Response to Richard Brinkman
Korten, David C., Journal of Economic Issues
A couple of years ago Richard Brinkman told me he was writing a paper intended to call my work to the attention of institutional and evolutionary economists and demonstrate its relevance to their disciplines. I was impressed by the overall knowledge and grasp of my work reflected in his early drafts. It seemed quite an honor.
With this background I was both surprised and dismayed when I found new material in the final draft attributing positions to me sharply at odds with my actual views. Let me address here three of the article's most egregious misrepresentations.
The Nature and Origin of Capitalism
Brinkman asserts that I believe capitalism came into being only in the late nineteenth century because I have noted that the term capitalism did not come into use until the mid 1800s. Brinkman's assertion is based on the following paragraph from The Post-Corporate World:
Historians have traced the first use of the term capitalism to the mid-1800s, long after Adam Smith's death, when it was used to refer to an economic and social regime in which the ownership and benefits of capital are appropriated by the few to the exclusion of the many who through their labor make capital productive. (Braudel, 1979, Vol. 2, 232-9) This, of course, describes with considerable precision the characteristics of the current global capitalist regime, which bears no discernible resemblance to the concept of a market economy as envisioned by Smith and those who followed in his tradition. Those who rejoice at the triumph of capitalism are rejoicing at the triumph of the few over the many. (Korten 1999, 39)
It should be clear even to the casual reader that I am referring here only to the origin of the term capitalism, not the origin of the reality of capitalism. I do not recall that I've commented in any of my currently published work on when the reality of capitalism first appeared. I was well aware when I wrote the above words, however, that the unequal control of productive capital that eventually came to be known as capitalism entered into the human experience long before the 1800s. Indeed, the research I'm now doing for my forthcoming book on Beyond Empire suggests that it traces back at least 5,000 years to the Mesopotamian civilization, in which control and administration of land and commerce around each of several cities was centralized in the temple and the person of its head priest and later in the person of a king--different institutional forms, but the basic pattern fits the definition remarkably well and the consequences of concentration and exclusion are much the same.
Adam Smith and Mindful Markets
Brinkman also asserts that I am an advocate of unregulated markets because I find merit in Adam Smith's concept of a market economy. Those familiar with my work know me as a leading advocate of the idea that markets must be regulated to maintain the conditions essential to socially efficient market allocation. Indeed, the presence or absence of regulation is basic to the distinction I draw between a capitalist economy and a market economy.
The capitalist economy is dominated by global publicly traded corporations that command more economic resources than most nations and by legal mandate are engaged in the sole and exclusive business of making money for their shareholders. Indeed, my institutional analysis of the publicly traded, limited liability corporation spells out why it is difficult, if not impossible, for this particular institutional business form to function in a fully responsible and accountable relationship to its workers, customers, the environment, and the communities in which it operates. The largest and most powerful of these corporations are engaged in a constant contest to increase their monopoly power over finance, markets, natural resources, and the political process. Institutionally and culturally the capitalist economy is about money and power, and much of its reality centers on financial speculation unrelated to productive activity. …