"Beyond the Commodity: Toward a New Understanding of Political Economy"

From American Affairs Journal:

It seems almost certain that in the aftermath of the Covid-19 pandemic, the U.S. economy will be even more dominated by giant firms than it was before. Government rescue efforts have been tilted in favor of the largest firms, and strong relations with suppliers give megacorporations such as Amazon and Walmart a huge advantage over smaller retailers. It seems highly likely that millions of small businesses will not survive the crisis.

This boost to giant firms will inevitably attract the attention of activists and scholars who have been working to revive the anti-monopoly politics that played a central role in the United States from the agrarian populists in the late nineteenth century up until the 1980s.¹ Elizabeth Warren’s unsuccessful presidential campaign in the 2020 cycle gave this movement its greatest visibility to date, but the movement is not confined to the Democratic Party. Josh Hawley, Republican senator from Missouri, is just one of a number of conservatives who have argued that powerful tech companies, such as Facebook, should face antitrust scrutiny.

These efforts to revive Theodore Roosevelt’s iconic trustbusting initiatives in the twenty-first century have met resistance. For advocates of racial justice, gender justice, and a postimperial foreign policy, nostalgia for policies advocated by the first Roosevelt is a hard sell. Even in the second Roosevelt’s New Deal, the advocates of antitrust faced fierce opposition from opponents who saw the efficiencies that came with large size and who insisted that anti-monopolists imagined that all problems could be solved with their one preferred remedy.² Some of these same arguments have resurfaced recently as critics of the anti-monopoly tradition have suggested that antitrust policies are not sufficient to address current problems.³

These criticisms are inherent in any project that seeks to revive a politics that was powerful in an earlier historical moment. Since so much has changed in the interval, the task of revival can appear nostalgic or even reactionary. This is probably why Milton Friedman, one of the most influential neoliberals of the twentieth century, usually avoided labeling himself as such. He preferred to disingenuously market his ideas in the United States as though they were new, original, and represented a commonsense response to the mistakes made by Franklin Roosevelt and his immediate successors.

A more honest way to give new life to ideas that had considerable currency in an earlier period is to put them on a new theoretical foundation that is derived from an analysis of current conditions. With such a new foundation, the risk of sounding antiquarian disappears and the agenda can be broadened far beyond the policy repertoire that was used in that earlier time. It is more than putting old wine in new bottles; it is a question of finding new and better ways of making wine while also modernizing the bottles.

That is the project of this essay. The older anti-monopoly tradition centered on the problem that giant firms undermine the vigorous competition required for markets to work. The problem today is that vigorous competition has been undermined because many of the things we consume differ significantly from the standardized commodities on which economic theory is based. When goods and services are not standardized, when they are available from a small number of outlets, when they are transferred over extended periods of time, and when they are interoperable with other purchases, it becomes costly for purchasers to exit from transactions and power accumulates in the hands of sellers. As a consequence, the discipline of market competition becomes much weaker, and firms are freer to engage in harmful or even predatory behaviors.

The Commodity and Its Discontents
The commodity concept originally emerged from the intersection of two historical trends. The first, dating back to the sixteenth century, was the expansion and systematization of global trade for a number of agricultural products and raw materials, such as cotton, wheat, sugar, coffee, tobacco, wine, iron ore, and precious metals. The second was the process of industrialization from the late eighteenth century onward that mechanized the production of cotton cloth, pottery, shoes, and other goods that had earlier been luxuries because production had depended on skilled artisanal labor. Both types of products could be conceptualized as commodities because they were standardized, provided by multiple producers, usually transferred in a single moment in time, and usable without coordinated purchases. Moreover, during the course of the nineteenth and twentieth centuries, as more and more things could be successfully mass-produced, the understanding of the economy as a system of commodity production was consolidated.

This understanding was the foundation for seeing the market as a largely self-regulating mechanism governed by the price system. When products are standardized and available from multiple producers, they compete almost entirely on the basis of price. When prices for a particular commodity rise, more producers are drawn into the market and some consumers will substitute a different commodity, so the price mechanism is able to bring supply and demand into balance. Moreover, when some producers discover a more efficient production technique, they are able to lower the price, and their competitors are forced to find comparable efficiencies. Hence price competition leads to continuing advances in the efficient use of inputs. The ongoing and rapid balancing of supply and demand and the continuing pressure on all firms to match the efficiency of cutting-edge producers are the central arguments for the superiority of markets over other forms of economic organization.

Yet even in the nineteenth century, the commodity concept provided only a partial and somewhat misleading view of the economy.⁴ For example, the insistence that human labor was just another commodity that was bought and sold on a labor market was resisted by working people and criticized by many analysts as obscuring the coercive power of employers. Moreover, a significant share of the labor supplied to the economy was not even provided through the market; the work of slaves, apprentices, housewives, and other family members working on farms or in businesses was not commodified.

Those who claimed that the economy could be understood as a system of commodity production also made greatly exaggerated claims about the market’s ability to dissolve older social hierarchies. Henry Sumner Maine’s famous formulation that society was evolving “from status to contract” was echoed by many nineteenth- and twentieth-century social theorists who imagined that older distinctions of race, ethnicity, gender, and national origin would soon disappear in the new system of voluntary contracting to buy and sell commodities.⁵ Even Marx and Engels in The Communist Manifesto insisted that in the new bourgeois order, “All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away. . . .”⁶ Such assertions were recycled in the twentieth century in Gary Becker’s argument that firms with a taste for discrimination against women or racial minorities would be effectively punished in the marketplace.⁷

The reality is that the market economy has routinely exploited and intensified many of these old hierarchies. Plantation owners in the Caribbean and the American South used sophisticated management and accounting schemes to organize the labor of their slaves.⁸ Employers routinely used differences in gender, race, ethnicity, and national origin to play groups of workers off against each other. Meatpacking firms in North Carolina replaced undocumented Latino immigrants with workers from Haiti and Honduras who are in the United States with Temporary Protective Status. And while employers and businesses have alternated between pushing women into the housewife role and pulling them into the labor force, gender inequalities persist.

In sum, the view of the economy as a system of commodity production was never completely accurate. It mistook a part of reality for the whole, with the consequence that both the autonomy and the emancipatory potential of markets were greatly exaggerated. And yet, at another level, there was and continues to be some truth to this formulation. Marx highlighted this in his discussion of “the fetishism of commodities.”⁹ He argued that the buying and selling of things in the marketplace, including the labor of human beings, had the consequence that people came to misunderstand actual social relations among people as relations among things. People routinely make the calculation, for example, that it is necessary to work another week to purchase a specific product rather than questioning why the owner of my firm earns many times the wage of an average worker. What we learn from Marx is that it is important to examine the actual social relations that lie behind buying and selling in the marketplace.

Reconsidering the Commodity Frame
If understanding the economy as a system of commodity production was problematic and incomplete in the nineteenth and twentieth centuries, it has become even more distorting in the twenty-first because of changes in what the economy produces and how those things are produced. While we still depend upon the production of some of the same standardized products such as sugar, wheat, copper, and petroleum that were important in earlier eras, their weight in the overall economy has diminished sharply. Many of the things that we now consume do not resemble classical commodities, nor are they produced in the way that classical commodities were made.

To be sure, the declining weight of commodity production in the current economy must be understood as a success story for competitive markets. Things produced with the technologies of mass-production have fallen in price relative to the goods and services that cannot be mass-produced. For example, sophisticated machinery and about a hundred thousand workers made it possible for sock factories in the Chinese city of Zhuji to turn out seventeen billion pairs of socks in 2014.¹⁰ This is equivalent to two and a half pairs for every person on the planet. Moreover, a Chinese employee who is responsible for 170,000 pairs might earn just the Chinese minimum wage.

For consumers, the consequence is that the cost of many of the mass-produced items that one needs to survive—basic foodstuffs such as flour, rice, and meat, as well as clothing, oil, gas, and home appliances—has been steadily falling as a share of total income. Back in the 1960s, expenditures for food represented about a third of a typical family’s budget in the United States, but that has dropped to less than 10 percent even though there has been a big increase in expenditures for food consumed away from the home. It follows logically that the price of those things that do not lend themselves to mass-production, such as many services, housing, specialized goods, infrastructure projects, and research and development, are rising relative to mass-produced items. This contributes to a dramatic shift in consumption patterns away from standardized products.

Above all, most services—including health services, education, other professional services, and financial services—differ from classical commodities in two key respects. First, they are generally not standardized; most service providers promise to tailor the particular service to the specific needs of the individual client. Second, they are rarely transferred at a single moment in time; they tend to be provided in the context of an ongoing relationship, even if it is just a few hours that the anesthesiologists and the surgeon devote to a particular procedure.

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