A few more lingering thoughts on corporations before we get to Capitalism.
A corporation is a creature of the state in every sense of the word. It must have the blessing of the state to exist. It must play by the rules of the state according to the industry it competes in. Depending on the industry, it is subject to governmental control through regulations instituted by departments such as OSHA, ATF, the departments of the treasury, transportation, and agriculture, the FAA, The Surgeon Generals office and any number of other governmental offices that have a measure of authority over most of the corporations in operation today. If you want to see where your tax dollars are at work, check this site out for a fairly exhaustive list of governmental agencies.
If you add to this direct control the national aspect of corporations and the huge sums of money that flow through the boards of these organizations, you see another connection between the government and the corporations, that of mutual financial benefit. If you have any doubts of this, revisit the details behind Enron, or any of these telling articles:
Two last points on corporations. According to The Pursuit of Wealth, by Robert Sobel, Corporations are a means to control the competition that threaten the business people’s existence. They evolved from pools and trust, a la The Sherman Anti-Trust act, and where originally called holding companies. They were a vehicle used to buy up competition and transportation positions that would squeeze out the competition’s ability to transport their products, specifically on railroads.
When they arrived on the scene corporations where not received by everyone with joy. Senator William Lindsay of Kentucky cautioned the members of the American Academy of Political and Social Science in 1900,
“We have reached the point at which the individual feels he can no longer compete with his incorporated rival, and where members of old-line partnerships are no longer willing to pledge their personal credit in competition with members of incorporated companies.”
In other words, the corporations were killing the small business. Walmart anyone? We’ll have to come back to that thought, but has anyone seen the gutted downtown areas of America’s small towns where Walmart has come in?
So how were the corporations able to get the upper financial hand? After all it’s just men running the organization. What makes it superior to a family business or local partnership?
One of the ways they out distanced the individual businessmen, was the means of raising capitol. A corporation can raise funds via a more liquid assets in the form of stock and they could do so beyond the actual value of the assets of the corporation. People would (and still do) pay a premium on the stock price based on what they believe the company will do in the future. First, just strictly from a biblical perspective, this is called gambling or speculation. I think one could make a strong case that this is not acceptable for a Christian.
Let me be clear, investing is where you purchase part of a company’s tangible assets and become a part owner in the company. There is hope for the future, but value for today. If the company goes under, you can sell the assets and receive your original funds back. (barring other risks) Gambling is where you pay for part of a company that is valued beyond it’s assets with the hope it will preform in the years to come. If this company goes bankrupt, there are not enough assets to pay the shareholders and you loose most of what you put up.
Back in the late 1800’s they called this process stock watering and according to Sobel, “to prudent investors of that day this seemed tantamount to fraud.”
“Depriving a [corporation] of its stock-watering feature,” surmised Senator Lindsay, “is almost the same as depriving a venomous serpent of its fangs.”
We are so steeped in the language of corporations, let me give an example of what this might look like in a partnership. The richest man in Babylon comes to me and wants me to invest with him in some fine Persian rugs. The rugs can be purchased in bulk in Persia for 100 talents of gold per 100 rugs. The rugs currently sale for 2 talents apiece here in Babylon. The risks are, theft, damage in shipment (camel trips and falls), another supplier comes and loads the market with better rugs, or cheaper rugs, etc…
Now, we have the same situation, but the rugs are currently selling for 1 talent a rug and we are buying them at 1 talent a rug. However, the richest man says, hey I have an inside tip and I know that there is going to be this huge rug seminar to teach people about how superior Persian rugs are and the prince has promised to buy one from us so we know everyone is going to be wanting a rug, so I’m certain we can sell these rugs for 2 talents apiece. This is called speculation… it’s called gambling.
All business has risk, but not all business investment is speculation.
Of course, what the corporations can do with this capitol is the point, not the individual responsibilities with investments. With it they can control prices, endure hard times, and drive every competitor they desire out of business. Remember this was the original reason for the creation of these companies; to control the competition.
After they remove the local family store, the corporations remove the money from the local market and place it in the hands of a few men to distribute as they see fit. This is re-distribution of wealth. This is one of my chief complaints against Walmart. Every dollar spent in their store goes directly to Bentonville AR. Money spent in a local store will support and benefit 5 to 8 neighbors before it leaves the community.
Here are a few links to bring this back home to Walmart:
- http://www.ourfuture.org/docUploads/sticker_dl_color.pdf – Walmart bumper sticker
- http://www.newrules.org/retail/midcoaststudy.pdf – Effects on a small town
- http://economics.missouri.edu/~baskere/papers/ – other articles
Of course we should not miss the political giving. Even if they are giving to “conservative” organizations, they are buying benefits for them, not us. They are taking our money and giving it to causes which benefit them, not our family or our community. But, that’s what we can expect when we give our money and our business away to the lowest bidder.
Again, there is more to life than price. Wall Street may judge on numbers, but we have the capacity to discern between right and wrong.
Don’t forget to contact Walmart and let them know what you think.
http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=224 – Contact Walmart