Why Free-Market Capitalism Will Follow Communism Into the Trash-Heap of History, Part II
Last week I said free market capitalism rested on three fatal flaws: (1) the premise that greed is good; (2) the legal concept of corporate personhood; and (3) the necessity of infinite growth. This week I'll deal with the second.
When corporate law first evolved a few centuries ago no one envisioned the monstrous entities that dominate the world today. The legal fiction that a corporation is an individual, with all the rights and privileges pertaining thereto, may have offered some legal conveniences when a corporation was a small number of investors with a common goal, but is the depth of absurdity today, when the majority of the world's largest economic entities are corporations rather than nations. This legal fiction assumes that Exxon-Mobil and a single mother working at a minimum wage job have equal power in the marketplace, the legislature, and the courts, and should have the same right to privacy and freedom from government supervision.
But does that single mother have the power to finance a course in right-wing economics for a hundred federal judges? Or the power to get award-winning journalists fired from Fox news for exposing the dangers of hormone-polluted milk? Or the power to get nuclear-energy propaganda made part of the public-school curriculum? Or the power to mount multi-million dollar advertising campaigns against popular ecological initiatives?
Multinationals today account for a fourth of the world's total production. A third of the world's trade is actually between different branches of the same corporation. Over half of the world's largest economic entities are multinationals rather than nations.
Such giant organizations can dominate governments with the economic power they wield. Through campaign contributions they determine who gets elected (they outspend unions fifteen to one). Through powerful political action committees they determine public policy -- often writing legislation that Congress merely rubber-stamps. Through their ability to buy space and airtime they determine what ideas and images appear in the media. Through their ability to hire high-powered legal teams they determine the outcome of trials, and are able to effectively outman federal officials when the government attempts to bring them to book. Yet these giants have all the legal protections, rights, and privileges of private individuals. They seek utter immunity from any obligation to the general public. "We're a person! We have rights! Leave us alone!"
Until they get themselves in trouble. Then these clever shape-shifters suddenly morph into vital public institutions. "We're too big to fail! We provide jobs!" (Yet if they want to cut costs by laying off workers or outsourcing them it's none of the government's business).
This is not to demonize corporations. They're only doing their job as they define it -- making money for their stockholders. The problem is in the definition, which is faulty. Stockholders are only a small minority of those who have a major stake in the decisions a mega-corporation makes.
Major corporations can ravage and pollute the environment at will until a specific law is passed forbidding a specific act. And if their products are found to endanger the American consumer they can "phase them out" gradually or peddle them abroad.
But as 'persons', corporations are innocent until proven guilty, which means they can continue destroying the earth, mistreating their workers, or poisoning consumers for years, while their case gradually makes its way all the way to the Supreme Court -- by which time whoever had the temerity to challenge their right to commit crimes has run out of funds.
Small wonder a study found that among Fortune 500 companies, the larger the corporation the more likely it is to engage in illegal activity, and the less likely it is to stop when caught.
It used to be that only Third World nations were dominated by international corporations. But today even major powers have lost much of their ability to set tax rates, maintain pollution controls, or institute social programs. Two hundred of our nation's wealthiest corporations pay no taxes at all.
Only multinational entities have had any success in policing the corporate world -- compare the EU's ability to crack down on Microsoft's anti-trust violations with the United States' abject helplessness.
The problem is not with the corporations, it is with the absurdity of the legal fiction. A corporation with over 1000 employees is no longer private. It has become a semi-public institution, whose actions are the concern of the whole society. Far from needing de-regulation, we need a system that goes beyond regulation but stops short of nationalization. A system in which society's representatives are embedded in the organization with power comparable to that of the shareholders, for taxpayers as well as shareholders have a stake in corporate decisions.
We've seen the catastrophe that free-market fanaticism has wrought: what happens when compulsive gamblers are in charge of our financial system; what happens when hucksters are in charge of our health care; what happens when the pathologically greedy are in charge of our energy system. (Enron executives actually wrote Bush's energy policy, while paying no corporate income tax). We need to do some hard re-thinking about what a corporation really is.
(In his inauguration speech, Obama talked of a whole new way of doing things. To understand the cultural paradigm shift that engendered this change--the shift that both Bush and the Taliban have resisted so fiercely, see my website for information on THE CHRYSALIS EFFECT: THE METAMORPHOSIS OF GLOBAL CULTURE).
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TIME FOR PUBLIC BANKS. http://www
ROMANS HAD FREE MARKET CAPITALISM AND IT FAILED.
BUSINESS OWNERS BECAME TOO POWERFUL AND CONTROLED THE GOVERNMENT AND THEN WERE OVERTHOWN.
IF BUSINESS STAYS OUT OF GOVERNMENT THEN BUSINESS WOULD NOT BE FAILING.
GOVERNMENT IS FAIR OVER THE LONG HAUL TO ALL BUSINESSES. WHILE SHORT TIME PROBLEMS MAY OCCUR OVER THE LONG HAIL BUSINESS DOES WELL.
we haven't had free market capitalism since the early 40s. so, your premise is false from the get-go.
I agree. Good Point. We started out with a free market but as time went on, the government became more and more involved with all business transactions. Initially, the interference was to protect the consumer from fraud. That's a legitimate purpose. But, as the business prospered, society felt that it deserved monetary benefits from corporate profits. As long as corporations had profits, they were able to share them in the form of taxes. Further regulations were imposed and now, the government becomes a partner with major corporate institutions. Its a symbiotic relationship.
Part of todays problem stems from the fact that securities and mortgages sold in the overseas markets had the stamp of Approval from FNMA or other government related institutions. Investors, feeling that their investments were backed by the US government, felt safe in buying US mortgages.
No due diligence means recklessness. That equals losses.
The 25 years of prosperity that resulted from Reagan and Deregulation . You have got to be kidding me .The top !% have done very well but the Median Wage has stagnated . All the while running up the National Debt . Well they finally did away with all those pesky Regulations and Look What it has Given US
Oops, on rereading your post....ma
Regulations have been increasing for the past 75 years. By focusing on a few major changes in laws that did away with some regulations, you are obscuring the fact that other federal, state and local regulations have doubled and tripled during the past 25 years.
The deregulation of the airlines brought about lower fares and safety is at an all time high.
NO one in Congress is saying that deregulation brought about this financial crisis. Rather it was the poor oversight of the REGULATORS, that contributed to the problem.
There is a risk in most transactions. When the government becomes involved, it gives people the impression that the risk has been mitigated because of government oversight. Thats been a false premise. Thats what caused this current crisis.
The first problem with "free market" capitalism is that the term "free market" is an oxymoron, like "married bachelor." A market is a set of regulations, and a set of regulations can't be free, that is, unregulated. When someone invokes free markets they are either delusional or lying. What the phrase means in practice is "regulations that benefit me/my business/my type of business." In general practice, it means building a regulatory structure that benefits large corporations at the expense of small businesses and humanity. http://www
The most important thing we can do, politically speaking, is to peel the corporate grip from our government. It will require focusing on the electoral process and, most importantly, campaign finance. Money is the handle by which corporations manipulate our government. If we can focus on getting the big money ($1,000 donations) out of the system we can move on to other subjects. Until then, we are engaged in the futile pursuit of trying to convince people of something when their salaries depend on not being convinced. ( http://www
Free market as an idea, it is a place where individuals trade on their free will, without any forceful influence by government or other individuals regarding prices, quotas, etc. In this sense, rules of the free market are set to protect individuals from that undue influence, so their freedom of entering the trade is protected.
Does that ideal place exist? No. Does anything ideal exist anywhere on Earth?
In the meantime, instead of criticizing the free market, please show me a better system.
Start here:
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scroll down to July 16 post: "Is there a sapient form of governance?" and then after reading that introduction scroll up-page to the series starting on July 20. You should like this blog - it is about questioning the conventional wisdom.
This doesn't need to be an dichotomous argument, democracy/
I am not criticizing "the free market" - I am saying that it doesn't exist. It is a fantasy. All markets are sets of rules. Rules influence people's behavior. Social norms (other people) influence people's behavior.
For that matter, one of the primary duties and prerogatives of a government is to establish and regulate markets. A democratic government is the people's way to decide how commerce should be conducted. There have to be rules in order for there to be commerce, and somebody has to make the rules. That somebody should be us, as a commonwealth.
As you said yourself, "Does that ideal place exist? No."
Asking me to show you a better system is like asking me to show you a better person than Tinkerbell the Fairy. Tinkerbell doesn't exist, no matter how much you clap your hands.
What actually exists are markets, which are sets of regulations, which inevitably influence people's trading decisions, and which benefit some people and businesses more than others. The question is, who and what do we want to benefit from these sets of regulations? We need to get past the myth of a neutral market and decide, as a nation, what outcomes we want and how to get them.
how would you like to define a better "almost-free marker"?
Life expectancy?
Infant mortality?
single worker household vs. dual?
average hrs worked per day?
minimum wage?
.....?
The term 'free' adds little to the idea of a market system. "Free market" is a political term, one used so that the audience hears what each member wants to hear. It means little from a technical perspective.
I agree that corporations have too much influence over our government but I don't understand your other points.
"Market" means an exchange of goods and services. Free market, means that there is no external influence over choices people make in trading their goods and services.
When a large entity such as the government attempts to influence the market, they do it by affecting prices or demand thru external means. Subsidies, tax incentives, penalties.
The only role of government is to prevent fraud and thief in markets. They should try and keep markets fair and honest. Thats all.
The legal concept of corporate personhood is not a prerequisite of capitalism. In fact, it is a distortion of it. What we have in the U.S. is NOT capitalism, which makes these arguments that capitalism has failed quite silly.
Yes, could we please go back to the 1930-something Supreme court case that originally decided that corporations are NOT persons and don't enjoy the legal protections granted to persons, and rectify the deliberate misfiling of a defiant CLERK who wanted the ruling to come out his way? That would do alot to loosen the stranglehold of business on government, and maybe (wish, wish) the little guy can get a Congressman's ear.
Even FDR wasn't trying to get rid of Capitalism. He was trying to save Capitalism from itself.
Capitalism will not go away. As Robert Heilbronner one wrote that capitalism can exist under different political systems but the political sytem cannot exist without capitalism. Democracy cannot exist without capitalism.
What you're going to see is more regulation of corporations that are usually essential for smoother economic trasactions: banks, investment banks, utilities, multinationals, etc. You will see an amplification of pro-labor regulations, protectionist trade policies, and greater economic protections. When the economy truns, the regulations will be eased.
Capitalism is going through a transformation and transition.
"Democracy cannot exist without capitalism
And that sir is TOTAL BS; it is an infantile notion that anyone with half a brain should be able to get beyond, despite all of the conservative/free market blather to the contrary.
However, despite the truth of what I just stated, I don't believe that the basic concept of capitalism is immoral or unworkable; what puts the fly in the ointment is the absurd assumption that captialism DRIVES democracy, and when in truth it has absolutely NOTHING to do with the concept. Let democratic principles drive the economy through the will of the people, and you will NOT have the social Darwinistic greed-fest so enamored by free market fundies, but a hybrid of free markets held in check by socialist features and prudent regulation. Such allows for modest growth and stability, as opposed to the Friedmanite nonsense that ALWAYS results in huge financial bubbles that burst, becoming more frequent and catastrophic until the system crashes.
How bad must it get before American voters are willing to hold corporations responsible for the rotten government we have had for the last half century? I took a course in practical politics in the early 1960s sponsored by the local Chamber of Commerce in my mid-sized city. The materials were prepared and distributed nationally by the CofC.
There was no need to wonder why the CofC was interested in organizing political action committees. And they succeeded in electing Nixon and the whole tribe of GOP reactionaries who followed.
Of course corporations vote. The Supreme Court has said that we cannot deny corporations the right to contribute to political campaigns, because the corporation is a person and entitled to free speech. Anyone who thinks money does not decide American politics wears blinders.
Denial of the corporation's right to support candidates would influence both sides of the traditional two-party system. Primarily it would allow third party candidates a chance to get equal exposure. So this is not a GOP/Demo thing. It's a free and open elections' thing. Slater knows whereof he speaks.
Again: how bad does it have to get? How much must we suffer? How many people must die? Before we take corporations off the public dole?
(Enron executives actually wrote Bush's energy policy, while paying no corporate income tax)
I would like to believe this, as I would not put it past them, but could you show us the proof?
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." - Benito Mussolini.
A Corporation is NOT a person. Never has been. Never will be. This has to change immediately. If Obama does nothing but correct this, his administration will have been a resounding success.
You write that the “free market capitalism rested on three fatal flaws: (1) the premise that greed is good; (2) the legal concept of corporate personhood; and (3) the necessity of infinite growth.” Plainly, it is not true. Your whole reasoning, as based on wrong assumptions, is worthless.
The free market capitalism it is not an ideology. It is just building an economic system that fits the human nature the best way we know it. We do not know it the best, and humans are not angels either. Hence, all the small and big faults of the free market capitalism.
If you know something better, please tell us what it is.
Socialism. Hardcore socialism. An unregulated market can only lead to the outcome we have before us.
When you say "before us", do you have in mind unprecedented growth of the U.S. in 19th century? Or, do you have in mind about 25 years of prosperity resulted from the deregulations of the Reagan era?
Socialism? Could you bring one example that it worked?
As I posted above:
Let democratic principles drive the economy through the will of the people, and you will NOT have the social Darwinistic greed-fest so enamored by free market fundies, but a hybrid of free markets held in check by socialist features and prudent regulation. Such allows for modest growth and stability, as opposed to the Friedmanite nonsense that ALWAYS results in huge financial bubbles that burst, becoming more frequent and catastrophic until the system crashes.
Free Market Fundamentalism IS an illogical ideology; unsustainable growth driven by unchecked greed has always collapsed due to it's own design, which is as flawed as any Marxist doctrine, and for exactly the same reasons--human nature is assumed to be virtuous and is negated as a complicating factor.
I remember an old Polish joke from the mid 70's when Poland was still Communist: "Capitalism is the exploitation of man by his fellow man; Commnism is the exact opposite."
Both capitalism and Communism involve the concentration of the wealth and power in the hands of the few. In the bad old days of the USSR, this privileged few was called the nomenclatura. We call them Republicans and CEO's. It's the same thing. Ironically also the former USSR AKA Russia has now become one of the most free-wheeling and corrupt capitalist societies on the planet. IN fact, Russian capitalists are one step above the pirates on the Somali coast. That also describes the wealthy in this country.
There's only one solution. Break up the power monopoly. We have anti-trust laws. Enfroce them. We need to cancel all the tax breaks wealthy corporations and individuals have enjoyed since 1981. They clearly have failed just as Communism as failed. (Pretty much for the same reason.)
A down payment is passing Obama's American Recovery and Renewal Act. If Senate Republcans attempt to destroy Obama's bill, demand that the Democrats resort to the nuclear option. (I looked it up in Wikipedia.
Capitalism has nothing to do with the concentration of wealth. That premise is wrong.
Capitalism means using labor, materials, and property to produce profit. Its inference is that its done by free individuals to satisfy societies needs.
It has NOTHING to do with large corporations or large businesses.
The monopolies we have are sanctioned by the government because money buys votes and legislation. The people keep voting in these clowns.
We get what we deserve as a nation.
Cancer capitalism, we need chemo....I guess
Major surgery first. Then radiation and chemo. After that.... a complete change in lifestyle and diet.
I dont know what it's like on your commune, but here in the U.S., PEOPLE vote. Corporations are not allowed to vote. If your democrat friends cave in at the sight of money, it's seems like a character flaw on their part, not a corporate issue. Quit voting for the cavers.
In your nonsensical tirade you forgot to mention the benefits of corporate 'personhood', like shareholders NOT being held personally responsible for lawsuits and taxes against the company.
What exactly would you like to happen to corporations? Disband them all? I think unemployment might creep up if you do that. Not to mention, the Trillions of dollars lost by shareholders. Or do you want to just 'depersonalize' them? Again, holding million of Americans responsible for every slip and fall lawsuit against Wal-Mart will clog the judicial system for 50 years. Don't be so ignorant. If yours tired of corporations, and want to give you life over to government go to Cuba, Michael Moore liked it so much he didn't stay.
"Corporations are not allowed to vote."
Good god rocketman69, are you truly that naive? Why does a corporate "person" need to vote when they can LOBBY???
Do you for one second really believe that your single vote has anywhere near the magnitude of influence on policy as corporate lobbying?
The American people lose nothing my altering corporate personhood to a more reasonable level of responsibility.
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