Reader "Geoff" writes an excellent question that more or less stumps the "expert" today.
Been reading through your blog, must say I'm a fan! Here's my questions:
Especially during the recession, we keep hearing how awful large corporations are, and how their recklessness and greed has brought unspeakable harm to taxpayers. From finance to the auto industry, even the food industry, everyone seems to be in it for a buck at the expense ... Read Moreof everyone else. Are there any rays of corporate hope out there? Any large, for profit companies who have maintained business ethics, remained transparent when dealing with consumers and have generally not been evil? Or is capitalism really this bad...
Well, ok. It is the way of James Call: Expert to smarmily summarize the answers to questions about which a lot can be written. So I'm going to do just that.
In terms of our current crisis, which is a big one, the truth is that most corporations are actually just fine. Or rather, no worse than usual. Corporations, after all, allow economies of scale that tend to raise our standard of living and employ buttloads of people.
I would argue, and many Keynesians and socialists would as well, that our severely crippled Labor situation in this country is the big problem, NOT the size and scope of corporations per se.
One needs to distinguish between Finance and Industry. Finance has been out of control, and is the "villain" of our current times. People tend to get up in arms and conflate auto manufacturers, for example, with big finance. The two are extremely different. Big Auto actually manufactures a product that is sold on the market. Maybe it doesn't do so very well, and maybe we should be relying on mass transit instead of the automobile now that it's the 21st century for fuck's sake, but still, until the government steps up and invests seriously in mass transit on a national scale, which it seems to lack the will to do, we're still going to need cars. Therefore, the auto manufacturers are making something we need. And employing people at pretty decent wages to do so. I'd consider the Big 3 auto manufacturers, as flawed as they are, "useful" and even "not evil".
Not so much Finance. Of course, without loans from banks business couldn't run. But Finance has been involved in a series of escalating shell games for decades now, essentially one financial institution at a time combining assorted loans and selling them to OTHER financial institutions, and claiming a profit. They aren't actually -producing- anything, they're just shuffling loans around.
And they're also -mixing loans up-, so that the good cannot be distinguished from the bad. So now ALL the major financial institutions essentially have money in every aspect of the economy, rather than having more limited portfolios. This is why institutions become "too big to fail".
So the challenge of our times to is to make financial institutions, moreso than other corporate entities, specifically: 1.) More transparent, and 2.) Smaller, so that when they fail, they don't pull down the whole fucking economy with them.
I could go on, but honestly, there's a much better source for easy-to-understand financial and economic analysis on the internet, and it's The Baseline Scenario, which I read daily, and has great introductory articles on how modern finance, and our economy as a whole, works. Still, in a nutshell: regardless of the very-difficult-to-follow complexities of finance, it all kind of boils down to a shell game and a ponzi scheme played with the entire economy as the stakes.
Finance used to be fine when it was regulated, and the government explicitly forbid severe gambling with the lifeblood of the economy. I can get into this further, later, if you'd like... I'm trying to keep this short and simple.
One last point on finance: It used to be a much smaller portion of our overall economy. Financial earnings in 2007 constituted 40% of GDP, I believe, but don't quote me on that. Used to be in the ballpark of 10-15% back in the 50s-70s.
As for whether corporations are evil, in general? I'd have to say that the corporation is geared towards maximizing profits for the shareholders, and that social concerns, externalities, etc., simply don't matter to the corporation, and that is why the government must IMPOSE such considerations on large corporations. This seems to be true across the board. I'm flummoxed to think of an example where this is not the case.
That's not to say that Google, General Motors, General Electric, Lockheed Martin, etc., can't be useful. It is to say, however, that whether or not they're Good for Society is of no concern to the shareholders, and that's why they have to be closely watched, and swatted down upon occasion.
Even a worker-owned company like Saturn (which I wish I knew more about, honestly) still produces cars, which may not be in the best long-term interests of society, right?
I'm rambling at this point. It's an excellent question and I wish I had a more concrete answer. If you take away anything from this blog post, make it this: at this point in time, the corporations that make your cars and computers, despite the sheer amount of oil they consume, or the companies that manufacture your tennis shoes, despite the child labor they may be employing, are less destructive to the world than Finance, which has us all by the nuts and really seems to care not one jot.