Mike Phipps reviews Vulture capitalism: Corporate Crimes, Backdoor Bailouts and the Death of Freedom, by Grace Blakeley, published by Bloomsbury.

In the Introduction to this book, Grace Blakeley says her aim is to show that “capitalism is not defined by the presence of free markets, but by the rule of capital; and that socialism is not defined by the dominance of the state over all areas of life, but by true democracy.” How far does she succeed?

The first premise is amply illustrated – from the huge sums of government money thrown at the under-regulated and cost-cutting American aviation industry, to the state bailouts for the US car industry which allowed Ford and others to continue to pay huge dividends to shareholders. Embracing neoliberalism has certainly not resulted in a smaller state: what has changed under its system is who benefits.

Pandemic piñata

The Covid pandemic underlines this. The US’s “Paycheck Protection Program” saw workers receive just $1 out of every $4 distributed through the initiative. The rest went to business and has mostly never been repaid. Many of the companies involved use tax havens to cut their tax bills. Several members of Congress benefited financially from the scheme, as did lobbyists. Meanwhile, millions of workers lost their jobs or were evicted by companies that received public money.

Likewise in the UK, “dozens of large companies that had accessed government support through the Bank of England’s Covid Corporate Financing Facility went on to lay off workers and pay out dividends to shareholders.”

Similarly, all of France’s top companies received some form of government support and paid out 34 billion euros to shareholders while cutting 60,000 jobs around the world. A recent report noted that “public assistance to the private sector now exceeds the amount paid out in social welfare.”

In Australia, a colossal A$12.5 billion of government money was given to companies that were “largely unaffected “ by the pandemic. All over the world, the same picture emerges.

The precedent for such largesse was set during the financial collapse of 2008. Although the crash is often blamed on corporate greed, in reality the investment banks would never have taken the risks they did without the implicit insurance of the central bank, and behind it the government. The crisis’s global dimension “was driven as much by crooked coordination between powerful actors as it was by unrestrained ‘free market’ capitalism. And when the crisis did hit, once again the state stepped in to shield powerful vested interests from the consequences of their own greed.” Prosecutions in its wake were almost unheard of.

Permanent subsidies and rigged rules

Big corporations expect a government bailout in a crisis, but for many industries public subsidies are a permanent state of affairs. The fossil fuel industry gets a staggering $5.9 trillion of public money worldwide.

In the world of exports, ‘free markets’ don’t really explain the dominance of the companies of the Global North over poorer countries, for all the neoliberal rhetoric about free trade. Attempts by the Global South to use industrialization to escape the cycle of dependency enshrined in their export of raw materials, have repeatedly been thwarted by richer countries, whether by direct political interference – as in the US-sponsored coup in Guatemala in the 1950s – or through Western-imposed trade rules. These prevent governments in poorer countries from protecting their fledgling industries against Western imports, themselves often state-subsidised.

Investor-state dispute settlements (ISDSs) are part of this international architecture, dreamed up  – and arguably rigged – by the West. When after a lengthy legal battle, the Ecuadorian courts ordered Chevron to pay $9.5 billion in compensation for a massive toxic waste spillage in the country’s rainforest, the company closed all its Ecuadorian operations and launched an ISDS claim, which overturned the judgment. To add insult to injury, the Ecuadorian government was then ordered to pay $800 million of the company’s legal costs.

Blakeley concludes: “ISDSs are part of a growing body of international law that, with the active support of powerful states, has helped to routinise corporate crime on a mass scale.” They can be used to get compensation for companies whenever a government passes a law to discourage smoking or protect the environment. Canada, Mexico and Germany have all been forced to abandon or dilute environmental regulations and pay compensation to corporate polluters in recent years.

And this is just one mechanism that allows Western capital to penetrate overseas markets on unequal terms. The state-assisted exploitation of less developed countries can be violent and barbarous. “One of the first things the US government did with occupied Iraq was sell off state assets en masse. In doing so, the planners of the 2003 US invasion sought to share the spoils of the invasion with US businesses and introduce the disciplining hand of American capital into Iraqi society.”

Blakeley is hardly the first economist to highlight capitalism’s monopolistic tendencies. But what’s new here is how today’s giant companies use their privileged position not just to corner the market or raise prices, but to establish for themselves as much sovereignty as possible. This applies not just internally, for example in the case of Amazon’s ruthless approach to suppressing trade union organisation, but also externally, as with corporations involved internationally in human rights abuses.

In this sense, modern corporations constitute a form of private government, hierarchically centralised and controlled, and often unconstrained by the national laws of weak governments – in poorer countries especially, but not exclusively. And in many fields, such companies are empowered to act using force – from private armies to outsourced contracts for immigration detention and removal activities.

Democratic alternatives

Blakeley’s focus on economic democracy as an expression of nascent socialism is a lot shorter. The 1976 Alternative Plan for Lucas Aerospace was a significant milestone, but it may be overstating its importance to say “it provided inspiration for workers all over the world for the next several decades.” In any case, as one reviewer pointed out, “it was swatted aside by management.”

However, the author does produce some interesting examples of human cooperation and democratic planning: the New South Wales Builders Labourers Federation which refused to allow its labour to be used for harmful purposes; the Union of Farm Workers’  occupation of land in Andalusia after the death of the fascist dictator Franco in 1975; the Brazilian Workers Party’s experiment in participatory budgeting pioneered in Porto Alegre in 1989, which spread to over 250 cities in Brazil and another 1,500 around the world; the People’s Plan in the Indian state of Kerala in 1996; the post-2008 Better Reykjavik initiative in which 40,000 people pitched ideas to improve Iceland’s capital in an online consultation; the Preston Council experiment in Community Wealth Building; and quite a few others. While the levels of genuine popular participation in these experiments vary considerably and most proved short-lived, they do demonstrate the potential of this kind of democratic planning.

For Blakeley, the 1970-3 Popular Unity government in Chile showed that “it is possible to begin building democratic institutions at scale.” However, it also underlined that full control of the state apparatus is vital, to prevent not just capital strikes and flight, but also the possibility of a violent military coup of the kind that toppled Allende.

Democratising society through activity in trade unions and community campaigns falls some way short of this critical goal. The author’s section on “Democratise the state” says nothing about dismantling its repressive apparatus.

Vulture Capitalism is certainly worth reading for its well-argued critique of contemporary capitalism and the historical alternatives it explores. However, as with many books in this vein, how we proceed from the current mess to a more enduring socialist alternative is less clear.

Mike Phipps’ book Don’t Stop Thinking About Tomorrow: The Labour Party after Jeremy Corbyn (OR Books, 2022) can be ordered here.