In the first post of this series, I explained the danger to democracy as financial mega-backers choose our political candidates for us and then influence our votes. The usual source of their big money is big business. Now this second post will explain why big business strives to gain ever more control of government. In short, it’s just doing its job.
You may have heard the saying that the purpose of business is business. That simple statement reflects the whole story. Although business owners themselves might pursue other purposes in life, businesses have only one purpose, which is to make money. The job of corporations is to return value, which normally means money, to their investors. The corporate executives who achieve high financial returns for their shareholders are in turn highly rewarded. Investors want not only financial gains: they want them soon. If a business does not return enough value fast enough, investors move their money elsewhere. The business that they leave behind may shrink or shut down causing layoffs, abandoned buildings, lost tax revenue, and other costs to the rest of us. On a much larger scale, the economies of entire nations can be disrupted as investors move billions of dollars out of one country and into another.
You may have noticed that sometimes businesses do give, but they give in order to get. If they were just giving away value without expected return, they would be robbing their shareholders. Their giving is an investment. For example, a business might offer a prize drawing in which a small number of contestants will win while the thousands of contestants who provided their contact information will become sales targets. A business might create a foundation to support worthy causes and thereby gain valuable advertising, public relations, and tax benefits. A business might contribute to a political candidate with the understanding that upon election the politician will address its concerns. The same business might also donate to the opposing candidate to assure a return on its investment no matter who wins. Giving in order to receive is just another way for a business to pursue profit.
Without government controls, businesses can maximize their short-term profits. Without regulations, a business is not responsible to pay its employees a living wage. Indeed, given its purpose, it should pay the lowest wages that will still generate sufficient worker output. Business is also not responsible to provide a safe workplace beyond what is necessary to avoid lowered productivity from illnesses and injuries. It is not responsible to protect our natural environment although it may want to conceal activities that could provoke sabotage or boycotts against it. A business is not responsible to treat consumers fairly or to provide reliable products beyond what is necessary to maintain an optimally profitable customer base. A business may misrepresent itself or pay bribes in order to win contracts. Businesses will collude with each other and evolve into monopolies that can charge customers more money in the absence of competition. In short, without government regulations, a business is not responsible to behave ethically if it can make more profits by immoral or amoral behavior.
However, businesses are not left to operate on their own. In America, for example, they are subject to government regulations on minimum wages, working conditions, environmental protection, product safety, marketplace competition, ingredient disclosures, and so forth. Other laws allow employees to form unions. Employees and customers can sue businesses for mistreatment or for harm from faulty products. Anti-trust laws attempt to prevent collusion and monopolies. In sum, although there may be great variation from one country to another, businesses regulated by government cannot legally do whatever they want.
Compliance with so many regulations costs businesses a lot of money, which decreases profits. Therefore, they must strive to decrease problematic regulations and to arrange for regulations that will favor their profits. They can control regulations by controlling the regulators, that is, by gaining control of the government. Business has been pursuing the conquest of government for decades, or should I say for millennia. Do you remember Ronald Reagan’s famous declaration that government is not the solution to problems but instead is itself the problem? The problem for whom?
Governments complicate the pursuit of profit even more nowadays because business is international. The material resources, employees, processes, physical plants, investors, and customers of businesses are networked all over the world. However, that one world of business is divided into nearly two hundred sovereign countries. Each country imposes its own version of regulations and ways of operating. For example, one country may criminalize corporate bribes while another country may require them. Although the variation among countries also creates opportunities for profit, dealing with the kaleidoscope of national differences is complex, burdensome, and expensive.
To gain control of regulations in America, as mentioned previously, business interests have to find and fund amenable political candidates and then persuade us to vote for them. To that end, those business interests would like us to believe that what is good for their profits is also good for the rest of us. They are willing to deceive us if deceit would bring success. For example, they tell us that our country is overregulated in hopes that we will support their deregulation. Another fallacious business claim is that businesses and their executives are heroic “job creators” who should therefore be supported. However, the obvious fact is that jobs are created when very large numbers of people have more money to spend. Another fallacious business claim is that profits from business will “trickle down” to the rest of us. Maybe those of us who sell goods and services to shareholders and executives will get some “trickle down” benefit, but a much larger proportion of us will continue to lose purchasing power as the rich gain more. The “trickle down” argument seems especially arrogant by suggesting that we should be happy to get some sustenance dropped from the banquet tables of the rich. Another fallacious business argument is that the gains for the rich will be only one facet of the overall gains that will accrue to everyone. This argument hides the fact that the same business drive to maximize profits for its shareholders and executives will continue relentlessly to the detriment of the rest of us. Given the same pattern, the rich will get richer while many millions of others will be left farther behind. Unfortunately, such untenable, arrogant, and cynical business arguments cause many people to stand by idly while business takes over our government.
Here are some modern examples of the business profit motive in action. I think the purist example comes from 1994 when the chief executives of seven major tobacco companies swore under oath to Congress that they believed nicotine is not addictive. (You can watch that travesty at https://www.youtube.com/watch?v=MJBaBJawnSYA.) In other news, a giant chemical and seed company hired a consulting firm to develop a plan by which the company essentially could dominate the world’s food supply. Pharmaceutical companies have increased the prices of life-saving drugs beyond the reach of many people who need them while reaping corporate profits averaging between fifteen and twenty percent per year. Adding to those profits at our expense, our government has barred Medicare from negotiating for lower prices. Before the environmental regulations that are now being rolled back, businesses dumped waste into rivers to the extent that in 1969 a major river, the Cuyahoga, caught fire (for the thirteenth time). Before the Affordable Care Act, which is under attack, health insurance companies had the legal right to cancel the insurance of a paid customer if his or her health care became “too expensive”. These days, the financial services industry has been fighting against legislation that would require financial advisers to put their clients’ financial welfare ahead of their own interests. Leading up to the Great Recession of 2007, major lenders and investment banks adopted unsound business practices that took them and the world economy to the brink of collapse; and then they turned to us taxpayers to save them (and ourselves). Corporations and their politicians are still denying the existence of global warming caused by humans and are fighting attempts to make changes that would hurt their profits.
That list could go on and on. A business action that is planned and implemented by identifiable executives may harm millions of people, but no one goes to jail. Eventually, an offending business may have to pay a fine, which it can absorb as a cost of doing business. In the end, the net profit is still great.
Dave
P.S. If you want to receive notifications of future posts to this blog, scroll up this page using the slider on the right and watch the bottom right corner of your screen. A small box that says “Follow” will appear there. Click on that box, and enter your email address. Then an automated confirmation message will be sent to your email account. You will need to open that email message and click as indicated. It’s easy.
How It Works 