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Wednesday, October 05, 2011

Corporations - To Do Big Things, you need Big Money


To do big things, you need big money and a lot of people. There are fundamentally only two ways to accumulate big money and a lot of people: voluntarily, or involuntarily.

In the voluntary column, you have say Apple. It has accumulated some $80 Billion now through the efforts of its tens of thousands of employees, investors, and executives. It uses that money to invest in great new technology. Big innovations often require big money. Apple spends tens if not hundreds of millions of dollars, and the efforts of thousands of people to bring new products to market. It has earned all the money to do that, through voluntary, mutually beneficial relationships.

In the involuntary column, when the pharoahs built the pyramids, it was done by slaves, under the whip, worked to death with no choice in the matter.

Both "big" projects (the iPad, and the Pyramid) required lots of money and lots of people. But one was voluntary, the other involuntary. One was created through a nexus of the free choice of every participant; the other built from slave labor and coercion.
So, human beings want to do big things. It's part of our nature. Which type of society do you then want? Voluntary - or involuntary. Free, or slave? There really is no middle ground.

A corporation that unwisely invests its money, loses it. Through expenses - such as payroll, utilities, rent. While the people who receive these payments may benefit, they do so only for a limited time. It is not a self-sustaining social organization, it costs more to do this work (such as the debacle at Solyndra) than it generates, and it eats and consumes the human lives engaged in it. Continued against sanity, it would end in starvation.

A corporation that wisely invests its money generates ongoing returns. Those same beneficiaries will benefit for the long term. And the corporation generates profit, which can be used to invest in new ventures, generating even more economic growth, more employment, more value for everyone.

This is the difference between the government's recent "stimulus" efforts - which unthinkingly threw money at unsustainable businesses - and the work of (for example) Apple, which not only continues to grow, continues to employ more people, continues to produce more products, continues to produce more profits - not a dime of which was given to it coercively through taxation.

Since government handouts are often assigned on the basis of political favor and not true long-term economic benefit, ask yourself again: what kind of society do you want? Voluntary, or involuntary?

Government cronyism and wasted billions is the result of involuntary big things.
Corporations in a free market will produce voluntary big things.
Before you protest and attack corporations, be sure that you know what it is a corporation is, and how it works.

What is a Corporation, Anyway?

With all of the little neo-hippies on Wall Street (and the President) bashing "greedy corporations", holding signs that say "A corporation is not a person", perhaps we should take a little detour from our political path to discuss what, precisely, is a corporation?

Indeed, a corporation is not "a person". That is obvious to even dullards such as the Occupy Wall Street crowd.

A corporation is a nexus of a number of people organized around a common goal. It is a type of social organization that provides incredible benefits to civilization.

Corporations align the interests of:

owners/shareholders/investors

workers

customers

Of course, the purpose of a corporation is to produce a profit for its owners. There, I said it. PROFIT. Profit is not evil, profit is not "exploitation". Profit is a goal of all rational, productive activity. Without profit, you are toiling in order to live hand to mouth, on a day to day basis. To profit is to produce more than your immediate needs - in a durable way that can be used in the future (this is one of the functions of money). Profitless civilizations are those that live in squalor, constantly on the edge of starvation. Every single person who works, does so to profit. You earn more than you spend, in order to save, so that you can buy a car, buy a house, send your children to school, to be able to continue to eat should you become injured; or just to retire. Profit is how we provide for uncertainties in the future. Profit is not evil; profit is one of the highest and noblest goods, it is one of the great achievements of our civilization. To accumulate wealth is to make your life easier, safer, more pleasurable.

But while that is the goal of the owners of the corporation, in order to profit, they must take reality into account. That reality is that in order to do big things, they need help. In addition to capital and vision, you need artisans, engineers, line workers, drivers, accountants, and marketing.

The beauty of capitalism - true capitalism, unfettered by government cronies, special favors or special restrictions - is that it is entirely voluntary. Noone forces you to buy an iPad - Steve Jobs isn't standing behind you with a gun. You voluntarily give Apple your cash because the iPad is worth more to you than the cash. You profit in every voluntary trade you make in such a society. In these trades, your profit is not measured in cash - it might be measured in productivity, in being able to do things you couldn't do before - but it is real nonetheless.

Similarly, the help the owners need - the corporation's employees - work through their voluntary agreement, which they decide on a daily basis. There are no slaves in corporate America, the socialist claptrap about "wage slaves" notwithstanding.

All these parties come together through this nexus, the corporation, trading cash, capital, labor and production, in order to achieve the things all these various parties want. It is a win-win-win scenario. There are no "exploited". Everyone who trades voluntarily through the nexus of a corporation profits, or by definition they wouldn't. Anyone who doesn't think they are getting a fair deal may trade with someone else. Think the iPad is too expensive? Buy any of dozens of Android tablets. Boss is a jerk? Get a different job - or start your own company. Or go whine on Wall Street if you think that will get you anywhere (it won't).

It's important to identify this essential nature of a corporation - as a voluntary assemblage of people. A corporation is not a person. It is, however, *people*. A group of people.

Just because some people choose to work together for a common goal, doesn't mean they magically lose their freedoms - their right to property, their right to speak their mind. Some would have it that corporations cannot put a political ad on TV discussing a topic that is important to them. But remember: a corporation is just a group of people. If you ban a corporation from political speech, you are saying that *this particular group of people is not entitled to its political speech*. That is no different than saying "We don't think blacks should be able to put political ads on TV".

It also doesn't mean that this group of people we call a corporation has special rights that individuals don't. They should not (though they sometimes do) get special tax breaks, special legislation, special treatment under the law. But in true capitalism, such would not occur. A corporation would have no more -- and no less -- rights than any individual. It would have exactly the same rights as its members - to speak, to trade, to profit, because a corporation is merely some people doing these things together.

In short - if I have a right to speak, I have a right to speak in partnership with someone else. The Constitution guarantees the right to peaceably assemble, and to petition the government for a redress of grievances. We have the right to do these things together.

Now of course, corporations do not vote. Voting is not a fundamental human right in the same way that my life, liberty and property are. It is ok to deny this "civil right" (which is to say, a privilege in the construction of a particular government) to the paper entities which are corporations. And I don't think anyone has suggested otherwise.

But allowing people to form corporations *specifically* for the purpose of raising money to spread their political ideas - this levels the playing field in the marketplace of ideas. Imagine a company formed to solicit $20 donations from millions of people, just in order to put ads on TV to support their political ideas. You might call such a corporation.. MoveOn.Org. Or the AFLCIO. Except that MoveOn.org and the AFLCIO oppose your right to do the same thing they're doing. They don't like the competition, and hope to use the government's power to *force you to be silent*. They are huge outfits that spend tens or hundreds of millions of dollars a year. Before the Citizens United court ruling, you had no chance to go up against them. Or even to go up against any bogeyman "big corporation" you don't like. But now, you can.

So, in a very narrow sense the Occupy Wall Street hippies are right. A corporation is not "a person". But it is people, who have the same rights together that they do apart. It is precisely collective exercise of individual rights that gave power to Ghandi, the US civil rights movement in the south, the anti-slavery movements in the 1800s. Keep that in mind the next time you think it's ok to muzzle "corporations".