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Tag Archives: economics
Many protesters in the Occupy Wall Street movement have roundly denounced any and all forms of capitalism as the source of all our present ills. That’s one of the reasons they chose Wall Street as the place to make their angst known.
But while they march and chant and propose lists of endless demands I can’t help but wonder, are those who are so outraged clear on who their enemy really is?
Its the wedding of a select few corporations to the government combined with a lack of accountability that is the problem. The father of capitalism, Adam Smith, was opposed to the notion of joint-stock companies which enjoy limited liability, enforced by the state (ie. the East India Company) for many of the reasons the Occupy Wall Street protesters are now upset. He didn’t believe corporations should be considered legal entities in themselves (from which we get the modern view that corporations are persons). And he was opposed to the separation of ownership and management which he rightly predicted would end up harming both the owners and managers.
So who was for this joint-stock system which has blossomed into what we have today?
Many of the Occupy Wall Street movement are openly sympathetic to socialistic notions. What those protesters likely fail to understand is that the same movement which supported socialistic economic policies also supported joint-stock companies because they believed that by allowing the common man to own stock he would have a better chance to become wealthy but in order to encourage the common man to take such a risk his liability needed to be limited. And Smith, among others, accurately predicted the problems that limited liability would produce. Its really not fair to place all the blame on CEOs for accepting golden parachutes when the real problem is that such a disconnected ownership structure provides the perfect environment in which to draft such contracts.
So if the protestors want to be consistent they need to read their history to understand that 1. capitalism is not their enemy nor the cause of the corruption they are rightly upset over and that 2. the fault does not lie solely with corporations in general (not all companies that are listed on the NASDAQ or the Dow Jones Industrial Index are evil) or even corrupt corporations but with the toxic mix of a select few corporations which enjoy government favor and protection.
What essentially needs to happen is for the Tea Party to mix their hatred of the government with the Occupy Wall Street’s hatred of corrupt businesses. I’m pretty sure the two would be pleasantly surprised at the result.
Here’s a funny video from 1949 on “What is a corporation?”
Many people today consider government regulation to be a necessary evil. Without government overseeing greedy corporations, the thinking goes, attention to quality, and especially safety, will degrade.
It is assumed that government is the only entity with the ability and motivation to look out for the interests of everyone.
To help illustrate how faulty the notion of government regulation being our saving grace is, let’s take a look at how the Soviet Union regulated the production of its most effective propaganda outlet, the common TV set. Keep in mind that the USSR had an interest in producing quality TVs in order to govern more effectively.
Soviet television sets tended to explode, because of faulty manufacturing. The surprising and alarming propensity of Russian receivers to blow up, and by extension the apprehension it causes in Soviet viewers, was one of the stranger features of Soviet life. By one estimate, sixty percent of all apartment fires in Moscow are caused by mass-produced Soviet television sets, which hada tendency to explode. Of the 715 apartment fires in Moscow in November 1987, 90 were blamed on exploding television sets, a statistic the Soviet press viewed as an alarming commentary on Soviet technology. Police said three television models notorious for defective wiring are being removed from the market, and millions of warning leaflets have been mailed to television owners.
Its true that markets aren’t efficient (in terms of the efficient market hypothesis ), but as inefficient as they are, governments are worse. It is a fallacy to think that a small subset of the market can do a better job than the whole market in ferreting out bad products.