Don’t demonize corporations and the rich

Published 9:23 am Wednesday, January 17, 2018


Contributing columnist

In the wake of tax reform, some people are obsessed with corporations and the rich. I suggest they “check their envy” and re-examine their understanding of evolution. Modern corporations are the product of hundreds of years of natural selection.  Simply put, hating corporations is like hating bunny rabbits or baby ducks.

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I don’t hate skunks just because their body odor offends me. So, why hate something just because it exists, and you can’t see rhyme nor reason why it exists? Furthermore, envy is one of the “seven deadly sins.” You can’t hold on to the moral high ground while gripping spite with both hands.

Competition between firms in market economies leads to “survival of the fittest.” New entrants, who study the behavior of surviving firms, tend to survive. Scores of other firms fail, not to be copied by others (unless it is those who persist in trying to make socialism work). Hence, the economy becomes populated by those who copy the successful firms. We have come to call successful firms “corporations.” We could call them “bunny rabbits” or “baby ducks?”

These “corporations” are subject to random economic shocks that test their ability to adapt. On occasion, the random shocks disrupt the entire competitive climate; for example, technology waves such as the steam engine, computers and the internet are examples. You are witnessing this right now as the internet revolution flows through the retail industry; online sales grow and “brick and mortar” sales decline.

In addition, it is ungracious to assert that people become rich only because of the public goods provided by the government; the government does not provide the public goods, the taxpayers do. First, the government could not pay for those public goods without the rich who pay the taxes. That is a demonstrated fact. A better case can be made that: “the rich make public goods available for all of us to enjoy by paying taxes.”

Second, to become rich, one must work much longer hours, bear considerable risk, and endure considerable anxiety and frustration worrying about their business. Those who think all profit above the minimal belongs to the state only demonstrate their ignorance about where prosperity comes from (see accompanying YouTube video).

On the flip side, corporations are animated by the people they employ, so they are capable of all sorts of saintly and unsavory behavior. Like all organizations, they are generally governed by well meaning individuals. From their behavior, I would suggest they do not handle political power very judiciously and the larger they are, the more political power they have.

During the first half of the 20th century, the US followed a vigorous anti-trust policy. That seemed to keep the large corporations of the day in check. I doubt the revival of anti-trust would be sufficient to solve our current problems, since today’s large corporations dwarf our grandparents’ large corporations. On the other hand, it might be a good start.

Big government and big corporations are a toxic mix. This is particularly true when the big corporations are tech companies who have unparalleled access to our most private information. This is very dangerous. Since 9/11, we have surrendered far too much of our privacy rights to improve our security; recent political scandals suggest people in the government have abused their access to private information.     

An economy without corporations (or some other comparable “baby ducks”) who are free to compete cannot achieve secular economic growth sufficient to raise people out of poverty (as they have for the past two hundred years — see accompanying YouTube video). Therefore, the Soviet Bloc economies ultimately collapsed and Venezuela’s’ economy recently imploded.

True, sometimes these “baby ducks” grow up to be rampaging cave bears that are a serious threat to the tribe. The moral of this story is the adult bears must be domesticated before they are useful to the tribe. Therefore, if you hate corporations, you might as well hate bunny rabbits and baby ducks, for all the good you’re doing.


The video referenced in this column is viewable on YouTube by visiting this URL:

Bob Martin is Emeritus Boles Professor of Economics at Centre College.