they are more accurately (and rightly) vilifying cronyism. This is true especially of the most ardent Marxians, whose concept of capitalism (as drawn from Marx’s Das Kapital) relies on a very antiquated iteration of the system. Put another way, using Marx’s observations about early capitalism to critique contemporary American capitalism is a bit like explaining the impossibility of a laptop by studying a schematic of a 1960s mainframe computer.

​To understand how capitalism became conflated with cronyism, it helps to review the history of both and their ties to the labor movement. During the late industrial era (which I’ll call “protocapitalism,” a fusion of post-feudalism and pre-capitalism), mass labor was non-creative and company profits depended on the rote uniformity, rather than the ingenuity, of individual workers. As a result, innovation was slow; and economic sectors were prone to stagnation and decline. (Both Marx’s Das Kapital and Marx and Engels’ Communist Manifesto were written during one such particularly harsh recession.) Under protocapitalism, all but the most elite workers generally had three options: starve; steal; or stand in an assembly line and screw in widgets (or do something equally alienating).

​Workers fared little better during the second industrial era (early capitalism).

The “division of labor” had begun, but it was still not complete: labor had not yet been reduced to the smallest common denominator of self-ownership (the individual). Rather, labor had been reduced to the smallest relative unit of mechanical assembly (the widget). This made a powerful difference in terms of labor relations. In most U.S. jobs today—from waiting tables to financial consulting—the individual worker contributes some degree of unique, creative value to the enterprise. If a contemporary American worker complains or dissents, their dissatisfaction, and the fact that they might leave as a result of it, is a threat to the employer.

​During the second industrial era, this was hardly the case. So far as factory foremen were concerned, all individuals who screwed in widgets were effectively the same. If a widget-screwer complained or dissented, they could easily be replaced. This gave employers license to mistreat workers with little fear of employee retaliation. Governments also profited from looking the other way when it came to worker exploitation, since manufacturing warehouses brought more laborers and consumers—and therefore more revenue—into cities. Capitalism was nascent, and cronyism ran rampant.

​Eventually, labor laws and safety regulations altered the federal response to worker treatment and corporate transparency. As anyone who has studied the history of the labor movement knows, however, these government policies were a shamefully (yet characteristically) lagging indicator. Labor reform was instead prompted by two related and much swifter social catalysts: greater information, and subsequent public outcry.

​Who provided and curated that information? Certainly not the government itself, nor any arbiter of state-sanctioned data. On the contrary: journalists, often maligned as “muckrakers”, alerted the public to everything from horrific factory conditions, to unsanitary food processing practices, to psychiatric inpatient abuse. Voting constituencies (and often populist politicians who campaigned on the revelations of so-called yellow journalists) clamored for change. Had the cronyist state been able to keep those pesky journalists quiet—whether by calling them “enemies of the people” or by flagging their articles and books as “misleading”—there might never have been a labor or worker’s rights movement. We might never have heard of concepts like “competitive salaries” and “employee benefits”. More importantly, we might never have evolved toward a more educated work force, and along with it, an economy that rewards worker ingenuity at all levels of enterprise, where rapid innovation begets still more rapid innovation.

​It should come as no surprise that many of the labor movement’s early pioneers identified as socialists and Communists. At the time, the capitalist ideal was still too intellectual to be practical, if not too revolutionary to be imagined. The industrial cronyism masquerading as capitalism just felt like an angrier and more crowded feudalism; and capitalist bosses, like nobles who lacked even the legitimacy of divine right monarchy. So far as the socialists and Communists of the 19th and early 20th centuries were concerned, there was only one paradigm through which all of human history could be understood and predicted: that wealth dictates the dynamics of social and labor relations; that work is a means of survival, not expression or enrichment; that all productive effort must therefore be coerced; and that for humans to live among one another, the distribution of wealth must be organized by a central body, whether a state, a corporation, or a revolutionary Party. Between Communism and cronyism, at least Communism pretended to be a system where workers had some say in how effort was coerced, and wealth distributed.

​The idea that someone who chauffeured you could make more money than you did; that you could earn money doing something you loved so much that you’d have paid someone to let you do it; that you could have the same choice of everyday appliances as someone who earned twice your salary; and that, regardless, money could ever cease to be the primary unit of personal sovereignty, or class the basis of social identity—all this was lunacy at best and blasphemy at worst.

​Communism, then, is hardly the most original revolutionary ideology. Nor is it the most progressive. Generally speaking, in contemporary America, if you lose your job, hate your boss, or are being mistreated at work, your sole alternatives are not either stealing or starving. With varying levels of effort, you can escape through various routes: finding another company; becoming your own boss in the gig economy; launching a startup; setting your own rates as a tutor; providing any number of freelance services; trading assets; or developing a public following and getting monetized on YouTube (just don’t mention Ivermectin).

​If you study that list, you’ll also notice that most of the escape valves mentioned involve moving further toward the periphery of regulatory purview—not closer to the center. Capitalism has evolved. Communism has not. (How could it? It thinks it’s the eschaton.)

​Nevertheless, cronyism remains a threat, although it looks different today. It’s more subtle; and in that regard, it’s more insidious. Contemporary American cronyism takes the form of emergency use authorization policies that stymie competition between drug manufacturers by revoking authorization if another safe and effective treatment becomes available. (This stipulation does nothing to make emergency-authorized treatments any safer or more effective; it simply incentivizes manufacturers to quash information about other safe and effective competitors by any means necessary.) Contemporary American cronyism takes the form of federal officials non-disclosedly using taxpayer dollars to fund laboratory research banned in the United States, after receiving two warnings from the State Department that the laboratory receiving those taxpayer funds lacked the personnel, training, and safety and containment mechanisms necessary to conduct potentially hazardous research. Contemporary American cronyism takes the form of unelected bureaucrats coaxing corporations to platform or prohibit certain pieces of information; conducting “disinformation research” on private companies’ behalf; and advising social media companies on what content to remove or promote on the basis of said research.

​Because the modes of American cronyism have changed, so must our means of combatting them. In the first place, it’s important to call state-corporate meddling of the sort described above what it is: It is cronyism. It is antithetical to capitalism.

The best way of counteracting the former is by extending the scope of the latter. If our goal is to eradicate the corporate sponsorship of state interests, there can be no room for conflation between the two. The revolution cannot be centralized.