Saturday, October 29, 2005

On corporations

Just a note on a most self-evident thing that curiously seems to escape the free market enthusiasts: companies behave like the classic economics would have people behave - in their rational material interest. The corporations operate to maximize their own perceived short and middle term economic interest. So even though the top management might fervently belief in free competition and free market principles in general, the organization they lead will attempt to quench competition and restrict the free play of supply and demand at every opportunity. That is why we need state regulation: the private corporations would unsupervised destroy the free market and establish mercantilist baronies. The most self-evident thing there ever was: this is how human nature works in institutions and organizations - or how institutions and organizations work through human nature.


helsinkian said...

I believe today's centre-left politics has a lot to learn from early 20th Century progressives, no matter what ulterior motives they had. They were very much against monopolies and in their way for the free market.

Libertarians and many Conservatives think that the market, when unregulated, will be free. Even if some markets will be free even unregulated, very many of them won't. Your point was a very good one. There is nothing Communist about trying to level the playing field for small businesses and to keep competition alive and to try to look for the consumers' interests, quite the contrary.

Sometimes Libertarians and Communists share the belief that their ideology is always right and since the doctrine is more important than reality, who cares what happens to real people.

One problem is that even if we succeed in regulating the market looking after the consumers' interests in the EU, the corporations can always do what they like elsewhere, produce the goods with child labor, ignore the environment etc.

I'm not against markets or corporations but I'm very leftist and regulatory in that I want them to keep the environment clean and not to exploit children etc. Globalization is good in that it forces us to deal with this issue on a global scale and we must have enforceable global treaties to make the markets work so that they don't self-destruct. It is bad if we can't face these issues.

I believe major corporations will survive and thrive even in an environment where there are both fixed rules and regulatory mechanisms to ensure a level playing field on a global scale. Getting rid of child labor is just like getting rid of slavery, nobody really needs that to get rich. The market mechanism will not develop its ethics automatically. Basically this thing, exploitation of children and the environment and inhuman working conditions, is about ethics.

For all of us to survive and for the corporations to make profits in a way that is not overly wasteful of human and natural resources, ethics have to be globalized. We all have to abide by a basic set of rules that govern human behavior.

Both fair trade and free trade are being abused in the current situation, a combination of these - trade that is free only to the point that it is fair, still relatively free - is what I see as the ideal. For markets to be free, there has to be this regulatory dimension that corrects market failure. That's the sort of good socialism or social market economy that I think is needed for the planet to bear its burdens in the future.

stockholm slender said...

Excellent points - for me the strong regulatory state is absolutely essential in protecting the free market. Otherwise it would not stay free for long. It is curious how much the most extreme libertarians and free marketers resemble marxist-leninists in their disregard of human nature and the cultural and local factors in our political and economic actions. Despite being a strong progressive I have quite a Burkean view of how a society functions organically and how it is always risky to change existing and working structures. I have also quite pure Burkean distrust of humanity: collectively we still cannot act rationally - but if we won't learn, we might be quite a shortlived species. So, unlike Burke and traditional conservatives I still hope for rational progress towards controlled and reasonable human selfrule.