While it is true that market forces are always shaped by laws and political regulations, anyone who doubts that there is such a thing as class-based economic power needs to think about what has transpired in Ontario this summer over government subsidies to attract automaker investment in electronic vehicle production. I live in “Canada’s Automotive capital,” across the Detroit River from the Motor City. Both Windsor and Detroit have faced decades of factory closings. So when Stellantis (the latest permutation of what used to be Chrysler) announced a partnership with LG, a Korean company, to build a new factory to produce lithium batteries for electric vehicles, it seemed to ensure the long term future of Windsor’s one remaining assembly plant (Canada’s largest factory). Construction began almost as soon as the agreement was announced, but it came to a crashing halt two months ago. The Canadian and Ontario governments had pledged an undisclosed sum to secure the investment, but they had also been negotiating with Volkswagen to build a similar factory in St. Thomas, about 150 kilometers away. Unlike the Windsor deal, the subsidy that Volkswagen would receive came out in the press: 16 billion dollars according to a report from the Parliamentary Budget Officer. No sooner had this deal been announced than work halted on the Windsor plant. Whether Stellantis demanded that an existing deal be re-opened or whether the deal had never been finalized was unclear, but what was clear to the city, the provincial and federal governments, and Unifor, the main auto workers union, was that the biggest industrial investment in Ontario in 30 years was in jeopardy.

Negotiations were re-started and a new deal was reached this week: Stellantis will receive 15 billion dollars in tax concessions. All told, then, two companies will receive 31 billion dollars in subsidies to build two factories that will create 1400 jobs in St. Thomas and 2500 in Windsor.

It is easy to criticize these deals, but they prove that corporations have the power to extract (extort) these concessions from governments. Governments will pay these subsidies regardless of their ideological stripe. The Ontario government is a right-wing conservative party and the federal government a classic example of Liberal centrism, but both scrambled to save the Windsor deal when it became apparent that it was in jeopardy. So important are large-scale manufacturing investments to the appearance that the economy is growing, and so central is the appearance that the economy is growing to the longevity of governments, that it is relatively easy for major corporations to start subsidy bidding wars between cities, regions, and countries. (A complicating factor in the Windsor deal was that the Biden administration passed its own massive subsidy program for green energy and manufacturing as part of its Inflation Reduction Act). In negotiations, one exploits one’s advantage to the fullest. Corporations hold the key to the decision as to where manufacturing plants are sited and they used this power to play countries and regions off against each other until they get the best deal for themselves. Even the most powerful government in the world tailors its policies to attract corporate investment. if governments will not pay, their countries or regions will not get investment.

(Whether these investments really do contribute to overall economic growth is more questionable: The Parliamentary Budget Officer estimates that the total aggregate economic benefit of the St. Thomas plant will amount to a .01 % boost to GDP. Mathematically, the economy is no further ahead than if the government had just kept the money it will pay out in subsidies).

Of course, economies are not mathematical equations but systems of production and distribution upon which workers’ lives depend. Workers live in one place rather than another and must concern themselves with the state of economic forces where they live and not in the abstract realm of aggregates and averages. Voters vote for local MPs and they expect that they will deliver the goods, especially if their local MP is a member of the ruling party. The Volkswagen plant might only generate .01% GDP growth in the country as a whole, but in St. Thomas its effects on the local GDP will many orders of magnitude more than .01. One cannot dismiss from on high the efforts of local governments to attract investment (especially in historically industrial towns like Windsor and St. Thomas) unless one has a ready-made better alternative for workers.

The ability of corporate capital to determine political policy proves that class-based economic power is real. While this ability confirms one core criticism of capitalism (that it subverts democratic power by determining government policy) it also undermines a key plank of capitalist ideology. Capitalism’s main supporters argue that free competition drives innovation and innovation drives economic growth, better standards of living, and technological progress. Visionaries and bold, risk-taking entrepreneurs constantly sail into the unknown, returning with new ideas, new products, new methods of production: all that governments have to do is stay out of the way. Sure, sometimes a homemade sub will implode while it takes adventure seeking billionaires to the bottom of the Atlantic, but cumulatively, over time, the risks return rewards that pay for the occasional failure.

But what risks are Volkswagen and Stellantis assuming here? None: at least in the case of large-scale investments, public money and not entrepreneurial vision drives “innovation.” The ability of corporations to determine public policy by playing jurisdictions off against one another thus proves the reality of class-based economic power at the same time as it undermines the myth of entrepreneurial vision as the driving force of capitalism. The actual marketplace is not a complex order of small competing firms pushing each other to innovate but a network of coercive power controlled by massive corporations able to bend governments across the political spectrum to their will. Syrizia in Greece was effectively destroyed by the power of German banks who threatened to destroy the Greek economy if Syriza heeded the will of the people as expressed in the referendum of July, 2015. In the Windsor case, Stellantis either reneged on an existing agreement or radically changed its demands. Governments scurried back to the table and added untold billions to the subsidy package.

Examples could be multiplied thousands of times, but the point to take away is that capital is not the source of innovation. It is not even the primary source of investment for large scale enterprises: national and regional governments provide the funds (directly and indirectly), engineering and scientific intelligence is the source of the know how involved in the manufacturing, and workers provide the labour power. The corporations risk relatively nothing but extract all the profits. Governments pay the bills because for the majority of working people “the economy” means “jobs” and jobs at large manufacturing plants tend to pay better, provide more stable employment conditions, can be effectively unionized, and provide better benefits. However, if governments provide the capital, engineers and scientists the ideas, and workers the labour power, the corporation is really an unnecessary middle man appropriating the value created by government and workers.

There is no reason other than ideological attachment to a mythical free market and its magic powers of innovation and wealth creation to prevent governments from actively cutting out the corporate middle man and simply investing in industries that will produce life-valuable products and services. Well, a critic will respond, that is all well and good but we know that “state industries” are not efficient and that governments lack the expertise to run complex systems. That might be true, but it is is equally true about private corporations (which often underperform because of managerial incompetence or greed). Corporate boards do not know anything about the physics of lithium batters. They hire scientists and engineers that do. Nationally owned industries do not need to be run by the cabinet of the government of the day. Competent managers can be hired along with the requisite scientific experts. Few people are so dogmatically attached to an idea of capitalism that they will turn down challenging careers just because their employer is publicly rather than privately owned. Plenty of right-wing economists happily toil for publicly funded universities (and some even participate in their faculty unions).

I conclude on this note because even as capitalism lurches from crisis to crisis people will argue that there is no alternative. Here we see a first systematic step towards an alternative right before our eyes: public control of the industries that public investment and collective labour build.