Cottage cheese and the ethics of balancing power

Consumer protests demonstrate the persistent power of solidarity. In the wake of egregious price increases in the last few years, Israeli consumers took to the streets in protest over the summer.

But the protests were not merely a cri-de-coeur, an outpouring of frustration; fairly rapidly, the protesters came to consider certain individuals the protest leaders and. in an informal way, to deputize them to represent their interests.

This week, the papers reported that protesters began negotiations with one of the leading Israeli producers.

Negotiations presuppose defined sides with defined interests.

We can gain some insight into this phenomenon from the ideas of economist John Kenneth Galbraith. In his 1952 book American Capitalism: The Concept of Countervailing Power, Galbraith postulated that markets work in a sense both worse and better than the textbooks present them.

Markets work worse than the textbooks say, because the economics textbooks tend to focus on an imaginary world of perfect competition where there are many independent sellers all competing to provide the consumer with the best price and quality, and many independent employers competing to provide workers with the best salary. In fact, Galbraith claimed, industry is dominated by a few large firms who have market power and exploit it to raise prices and lower wages.

But the markets also work better than the textbooks say, because the textbooks state that when firms do work together, they have virtually unlimited power to exploit the consumer and the worker. Galbraith pointed out that such exploitation inevitably induces the other side of the market to effect its own concentration of power so as to effectively counter the power of firms.

His most famous example is labor unions, which are found almost exclusively in industries dominated by a few firms, but Galbraith discusses consumer power as well. One example he brings is the consumer cooperatives that were then widespread in parts of Europe. Another is joint political action to bring about trust-busting legislation.

Galbraith acknowledged that it is not easy for the many to organize effectively against the few.

“It must not be assumed that it is easy for great numbers of individuals to coalesce and organize countervailing power,” he writes.

And yet they do, sometimes at great individual sacrifice. Each individual protester standing on the sidewalk next to the house of the CEO of a major food company cannot expect to ever recoup individual benefit commensurate to his or her efforts in the form of lower food prices in the future. The contribution of each individual is so small, and the effort far from negligible.

The continuing fact of the exercise of countervailing power shows that the true “economic man” is by no means the lone individual trying to improve only his own situation.

Self-interest is certainly a ubiquitous feature of human nature, but solidarity, collective identification and collective action are equally ubiquitous in society and even in market capitalism. Workers feel solidarity with other workers and are willing to sacrifice on behalf of the collective; consumers feel solidarity with other consumers and are willing to show up to protests and to acknowledge representatives.

The concept of countervailing power, so powerfully exemplified by the summer protests simmering well into the fall, are not just a “tweak” of the classic economic model. It is a fundamentally different way of looking at the economy and its institutions.

Free and competitive markets are an essential aspect of the modern economy, but they are not the whole story. Collective sentiment and action – exercised through voting, protests and organizations – are equally an essential aspect of an actual “economic man” and of the actual economy we live in.

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Asher Meir is the research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).