Corporations: the Good, the Bad and the Ugly

[Missed AB]

Would you mind explaining the advantages of a corporate business in an industry that does not require massive start-up capital like retail, against a myriad of smaller businesses vs. the real benefit of producing more jobs 'ineffecienctly' (I'm referring on a microeconomic level, if i've not mistaken the terminology)?

The first problem is you assume the corporation's purpose is to supply jobs. It is not. The purpose of the corporation is to make money, and it does that by doing a good job of following through on it's business mission. This then benefits you the consumer.

Take any product, beit cars, movies, video games, sneakers, paint, computer... there is millions of dollars of research to produce that product. And YOU are able to get the product for pennies vs the initial investment. The Iphone is not a 200 dollar phone, it's a hundred million dollar investment by Apple. The reason you can have an Iphone is because of Apple.

How many millions of dollars of your money are you willing to spend to design a cell phone for yourself?

 

[sookster]

The first problem is you assume the corporation's purpose is to supply jobs. It is not. The purpose of the corporation is to make money, and it does that by doing a good job of following through on it's business mission. This then benefits you the consumer.

Take any product, beit cars, movies, video games, sneakers, paint, computer... there is millions of dollars of research to produce that product. And YOU are able to get the product for pennies vs the initial investment. The Iphone is not a 200 dollar phone, it's a hundred million dollar investment by Apple. The reason you can have an Iphone is because of Apple.

How many millions of dollars of your money are you willing to spend to design a cell phone for yourself?

Sigh. Take a macroeconomics course please. If people have more disposable income, they consume more, which is good for the economy. It is true, that corporations want to maximize profits and the average wages have decreased as corporate executive income has sky rocketed. Part of this is large pressure from investors, but the other issue is greed, of course. It seems people only think short term instead of long term. If there was a stronger middle class (i.e. more "average" Americans with more disposable income) overall wealth would be gained with much less risk. BUT....

Even still, there is always going to be a business cycle, which means there can not be infinite growth under this system. Considering globalization and how the entire world is now interconnected more than ever, the business cycle is a world business cycle now. So in order to deal with systemic risk while keeping our current system in place, a world wide institution has to be in place to hopefully stop an entire systemic collapse. This is one of the reasons why I believe there is a move towards a "New World Order" so to speak. I mean, you can call it all you want, but I read an article on MSN where the first audit of The Fed revealed that The Fed bailed out various institutions around the world secretly with loans that amounted to 12 trillion. That's right, trillion.

Compound the fact that a world wide government provides more power and influence, this is the direction that world leaders are going to go.

Soooo....

Keep believing in our perfect system! It's only going to lead to more exploitation of the population, world's resources, Earth conditions that will lead to human extinction, and not to mention world wide governments!

 

[Rhapsody1447]

Sigh. Take a macroeconomics course please.

This has got to be denial.

1.) Lobbying.
2.) Globalization
3.) "The Great Recession"

Please respond to my post. List some corporations that crush all competition, buy their own legislation, and collapse the global economy by taking too many risks.

If people have more disposable income, they consume more, which is good for the economy. It is true, that corporations want to maximize profits and the average wages have decreased as corporate executive income has sky rocketed. Part of this is large pressure from investors, but the other issue is greed, of course. It seems people only think short term instead of long term. If there was a stronger middle class (i.e. more "average" Americans with more disposable income) overall wealth would be gained with much less risk. BUT....

Even still, there is always going to be a business cycle, which means there can not be infinite growth under this system.

You had me up until the following:

Considering globalization and how the entire world is now interconnected more than ever, the business cycle is a world business cycle now. So in order to deal with systemic risk while keeping our current system in place, a world wide institution has to be in place to hopefully stop an entire systemic collapse. This is one of the reasons why I believe there is a move towards a "New World Order" so to speak. I mean, you can call it all you want, but I read an article on MSN where the first audit of The Fed revealed that The Fed bailed out various institutions around the world secretly with loans that amounted to 12 trillion. That's right, trillion.

The macroeconomist is basing this off an article he read on MSN? Why don't you read the actual audit? If you did you would have found on almost every single chart that loans outstanding normalized to pre-crisis levels and earnings returned to the US treasury peaked to all time highs. Just because you read some misinformed, alarmist article on MSN doesn't even begin to give you the authority, or the knowledge, to say the Fed "bailed out" institutions to the tune of "$12 trillion".

http://sanders.senate.gov/imo/media/doc/GAO Fed Investigation.pdf

I would also like to see some links from economists that say we now follow a world business cycle. A fun claim to make if you believe the following:

It's only going to lead to more exploitation of the population, world's resources, Earth conditions that will lead to human extinction, and not to mention world wide governments!

The reality is is that we are in a period of deleveraging. Deleveraging periods minimize the effects of the normal business cycle and will not be remedied until global debt levels are brought down to more sustainable levels. Either by writing them off or paying them down.

 

[Aunt Spiker]

I'll state my position, I dislike corporations, but I'd like to hear the other side of the argument if those out there are willing to educate me on their ideological choice and why [and for my anti-corporation compatriots to counter].

My main issue with them is that they higher less people per dollar that they make, and the mass of profit treasuries [which in large part /do/ lead to reinvestment] they make is not an acceptable justification for their existence since the banking industry would be more than happy to pick up the monetary supply slack.

Also, I'm a firm believer in full liability. [And having hiring racist policies, it's the consumer's job not to tolerate such practices and run the business owner in the other direction of social progression through economic incentives]

Corporations aren't just retailers and such related entities - and not all corporate businesses hold a poor work ethic.

Topic: Women! Whatcha think?

A) Love em!
B) They're tolerable.
C) They make babies.
D) They're nuts!
E) Can't live without 'em.

In other words, there is no possible way I can answer this poll.

F) All of the above

In this space it is impossible to discuss thoroughly, so I'll just hit a couple of high points. First, look at the development of economies worldwide. Today, there are many, many corporations that operate globally. But consider how many of those started life as a small business, many of them sole proprietorships, partnerships, or small corporations. It is the corporate form of organization that facilitates the bringing together of land, labor and capital to produce goods and services on a large, possibly global, scale.

Indeed, very few of today's large corporations started life as a large corporation. If driven by successful products or innovations, the smaller entity, whether it is a proprietorship or partnership, will find it very difficult to achieve the economies of scale afforded by growth without becoming a corporation. OTOH, Koch Industries, Cargill, and Bechtel are a few of the names that immediately come to mind when thinking of the few very large companies that have successfully eschewed the corporate form.

As you can see, I am differentiating according to scale. Smaller companies, if less successful or wishing intentionally to remain small, are less likely to need the capital formation abilities of a corporation and more likely to find advantages in remaining a proprietorship or partnership or perhaps an LLC.

Another significant advantage accruing to the corporate form is its perpetual nature: no dissolving/reforming of partnerships, succession of proprietorships, etc.

I'm sure others will have differing opinions...

Well said - all true.

i have no problem with a group of people incorporating in order to sell their product competitively.

i have no problem with a group of people forming a union in order to sell their labor competitively.

i do have a problem with global corporations with the power to buy legislation, crush most competition, and bring down the world economy when they take too many risks and collapse.

This, too.

A common view of corporations is that they incorporate purely to sell stocks and gain capital that way - whereas quite a few are non-stock corporations and incorporate for other more practical purposes . . . their board or CEO's (etc) make the decisions - not the stockholders.

 

[Rhapsody1447]

Some charts from the report:

http://sanders.senate.gov/imo/media/doc/GAO Fed Investigation.pdf

The list of "bailouts":

Page 131


And the chart on practically the next page of Total Loans Outstanding:

Page 137


Here is some more information on the "$12 trillion bailout" (estimated by Bloomberg as $7.7 trillion and really stretches the imagination of what a bailout is):

Secret Fed Loans Gave Banks Undisclosed $13B - Bloomberg

The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.

The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger

The article is critical of the program as it shows that all the recipients combined added $13 billion to their bottom lines as a result of the cheap credit available from the Fed's Term Auction Facility. Note the quote from the professor of international economic policy about how the program generated record profits for the Fed (all of which are returned to the taxpayer, see chart below). So you can whine about the "unfairness" of the program and complain about the sheer size of the deal and you would be completely justified. But don't attempt to paint the entire concept of the Federal Reserve providing liquidity to the financial system as some sort of free money via secret bailouts for the entire world. The TARP program was truly a (successful) bailout because it injected capital in major banks by purchasing preferred equity. The Fed's Term Auction Facility made loans at lower interest rates to banks all over the world, in addition to employing currency swaps with the ECB; part of it's core purpose and something it has done since it was established in 1913. The sheer size of the program in 2008 is due to the extreme global credit crisis completely unprecedented in modern financial history. Federal Reserve's profits which were returned to the US treasury are below. If anything you can say the program (like TARP minus Freddie/Fannie/AIG) resulted in a net profit to the US taxpayer, ignoring inflationary pressures of course (which are currently subdued but remain a threat in the future).

Page 115


Of course if you actually read the report instead of "some MSN article" you would already know this.

 

[oldreliable67]

you can call it all you want, but I read an article on MSN where the first audit of The Fed revealed that The Fed bailed out various institutions around the world secretly with loans that amounted to 12 trillion. That's right, trillion.

What Rhapsody1447 said.

Oh, and Bernie Sanders? Just consider the source.

 

[Kushinator]

I thought we debunked this nonsense a while ago?

http://www.debatepolitics.com/economics/110191-audit-federal-reserve-reveals-16-trillion-secret-bailouts.html

 

[TNAR]

It appears that this thread has gone off into the weeds and is not addressing the simple question of corporations to begin with so let's go back to Simon's excellent point back on page 2:

You posted a list of things that you found objectionable--none of which are actually a part of corporations but rather a part of bad actors--and you proposed solution was to change to some as yet undefined method, a non-corporate form of business. But since the problem isn't actually a part of the the form of business, it seems natural to ask how this change will address the issues you raised.

The issues of hiring "less people per dollar that they make [w/e that means] and the mass of profit treasuries (which in large part /do/ lead to reinvestment) ", and having hiring racist policies" that are associated with businesses who have incorporated wouldn't actually be solved by eliminating corporations because the issues aren't solely inherent to corporations.

So as he said, what part of the corporate entity is so bad compared to the alternatives? Why are so many people anti-corporatist and not anti-sole proprieterist?

Nobody has addressed this key question.

 

[iliveonramen]

There is simply no other form of business that could have in past or can in the future, bring together the factors of production in the scale and technological prowess necessary to provide the products and services demanded by, and the number of jobs needed to the masses.

This is true, but you don't see a need for reform?

 

[oldreliable67]

This is true, but you don't see a need for reform?

Oh, sure. By 'reform,' you seem to be referring to activity that might be described as, and viewed by critics as less-than-socially-or -economically desirable. There is always someone looking to accomplish something cheaper and faster and willing to do so by bending or outright breaking the law, sometimes in the name of 'innovation,' perhaps (scarcely) disguised as 'progress.' Looking for the 'gray areas' of the law; excessive pushing of lobbyist buttons, etc.. But that is equally true, regardless of the form of organization. (See Kormyer's good post on the subject.)

And times change, industries are born and die, economies evolve. Some of the policies that were unequivocally in the national interest in decades past are perhaps no longer needed, but maybe they are so ingrained both culturally and politically that it is near impossible to 'reform' them. Certain farm programs and certain oil industry allowance come to mind as examples.

 

[iliveonramen]

I love corporations. Corporations are what allow me to type this message. Corporations are what allow us to discuss in such a global, instantaneous manner. Corporations let me watch my Monday Night Football every week. Corporations let me get that cheap microwave dinner for when I don't feel like cooking. Corporations let me get to work in a reasonable amount of time for a reasonable price. Corporations allow me to go buy a cheap suit for when I have a meeting. Corporations allowed me to get my textbooks in college. Corporations allow me to pursue my hobbies at a reasonable price. Corporations provide me with medicine that is tailored to my specific illness. Corporations provide me with a diverse selection of food and drink when I am hungry. Corporations allow me to fly anywhere in world whenever I want. Corporations even allow me to protest corporations if I want to by providing me with cheap stationary and writing utensils. I love corporations.

I think glorification of corporations is just as ridiculous as demonization of them.

 

[Rhapsody1447]

I think glorification of corporations is just as ridiculous as demonization of them.

Call it appreciation. "Corporations" (organizations of people) are largely responsible for my standard of living. In fact, I'm going on my lunch break right now to eat some food that corporations helped bring to my plate.

PS: My initial post was in response to lumping together all corporations. Obviously this is overly simplistic and ignores the variety of corporations in the world, both good and bad.

 

[Anarcho-fascist]

Having a moral opinion about corporations strikes me as peculiar. They're not moral entities. A corporation is nothing more than a legal fiction that facilitates the investment and operation of capital toward profitable ends. It only has one goal, and the means by which it pursues that goal are determined primarily-- if not entirely-- by the legal environment it operates in. Even if the people responsible for governing a corporation desired for it to have a conscience, it is simply impossible by virtue of its nature and function.

Blaming the corporations themselves for their negative social impact makes about as much sense as blaming the meat grinder when the butcher loses his fingers. You don't prevent industrial accidents by taking the tools out and whipping them; you prevent industrial accidents by changing the way you use the tools.

I agree with what you have said.

A meat grinder not being personally responsible for mutilating someone's hand doesn't mean it isn't dangerous. It seems like the structure and organization of some corporations can encourage amoral profit seeking. Some corporations seem to encourage profits being distributed a bit more towards the corporation as a legal construct rather than the management or employees of the company. ... I haven't really thought about things like this much, but I suppose that the two previous sentences might be related since taking more money from an organization that is a step removed from actual people might be easier to justify to oneself. I don't know.

 

[nathanj63]

I think people who are against "corporations" don't really understand what a corporation is. I think they just mean they are against "big businesses." And I admittedly don't have a complete understanding either. I mean, if you're against corporations, are you saying you are against people who own businesses not being personally liable if the business fails?

In general, people need to stop talking in such general terms about how "corporations" are evil and start talking about specific businesses whose practices you disagree with and be able to explain why because otherwise you end up sounding misinformed in my opinion. Not all corporations are "bad." I think some, maybe even many, possibly even most, engage in questionable practices, but I am smart enough to realize that I am not informed enough at this point to say anything about corporations in general. If people want to criticize the corporations in America, they need to do their homework and learn about and explore specific grievances. And if, once you have done your homework, you find that there are unethical practices across a wide number of corporations, THEN criticize them in general terms, and you will be able to back up your claims.

 

[stsburns]

Corporations are like a 'dollar to change' machine. You put in a dollar: it pollutes, it corrupts your local politician, takes jobs away from smaller businesses, treats their employees like cattle, doesn't want to pay anyone a livable wage, uses employee programs (insurance, retirement) to make personal and company loans, (just google Enron) etc... oh yea.... hears a quarter. You lost .75 in fees. Have a nice day!

 

[Rhapsody1447]

Corporations are like a 'dollar to change' machine. You put in a dollar: it pollutes, it corrupts your local politician, takes jobs away from smaller businesses, treats their employees like cattle, doesn't want to pay anyone a livable wage, uses employee programs (insurance, retirement) to make personal and company loans, (just google Enron) etc... oh yea.... hears a quarter. You lost .75 in fees. Have a nice day!

I guess we can assume an upstanding gentlemen such as yourself has never utilized the services of one these terrible machines, correct?

 

[Anarcho-fascist]

I guess we can assume an upstanding gentlemen such as yourself has never utilized the services of one these terrible machines, correct?

I don't know if it's even possible live in a modern western society without ever using something made by a corporation. You didn't address any of the claims that were in what you quoted. Maybe one could work to reduce the harm that comes from corporations instead of having to choose between living in some forest and modern life.

 

[sookster]

Please respond to my post. List some corporations that crush all competition, buy their own legislation, and collapse the global economy by taking too many risks.

It's called reading independently. I suggest you try it out on your own.