Capitalism VS Corporatism: Your Thoughts

[federalistnp]

I was in Europe for two weeks recently and had the time to listen to some sound advice from a more libertarian British economist, while also listening to some US and Europeans talk about Capitalism as if it is inherently evil and given to greed. They criticize a misconception of capitalism; a straw-man capitalism. Somehow we need to set the record straight.

I've heard Ron Paul make a distinction in congress, yet this idea was left at the abstract level and never broken down into digestible ideas. The idea of real capitalism as opposing corporatism was been missed by young liberals and others who think that capitalism is akin to something nasty. Blog articles are somewhat easy to come by when googling and the one listed below expertly addresses the issue. However, we need to reach another audience. The new message should address ethics, and lay out examples and pragmatics; not economic theory written for the choir.

http://www.lewrockwell.com/gregory/gregory64.html


What are your thoughts?


Mine? Corporatism was bred from the creation of the Federal Reserve and political favors to large business and wealthy business that began moreso at that time and continues to this day. It has meant the destruction of the cottage industry, mom-and-pop operations, small business, and indepdent farmers everywhere.
We are living in a feudal age now where the lords are the chairs of large corporations, and the serfs are everyone else submitting to feudal oligarchy. The huge success and domination of oligarchical business was won by deception, lobbyist bullying, and backroom deals. Their capitalist success was not won on fair terms or by excellence fitting a genuine self-made Rand antihero.

I am for dog eat dog as long as the competition is based solely on who has the more excellent idea or product; not who has more lobbying power. Capitalism and the free market must be given back to the micro-markets and the consumer must again reclaim control lest we forever submit to perpetual false choices from the Feudal lords of Corporatism or from the lords of Socialism and Humanist Dogma.

We are free to choose our own destinies. This right should not be given to large corporations or the government, but instead the government, in accordance with the constitution should protect the general welfare of all markets and not just those who give large donations, and not those who favor a particular social agenda.

 

[Acala]

Corporations

The corporate business form itself generates problems by separating management, ownership, and liability:

Since management is not the owner of the business, it has no long-term commitment. Corporate managers are motivated primarily by making the current books look good so the manager looks good to prospective future employers. What the business looks like in five or ten years is of no concern to the manager because they will have moved on. As a consequence, high-level managers put effort into mergers, acquisitions, and divestments that make the books look good and spend little or no effort on providing better services and products.

Because managers and owners (stock holders) don't care about the long term, they don't care about employee loyalty or happiness. They also don't care about customer loyalty or satisfaction. They don't care about the relationship to the local community. And they don't care about their impact on the environment. Of course there are exceptions to this, but the general incentive for corporate owners and managers is to maximize short-term profits and ignore long-term consequences.

Since neither the managers or the owners are personally liable for the costs incurred by, or damage caused by, the corporation, there is an incentive to act recklessly. If you can make profit now and push the cost down the road, good! Because when the costs come due, the business will be under new management and may have new owners (stock holders) as well. This is one reason that corporations take on so much debt. Even if the corporation suffers losses now, the managers walk away with their fortunes intact, as do the shareholders unless they only own stock in that one company. This is rare since diversification is the by-word in stock investing.

When a business is owned by human beings, the assets of the business are eventually split up and dispersed when the owners die. You might have a generation or two that keep the family business together, but eventually they tend to be broken up or sold off. This keeps the resources in circulation through the market, always being directed toward efficently meeting the needs of consumers. But corporations are immortal. That means corporations can accumulate wealth and property for centuries, getting bigger and bigger all the time, exercising ever greater economic power, gobbling up ever-greater market share, and finally outlasting the competition rather than outperforming.

Corporations also can buy assets and resources with newly-created stock. In essence, corporations print money, or a money substitute, and use it to acquire resources. A large corporation can buy a virtualy infinite number of smaller businesses by paying off the owners of the smaller businesses with newly issued stock. This constributes substantially to the trend of corporations to grow massively large.

So it is in the nature of the corporate business form to promote short-sighted, reckless conduct that ignores employee and customer satisfaction and loyalty, ignores the happiness of the community, promotes "paper" gains rather than improvement of products and services, and accumulates property and resources indefinitely.

Those are characteristics of corporatism, not the free market.

The answer is simple - elminate the personal income tax and keep the corporate income tax, lowering the former and raising the later until corporations become unprofitable and business activity reverts to human ownership.

 

[heavenlyboy34]

It is important that those of us who believe in absolutely free markets continue to help people understand real vs phony capitalism. I'm glad you helped in the education process, OP.

 

[federalistnp]

The corporate business form itself generates problems by separating management, ownership, and liability:
...
Those are characteristics of corporatism, not the free market.

The answer is simple - elminate the personal income tax and keep the corporate income tax, lowering the former and raising the later until corporations become unprofitable and business activity reverts to human ownership.

GREAT response. I enjoyed reading this and was glad to be a part of rational discussion.
Could this not also be addressed in legislation that prevents or eliminates the following:

Corporate Law and Structure: Change the law so that greater transparency of financial reporting is required when ownership is through Public Offerings. Give shareholders immunity while placing proprietorship like responsibility on the chairs and chief officers.

Business lobbyists: The House and Congress is enough representation. NO third party groups should be allowed to lobby, aka influence, policy. Individuals are welcome to call or contact their representatives, but group funded.


Maybe this is too Hamiltonian, but if government and law is to be used to do something, it can be used to protect the ability of the real market to work effectively and without bought out advantages currently afforded only to the largest companies.