the rise and fall of the mythical corporation
Over the last month, I wrote a few examples of how corporations acting in their own self-interest can create a whole lot of problems for society at large when politicians basically allow them to buy legislation favorable to their goals. But a big addendum to the description of that issue seems to have been missed and it was that addendum which was used to explain why supply-side economics doesn’t work. So just to make things clear for future reference, all the corporate self-interest lamented on the web should not surprise us and we should not be turning companies into villains.
All of us have our personal interests and all of us with the means tend to do what we can to get our way. Complaining that a company wants less taxes and regulation is like voicing your indignation when a hungry bear bulking up for the winter mauls you after you try to take berries under its nose. The bear doesn’t care about you. It doesn’t care about other bears. It just wants to eat and if you want to take what it sees as its food away, it will predictably get agitated and use its superior strength to protect what it found so if you really want berries that badly, feed the bear something else and pluck them while he’s busy.
No, the problem comes when corporate CEOs start fancying themselves as political masterminds and make their business not just a way to make money for themselves and their shareholders, but to push their political dogmas on all those around them. When a CEO rises from his chair and declares that the nation in which he lives should be ran the way he wants and proceeds to bribe a legislator to act on his personal whims, then it would be more than appropriate to complain. And his shareholders shouldn’t be too pleased either since the focus on personal ideology and short-term avarice means bad PR and less sustainable dividends for them.
I bet you could make a lot of money by stripping away jobs from entire towns and outsourcing everything to the lowest bidder. But eventually, you’ll run out of customers since they have nothing with which to buy your goods and the nations to which you outsource won’t let you sell your wares because they’re using your money as the start-up capital for your future competitors. And the politicians we elect supposedly to guard our interest have to be able to keep companies from trying to mandate what’s best for them by bribery, and avoid elevating the corporation as the most idyllic and model organization in all of existence because that’s just wrong.
The truth is that whenever you have a large group of people, you’ll have bureaucracy, inefficiency, and people trying to dodge responsibility for their mistakes. Whenever politicians and pundits talk about inefficiency and red tape in government, I like to try and compare that to the supposedly stellar efficiency of a major company, especially when it comes to resolving such things as billing issues. Just ask some very satisfied and happy customers of Comcast and AT&T how efficient and responsive these conglomerates are in responding to an angry customer trying to fix his bill. Or the kind of stellar service you can expect from a typical major airline.
So, just as we shouldn’t naively expect that companies are necessarily wonderful, efficient, and benevolent to the economy at large, we also shouldn’t expect them to create jobs for us whenever we need them and then hurl frustrated invective at those companies when they don’t. Take the bear in our analogy. It’s not his job to make sure you’re fed since he’s looking out for his needs. Likewise, we shouldn’t blame companies for not hiring a whole lot of people, especially when the economy is down. They have no incentive to do so and the small tax credits offered in the last few years to generate new jobs don’t offset the expense of hiring a new employee to nurture and train from scratch. And promising them tax abatements for years on end simply gives them some incentive to move their offices after the abatements are up and taking the few jobs they brought with them.
Want to get companies to create jobs? Make it in their short term interest to do so. The problem is that over a three decade stretch, the economic and political structure we set up has elevated The Company to the status usually attained by sages and saints. People placed their hopes and dreams into wise businessmen whose brilliance was lauded in breezy hagiographies, and the CEO became the epitome of logic and efficiency. We thought that they’d go out and start looking for unrecognized talents in people, train them, promote them, and pay them to learn and grow because they knew what was best for the economy in the long term. Watching our mythical corporate idols fall from grace in the Great Recession, we now know that their real focus is squarely on the quarterly earnings reports and that they’re not all brilliant visionaries who have amazing solutions to all the world’s problems laying around on their desk.
But the companies aren’t the bad guys here. Sure there are corporations ran by venal, short-sighted, avaricious CEOs with a loose grip on ethics and who can dodge tax bill after tax bill while decrying how high taxes are, but did we really expect Ghandis and Buddhas? People go into the business world to make money and we shouldn’t have been treating this pursuit as some noble goal for the betterment of the world. It’s not that businesses lost their way over the decades or became evil. It’s that we were exposed to far too many romantic idolizations of the business world and are now disappointed that it was all just a facade we bought hook, line, and sinker at some point in our lives.
