Corporations

Corporations do not have a conscience.  That may seem odd given that they are organizations that are composed of human beings, but although the individuals may have a conscience, they are required to act on behalf of the corporation, not their own sense of morality.  On the other hand, in the absence of accountability, greed can overcome patriotism, empathy, loyalty or any other human characteristic.

Individuals are good at self-deception, and we can convince ourselves of the benefits to society generally even though we recognize that actions may be harmful to large numbers of people.  There is a filter for decisions in corporations that judges actions based on the benefit of any action to the corporation and by extension to the profits of the corporation.  The overriding purpose of corporations is not to better society, but to maximize profit. 

The idea that a corporation might care about pollution, workers’ rights or health, or even the quality of the product of the corporation comes from the fact that adverse consequences hurt the bottom line.  Pollution can result in fines and bad publicity.  Workers can sue.  Liability for dangerous or ineffective products can drain money from the profits.  Corporations weigh the benefits and risks of their actions, and when the penalties for actions are sufficiently harmful, they change their ways.

The flip side is that corporations do a lot of good.  They provide jobs, goods and services, and without these our standard of living would be dismal indeed.  They donate to charities, help out the community, pay taxes (sometimes), and provide benefits for their employees over and above salaries.  Even if everything they do is somehow to improve their public relations and ultimately benefit the bottom line, it cannot be said that everything they do is harmful.

The problem is that without some incentive, direct or indirect, for doing good, corporations would do nothing good.  If it were legal to just take money without providing anything in return, and there were no adverse consequences that would redound to lower profits, fines or loss of employees (by injury, resignation or strike), they would.  We give the name “subsidy” to this practice.  If their actions (through pollution, monopolistic practices or unsafe working conditions) created profit without any penalties, they would have no compunction about continuing the same practices.  If there were no minimum wage and no restrictions on child labor, corporations would certainly take advantage of the labor force.  Well, until the labor force rebelled, quit or went on strike.

By analogy, a person walking a dog would be less likely to pick up the poop if there was no penalty. And smokers would not voluntarily segregate themselves or refrain from smoking in public restaurants if no one asked them to do so.

It has been argued that the absence of accountability led to unrestrained greed that resulted in the recent Recession.  Stockholders were left to pay the penalties for the malfeasance of the executives in corporations, while the executives themselves left with their pockets lined with gold.  Or stayed and continue to stuff their pockets to this day.  Governments provide some accountability (assuming that the legislators and regulators are not in bed with the companies they purport to regulate), but even then the executives are rarely (or never) held personally liable for their own misconduct, even if that misconduct results in illegal actions on the part of the corporation.

When Ayn Rand wrote of John Galt, the protagonist of Atlas Shrugs who persuaded the wealthy industrialists to leave the country, she wrote of an amoral culture of greed and personal aggrandizement at the expense of everyone else.  Corporations are the ultimate Galts; without loyalty or patriotism, not beholding to any system of ethics, incapable of mercy, compassion or sympathy, acting solely on the principle of “rational self-interest”. 

It may seem that corporations, workers, government and the public have reached an uneasy truce.  This would be incorrect.  They aren’t all being good corporate “citizens”; many are “Going Galt.”

The cost of manufacturing goods overseas is significantly lower than here in the United States, and corporations have no qualms about taking advantage of the appetite of Americans for cheap goods imported from other countries.  They have found a way to avoid laws against pollution.  They have found a workforce that will work for less than minimum wage, no benefits, in unsafe conditions.  They have found ways to avoid paying taxes. 

The transfer of manufacturing to these foreign countries obviously benefits the corporations.  They made a calculated gamble that Americans would rather pay less for their goods than seriously engage in a campaign of “Buy American!”  They see the negatives as less than the positives, and whatever ill will they may be engendering on the part of the average American is overshadowed by the abundant profits they have garnered.

Some people on the right see the workers as having shot themselves in the foot by demanding safe working conditions, generous benefits and high salaries.  The American workforce, they contend, negotiated itself out of the jobs they lost to foreigners.

Carrying this criticism to its logical conclusion, the American workforce should become like the Chinese workforce to be competitive. 

Really?

Without adequate financial incentives to keep Americans employed (or adequate disincentives in the form of taxes or other penalties for exporting jobs), there is little doubt that this downward spiral will continue until the United States is unable to afford to pay for even imported goods.