To the average person living in a democracy, capitalism, and the social changes it forges, rarely is given much thought. And yet our very lives, not to mention our livelihoods, are so wholly connected to our capitalistic economy, that the line between people and business has become blurred, and the properties of one has been usurped by the other. Private enterprise is the engine of our economy, but it also the string that ties us all together. Everything we buy is supplied by a business. Every paycheck we earn is supplied by a business. Every facet of our culture is connected to another by a business of some kind or another. It is this omnipresent aspect of business that makes it so powerful and yet so invisible at the same time. We would like to believe that businesses exist to offer a quality and fairly priced service or a product while making a modest profit for the owners and employees. We would like to believe that companies have the best interest at heart when it comes to their customers and their employees. We would like to think of business as an extension of the human traits we most admire, but the reality is that business in today’s world is hardly the altruistic picture we paint for ourselves. The success of capitalism in the West, and especially in this country, has instead made its higher echelons drunk with wealth and power, and unfortunately, capitalism doesn’t make a very fun drunk. Business, rather than compliment society, now tries to rule it with an iron glove.
The problem isn’t really with all business, per se, but rather with the evolution that has transformed business from the small or medium sized company into the multi-national behemoth that dominates the business landscape today. The legal rules that separated business endeavors from their founders and created the corporation as a separate legal entity, akin to an individual person, have bestowed upon these large companies many of the rights that are constitutionally guaranteed to us as individuals, even though the businesses are not human beings in any way. But because corporate capitalism uses its own considerable wealth to advance legislation, often times these businesses are not held accountable as an individual would be. They are receiving all of the benefits without bearing any of the responsibility. Furthermore, through their legislative access (allowed them by means of political contributions by a variety of means, both legal and extra-legal) they enjoy access to policymakers and exert influence on policy and laws without having any accountability to the general public, a practice that not-so-subtly bypasses the representative system guaranteed by our Constitution. This is wrong, and to stop this corporate subversion, we need to change our political finance laws as well as our interpretation of the rights of businesses. To what extent should a corporation’s activities be separated from those who actively manage it?
Does a business exist merely to produce profit or is it more of a cooperative effort between the business leaders and the employees to ensure mutual success? The answer should be, “Yes.” Obviously, in order for a business to be successful, it has to be prosperous at some level. It must earn enough money to pay for all of its materials and employees and utilities. And if the goal of free enterprise is to provide a materially wealthier lifestyle for the entrepreneur, a business must also generate an adequate profit for the owner. But since the success of a business is directly related to the effectiveness and expertise of its employees, business leaders need to find a balance between acceptable profit and outright greed. Most employees enjoy working for a successful corporation if they see the company returning some of its profit to the workers through benefits or raises or other perks. Yet increasingly, large businesses are decreasing their investment in their workers through reduced pension plans or decreasing health insurance coverage, or worse, through down-sizing and relocation. It’s hard to blame them with costs for these programs skyrocketing in recent years, but in many cases, corporate profits are increasing at just as rapid rates, yet the employee cuts continue unabated as the shareholders profits rise. Reducing the costs of doing business should be a top priority in the area of economic reform, and I’ve already discussed ways to significantly decrease or eliminate the costs associated with retirement and health benefits. (See The National Whole Life Pension Plan and Affordable Health Care Does Not Mean Free Health Care) But any reductions in the cost of doing business should be translated into lower costs, better products, higher wages or any combination of the three. If society and politics work to reduce the costs to business, we should expect business to reduce their desire for enormous profit margins and settle for merely large or even modest profit margins.
We also need to take a look at certain areas of business that generate large profit margins simply because the products or services rendered are necessities for living in this modern world or are mandated by law or nature. A prime candidate for scrutiny would be businesses in the energy industry. Modern society requires a fair amount of energy, either as electricity or as gasoline. And although we derive our electricity from a variety of public sources (hydroelectric plants using public river ways for energy, wind farms using public air, or nuclear generators using public minerals and dollars), the costs to the public are anything but consistent. In a capitalist system, these fluctuations are attributed to supply and demand, but recent shenanigans in this sector of business have shown us that this isn’t necessarily the case. Manipulation and false scarcity have been used to increase the costs to the consumer for no reason other than greed, and the energy sector isn’t alone in this. (For ideas on energy reform, read The Future of Energy) Insurance companies, whose products are often mandated by law, and medical companies, whose products are mandated by nature, also engage in these kinds of manipulations. Perhaps returning some of these businesses to public control, or at least more stringent public regulation is finally in order. After all, there are plenty of other ways for people to make their fortune without having to gouge consumers for the very necessities of modern life.
Corporations, because they are also the main source of employment for many, also enjoy certain legal protections not afforded to individuals. This is done under the assumption that a large business is too valuable, in terms of tax revenue and as an employer of the people, to hold accountable for many of its mistakes. We see the error of this thinking all around us, but usually only learn of it once the real damage has been done. Think in terms of environmental pollution or sealed out of court settlements. Think in terms of hushed up research documents in the rush to market the newest medicine. Think in terms of massive product recalls due to cheap or defective parts. All of these issues tend to diminish the image of business in the eyes of the public. Yet our politicians support these loopholes as if they were part and parcel to the way the world works. As individuals, we expect accountability from each other. We expect honesty and integrity. Why don’t we demand the same of corporations? Why don’t our politicians? The truth is that the corporations don’t care what we think, because they’ve paid for the politicians to keep things as they are and our apathy at the voting booth affirms their assumption that we don’t care or can’t see what is happening. Corporations need to be held accountable for the products they sell. They need to b
e held accountable for the messes they make. They need to be open and forthright when they discover a faulty product. And they need to put safety and integrity at the same level of concern as they put profit.
Finally, businesses, both large and small need to have greater accountability to the public (if they are a publicly held corporation) or to their employees and customers (if they are a small or medium business) in both their financial dealings and their human efforts. Employees should be paid a living wage, (which becomes more possible with pension and health care reforms) be offered a fair amount of leave for illnesses and vacations, and be given the opportunity to grow with the company to their ability and aspirations. It is the best interest of any business to have happy, productive employees, and this can be achieved without seriously harming profit. Simply offering more flexibility in scheduling and more reasonable expectations from overworked staffers would be a start. After all, there is only so much money a person can enjoy, and no one wants to be worked into insanity. The benefits derived from making other people’s lives happier can outshine the brightest diamond, and they provide more goodwill towards a company in the long run.
I don’t think of business as evil, or capitalism as the enemy, and I don’t think money will automatically turn you bad. But it is plain to all who care to look with an open eye that the modern constructs of business in society are leading us back to a place we’d sooner keep in the past. Unless we make an effort to drive the influence of corporate money from our politics, unless we begin to demand honesty and integrity from our business leaders, and unless we teach the future leaders of business that people matter more than profit, we will see a return to the days of indentured servitude as the costs of living continue to outpace wages because our poor, rich corporations aren’t clearing enough profit.
This entry was posted on Wednesday, September 14th, 2005 at 6:45 am and is filed under Common Sense, Democracy, Government, Politics, Reform, society.
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September 14th, 2005 at 8:29 pm
Don’t ever stop fighting the good fight! Thank you.
September 14th, 2005 at 10:45 pm
Ken,
Another fine post – the simple goal of capitalist and capitalism is to get your money into their pockets. It’s fairly straightforward. They win, you loose, and perhaps get some nice cheep products in the process, sure. But in the end, the big industrialists are not about being good community members, more so, they aim to be good capitalists. More bux for them, less for us. Them winners. Us loosers.
What we really need is a change in economic focus from capitalism that is set on an unlevel playing field to one that has moral and ethical reasoning attached to it. I call this Capitalism with a Conscience. When big business gets to open large corporate campauses in fancy new buildings four blocks from a middle school that the doors are falling off the hinges in the lavatories, one wonders what happend to Corporate Resonsiblity. Capitalism in it’s purest sense – and certainly not common – is not about helping others, but helping themselves.
I posted about these ideas long ago, in a response to another of your posts if you care to do a refresh on that, i have it here: http://educationalwhisper.blogspot.com/2005/04/common-sense-on-public-education.html
Blog on Brother Blog on.
September 15th, 2005 at 4:58 am
Great post. I just happened to be using BlogClicker and found your blog. Most of the time, when the counter runs I out I find myself quickly moving on to the next blog, but your blog caught my eye. I think this Hurricane Katrina situation is a great opportunity for businesses. The insurance companies need to cover the damages caused by this terrible storm. They can then go to the government and settle any financial issues. So many of these people affected by this storm were not able to afford flood insurance, and many insurance companies have started to say “we’re not paying” in response to their pleas. They lost everything; I think these corporations should show some compassion and think about the “bottom line” later.
-Chris
September 15th, 2005 at 11:34 pm
Just wanna say you’ve got a great blog from http://www.internethumorsucks.com webmaster 😉
This post was right on point
September 16th, 2005 at 9:47 am
God, I would love to find a liberal who actually understands basic economics…
This is nonsense:
In a capitalist system, these fluctuations are attributed to supply and demand, but recent shenanigans in this sector (energy) of business have shown us that this isn’t necessarily the case. Manipulation and false scarcity have been used to increase the costs to the consumer for no reason other than greed, and the energy sector isn’t alone in this.
We’ll just forget the fact that a third of the nation’s refining capacity was taken offline by Katrina (there is nothing false about that scarcity, though).
Presumably, you are one of those people who believes that because gas had already been refined at the time of Katrina, it should have been sold at the pre-Katrina rates.
If you do, you are a fool. I’d love to do business with you.
If you buy a stock for $10, and three days later it is selling for $100, I assume you would still sell it to me for $10.
After all, you bought it before the price went up! (of course, I would just turn around and sell for $100 and pocket your profit for you, free of charge).
That is your logic in a nutshell.
The high price of current gasoline:
1. Will encourage people to conserve fuel
2. Will make alternative technologies more attractive
3. Will encourage companies to get their refineries back online and to find domestic sources of oil
These are good things.
Prices are the way that suppliers tell consumers “hey, this stuff is scarce; don’t waste it.”
What is wrong with that?
“Common Sense?” Really?
September 16th, 2005 at 1:17 pm
I see that John is one of the new breed of “capitalist” that believes that corps ought to be able to shut down the economy if they choose to do so.
I’ll also bet my last dollar that John wouldn’t like it much if Government had imposed levies on energy to create the precise climate he’s advocating, even though we might have even been able to pay for El Shrubbo’s Great Patriotic War this way AND encouraged conservation.
Between the tax reductions for big oil and the massive profits big oil has raked in, it looks like a pretty good business to be in these days. And I am glad to see that John wants them to have all that money, as well as the money they’ll soon collect from insurance for damages to their facilities. In the meantime, of course, we couldn’t even afford to shore up a frigging levee that happens to straddle one of our major export ports.
September 16th, 2005 at 1:23 pm
Hi Ken,
Your reference…
“But because corporate capitalism uses its own considerable wealth to advance legislation, often times these businesses are not held accountable as an individual would be. They are receiving all of the benefits without bearing any of the responsibility. Furthermore, through their legislative access (allowed them by means of political contributions by a variety of means, both legal and extra-legal) they enjoy access to policymakers and exert influence on policy and laws without having any accountability to the general public, a practice that not-so-subtly bypasses the representative system guaranteed by our Constitution. This is wrong, and to stop this corporate subversion, we need to change our political finance laws as well as our interpretation of the rights of businesses. To what extent should a corporation’s activities be separated from those who actively manage it?”
…is basically addressed by the Sarbanes-Oxley act. Of course, like all acts of Congress it is a cumbersome and unweildy mess, creating bureaucracy and inefficiencies, focusing on nonsense while leaving wide open avenues of abuse. It is a start though.
Also, I think the point you deal with here:
“Does a business exist merely to produce profit or is it more of a cooperative effort between the business leaders and the employees to ensure mutual success? The answer should be, “Yes.” Obviously, in order for a business to be successful, it has to be prosperous at some level. It must earn enough money to pay for all of its materials and employees and utilities. And if the goal of free enterprise is to provide a materially wealthier lifestyle for the entrepreneur, a business must also generate an adequate profit for the owner. But since the success of a business is directly related to the effectiveness and expertise of its employees, business leaders need to find a balance between acceptable profit and outright greed.”
Is essentially guided by forces and dynamics within the business. We have adequate safety valves through legislation (FLSA and others) and the success of the business largely hinges upon all of its factors (like its ability to retain a good labor base etc.)
Here is something that may help in your analysis. (And you touch on it somewhat). With the introduction of the corporate entity we have access to almost unlimited funding for capitalization. This is good, it gives the company great flexibility in operations. There are a host of advantages to the corporation and the consumer because of this capitalization. The problem unforeseen was twofold: 1. Americans have become more shortsighted, and have bought into the qet rich quick thinking, and that translated into problem #2. the accounting perspective changed. Traditionally, companies judged performance by productivity. (This is the reason I always look at a nations GDP as the primary economic indicator, rather than nonsense like the stock market, futures, etc.) For example, a 1970’s GE was unconcerned about profit MARGIN–and was more concerned about gross productivity and the revenues they produced. When companies started trading publicly, the source of company funding was based upon the desirability of its stock. In order to make a stock increase, the MARGIN had to increase. So a company’s CEO and CFO would get together, (and since their bonus was tied to the stock price), they would try to find out how to widen the margin between revenues and expenses. In doing this they would lose the focus on the two primary long-term components (revenues and productivity), because the easiest thing to do was cut expenses. Anyone knows that if you skimp on resources (human to raw materials) you create an inferior product, which in the long run hurts the business.
So essentially the damage has come about through the short sightedness of our corporate structure. This can be linked to personal greed, as you mention, but also can be linked to the promotion of moral relativity and decaying ethics in the nation.
One more factor, and I’ll end this long winded missive.
The cost of government in business is staggering. Not just the obvious taxation, but in forms of regulation. The Cato Institute did a comprehensive study that measured the cost of regulation passed down to American household’s through businesses as a result of government regulation. When divided out evenly to all American households the cost per year was in excess of $20,000.
Ken, will be back–I enjoy your well thought out articles.
-Jack
P.S. Windspike above is a little fundamentalist in thought. Capitalism is just an economic system, but many on the left put horns on it and try to personalize it. I am glad that you point out that if there were no capitalistic transactions, there would be no economy. The less inhibited the transaction process the better the economy, the greater the opportunity for regular folk to advance in free enterprise.
September 17th, 2005 at 7:30 am
(responses)
eve- My thanks to you for leaving a comment. It’s nice to know when people like something I’ve written.
windspike- It was a nice refresher to review some past discussions that subtly dovetail into this post. I also think that it is deplorable to see multi-million corporate buildings so near to dilapisating infrastructure, especially schools. Businesses like to complain about a shortage of qualified workers, yet take such a limited (if any) role in alleviating that situation. They are they ones who have all the money (and who get our tax bucks too), it’d be nice to see more return to the community. The benefits for business and society are fairly obvious.
Chris- Glad you found me. And yes, it would be nice to see something other than the soon-to-come corporate handouts disguised as help for the victims. I’d much rather just give each affected family a couple hundred thousand to rebuild and restart their lives than trust giant mulit-national corporations to reconstruct an affordable, efficient, safe redevelopment that has more than profit in mind.
Hope to hear from you again.
Martin- Thanks! While this thinking may be in the minority (or even the unspoken majority) it’s still nice to hear some agreement.
John- Understanding that capitalist economics is NOT the end all, be all of life is more important than making a buck, but if you’ve been blinded by the theory of greed over good, then I wouldn’t expect you to agree. Still, you seem to have missed the point that this essay looks at the big picture, not specific instances.
No where do I mention the hurricane in this post. The manipulation I mention is well documented and refers more specifically to the Enron created energy shortage on the west coast a few years back. I’d like to hear your defense of their actions.
Also, your assumption that price increases only reflect scarcity (real or contrived) is a bit naive. Price increases that occur by different producers in a similar industry are nearly always done in a “tit-for-tat” method, meaning that one product goes up and so does the competitors. This is done to increase profit, not necessarily to promote conservation.
Common Sense? Yes indeed!
Jolly- Nice rebuttal to John. I think we do need to get rid of many of the tax give-aways to corporations, but many of the reforms I’v eproposed on this blog would produce savings that could help offset many of the financial problems inherrent in government today. We just need some politicians with the guts to stand up for the people for a change.
Thanks for backing me up.
Jack- Another well thought out response, and I thank you for that.
I readily admit that I am not up to speed on all the laws, regulations, and restrictions already on the books. But what do they matter if they are flagrantly ignored or subverted?
And while we may have legislative safety valves in place to prevent overwhelming worker abuse, the system still favors the corporations because they spash the most cash at the politicians. Out political finance laws need to change to dilute their influence significantly.
I do agree with your supposition regarding the “unforeseen” consequences of capitialism run amok. Though I’m not sure that moral relativity is to blame, if by that you mean a relaxing of historical Judeo-Christian dogma. A person (and by extension, a business) can operate on the principals of profit and charity, productivity and care for worker conditions, but the ethics of the “Greed is Good” culture are rotten to the core.
Business regulation is necessary to a degree, but the bureaucratic red tape that make such regulation expensive can be reduced or eliminated. While most of life does exist inshades rather than absolutes, sometimes the loopholes need to be shut down entirely, especially when a sector of society can’t show the temerity to police themselves.
Thanks for dropping by again Jack.
November 24th, 2005 at 1:34 am
I think health insurance is a major issue and businesses should provide to all employees.