Lowenstein: Big Business: Where did our love go?

It's sadly true that Americans have come to hate Big Business.

In opinion surveys, Big Business ranks lower than the presidency or the medical system. It is trusted less than labor unions or (egads) newspapers.

Among young people, more disapprove of capitalism than favor it. According to much public discourse, including from some presidential candidates, Big Business is corrupt, loathsome and responsible for just about everything bad.

Have we forgotten that business makes the stuff that we consume and enjoy and also gives a great many people jobs? Have we forgotten that the charities that do good works are funded by profits that came from private business - likewise the taxes that fund our schools, Defense Department and national parks?

Tyler Cowen, the George Mason University economist and prolific blogger, has written a defense of, in particular, American Big Business. “Big Business” is a contrarian polemic, a cri de coeur that, he protests, “ought not to be contrarian at all.”

Given how much wealth, opportunity and innovation Big Business has enabled and created, he says it arguably has outperformed any other set of private institutions. You may not agree, but I think he is right that “business has become underrated.”

Cowen could have written this book at any time over the past few years; I suspect its appearance as the start of the 2020 election cycle is no accident. I think he is asking us not to fall into the Trump trap.

The Trump trap is the urge among Trump haters to demonize whatever the president is associated with. Cowen is careful to point out that Donald Trump, with his trade wars and anti-immigration hysteria, is no avatar of free-market capitalism. But Trump has done some things that benefit business - namely, tax cuts and deregulation.

In the current polarized moment, many act as though it must be all or nothing. If Trump likes business and capitalism (or pretends to like them), we must hate them. Take over their boards, control their prices, regulate anything they do. As the author notes, Bernie Sanders unceasingly attacks corporations, and Elizabeth Warren is not far behind.

Cowen says most of the common prejudices against Big Business, which such politicians pander to, are undeserved or overstated. In the first place, corporations are not people with feelings and attitudes. They are legal constructs. The people who work in large companies are not better or worse than people in other walks of life. Businesses encourage us to anthropomorphize them because people find “a singing raisin” more persuasive than “a raisin that just sits in the box.” But when the raisin behaves like a profit-motivated corporation, we feel betrayed.

Cowen does not think companies should be devoted to purely mercenary goals - nor, generally, are they. Well-run businesses, he says, encourage employees to engender trust. Market and public pressures induce adherence to diversity and other social goals. He acknowledges the scandals at Theranos, Wells Fargo and other corporations, but asserts that business scarcely has a monopoly on fraud.

Cowen points out that doctors, on occasion, deliberately overprescribe, and frauds occur in nonprofit as well as for-profit institutions. He provokes us by saying, “You're more likely to be ripped off by your local TV repairman” than by McDonald's. If that offends, consider that people in noncorporate contexts also cheat - on their taxes, for instance, or on their dating profiles.

Cowen thinks the bad name of big banks is “an overreaction to a single event,” meaning the mortgage crash and the ensuing recession, in which job totals fell for 18 straight months. He might have said a little more on that.

He reminds us that finance performs an important function, allocating the capital of savers. The flaws of the financial system more nearly reflect the traits of Americana writ large: Since the westward expansion, we have been a country of risk takers and (though he does not say this) of hucksters.

Cowen rejects the familiar protest that business controls government. The biggest budget items, Social Security and Medicare, are favorites with, and demanded by, the voters. This argument overlooks that Business lobbied earnestly for the tax cuts.

Likewise, Cowen says the fear of monopoly is overstated. Airlines are plenty competitive (I wonder). Big Tech is concentrated but, with the exception of Apple, it does not charge luxury prices.

Cowen does see problematic concentration in hospitals, cellphone service and cable TV. He also worries that Big Tech might eventually lead to an Orwellian invasion of privacy. His most damning criticism is that, on the whole, “American business is better at talking people into spending money than at helping them save money.”

This criticism is welcome, because Cowen's tone is often fawning and credulous. His subtitle is “A Love Letter to an American Anti-Hero,” and the love is too evident. He faults corporate critics for seeing only the bad, but Cowen would be more persuasive had he written a critique, as distinct from a sonnet. He lists seven also-ran search engines to suggest that Google faces more competition that you think. Really? When is the last time you ran a search with DuckDuckGo? Too often, he seems to be stretching the evidence. He argues that, given the social aspects of the workplace, “companies are actually responsible for some of our most important relationships.” But that's a function of work - not of corporate life. People at nonprofits make friends, too. Cowen asserts in defense of Amazon, “My options as a book consumer never have been better.” He includes as evidence of a competitive book market the option (which he doesn't condone) of “illegal downloads of free PDFs.” Jeff Bezos must rue such defenders.

Cowen is at his most disappointing in defending CEO pay. He buys into the myth of the superstar, claiming that CEOs are not only talented executives, they also are our modern “philosophers.” He forgets that people who are worth a lot can still be overpaid. He seems unaware that CEOs who get hugely rewarded over a series of short-term intervals can retire with a great, and undeserved, fortune if their overall performance turns out to be mediocre or worse. That isn't reliance on “anecdote” (his swipe at journalists like me who write about examples of CEO excess); it's a systematic flaw.

I also wish Cowen had said more about income inequality. He celebrates America as “the world's largest and most successful hedge fund,” but half of Americans don't participate. He could have made the case that, on balance, Big Business lifts the incomes of the poor and makes the society better, if not fairer. He mostly avoids this urgent subject.

Nonetheless, Cowen raises trenchant points and his theme is correct. Big Business is not the ogre it is made out to be. It is no more deserving of being scapegoated than are other familiar targets. As 2020 approaches, I especially hope Cowen is read by Democrats. Capitalism remains the best engine of prosperity and growth, and the party of the working woman and man should not abandon it.

Roger Lowenstein is a financial journalist and the author of “America's Bank: The Epic Struggle to Create the Federal Reserve.” From the Washington Post.

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