You are here

Corporate 'Power' Is Limited and Temporary—Government Power Is the Real Threat

An Axios article today examines for-profit companies taking public positions on controversial political issues, carrying the headline “When companies act like governments.” Reporter Erica Pandey takes as her premise the idea that “Throughout the history of capitalism, wealthy and powerful companies have effectively acted like governments.” This is a problematic take that conflates the collective market power of a company’s customers and shareholders with actual coercive state power—two very different things.

While some early corporate entities, like the British East India Company, did actually serve as de facto governments in some places, modern corporations do not operate like that. Amazon can’t imprison you and Twitter can’t fine you. Limits on what you can sell on eBay are not the same as a Federal Trade Commission enforcement action. There is a dramatic moral difference being legally forbidden to do something and—as with most of the examples Pandey cites—some company not being willing to offer you their services to help you do that same thing.

Most people are good at understanding this when a corporation is taking the side of an issue they agree with, but experience cognitive impairment when it comes to a company taking the opposite side. As I wrote last week, everyone is for companies “standing up for their values,” until they take the wrong position. Then it supposedly becomes arrogance, paternalism, tyranny, and an exercise in undue influence. We witness the same phenomenon when it comes to celebrities addressing political controversies. When we agree with them, they’re brave truth-tellers and inspiring activists. When we don’t, it’s “stick to the acting/singing/fiddle playing!”

It is particularly disappointing to see Prof. Luigi Zingales of the University of Chicago referenced (through not directly quoted) in the Axios article warning that “unelected businesses” can “have the same sort of power as government officials.” A large company may have a lot of influence on other market players. It may, in some sense, have even more influence over how certain items are bought and sold than most government officials. It absolutely does not, however, have the same sort of power. That distinction is essential.

Large companies like Amazon and SalesForce have amassed millions of customers and billions of dollars because many people have decided that they would rather do business with those companies than any other competing company. The influence the companies acquire is thus based on a revocable voluntary association. I can switch my book shopping habits from Amazon to Alibris whenever I want, and Amazon is powerless to stop me. Users who feel Facebook is squelching their freedom to post controversial political memes are free to join MeWe or Codias. The same opt-out is not available when dealing with government policies on commerce and expression.

The argument here is not that corporations don’t actually have any meaningful power just because they’re not governments. Of course they do. But the temporary, conditional power they have—because it is based on the voluntary association of their shareholders, customers, suppliers, and employees—is a legitimate exercise of collective action in a free society. They can’t, of course, do just anything they want—they can’t violate our rights or defraud us. But the people that make up a corporation can, as a group, refuse to do business with us under conditions and on terms that they find unacceptable. Trying to force them to offer us their services with new laws would be the real violation.