Perspectives
October 15, 2024 | By Richard Moore
Policy Issues
Economy

Trapture! Gary North and the Corporate Capture Trap

In the third and final part of Richard Moore's "MAGA and MAHA" series, Moore shows, definitively, that the idea of corporate capture is flat-out wrong. Capture does exist, but it is Big Brother who does the capturing––not business.

Gary North: "Trapture, Not Capture"

If anybody had told me in 2019 that, in the month before the 2024 presidential election, we would be seeing the likes of Elon Musk, Robert F. Kennedy, Jr., and Tulsi Gabbard all out on the hustings stumping for Donald Trump, I would have immediately assumed they lived in Colorado, for obvious reasons, and left it at that.

But here we are, and, as I have been suggesting over the past several weeks, the unity is being driven by an unprecedented and diverse resistance to the massive merger of state and corporate power in the modern era. As I have also been cautioning, the decisive actor in this anti-democratic axis is not globalist corporate interests who infiltrate, take over, and buy off the agencies that regulate them but the regulatory state itself.

The bureaucrats are the dictators, not the other way around.

Some have occasioned to me that this viewpoint is somewhat of an outlier—OK, almost totally an outlier—and that I should reconsider. I’ll say no thanks, mostly because it’s self evident if you stop to think about it. I stand by the theory so much that I even wish I had come up with it.

But I didn’t. A guy by the name of Gary North did. Well, he was not just some guy. He was a brilliant professor and economist who was president of The Institute for Christian Economics and was long associated with the Mises Institute and the Foundation for Economic Education. He also wrote many books, including the notable “Marx’s Religion of Revolution.”

Way back in 1978, North was among the first, if not the first, to point out that the corporate capture of agencies—Ralph Nader and his ilk pushed the theory in those days—was a fairy tale. A convenient one for big government apologists but a fairy tale nonetheless.

It might look like corporate interests were calling the shots, North wrote, but the bureaucracies occupied the power centers, day by day luring corporate special interests—not to mention public perception—into the maze. He outlined the process by which the agencies subverted corporations in a piece entitled “Walking Into a Trap.”

I’ll go through just how North said the process worked, using some contemporary examples to make the point that, instead of corporate “capture,” what we really have is what I call bureaucratic “trapture.”

It’s an important distinction because viewing it through the other lens makes big government as much a victim as citizens, hostage to greedy robber barons of the twenty-first century. It is not.

    

The Concept Of Trapture

The whole process starts with the profit motive, North observed, meaning business people are in the business of making money, even to the point of welcoming the expansion of govern­ment power if that power will help them score short-term profits and run interference against their competitors in the private market.

“Offer the typical businessman the opportunity to es­cape the constant pressures of mar­ket competition, and few of them are able to withstand the temptation,” North wrote. “In fact, they are rewarded for taking the step of calling in the civil gov­ernment.”

That civil government rewards them with subsidies and tax credits and other favors, which in turn bring rising profits and rising stock prices, North wrote. Unfortunately, it also brings something else:

  

This being the case, those within the government possess an extremely potent device for expanding political power... 

By a comprehensive program of direct political intervention into the market, government officials can steadily reduce the opposition of businessmen to the transformation of the market into a bureaucratic, regulated, and even centrally-directed organization. Bureaucracy replaces entrepreneurship as the principal form of economic planning.

––Gary North

  

That planning rewards individual enterprise, but only for the short term and only for the privileged few, North wrote.

  

Those individual enterprises that are expected to benefit from some new government program have every short-run financial incentive to promote the intervention, while those whose interests are likely to be affected adversely—rival firms, foreign enterprises, and especially consumers—find it expensive to or­ganize their opposition, since the adverse effects are either not recog­nized as stemming from the particu­lar government program, or else the potential opponents are scattered over too wide an area to be organized inexpensively.

––Gary North

  

The result: “The efforts of the po­tential short-run beneficiaries are concentrated and immediately prof­itable; the efforts of the potential losers are dispersed and usually in­effective.”

As it turns out, North wrote, the benefits conferred on special interests turn out to be short-lived, or at least dependent on surrendering total control to the bureaucracy: “Governments have evolved a strat­egy by which whole industries or professions are captured by the bu­reaucratic state.”

According to North, there are four steps to the capture of corporations for state purposes: baiting the trap; setting the trap; springing the trap; and, finally, skinning the victim.

Trapture!

  

Baiting The Trap, 2020s-Style

The most obvious and classic example of bureaucratic trapture these days is Big Government’s triumph over Big Tech. That’s right, Big Government has indeed prevailed over big, bad Tech, and here’s one of the ways—it was a diverse attack—they pulled it off.

First, government placed some tasty bait in the trap. For North, baiting the trap involves awarding the firms or industry some extra market benefits. In other words, as North wrote, “the politicians enter an otherwise competitive market situation with an offer to promote certain indus­trial or professional programs.”

The offers can take any number of forms, North wrote. They may come gift-wrapped as tariff protection. Or, for more professional outfits, the trap of licensing, in which members of the privileged professions restrict entry into their ranks by competitors, by estab­lishing standards through government licensing boards that are conveniently populated by those already in the club. Of course the end result is higher fees and fewer choices—and more bureaucracy.

North rattles off other ways government baits the trap: Direct grants of money, that’s a popular one these days, or through its purchasing power, becoming a preferred and perhaps the largest customer. Let’s not forget about direct subsidies, or those research grants controlled by the likes of Dr. Anthony Fauci in his gain-of-function heyday.

In fact, a quick review shows that, for years, Fauci and the NIH were much more eager to please Peter Daszak and his EcoHealth Alliance—a rebranded radical environmental organization—in Wuhan than they were in pleasing their supposed pharmaceutical masters.

All of those special favors involve incentives for private individuals and firms to conform themselves to the goals set forth by the sponsoring agency, the government, North wrote.

“All of them involve the transfer of wealth from consumers and taxpayers to the beneficiaries,” he wrote. “All of them involve a temporary suspension of market forces and a redirection of those competitive pressures. All of them necessarily involve a reduction of the sovereignty of the recipients, since they become partially dependent on the government for continued benefits. In short, the bait is most tempting.”

In the case of Big Tech, the bait—at least some of it—was Section 230 liability protection, which generally protects platforms from being held liable for third-party content on those platforms. Ostensibly this was enacted in the public interest, to foster a free, open, and innovative internet in which major platforms could serve as forums for free speech without being held liable for the content of their users.

In exchange, Big Tech’s function was to provide passive platforms, not serve as active curators of lawful content, in other words, not to be “publishers.” It was wildly successful—“the law that created the internet,” it was called.

But why did Congress enact Section 230 in the first place? Why did it bait the trap with liability protection?

It happened because a Big Tech firm got sued and then it and others came looking for protection, hat in hand. In 1995, in Stratton Oakmont, Inc. v. Prodigy Services Co, Prodigy, which hosted online bulletin boards, was sued and subsequently held to be a publisher because it had chosen to moderate some—it published editorial guidelines and removed profanity—but not all of its content. By wading into content moderation at all, the court found that it had become an active publisher as opposed to merely providing a passive platform.

Section 230 came to the rescue with liability protection. As North might say, it was the bait in the trap: “In short, the bait is most tempting.”

Ah, but the government did more with the legislation than was needed. Remedying the court decision might have been the bait, but then Congress went an extra mile to “set the trap.”

For North, setting the trap involves granting a particular group special favors—sometimes favors the industry hasn’t even asked for—for the express purpose of expanding its “polit­ical power at the expense of private associations.” In this case, the government didn’t just fix the Stratton Oakmont ruling, it went beyond it, a fact acknowledged at the time by the legislation’s authors.

Indeed, instead of setting rules for when content moderation might become publishing, it decreed that providers of “interactive computer services” may not “be treated as the publisher or speaker of any information provided by another information content provider.”

In other words, instead of making “publisher” status dependent on specific content moderation rules, which would have fixed the ruling, Congress chose to offer the industry blanket protection, prohibiting platforms engaged in “interactive computer services” from being treated as publishers of third-party content under any circumstances.

It was a gigantic gift to the industry, and the impact was immediate. To be clear, the statute itself did not discriminate by firm or confer special privileges on preferred companies within the tech industry, as some have pointed out. But Section 230 did unleash emerging social media platforms such as Facebook, Twitter, Reddit and others to immediately become interactive information hubs in ways traditional publishers such as newspapers legally could not.

It effectively picked Big Tech as a winner and traditional publishers, notably newspapers, as losers, and in a big way. A 2017 study by NERA Economic Consulting estimated that eliminating liability protections would cost the U.S. $44 billion in GDP and more than 425,000 jobs each year.

The impact wasn’t just economic but cultural. The left-leaning Wikipedia has acknowledged that its existence would not be possible without Section 230, while, as of 2019, Facebook’s billions of users posted an average of 510,000 comments every minute. Without a total liability shield that wouldn’t be possible, and neither would user-driven product and business reviews.

And while Section 230 did not cause the monopolization of Big Tech, it certainly helped to drive it by creating artificial and destructive economies of scale within the industry. Smaller platforms and ecosystems depend upon distinct communities and distinct community standards to survive, and, at least in an era of traditional content moderation, those standards—and the accountability that potential liability ensured—kept larger predators away, or at least honest.

Sweeping away standards was akin to opening the borders of the internet nation, letting in an invading army of corporate predators. Communities and smaller firms were literally overrun, as they usually are when moral standards are abandoned.

Thanks to the government, these larger predators were, in North’s words, “milking the system.”

The trap was being set.

And Big Tech went merrily on its way, allowing pretty much anything and everything. Here’s how North described the process of setting the trap: “Managers expect it [the favors] to con­tinue. After all, they are all agreed that such subsidies are in the na­tional interest. Would the nation (the politicians) revoke their trust? Never! The organization is hooked. It has become dependent on the con­tinued favors, meaning the con­tinued favor, of the state.”

Of course, as North pointed out, this is exactly what the government wants: “The government establishes the system in order that some beneficiary will milk it.”

When they do, the trap is set. The government is ready at the gates of domination (or of hell, depending upon your point of view). Things perk along happily for a long time, but then, suddenly, the government becomes angry. It demands that the industry police itself because the market as a policeman has been compromised by the original grant of power. They begin to spring the trap.

This is exactly what happened with Big Tech. There inevitably would come a time when those milking the original grant of power—unlimited liability immunity—would run afoul of the government, and that time came during Covid.

Now there has been extensive reporting on the Censorship Industrial Complex and its quieting of Covid skeptics and various opponents of the government’s narrative, so only an example or two will suffice here, but the examples demonstrate how the government springs the trap.

For starters, never mind the public pronouncements—President Joe Biden literally accused tech platforms of killing people—the private pressure was immense. For example, according to court documents in multiple censorship cases filed against the government, Clarke Humphrey, digital director for the Covid-19 Response Team, demanded that Twitter remove a Robert F. Kennedy, Jr., post “ASAP” while deputy assistant to the President Rob Flaherty, demanded that Twitter delete a parody account “immediately.”

White House advisor Andy Slavitt wanted Alex Berenson’s tweets removed: “The White House wants FB [Facebook] to come clean with how many people see these posts and what it’s doing about them,” he wrote in an email to Facebook executives. “They believe they asked and asked.”

Most damning of all was the letter sent this past August 26 by Facebook founder and CEO Mark Zuckerberg affirming that Biden administration senior officials repeatedly pressured his teams— for months—to “censor certain Covid-19 content, including humor and satire.”

And, Zuckerberg declared, Facebook did just what the government wanted. They did so on other occasions as well, as discovery documents show. On the day Biden accused Big Tech of killing people because of lack of content moderation, a Meta senior executive sent an email to surgeon general Vivek Murthy, writing, “I know our teams met today to better understand the scope of what the White House expects from us on misinformation going forward.”

Just about a week later, the government got its way.

“I wanted to make sure you saw the steps we took just this past week to adjust policies on what we are removing with respect to misinformation,” the executive wrote in a follow up email. “We hear your call for us to do more and, as I said on the call, we’re committed to working toward our shared goal of helping America get on top of this pandemic . . . .”

Then, too, in an email exchange in March of 2021 with a Facebook executive, Flaherty wrote:

  

We are gravely concerned that your service is one of the top drivers of vaccine hesitancy—period. ... But we want to know that you’re trying, we want to know how we can help, and we want to know that you’re not playing a shell game with us when we ask you what is going on. This would all be a lot easier if you would just be straight with us.

––Rob Flaherty, White House Digital Director

  

Soon afterwards, Facebook informed Flaherty that it had made a number of policy changes, including the removal of ‘Groups, Pages and Accounts’ containing, in the executive’s words, “often-true content” that “can be framed as sensation, alarmist, or shocking.”

Over and over again, the emails and posts show that Big Tech did not always agree that posts and users should be censored but ended up caving under government pressure. This does not sound like Big Tech was in control of a captured government.

It sounds like the government was in control of a traptured industry.

  

Springing The Trap

Over in Congress Democratic lawmakers were publicly springing the trap, calling for new laws because, as Sen. Sheldon Whitehouse (D-R.I.), said at one hearing: 

“Collectively, your platforms really suck at policing themselves.”

And here’s how Massachusetts Democratic Sen. Ed Markey put it

“The issue is not that the companies before us today are taking too many posts down. The issue is they’re leaving too many dangerous posts up.”

In another exchange, this one with Elon Musk, Markey declared flatly: 

Clean up your companies. Or Congress will.”

That’s just the tip of the iceberg when it comes to government pressure. There was a perceived crisis—too much information, or “disinformation,” was getting to the public, the tech companies had failed to self-police, and now the government, which created the crisis in the first place, is needed to deal with that crisis.

The trap is sprung by threatening, both implicitly and explicitly, to take away all special favors if the government is not obeyed. Not only that, but now that the industry can’t be “trusted” to self-police, the perceived industry crimes will continue to escalate, at least in the government’s framing.

“But now it will be a government problem, to be met by even more intervention,” North wrote. “More laws can be passed, more penalties handed out, more regulations en­forced: the government expands its control relentlessly. The trap has been sprung.”

All that’s left is to “skin the victims,” which North defines as the government turning what were favors for special interest into strait jackets for its victims. In the end, North writes, the gov­ernment directs the operation of the association through its captive agents, the profession’s representa­tives. Members of the profession are told what they will be paid, the kind of service to be offered, and the quantity of service to be dispensed.

We are not quite there yet with Big Tech, though with Big Tech we have progressed from baiting the trap, to setting the trap, to springing the trap.

Still, those companies—not to mention we citizens—have yet to be fully skinned. The censorship pressures continue inside the administration, as new court filings just this past month allege, and in Congress the grumbles about content moderation continue as election day nears.

We are fortunate to have resisters—a strong conservative movement and an assortment of civil liberties allies, among them X CEO Elon Musk.

So the battle is not lost but we are perilously close to being skinned. Our most immediate hope now is that voters turn the tide and a new Trump administration sets about dismantling traptured power.

But to turn the tide means recognizing who has captured whom. As North wrote:

The answer, philosophically, is to avoid sniffing at the bait. This must be done on principle. It would help if businessmen understood the chain of events which follows from the acceptance of a government subsidy. Yet even if this chain of events is not understood, men should still be able to recognize a violation of basic moral principle when they see it. They should understand that the coercive power of the state should not be used to benefit one group at the expense of another. Such power is inevitably misused, if not im­mediately, then ten years or fifty years down the road. The precedent is evil; the results following it will also be evil.

––Gary North

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