Corporations redefined?

Who gets to define what a corporation is or should do?

By Morf Morford
Tacoma Daily Index

“Man is an animal that makes bargains: no other animal does this – no dog exchanges bones with another.”  - Adam Smith

Our cultural identity is wrapped around our economic system. Capitalism, defined by Merriam-Webster as “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market” literally defines how most of believe the world does – or at least should work.

We should be able (and free) to spend, invest or waste our own resources any way we might choose – and prepare to live with any consequences of our own actions or inactions.

Most of us, at least in theory, support or even advocate a free market.

Or at least as free as possible. Or maybe as “free” as  might be convenient.

But a “free market” is as evasive as the perpetual end of the rainbow.

The closer we look at “free markets” the less possible – and maybe even desirable – they become.

Shifts in government policy regarding the gold standard and the needs of bootleggers (who dealt primarily in cash) during Prohibition led to the necessity of the 1,000 dollar bill  during the height of the Great Depression.

Shifts in government policy regarding the gold standard and the needs of bootleggers (who dealt primarily in cash) during Prohibition led to the necessity of the 1,000 dollar bill during the height of the Great Depression.

Virtually every source of energy and transportation that we take for granted as we drive to work or fly to an exotic vacation spot is (heavily) subsidized.

In other words, almost nothing actually costs what we pay for it.

We would have very little, or even no oil, gasoline or natural gas without massive subsidies from our mutually contributed tax dollars.

And did you know that farms (and farmers) are heavily subsidized? Most subsidies go to farmers of basic foods like grains, such as corn, wheat, and rice.

Between 2001 and 2006, farms subsidies averaged about 15 billion dollars a year – and by most accounts, about 15% of that was wasteful, unnecessary, or redundant.   (1*)

Between 1995 and 2010, farm subsidies had ballooned to an average of $52 billion a year. Of this, more than 6 percent went toward four “junk food” components: corn syrup, high-fructose corn syrup, corn starch, and soy oils – major contributors to America’s obesity problem.

Half of farmers receiving subsidies made more than $100,000 a year. Between 1995 and 2016, the top 10 percent of farmers received 77 percent of subsidies. The top 1 percent received 26 percent or $1.7 million per recipient -https://www.downsizinggovernment.org/farm-subsidy-report-reveals-reverse-redistribution?.

Virtually all of our food is food is subsidized – and this leads to all kind of distortions in pay, cost and availability.

Ever wonder why an apple costs so much more than heavily processed snacks or “junk food”? You can thank government subsidies.

A nation is not made wealthy by the childish accumulation of shiny metals, but it enriched by the economic prosperity of its people.  - Adam Smith

The price of gas at the pumps is something we Americans like to complain about. If you travel abroad – especially Europe – you will notice how much more expensive fuel is. Yes, it is taxed (ours is too, in Washington – at about fifty cents a gallon) – but it is also heavily subsidized.

Oil companies, for years, have received at least 4 billion dollars a year (though many industry observers say that this is actually closer to 10 – 40 billion dollars).

For a local connection, Boeing was (by far) the recipient of the largest government subsidy in the state of Washington – https://www.washingtonpost.com/blogs/govbeat/wp/2015/03/17/the-united-states-of-subsidies-the-biggest-corporate-winners-in-each-state/.

There is far more to the destabilizing effects of subsidies, but my point is to focus on how far from a “free market” we have come.

We have become used to subsidized food and fuel, and will probably complain if the subsidies stop, but we should be more aware of our economic system and how un-capitalistic it has become.

Photo: Morf Morford

Photo: Morf Morford

The Business Roundtable

Not long ago, the Business Roundtable, a lobbying group composed of many of the nation’s leading CEOs, including Apple’s Tim Cook and Amazon’s Jeff Bezos, announced a decision to change the definition of the “purpose of a corporation” from solely or even primarily short-term shareholder profit to having a commitment that its actions benefit all stakeholders, including its shareholders, but also including its employees, communities, (present and future) customers and the environment.

Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains.  - Adam Smith

To put it mildly, this view brings into critical focus the traditional capitalist goal of maximizing profits at any cost to a more holistic and long term goal of looking out for the well-being of everything the company’s actions affects.

The current scandal of Sackler family fortune largely built on opioid addiction is only one example of the cost of neglecting these enduring principles.   (2*)

A return to, or even a reflection on what capitalism is (or was) has prompted me to insert a few salient quotes from Adam Smith (1723-1790), who is commonly considered as ”The Father of Economics” or ”The Father of Capitalism”.

Our economic system should, above all, serve all of us and provide opportunity to as many as possible, and like that traditional Boy Scout principle, leave the world a little better than we found it.

“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”  - Adam Smith

Adam Smith, even in the 18th Century, saw the rich potentialities as well as the possible pitfalls and hazards inherent in a capital-based (as opposed to a top-down economic system subject to the arbitrary whims of a king or noble class).

Perhaps like any other area, we should return to our foundational documents. They just might rescue us from the excesses, fears and obsessions of the current market.

Governments, corporations and consumers live in an atmosphere of an uneasy truce, where none of us fully trust any of the others. At some level, we are allies and adversaries at the same time.

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”  - Adam Smith, Wealth of Nations

(1*)    http://www.washingtonpost.com/wp-srv/nation/interactives/farmaid/

(2*)    https://www.newyorker.com/magazine/2017/10/30/the-family-that-built-an-empire-of-pain