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INDEPENDENT COUNTRY
Corporate Greed
Is it really the cause of all our problems?

by James Leroy Wilson
January 17, 2008

One reason I had for some optimism in the Ron Paul campaign was the possibility of anti-war Democrats crossing over to vote for him in the primaries. This hasn't happened, partly because the Democratic race is competitive, and partly because of rank ignorance: the extremist neoconservative John McCain is getting more votes from self-described "antiwar" voters than is the antiwar Ron Paul.

But there is more to it. For instance, there are some who would never vote for Paul. Aggressive war, torture, and warrant-less searches and seizures may be bad, but to such folks, anyone who would abolish the Department of Education and return control of the schools to the people must be downright evil.

And then there is the Corporate Greed argument. To many people, corporate greed is to be blamed for every ill under the sun. What is the cause of low wages? Corporate greed. High prices? Corporate greed. Pollution? Corporate greed. Unemployment? Corporate greed. Trade deficits? Corporate greed. Corrupt politics? Special-interest (i.e., corporate) money. The War on Iraq was to enrich Halliburton and protect the interests of Oil Companies. In their eyes, Ron Paul, and the small-government direction he would take the nation, would leave the door open for corporations to screw the people and rape the environment even more than they do now.

As a libertarian, one might expect a defense of corporations from me, or even a "greed is good" argument. But that's a caricature of the libertarian position - what Kevin Carson calls vulgar libertarianism- which confuses government-granted privileges with a genuinely free market. The modern corporations is like the institution of slavery: it could not exist without The State. Steve Scott explains,

"I remember working for a very small company once. It was owned by two men who were partners. They incorporated their business while I was working there. I'll never forget how they explained their company's incorporation process. In becoming a corporation, they essentially turned ownership of their business over to the state in return for special perks and other advantages while retaining effective control of the business. They were allowed to do many things as a corporation that they couldn't as a partnership. They also were granted a limitation of liability as a corporation that they never had as a simple partnership. With limitation of liability and special favors, backed by the threat of force, a corporation has a greater ability to profit from the disadvantage of others."

Ron Paul is actually the candidate most likely to cut corporate welfare and open all industries to greater competition by easing taxes and harmful regulations on small businesses. Indeed, Paul would take us on the road that would abolish the corporation as a State entity. Corporate America understands this. That's why it never supported the Libertarian Party. That's why corporations are not raising money or skewing media attention in favor of Ron Paul - if anything, they're suppressing the coverage Paul would normally get.

All of that said, is Corporate America really to blame for so many ills?

American corporations have the highest tax rates, and the most complex tax code, of just about any nation in the world. Indeed, some economists estimate that tax-related legal and accounting costs exceed what corporations pay in actual taxes, and these expenses lead to higher prices both at home and abroad. This makes it harder to compete, and makes it all the more tempting for corporations to out-source jobs and set up headquarters in a "tax haven" country. When they do that, we call it Corporate Greed, but was it Corporate Greed that created our insane corporate tax structure to being with? Unlikely. It was, rather, the very complaints of "corporate greed" and "the rich not paying their fair share" through the generations that made taxing corporations so popular in the first place.

Corporations do benefit from Big Government spending, and here critics can't have it both ways. How can we rail against the Military-Industrial Complex but then turn around and say, "Of course we must defend Israel and South Korea," as if they are incapable of defending themselves? We can't complain that we spend too much on defense - which in turn enriches corporations -but then always be ready to send the Marines to "save Darfur" or fight for some other fashionable cause. If you believe America should police the world, then it is your own ideology, not Corporate Greed, that is responsible for the Military-Industrial Complex.

Here's another example of Corporate Greed that probably isn't. A pharmaceutical company develops a drug and gets a patent for it. But the drug has to stay off the market for several years because of the FDA's clinical trials and approval process- even as the time clock on the patent ticks down. There is only a limited time that the approved drug has a patent-protected monopoly on the market before it faces competition from generics - which didn't have to put any expense into Research and Development and can therefore sell the drug for a low price. Therefore, before the patent expires, the company sells the drug at a high price to try to make a return on its investment. Then people shout, "Corporate Greed! Price Gouging!"

But if one suggests that we'd have much lower prices if we got rid of both patent law and the FDA, the response would be that we need patents to give companies an incentive to develop new drugs, and we need the FDA to make sure the drugs are safe. (Both points are fallacious, but that's a separate discussion.) But when the drug companies actually take advantage of the patent incentive as we say we want them to do and create life-saving drugs, we get angry about the price. We can't have it both ways.

Indeed, we criticize corporations, and call for closing tax loopholes. But then it sounds like a good idea to provide "tax incentives" for corporations to do something or other, and that complicates the tax code further. We complain about corporate welfare, but then call on the federal government to protect American jobs – which is corporate welfare. We complain about corporate welfare and then think it's a good idea to subsidize those who develop alternative fuels – which is corporate welfare.

We call for regulations to govern corporations, and then Enron buries its activities in tens of thousands of pages of government-required paperwork, and our reaction is, you guessed it, more regulations. The compliance costs of the Sarbanes-Oxley Act is undoubtedly a major contributor to the recession we are now in. If greedy corporations run our government, how did Sarbanes Oxley ever get passed? It is actually anti-corporate sentiment that prompted Congress to rush through such a disastrous law.

In any case, whose "greed" are we condemning? The employees of corporations? The CEO's, who are accountable to the Directors? The Directors, who are accountable to stockholders? In the end, isn't it us? We rail against the Corporation, but we dis-associate our populist diatribes from the performance of our 401k's.

There is a lot wrong with modern corporations, but let's remember that they creatures of the government and not "private" parties in a free market. And critics of corporations overlook government's role in causing economic problems, namely our system of fiat money and giant budget deficits. At least Ron Paul is identifying causes and proposing a way out; everyone else seems to be re-arranging the deck chairs on the Titanic.



About the Author:
James Leroy Wilson blogs at Independent Country and writes for DownsizeDC.org. Views expressed here do not represent the views of Downsize DC.


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