This page presents a summary of Corporate Systems. Detailed posts are in the Corporate Systems category. (This full category/subcategory URL is the more desirable way to get there, but it may not work.)
The systems diagram below represents my original analysis of corporate influence on society. The diagram was later rearranged to separate health, political, and government systems, to produce the Detailed View in the Social Systems Analysis page.
This version of the diagram has been retained, at least for the moment, partly to display the complexity of the interplay between subsystems, and partly for the sake of a few details that were left out of the rearranged version.
This diagram shows the interlocking forces that produce long-term losses from short-term gains. Where Marx Went Wrong summarizes the way in which aggregate corporate activity — where each corporation is acting in its own self-interest — has the cumulative effect of destroying the very market the corporations want to sell into.
This diagram provides much more detail, displaying the interlocking forces that causes short-term profits to become (much later, after a time delay) long term losses. Of course, the system could work in reverse. But since corporations are forced to optimize for the short term (as discussed in the next section), things don’t generally work out that way.
Unfortunately, the way our financial systems are structured, corporations are virtually forced to optimize for the short-term, even if the long-term consequences are adverse. The situation looks like this:
- Interest rates charged for the short-term loans a company needs to operate depend.
- If the stock price drops relative to other stocks, those rates go up.
- If the interest rates go up, profits are reduced, and the stock price drops.
The situation can obviously produce a downward spiral where it is difficult to recover from an initial dip in the stock price. A tailspin like that is hard to get out of, so the best medicine is prevention.
Prevention, however, means doing anything and everything necessary to preserve short-term profits — even if the long term consequences are negative, as indicated in the preceding section.
As long as the company is expanding, finding new customers and new markets, the long-term effects are offset by growth. The company can therefore “kick the can down the road” — as long as it is growing.
That situation forces the company to keep growing and expanding. Since there is no steady-state where it can remain comfortable, it is always either expanding or contracting, growing or shrinking.
But the need to expand — and to produce short-term profits in the process — causes the company to do many things that are much less than ideal for society. For example, a company might re-brand the product, change its packaging, or launch a new and sexy advertising campaign — exactly none of which provides any additional benefit for society!
But at least solutions like those are (mostly) devoid of negative consequences. But the other solutions like offshoring and payroll reduction have adverse effects for society, as seen previously.
Enforced growth also causes a corporation to devour resources even more voraciously than it otherwise might have, which is also less than ideal for a society that is heading into an era of increasing resource shortages in the areas of food, water, and oil — to name a few.