In defense of corporations & capitalism

This morning I woke and got out of my Sealy bed. I went into my kitchen and ground some Starbucks coffee beans before using my Krupps espresso machine to make a latte. I heated some water in my GE microwave and poured it over my Quaker Mills oatmeal. I then sat down at my Dell computer and accessed the internet via my Comcast cable internet service and an RCA modem. This is just a snapshot of a few minutes of one day in one persons life, but it illustrates the degree to which private and publicly held corporations have improved the lots in life of even poor college students such as myself.

I provide this illustration to give some context to begin talking about corporate power and the role of these companies in our lives and in the policies that government enacts to serve their interests. Anyone that knows me, knows that I am an avid defender of the free market and the corporate power structure on utilitarian grounds. The capitalist system has, simply, provided the greatest happiness to the greatest number of people compared to any other system that has ever been implemented. I also favor capitalism on ideological grounds. Free people must be free to engage in commerce and earn their way as they see fit, free of compulsion.

It drives me nuts when the Ralph Naders of the world want to blame every human foible on corporations and then propose the power of the state as the means to address it. Government has a long and dismal track record of undermining human freedom and failing to protect its citizens in almost every arena of life. I can't understand the utopianism that lead seemingly intelligent people to conclude that it is government, which has produced vast amounts of human suffering historically, that should address the short comings of the free market and corporate system which has produced the vast majority of the goods and services that make life pleasant and have only been responsible for human suffering on a relatively small and isolated scale.

A reader recently posted a comment to this blog fretting that the democratic process can rein in government, but not corporations and, hence, corporations represent a greater potential evil. I couldn't disagree more. I have on numerous occasions attacked the notion of the democratic process putting any kind of check on the ever expanding and consolidating power of government so I wouldn't rehash those arguments here. Instead I want to look at two specific points. One - Corporations are responsive to democratic pressures. Two - It is only when corporate money is used to influence government policies that corporations become a danger to the system and the individual.

On the first point, I need look no further then the example of Enron. Here we have a clearly rogue corporate power that was operating illegally and breaking every law that ran counter to their objectives. When they were exposed, it was the capitalist system that unmercifully punished them while the government largely sat on its hands. The stock price tanked as individuals and investment groups pulled their money out of the company. Enron was effectively ended as a company long before any indictment came down or any sanction was implemented. This is a perfect example of a democratic process (voting with one's money) putting a check on an out of control corporation. Granted that many investors and employees were hurt in the process but it was the illegal actions of the company and its leaders that caused this pain, not the system. They would have been hurt no matter what the government did and, although it sounds somewhat cold, it is the responsibility that every investor accepts when they choose to expose themselves to the risk that is inherent in the markets. If there were no failures, there could be no successes. The same is true of all the other high profile corporate malfeasance of the last few years. Adelphia, Global Crossing, Worldcom were all punished by the market long before government did anything. When government did act, it acted to punish the perpetrators, not to protect the investors and consumers. So to suggest that government is the proper protector of the people against corporate misconduct is to ignore history that has proven time and again that it is the self-regulating function of the market that most effectively culls the herd and assures efficiency in the system. This self-regulating function is unabashedly democratic.

On the second point, the corrupting influence of private money in the public arena, there can be no doubt that the private sector seeks to use the coercive power of government to pursue its own goals when it can. Is this the fault of the market or a fault of government? I would say that it is a little of both. To be more specific, it is a fact, as I have states before, of human nature that men will, when given the means, attempt to subject others to his whims and interests. If a mining company strips 50 square miles of government owned virgin forest, it is only after money has been used to gain the permits and approval of legislators and bureaucrats who, after all, must decide to allow such a visage blighting project to move forward. So then, the corporation is pursuing its own interests, which is rational, but can only do so because we have ceded significant power to administrators to allow it. This is true in any number of instances -- corporate welfare, pollution allowances, eminent domain, the hiring of illegal workers, no-bid contracting, regulatory roll-backs, tariffs, and worker protections to name just a few. In each case, a company pursues its own best interest by using the power of the state to subjugate the law or the natural rules of the market. This creates market distortions that can ripple through whole sectors and even the entire economy. When this occurs the corporation is rightly blamed for its excesses, but the government, whose power made the abuse possible, is left off the hook. A perfect example is pollution. The United States government is far and away the biggest polluter in the country. It creates many times over the amount of solid and gaseous waste that the largest corporation does. But due to sovereign immunity, it cannot be held to account, so instead the environmental lobby focuses on corporate polluter's who represent a fraction of the total problem. The proposed solution -- use the power of the state to limit pollution by corporations. This is obviously ridiculous, but no other solution exists since the government, funded by those private polluter's, claims regulatory authority over them and disallows privates suits being brought against them. It is a classic fox guarding the hen house scenario. Yes, the corporations behave badly because it is in their interest, but they can only behave that way because they have the government providing them the cover to do so. So should the blame be placed more on the companies that are pursuing their rational self-interest or on the government that protects them from market and judicial pressure being brought to bear?

In conclusion, it is the role that government plays in subverting the democratic processes of a free market that most directly leads to the tendency of corporations to behave badly. Free from the protection of government, corporations, and the free market generally, would be more responsive to the needs, wants, and expectations of investors, employees and consumers.