Adam Smith, the father of modern capitalism, famously thought that fair markets required a shared moral framework between buyer and seller. That’s no surprise, considering that his ideas came out of the 18th-century marketplace, in which producers and consumers were likely to be neighbours. Advances in technology, transport and communications have taken us a long way since then, creating complex global supply chains. These have reduced consumer prices but introduced risks of their own, from market-distorting monopoly power to labour exploitation and environmental degradation.
One of the costs of these supply chains — which exist in both physical products and also global capital — has been the rise of powerful corporate middlemen. These include companies like, for example, Cargill, which transports more than 200mn tonnes of food and other cargo a year, and any number of large financial institutions that package complex securities, Big Tech platforms like Amazon, giant retailers like Walmart or even the real estate brokers that intermediate between home buyers and sellers.
These middlemen grease the wheels of capitalism, but also distort it in ways that are undermining our economy and society, argues Columbia University’s Kathryn Judge in her new book Direct: The Rise of the Middleman Economy and the Power of Going to the Source. Middlemen make it possible for us to “buy goods made on the other side of the world, build a diversified investment portfolio, order groceries from the comfort of our couch”, she writes. But this connective power is “undermining accountability” by creating so much separation between buyers and sellers that it’s impossible to tally the real cost of convenience and low prices.