Much of Big Business musters arguments and evidence against the accusations critics articulate concerning the corporate sector. But to me, this is an exercise in Whack-a-Mole, where every time you knock down one canard against big business another one will pop up.
Overall, Big Business is a genuine attempt to be charitable to those who disagree and to try to nudge them to change their minds. Sadly, my sense is that most people read to reinforce their views rather than challenge them.
Having not read the book, I won’t address many of Tyler’s specific claims.
I think that average people (not activists types, but regular folks) actually have something of a good idea of what companies are doing right by them and which are screwing them. At least with context.
The example I typically give is that outside a few activists, Chick-Fil-A is loved. I think it came out on top of this Millenial “Hip Brand” study. I think everyone can appreciate a quality product, delivered at a good price, with good customer service. I think most people even believe that Chick-Fil-A does a “better then replacement” job in a way other fast good doesn’t (Burger King and McDs are interchangeable).
So despite being Christian fast-food, stuff that is supposed to make their brand radioactive, people love Chick-Fil-A.
Meanwhile, people hate Comcast. Everyone. And I think its basically the same for all the major service providers. And we all know why. They tend to be local monopolies that take “you don’t have any options” to clown world levels of abuse and incompetence. In theory people should love a company that gives then unlimited entertainment for ultimately not that high a price, but they can tell abuse when they see it.
In my career of working for Big Business I’ve seen it engage in a lot of abuses that any sane person would call abuses. And while I’ve certainly seen the public complain about frivolous or unavoidable things, often their complaints are about things that I can tell companies shouldn’t get away with.
In the 1920s, it was commonly believed that American banks were too big, and so regulations were passed limiting their size, most of all by restricting interstate banking… When the Great Depression started, however, a large number of these small banks failed, as they were insufficiently diversified and had a hard time raising capital or otherwise protecting against sudden losses. In Canada there also was a severe depression, but the banking sector was much more concentrated, and so Canada did not see any bank failures at all. – Tyler Cowen
The Canadian banks did not fail because they were more concentrated, they did not fail because they were diversified. Cowen conflates concentration with diversification: they are not the same. As Cowen correctly observes, the nearly 10,000 small, mostly rural US banks failed because they were limited by regulation to serving small areas and could not withstand the shock of local catastrophes such as a drought. However, the relevance of Depression Era small banks to critiques of the current banking system and reform proposals is at best a stretch of imagination. By suggesting Depression Era banking regulation is what reformers are striving for, Cowen is tackling the strawiest of straw men.
Interesting that Dr. Kling should include this quote in his review since earlier in the chapter in which it appears, Cowen takes a shot at the good Ph.D. :
“Some other conservative and libertarian voices, including Thomas Koenig and Arnold Kling, have wondered whether America shouldn’t apply antitrust law radically and move to a greater number of much smaller banks. In particular, if a bank is ‘too big to fail,’ doesn’t that mean the bank is too big, period?”
Cowen seems to argue that the great recession was no big deal in the bigger scheme of things. The names “Lehman Brothers,” “Bear Stearns,” “Fannie Mae” and “Freddie Mac” do not appear in the book. Cowen repeatedly speaks of “itty bitty banks” as the desired end result of what the bank-busters desire. Hardly charitable, or honest for that matter.
In contrast, Dr. Kling’s words in his 2012 National Review article entitled “Once Again, Break Up the Big Banks” ring true, are more nuanced and insightful, and persuasive:
“A final option is to concede that there is no foolproof way to regulate banks. Modern finance is complex and fast-paced. Try as we might, it is impossible to outlaw errors in judgment, overconfidence, misguided innovation, or unforeseen events.
“I believe that our best hope lies somewhere other than making our largest financial institutions impossible to break. Instead, I think we need to make our financial system easy to fix. It was with that idea in mind that, writing in National Review two years ago, I proposed breaking up the big banks. J. P. Morgan’s announced loss serves to reinforce my view.
“My biggest objection to large financial institutions continues to be what I see as the inevitable collusion of politics and economics that results. When large banks have resources, politicians will be tempted to treat them as piñatas, taking whacks at them in order to extract money to distribute to constituents (see the recent “foreclosure settlement,” or the pressure being placed on Freddie Mac and Fannie Mae to write down principal on loans). When large banks get in trouble, politicians will be tempted to bail them out.
“In my view, we do not need the thousands of pages of regulation represented by Dodd-Frank. We do not need to ask regulators to divine the difference between speculation and “real banking,” as envisioned by the Volcker Rule. Instead, we should seek limits on the asset size of individual banks. J. P. Morgan today is about ten times as large as any bank ought to be. The general public should not have to lose sleep worrying about this or any other individual bank’s fate, and with smaller banks, they wouldn’t have to.”
I have seen nothing that would suggest Dr. Kling has renounced this view, but I may have missed something. This may suggest that Dr. Kling is one of those remarkable book reviewers who leaves their personal views aside and dispassionately analyzes the book being reviewed on its own terms.
Dr. Kling does not touch on Cowen’s white wash of the big business of higher education. Cowen argues that US higher education is perfectly fine except for the for-profits. His critique of “for profit” colleges for going out of business after the Obama Administrations regulatory war upon them is nothing short of nauseating. It would be interesting to know Dr. Kling’s thoughts on Big Business’s treatment of the education industry. A useful corrective to Cowen is the collection of essays put out by Cato under the title Unprofitable Schooling: Examining Causes Of, and Fixes For, America’s Broken Ivory Tower (edited by George Mason’s Todd J. Zywicki and Neal P. McCluskey. Zywicki and McCluskey make a compelling case for free and independent business in the realm of education.
Yes, Cowen is correct, business bestows many blessings for which we should all display more appreciation. But Big Business is a cup poisoned with other agendas and I must respectfully disagree with Dr. Kling on its alleged virtues.
You write that “most people read to reinforce their views rather than challenge them.” Still, some readers—at least a few—are quite amenable to reason, and even the rigid ideologues are slightly amenable. Good political commentary is not entirely useless.