I would first like to start by talking about something that, on the surface, is wholly unrelated to corporations. Immigration reform in America. This is a hot button issue. Some people believe that support of stronger immigration reform is tantamount to racism. Not in my opinion. There are laws already in place making illegal immigration just that, illegal. Illegal immigration is disrespectful legal immigrants (they made the effort to immigrate legally), to the illegal immigrant (they are exploited for cheap labor) and America (lost tax revenue).
But why am I talking about it in this post? Arizona, known for it’s controversial immigration policy, was recently considering 5 bills to try to curb illegal immigration. But it did not pass. That’s not why it’s interesting though. It’s interesting because of the reason why it did not pass:60 businesses sign a letter asking them not to do so. Why would they refuse to tighter laws on immigration? Well they cite bad press for being Arizona located corporations, but how does that apply to Wells Fargo, Intel, or Cox Com.? The implication is that these corporations profit, directly or indirectly from illegal immigration, it wouldn’t be the first time a major corporation has been caught doing such.
But even more disturbing is that even though 6,500 citizens could not prevent the turning of the first reforms in the state, just 60 businesses could do so today. The reason for that is lobbying. Not many American know what it is. Basically, it’s legalized bribing. I know, I know, you were as swoon as I was when my grade school teacher recounted the tales of how the muckrakers exposed all of societies ills in the early 20th century and did away with corruption. But today bribing is as alive as ever was, there’s just a few technicalities now. In a 12 year period our public officials accepted $30,529,002,364 in bribes! And if bribes aren’t enough, they offer to hire them! All of this is exacerbated by career politicians, being a statesmen is now a job and not volunteer work. We’ve created a buffer between representatives and the people they represent. It’s not a bad idea, considering you don’t want every yokel in America to exert direct control over the entire nation, but politicians have forgotten who they're representing.
“Too big to fail” has become a buzz word these days to describe some financial corporations. But I think is an apt phase for some of other corporations: super large, super connected companies who pose a systemic risk. Comcast, AT&T, too a lesser extent Disney, and Sony. These corporations dominate a market to the extent that every action they take has an effect on the market. They are able to dictate market conditions beyond what would occur in a competitive environment. And when these corporations are in trouble, the effects are felt even outside their market. When corporations are able hold our economy hostage for a government bailout, it is no longer a question of free market capitalism and instead a question of national security.
CNBC sometimes runs biographies on companies. They’re not really journalistic, more of an hour long commercial for whatever company their doing. But for every one that I can remember seeing, there is always something awful that the company has done to get where they are. And they are not ashamed of it. One of the executives of Coke boasted how they made a killing in South Africa when other companies were boycotting the region at the behest of Archbishop Desmond Tutu because of apartheid.
What do you expect though? Corporations aren’t people, but we treat them as equals under the law. The case of corporate personhood is rather complex and hits on some constitutional issues. First, some background. There’s no definitive corporate law. That is to say, there’s no international law on how these multinational organizations are treated. Most contain some form of idea of Ownership and Separate Legal Personality from that owner. Worst still is the fact that this is one of the few areas where the 10th Amendment is at play and the federal government has left states to create their own laws governing corporations. So, you get odd cases of a Delaware company suing a New Jersey man in a California court. Add to this that federal law is being applied to these corporations and you end up with 50 different pegs being fitted to one hole.
Now, you also have to understand how different companies are structures. One of the core differences between an incorporated business and an unincorporated business is the concept of limited liability. Limited liability prevents owners of a company for being sued for the improprieties of their company.
Let’s take an example: Mom and Pop form a partnership (a form of company that does not provided limited liability), Mom and Pop Company, and start a shop. A customer walks in and slips and falls due to a slippery floor. This customer sues Mom and Pop Company and wins, but Mom and Pop Company has not had a good year, it doesn’t have enough assets to pay the customer. However, because it is a partnership and it’s owners don’t have limited liability Mom and Pop personal accounts must pay the remainder. Now, let’s run this scenario again and assume Mom and Pop incorporated their company to form Mom and Pop Corp.. This time our customer can only sue Mom and Pop Corp. and not Mom and Pop individually. Assuming Mom and Pop Corp. hasn’t done well this year and can’t pay the judgment, there’s nothing our customer can do. Now that’s an extreme simplification, but this is a very important concept, Mom and Pop Corp. is a different legal entity from Mom and Pop. It has its own responsibilities and rights under the law.
So, let’s put this all together. States create laws allowing the creation of corporations, distinct legal entities under that state’s laws. The federal government enacts national laws intended to protect a person’s legal rights. These federal laws are then applied to corporations because they are distinct legal entities. The end result is corporations with far more rights than anyone intended. I'm honestly surprised they haven't been given the right to vote.
But corporations aren’t like us. Corporations aren’t moral. They aren’t people. Regardless of the theory of stakeholder, corporations don’t have a vested interest in their community beyond profits. Look at the job situation. You’re a business and you’re in it to make a profit, so you want the best person for the job. So, you through up insane requirements like 2-3 years of experience for the exact same entry level job because you know it’s an employer’s market and a bunch of 401k’s just dried up so you can maybe get someone. And then you use come up with strange requirements like GPA, irrelevant courses, even SAT results because it might lead to better candidates. And because it’s an employer’s market you can ask for unreasonable things: unpaid training, substandard pay, and employer benefiting agreements. Or maybe you just have one of your employees do the job instead of hiring someone new, you save on hiring and training someone new in a tough economy. All the while you have a buildup of perfectly good, fresh graduates filling up unemployment.
Corporations poison our land, our air, our water, our food, our medications, our military when it makes them a dollar. They are the greed manifest: “every man for himself”. And we look the other way.
Because we get our high fructose corn syrup and our reality TV. We’re not poor, we get our stomachs filled and our promotions and we’re happy. That’s something that all those dictators in the Middle East forgot. So, you’re not likely to see a wholesale revolution or something like the end of Fight Club anytime soon. And I wouldn’t want to see one; life is pretty good compared to other times and places. So, what can we do?
Outsourcing is another devious thing corporations tend to do. Can’t get cheap labor to come to you, go to it. So counties that have laws that protect laborers lose jobs to countries that don’t. Right now, our tax code actually rewards corporations for doing so. What about heavier import tax or, dare I say, embargos? It would certainly create a niche where that company used to be. Kind of artificial trust busting: when a corporation gets big enough, it outsources and can’t sell their goods in their original country anymore, opening up the market again.
And on the topic of taxes, a flat tax is not unobtainable. Some simple calculations will tell you that based on the total income taxes in 2008, $1,091,473,000,000, and the 2008 budget, 2,900,000,000,000, that a flat tax of %8.76568 would yeild the same amount of income tax and that a flat tax of %23.29017 would cover the entire budget. Especially when you factor in removing all the loopholes from the current tax code, a flat tax becomes less absurd. Capital gains are treated differently than earned income in our current tax code, millions of tax dollars slipping passed. If the adjusted flat tax puts too much burden on lower income brackets, increase the minimum to compensate. It’s been kept artificially low through our tax system, and that’s not what a tax system is for. The role of a tax system is not to supplement low income or reduce wealth disparity; its role is simply to generate income for the government to operate.
Back to the topic of corporations, perhaps the solution to corporate greed is simpler than regulation.
In the 1960s and 1970s a company called IBM had commanding control of the computer industry, which was at the time relegated to mainframes. There were other companies that manufactured mainframe, but IBM was so much larger than them that they were referred to as “Snow White” and the others as “the Seven Dwarves”. Everything was going swimmingly for IBM up until the 1980s. By this time IBM was bloated and slow, allowing technologies that they owned to be replaced by newer technologies and allowing their competitors to undercut their prices. When the PC revolution came, they lost their core business, mainframes. To this day, they have never regained the market control they once had.
