Iris’s argument was that the difference did indeed go deeper than that – far deeper – and went as follows. Up until the end of the sixteenth century, even global trading outfits like the Levant Company were guilds or partnerships, whose members pooled their resources to do things that none could accomplish in isolation. But then, on 24 September 1599, in a half-timbered building off Moorgate Fields not far from where Shakespeare was struggling to complete Hamlet, something momentous happened. A company was founded whose ownership was cut up into tiny pieces to be bought and sold freely and anonymously, like pieces of silver. One could own a piece of the new company without being involved in it, indeed without even telling anyone. The first global joint stock company was thus born – undoubtedly Tudor England’s most revolutionary invention. Its name? The East India Company.
A contemporary commentator drew an analogy between the East India Company’s ownership structure and the River Thames’s splendid flux, which leaves it ‘still the same river, though the parts which compose it are changing every instance’. Once the property rights over a firm become detached from the people that set it up and work in it, it becomes a corpus in flux. It acquires a liquid life of its own. It can grow out of any human proportion. Indeed, like a river, it becomes potentially immortal.
History, Iris said, is the constant struggle to accumulate power over others. Money buys the resources needed to amass such power, for a king as much as for Coca-Cola. The right to issue unlimited quantities of anonymously tradable shares, along with the institution of a liquid market for them, created something new: corporations with power so immense it dwarfed that of their countries of origin and could be deployed in faraway places assiduously to exploit people and resources.
Shareholding and well-governed share markets fired up history. Separating ownership from the rest of the East India Company’s activities unleashed a fluid, irresistible force. Unchecked, the East India Company grew more powerful than the British state, answerable only to its shareholders. At home, its bureaucracy corrupted and largely controlled Her Majesty’s government. Abroad, its 200,000-strong private army oversaw the destruction of well-functioning economies in Asia and a number of Pacific islands and ensured the systematic exploitation of their peoples.
The East India Company was no aberration, though. It was the template for many subsequent corporations, such as the Anglo-Persian Oil Company, which in 1953 marshalled the British and American secret services to overthrow the last democratically elected Iranian government. Or the communications conglomerate ITT, which played a major role in the murderous coup d’état in Chile twenty years later. Or indeed more recent mega-corporations like Amazon, Facebook, Google and ExxonMobil, which are effectively beyond the control of any nation state.
Liberals betray themselves, Iris argued, the moment they turn a blind eye to this kind of hyper-concentrated power. Freedom means as much in a society under the thumb of the East India Company as it does in those controlled by totalitarian regimes: nothing. This is why trading in apples does not even come close to trading in shares. Large quantities of apples may produce, at worst, lots of bad cider. But large amounts of money invested in liquid shares can release demonic forces that no market or state can control.
‘Liberalism’s fatal hypocrisy,’ said Iris, ‘was to rejoice in the virtuous Jills and Jacks, the neighbourhood butchers, bakers and brewers, so as to defend the vile East India Companies, the Facebooks and the Amazons, which know no neighbours, have no partners, respect no moral sentiments and stop at nothing to destroy their competitors. By replacing partnerships with anonymous shareholders, we created Leviathans that end up undermining and defying all the values that liberals like you, Eva, claim to cherish.’
In spite of herself, and roused in part by her own words, Iris found herself warming to the world Kosti described in his dispatches.
Going with the evolutionary flow or dallying with extinction?
‘You’re clutching at straws, Iris,’ Eva said, with an undisguised look of pity on her face. ‘The beauty of markets is that they are the natural habitat in which the fittest organizational forms survive. Anything else exists only in fiction. If democratic corporations, based on a one-person-one-share rule, were better in any sense, they would exist in the here and now. As it is, they exist only in Costa’s fantastical dispatches.’
Costa took this as his cue. ‘That a system evolved in a given environment only proves it’s best at replicating itself in that environment,’ he said. ‘That doesn’t make it a system that we should want to live in. Nor, more importantly, is it any indication of its ability to survive over the longer term. Environments change, sometimes rapidly, sometimes because of the system’s own ill effects. Outcompeting other systems, rather than living harmoniously with them, can eventually be self-destructive. Viruses are a good case in point. The Ebola virus, though extremely infectious and good at replicating itself, kills its hosts much more frequently than, say, Covid-19. The fact that coronavirus was relatively harmless is what allowed it to bring capitalism to its knees in 2020. The question is not whether share trading and capitalism have outcompeted other systems up until now but whether their effects are consistent with their host’s survival! And for that, we need to take into account a factor that neither of you have yet considered.’
‘Is that so, Costa?’ said Eva. ‘Well, then. Be so kind as to tell us. What have we overlooked?’
‘Technology, of course,’ he answered.
Electrified liquidity
‘If we are properly to assess the effects of share markets today,’ Costa went on, ‘we cannot confine ourselves to their birth back in the seventeenth century, as Iris has done, or to the mere fact of their prevalence, as you have done, Eva. We must consider how they have evolved in relation with their environment. The introduction of tradable shares might have made companies limitless in theory, but it’s only with the invention of specific technologies that they have become limitless in practice: the technologies made possible by the discovery and harnessing of electromagnetism by James Clerk Maxwell in 1865.
‘Now, I happily concede that if Maxwell had come up with his equations in, say, the fifteenth century, they would have excited only a few fellow mathematicians. Nothing more. It took Thomas Edison to turn those equations into the kind of electricity grid that would eventually power the world, and Edison would never have been able to do this without the vast sums of money made accessible to him by share markets. I’m sure I don’t need to remind you, Eva, that his Pearl Street Station, the first electric utility provider, was shareholder-owned.’
‘My point precisely.’ Eva smiled. ‘Without Maxwell’s equations, of course there would be no electric power generation, no telephony, no radar, lasers or anything digital at all. But without the share market to provide the massive funding necessary to build the networked firms – the General Electrics, the Bell Corporations, the Amazons – the scientists’ blueprints would remain in museums, along with Leonardo da Vinci’s helicopter designs. This is why I think it is pure madness to imagine an advanced society that bans share markets.’
‘But hold on, Eva,’ Costa cautioned. ‘When share markets met technology, they didn’t stay the same. They transformed one another, they evolved. Together they created something new: the Technostructure. And in the process they changed their environment too.’
The birth of the Technostructure
The real force that pushed history to breakneck velocity, Costa explained, was not the share market. Share markets were simply not liquid enough to bankroll Edison-sized ambitions. At the turn of the twentieth century, he reminded Eva, neither the banks nor the share markets could raise the kind of money needed to build all those power stations, grids, factories and distribution networks. To get those vast projects off the ground, what was required was an equivalently sized network of credit.
Hand in hand, shareholding and technology led to the creation of shareholder-owned meg
a-banks willing to lend to the new mega-firms by generating a new kind of mega-debt. This took the form of vast overdraft facilities for the Thomas Edisons and the Henry Fords of the world. Of course, the money they were lent did not actually exist – yet. Rather, it was as if they were borrowing the future profits of their mega-firms in order to fund those mega-firms’ construction.
The rivers of money these credit lines generated did much more than build the Bessemer furnaces, the pipelines, the machines, the transmitters and the cables. They paid also for mergers and acquisitions that generated industrial cartels far larger than the original networked mega-firms. A Soviet-like, albeit privately owned, planned system emerged, spanning the globe, allowing the captains of industry and the masters of finance, together, to shape the future for themselves and in their image. This, explained Costa, is what John Kenneth Galbraith called Technostructure, and is what, according to Kosti, the techno-syndicalists of the Other Now sought to bring down.
‘Time and again over the course of the twentieth century,’ Costa said, ‘the Technostructure grew beyond our control, overwhelming any notion of market discipline or public virtue. Like a virus, it has repeatedly sickened its host. Its extravagant appetite for private debt caused the great crash of 1929, the Depression of the 1930s and ultimately the calamity of the Second World War. In its aftermath, post-war governments neutered the mega-banks and placed the Technostructure on a leash. But in the early 1970s, the Technostructure escaped its leash and shook off all state restraints, aided and abetted by Thatcher and Reagan’s political insurgency.
‘Once it was back in full control, the Technostructure’s plundering of future value reached new heights, causing another great crash in 2008. This time, without the rubble of a world war to clean up, it took no time at all for us to revive the Technostructure with rivers of new public money printed by the central banks. But by now, the virus had so sickened its host, had so plundered its own environment, that a full recovery was impossible. Bloated and inflamed, the Technostructure was unable to convert the new liquidity into real productive capacity, into good-quality jobs, into a carbon-neutral economy drawing on planet-saving new forms of energy. It took an actual virus in 2020, produced by environmental pillaging, for most of us to realize the terrifying precariousness of our situation. And yet, once again, governments saw fit to pump trillions back into the Technostructure, clinging to the source of our sickness as if it were a life raft. By 2023, the Technostructure and its controlling oligarchs were in greater control than ever of a planet gripped by an out-of-control environmental and social crisis. So I fear that a ban on share-trading may not be sufficient for restoring sanity on planet earth,’ concluded Costa. ‘But, if you ask me, the OC rebels were damned right: it is necessary!’
The baby and the bathwater
Eva was not averse to this criticism of capitalism – namely, that it tended to favour big business – nor to criticism of mega-banks like Lehman for creating unstable debt mountains dwarfing Mount Everest. Free markets were her obsession, matched only by her fear of collectivism – not defending Goldman Sachs shenanigans or Amazon’s right to destroy small businesses or ExxonMobil’s incineration of the planet.
After all, she knew first hand what they had been up to. How chief executive officers had metamorphosed into financial gurus in order to appropriate, instead of add to, society’s riches. Even before the crash of 2008, she had noted that sixty-five out of the one hundred wealthiest entities on earth were financialized corporations, not states. ‘And believe you me,’ she told her friends, ‘these guys are not exactly custodians of society’s values.’
‘I don’t need to be lectured on the perils of so much power in the hands of so few, corruptible businessmen,’ she replied to Costa. ‘But – and this is a huge but – throwing the baby out with the bathwater, is that wise? The fact that share markets facilitate the birth of public enemies, such as the East India Company, Lehman or Walmart, is not a serious reason to ban tradable shares. Sure, cars can cause pile-ups. That’s not a reason to ban them. It is, rather, a reason to enforce better road rules more rigorously. So too with corporations. By all means let society step in with the right carrots and sticks to steer them in the direction of the common interest.’
‘Hang on, hang on.’ Costa jumped at the chance to point out a rare inconsistency in Eva’s argument. ‘For as long as I’ve known you, you have challenged the very notion of a common interest.’
Eva winced. She was, indeed, one of those economists who believed that working out objectively what society wanted was not just difficult but in fact impossible. Put technically, Eva and economists of her ilk rejected the possibility of any impartial method for synthesizing the conflicting preferences of different people into one, sensible, actionable list of social priorities. This is why they believed that free market competition was the only reasonable and most efficient way to allocate resources. Indeed, it was this radical rejection of the idea of a common interest that Margaret Thatcher was alluding to when in an interview for Woman’s Own in September 1987, she had asked rhetorically, ‘Who is society? There is no such thing! There are individual men and women and there are families.’
‘If it is impossible to define the common interest, society’s collective will, as you have been telling us and your students for years,’ continued Costa, ‘then how will society step in? Towards what common objective will it steer the corporations? Or have you had a change of heart?’
‘You are not wrong, Costa,’ Eva admitted after a momentary pause. ‘Every attempt to discern society’s will is condemned to leave room for manipulation by some groups and individuals who are more influential than others. But, while our sense of the common interest is always imperfect, we can approximate it sufficiently well – and we must, so as to avoid losing the wealth-creating power of markets altogether.’
‘I won’t allow it!’ thundered Iris from the sidelines. ‘I won’t allow you to sacrifice your only saving grace. At least stick to your guns, Eva!’
For Iris, Eva’s saving grace had always been her Thatcher-like clean break from woolly, pseudo-progressive do-gooders who went on and on about the ‘common interest’ not realizing that they were simply defending a moribund status quo. Indeed, Iris wholly supported Eva’s ruthless disavowal of the idea of common priorities, albeit for entirely opposing reasons.
‘How can there be common ground,’ Iris said, ‘between a girl living without clean water on less than a dollar a day and one of those masters of the universe whose bonus alone is larger than the entire education budget of a sub-Saharan country?’
‘And yet you can’t have fair competition between them either, can you?’ said Costa. ‘No one can win against corporations as powerful as Amazon or Walmart.’
‘There is only one choice,’ continued Iris. ‘Either we must surrender to an oligarchy that, in liberalism’s name, steamrollers every value or freedom that matters. Or we must recognize that the invention of capitalism must be reversed, leaving only one road available to us: the one that, if Kosti is to be believed, the OC rebels paved in the Other Now.’
‘Very well,’ said Eva. ‘I agree. You are probably right. Trying to tame the capitalist beast is probably futile. And in that case,’ she said, staring Iris straight in the eye, ‘in the same way you would have chosen Thatcher over the decrepit centrists in the early 1980s, I now choose the freedom to trade shares – even if this means my son will grow old in a world ruled by ugly, over-powerful corporations. There are no clean choices, Iris. We all have to choose our poison, the unfreedoms that we must live with. I choose not to live in a society that stops me from selling a share of my small business or from purchasing a tiny share in a large one. And I’ll tell you why: because in the end, it’s what lifted us all out of poverty and offers the only realistic prospect of doing the same for the millions who still suffer it.’
A fool’s wager?
‘Look around you, Iris,’ Eva went
on. ‘Sure, 2008 was awful. But only middle-class hypocrites can fail to marvel at the technological progress of the past century, to feel the relief of billions who have been lifted from poverty in that time and who can now aspire to a multitude of advantages, from cheap clothes and plentiful food to a smartphone connecting them with the rest of humanity. It has all been made possible because share trading allowed the present to borrow from the future to make a better life for itself than in the past. Without that, companies must rely exclusively on loans for every bit of their funding, as they do in Kosti’s Other Now. If that were the case, we’d still be living as we did in the sixteenth century.’
‘Did you seriously learn nothing from 2008?’ Iris asked. ‘A licence to lend non-existing money, when combined with a share market, is the highway to ruin. Not only does it concentrate ownership of every business in the hands of a tiny minority, it fundamentally destabilizes the economy. Why? Because the future is a fool’s wager, Eva! The future is a possibility, a who knows? or at best a perhaps. By deluding us with debt, capitalism has ensured that the future is not what it used to be. Five years ago, Covid-19 pricked our debt bubble, exposing capitalism’s incredible fragility. It put to bed all the nonsense about our recovery from 2008. All capitalism proved itself capable of after 2020 – just as after 2008 – was a fascinating reversal of natural selection: the larger an institution’s failure and the steeper its financial losses, the greater its capacity to appropriate society’s surplus via massive bailouts. Capitalism, thy name is bankruptocracy – rule by the most bankrupt of bankers!’
Eva was unperturbed. ‘This capitalist Technostructure, as Costa refers to it,’ she replied, ‘why deny its great achievements? The way it transformed China into a powerhouse, harnessed millions of brilliant Indian technologists, ended food shortages in most of Africa, made it possible for people with no bank account to send and receive money using their mobile phones. For all its obvious failures, is it wise to jeopardize these achievements with a ban on share trading?’
Another Now Page 9