Ch 8: Corporate Capitalism

Originally, there was no money. Some people would hunt and gather while others made tools, tanned hides or sewed clothes. People specialized and traded. In a tribal system, like a family system, everyone worked at whatever specialty was needed.

Thriving tribes had good hunters, craftsmen and herdsmen. When tribes met, they traded or fought. In what was to become Arizona, tribes far from the ocean traded for seashells which they made into jewelry. Small family industries bartered for materials, made things and then traded with others.

Capital consisted of bows and arrows and spears; needles, thread and looms; drills and polishing stones; scraper stones, drying racks and digging sticks.

When guilds developed, youth traded their labor for the opportunity to learn a craft, working towards mastery of a profession. They would, in due course, make their own tools and develop their own clientele, passing stringent tests by masters in their trade.

During all this, there was an intimate connection between a capitalist and his or her capital equipment.

When stocks and bonds started up, this changed. “Capital” came to mean money rather than equipment. This money was invested in enterprises so it could earn, with some risks, far greater returns than in a bank. The game was no longer learning a craft but investing money with high return on investment and low risk. Eventually, wealthy people hired others to manage their investments. And investments were no longer in a single enterprise but in a type of manufacture or service. The owners of individual enterprises were no longer competitors but had a vested interest in creating and protecting a virtual monopoly within an industry.

Today, mom-and-pop hardware stores have lost out to Ace Hardware franchises, Home Depot, or Lowe’s. The overwhelming majority of restaurants are name-brand chains or franchises. Wal-Mart has beaten out a significant sector in both grocery sales and department store retail business and is growing while small neighborhood markets are generally a thing of the past and local chains are losing ground to national and international groups of allied businesses with massive economic and political power.

The virtual monopolies and economies of scales allow gigantic conglomerates to dictate costs, prices and wages. They tell their suppliers what they’ll pay and the suppliers either meet their demands or close their doors. Conglomerates set prices so competitors with much higher costs can’t compete and then, when their small, local competitor closes, charge what they want. When competitors fail, laid-off employees often take the reduced wages and benefits offered.

We now have a system which runs on its own with only two meaningful metrics – risk and short-term profit. Because stockholders easily sell stock, the focus is on the next fiscal quarter. If dividends and growth are high, stock prices rise. If expectations aren’t met, people and mutual funds invest elsewhere. A CFO1 or CEO2 must maximize short-term profit and minimize risk.

Of course, a system which works only to create high short-term profit is ripe for abuses and our system has seen many. Companies sell products they know are harmful or unsafe such as machine guns, cigarettes, booze and sugary foods. Companies regularly skimp on wages and safety measures to boost profits for the next quarter. Toxic dumps are cheaper than responsible stewardship of the land or the health and safety of workers and their families. We’ve created laws to stop many of these abuses. We instituted work safety, corporate liability and minimum wages. In some states, we even have unions which sometimes protect workers and sometimes leach off the system and provide bureaucracy where people are tenured rather than promoted on merit.

A more recent practice is for corporations to use profits to buy up their own stock which raises the value of each piece of stock but doesn’t create any real growth. Thus, the profits go into individual wealth rather than economic growth for the community.

There is another entitlement to these monopolistic monoliths: they can spend as much as they want to influence voters, legislators and consumers. They can own as much of the media as they can buy. They control much of what we see and hear which strongly influences our thoughts and actions. With short-term profit as a singular goal, is it surprising that the system seems crazy and out of control?

Our society is engaged in various endeavors to make wealthy people wealthier. This is the general focus of Corporate Capitalism. The sons and daughters, grandsons and granddaughters of wealthy barons of industry do little to earn the enormous profits we bestow upon them.

Lest I mislead you, this is only a new wrinkle in an old game.

In the age of emperors and kings, an entire society worked for the sole benefit of a single extended family. During the Middle Ages, wars were constantly being fought between members of the same royal family with marriages and alliances changing every generation or two. The constant was enmity, peril, and loyalty to one’s flag and one’s king or queen, almost always a close relative of the enemy’s.

It was peril, real or contrived, which kept countries united and allowed the system to sustain itself. War and peril (real or contrived) were the glue that bound society together.

In the system of corporate capitalism, there are a number of reasons war is desirable to the wealthy and their highly rewarded stewards in addition to distracting others from the hand in their pocket.

War creates accountability loopholes so tax money can more easily be spent on things we don’t actually need. The US government bought huge excesses in inventory while selling Victory Bonds and enlistment to their population once we got involved in World War I. The best source of information on this is a small book, free on-line, written by a retired Marine Corps Major General, Smedley Darlington Butler, and entitled War is a Racket.

War unites the population against it’s chosen “enemy.” We close ranks and expect the average citizen to suck it up and sacrifice toward our survival – even when there is no actual threat. Yet the wealthy use war as an opportunity to loot the treasury and boost profits past reasonable expectations. When I joined demonstrations against the War in Vietnam, the common reaction was to consider me a traitor to my country. Even after the United States left and the insanity of being there was clear and indisputable, dissidents were shunned and reviled. Jane Fonda, a spokesperson for the anti-war movement, was finally forced to recant having told us the truth – North Vietnam was not a legitimate enemy.

Today, the vast majority of Americans – and an expanding workforce overseas – expend an enormous effort to increase the wealth of the already wealthy. The major benefit is to those who have excess money to invest in anonymous and liability-free holdings which, in turn, control our laws, our foreign policies, and much of the information we receive.

Ronald Reagan told us this was a good thing; that we would get our piece of the pie right after the wealthy got theirs. It didn’t happen, but we cling to the belief that it will or that it should; that bounty will be shared – earned and deserved, not given.

As we vote to increase the minimum wage and tighten environmental restrictions and worker safety laws, the only rational option left to corporate capitalism is investing where labor is cheap and regulation lax or non-existent – overseas in the Third World. After all, it’s more profitable and what else is meaningful?

1Chief Financial Officer
2Chief Executive Officer

©David N. Dodson, June, 2016, Phoenix, AZ

==>Ch 9: Why Fight Wars?

Categories PoliticsTags , , , , , , , , , ,

1 thought on “Ch 8: Corporate Capitalism

  1. Pretty eye opening facts to the frightening realities of human existence. Will be back to continue with the book. There’s obviously a lot to learn before any decent thought can be committed toward changing the current narrative to something more pleasant and universally acceptable. Phew!!

    Like

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