Neoliberalism and the Corporation: Mutually Contradictory and Corrupting

35 Pages Posted: 23 Aug 2018 Last revised: 3 Sep 2018

Date Written: August 28, 2018

Abstract

Neoliberalism and the corporate economy stand in fundamental contradiction. First, corporations are created and sustained through government intervention in the economy, contradicting neoliberal strictures. Second, the neoliberal attempt, in the face of this contradiction, to better square the corporation with free market principles, by treating it as a private partnership of stockholders as opposed to a state franchise, renders the corporation dysfunctional. Particularly damaging has been the application of a distorted version of agency theory that, as I show, is indebted to game theory, in which stockholders are modeled as the “principal” and management (and workers) as their opportunistic agent. This exaggerated “agency problem” has been addressed through a massive reallocation of firm revenues, from reinvestment and workers, to executives and stockholders. Far from supercharging capital accumulation, as widely assumed, neoliberalism has the opposite effect, decapitalizing the corporation, the state, and the worker in order to enrich the stockholder and stock-compensated executive. In contradiction to its ideals, neoliberalism applied to a corporate economy lowers investment, slows growth, heightens irresponsibility, intensifies worker coercion, and sharply raises economic inequality. And for all this, it fails to reduce the corporation’s dependence on government intervention.

Keywords: Neoliberalism, Corporation, Inequality, Investment, Friedman, Jensen

JEL Classification: L20

Suggested Citation

Ciepley, David A, Neoliberalism and the Corporation: Mutually Contradictory and Corrupting (August 28, 2018). Available at SSRN: https://ssrn.com/abstract=3230520 or http://dx.doi.org/10.2139/ssrn.3230520

David A Ciepley (Contact Author)

University of Denver ( email )

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