Wednesday, October 19, 2011

"Corporate Greed" is only a symptom

Occupy Wall Street has successfully avoided publishing a list of demands, which is wonderful. However, one of the more common messages is "End Corporate Greed". While this may be useful as a rallying cry, it's worth asking the question "Why is there corporate greed?"

Is it just because people are greedy? The 10th commandment seems to think so.

Is it because these corporations are run by Jews, and Jews want to screw over everyone else? The American Nazi Party seems to think so.

If you agree with either of them, then I probably can't convince you otherwise. That's fine, we're all in this together, and I believe we can find a way to take care of each other. However, if you're open to other points of view:

An obvious answer is "capitalism". Suppose you & I are competing for the same customers. I behave greedily (pollute and break up unions to maximize profits), while you attempt to behave ethically (clean up after yourself and treat your workers well). My prices are lower. Investors will drive my stock price up, while yours crashes. You go out of business and I am a darling of Wall St. This is "success" in the free market.

Thus, the "corporate greed" we see is merely a symptom of the system that corporations participate in, not a feature of a few "bad guys" at Goldman Sachs or wherever.

You might argue that the big corporations don't participate in a free market - they use their considerable lobbying power to gain market protections for themselves (while letting the rest of us fight each other over every penny). However, the same principle applies: in a competitive system, where each player seeks to maximize their own self-interest, the only sane and successful tactic is to attempt to influence lawmakers in your favor, at the detriment to others. So, maybe the "free market" label isn't accurate, but clearly the greedy behavior is still merely a symptom of the system we create.

Going a little more deeply, note that nearly all businesses depends on debt. They borrow money, do business, take a revenue, and pay off the debt. A creditor will only loan your business money if they believe you can turn a profit. That is, only profit-generating activities are likely to gain access to money. Restoring salmon habitat, or sitting at the bedside of a dying person is not profit-generating so it's very hard to get paid to do that. Building machines that clearcut forests faster is profit-generating, so it's easy to get money for it (at least as long as there's a demand for lumber).

So, if we are concerned about the effects of "corporate greed", we're going to need to go much deeper than, say, the Volker Rule or prosecuting some CEOs. This is too much to fit on a cardboard sign, but it's important that we be willing to look at underlying causes as the Occupy movement continues.

I accept that you may disagree with my analysis of the causes; even if you agree, you may notice that it's possible to go deeper still. There's plenty of room for more study here.

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