Notes From Babel

Corporate Abuse, and Why Government Is Not the Answer to That, Either

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Upon watching The Story of Stuff, I was reminded of how many people believe, probably without much reflection, that corporations are evil, and that the government’s job, naturally, is to rein in their abuses. With the premise, one can hardly dispute that corporations breed many inequities. (We will leave aside the fact that, while the corporation hums along making ungodly sums of money for a select few, it also happens to provide an unparalleled structure for human innovation, production, and employment.) Introducing more government, however, is a cure worse than the disease.

To begin, one must keep in mind that corporations are artificial. There is a basic problem with artifices, as they are wont to create just these kinds of problems.
But where an artifice is so unqualifiedly effective at improving wealth and overall standard of living, adhering to a Jeffersonian “agrarian” paradigm seems quaint at best. It’s the tower of babel problem again — can’t deny the implicit human need for progress.

So, we came up with the idea of corporations, and they work great for innovation, production, and distribution. So how do we deal with the inequities involved? Because yes, there are inequities. First, let’s test our attitude regarding inequities, because my contention is that we Westerners are far more concerned with them than is appropriate. So for example, imagine your brother possessed the natural ability to run faster than you; would it be equitable to twist his ankle so as to shrink the delta between your respective top speeds? Of course not. Some inequities cannot be removed without violating a more fundamental law. They are damnum absque injuria — a loss for which human law can provide no remedy.

Now let’s move to the economic context. If you are blessed with the Midas touch, a shrewd business acumen, what duties do you have to those whom you employ, whom you contract with, whom you sell to? The common law of contract and tort developed a fairly effective way of providing predictability, enforceability, and equity to all of these players, although certainly not perfect. And as our economy grows and the complexities of business, technology, and social needs mount, so do the apparent inequities. This means that the government should step in, right?

The concern is the same as whether something should be done to slow your brother down: by what right does a man, or a group of men acting in concert, to strip a benefit from another man? Again, the focus is not on the inequity — we can agree that it is unfair that some are born with great ability and some are not — the focus is on the damage done when we act in the absence of legitimate authority. When government redistributes wealth, it is wrong not because it redistributes poorly, but because there is no law governing the manner of the redistribution. It is arbitrary, and therefore evil in itself, no matter the result.

For this reason, I approach the problem differently than most law and economics buffs, who stress the implicit efficiency of pure, free markets. I believe there is merit to that view. But as I suggested earlier, having employed so many artifices in our economic system, it makes little sense to talk about “pure” markets.

Thus, the best the government or anyone else can do is (1) promote a virtuous society, and (2) improve the collection and dissemination of information about the products and services we buy. In this way, inequities can be decreased by the same natural mechanism that production is increased: human reason.


Written by Tim Kowal

February 21, 2009 at 9:05 am

Posted in Politics

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