[Home]  [Headlines]  [Latest Articles]  [Latest Comments]  [Post]  [Sign-in]  [Mail]  [Setup]  [Help] 

Status: Not Logged In; Sign In

Trump says the 12 Day War is over. Iran starts the ceasefire. Israel joins 12 hours later.

Iran Reportedly Agrees To Trump-Backed, Qatari-Mediated Ceasefire With Israel

Making Mitochondria at any age for free

Israelis moved into underground parking lot 4 stories below

Tim Walz is [totally not] royally SCREWED.

(MAJOR THREAD)China's property crash has erased $18 trillion since 2021. That is more than the U.S. lost during its entire financial crisis.

All HELL BREAKS LOOSE in Middle East as Iran RETALIATES (Attacks U.S. base in Qatar)

Construction set to start on $4B Red Sea Bridge between Saudi Arabia and Egypt

Review of Israeli civilian damage

The Big Beautiful Land Grab: Technocrats Stand To Profit As 250 Million Acre Bonanza Hidden In H.R.1

Computer Engineering Grads Face Double The Unemployment Rate Of Art History Majors

What the Hell is That? (US Lebanon Embassy has 5,000 staff)

Scott Bessent & George Soros:(defeated by Hong Kong and China)

How China is Helping Iran Stand Against Israel (Sent fuel and parts for 800 missiles)

China Just Pulled the Plug on Israel's Defense!

MAJOR ESCALATION! IRAN STRIKES BACK, PUTIN ISSUES MAJOR THREAT TO ISRAEL AND U.S.

Iran Issues New Grave Warning to Trump, U.S.

Iranian Store Shelves are Full in Spite of Bombings

You can't make this up (Mexicans want Hondurans to go home.)

Barbara O'Neill - How to clean your home without toxic chemicals

Guess who banned 5G where they live?

The Real Cause of High Blood Pressure

Iranian Parliament Backs Strait Of Hormuz Closure, Oil Market Braces For Turmoil

Doomsday economists stunned as Trump policies defy predictions

D-Day | How One General Turned Disaster Into Victory (WW2 Documentary)

Satellite Imagery Flags "Unusual Activity" At Iran's Fordow Nuclear Site Days Before U.S. Strike

Chiropractor working on a giraffe and the giraffe loves it

Why the U.S. Fears Iran More Than Any Other Nation – Morgan Freeman

We had timely moved all strategic materials to secure locations. Uranium is still fully under our control

Trump 'Doesn't Give a Sh*t About The People Of Gaza'


Author! Author!
See other Author! Author! Articles

Title: Corporations are not Free Market
Source: Opednew
URL Source: http://www.opednews.com/articles/Co ... rryl-Hermanutz-110718-126.html
Published: Oct 21, 2011
Author: Derryl Hermanutz
Post Date: 2011-10-21 14:36:35 by Turtle
Keywords: None
Views: 122

Market fundamentalists, who believe that unhindered market forces will generate optimal socioeconomic outcomes while market management will invariably generate perverse outcomes, fail to recognize that large corporations are engaged in nothing other than the "management" of very large chunks of the economy. Corporate "governance" is no different than government "governance".

In 2008, for e.g., Exxon Mobil's gross earnings were $408 billion, while the GDP of Venezuela was $403 billion. Exxon's managers "manage" more economic resources than does the nation of Venezuela. Yet market fundamentalists believe that Exxon is a 'virtuous' free enterprise business subject to market forces, where the nation of Venezuela is an 'evil' government managed economy.

If Exxon's managers are not deliberately "managing" their $408 billion corporate economy, then what are they being paid to do? How is managing a $408 billion "private economy" any different than managing a $403 billion "national economy"? If anything, Exxon's managers exert even tighter managerial control than does Venezuela's government. How can anybody think managing a $400 billion economy is a "free market" activity?

Scale matters. When corporations are larger than nations, then corporations are no longer free market actors subject to market discipline but are in fact managed economies enjoying market power. If a corporation is destroying your nation by transferring your jobs to other countries and gaming your tax system, that is more like an act of war by an enemy nation than it is the behavior of one of many "friendly" companies competing within your national economy.

In fact both the President and cabinet of Venezuela, and the CEO and board of Exxon, are hired "bureaucrats", not free enterprise owner-operators. Venezuela's government purportedly acts in the interests of its stakeholders, the people of Venezuela. Exxon's governors purportedly act in the interest of their shareholders. Like most large corporations, Exxon's managers take 10 to 100 times as much personal income out of the company as Venezuela's governors take out of their country.

Many corporate bureaucrats are far worse parasites on their companies than most politicians are on their countries. The money taken by corporate managers as personal income comes directly out of the dividends paid to the company's owners, its shareholders. Corporate pay is set by management decisions, not by "free markets" as is the case with real competitive businesses.

If a small business owner's bad decision costs his company $50K in losses, that loss comes directly out of the owner's profits, which is his personal income from his business. If a government manager or a corporate manager's bad decision costs his country or his company a $50 million loss, the manager not only still gets 100% of his annual salary and benefits, but in the case of the corporate manager, he will probably get a bonus too for 'limiting the losses'.

Bureaucrat decisions are not subject to market discipline because, unlike free enterprise business owners, the bureaucrats do not personally pay for their mistakes (though they certainly claim credit and expect to personally benefit from their successes). This is the criticism market fundamentalists level against government bureaucracies, that they are inherently inefficient because their decisions are not disciplined by market forces. But the same criticism applies equally to corporate bureaucracies, because the decision makers are never forced by "the market" to personally pay the full cost of their mistakes. If the decision maker is not punished, there is no "discipline".

The large scale of the corporate body, be it a country or a company, effectively insulates its managers from feeling the consequences of their decisions. Large scale corporate bodies do not function in free markets where their managers' decisions are immediately rewarded and punished by market discipline. They function in oligopoly or monopoly markets where they enjoy "market power" and/or legislative immunity, the power to impose the costs of their excessive pay packages and the cost of their business mistakes on shareholders, consumers or taxpayers.

Corporate managers, on Wall St for e.g., enjoy 'earning' $10-50 million per year in salary, bonuses and benefits, so they could afford to cover a $50 million loss that their company suffered just like the small business guy has to personally cover the $50k loss he suffered. It doesn't matter whose 'fault' the loss is. If a small business loses $50k due to bad weather or economic events that the owner had nothing to do with, he still pays the full $50k out of his pocket. That's the 'risk' side of operating a business in a free market. If the small business enjoys a windfall of $100k due to forces beyond the owner's control that he is luckily positioned to cash in on, that is the 'reward' side of the free market.

Corporate managers want to have their cake and eat ours too. They are guaranteed very large salaries and benefits that maybe the company can afford to pay in good markets, but they suffer no personal losses ever like a real free market businessman. This is because corporate managers are not free market players but are in fact employees, bureaucrats, 'economic managers" of large scale enterprises that enjoy market power, not free enterprise businessmen working in a truly competitive market economy.

Once we recognize that free market discipline does not function in the corporate sector, and it doesn't matter if we're talking about the public corporate sector (governments) or the private corporate sector (corporations), then we collapse the whole moral argument that private corporations deserve the same treatment as free enterprise businesspeople. If your personal income is not directly affected by the ups and downs of your company's fortunes, then you are an employee, a bureaucratic manager/worker, and not a free market player. If somebody other than you pays ANY of the costs of your excesses and errors, you are not a free market player.

In a republic it is the people who hold ultimate power over the managers they elect or hire to govern various aspects of their corporate affairs. Too much power for too long corrupts these managers, so they need to be constantly reined in or routinely replaced, or they become tyrants who believe it is their 'right' to rule their particular niche of the realm, their personal fiefdom. Politicians, corporate executives, and all of the bureaucrats under them, are subject to this corrupting influence of power because their personal incomes are insulated from the forces of market discipline.

Market fundamentalists are right. Market competition is the only real solution to the buildup of dominant powers that stifle free enterprise and the functioning of market discipline. Governments and companies must be kept too small to dominate. Big government and big business needs to be broken up and their powers dispersed among many players in a truly competitive market economy.

Americans believe in the morality of free markets, where individuals have the right to enjoy the benefits of their own successes, and the responsibility to suffer the costs of their own failures. If it is beneficial to have a safety net so failures don't suffer a social Darwinist death, that is up to the people to decide how to pay for.

If it is beneficial to have some very large government enterprises or companies as oligopoly or monopoly "national champions" as part of an industrial policy that serves the interests of the nation better than free market competition (the German and Chinese model), then it must be recognized that those companies and their managers and employees are not operating in a free market where their income is set by market forces.


Poster Comment:

Corporations are State-created entities and exist to enrich themselves, exploit the public and workers, and bleed their suppliers.

Originally they were supposed to serve the public interest. Maybe so, but that was about 250 years ago. Today, they have to be eliminated.

Post Comment   Private Reply   Ignore Thread  



[Home]  [Headlines]  [Latest Articles]  [Latest Comments]  [Post]  [Sign-in]  [Mail]  [Setup]  [Help]