What’s Wrong with American Corporations?

Corporations represent the most powerful instrument of progress ever invented by man. But a chainsaw is powerful, too. The problem is, if you don’t have control of that chainsaw, it will just as easily rip off your leg as do useful work. There is no question that corporations need to thrive. But people need to thrive, as well. So clearly, corporate profits need to be balanced against public need.

The Good News

Corporations are arguably the most powerful instrument of progress ever invented, because they provide a way for one person to help literally millions of others and, in return, to receive help from others. That help comes in the form of tools, technologies, and materials that save time and effort, forming a self-reinforcing of ever-improving capability.

The measure of that capability can be calculated in terms of time saved. As late as 60 years ago, in the 1950’s, it used to take hours to type up a message, and days for it to be delivered. A spreadsheet for a major corporation literally took months of double- and triple-checked calculations. Now, those things can be done in minutes.

Computer-aided design systems, robots, and artificial intelligence system, meanwhile, allow problems to be solved in days that could barely even be addressed, before. Information that might eventually be found in a library can now be searched and read online in a matter of minutes. Instead of being limited to a local professional or instructor, online videos now provide how-to-do-it instruction for every topic under the sun.

As a result of our increased bandwidth and capabilities, we are experiencing an unprecedented and accelerating explosion of productivity. Technologies that used to change once in a lifetime, at best, are now completely upended in a matter of months — and sometimes in a matter of weeks.

The Bad News

The bad news is that is corporations and their owners who reap the benefits of the increased productivity. Americans work just as long as they used, before unions ushered in the 40-hour work week. And in general, Americans work 50- or even 60-hours a week.

Americans take pride in that fact, and in our productivity and creativity — but the fact of the matter is that the explosion of productivity has done precisely nothing for the average American, who’s real income in terms of buying power is much less than it was in the 1950’s.

Advanced productivity hasn’t saved us any time, then. What about monetary rewards? Who reaps those benefits? The answer is: The owners of the corporation.

Of course by “owners”, we mean stockholders. And we’re all stockholders in those corporations, aren’t we? Well, no. Marxist Richard Wolff who founded Democracy at Work points out that 75% of the stock in American companies is owned by 1% of the population. One percent. There you have the perfect definition of what it means to be in the 1%.

Now granted, it takes a fair amount of work and some risk-taking to make money in the stock market. But if you’re an average American, you have maybe a few thousand dollars to invest. (More if you’ve been contributing to a 401k but less, on average.) Someone in the 1%, on the other hand, has maybe a few million to invest.

So you do the work, take the risk, and make the investment. You gain a little. Someone in the 1% does the same work, takes the same risk, and makes a ton of money. What’s wrong with this picture. You both did the same amount of work. You both risked (let’s say) the same percentage of your total wealth. But the pay scales are massively different.

The standard defense of the rich is that they “earned” their money. Once upon a time, that was the case. That was back in the early days, when America really was the Land of Opportunity — when everyone started out roughly equal, and you could make hay by the sweat of your brow.

But today, an aristocracy of wealth has formed, by virtue of inheritance. That is how 1% of the population can come to own 75% of the stocks. That is the only way it can happen.

That aristocracy derives virtually all of the benefit from that explosion of productivity. So we make better and better tools that allow us to do more and more — but only 1% of the population benefits. And in addition to deriving virtually all of the economic benefit, that aristocracy is now firmly in control of the American government — which means they are pretty well running the world. (That wouldn’t be bad, except to the degree they are running it for their own benefit, rather than anyone else’s.)

A Matter of Control

The problem, of course, is that corporations are effectively “out of control”. Remember that 1% who own all the stocks? Guess who sits on the board of directors for those corporations. That’s right, they all sit on the board of directors for each other companies, voting themselves hefty pay raises.

“Yes, that’r right Mr. CEO. We have all agreed that you should be guaranteed to make $10m next year. But if the company does really well, we’re going to give you an additional $2m bonus.” Man! Talk about incentive! Run the company into the ground and you can still walk away with $10m. What a deal. Sure wish I had a job like that.

That’s not true of every major corporation, of course. But it is fact that many of the largest aren’t being controlled in any meaningful way by the board of directors.

What’s that you say? How about government? Sadly, no. Not nearly as much as you might think. With the Security and Exchange Commission losing its funding, they’re not acting as much of a watchdog. And with lobbyists writing 90 percent of the legislation that Congress votes on, it’s corporations who are pulling the strings, not the other way around.

Yes, corporations do have a ton of red tape binding them. It would be good to streamline those processes. But the next time an earthquake hits, you can be grateful for the “red tape” building codes that leaves most of our structures standing, so occupants survive, instead of becoming a pile of rubble, as happens in so many other parts of the world.

Of course, a voting advice system that uses social media effectively would disarm the lobbyists, but we don’t have a system like that, just yet. So the government isn’t really in control.

Of course, if corporations were capable of exercising self control, they might just prioritize people over profits. But the fact of that matter is that it just doesn’t happen. “People”, whether in the form of employees or local citizens, just don’t count, compared to paying customers and profits.

The “profit over people” principle may not be a stated policy, but it is nevertheless real. Of course, corporations are legally enjoined from committing outright fraud, and from inflicting immediate harm, but lacking any kind of controlling influence, nothing prevents them producing slow and irrevocable harm on a widespread scale.

Here are some of the consequences that fill our newspapers every day:

As Richard Wolff notes, no American employees, sitting on the board of directors, would vote to move their jobs overseas. Nor would they vote to fire nearly everyone in order to preserve the huge profits stored in the bank — profits that will get divided up among the owners (founders, investors, and key executives), without so much as a dime going to the employees.

One other consequence deserves mentioning, as well. The U.S. has a dire need for a large number of political reforms. But every last one of them is opposed by the Big-$$ interests who are currently in control of government. “The system works just fine, thank you. We like it the way it is.”

Major Corporations are only BARELY Taxed

Another problem with American corporations is that the larger they get, the less they pay in taxes. Of course, some people claim different. But they’re wrong. Some of them honestly believe that corporations pay a huge amount in taxes. But they’re still wrong.

On paper, the U.S. has the highest corporate tax rate in the world. But in reality, corporations doing business in America pay the least taxes, among all industrial nations. In fact, corporations here pay less than some third world nations, competitively speaking.

The larger you are, it seems, the less you pay. Some of the largest actually pay nothing whatever in taxes. Those corporations take advantage of American infrastructure, and sell to American buyers, but do nothing whatever to contribute to either. It’s a good business model for them. It’s not so good for the American people.

Details of those claims are discussed in America’s REAL Corporate Tax Rate. But the fact that corporations pay so little does not stop them the lobbying. No, Sir! They use the paper rate as justification for even bigger tax breaks.

The Consequences of an Underfunded Government

Because corporations are paying so little in taxes, the government has less and less money to spend. But that’s a good thing, right? If you’re a corporation, you like that. Here’s what happens

  • The Security and Exchange commistion is underfunded, so it can’t exercise oversight over Wall Street.
  • The EPA is underfunded, so it can’t prevent destruction of the environment for the sake of profit.
  • The FDA is underfunded, and is prevented by Congress from eliminating the toxins in the food supply that are making medical practitioners and drug companies rich.
  • Academic research is underfunded, so instead of creating edible tomatoes that grow wild, corporate-funded research creates tomatoes that withstand stronger, more profitable pesticides — tomatoes that won’t reproduce on their own, and which can only be grown from profitable seeds.

Of course, right now Donald Trump is in office. (The omission of the title is intentional.) Never mind a lack of funding. He has put people in charge of each of those departments who sole purpose is to destroy them. So funding may well be the least of our problems, in the very near future.

Corporations as “People”

The fiction that corporations have the same rights as people has probably done more harm to the American public than any other principle enshrined into law.

As a “person” a corporation can contribute to political campaigns, which has allowed corporations to “game the system” in very real ways, to the extent that both Republicans and Democrats are now two wings of the Big-$$ Party. All of which explains how corporations and the ultra-wealthy came to be in control of the American government.

Those contributions give them a seat at the political table that allows them to block all avenues of reform, and to reduce restrictions, and to vote themselves ever more favorable tax laws.

But the problem is that a corporation is not a person. A corporation can’t be put in jail. It can’t even be terminated for failure to act in the best interests of the public.

A corporation can be made to pay fines, but they’re all too often a tiny fraction of the enormous profits that were made while wreaking massive harm. And a corporation can outlive actual people by many generations, allowing them to to grow far larger and more powerful in the process.

The European Model

Europe provides a decent model for how to achieve a decent balance between corporate needs and the public good. America, in contrast, is learning its lesson the hard way. The sad part is, that most of America is largely unaware of the learning process it is engaged in.

For one thing, a corporate board of directors is required to have members of the workforce, and members of the local community. Here, a CEO gets $10m if the company fails, with $2m “incentive” bonus, in case it happens to go well. You won’t see that happening in Europe, anytime soon.

European governments take care of their citizens, too. They can, because their rules place people on the board of directors. And since corporations aren’t allowed to contribute to political campaigns, so they can’t fight against laws like the one in Germany, where a company is not allowed to declare bankruptcy, liquefy its assets, and take them to the bank while throwing employees out on the streets. (Instead, they are required to pay their employees until there are no more assets left to pay them. As long financial investors get much of their money back, what could be more fair?)

It is noteworthy, that European countries are derided as “socialist”, because they pay 50% of their income in taxes. Americans, on the other, pay very nearly the same amount, when you combine federal, state, local, and sales taxes. But we Americans pay for our own health care, education, and child care. And we foot the bill for large parts of our unemployment and retirement.

The Outlook

The European model was put in place by FDR’s advisors, after he was unable to get his “Citizen’s Bill of Rights” enacted here in the U.S.. It is also noteworthy that European social systems are under attack by right-wing politicians who claim that “reform” is needed, “in order to compete with America”.

In other words, the corporate owners who already control American government are working to take ownership of other governments around the world. One can only hope they’ll be kind when they achieve the worldwide domination they are aiming at.


–resources: Who to Invade Next
–Why You WANT Socialized Medicine

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