Capitalism against Capitalism

Michel Albert, author of Capitalisme contre Capitalisme, compares the neo-American model of a capitalistic market economy with the Rhenish capitalism of Germany's social market economy. The neo-American model is based on the ideas of Hayek and Friedman, and the latter, according to Albert, is founded on principles of publicly organized social security. Albert asserts that this model is more equitable, efficient, and less violent.

To the general public (and certainly most Americans), however, the neo-American model appears more attractive and dynamic.  Part of this attractiveness, he asserts, is an illusion because, as Albert (in 1991) argues:

The largest banks know, however, that they are literally 'too big to fail' and can count on a helping hand from government if the worst comes to the worst. America's political leaders would step in to prevent the crash of a major financial institution on the grounds that it could set off a lethal chain reaction culminating in widespread disaster. ... Thus, in yet another intriguing but ominous irony of history, 10 years of ultra-liberalism have resulted in a US financial system whose future may only be assured with the help of federal government handouts. [Michel Albert. Capitalism Against Capitalism. London: Whurr, 1993.  p. 61]

Alberts ideas for a "better" capitalism include finance controlled more by banks than stock exchanges, closer relationships between between banks and companies, more balance between shareholders and managers, more partnerships between employers and unions, more loyal employees, more educated employees, a dual education system (more apprenticeships coupled with classroom learning), more regulation, and greater societal emphasis on equality and solidarity.  Perhaps Washington should, at least, consider some of these alternatives.

The Alignment of the Interests of Shareholders and Management in Corporations

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The Modern Corporation and Private Property, written in 1932 by Adolf Berle and Gardiner Means, suggested that the increasing impact and concentration of corporate power is at the heart of many of the problems with the capitalist system. The basic problem is that the organization of the modern corporation separates corporate ownership from corporate control. In general, corporations are not run by their owners, the stockholders, but by professional managers. With increasing stock ownership, ‘control is maintained in large measure apart from ownership’ (Berle and Means, 1932, p. 117), and owners do little more than ‘supply the means whereby the new princes may exercise their power’ (p. 124). This example of a principal-agent problem helps explain the current Great Recession, and it presents a reason to consider increased regulatory scrutiny and information transparency.

In Means' 1962 book, The Corporate Revolution in America, he opined:

We now have single corporate enterprises employing hundreds of thousands of workers, having hundreds of thousands of stockholders, using billions of dollars' worth of the instruments of production, serving millions of customers, and controlled by a single management group. These are great collectives of enterprise, and a system composed of them might well be called "collective capitalism."

An economy controlled by huge corporate interests makes for a country controlled by the interests of their managements, not the public at large.