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Corporations have no heart

September 3, 2018

Companies selling wine, beer, and liquor make the majority of their revenue from people who drink too much“Two-thirds of alcohol sales revenue in England comes from people drinking above the low-risk guideline levels of 14 units a week.” Nestle is objecting to a proposed Australian law that requires businesses to report where slave labor might be exploited in their supply chains. Businesses funded Republican politicians in Wisconsin to block suits brought because they poisoned children.

None of that should surprise anyone. Corporations are not people. They no more have a conscience than they have gall bladders. They are organizations designed to maximize financial return to shareholders. An organization works by its own logic, and it is a fallacy to think that its behavior derives solely from the character of its members. Expecting a for-profit corporation to forego significant profit is like expecting a copper wire to stop conducting because its current is misdirected.

That doesn’t mean corporations are bad. It means they are organizations that have a particular purpose and incentive structure. Within the context of the hypothetical free market, where slave and child labor are not exploited, where workers are not cheated out of their pay, where the air and waters are not treated as free dumping grounds, where scale is not used to take unsustainable bargaining positions, where their products are not public health risks, where financial and business practices are transparent, where consumers are both rational and informed, where investors are both rational and informed, etc., corporations that chase a profit always do so by providing goods and services whose value exceeds their costs.

Of course, capitalism never has and never will operate in that hypothetical free market. The wrong way to think about that is to demand that corporations behave better, as if they were moral agents, as if they had consciences. They aren’t and they don’t. They’re not designed to behave so. Regardless of how their employees might think. The only way to address those problems is through other mechanisms external to corporations. We need environental regulators that monitor and limit pollution, public health research that determines the safety of products, labor laws that forbid the use of slave labor and child labor and that enforce fair labor practices, a justice system that prosecutes fraud and corruption, financial regulators that require public corporations to accurately report their finances and operations, and voters who understand the importance of institutions that constrain corporate behavior.

Even in our imperfect world, corporate business usually makes the world a better place. Those other, constraining institutions heavily determine the balance of that.

We are in the second week of a prison strike against the use of inmates as slave labor. I don’t know if the height of America’s neo-fascist turn is the best time for that. But you have to fight when you can.

The photo shows Hamilton Easter Field’s painting of three workers playing cards and drinking after the day is done, about a hundred years past.

Ob disclaimer: I am a capitalist. I have founded multiple businesses. My retirement accounts hold stock in public companies. Nothing I wrote above opposes corporations per se, no more than it opposes copper wires per se. If you think it does, read again.

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