
What Companies Are For - prostoalex
https://www.economist.com/leaders/2019/08/22/what-companies-are-for
======
caseysoftware
As I've noted elsewhere:

 _Private corporations acting in quasi-government ways is risky at best and
terrifying at worst. While some of the checks & balances in civil+legal
society have been broken, many are still there and there are repercussions
when they're broken.

A corporation doesn't have the same mechanisms - public rules (aka laws),
processes, appeals, accountability, etc, etc - built in and there's limited
recourse when their definition of "right" and others' conflicts._

Based on this new assumed role, it's begging for more government regulation.
And unfortunately, it makes sense for governments to say "as you take a more
active role in society, you need more public oversight."

~~~
seibelj
And once a corporation takes on the roles of government, it naturally needs to
be protected from competition lest the essential government functions it
provides get threatened.

We shouldn’t be demanding more from our corporations, we should be demanding
less. Companies should produce goods and services at the highest quality for
the lowest price, and let free citizens choose between them - and if the goods
for sale are subpar - let the same free citizens start their own competitor.

History is a never ending see-saw, and we are now sawing back towards
protectionism, big government, and less freedoms for the individual. At the
very least it will once more teach painful lessons to a new generation that
doesn’t remember the past.

~~~
numakerg
>let the same free citizens start their own competitor.

Except that starting a competitor often requires far more capital than the
incumbents needed to reach their position. I don't support protectionism, but
"true free market" economics are an illusion used to prevent and tear down
regulations.

~~~
ttoinou
Would you have examples? Starting SpaceX required far more capital than NASA?

~~~
coldtea
SpaceX is mainly alive because NASA/government poured tons of money in it, so
not exactly the best example:

"As a company, their total contracts are worth $12 billion including
commercial satellite launches as well as NASA and U.S. government missions. Of
that total, $5.5 billion is from government contracts from NASA and the Air
Force."

Basically what could have been done (and was done, and reached the moon and
built the space bus etc) on government money, is now paid to a private
constructor to do (plus profits, minus the patents going to the state).

~~~
TaylorAlexander
Indeed, SpaceX nearly went bankrupt in the early days because they couldn't
get a contract until they successfully launched a rocket. That first contract
after their first successful launch was from NASA.

~~~
fragmede
NASA didn't do that out of the goodness of their hearts though. Pound-for-
pound (which, to orbit is pretty pricey), SpaceX was cheaper.

Blue Origin, a different space corporation, was not even in consideration, but
if they had something competitive, NASA would have considered their bid as
well. (Tbc, Blue Origin isn't shooting for that market at all, so this is in
no way a dig at them.)

~~~
coldtea
> _NASA didn 't do that out of the goodness of their hearts though. Pound-for-
> pound (which, to orbit is pretty pricey), SpaceX was cheaper_

Well, that's how you do it: you mismanage a state organization to make
development costlier, and then you give the project + profits to private
industry pals...

That's how many-a-privitizations have started...

------
hliyan
Oddly enough, I was just in the process of writing the following in an
adjoining window for a blog post:

"The modern business corporation is not just an investment vehicle, but is
also an integral part of civilization. We spend as much has half our waking
hours working within these organizations, tend to find purpose in them and
make many of our social relationships through them, so it is not incorrect to
consider them social institutions, not unlike school or marriage. As such,
corporations are best structured and operated with the wellbeing of all
involved stakeholders.

One can think of a corporation as being built on three pillars: the investors,
the employees and the customers, with employees as the conduit that connect
investors and customers. Contrary to the theory of shareholder value
maximization, sole focus on the investor does not, on the long run, lead to
good outcomes for the investor."

~~~
harimau777
I don't necessarily disagree with you, but for sake of argument I think one
difference between corporations and social institutions is that no one owns
social institutions.

~~~
swayvil
That would be one of the pillars. The investors. The link of obligation being
the contract of ownership.

The links to the other pillars being the contract of purchase (customers) and
the contract of employment (employees).

I guess social institutions have just one pillar (the customers).

~~~
harimau777
This is a very interesting idea that I hadn't really considered before.

Under this system would it still be possible to fire people without cause?
Would there be some mechanism to share profits with the employees? Without
those I think it would still be a situation where some of the stakeholders are
more "first class" than others.

------
rcurry
I’m not sure if I’m about to get laughed out of here, but what do folks think
of something like the Uniform Code of Military Justice being required for
executives of publicly traded corporations - not literally the UCMJ, but I
mean a separate legal system that is designed to ensure more accountability
for executives of these large businesses?

~~~
0xDEFC0DE
It’s not going to go over well. Many people believe there’s different
enforcement of the law for rich and poor. I expect it will promptly backfire
when you actually introduce something like that unless executives suddenly get
a reputation for being poor people. You would need to build a ton of trust and
everyone will watch it closely for clickbait fuel.

Even if this somehow cracks down harder on execs than the current system, it
could also be seen as a separate track to justice for rich people.

~~~
Hermitian909
I'm not sure I buy into the idea, but maybe you could deal with this
particular objection by stipulating that this is purely an _extension_ of the
regular rule of law?

Executives would still be subject to all the normal laws everyone else is but
also had to comply with another system set up specifically to deal with those
who wield disproportionate levels of power in society through their control of
capital.

It's an interesting thought experiment if nothing else.

~~~
0xDEFC0DE
I just don’t see why there needs to be a UCMJ arrangement or extensions. Just
make and maintain regular civilian laws and enforce them.

------
dfilppi
Interesting that liberty is irrelevant. It's only shopping whatever system
produces the most prosperity for certain voting blocks. Just the framing of
the discussion signals dark times ahead.

~~~
Ididntdothis
How do you define liberty? there seem to be a lot of competing definitions of
liberty.

~~~
primroot
The adjective liber in Latin is what the slaves are not, that is,
"unrestricted [people]". The root 'lewdh-, from which it comes, is also in
Leute and ljudi (people). Liberty today seems to be often used to mean
unrestrictedness of capital/property/contracts, so the connection I see with
its semantic history is the idea that some people can be more people than
others, and that the government should be strong enough to deter anyone from
threatening this state of liberty (e.g. back then by fleeing from slavery, now
by ... well the list is too long). Remember the words of Laozi, long and short
give rise to each other.

------
chiefalchemist
But how much of the economy can be truly competitive? I mean, from autos to
laundry detergent there seems to be very mature products and little room for
innovation. The result is either compete on price (that has limits) or assume
a sense of parity and coast (in a way where you don't muck it up).

I'm not claiming all is discovered. We've reached the end of history. That's
foolish. But for a fair amount of the economy competition/innovation is simply
not possible.

~~~
gpresot
I would disagree. Conditions keep changing. keeping to the sectors you
mentioned. Tesla and electric cars are clearly examples of innovation that was
favoured by external elements (e.g growing concerns for climate / environment,
increase of pollution in urban areas). In laundry detergents (and also
personal care) , the big companies are racing to acquire small brands that
were faster than them to go to market with more natural cleaning products
(less chemicals, no parabens, traceable / sustainable ingredients...). Large
Consumer Goods (P&G, Nestle...) companies are facing a backlash by consumers
that are shifting to more local / smaller companies. This is more difficult in
the automotive industry (there are some massive investment in assets that are
simply impossible for companies that are not well funded). EDIT: I can not
think of one segment where there are less products today than there were 30
years ago. Even when companies become fewer, they don't stop expanding and
innovating the portfolio. The penalty for doing so would be either some
competitor selling the same for less or selling something better.

~~~
chiefalchemist
But. Remove electric and its the same car.

And yes. Tesla. But again, what % of the economy is that? I'm not saying there
isn't change and innovation here and there. There is. But on the whole what
percentage of the economy can be fully and truly competitive?

~~~
gpresot
It depends on what you consider innovation. There are the big leaps, certainly
(combustion engine, electric engine), but also the small increments: seat
belts, automatic gears, runflat tyres, ABS, traction control, speed control...
And these smaller innovations contribute to people picking one model or brand
instead of another. Innovation also means producing the same thing at a lower
cost (different process, better equipment, automation...). All this is
competition. The Toyota quality management process was a revolution that led
to japanese car companies becoming world leaders, with the same cars that
everybody else were selling. Autonomous driving may be doing the same for some
brands now.

------
jnordwick
Matt Levine's take (sorry Matt for the long excerpt):

[https://www.bloomberg.com/opinion/articles/2019-08-19/we-
loo...](https://www.bloomberg.com/opinion/articles/2019-08-19/we-looks-out-
for-our-selves)

The managers and the board, in this version of the corporation, are the only
ones representing all of the constituencies, so they are the only ones
qualified to evaluate their own performance. If an activist shareholder comes
in and says “we should replace the board because performance is bad,” the
board and the CEO can respond “no you are just saying that as a greedy
shareholder and we shouldn’t listen to you.”

Another way to put it is that the corporation really does have to serve many
different stakeholders, but in practice most disputes over corporate
governance are not between shareholders and employees or shareholders and
polluted watersheds, but between shareholders and managers. And these disputes
tend to follow a stereotyped pattern in which disgruntled shareholders say
“the stock price is low” and the managers say “ah but in the long term it will
be high.” Because—on the agency-cost view—it is just harder to measure the
long term (since it hasn’t happened yet), so you can’t hold the managers to
it. Similarly, if managers can respond “ah but the stock price is low because
we are serving other constituencies,” that gives them another argument against
the shareholders.

... So when an association of big public-company CEOs gets together and
declares that corporations should serve the community, take care of the
environment, and be responsible to employees and customers, not just
shareholders, that might be because the CEOs have thought it over and decided
that employees and the environment are getting a raw deal, but it is also
possible that the CEOs have thought it over and decided that shareholders are
annoying.

------
majewsky
The part about dynamism echoes a thought that I had earlier today. As far as I
can tell, socialism as an economic system largely failed [1] because of a lack
of dynamism. Because everything is state-owned, everything is "too big to
fail" and all management structures petrify. It doesn't have the same
regenerative properties that exist in all living and evolving systems, the
controlled killing of old parts of the system without killing the entire
system that in capitalism is provided by competition on the free market.

The question is: Is there any socialist theory that provides a solution to
this lack of dynamism? I'm asking not necessarily because I want socialism,
but because pure free-market capitalism has some obvious flaws when it comes
to natural monopolies and the pricing of externalities, so I'd like to know if
there is a better system that doesn't devolve into the real-world socialism
we've already seen.

[1] I'm not disputing that socialist regimes did horrendous things to their
subjects, but I'm focusing on the economic perspective here.

~~~
bo1024
Markets and free competition don't have to be synonymous with capitalism
(private ownership of economic resources). I think that's a historical
accident. The recent book "radical markets" has examples, such as common
ownership self-assessed tax (cost) where nobody owns any private property,
each person rents everything they use from society, rates are set by
competitive market mechanisms, and rent is redistributed. Just one extreme
example.

------
scotty79
As I understand the companies have one superpower. If they do wrong thigs they
can die without killing their employees and destroing their equipment.

This one thing is their secret strength and that's where the strength of
capitalist economy comes from.

Any mechanism that prevents companies from dying or makes their deaths more
destructive than it needs to be makes the whole system weaker and less
valuable to humanity.

~~~
awinder
I would say the superpower is even greater. If you’re a mom and pop business,
you can die — we will protect you so that like, your children’s children’s
children aren’t still paying your debts. And if you’re a small or mid cap
company you can also die but the timelines are a little different. Large cap
companies I think house a unique placement because they shouldn’t regularly be
going to 0, and some level of backstopping may be strategically necessary. I
think the reason for making that “design tradeoff” if you will, is that in
return you gain a wider spectrum on investment risk tolerances that makes the
market stronger. And there’s also great utility in the real-world
consequences, I think the auto bailout proved you could make a good investment
for the taxpayer, for workers, and for the shareholders. The real world is a
different place from the textbook so anything dogmatic sets off alarm bells
for me that we are maybe leaving money on the table out of a sense of a form
of religiosity.

------
neonate
[http://archive.is/E0yrs](http://archive.is/E0yrs)

------
Ididntdothis
That's not a bad article. A lot of people seem to confuse capitalism with
competitive markets. Competitive markets gave us most progress and innovation
whereas pure capitalism gives monopolies and stagnation.

~~~
jpkiser
Many "pure capitalists" would argue that you only achieve competitive
capitalism through "pure capitalism." The idea applies a cynical view to human
nature but is interesting none the less. The idea can be boiled down to one
simple point; everything can be bought for the right price. If there is a
governing body that has the power to regulate any and every business then it
only follows that the biggest of those businesses have every resource and
incentive to guide regulation to enforce their monopolies.

We may think about these as backroom deals between senators and lobbyists but
I'd argue that you actively participate in such deals by just sitting in front
of your TV or surfing the web. In America the biggest governing body is
voters.

~~~
whatshisface
Pure capitalism would have no institutions in place to stop society from
switching to another government type in the aftermath of a successful
campaign.

------
throwaway18468
They are needed for feudalism to function without raising awareness of the
serfs. Corporations are government arms, throwaway proxies.

They extract the power from the serfs and transfer it to the ruling class.

Government: Please kindly pay taxes with these papers that we print. Serf:
Where do I get those papers? Government: Participate in involuntary servi...
in economy. Maybe trade something to a... corporation. Let us know if they
don't treat you fairly. <gently kisses in the forehead>

