Digressions & Diatribes

by Kort E Patterson, Editor

Response to Philip Stahl's response to Jeff Fisher's article on Coporations

The article I intended to contribute to this issue got bumped due to the amount of space occupied by a couple of large member submissions. While attracting enough submissions to fill the issue is the "holy grail" of newsletter editors, this unusual level of success did create an unexpected complication. Bumping my article left this space to fill without anything on hand that would fit. So I'm going to fill it writing about one of the member submissions that bumped my article.

Philip Stahl starts out saying that he is responding to Jeff Fisher's pro-corporation piece in the Feb/March Port of Call. He then describes a variety of abuses in making the case that corporations are evil. He specifically excludes the vast majority of corporations from his analysis to focus exclusively on the sector popularly referred to as "big business". Jeff's piece focused specifically on the vast majority of corporations that make up the sectors popularly referred to as small and medium businesses.

While I may question some of Philip's details, I'm more than willing to stipulate that big business has engaged in various abuses of the market, labor, the environment, and society in general. The question is whether those abuses were the result of the nature of corporations, or other dynamics that have little to do with the corporate structure of the perpetrators.

A key factor in all of the abuses Philip cites is the involvement of government. None of the abuses Philip attributes to corporations would have been possible without the connivance if not active complicity of corrupt government. On the other hand, government corruption and abuses of power don't require the involvement of a corporation. A fair case can be made that the bulk of government corruption and abuse involves unincorporated participants.

Philip attempts to frame the issue as a function of class struggle, implying that stock ownership is concentrated in the hands of the rich. Unfortunately, the largest stock holdings today aren't even in the hands of the rich. They are in the hands of artificial investment collectives like union pension funds, insurance companies, mutual funds, etc., that fail to fulfill the critical role of active long term stockholders in the direction and control of large corporations. The lack of effective owner control allows those drawn to the artificial power concentrations created by large corporations, to misuse those powers for their own benefit.

The corruption of the internal controls of large corporations is largely a function of the government sanctioned conversion of stocks from long term investments into a form of short term gambling on momentary fluctuations in the largely hysteria driven stock market.

The result is large companies controlled by executives who are able to operate outside of the oversight and control of long term stockholders, and whose only mandate is to drive the company's stock price higher any way they can in order to pay off the short term traders that are only temporarily holding the bulk of the company's stock. Small wonder that they tend to find ways to use the financial resources of big business to bribe corrupt government to cooperate in abuses of the citizens, market distortions, and outright criminality.

The common thread in all of these abuses is the involvement of government with sufficient power to be susceptible to corruption. It is big government that protects big business from the discipline of the free market, and makes it possible for big business to survive let alone commit all the abuses attributed to it. Eliminate the involvement of big government, and big business will quickly succumb to its inherent inefficiencies and inability to respond to changes in the free marketplace.

However, Philip attributes the root cause to the structure of corporations, and advocates increased government power to manipulate the market and intrude in the inner workings of businesses as a solution. He even advocates the nationalization of some big businesses. His solution of choice is more of the same failed expansions of authoritarian government that have consistently expanded the ability of big business to commit the kinds of abuses that are then used to justify even more expansions of government.

I think it was Albert Einstein who said something along the lines of the definition of insanity being repeating the same mistake and expecting a different outcome. Seems to me advocating the expansion of the power of authoritarian government in the false hope that a bigger more intrusive government will solve the problems government itself has created, comes pretty close to insanity.

Unfortunately, this strain of mental illness seems to be more the norm than the exception in the theater of the absurd that passes for economic policy these days.

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