Corporations make a lot of noise about supporting markets. However, again and again it is cleaer that they actively subvert the efficiency of markets in order to maximize their profits. They do this whenever the can, so the larger companies do it more than mid sized companies. Companies like Standard Oil and Microsoft interfered with markets to maximize their profits and their control over a market. The financial industry is all about market interference, but while talking up its commitment to markets. However, the question for this post is whether corporations in total are simply designed to interfere with markets.
The Evidence That Corporations Support Markets?
Interestingly, corporations are said to support the market, but no evidence is presented that they do this. It is something that is simply said enough times by distinguished looking people on many news programs so it is simply considered a truism. A corporation is a legal entity that in the US at least, has fought through the courts to obtain the rights of personhood, but without the same liabilities as personhood. They did not always exist and in fact are a relatively recent development. Interestingly, they are increasingly seen as immortal, instead of temporary and we lament the passing of corporations when they are no longer competitive.
Why Corporations Are Anti-Market
The problem with blindly supporting the idea that corporations support markets, is that many of them simply don’t. For instance many of the larger companies in the US directly interfere with markets by using monopoly power to control them. So when Archer Daniels Midland engages in price fixing this is anti-market behavior. The fact that so many corporations spend so much money on lobbying, rather than spending that money to improve operations means that corporations are not really all that focused on improving themselves or on the overall market efficiency and are more concerned with carving out certain markets for themselves. In fact of all the expenditures made by large corporations, lobbying has the highest return on investment. Political contributions of thousands can result in financial returns in the millions.
One of the most damning pieces of evidence that corporations don’t support markets is found in economics itself, which proposes that as markets become more efficient and transparent the profits for the companies in that market declines. Why would any company support something that decreases its profits? Secondly, if this is well known, why do we keep discussing corporations as if their statements about being in favor of efficient markets is true?
Preferring to Not Compete
As with any entity, when given the chance to compete for something, or to get that same thing without competing, they prefer not competing. Corporations don’t recognize the right of the government to regulate them. They prefer “self-regulation,” which is code word for no regulation. Many people that work in corporations or take the corporate line they would like the government to “get out of their way.” “Getting” out of their way often takes the form of reducing regulations which protect the environment, workers and other companies from the exploitations by the company under discussion. In this way corporations would like the government to get out of their way the same way a rapist would like law enforcement to get out of their way. Everyone intuitively knows that rapists would prefer if rape were legal, but we also understand that this desire is based upon selfish desires to continue exploitation. However, when corporations ask for governments to “get out of our way,” for some reason it is taken seriously.
Do Corporations Really Want to be Left Alone?
Corporate relations with the government are not this simple as presented by corporations. Corporations are extremely active in influencing government at all levels. Corporations don’t invest in lobbying to simply put the government on the sideline, but to gain advantage over other corporations and over workers, in addition to obtain funds directly from the government in the form of contracts. In the case of lobbying against workers, the comment is often made that corporations must do this to fight against large and powerful unions. However, the amount of money contributed by unions is quite small compared to that contributed by corporations. The propagandistic term “unions bosses” is often used to give the impression that unions are corrupt and untrustworthy, when in fact the majority of the corruption resides within corporations as does the exceedingly vast majority of political power.
Also, corporations have lobbied against everything from child labor laws to health and safety laws, not only wages. Corporations were perfectly happy to have seamstresses burned to death so they be ensured the ability to keep all the doors locked on apparel manufacturing operations. Slavery is a common feature internationally, although it is not longer called slavery. Without logging regulations, logging companies will strip the land bear. Nuclear power plants are continually leaking radiation in an unreported fashion (as evidenced by the fact that populations close to nuclear reactors have higher cancer rates, and significantly higher cancer rates that populations not close to nuclear reactors), because nuclear regulations are too corporate friendly. Conservatives are very quick to call for an end to “overzealous” regulation, but are short on details.
Do Governments Interfere in Markets?
The opinion on this in corporations seems to differ depending upon that interference is helping the corporation in question or hurting it. When the government prevents companies from exploiting workers or from polluting the environment, the government is said to be interfering in markets. However, when the government is providing patent protection which allows corporations to make excess money off of a discovery which they usually did not invent themselves (corporations tend to strip inventions from the real inventors, such as when they get inventors to sign pernicious contracts or when they take inventions that were created in universities and compensate the originators very little for them), then this is not deemed as a market interference. Thus the term market interference seems most importantly to be completely determine by whether the action benefits the corporation. Also, corporations do not agree amongst themselves, because a market interference which may help one corporation may hurt another. That is something else to understand, corporations do not all have the same interests.
Are Corporations Designed to Interfere with Markets?
The idea that governments interfere with markets while corporations enable markets is not cut and dried. Governments interfere in markets, but often have a higher public purpose. This is not always the case, but when they don’t have a higher public purposed it is most often because they are doing the bidding of a corporation. However, corporations never interfere in markets for a higher purpose. Their only purpose is profit maximization.
Corporations are anti-market mechanisms designed to push externalities onto society, while maximizing profits for a small elite. Corporations are anti-market because to support markets means to decrease the power of the corporations and to decrease its profits. Therefore, progressives should not unquestioningly accept the proposal that corporations are all about market efficiency. Examples from history as well as what economics says about markets can be used to effectively dispute the false claims of corporations and their backers in this regard.