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Adversarial Corporatism: Additional Thoughts

I am deeply grateful to Brian Mannix and to Peter Conti-Brown for their thoughtful, indeed profound comments on my “adversarial corporatism” post. I am equally grateful to Richard Reinsch and the Liberty Forum for hosting this exchange. To paraphrase the Boss, we learn more from three minutes on this blog than we ever learned in school.

Peter has this exactly right: the post was a first cut at developing a conceptual framework for the contemporary regulatory state and its perplexing m.o.—more than a thumb sucker, but way less than a worked-out theory. And Brian may well be right that the moniker is apt to give rise to misunderstandings. (I’ll stick with it for now, but I’m not wedded to it.) Thus, my replies here serve not to defend any firmly held view but rather to pick up some of Peter’s and Brian’s many useful arguments and observations.

How to Think About This Stuff

“Adversarial Corporatism” argued that government’s seemingly disjointed modes of conduct vis-à-vis many industries (especially financial institutions)—huge subsidies at one end, heavy-handed prosecutions and fines at the other—are two sides of the same coin: having conferred gargantuan subsidies at one end, government has to confiscate a portion of the proceeds at the other. Peter suggests two principal alternative explanations. One, government’s crisis responses ex ante (bailouts) and ex post (prosecutions for illegal conduct, and mitigation) could both be public-interested, and disconnected. Two, seemingly disjointed policies might indeed be connected but be (better) explained by coalitional politics, rather than a model of government-industry relations.

Option one is conceivable—but barely. I wholeheartedly agree with Peter that one can’t simply assume (in the way of more naïve “capture” or public choice theories) that all government is a racket. That said, rents conferred for (ostensibly) public-regarding reasons remain rents, and fines collected, or settlements exacted, under amorphous standards and in a process that bears no discernible relation to compensation or deterrence—and which in my estimation bears no resemblance to anything that deserves to be called law—remain exactions. One could say that in a system of fractional reserve banking the public interest requires a lender of last resort, which must be the government. And one could say that the ex post prosecutions serve the public purpose of heaping opprobrium on the folks who abuse the ex ante socialization of losses. But now we’re in Greve-land: the phenomena are related. We’re also in Mannix-land: the problem here is the re-marriage of capital and political power (or, as Brian says, of violence).

Option two—alternative explanations are available—is, like, so totally true. And especially with an eye towards possible remedies for a state of affairs lamented by well-nigh all, quite a bit hangs on getting the analysis right. In that spirit, three observations:

First, Peter’s proposed coalitional explanation may be entirely consistent with, or complementary to, the adversarial corporatism model: adversarial corporatism is the way in which a fractious coalition manages its conflicts. This kind of connection is nothing new. The APA, as originally written, was a way of cementing the New Deal coalition and of organizing government-industry relations. (Read an AdLaw case like Universal Camera or a FedCourts case like Lincoln Mills through that lens: you’ll see the interplay, and the Supreme Court’s conscious effort to harmonize the system.) New Deal corporatism cut in the unions. Adversarial corporatism cuts in “Baptists,” meaning groups that nominally represent values rather than actual constituents. Thus, Brian rightly notes the affinity between “Adversarial Corporatism” and Bruce Yandle’s model of “Bootlegger and Baptist” coalitions. (My only caveat is that there are no true Baptists left: our political system has been ferociously efficient at monetizing the “values.”) If Peter wants to argue that the coalitional explanation is more foundational, I’m inclined to go along. In fact, my initial piece ended on precisely the point that any meaningful reform will hang on breaking the coalitions.

Second, I’ll do Peter one better and propose yet another theory: what I call “adversarial corporatism” may be a feature of a more pervasive trend toward executive government. One of the hallmarks of New Deal corporatism was that you couldn’t really “capture” an agency unless you had already “captured” the congressional (sub)committees. That is no longer so—inter alia, because our agencies now send money to Congress, rather than the other way around. Congress could limit or claw back rents by means of legislation—except that it can’t. Instead, it confers that authority on the executive. If that analysis is right, reform ideas should focus on restoring a functional Congress and party system. And again, there may be a connection between executive government and our corporatism (as there is in many Latin American countries). Like I said, I haven’t figured this all out to my own satisfaction, let alone others’.

Third, I am troubled—as I think Peter and Brian are—by a surfeit of occasionally wild rhetoric (“Cronyism! Extortion!”) and a corresponding lack of meaningful , reliable data. Government agencies collect many billions of fines each year: does anyone know how much? For exactly what? Where the money goes and to what end? To what effect, either on the economy or the incentives of regulated parties, government officials, or legislators? Short answer, no. It’s high time to find out. The empirics will help to sort fact from fiction, and plausible (if partial) theory from rank speculation or agitprop.

Postscript

As I noodle over this stuff on my annual vacation in Krautland, Karl Albrecht died on July 16 at the age of 94. Germany’s second-richest man, he was the architect and owner of a vast retail chain. His Aldi stores (Aldi stands for “Albrecht Discounts”) spread across Germany and abroad, including the U.S.. Trader Joe’s is owned by a separate part of the Aldi empire created by Karl’s brother Theo, deceased in 2010 at the age of 88.

For all that, few Germans had heard of Mr. Albrecht. Newspaper obits described him as “reclusive”–fiercely loyal and generous to his family and friends but wary of the media, politicians, and the corporate elite. He never gave media interviews (except one). He never hung with the fashionable, polo-playing riff-raff in Kampen auf Sylt (Germany’s version of Martha’s Vineyard). He declined the Bundesverdienstkreuz (Germany’s highest official honor) because it would have forced him to shake hands with politicians (as if he owed them anything ). His home was in Essen’s most upscale neighborhood—a modest abode, though, compared to the nearby home of the Krupps, whose castle stands as a monument to Germany’s ill-fated, nasty marriage of capital, industry, and government.

On all accounts, Aldi’s fantastic success depended on the Albrechts’ keen sense of the demands of a re-emerging German middle class. But there’s also another side to that story. Born and raised in a small shopkeeper’s household, Karl Albrecht said in his last and only interview (with the Frankfurter Allgemeine Zeitung), the brothers wanted to “go big”—on toilet paper, noodles, whatever. But they didn’t want to do it the corporatist, Krupp or Deutsche Bank way. Their genius was to do on the producer side what they did on the consumer side: ramp the Mittelstand’s ethos of thrift and independence up to national scale without government assistance or “partnership.” It bears mention in this context that Mr. Albrecht’s employees laugh at Germany’s elaborate welfare state protections, or for that matter the unions: you earn so much more at Aldi, provided you actually work.

The Albrecht saga, I think, is worth pondering. For example, it suggests that it is possible to build a big yet independent company even in a thoroughly corporatist political economy. On a darker note, it suggests that that strategy may work for some industries but not all. It’s hard to believe that the Albrechts could have evaded corporatism’s embrace if they had peddled not produce but energy, steel, or consumer credit.

Foremost perhaps, the Aldi story suggests that (adversarial) corporatism has a cultural dimension. Just as there is something admirable about Karl Albrecht’s give-no-rip “reclusiveness,” there is something unseemly about the way in which our captains of finance and industry trumpet their weird partnership with government and its hangers-on, from enviros to the “fair housing” complex. Maybe they deserve pariah status—not for their supposed illegalities but for their cloying displays of “corporate citizenship.”

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