Question Raised in Glenn Beck Interview

[botounami]

Sorry, I'm unsure as to where this post is best-suited. It's really about capitalist theory. Move if necessary!

I'm writing because, while watching Ron's interview with Glenn Beck, an issue came up that I've been wondering about since 2007, when I first became a Paul fanatic.

Glenn asked it in a pretty roundabout manner, but the basis is quite simple.

"If corporations are unregulated, what checks corporate greed?"

The basic idea here is that we allow each individual the freedom to do what they want to do. You have free markets with competition. The government subsidizes nothing. But then, what happens when certain people just get incredibly rich? What happens when those people begin controlling entire industries?

We have countless examples of this in history, perhaps the best example being brought to light by Upton Sinclair's "The Jungle". There are times when it seems like regulation is necessary in order to "force" basic human morality. I think we can all agree that not everyone is kind, moral, and caring. Imagine someone like that with billions of dollars.

I know that many wealthy people give to charities and are generally quite helpful (Gates, Buffet). But citing a few people who give a small percentage of their wealth to "charity" doesn't really address the question. What's to stop corporations from running over a relatively helpless population?

Thanks so much for reading and hopefully for giving me some insight. This is the one thing that will not stop bothering me!

 

[pcosmar]

"If corporations are unregulated, what checks corporate greed?"
!

Corporations are created by a collusion between Government and Business.
They are created by Regulations. The purpose is to protect individuals behind corporations from liability and to hide monopolies.

It is an artificial construct. NOT a natural result of a Free Market.

 

[sailingaway]

State fraud laws cover a lot. That is what Enron executives were convicted of.

 

[liberty2897]

I am a very new Ron Paul supporter, so I can only speak for myself. I have been thinking the same thing. What stops big corporations from causing damage to environment, people, etc without regulation? I think the answer is that with more freedom, comes more personal responsibility. As consumers, we need to vote with our dollars. Of course this only works if people are willing to pay more for something based on principle. I'm looking forward to reading responses to your question.

 

[Krugerrand]

I am a very new Ron Paul supporter, so I can only speak for myself. I have been thinking the same thing. What stops big corporations from causing damage to environment, people, etc without regulation? I think the answer is that with more freedom, comes more personal responsibility. As consumers, we need to vote with our dollars. Of course this only works if people are willing to pay more for something based on principle. I'm looking forward to reading responses to your question.

It's the regulations that say a company may produce x amount of pollution and those who are victims of that pollution can then do nothing about it.

 

[Rothbardian Girl]

Well, corporations and "robber barons" are the direct result of state intervention into the marketplace. Unfortunately, capitalism itself has always been intertwined with the state, because capitalism as we know it grew out of feudalism, which definitely was an economic system based heavily on state intervention. People sometimes wax nostalgia about the good old days of "laissez-faire" before the Great Depression, but the simple truth is that laissez-faire has never existed and never will as long as there's a state in place.

Pcosmar definitely summed up the point brilliantly - that corporations are not a natural feature of a hypothetical free market, they are artificial constructs.

Edit: I am a big supporter of free-market environmentalism, so this question is slightly embarrassing to ask, but doesn't the libertarian method of dealing with pollution (suing based on the fact that one's property rights were violated) deal with pollution only after the fact? In the case of truly damaging pollution, that might be too little, too late, particularly if, such as in a hypothetical case, the chemical is difficult to remove from the groundwater and such. There are also questions I have about preserving endangered species, especially those that are not seen as profitable, but may be essential to the environment anyway. Those are questions for another thread, though. I didn't mean to derail anything.

 

[freshjiva]

The basic idea here is that we allow each individual the freedom to do what they want to do. You have free markets with competition. The government subsidizes nothing. But then, what happens when certain people just get incredibly rich? What happens when those people begin controlling entire industries?

We have countless examples of this in history, perhaps the best example being brought to light by Upton Sinclair's "The Jungle". There are times when it seems like regulation is necessary in order to "force" basic human morality. I think we can all agree that not everyone is kind, moral, and caring. Imagine someone like that with billions of dollars.

What's to stop corporations from running over a relatively helpless population?

Good questions, and there are good answers.

In a free market, where no individual or organization receives any subsidies or special incentives from government, everyone must produce and everyone must compete.
1) Corporations must compete with other corporations to produce a quality product/service at a better price.
2) Individuals must compete with other individuals to provide superior labor (either physical or intellectual) at a better price.

However, just as corporations have pure freedom, so do individuals. If a corporation becomes too powerful, individuals have the power to unite and collectively bargain (i.e. free market labor unions). We all know how powerful collective bargaining can be.

The free market works both ways: in favor of the corporation and in favor of the individual. Because of this perennial battle between the two forces, no corporation would ever get to the point where they completely dominate and enslave everyone. Sure, there are examples of extremely powerful corporations who dominate industries, but if they achieved that by superior managerial skills combined with a better product at a good price, who ultimately wins? The people!

Just as a product is a commodity, so is labor. If one corporation offers too low pay and unsafe working conditions, there are plenty other places to work.

 

[erowe1]

One of the great things about freedom is that it's the only system that motivates greedy people to direct their energies into providing the very best services they can to other people at the lowest cost.

In a free market, any greedy person (corporation or not) who wants to make more money will find that laziness, stupidity, shoddy workmanship, cutting corners, and stubbornness, all punish them with lower profits, while intelligence, hard work, quality, and innovation, all reward them with greater profits.

It's when central managers manipulate the market and compel its actors using other incentives that greed causes them to do what is not in the best interest of customers.

 

[Kade]

 

[acptulsa]

Let's get concrete.

Wal Mart goes to a village government, and says, give us a break on water bills and property taxes and we'll employ a thousand people. A mom and pop store goes to the same and asks for the same, and promises to employ two. Who gets the sweet deal? Now, Wally World, based out of Arkansas, then puts not one but eight local mom and pops out of business. Does the town benefit or lose?

Case two: Monsanto used their pet Secretary of Ag Tom Vilsack to push through a sweeping law about a year and a half ago which essentially makes it a federal offense to sell home-baked goods. Every prepared food offered for sale in the nation must be prepared in a federally-approved kitchen. This is the same law that came within a whisker of making farmers' markets illegal. Now, who is this good for besides Sarah Lee?

You guys seem to be suffering from the delusion that regulations level the playing field. Some do, but these days most (especially those passed on the federal level) tilt the plaing field. And this just isn't a good thing.

 

[bwlibertyman]

All good answers.

To the environment answers. One can always buy more land to where there could be a buffer between the early pollution areas and your main area of living. People might say "well what if I can't afford all this land?" I would say "are you suggesting you get things for free because you are what? somehow human or white?" I really don't know how to come at the argument that people should get things just because they are what there? Sorry, I did it again.

I think your main concern is proactively battling pollution. I'm not sure one needs to worry. I envision in a free land that there would be a pretty good deturent from polluting the environment. This of course would come from the result of pass law suits that drove costs up and made those ventures less profitable.

Also, why shouldn't I be able to be greedy on my on property? I have no problem with rothbardian girl selling 500 dollhair watermelons. I'm not going to buy them. Of course the argument against that is well what if it's something that people need, say water or gas. The easy answer is go somewhere else and the other easy answer is that I will probably start a business selling cheaper goods.

This is all probably common sense but I like to watch myself type. END.

 

[pcosmar]

How about getting rid of the Regulations that allow Corporations to exist.

Like Corporate personhood for instance.

 

[Elwar]

Think of an unregulated market being something like e-bay stores.

Imagine Company A becomes huge and corners the market on pet clothing. They contract with chinese sweat shops and get the clothes at pennies on the dollar and sell for cheaper than all of their competitors.

You have the cheapest pet clothing through them and if customers like the quality they give good ratings.

Ok, now imagine that business becomes "greedy". They start cutting the quality and raise the prices.

Then comes company B who starts offering better quality at similar prices because Company A is getting to "greedy".

Company A starts getting some low ratings because of the quality so their rating might be around 98% while new Company B is satisfying all customers with a 100% rating. Newbie comes to shop and sees the two ratings and the similar prices and starts buying from Company B.

Do you think Company A will start offering better quality to try to get back to 100% or just become more greedy and raise their prices and offer even poorer quality clothing?

Should the government create rules and restrictions which would be in place to make Company A stay at the original quality and make it difficult for Company B to start up as a business or let the market handle it?

 

[Hotchney]

A compelling thought I had was that, as we deal with pollution as a property rights issue, Environmental groups could buy up property near polluters and sue the pants off them when their land was eventually polluted. Or, it'd put a check on the corporation from polluting.

Environmental Clubs like the Appalachian Mountain Club purchased huge swaths of land throughout new england back in the day to preserve it. Everyone wants a clean environment and I think there are tremendous social incentives to maintain one.

 

[YumYum]

Forget corporations. Let's look at this way: A multi-billionaire comes to my county and wants to put everybody out of business, and own all the businesses. How does he do it? He provides equal or better products or services at a lower cost, even it if he takes loses on his new operations. Eventually, the smaller businesses can't compete and either sell out or go out of business. No corporation here; no regulations or subsidies. Just a case where the guy with the most money eventually wins the poker game.

 

[VBRonPaulFan]

Forget corporations. Let's look at this way: A multi-billionaire comes to my county and wants to put everybody out of business, and own all the businesses. How does he do it? He provides equal or better products or services at a lower cost, even it if he takes loses on his new operations. Eventually, the smaller businesses can't compete and either sell out or go out of business. No corporation here; no regulations or subsidies. Just a case where the guy with the most money eventually wins the poker game.

yeah, and then he tries to jack up prices to recoup his losses. which makes it profitable for new people to come into that field to try and compete. it's a cyclical thing. yeah, it would be shitty for those previous people to have gone out of business... but that sort of model is a self-destructive one for the wealthy individual. he's fighting an uphill battle.

 

[silverhandorder]

How about getting rid of the Regulations that allow Corporations to exist.

Like Corporate personhood for instance.

Corporations will still exist but in a much weaker form. The regulations that shift liability from individuals just make it more attractive but it is not the only reason someone might make a corporation.

 

[hugolp]

Forget corporations. Let's look at this way: A multi-billionaire comes to my county and wants to put everybody out of business, and own all the businesses. How does he do it? He provides equal or better products or services at a lower cost, even it if he takes loses on his new operations. Eventually, the smaller businesses can't compete and either sell out or go out of business. No corporation here; no regulations or subsidies. Just a case where the guy with the most money eventually wins the poker game.

Ehhh, no. Just how a guy with a lot of money loses it all. How?

This acutally happened in XIX century. There was an american entrepreneur that started selling chemical products. He was so cheap and efficient that he got his company running. At some point he decided to expand to Europe. But in Europe the germans dominated the marketplace for this chemical products and they did not want the american competition. To combat this guy they decided to go to the USA and start selling the chemical products for a loss, so cheap that they though thy could put the american producer out of business. They did not care if they lost money for a while to acomplish it. You know what the american did? He started buyin the german product in the USA, since the germans were selling it there cheaper than what costed producing it, and send it to Europe where he kept selling it cheaper than the german price for Europe. The germans were very surprised by the demand for this chemicals in the USA and the money they were loosing. The american guy just kept buyin it. At the end the germans had to give up and arrenged with the american that they would retire from the USA and allowed him to sell in all Europe except in Germany. The american accepted. [This is from a Tom Woods speech]

There is actually no case in history of this kind of behaviour working. Its just a story of terror from the statists.

 

[YumYum]

There is actually no case in history of this kind of behaviour working. Its just a story of terror from the statists.

Right here where I live, Wal Mart did this very thing; putting every mom and pop business out of business on the town-square. Every time a new paint store or fabric store tries to open up, Wal Mart lowers its prices and puts them out of business. It doesn't take a genius to figure out that if someone comes to town with one hundred billion dollars, he will eventually own the town. Another thing, you like the fantasy of a free market utopia where everyone is honest and loving and caring. Sorry, but those same loving, honest, caring individuals can be bought for a price. If you don't believe me, just look at the drug cartels, which is an example of a "free market" with no subsidies and regulations.

edit: the bottom line is that people can be bought. You don't have a central government and you have free trade and everybody's happy? Don't worry, wealthy people can change all that.

 

[Krugerrand]

Right here where I live, Wal Mart did this very thing; putting every mom and pop business out of business on the town-square. Every time a new paint store or fabric store tries to open up, Wal Mart lowers its prices and puts them out of business. It doesn't take a genius to figure out that if someone comes to town with one hundred billion dollars, he will eventually own the town. Another thing, you like the fantasy of a free market utopia where everyone is honest and loving and caring. Sorry, but those same loving, honest, caring individuals can be bought for a price. If you don't believe me, just look at the drug cartels, which is an example of a "free market" with no subsidies and regulations.

Wal Mart also gets tax breaks and other state-sponsored advantages. That means corporatism is failing not free markets.