Thinking small in the 21st century


Comment: Economic, political and social power needs to be broken up and not concentrated in the hands of the few, argues Adam Lent

30th December 2015

In 1913, after an epic political battle, the US Congress voted to implement a one per cent tax on income. One influential congressman predicted the tax "would produce more money than the mind of man would ever conceive to spend".

He could not have been more wrong. As taxes have grown far beyond that solitary per cent – and similar low levels in other industrialised economies – so state expenditure as a proportion of GDP has easily kept pace. It rose from around 10 per cent in western nations in 1900 to close to 40 per cent by 2000.

This tells us much about what was considered progress in the last century. The concentration of resources and power in the hands of a few very large organisations became accepted not just as inevitable but as a genuine social good. And it was a sentiment not just reserved for the public realm.

Between 1897 and 1904 there were no less than 2,934 corporate mergers: the biggest wave of mergers and acquisitions (M&A) activity in the history of capitalism. The result was monopoly or near-monopoly control. By the start of the century, American Tobacco controlled 90 per cent of its market, Standard Oil 85 per cent and US Steel 75 per cent. Just 100 firms owned almost a quarter of all industrial assets in America.

The concentration of resources and power in the hands of a few very large organisations became accepted not just as inevitable but as a genuine social good

The corporation soon held an unassailable place in the US economy. Other nations looked on in admiration and urgently tried to 'Americanise' their own economies believing that scale had given the stateside corporation a great market advantage.

Even in the cultural sphere, power became concentrated by the mid-century as large TV networks and film companies churned out news and entertainment that held up the heterosexual, white, middle-class nuclear family as the ideal type. Being different in the 1940s and 1950s was not a comfortable thing to be.

Big power challenged

It was not until the 1960s that this 'big power consensus' faced challenge. A new generation rebelled against the cultural conformity. By the 1970s, feminism, gay liberation and anti-racism were challenging the deepest taboos.

New intellectual currents began to gain attention; most notably the revival of the half-forgotten anti-state economist Friedrich Hayek and the sudden global popularity of EF Schumacher's Small is Beautiful, which launched a blistering attack on the giant corporation.

Hobby groups sprang up in California with a determination to destroy the hold of big computing corporations such as IBM. One of these, the Homebrew Computer Club, would lead directly to the production of the first commercially viable personal computer in 1977: the Apple II. PC ownership spread rapidly during the 1980s and in the following decade the internet revolution began heralding an era of disruption for incumbent firms.

There are many changes under way, replacing big power principles of hierarchy and elitism with small power principles of individual choice and mass engagement

These were not unconnected phenomena. The work of Ronald Inglehart has revealed that over the last 40 years populations have moved consistently from a focus on materialist values – earning a living, ensuring their families have enough to eat, securing decent housing; to emancipatory values – seeking autonomy, self-expression and personal fulfilment. It is this shift that explains why a 20th-century consensus that valued concentrated power has faced such challenge over the last four decades.

As a result, there are many changes under way which are replacing big power principles of hierarchy and elitism with small-power principles of individual choice and mass engagement.

The stunning growth of social media in the last few years has upended conventional elite practices in areas like journalism and the entertainment industry. New technologies and technological trends such as the Internet of Things, 3D printing and the blockchain look ready to do the same to energy generation, manufacturing and finance.

The shift to direct payments is for the first time putting the power of financial decision-making in the hands of public service users – some of whom only three decades ago were considered incapable of independent life outside a medical institution.

And increasingly, businesses are being forced to rethink their management structures and recruitment procedures to attract and hang on to staff as growing numbers abandon life as a corporate drone for the freedom of self-employment.

A new agenda for the frustrated generation

But this change is not happening fast enough. Big power structures are proving remarkably resilient. The result is frustration and dysfunction as people struggle against the constraints imposed by hierarchy.

Nowhere is this clearer than in the world of politics. The mass parties of the 20th century have haemorrhaged support and yet still retain a stranglehold over governments.

For millions across the world this system has become increasingly alienating. It denies people the direct influence over the big decisions that affect their lives which they say they want. The result is either disengagement from politics or the turn to populist parties which portray themselves as challengers to this elitist establishment.

Even more fundamental is the way big power has strengthened its grip over the economy. The top 500 global corporations earn one third of all business revenues up from one fifth in the 1960s. Just 0.1 per cent of households now own 22 per cent of the value of all US assets, compared to just 7 per cent in the early 1970s.

A vision of a world where political, economic and cultural power and resources are spread as widely as possible

There is a growing need to channel the frustration and anger resulting from this tension away from the negative populism that is currently exploiting the situation and into a constructive political agenda. That agenda would have at its heart a vision of a world where political, economic and cultural power and resources are spread as widely as possible.

In practice this means shifting our party-dominated system based on tightly controlled representatives towards a more direct and deliberative approach. Members of elected chambers must see their prime role as the aggregator and champion of their constituents' views, not those of party leaders or wealthy donors.

It means reforming corporate structures and cultures so that the financial return on growth flows automatically to the innovative workers and consumers who add value to a firm's assets rather than solely to investors and executives. It also means reviving the anti-trust spirit of the early 20th century to break up undue concentrations of economic power.

And in the face of growing support for intolerant political strands, a new agenda will require a bold defence of the huge gains made over the last 40 years towards free choice in areas such as gender roles, sexuality and race.

There have been transitionary periods in the past when big power has been challenged by an insurgent small power. Sadly they have often been times of conflict, as established elites use every means to defend their position. Building a powerful new agenda that recognises the need for a small power revival is one way we can make sure the transition is smoother this time.

Homepage image by Matt Ring via Creative Commons 2.0


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