Drain the Swamp - In Agreement with Trump

 An enduring message from Donald Trump this past eight years has been that the institutions need pruning, if not a simple pruning then a far more rigorous draining of the swamp. In terms of the following arguments there is little to disagree with. Government has become oppressively involved in the majority of the personal, cultural, and economic aspects of our lives. The main disagreement with Trump is that we do not need neo-monarchism to solve it, we need a decentralisation of institutions.

The argument presented here is that the most fundamental mechanism of that power grab is the way that institutions are regulated and controlled by government, which in turn permits those institutions (including corporations) to garner the lion’s share of power. This leads to a fundamental corruption of free markets and culture which then results in corporations and institutions being used by government to run our lives. This article will look at the most objective factors, those involved in economics, but similar dynamics also appear to apply to society and culture - centralised and thus dominant cultural trends are over-promoted and supported by the way government functions.

 

The key in terms of economics is regulation. Government regulations, while often designed to protect consumers, ensure fair competition, and promote economic stability, systemically empower corporations and holders of economic capital to exert disproportionate influence over free market economics. This phenomenon occurs through several mechanisms. The most well known is the phenomenon of regulatory capture, which in turn biases the effects of barriers to entry, economies of scale, lobbying, and standard setting towards the interests of the largest corporations; and in corollary towards the interests of small and medium sized enterprises over self-employed traders. 

 

Regulatory capture is the idea that regulatory agencies may be dominated by the industries or interests they are charged with regulating. Over time, regulatory bodies can become "captured" by the very industries they are supposed to oversee, leading to regulations that favour large, established firms over new entrants or smaller competitors. The revolving door phenomenon, where individuals move between roles in the private sector and regulatory agencies, can exacerbate this issue. 

 

Complex and costly regulations can create significant barriers to entry for new or smaller firms. Large corporations typically have more resources to comply with extensive regulatory requirements, while smaller firms may struggle to afford the necessary legal and compliance costs. This can stifle competition and innovation, allowing established firms to consolidate their market power.

If regulatory capture was not enough, several other factors and mechanisms continue to tip the scales. At its core what happens is that all the public goods our tax money is used to develop, the roads, the schools, ports, the supply chain facilitation, and money supply itself, are disproportionately used to the benefit of large corporations and their shareholders, and far less for the benefit of the average person. This works through some of the further factors that regulatory capture permits.

Large corporations often benefit from economies of scale in their compliance efforts. They can spread the fixed costs of regulatory compliance over a larger volume of production or services, reducing the per-unit cost compared to smaller firms. This gives larger firms a competitive advantage, potentially leading to market concentration. Large corporations often have significant resources to invest in lobbying efforts, which can shape the development of regulations to their advantage. They may push for regulations that create high compliance costs, which they can afford but which are prohibitive for smaller competitors. Additionally, they may influence the creation of loopholes or exceptions that benefit their specific business models. Regulatory agencies may adopt standards or requirements that reflect the practices and capabilities of large firms. These standards can inadvertently disadvantage smaller firms or new entrants that do not have the same capabilities or resources. Standard-setting can also occur through industry-dominated committees or advisory boards, further entrenching the advantages of large corporations. 

A small selection of  examples of the biases of regulatory capture include medicines and financial regulation, telecomms, and agriculture. The following examples are mirrored across most Western societies. The FDA’s regulatory process for drug approval is rigorous and costly, involving extensive clinical trials and documentation. While these regulations are crucial for ensuring drug safety and efficacy, the high costs and long timelines can favour large pharmaceutical companies with substantial financial resources over smaller biotech firms. The Dodd-Frank Act, enacted after the 2008 financial crisis, imposed extensive regulatory requirements on financial institutions. While aimed at reducing systemic risk, the compliance costs associated with these regulations have been particularly burdensome for smaller banks, leading to industry consolidation as smaller banks either close or merge with larger ones. The regulatory framework governing telecommunications often involves significant lobbying by major companies. For example, net neutrality regulations have seen intense lobbying from both sides, with large Internet Service Providers exerting significant influence over regulatory outcomes that affect market competition. In the U.S., the regulatory environment surrounding food safety and agricultural production often favours large agribusinesses. For instance, stringent safety standards and certification processes can be disproportionately costly for small farmers, driving them out of the market or forcing them to consolidate with larger firms. 

Some explanations for the bias towards large corporations and the interests of capital, and hence a corruption of basic free market principles, are public choice theory, economic regulation theory, institutional economics, and network theory. Public choice theory, developed by economists such as James Buchanan and Gordon Tullock, analyses how public decisions are made. It argues that regulators and politicians are influenced by their own self-interests, which can include career concerns, financial incentives, and political support. As a result, regulations may reflect the interests of powerful groups rather than the public good. George Stigler’s economic regulation theory suggests that industries seek to influence regulations to create a favourable environment for themselves. 

Stigler's "Capture Theory" argues that industries will use regulation to limit competition, control prices, and increase profitability. Institutional economics suggests that regulatory frameworks are part of the institutional environment that can either promote or hinder competition. Institutions, including regulatory bodies, may be swayed by powerful economic actors, thereby embedding and perpetuating the advantages of large corporations. 

And if this wasn’t enough to explain the biases then network theory examines how social and economic networks influence behaviour and outcomes. In the context of regulation, network theory can explain how interconnectedness among industry players and regulators can lead to a regulatory environment that favours established networks and entrenched interests, often to the detriment of new entrants and smaller players such as SMEs and the self-employed. 

The overall outcome of regulatory capture is what the libertarian theorist Kevin Carson refers to as State Capitalism, in contrast with what we have been sold as ‘Free Market Capitalism’. The swamp that needs draining in economic terms is the tight relationship between governments and corporate institutions. Although not explored in this article, a similar systemic set of corruptions exists within wider social and cultural institutions, a dynamic which itself has a symbiotic relationship with the economic side of the swamp.

Carson's "Organization Theory: A Libertarian Perspective" presents a thorough critique of conventional organisational structures, particularly large corporations, through the lens of free-market libertarianism and mutualism. His thesis is that many of the inefficiencies and injustices attributed to capitalism are, in fact, consequences of state intervention rather than inherent features of the free market. Carson argues that genuine free markets would lead to more decentralised, egalitarian, and efficient forms of organisation. Grass roots libertarian social and cultural forms of organisation would also then have freedom to grow in the drained swamp.

 

Some of Carson’s key arguments, in distinguishing between State Capitalism and true Free Markets, firstly and most obviously that what is often criticised as "capitalism" is actually state-capitalism, where government interventions distort market dynamics in favour of large corporations. The state's role in subsidising transportation, infrastructure, education, national security and policing, and research and development, and distorting property rights through mechanisms such as rentierism, disproportionately benefit large firms, enabling them to grow beyond what would be sustainable in a free market. 

Furthermore Carson challenges the notion that Economies of Scale inherently benefit large firms. He suggests that beyond a certain point, diseconomies of scale set in, making large firms less efficient. He argues that without state subsidies, many large corporations would be unable to maintain their size and dominance. In a truly free market, smaller, more agile firms would prevail, leading to a more decentralised economy. The bureaucratic inefficiencies and hierarchical structures of large organisations are more prone to mismanagement, waste, and a disconnect between decision-makers and workers. Decentralised, cooperative, and peer-to-peer organisational forms are more efficient and better suited to meet human needs. Mutualism, a form of market anarchism that emphasises cooperative and non-hierarchical forms of organisation, such as worker cooperatives and peer networks, would thrive in a true free market. 

A society where individuals and small groups freely cooperate without coercive state interference would lead to more equitable and self-sustaining economic relations. Intellectual property (IP) laws are a good illustration of a form of state intervention that benefits large corporations at the expense of innovation and competition. IP laws create artificial scarcity and monopolies, hindering the free flow of information and creativity that would otherwise drive a more dynamic and competitive market. Other state interventions, such as licensing laws, planning regulations, and minimum wage laws, often have unintended consequences that harm workers and small businesses. In a truly free market, without these distortions, workers would have greater bargaining power and more opportunities to engage in self-employment or cooperative ventures. Carson’s is the Libertarian angle, and it is also supported by non-politically aligned theorists such as Michel Bauwens of the Peer to Peer Foundation. For balance and contrast there follows another critique supporting the idea that State Capitalism is hidden within free market rhetoric, but from the Left, and which reaches similar conclusions. 

George Monbiot's "The Invisible Doctrine" delves into the pervasive yet often unacknowledged influence of the supposed free market ‘Neoliberalism’ on global politics, economics, and society. Monbiot argues that neoliberalism, despite being largely unseen and unrecognised by the general public, has shaped policy and societal norms profoundly. He asserts that neoliberalism has become the dominant paradigm since the late 20th century. This ideology promotes deregulation, privatisation, and a reduction in government intervention, under the guise that ‘free markets’ lead to optimal outcomes, while the heavy lifting of centralised power happens at the back door through regulatory capture, invisible influence, the undermining of democracy and the natural capital that we should be protecting for future generations, and a bias towards wealth creation and retention among elites rather than the redistributive effects of the free market. 

Monbiot provides numerous examples of industries and services that have been privatised, such as utilities, transportation, and healthcare. He discusses the consequences of these policies, often pointing to increased costs and decreased accessibility for the public. The book critiques trade agreements like NAFTA and the Trans-Pacific Partnership (TPP) for prioritising corporate interests over national sovereignty and labour rights. These agreements are seen as tools to entrench neoliberal policies globally. In the aftermath of financial crises, many governments have adopted austerity measures—cutting public spending and social services—which Monbiot argues are driven by neoliberal logic. He examines the social fallout from these measures, particularly in countries like Greece and the UK. He goes on to highlight cases where corporate power has overridden public interest, such as the influence of the fossil fuel industry in climate policy. He argues that corporate lobbying and the revolving door between business and government have entrenched neoliberal principles in policy-making. The reader will see the clear parallels between both Carson’s and Monbiot’s explorations of the same phenomenon from Right and Left leaning perspectives.

The roots of a privately concentrated ‘property owning democracy’ which emerged in the political and economic upheavals of early 20th Century labour-versus-capital conflicts have gradually concreted into perverse structural disparities through the influence of classical liberalism, particularly the ideas of economic freedom, individualism, and limited government. Monbiot traces how these principles have been adapted and intensified in neoliberal thought. The influence of economists like Friedrich Hayek and Milton Friedman who advocated for free markets and criticism of government intervention laid the intellectual groundwork for neoliberal policies, and these were implemented through policy decisions across the globe, from the Reagan and Thatcher administrations in the 1980s to contemporary international institutions like the IMF and World Bank promoting structural adjustment programs. All the while the supposed Free Market has become everything but free for the vast majority of people - the reality is that power has a winner takes all trump card if the majority of us do not have a seat at the inevitably centralised table of government and regulation. The property owning democracy has become ‘democracy owned by property’.

The benefits of economic freedom that a truly Free Market would bring to individuals beyond corporate domination, heads into the area of psychological and sociological theories and we’ll leave that for another time, but: It should suffice to note that self-determination theory, human capital theory, and network theory, all support the idea that freedom and its economic counterpart Truly Free Markets offer individuals far greater empowerment and hence also richer cultural lives when allowed to flow from individuals, families, tribes, and communities upwards rather than from government downwards. 

The negative effects that social and cultural centralisation have on us when they are controlled by governments and institutions is far more insidious than just the objective measurables of centralised economic power described in this article. Our lives would be richer if they were more able to emerge organically from free association and ‘free cultural markets’. The political right and left each have their critiques of the status quo, and they are both correct. However, no progress will be made unless the underlying distortions of economics and ownership in a controlled marketplace can be turned around.