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I just watched "The Corporation", which
humorously wonders about the
personality
of corporations, since a company, from a
legal standpoint, is a person. They find
that a typical large corporation's profile
fits all the diagnostic criteria of a
psychopath.
While I believe in the fundamental
correctness behind the capitalistic
approach to economy, I also think that
governments have a strong responsibility
to intervene when a company's greed
(which is good) has predatory effects on
the population. It's odd that while many
precautions are taken to split political
power between (supposedly) mutually
independant institutions in order to
prevent tyranny from taking hold, little
thought is given to bridling the power in
the
private sector.
Large companies that post numbers in
the
hundreds of billions of dollars wield
comparable power to that of
governments
of mid-sized countries, and yet their sole
leaders are undemocratic elites, and their
only responsibility is to their
shareholders
(who incidentally often happen to be
the elites themselves).
In my mind, there is no single industry
that truly requires such massive sizes,
and
huge companies are a menace to society
rather than a benefit. Hence my proposal
for the Corporate Cap: a set of financial
metrics which a company may not
exceed
at any given time. A company reaching
the
CC would have to segment its activity
among several new, *mutually
independant* companies.
By itself, the CC would encourage
companies to stagnate at levels just
beneath the cap, and thus be detrimental
to global economic growth. This effect
can
however be counteracted by giving the
cap
economic incentives, for instance by
granting newly "capped" daughter
companies a competitive advantage for a
limited period of time, in terms of taxes.
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But this cap would have to be agreed by all countries as the really big companies (who are big because of the advantages of scale) are all multinationals. |
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// this cap would have to be agreed by
all countries // Yes, ideally it would, but
a top-down, one-shot approach is not
required. This could work as a
grassroots initiative, where first a group
of countries say that they only allow
companies under the cap to operate
within their borders. If the approach
proves beneficial to those countries,
others will follow suit. |
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I might add that while scale is certainly
an advantage up to a point in terms of
production etc, the largest companies
are way past this justification, and are
using their size for pressure on
governments to obtain favorable
conditions. Now that is one advantage
of scale I would not want any company
to have. |
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As much as global corporations are widely believed to be more powerful than local governments, that is not the case. As long as the governments retain control of their armies, they will retain the upper hand. |
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Witness the humbling of Citigroup (then the biggest corproation in the world) by Japan, or the seizure of corporate assets by numerous tinpot tyrannies around the world. Even the US government was not above destroying Arthur Andersen when it got ticked off by the firm. |
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The corporate menace is indeed a scary one - but the checks and balances inherent in government are also available to protect us from corporate greed. |
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1) Anyone can own shares, and as such, potentially gets a vote.
2) These companies have customers, who can choose to, or not to buy their products. |
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// the US government was not above
destroying Arthur Andersen when it got
ticked off by the firm // You mean after
AA supported (thanks to their size) what
was arguably the biggest financial fraud in
history? The Enron debacle sent
shockwaves through the world economy,
and affected tens of thousands directly.
Now, if those companies had been
capped... |
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// own shares // I think that most
shareholders are in it for the money and
will trade shares without emotional
attachment. |
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// not to buy their products // Well, it's
true that fair trade products are popular
with some middle and upper class
customers, but on the whole they
remain a niche, and at the end of the
day it's the product quality or price, and
not
your agreement with the company's
practices, that seals the sale. |
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Re owning shares - imagine if, at the end of each year, every citizen spent $50 on shares - purchasing shares in those companies they felt they had an interest in - yes it would be dispassionate share trading, but for those who were passionate, having purchased those shares, or even acting as a proxy for other share owners, would be able to create a notable voice within the boardroom. |
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And re products, customer boycotts and other emotion-driven buying behaviour have been shown to have real results. |
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The success of VHS over Betamax had little to do with product, quality or price (ok, it didn't have much to do with ethical behaviour either) but another example might be McDonalds who, after having lost millions in custom since the whole obesity thing, have switched to selling brightly coloured salads. Other companies regularly go through the investigative mill, and are (somewhat) curtailled from going too far overboard in coorporate excess due to fear of losing their customers. |
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Too many ways to beat the system. Corp. Z owns Corp. Y, which owns Corps. X and W, which own ..., etc. Either that or just cook the books. |
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I say tax the hell out of them instead. |
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[zen tom] your point about McDonald's is well taken, but it's easy for people to understand the relationship between unhealthy food and obesity. But for most industries, their actions aren't that public or easy to trace. I'm all for something inexorable like this. And the taxes too, per [nuclear hobo] |
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The history of governments taking on the private sector before events force them to does not inspire me. |
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//a company, from a legal standpoint, is a person// Except of course when it comes time to find somebody responsible for wrongdoing, in which case the corporation becomes a nearly impenetrable defensive shield that protects the 'persons' behind it. |
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Actually, this is a good way to prevent monopoly/oligopoly. Plus in an ideal free market there is a large number of participants each with a small share of the market. |
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The downside of course is we lose large economies of scale. Or do we? Couldn't companies cooperate with each other to achieve these?
Funnily enough this might well make capitalism more efficient, although whether thats a good thing or not is another issue.. |
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Seems like a good time to resurrect this idea :) |
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Hmmm, interesting timing! |
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What would the difference have been if this had been in effect over the last 3 years or so? (Assuming we're linking the concept of the idea with banking crisis etc) |
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Would a whole bunch of smaller banks have fared (faired?) better than a more select number of massive banks? |
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On a tangential note, I'd like to see figures of how much of the world's banking power is currently under State control. |
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There would for instance not have been the bombshell of the collapse of Bear Stearns. Smaller banks specialising in housing markets would still have gone bust of course, but there would not be a sudden panic-ignited illiquidity after, say, a Lehman sized implosion. |
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The main advantage in my opinion, though, is that bankers would have less massive influence on government and parliament, who are being suspiciously lenient with the greedy clique leading us to societal collapse. |
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Maybe companies should be allowed to grow until
they become large enough to support lobbyists,
and then -- whack -- time for a little trim. |
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But in order to make microchips, or cars, or skyscrapers, a huge amount of capital is needed. If you have that kind of money, hiring lobbyists is pocket change. So is making electoral campaign contributions. |
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//The downside of course is we lose large economies of scale. Or do we? Couldn't companies cooperate with each other to achieve these?// |
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But once multiple businesses are on the same project, they are effectively the same business. They collectively have the same incentives for rent-seeking as a single business. And they are already working together. |
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// But once multiple businesses are on the same project, they are effectively the same business // |
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Not exactly. They would each have their own balance sheet. They could review each others' finances to see if they can trust each other. And they would, because they know that if one partner gets shut down by a regulator, the entire group is be in trouble. |
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// in order to make microchips, or cars, or skyscrapers, a huge amount of capital is needed // |
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You're right. The CC would have to be industry-specific. In the semiconductor industry, the cap would be much higher than in, say, the syrup industry. |
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