The main question of capitalism-vs.-socialism isn’t efficiency, market incentives, or competition — it is: Who has the power?
Workers in the capitalist world sometimes feel powerless in comparison with their employers, but they have the power to exit that relationship and take a different job, as millions of workers do every year. But imagine if there were only one employer.
Leon Trotsky was in many ways a critic of the Soviet police state — whose leaders eventually had him murdered for that criticism — and one of his observations is of enduring interest at this moment in history: Under socialism, an energetically active police state is, eventually, superfluous.
During the “purgations” in the last month of 1935 and the first half of 1936, hundreds of thousands of members of the party were again expelled, among them several tens of thousands of “Trotskyists.” The most active were immediately arrested and thrown into prisons and concentration camps. As to the rest, Stalin, through Pravda, openly advised the local organs not to give them work. In a country where the sole employer is the state, this means death by slow starvation. The old principle: who does not work shall not eat, has been replaced with a new one: who does not obey shall not eat.
And here is a sentence that you don’t read very often: Leon Trotsky and F. A. Hayek saw this issue much the same way. Hayek wrote:
That the freedom of the employed depends upon the existence of a great number and variety of employers is clear when we consider the situation that would exist if there were only one employer — namely, the state — and if taking employment were the only permitted means of livelihood. . . . A consistent application of socialist principles, however much it might be disguised by the delegation of the power of employment to nominally independent public corporations and the like, would necessarily lead to the presence of a single employer. Whether this employer acted directly or indirectly, he would clearly possess unlimited power to coerce the individual.
But socialism as such was, in Hayek’s mind, not the only threat taking this form. As I explore at some length in my forthcoming book, The Smallest Minority, Hayek worried that the emergence of salaried corporate employment as a nearly universal household norm would diminish the liberty previously enjoyed by the class of affluent sole proprietors and those we used to describe as “independently wealthy.” The habits of corporation life — bureaucracy, conformity, the managerial mindset — were, he feared, likely to become dominant cultural trends, a consideration touched on by other roughly contemporary authors ranging from William Whyte in The Organization Man to Erich Fromm in Escape from Freedom. Hayek’s rather forthright elitism distinguishes his approach from that of the Marxist-Freudian critic Fromm, but the clear-eyed journalist Whyte came to similar conclusions in his work on corporate research-and-development programs: Society needs a relatively independent class of free thinkers who are not immediately answerable to a committee of managers and the tut-tutting minions of “human resources,” an appellation that to me has always sounded entirely dystopian.
At our particular moment in history, those who describe themselves (risibly and inaccurately) as the partisans of “social justice” have taken up Stalin’s task, empowered partly by new technologies such as social media (particularly Twitter) and by old-fashioned partisan-hack activist organizations such as Media Matters, with the goal of cultivating a kind of moral hysteria that can be used to bully the ever-sensitive managers of corporate America into acting as a single employer for political purposes, achieving in the capitalist form the socialist goal of using employment as an instrument of political discipline. The university has been similarly hijacked — College Man is only Corporation Man in larval form — in order to exclude those with nonconforming political tendencies from the mainstream of elite economic and social life.
At the moment, the grim prospect that this campaign will prove broadly successful appears likely. Part of the reason for that is that the independently wealthy elites of our time are less interested in Hayekian intellectual independence and more inclined to seek Fromm’s “escape from freedom.” The corporate leaders at firms such as Facebook, Google, and Apple are, in spite of their vast wealth, in practice easier to bully than is the average midwestern car dealer or bank president with relatively little professional interest in or exposure to politics. Mark Zuckerberg is so beaten down by the fact that his monolithically progressive peers in California blame him — not just his platform, him — for Donald Trump’s election as president in 2016 that he has found the emotional and moral energy for a comprehensive reorganization of Facebook’s business model and practices. Facebook in particular seems vulnerable to bullying of this kind, which is one of the reasons why the company takes relatively little interest in the propaganda of politically acceptable anti-Semites such as Louis Farrakhan but recently announced a crackdown on anti-vaccine activists and their speech. It’s not the kookery but how the kookery makes progressives feel that really matters.
But there are reasons to be hopeful, too. Instruments such as Facebook and Twitter have empowered partisan hate-mobs and taken a few scalps in the process. That kind of thing is a regular occupational hazard for professional controversialists such as Tucker Carlson or Bret Stephens (or me), a cost of doing business, more or less. It is much more significant for previously obscure fast-food workers and Starbucks managers who lose their jobs in impromptu social-media crucifixions. But at the same time, Internet-based forms of communication have provided important, irreplaceable outlets in places where liberal free-speech and free-press regimes are not the norm, including places such as the Middle East and China where the tech giants have, to their shame, subordinated themselves to various despots.
And there are signs of life in the economically liberated class of Hayekian independents. It has proved relatively difficult for the social-justice Left to bring to heel such nonconformists as Whole Foods founder John Mackey, who was targeted for his criticism of the Affordable Care Act, or billionaire venture capitalist Peter Thiel, whose embrace of the Trump administration infuriated many of his peers. Amazon’s Jeff Bezos is at war on three fronts: The Left resents the fact that his Washington Post has opened up a little bit more to conservative and libertarian voices and blames him for it; the Trump administration hates him like poison, and the president himself has suggested using tax law as a political weapon against Amazon in retaliation for the Post’s bitterly critical coverage of his larks and shenanigans; and Bezos has created unnecessary trouble for himself with the irregularity of his personal life, which has attracted the interests of the National Enquirer, whose current owners (it is up for sale as of this writing) are closely allied with the Trump administration.
Bezos has proved a particularly difficult man to lean on. When the Enquirer threatened to publish embarrassing photographs of a personal nature, Bezos responded not with litigation but with an open letter denouncing what he described as obvious blackmail. Bezos, who is the world’s wealthiest man on any given day depending on the volatility of Amazon shares, is the very model of a Hayekian independent: “If in my position I can’t stand up to this kind of extortion, how many people can?” he wrote. “On that point, numerous people have contacted our investigation team about their similar experiences with AMI, and how they needed to capitulate because, for example, their livelihoods were at stake.”
Sales in Amazon’s North American division rose 33 percent in 2018, to $141 billion, and the company realized more than $10 billion in profit — a chief executive delivering that kind of performance can endure the disclosure of a few cringe-inducing, lovelorn texts to his mistress. Even with his net worth getting dinged a little in the divorce, he is effectively untouchable.
The Mark Zuckerbergs and Tim Cooks of the world could be liberated, too, if they chose to be. The purportedly “failing” New York Times, which made a respectable profit in 2018 and added more than 100,000 paid digital subscribers, has proved remarkably resistant to hate-mob efforts from the left and from the right targeting hires such as Bret Stephens and Sarah Jeong. Institutional character matters: Yale folded in the face of a hate-mob attack on Erika and Nicholas Christakis, but little ol’ University of the Arts in Philadelphia stood tall when students demanded the firing of Camille Paglia for her nonconforming views on transgender issues, dismissing viewpoint retaliation out of hand. As Facebook takes on more and more of an editorial role — its claims of being a mostly neutral “platform” whose managers intervene only in the interests of community standards and “safety” are very difficult to take seriously — Zuckerberg et al. will face much the same test.
If they fail that test, which seems likely, then there are others who will step in and get into the Internet-based/social-media publishing game, which has relatively low barriers to entry (Facebook and Twitter’s main advantage in the marketplace is not technology, capital, or — least of all — managerial excellence, but simple path dependency, which can be overcome, as Facebook itself once demonstrated against MySpace), and find profits in what we might as well call samizdata, given the resurgence of socialism in U.S. political discourse. In much the same way that Elon Musk managed to exnihilate a fantastic automobile company that most critics believed had no organic reason to exist (Tesla faces its challenges, to be sure, but what it already has achieved is remarkable, and Musk can already claim a place next to Henry Ford’s in automotive history), media entrepreneurs such as Joe Rogan have brought into being enormously popular and influential models of communication even in the face of corporate competitors and political enemies who would, if they had the power, exclude them from the public square and the marketplace.
The fact is, we love our high-achieving scoundrels, our dissidents, and our nonconforming geniuses. People may respect Bill Gates, but they loved Steve Jobs. You’d let Lee Iacocca babysit your kids, but you’d rather go out and have a drink with Elon Musk. The better sort of person enjoys (and maybe even admires) Musk’s SEC-baiting and dramatics more than he resents them. We can look past Henry Ford’s horrifying bigotry to see what was best about the man, even as we understand that the madness of Howard Hughes and his genius were a package deal. And therein lies a truth that is too seldom genuinely understood or appreciated: What we call “capitalism” is not, and never has been, primarily about the bloodless pursuit of a slightly better profit margin. The business of business is important — it is necessary — but the best part of capitalism is, and always has been: joy.
Do you know what Steve Jobs did not need before returning to Apple and what Elon Musk did not need before starting Tesla? A paycheck. They wanted to do something cool, to create something new and delightful and previously unknown. All of the apparatus of American capitalism — our superlative institutions of higher education and the annual crops of engineers and scientists they produce, the financial operators and venture capitalists, the mind-bendingly complex infrastructure and logistical expertise behind the integration of global supply chains — finds its highest expression in serving those ends. It is almost impossible to imagine that what gets Jeff Bezos out of bed in the morning is the desire for an extra billion dollars or two. The genius of American capitalism in particular is that American capitalism is cool. The Germans build fine stuff, and the Chinese build pretty good stuff pretty inexpensively, but what’s the coolest German company? BMW? Leica? With the exception of a few high-design/high-tech firms such as Japan’s Sony, along with Europe’s enduring fashion powerhouses, the cool stuff comes from California garages, Boston laboratories, Austin dorm rooms, Brooklyn home offices . . .
Which is to say: It is the intersection of big ideas, big innovation, and (very often) big personalities with all that ordinary stuff we call “capital” that makes the magic happen. Among other reasons, that is why the urban centers where big ideas meet big money produce so much world-changing innovation relative to the less densely populated rural areas, even though the politics of the big cities are, in theory, less enthusiastic about capitalism per se. New York City and the Bay Area are not the best-governed places in the United States, but the success of the enterprises that call these places home is proof of what really makes capitalism work: You can’t keep a good idea down. Not forever.
That redounds to the benefit of profit-seeking enterprises and crusading entrepreneurs, but also to the benefit of patronage-dependent artists and intellectuals, nonprofit cultural and artistic institutions, public-policy and activism groups, and enterprises, including political magazines (such as this one), that are not oriented toward fattening up the margins. Companies such as Google spend tremendous amounts of money on projects that have little or no prospect of near-term profitability. Part of that is the “portfolio” model of innovation: Because you cannot pick out the blockbusters in advance, you have to invest in a lot of different areas, catching a lot of little fish as you fish for the big ones. But much of this is sustained simply by the desire to put all of that capital and innovation to work doing something cool. It is precisely the largeness of spirit of American capitalism — which is not defined by the nickel-and-dime mentality regnant down there in accounting — that makes possible this joyful pursuit of the new, the cool, the excellent, the innovative, the delightful.
Adlai Stevenson famously put it this way: “My definition of a free society is a society where it is safe to be unpopular. Where it’s safe to say what’s on your mind, especially when everyone disagrees. Where it’s safe to believe what you believe, especially when everyone else’s beliefs stand elsewhere.” The Left has for the past decade or so been on a jihad to abolish Adlai Stevenson’s free society, to ensure that it is unsafe — often literally, physically unsafe — to hold unapproved political ideas. The fact that the Left has had some success in this endeavor is dispiriting, and it speaks ill of certain institutions — the universities, some of the New York City book publishers, and the Silicon Valley technology firms being tragically prominent among them. But we also have seen limits on the ability of the Twitter mobs — and the president of the United States of America — to silence critics or exclude certain voices from the public discourse. Inevitably, that includes some terrible voices: Islamic extremists, white nationalists, Communists, fashionable anti-Semites, etc. Not long ago, that was understood as both the price and the purpose of a tolerant culture: Rights such as those acknowledged in the First Amendment serve not to protect the speech we find acceptable but precisely the speech we find most objectionable, offensive, or even immoral. Our political culture has, partly and one hopes temporarily, lost touch with that.
But capitalism has provided the tools to subvert much of that forcible conformism while maintaining a culture that still rewards innovation and excellence over bureaucracy and obedience. Though the advice would not have served recent Apple investors very well, there is some truth to the Wall Street proverb about shorting a company’s stock when it decides to build a new headquarters building: Once a business ceases to be a campaign and ossifies into a committee, it is dead, even if it continues to throw off some profits for a long time after.