Vulture Capitalism: Corporate Crimes, Backdoor Bailouts, and the Death of Freedom

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Introduction

Probably it is true enough that the great majority are rarely capable of thinking independently, that on most questions they accept views which they find ready-made, and that they will be equally content if born or coaxed into one set of beliefs or another. In any society freedom of thought will probably be of direct significance only for a small minority.

—F. A. Hayek, The Road to Serfdom

A spider conducts operations that resemble those of a weaver, and a bee puts to shame many an architect in the construction of her cells. But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality.

—Karl Marx, Capital, Volume 1

When you wake up in the morning, the first thing you do is probably pick up your phone. That phone is made of rare earth metals, which were likely extracted from a country like the Democratic Republic of the Congo, where rebel groups use the revenues from mining these minerals to purchase weapons.¹

But that fact will be far from your mind as you check social media, eking out a little you time before the day begins. In doing so, you are surrendering information about the most intimate parts of your life to companies like Facebook, which has been accused of promoting far-right extremism, facilitating child sexual exploitation, and interfering with the outcomes of democratic elections, or Twitter, recently purchased by an egomaniacal, union-busting billionaire who fires the platform’s employees when his tweets don’t receive enough likes.²

You roll out of bed and pull on some clothes, manufactured by a multinational corporation that outsources production to Bangladesh. After thousands of their peers were crushed to death when a garment factory collapsed in Dhaka, the workers who made those clothes organized themselves into a union, but they’re still paid poverty wages.³

You see an old piece of clothing on the floor that doesn’t spark joy, so you remind yourself to take it to a charity recycling bin. The item of clothing may then continue its journey to a huge dump in Kenya, where impoverished children pick through the waste to find a few items of resalable quality.⁴

You rush out into the brisk, cold air, which is mercifully slightly warmer than the air in your house. Much as they have utterly failed to deal with the housing crisis that forces you to pay two-thirds of your income in rent, your government has failed to insulate people from rising energy costs too.⁵

You guiltily jump into your car, knowing that your decision to drive yourself to work is part of a problem that’s causing global temperatures to rise at an unprecedented rate. But you might console yourself with the knowledge that your car runs on gasoline, given Volkswagen’s record of lying to the world about the impact of its diesel engines on the environment and your lungs.⁶

By the time the day ends, you’re exhausted—physically and emotionally. You open a food delivery app, and when the delivery driver arrives, you give him a small tip. He’s very grateful for the extra cash, because his motorcycle is on its last legs and he’s being faced with a choice between taking out a high-interest payday loan to fix it or using his bicycle instead, which will mean more work and far fewer deliveries.⁷

As you drift off to sleep, you plug in the cell phone manufactured in a warehouse in China where nets have been installed to catch workers who have tried to throw themselves out the window.⁸

This may or may not be an accurate depiction of your life. Perhaps you’re reading this book in a home that is now entirely your own, having left your days of drudgery and toil behind you. But you may also be dimly aware that your children seem pathologically incapable of saving the amount of money required to purchase their own homes, let alone enough to retire as comfortably as you have. Or perhaps you are one of those lucky people who really, genuinely enjoys their job, loves their coworkers, and believes they’re really contributing something to society. But maybe you also struggle to escape the sense that something isn’t quite right in the world around you, even though you feel entirely unable to do anything about it—other than purchase products marketed to you as green and ethical.

Elements of this story will resonate with everyone because it describes what it is like to interact with the systems that govern our society and over which most of us have little control. The luckiest among us might be able to insulate ourselves from some of them, but no one can entirely extricate themselves from the webs of labor, production, and consumption that underpin modern capitalism. And, as a result, most of us at some point in our lives will feel a little powerless. Many people will spend nearly every waking moment being controlled by these systems. And for some, that feeling of alienation drives them into a deep sense of despair.

Most of us are trying to do what is best most of the time, yet so many of our decisions don’t feel like decisions at all. There is a deep contradiction between the belief that we are free and the reality of living under capitalism—a system of pervasive unfreedom.

This sense of unfreedom is grounded in the deep disparities of power that exist within capitalist societies—many of which are completely invisible. Most people are denied autonomy over their lives, yet we are consistently told that we are free to choose how we live. Life under capitalism means life under a system in which decisions about how we work, how we live, and what we buy have already been made by someone else. Life under capitalism means living in a planned economy, while being told that you are free.

For a long time, planning and capitalism have been thought of as opposites. Either one lives in a free-market capitalist society, in which no single actor controls the production and allocation of resources, or one lives in a centrally planned economy, in which one institution—generally the state—decides everything. Many people reading this book will have grown up during the Cold War, when the miracle of free-market US capitalism was counterposed with the sclerotic and oppressive centralized planning practiced in the USSR. But while these two systems differed in many ways, they had one important thing in common: both contained elements of centralized planning.

The confusion results from the fact that most people think of free markets and capitalism as synonymous. In fact, actually existing capitalist economies are hybrid systems, based on a careful balance between markets and planning. This is not a glitch resulting from the incomplete implementation of capitalism, or its corruption by an evil, all-powerful elite. It is simply the way capitalism works.

While markets may be an inescapable part of any capitalist society, capitalism is not defined by the free market. Capitalism is defined by the class division between owners and workers, between those who own all the stuff needed to produce commodities and those forced to work to produce those commodities.⁹

And the people who own all the stuff are capable, to a greater or lesser extent, of making decisions that have huge implications for everyone else. They are capable of planning.

All capitalist societies contain institutions capable of planning—from large corporations to financial institutions to states. At the global level too, the most powerful states and the institutions they control have some power to plan. This power is never total. Capitalist societies, and the world economy of which they are a part, are immensely complex systems that can never be fully controlled by any one actor or group of actors. But some individuals and institutions are better able to determine who gets what than others. This observation holds even in the most competitive capitalist economies, albeit to a lesser extent.

The question we should ask ourselves, then, is not whether planning is possible in a capitalist economy. Instead, we should ask where planning is taking place, how it is being executed, and whose interests it is serving.

One answer to these questions is to suggest that only states have the power to plan—and they tend to do so in the interests of politicians and bureaucrats rather than in the general interest. While markets may not be perfect, they are rigorous enough over the long run to ensure that no private actor is able to dominate them for too long. The state, on the other hand, with its monopoly over the legitimate use of force, is able to bend other actions to its will. And this power, some have argued, can be very dangerous if left unchecked.

Friedrich A. Hayek, Austrian economist and one of the fathers of what came to be known as neoliberalism, was deeply suspicious of the overt exercise of state power in capitalist societies. Without intervention to curb state power, thinkers like Hayek claimed that socialist policies like health care, public housing, and nationalization would transform even the most liberal economy into a totalitarian nightmare.¹⁰

Hayek’s views were formulated in opposition to those of another economist, one whose work dominated the global economy after the Second World War. John Maynard Keynes’s magnum opus—The General Theory of Employment, Interest and Money—was slightly less snappily named than Hayek’s, but during their lifetimes it was by far the more influential of the two.¹¹

Keynes believed that a level of state planning was necessary in all free-market economies because of the irrationalities that emerged from the normal operation of the market system. For example, when lots of investors felt pessimistic about the future, they would stop investing, and in doing so they would create the very conditions they had most feared. In such a context, the state could step in and act as a backstop to private demand, investing and employing workers where others would not.

After the Second World War, governments from all around the world adopted Keynes’s ideas as a way of taming the irrationalities of the free market—irrationalities that had become obvious in the midst of the Wall Street crash of 1929. Unionists and socialists also eagerly took up his theories, which provided the intellectual foundations for the collective provision of services that would improve the lives of working people everywhere.

As neoliberal economists articulated during the now infamous meetings that took place in the Swiss town of Mont-Pèlerin throughout the mid-twentieth century, their project was to put an end to this wave of Marxian and Keynesian planning sweeping the globe.¹²

Neoliberals like Hayek spent the early postwar years developing a scathing critique of the kind of planning seen around the world in the aftermath of the Second World War. The toxic melding of the power of the state with that of workers, they contended, was compromising human liberty and leading us all—in Hayek’s words—down the road to serfdom.¹³

In a story with which you may already be familiar, the neoliberals won. They supported the election of politicians who crushed the formerly powerful labor movement, privatized public companies, and marketized the welfare state.¹⁴

And they did all this in the name of freedom.

But things didn’t quite turn out the way the neoliberals promised. We live in societies that are just as tightly regulated, surveilled, and controlled as those of several decades ago.¹⁵

Public spending has not fallen, it has simply been redistributed. Rather than spending on welfare and public services, deemed an inefficient use of resources by neoliberals, states now spend billions on supporting big business and the wealthy with subsidies, tax breaks, and bailouts.¹⁶

And sprawling corporations have unprecedented control over many areas of our lives.¹⁷

What happened to Hayek’s dream of freedom?

Hayek was onto something when he posited that societies are far too complex to yield to any centralized authority without unintended consequences. The problem isn’t that this thesis was wrong, it is that he stopped short of taking it to its logical conclusion. If centralized planning tends to lead to tyranny, then why shouldn’t we be just as concerned about corporate planning as we are about state planning? Any institution capable of wielding largely unaccountable power within an allegedly democratic society should, at the very least, be subject to critical analysis.

The question that animates this book might, then, be framed in the following way: What if we were to take Hayek seriously? To do so, we must analyze actually existing capitalism by returning to our original questions: Where is planning taking place? How is it being executed? Whose interests is it serving?

The capitalist state is one source of semiaccountable authority and centralized planning within nominally free-market societies, but it is far from the only one. Corporations, for example, are able to plan investment and employment decisions—decisions that have significant implications not only for the lives of most people but also for the structure of our society.¹⁸

And they are unaccountable to those most affected by their decisions.

Neoliberals might argue that the power of the firm is limited by the operation of the market. A manager can plan, but only within certain parameters set out by the competitive environment. If he messes up, the business will fail. States, on the other hand, are not so constrained by market forces. In fact, states are often in a position to dominate the market in a way that, according to the mainstream economist, most firms are not. State agents are therefore free to make decisions—to develop and implement plans—in a way that corporate managers aren’t.

But this is true only when the market actually functions in the way it is imagined to in economics textbooks. As soon as we leave the world of small businesses competing with one another for market share and enter the reality of capitalism—one in which vast, sprawling enterprises cooperate with one another and with states as much as they compete—we enter a world of pervasive private planning. Large firms are able, to a significant extent, to ignore the pressure exerted by the market and instead act to shape market conditions themselves. As one author puts it, The free market is a smokescreen, behind which lies the brutal, despotic power of corporations.¹⁹

A large employer has the power to set wages and conditions without much reference to the competition. A sufficiently large producer can set the prices it pays to suppliers, and those it charges to consumers, without much pressure from the market. A sufficiently large financial institution has the power to direct investment into certain technologies and therefore to determine which futures are available and which ones are foreclosed. And all these firms can consolidate their power by buying up competitors, erecting barriers to entry, and crushing workers’ attempts to organize, further insulating them from competitive pressure and giving them significant authority both within their domains and over society as a whole.

But isn’t there a fundamental difference between state planning and corporate planning? To return to our original questions, isn’t private planning undertaken in service of different interests than planning undertaken by a central state?

States, you might think, plan only in the interests of unaccountable bureaucrats and greedy politicians. Corporations, meanwhile, plan in the interests of shareholders, and, so the argument goes, what benefits shareholders benefits all of us. The point of a corporation is to maximize its profits—and when corporations maximize profits, they create jobs and products that benefit everyone. States tend to get in the way of corporate planning through taxes, regulation, and other unwarranted interference with the operation of the free market.

The first problem with this argument is that, in the largely unfree markets that exist within all modern capitalist societies, profit maximization does not lead to outcomes that are beneficial to everyone else. Without the competitive pressure to invest or pay decent wages, profits are simply distributed to the wealthy while workers face lower wages and higher prices. A world of pervasive corporate power is one characterized by low investment, low productivity, low wages, and high inequality.²⁰

And even the very limited view of freedom held by the neoliberals is not safeguarded under the capitalist monster they have created. Neoliberalism was supposed to guarantee consumers’ freedom of choice, yet, as one keen observer has pointed out: [i]nstead of having infinite choice, as we thought, we are really presented with a wall of standard-issue cans and pouches that are distinguished only by the words and colours on their labels. The secret ingredient of US capitalism… could have been cooked up in the Soviet Union.

But, perhaps more importantly, the idea that corporate and state planning act in service of fundamentally different interests rests on a clean distinction between political and economic power that cannot be sustained in practice. Corporations are political institutions as much as they are economic ones.²¹

Many corporations prioritize growing their political power—their corporate sovereignty (a concept we’ll come to in chapter 4)—over short-term profitability.²²

Equally, the state is not a neutral entity floating on top of society, existing solely to empower those lucky enough to govern it. Politicians and bureaucrats tend to implement regulation in the interests of those best able to influence them—and powerful corporations and the wealthy individuals that run them are those that spend the most time and effort on this influencing. As anyone with some familiarity with the events leading up to the financial crisis of 2008 could attest, this means that laws are often made in the interests of powerful private actors.²³

State policy is, in other words, shaped by the balance of power within society.

As a result, the interests of politicians and corporate executives are not as different as you might expect. In fact, contrary to perceived wisdom, firms and states are not enemies in the free market game—more often than not they are powerful allies.

But what about democracy? Shouldn’t this provide a check on the unaccountable exercise of private power—both within formal state institutions and outside them?

Capitalist democracies provide the electorate with limited freedom to shape the operation of state power and zero freedom to shape economic institutions. This is no coincidence. Without democracy in the realm of production, large corporations and financial institutions are able to wield unaccountable power of the kind that would be the envy of even the most authoritarian state. This creates a curious kind of unfreedom that pervades even nominally democratic societies. While citizens are assumed to be capable of voting in democratic elections, when they arrive at work they become the subjects of a despotic corporate government²⁴

—and the only alternative to obedience is destitution.

While some may argue that they are constrained by democratic processes, today’s megacorporations are in fact extremely well placed to overcome these pressures and influence state policy in their favor. As Thorstein Veblen observed decades ago, the competitive process naturally creates incentives to try to change the rules to one’s own advantage.²⁵

So, over time, the rules of the market game we’re all supposed to be playing come to favor the interests of the powerful.

The next question on your lips might be So what? Why should anyone care about these abstract arguments about planning and markets, politics and economics? What real-world implications do these debates actually have?

The problem with our inability to understand the ways in which capitalist planning functions is that it closes off potential alternatives to the current system. When politicians mess up, we’re told that the state has grown too big, so we should cut public spending and hand more power to unaccountable corporations. And when corporations abuse their power, we’re told that the solution is to give more power to the politicians who are funded by those corporations. Power remains concentrated at the top of the same institutions, even as politicians lose elections and corporate executives are replaced.

This elite carousel gives many people a deep sense of hopelessness. No matter who you vote for, no matter what products you buy, no matter where you work, it doesn’t seem to make a difference. Yet we’re supposed to live in a free-market democracy. We’re supposed to be free.

Neoliberals like Hayek promised that policies like deregulation and privatization would promote human freedom. The removal of barriers to entrepreneurship and the end to the toxic obsession with equality would allow the most capable human beings to flourish, creating wealth and prosperity for all. But as the quote at the start of this introduction illustrates, Hayek did not believe that the vast majority of people would be capable of making use of this freedom. He believed that the cognitive capacity of the masses was… trivial compared with the intellectual influence of the elites.²⁶

The masses were destined to spend the rest of their lives taking orders from someone else.

Yet the only alternative with which we are presented—Keynes’s regulated market—suffers from some deep flaws too. Keynes’s ambivalence toward the freedom and autonomy of the masses is evident throughout his writing. He believed that the socially necessary role of constraining the market should be played by an enlightened class of politicians and bureaucrats who could rescue people from the consequences of their own actions. In doing so, they would be working to save capitalism from itself—to protect Western civilization and the freedoms that it supposedly guaranteed.²⁷

The battle that has been raging in our politics for so long is between Hayek and Keynes—a battle between a very limited view of freedom as personal sovereignty and a conservative view of freedom as submission to the rule of enlightened bureaucrats. Both men shared a belief that most people could not be trusted to make any real decisions about the nature of society.

In the absence of any serious alternatives to the status quo, many people fall prey to conspiracy theories, which suggest that the entire world economy is being run behind closed doors by a secretive, all-powerful—and often racialized—elite. Such perspectives fail to understand the nature of capitalist planning, which exists on the knife edge between competition and control. Capitalist planning is never total; no one institution can ever become powerful enough to completely dominate its competitors. Whether you’re a president or a CEO, you’re always going to have to deal with competing interests and unanticipated challenges. You can use your power to plan what to do in response, but you can’t control the outcome.

As Hayek observed, economies are complex systems that never completely submit to centralized control.²⁸

Capitalist societies are based on a dialectic—a creative tension—between planning and competition, control and anarchy. This tension is what makes these societies both so adaptable and so unchanging—institutions can be reorganized, elites can be reshuffled, ideologies can shift without fundamentally altering the structure of the society. The centralization of power in our world doesn’t result from the schemes of a few individuals—it results from the class structure of capitalism.

Far before Keynes and Hayek, Karl Marx saw that capitalist societies tended to become more centralized over time. The advantages of scale, combined with the cooperation that takes place between capitalists, financiers, and states, ensure that capitalist industries become more concentrated, and a small number of powerful people are able to decide what we produce and how our societies are governed. Centralization, in other words, goes hand in hand with the development of capitalism.

Some argued that this process would bring about world peace and economic stability, as private corporations and state bureaucracies melded into one super-institution capable of planning on a world scale. But Marx saw from the outset that centralization would instead lead to an increase in the mass of misery, oppression, slavery, degradation, exploitation in a capitalist society, with working people suffering the consequences.²⁹

More planning does not, then, equal less capitalism. The only way to get less capitalism is to constrain the power of capital—the people who own all the stuff. You can’t do this by giving more power to politicians, because unless we have real economic democracy, the wealthy will simply use their influence to buy them off. Nor can we expect giant private corporations to act on behalf of the general interest simply out of their own benevolence. The way out runs through the democratization of our society—redistributing political and economic power, rather than handing it all to a different set of people and expecting them to make good decisions on everyone else’s behalf.

We don’t have to accept a politics that can be reduced to more or less state, in which everything changes so that everything can stay the same. We don’t have to accept the flourishing of extremist fringe groups that prey on those who, often rightly, feel hopeless and powerless. We don’t have to live in a society in which only some people can be free. There is another way.

To Hayek, the worker was a bee: their role was to make the honey, not design the hive. But to Marx, the worker was at heart an architect. They yearned to create new worlds in their heads and bring those worlds into being with their hands. This view of freedom—the socialist view—is one in which each and every one of us has genuine power and autonomy over not only our own lives but over the progression of the societies in which we live. It is a conception of freedom that recognizes our mutual interdependence, while honoring the choices of the individual. It is an idea of freedom that hinges on our capacity to build and maintain democratic structures to govern the world.

In the current system, workers are alienated from their creative power in a society in which imagination is the prerogative of capital. Bosses decide business plans and managers implement them—considering only their personal power and the profits of the corporation. Politicians decide the rules and bureaucrats implement them—considering only their own personal power and that of the state. Workers are left to compete with one another in a game that has been designed to ensure they lose.

Marxist theorist Ellen Meiksins Wood argued that the separation of the economic and the political was one of the defining features of capitalist ideology.³⁰

Democracy is permitted in the political realm (within formal state institutions) while it is strictly limited within the economy (within the corporation and the market). Yet the designation of the corporation as an economic institution disguises the forms of private government that obtain within the firm.³¹

And the understanding of the state as a political institution insulated from the economy obscures how the exercise of state power is shaped by a process of social struggle in which capital dominates.³²

The fusion of political and economic power in capitalist societies means, Meiksins Wood argues, that democracy has become synonymous with socialism.³³

To understand socialism in this way, we must accept that the divide between capitalism and socialism is not defined by technical questions like the operation of the price mechanism, the extent of planning or markets, or even the balance between the public and private sector. These factors are all important in shaping the way socialist and capitalist societies function, but the difference between the two is far simpler. A capitalist society is a class-divided society in which power is monopolized by capitalists and their allies. A socialist society is a classless society in which power is shared and decisions are made collectively. A socialist society is, then, a true democracy.

Most people respond to this idea with a similar attitude: It sounds nice in theory, but how would it work in practice? As I will illustrate, history has provided us with many examples of what happens when working people are able to take control over society’s political and economic institutions. Experiments in democratic planning and worker control show beyond doubt the human capacity for cooperation, collective decision-making, and, above all, imagination. From the Lucas Plan, which saw workers develop proposals to transform a multinational arms manufacturer into a worker-owned social enterprise, to the participatory budgeting movement, in which citizens have taken control of government spending with astonishing results, the evidence is clear: when you give people real power, they use it to build socialism.

Hayek was right to begin his analysis with the question of freedom. The freedom to live as one wants is, after all, a big part of what makes us human. But under capitalism this freedom is, as Hayek acknowledged, available only to a small minority.

Under socialism, the freedom offered to all is the freedom of the architect—the power to create worlds. Naturally, this is not a power that can be exercised by any one individual alone. It is a freedom that lies at the intersection between the individual and the collective—it is, in other words, a social freedom; a freedom that recognizes and upholds human beings’ interdependence, with one another and with nature.

Over the course of this book I will seek to show how capitalist planning works and how we can start to resist it. I’ll discuss what capitalism actually is, how it has changed over time, and why centralized planning is one feature that has remained constant. Then I’ll look at the major institutions capable of planning within capitalist societies—firms, financial institutions, states, and empires. Finally, I’ll outline how we can start to replace the current system of oligarchic capitalist planning with democratic socialist planning.

Most of the ideas I discuss in the book are not new. My argument is constructed based on an analysis of the work of well-known political economists, with which academic readers will already be familiar. Nevertheless, I felt that it was important to draw these ideas together into a compelling and simple argument that will, hopefully, be of interest to most people. Because, while academics have already spent a great deal of time debating these ideas, their debates have not filtered down into mass politics. As a result, most political discourse around the world is still stuck in the sterile Keynesian-Hayekian division that has predominated since the Second World War.

As someone whose job it is to engage in these debates, I find this immensely frustrating. When COVID-19 forced governments everywhere to increase spending in order to protect capital and shore up their legitimacy in the face of mounting deaths, commentators across the political spectrum were quick to describe the resulting avalanche of public cash as socialism. It seemed that anything the capitalist state did could be described as socialist—even if it was dishing out billions to corporations and landlords. In early 2020, I felt like I was spending most of my energy explaining to people what socialism was and what it was not.³⁴

I soon realized that these questions concerning the nature of socialism related to a much deeper misunderstanding of the nature of capitalism. Perhaps because of the legacy of the Cold War, many people believed that centralized planning was the opposite of capitalism. Free markets seemed so anarchic and chaotic that it would be absurd to suggest they are planned by anyone. Politicians plan, corporations respond.

But, as I will show in the following chapters, corporations and financial institutions are capable of planning on their own account. Furthermore, public and private actors often work together to plan state policy. Capitalist planning is alive and well, even after the alleged triumph of the free market.

By the time you finish this book, it is my hope that you will be convinced that markets and states are not separate domains of power; that capitalism is not defined by the presence of free markets, but by the rule of capital; and that socialism is not defined by the dominance of the state over all areas of life, but by true democracy. More than anything, I hope that by the time you finish reading you will be convinced that you have the power to change the way the world works. Because there are a lot of very powerful people out there who want you to believe that you don’t.

PART I

CAPITALISM AND FREEDOM

1

How to Get Away with Murder

On October 29, 2018, Lion Air Flight 610—a Boeing 737 MAX plane—disappeared from the sky. Thirteen minutes after the flight took off from Jakarta International Airport, air traffic control lost communication with the pilot.¹

At 7:30 a.m. authorities revealed that the plane had crashed into the sea a few miles off the Indonesian coastline.²

It took two days to identify the first victim, and the search-and-rescue operation eventually determined that every single one of the 189 people on board, as well as six cabin crew and two pilots, had died in the crash.³

The plane had been intact when it fell out of the sky but was decimated upon impact, with even the strongest parts of the aircraft obliterated by the extraordinary force with which the plane hit the ocean.

Investigators later discovered that the problem lay with the aircraft’s angle-of-attack (AoA) sensor. For some reason, the malfunctioning sensor had caused the plane to nose-dive four times during the previous flight—and several more times during the subsequent flight, ultimately leading to the fatal crash on October 29.⁴

Every time the plane nose-dived the pilot had tried to pull it back up, but the plane’s power overcame his efforts. Boeing tried to blame the crew for failing to understand the systems that would have allowed them to correct the error.⁵

In the meantime, another plane—Ethiopian Airlines Flight 302, also a 737 MAX—had suffered the same fate as Lion Air 610. Flight 302 took off from Addis Ababa Bole International Airport at 8:38 a.m. on March 10, 2019, and within two minutes, the pilot had contacted air traffic control to report a flight error.⁶

The plane’s nose had begun to tilt downward, sending the aircraft plunging out of the sky.⁷

The pilots struggled to control the plane, trying to drag the nose back up manually.⁸

At 8:44 a.m., air traffic control lost contact with the crew.⁹

Ethiopian Airlines Flight 302 had plummeted out of the sky and hit the ground at a speed of 700 miles per hour.¹⁰

Wreckage from the flight was driven thirty feet into the surrounding earth, and the impact crater was 90 feet wide and 120 feet long.¹¹

All 157 people on board the plane died instantly.

A year after the crash, the Ethiopian Civil Aviation Authority released an interim report detailing the results of its investigations. It found that the angle-of-attack sensors on the plane had malfunctioned, delivering different readings for each wing, which had activated a system—the MCAS—that caused the plane’s nose to dive down.¹²

The report confirmed that the crew and pilots had followed all the correct procedures but had been unable to prevent the catastrophe.

The 737 MAX disasters came at a bad time for Boeing, which was literally putting out fires everywhere. The company’s previous plane, the 787 Dreamliner, was not only delivered extremely late and overbudget, it was also beset with technical and design flaws. One such flaw resulted in the plane’s batteries catching on fire, a fault that ultimately forced the entire fleet to be grounded.¹³

The faults with the Dreamliner could be traced back to a culture of cost-cutting and corner-cutting that had set in at Boeing over the previous several decades.¹⁴

Harry Stonecipher, the former CEO of the defunct aviation business McDonnell Douglas (a failed firm that merged with Boeing with the help of the American state, as we’ll see later), became CEO of Boeing in 2003. Stonecipher was the protégé of Jack Welch, former CEO of General Electric, who financialized the firm almost beyond recognition, leading to a culture of corner-cutting that culminated in scandals like GE’s dumping toxic chemicals into the Hudson River.¹⁵

Stonecipher was ultimately forced to leave Boeing—and his wife left him—after it was revealed that he had been having an affair with another Boeing executive.¹⁶

Stonecipher’s strategy for Boeing, developed alongside Welch, was simple. He’d allow problems to build and then exploit the chaos to implement what he referred to as a cultural revolution.¹⁷

He sought to denigrate engineering expertise, up to that point prized by the company, and instead lionize senior management to allow them to implement a radical cost-cutting agenda.¹⁸

Previously, many positions at Boeing had been unionized, but Stonecipher made it his mission to undermine the unions and employ contractors in their place.¹⁹

When developing the 787 Dreamliner, Stonecipher issued an ultimatum: [d]evelop the plane for less than 40 percent of what the 777 had cost to develop 13 years earlier, and build each plane out of the gate for less than 60 percent of the 777’s unit costs in 2003.²⁰

This bid to boost returns was what lay behind the 737 MAX disasters. Without push back from the regulator, the FAA, Boeing’s management prioritized the company’s profitability and stock price over everything else, including passenger safety.²¹

One of the surest ways to cut costs for the operators of a plane, and therefore sell more planes and boost profits, is to reduce seat mile costs—the cost of a flight per passenger per mile.²²

And one of the easiest ways to cut these costs is to make a plane’s engines bigger, allowing the plane to fly longer distances with more passengers.

The only problem with larger engines is that they leave less room between the plane and the ground during takeoff and landing; the engines on the 737 MAX were huge, making this problem critical.²³

As a result, the engines were moved forward, in front of the wing. But this created another problem: when the pilots applied power to the engine, the aircraft would have a significant propensity to ‘pitch up,’ or raise its nose. And when the plane’s nose pitched up in this way, it would frequently stall.²⁴

In essence, Boeing had created a dynamically unstable plane: as soon as the plane’s nose started to tilt up, features of the plane’s design would cause it to tilt up even more.²⁵

As aeronautical expert Gregory Travis explains, the only other dynamically unstable planes are fighter jets, and they are fitted with ejection seats.²⁶

Rather than solving this problem by changing the plane’s design, which would have been expensive, Boeing crafted a software fix. The company was intent on making the 737 MAX appear as similar to the 737 as possible to honor preexisting agreements with the airlines.²⁷

Boeing’s clients wanted to limit modifications to the plane to ensure they didn’t have to retrain their pilots. And Boeing was only too happy to oblige. The company agreed to rebate Southwest $1 million for every plane the company purchased if the airline had to retrain its pilots.²⁸

The hack software engineers designed was the MCAS, or Maneuvering Characteristics Augmentation System. The MCAS interacts with the plane’s angle-of-attack sensors to automatically push the plane’s nose down whenever the sensors detect a stall—this was supposed to solve the problem of dynamic instability caused by the engine placement.²⁹

Contrary to Boeing’s former pilot-first philosophy—another casualty of Stonecipher’s leadership—the system was automatic.³⁰

This meant there was no way for the pilot to correct the error manually—the controls would be pushed downward when the MCAS determined they should be, and the pilot would have had to use an inhuman amount of force to pull