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Squaring the Circular Economy

REVIEW ESSAY
The People’s Republic of Walmart:
How the World’s Biggest Corporations Are Laying the Foundation for Socialism
by Leigh Phillips and Michal Rozworski
Verso, 2019, 256 pages

About a decade ago, Ralph Nader published Only the Super-Rich Can Save Us!, a 700-plus-page fantasy of benevolent oli­garchy. Nader imagined seventeen wealthy individuals—including George Soros, Bill Cosby, and Warren Buffett—conspiring to push a left-populist agenda, including environmental activism and Walmart unionization. Critics were not kind. Rachel Balik complained that Nader “alternated between making the ‘super rich’ seem like idiots, and launching them into complex . . . scenarios in which they bring his structural dreams to fruition.” At the Financial Times, Emma Jacobs slyly mocked the characters’ imagined conversion as “Damascene.”

The prose of Leigh Phillips and Michal Rozworski’s The People’s Republic of Walmart far surpasses Nader’s, and it is, mercifully, a far shorter, snappier, and funnier book. But the basic premise—that a corporate structure like Walmart’s can be reformed into a responsible servant of the public interest—deserves the same incredulity as Nader’s dream of plutocrats upending the system that made their fortunes. Technologies of production, and modes of social organization, are not easy to extract from their origins, current aims, and principal exponents.

Phillips and Rozworski are at their best in analyzing the scale and scope of central planning in economies dominated by large corporations. In doing so, they demonstrate the inadequacy of ideological debates premised on the opposition between “free markets” and a “command economy.” People’s Republic of Walmart also scores points against the dwindling band of laissez-faire diehards who would call certain nations or markets a beau ideal of Hayekian spontaneous order. This is a valuable popularization of insights from political economists ranging from John and James K. Galbraith to Mariana Mazzucato and Katharina Pistor. Yet the book’s central analogy—between CEOs and state planners—fails to convince, be­cause the goals, methods, and powers of a Bezos and a Brezhnev are so different that their points of convergence seem fortuitous, despite the authors’ felicitous prose. Nevertheless, there is plenty to learn along the way about the growing divide on the left between those who want to better control capitalism, and those who would replace it with another system altogether.

Beyond the Easy Egalitarianism of Universal Basic Income

To understand real political options in the twenty-first century, it is helpful to situate People’s Republic in a broader dialogue on in­equality, sustainability, and the quasi-governmental role of contemporary finance capital. Hyperinequality has energized the contemporary Left. It has also fueled the popularity of a straightforward—though hardly unobjectionable—salve: providing a universal basic income to all citizens.

Other, more ambitious reimaginings of social provision reach deeper into corporate structures and consumerist mindsets. In the UK, Momentum’s Aaron Bastani has promoted a technophilic, left-accelerationist vision of Fully Automated Luxury Communism (FALC), elaborating Peter Frase’s vision of communist abundance. For FALCists, rapid technological advance is to act as a cornucopia ex machina, rapidly reducing the costs of anything we need or want. Remember the vogue for 3-d printers? FALCists accelerate it in two directions, usefully divided along the lines posed by Baumol’s fa­mous cost-disease theory. FALC predicts that manufactures will continue to get cheaper and cheaper. Meanwhile, in service sectors traditionally resistant to standardization and cost decline, AI will make cheap education, health care, haircuts, and more available to all.

However alluring they are as visions of a distant future, both prongs of the FALC program face serious challenges in the here and now. Solving the “cost disease” in services via automation may seem uncontroversial in theory. In practice, it can mean relegating less-connected students to massive open online courses (MOOCs), or a bottom tier of uninsured patients to barely vetted apps and robots. And yes, more advanced firms could supply the world with cheap cars, air conditioners, flights, and electricity, but the ecological con­sequences of extant, limited advances along those lines have been devastating. FALCists then may push for nuclear energy, geoengineering, and great leaps forward in green technology. But at some point the reliance on rapid scientific advance smacks of magical thinking.

People’s Republic of Walmart is best seen as a salvo to keep the dream of FALC alive. By pointing out how thoroughly planned key aspects of our current economy are, it encourages citizens and work­ers alike to buy into even more ambitious plans for nationalization and democratization of key parts of the economy in the future, in order to bring about a more fairly and effectively globalized com­merce.

Continuity as a Rhetorical Strategy

One way to acclimate citizens to planning is to frighten them into accepting authority. Naomi Oreskes and Erik M. Conway’s bracing book The Collapse of Western Civilization takes this tack, portraying China as the “last nation standing,” once mass dislocation of coastal refugees proves too much for liberal democracies to handle in an orderly fashion in the late twenty-first century. The book is no doubt intended as a spur to the United States and Europe to do more to mitigate and prepare for the far weirder weather ahead. But it also suggests that the longer mitigation and adaptation are delayed, the more likely we are to endure what Geoff Mann and Joel Wain­wright call “Climate Leviathan”—a strong state capable of imposing order amidst Hobbesian conflicts likely to be unleashed by sudden shortages of housing, water, and food. Call this the “start planning or else” school of political persuasion.

Another way to boost planning is to domesticate it, assuring skeptics that it is in fact what we are doing right now, and have been doing all along. Phillips and Rozworski go in this direction, high­lighting, praising, and then expressing grave reservations about command economies and planned coordination. They see planning everywhere: in Amazon and Walmart, the British NHS, the Soviet Politburo. “Planning works,” their last chapter assures us: our task now is to keep plutocrats, technocrats, and authoritarians from fur­ther hogging, dissipating, or misdirecting its miraculous productivity.

Industrial gigantism has made Phillips and Rozworski’s title metaphor plausible. In some key respects, a firm like Walmart is like a country, taking on the tasks of planning and provision that only governments were once capable of doing. Indeed, sometimes firms seem more competent than governments at core sovereign functions, like disaster relief. Recall the Hurricane Katrina response, where Walmart briefly seemed more “on the ball” than Michael Brown’s faltering FEMA. Some large firms’ business models even seem pred­icated on assuming “functional sovereignty,” coordinating workers and consumers en masse. Uber would like nothing more than to assume control over cities’ roads, curbs, and street lights, eliminating the inefficiencies of private cars, while rendering citizens reliant on its own network. Indeed, monopolization may be its only route to viability, as Hubert Horan suggested in these pages earlier this year.

The decades-long advance of market incentives in China blurs the boundary between state and market from the other direction. Both party and state bureaucrats, and the leaders of state-owned enterprises, have a “bottom line” with a corporate feel. Ostensibly private firms advance the party’s aims. Mayors develop land, and state-owned enterprises compete in markets to promote GDP growth and tax revenue for the central government. The renewal of political eco­nomy as a discipline reflects such trends, and drives the plausibility of Phillips and Rozworski’s emphasis on planning as the key to con­temporary economic advance.

Can a Capitalist Command Economy Be Democratized?

Phillips and Rozworski see contemporary capitalism’s core institution—the multinational corporation—as a command economy. At the pinnacle of markets, CEOs tell high-level managers what to do, and they in turn set directives down a chain of command, until at some point algorithmic monitoring and nudges effectively require workers to take certain actions. Performance assessments are becom­ing so granular and feedback so immediate that the ideal Uber driver or Amazon worker of the future is a behavioristically conditioned marionette, flexible enough to immediately adopt whatever patterns of behavior maximize profit. What legal scholars Ifeoma Ajunwa, Kate Crawford, and Jason Schultz have called “limitless worker sur­veillance” means that computerized control extends all the way to monitoring workers’ hand movements, recording every keystroke, and assuring every moment “on the clock” will be judged for efficiency and productivity.

If they were entirely consumer-oriented, Phillips and Rozworski might applaud this neo-Stakhanovite wringing of productivity from labor. “We might describe Jeff Bezos as the bald, moustache-less Stalin of online retail,” they quip in a chapter on Amazon. But they balance their cornucopian dreams with what Yale scholar James Q. Whitman calls a “producerist” orientation to ensuring better work conditions. Thus they recoil from the implications of such micro-level control of labor, breaking the labor supply chains of the cap­italist command economy. They want to maintain the high level of productivity of a Walmart or Amazon, while giving workers more of a say in how they do their work.

Standing alone, that demand is serious and important. There are all manner of petty indignities imposed on workers that could end tomorrow, without impacting productivity in the slightest. More­over, even when there is a zero-sum game (a clear case where work­ers’ interests and that of the company conflict), it’s hard to dispute that some of the vast sum of money that has (or will) go to shareholders could be relatively painlessly reallocated to workers.

But Rozworski and Phillips don’t stop there. They also want firms like Amazon and Walmart to be environmentally conscious. As they ask in a chapter on the “Good Anthropocene”:

Could we seize logistics and planning powerhouses—the Walmarts and the Amazons of the world—and repurpose them for an egalitarian, ecologically rational civilization? Could we turn these systems into a global “Cybersyn,” Salva­dor Allende’s dream of computational, democratic socialism?

Set aside for a moment the bounds of the “we” here (a North American vanguard? A congressional or parliamentary majority? A majority of nations behind a UN resolution?). Consider just the substantive demands such a vision would make on a new, renewables-friendly Walmart. It would need to do its part to stop global warming. Phillips and Rozworski also say it should respect the pri­vacy of both customers and workers, not getting too nosy about either work habits or personal data. The whole supply chain matters, and it has to stop exploiting suppliers, contractors, and subcontractors in Asia and Africa.

Something tells me that $3 cylinders of caramel popcorn, $6 blouses, and rows of firearms may not be long for the Walmart of Phillips and Rozworski’s future “Good Anthropocene.” The store would be unrecognizable, its shareholder returns either eliminated or severely reduced, and its management cadres would have to be replaced or converted to a gospel of sustainability. So why even mention it as a model? Even if the Walmart board and upper management had some kind of Damascene conversion to sustainability and labor rights, appointing AOC as CEO, wouldn’t the firm be smashed by the rapidly expanding dollar stores now nipping at its heels? The same specter of magical thinking that discredits FALC­ism also arises here—unless, of course, the economy as a whole could be planned by a higher level of enterprise.

Only Concentrated Finance Capital Can Save Us?

To deal with the problem of retrograde competition, an enterprising planner could take advantage of another level of concentration in contemporary capitalism. Phillips and Rozworski call index funds the “sleeper agents of planning.” Massive institutional investors have used the promise of low fees to become the guardians of trillions of dollars of assets. Thanks to their “horizontal shareholding,” a set of four or five massive institutional investors may each own 5 to 10 percent of the handful of firms dominating an industry. That is more than enough power to constrain boards and CEOs. Some of these investment powerhouses are also beginning to articulate basic princi­ples of social responsibility for the firms they invest in. For example, BlackRock CEO Larry Fink emphasized “sustainable financial per­formance” in a recent letter to CEOs, weakly signaling a commitment to some level of corporate social responsibility. Imagine a future where such titans of finance meet and agree not to compete in certain socially undesirable ways. Maybe such a world would even produce a Good Walmart.

Of course, as Phillips and Rozworski observe, exactly that kind of collusion has been predicted, but with very different results, by Rudolf Hilferding. Observing the tendency of capital to concentrate, Hilferding theorized that market-driven production would culminate in one massive cartel of capital owners at the commanding heights of the economy. The Monthly Review’s John Bellamy Foster has called that view overly simplistic, and capitalism’s defenders are even fiercer in dismissing it. Yet there are aspects of standard eco­nomic theory that support the direction, if not the conclusion, of Hilferding’s theory of finance capital.

Fans of free markets praise competition, but the point of a competition is to win. Well aware of the fragility of markets, a European ordoliberal tradition has emphasized rules to structure markets to assure that no firm can abuse a dominant position. American neoliberals, by contrast, went in the opposite direction, and gutted competition law by establishing “consumer welfare” as the be-all, end-all of most antitrust investigations. If a firm has found the one, best way of delivering search results, retailing prod­ucts, packing meat—then so be it; let it grow to corner its market, so long as arcane econometrics assure us that its prices are suitably low. Robert Bork’s Antitrust Paradox left jurists and scholars alike second-guessing themselves whenever they might be emboldened to challenge a massive firm. And it is a short step from that Chicago School veneration of dominant firms to Peter Thiel’s straight-up endorsement of monopolization as the highest aim of the start-up.

Other influential Chicago School theorems also conduce less to competition than to stasis. Consider, for instance, the efficient markets hypothesis (EMH), which in at least one form concludes that it is impossible for an investor to “beat” the market, since the market itself already incorporates all information. The EMH (and related work on the relative appeal of debt and equity investments) contributed to the enormous success of “set it and forget it” index funds. At its least ambitious, Phillips and Rozworski’s vision could simply be translated into a demand to make the indices behind such funds more responsive to social needs, rather than just individual profit. Shareholder activists are already pressuring banks to decarbonize their portfolios and to divest from private prisons and gun manufacturers.

But how far can this model go? Asset ownership only became so concentrated because massive institutional investors promised (and often delivered) robust and steady returns. True, they could be making money from renewables rather than natural gas pipelines, or health care rather than munitions. As David H. Webber has argued, labor’s pension funds could become far more active in democratizing economic power. The success of that project, however, depends on a much more wide-ranging political mobilization—to redirect government taxes and subsidies, consumer tastes, and more. Con­centration of finance capital is only one small step toward broader political opportunities to cooperate for a better future.

Consider, for instance, the prospect of increasingly concentrated private insurance markets eventually bringing down the cost of health care. In many markets in the United States, only two or three insurers operate. In Alabama, Blue Cross and Blue Shield (BCBS) has an 84 percent market share. Imagine a future where already somnolent antitrust authorities are abolished entirely, and some BCBS/Aetna/UnitedHealth combine monopolizes private health in­surance throughout the United States. Its bargaining power would be so great, it could probably cut hospital and physician costs dramatically. But what is to keep it from simply enjoying such savings as profits? True, existing law (under the ACA’s rules on the medical loss ratio) limits most insurers’ profits and overhead costs, so most of those savings are supposed to go back to those paying for insurance. Yet a firm that powerful would probably also make reg­ulatory interpretations of the medical loss ratio (or even its statutory foundations) a plaything of its lobbyists.

The question for Phillips and Rozworski—and one that their book unfortunately fails to answer convincingly—is whether such political manipulation is essential to the business model of firms they lionize, or is simply an unfortunate excess demanded by avaricious managers and investors. They want to reverse the classic Audre Lord aphorism, insisting that the master’s tools (here, the massive multi­national corporation, or its basic operational approaches) can not only dismantle the master’s house (hyperinequality and climate cri­sis), but also make us all masters. Yet real change requires different tools and different outlooks. It really is discontinuous with our cur­rent economic path.

At present, the “greening” of corporate megastructures is more a public relations move than a practical reality. To get the likes of Amazon and Walmart to develop real sustainability at every level of their global value chain is an extraordinarily difficult task. The logistics and cheap production they rely upon require cheap fossil fuels, and their R&D departments are unlikely to develop real alternatives. Nor are they likely to want, or succeed at, some new certification role, only purchasing from vetted, sustainable producers. Setting up a virtual storefront on Amazon Marketplace is now a matter of filling out a few forms. If the firm really started investigating and setting standards for suppliers, could it still connect buyers to sellers nearly as efficiently as it does now? Curing the externalities here would likely kill off the patient. To do something serious about climate crisis, we must frankly acknowledge the prospect of inflation or degrowth, as the social costs of “Everyday Low Prices” are finally transferred to the individuals demanding them. Call this the objec­tion from sustainability.

A further objection, from democracy, also haunts Phillips and Rozworski’s vision of planning. How are we to translate “demo­cratic” preferences for the managers of megafirms, or megainvestors? Expert administrative agencies can sometimes unite scientific exper­tise, democratic input (from political appointees), and bureaucratic regularity. Some countries bring together such regulators within a kind of supercommittee to harmonize, say, a nation’s military, envi­ronmental, educational, and other needs. That may be a way of en­suring that the full multidimensionality of modern multinationals’ functional sovereignty actually submits to legitimate, territorial sov­ereignty. Much of what concerns us about the activities and implica­tions of global firms, however, happens on a global scale. There, sovereigns conflict. And Rozworski and Phillips give us little guid­ance as to how to reconcile those inevitable collisions of priorities.

Taking Democratization Seriously

Phillips and Rozworski occasionally acknowledge such problems, but they offer only a casual and untheorized realism:

We have to think hard about how to ensure that the already enormous amounts of information controlled by large, unac­countable corporate bureaucracies do not become the basis for new unaccountable bureaucracies (state-run or otherwise). As the two twins of undemocratic planning, Soviet Union and Walmart, show, planning on its own is no synonym for socialism.

Nationalization without democratization is illegitimate. But what is the distinction between democratization, and Phillips and Rozworski’s own policy preferences? People’s Republic of Walmart would be far more convincing if its authors soberly acknowledged areas where control by “the people” would dramatically veer from their own vision of a more sustainable future. Without such concessions, the rhetoric of “democratization” merely bedizens a policy program in need of more substantive justification.

To be sure, they are not alone in this wishful thinking. It is easy to assume that one’s own preferences are the same as those of a “silent majority.” The real question now is the price of admission to a serious conversation about resolving the tensions among nations and classes as we begin to take climate change and hyperinequality seriously. Rather than focusing on structures (like the firm or command economy) and slogans (like democratization), the difficult work will be in crafting sustainable compromises toward more in­vestment in sustainable technology, and ensuring a wider distribution of its benefits.

Toward that end, the convergence of the financial models of modern monetary theory (MMT), and the practical political goals of a job guarantee and Green New Deal, are more heartening than Phillips and Rozworski’s intellectual history of Chilean cybernetic socialists, megafirm managers, and Soviet Gosplan-ners. We need to figure out how to pay for technological advance, and MMT at least offers a model of state financing (as constrained by inflation) that does not depend on the vision (or regulation) of today’s giants of finance capital. Rooting a response to climate change in a particular history of crisis management—namely the New Deal’s combination of relief, recovery, and reform—is a more concrete domestication of a bold political agenda than litanies of alleged similarities between capitalist and communist leaders. And key MMT advocates for a job guarantee are deliberately promoting subsidiarity, to elevate local control over priorities in the mobilization of un- and underem­ployed individuals toward fulfilling work and public purposes. Stake­holder corporate governance models could also play an impor­tant role here, ensuring that labor and local communities have a voice in the affairs of large commercial entities.

Phillips and Rozworski’s key insight comes from their insistence that large economies practice central planning now. They analyze an impressively broad range of industries, from retail to finance to health care. Their writing is refreshingly frank, funny, and bold. It’s almost enough to convert the reader to their can-do optimism. But the book merely suggests, rather than shows, how to cure the chief defects of both public and private sector gigantism. Its intellectual history of failed projects of both nationalization and marketization is fascinating in its own right, but it does not rise above the detached idealism that sank such visions in the first place. In this way, The People’s Republic of Walmart embodies the same impractical ideolo­gy that it so ably critiques.

This article originally appeared in American Affairs Volume III, Number 3 (Fall 2019): 56–66.

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