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A Further Perspective
The Occupiers’ Corporate Confusion
Why this obsession with corporations, which are so much less powerful than government?
The Occupy Wall Street protesters are profoundly confused about a number of issues, one of which is who their real enemies are. For the protesters and the left generally, corporations are literally evil personified. The left’s paranoia about corporations is difficult to explain or understand.
A telling and striking difference between liberals and conservatives is this — conservatives fear the government much more than they fear corporations, and liberals fear corporations much more than they do the government. Being more fearful of corporations than government makes no sense.
Virtually all medium and large businesses are organized as corporations. Almost all the consumer products we all, including the protesters, buy are produced and distributed by corporations. Most of us work for corporations. Obviously there are significant benefits to the corporate structure.
A good way to describe and categorize our economy is to look at the two primary ways we interact economically — voluntary exchange or coercion. The market sector of the economy relies on voluntary exchange. The basic purpose of a market, in fact, is to facilitate voluntary exchange. Being restricted by the realities of voluntary exchange is the most effective limit to abuse and tyranny ever conceived.
The difference in the power of corporations compared to the government is profound. What, for example, must Apple Corporation do if it wants your money? It can only get your money by offering a sufficiently appealing product in the context of the wide array of other products available to you. (A challenge Apple is currently meeting extremely well.)
The very nature of voluntary exchange is a continuous reality check. Government agencies have no equivalent check. Their “customers” cannot simply walk away from the relationship when they no longer value the service. The agencies continue to receive funding even though there may be no desire for their services.
How different are corporations from other business structures? A well-known (but not unique) feature of the corporate structure is “limited liability.” This means that if you buy shares in a corporation your risk is limited to the amount you invest. This important feature of the corporate structure has made possible the democratization of ownership. Even people with relatively small amounts of money become more willing to invest when they know their losses are limited. That enlarges the population of potential investors and reduces the challenge of raising large amounts of capital when starting or expanding a business. Dividing ownership into millions or even billions of relatively small shares makes it far easier for investors to diversify their investments and reduce their risk exposure.
There is a widely held belief that corporations can be taxed. Anyone who bothers to think about it, however, recognizes that’s only an illusion. Although corporations can and do write checks to the IRS, some combination of three groups actually bears the “burden” of the tax — customers in the form of higher prices, employees in the form of lower wages, and/or shareholders in the form of reduced earnings. Pretending that corporations can pay taxes is one of the biggest con games in politics. In the real world, corporations can’t pay taxes any more than cows can pay taxes.
A specific problem the left has with corporations is “personhood.” At the Occupy Eureka (California) protest less than a block from my office, one of the signs reads, “I’ll believe corporations are people when Texas executes one.” That one poster takes on three of their despised targets at once: corporate personhood, capital punishment, and Texas.
Liberals, however, confuse a legal fiction with reality. Corporations don’t have emotions; they can’t feel pain or pleasure. They can’t bear what economists refer to as the “burden” of a tax. In that regard, corporations definitely are not persons.
Again there is nothing particularly unique about the legal principle of categorizing corporations as persons. The United States Code states:
In determining the meaning of any Act of Congress, unless the context states otherwise — the words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint stock companies as well as individuals.
None of these groupings of people are literally persons, of course. Categorizing them as persons is defined as a “legal fiction.” For numerous practical reasons there really is no other alternative. The law also distinguishes between “persons” and “natural persons.” One difference is that natural persons are constitutionally protected from self-incrimination, corporations are not.
If the occupiers are opposed to corporate personhood, why stop there? Are they also opposed to association personhood? If not, why not? How about labor union personhood?
Another specific corporate grievance the occupiers and the left have is the 2010 Supreme Court Citizens United vs. Federal Election Commission decision. That decision ruled that corporate political spending is constitutionally protected, holding that corporations have a first amendment right to free speech. That ruling sticks in the craw of Democrats and the left. Even though they would love to reverse it, so far they have been unsuccessful.
About the Author
Ron Ross Ph.D. is an economist who lives in Arcata, California. He is the author of The Unbeatable Market. Reach him at rossecon@gmail.com.
Letter to the Editor View all comments (41) | Leave a comment
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Gary B| 11.8.11 @ 6:50AM
Dr. Ross,
You said, "The difference in the power of corporations compared to the government is profound." This is true most of the time, of course. But, as we've read elsewhere, fascism is rearing its ugly head here in America. So-called public/private partnerships are springing up everywhere, where certain corporations share revenue when private citizens are coerced by government into paying. Example: red light cameras.
Also, all corporations are not created equal. There is the corporation down the street (usually privately-held); there is the large corporation (usually publically-held); and then there is the corporation that's in league with the government (banks, securities firms, etc.). It's this third category that contains entities that are "too big to fail," meaning we taxpayers are coerced into bailing them out. Some of these entities are even foreign, yet we lucky American taxpayers must come to their rescue.
These crony capitalists are the targets of the OWS crowd. This is the one issue we conservatives can acknowledge as valid among the protesting rabble. It was their initial issue. Since then, Obama's communists have co-opted the protesting useful idiots into a general anti-capitalist movement. This is unfortunate because the corporation down the street is of great benefit to society, while the real culprits, corporate cronies of the federal government, are not. In other words the baby is being tossed out with the bath water. More differentiation would help.
Great article - thank you.
Alan Brooks| 11.8.11 @ 10:20AM
I want OWS to protest Selective Service.
Fight your own wars.
JimBob7| 11.8.11 @ 1:26PM
dear Allen, You may not have noticed this little inconvenient fact, but the Armed Forces have been All-Volunteer since 1973, the last year that there was a draft. I know that facts can be pesky things, but you really ought to pay more attention to them. You'll look like you are less of a Pendejo.
PolishKnight| 11.8.11 @ 5:20PM
JimBob, that doesn't mean the selective service doesn't exist: http://www.sss.gov/default.htm.
Even if a draft is not active and the military is all voluntary, for now, that doesn't change the fact that young men are required to register as on-call for a major conflict.
USMC Limey| 11.15.11 @ 5:49PM
Re-read the constitution. Focus on entries referring to the Militia. Yes it can be argued that it was inappropriately used during the Vietnam war (I tend to agree), but the concept that in national time of emergency all able bodied males should be called to service is not uncommon in other first world countries. My biggest beef is that women aren't required to register for Selective Seevice too.
ENOUGH ROPE| 11.8.11 @ 1:26PM
Should we be afraid of OWS? Based on the story below--yes.
The Hard-Left OWS Plan
http://www.americanthinker.com....._plan.html
Mike| 11.8.11 @ 5:29PM
Gary,
Good points but you have reinforced the fear the government perception. It is when corporations use the government or governement uses corporations that we must worry about them. Ultimately we must worry about the police power of the state. Keep your powder dry.
Mike Johnston
SFC USA (RET)
Gary B| 11.8.11 @ 7:03AM
Dr. Ross,
Also... You hit the nail on the head in your final sentence ("Maybe the OWS and the Tea Party share some common enemies."). I believe Republicans - especially the current crop of candidates - missed a golden opportunity when they failed to make this point early on. Perhaps they can be forgiven, since their experience with organizing mobs and inciting riots is limited.
Seapuss| 11.8.11 @ 7:53AM
Of course, corporations are people. A corporation is simply a group of people who have pooled their resources and organized themselves under laws that grant them, individually, limited liability with respect to their common venture.
What the liberals advocate is stripping people of their rights as soon as they organize themselves as a corporation. Thus, you are a full "person" until and unless you form a corporation.
Gary B| 11.8.11 @ 10:11AM
Seapuss,
Your argument is correct, except I'm sure the mob doesn't think that clearly. Corporations represent "them." Corporations represent a target to be plundered. And, believe it or not, we have a so-called president who is egging them on and now "organizing" them into a voting block to create a distraction from the real culprit - him.
Al Adab| 11.8.11 @ 2:38PM
Missing from the equation is the Lefts' fondness for non-profit corporations which do most of the community organizing and "empowerment" activities they so admire.
albert constantine jr| 11.8.11 @ 8:00PM
I think what is also missed is that the left wants to strip most individuals of their personhood, as well. No need to worry, they know what's good for you; submit and obey (which is probably what they have in common with Islamists, who want submission to their perception of Allah, as opposed to the Left, who require submission to Anghka, the Party, the Politburo, Big Brother or whomever they designate as "The Leader").
USMC Limey| 11.15.11 @ 5:57PM
Yes, and where do these organizations get a large percentage of thier funding ? Oh, corporations. Such as my employer, the Evil Corporate Jet manufacturer that matches employee contributions to the united way. How malevolent of them.
VonMisesJr| 11.8.11 @ 8:29AM
As Hayek explained in "The Fatal Conceit" in chapter 7 titled "Our Poisoned Language," socialist destroy the meaning of words to confuse the ignorant and short-circuit debate. This is true of the description "crony capitalism."
Crony capitalism is the opposite side of the same coin of fascism. Fascism according to Von Mises in "Socialism" is a form of socialism. While Marxism and other forms of socialism often promote "public ownership of the means of production," fascism accomplishes the same by controlling property. And if property is not usable and disposable as one wishes, one has no "property rights."
So OWS has been propagandized into calling fascism some form of capitalism. But it is the antithesis of capitalism. So these dupes are actually protesting socialism and fail to understand even the most basic of economics and civics.
You can access Hayek and Von Mises work online at www.mises.org and review "The Fatal Conceit" and "socialism" without purchase of the book.
Ivan Ivanovich| 11.8.11 @ 8:37AM
The sign proclaiming "I'll believe corporations are people when Texas executes one." is silly and incorrect for several reasons. I'm sure that at least one of the executed persons has owned a stock, therefore it's about like saying I'll believe the ocean is water when someone drowns. Besides, corporations, that are people, are also government. There are laws governing corporations i.e. without government there are no corporations. But, then I suppose this is what the anarchists want, the wild west. Wasn't that Texas? All very silly!
Al Adab| 11.8.11 @ 2:41PM
In point of fact the various State regulatory and registration agencies administrativly dissole corporations all the time for various infraction. They oversee the establishment, operation and compliance of corporations under the various State laws.
Purple Lips| 11.8.11 @ 8:45AM
Corporations cannot put you in jail, or send you to Ol' Sparky. Our federal government can.
Ryan| 11.8.11 @ 8:55AM
Corporatism, corporatism, corporatism.
Using the term "crony capitalism" does a
disservice to the term "capitalism."
One of the problems on the left is that they have completely mis-defined the terms.
Mike| 11.8.11 @ 10:24AM
Your wrong, Ryan. There is capitalism, there is crony capitalism and there is corporatism. Only those on the right are interested in blurring the lines among the three.
Ryan| 11.8.11 @ 10:32AM
I see crony capitalism and corporatism as the same thing - large corporations and government colluding to remain in business and bypassing the free market, and attempting to use taxpayer dollars to prop up bad business decisions.
What is the difference between crony capitalism and corporatism in your eyes?
JimBob7| 11.8.11 @ 1:28PM
I see the dhimmicrats as lusting to turn us all into serfs in the servitude of their beloved crony capitalists.
Mike| 11.8.11 @ 4:01PM
JimBob,
I see your inane comment as irrelevant to the discussion
SeymourGlass| 11.8.11 @ 10:09AM
Have any corporations been executed?
How about Lehman Brothers?
Mike| 11.8.11 @ 10:25AM
Seymour,
This was not a government action.
MikeBee| 11.9.11 @ 11:35AM
Seymour,
Try General Motors. It and its ownership were completely obliterated, and turned into a company largely owned by its union members, and by the U.S. government.
Gary B| 11.8.11 @ 10:23AM
The finer ponts of theory and terms can, and are, skillfully debated in this forum. However, the real problem is out there. All the mob knows and understands is "us" and "them."
Mobs are as old as time. What's striking this time around is that this particular national mob is being aided and abetted by a sitting president of the United States, whose only skill is in organizing such mobs. Finally, he has found his voice. Did you ever think you'd live long enough to see this?
We can only hope the personal responsibility (conservatives) crowd outnumbers the something-for-nothing crowd next November, else our goose is cooked.
Drunken Sailor| 11.8.11 @ 10:41AM
Conservatives 42%, Liberals 21%, Moderates 37%.
http://www.gallup.com/poll/150.....-2008.aspx
Gary B| 11.8.11 @ 11:35AM
Moderates 37%... And, that's the problem. Republican consultants have never given up on the idea than Republican candidates must soften the conservative sales pitch to appeal to moderates. I suppose that's the rationale for Romney. Trouble is... it's a loser every single time. Reagan proved that.
Never forget - campaign consultants are insiders, too. They poison every conservative they touch. Joe the Plumber would provide better advice than that bunch.
Drunken Sailor| 11.8.11 @ 12:13PM
No arguments here.
PolishKnight| 11.8.11 @ 5:25PM
Sadly, much of the conservative sales pitch fails to connect with the base much less what many moderates would want. While stopping tax increases at all costs, anti-abortion, and gay marriage are all great and all that, they are largely irrelevant not significant for candidates to win elections. An anti-abortion position, for example, will not stop abortions since that would require a constitutional amendment and that won't happen. Gay marriage opposition. It's great and all that, but the main problem with marriage now is the marriage penalty. How often do we hear about that?
Sadly, most conservatives are "reactive" in the Marxist sense of the word: They chase after sticks thrown by the left while the left does what it likes.
Joe D| 11.8.11 @ 2:05PM
Very good article. However, I don't think you spent some more time exponding on the last paragraph. You should have also mentioned, corporate rules that corporation have gotten designed to hurt their competition as well. Maybe this could be another article. But our real problem is in Washington and some states. Other than those items, it was excellent.
shipley130| 11.8.11 @ 2:45PM
When you can't see past your own ideology when something makes sense, no matter where the idea comes from, you are in a sad state. Seems to me that Republicans are in a sad state these days. They have abandoned common sense for the party line.
Mike Hawk| 11.8.11 @ 2:47PM
Moderates by and large are politically uninformed and do not want to have anyone have a bad opinion of them based on a political affiliation. They are afraid to take a position and are easily led around by the cajones. As long as Liberals and Democrats beat up on Republicans, RINOs will fear for their image. SInce they won't fight back, moderates see it a true and the Moderates lose anyway. Bullies beat up on the soft and wimpy. That's why RINOs lose.
Gary B| 11.8.11 @ 3:51PM
Essentially, they're metrosexuals. However, many of them will pull the lever for conservative candidates because not all of them are idiots. A candidate with a clear, conservative message can attract a lot of them.
Again, Reagan is the proof. It works every time. RINOs fail every time. That's why the DC elite and the enemedia love them so much. If they lose, great. If they win, that's okay, too.
Niniane| 11.8.11 @ 6:45PM
Excellent article. And a corporation is nothing more that a collective of people willing to invest in a company's future by owning a piece (stockholders) or loaning money (bondholders).
The corporation's allegiance is to pursue their business model and answer to the collective which are looking for a profit and rooting for success, whether that means shipping jobs to China or not.
And watching what Boeing has been subjected to for not hiring union workers as being demanded by the NLRB, this country is very lucky they did not leave the country.
Stan Redmond| 11.8.11 @ 7:04PM
I like that sign. Too bad that fool doesn't realize the government excutes corporations all the time. The EPA is the torturer, the NLRB is the inquisitor, the IRS is the chief executioner.
Gary B| 11.8.11 @ 10:13PM
Excellent point...
Jennifer Blossom| 11.8.11 @ 9:47PM
Dr. Ross,
I enjoyed reading the article. I understand the viewpoint of the right regarding corporations much better now. Thank you. I will, however, have to choose to side with the founding fathers on this. I think that they were very wise to seek to restrict the formation and activity of corporations. These laws held sway for about 100 years of our nations history. Our country would be much greater today if the laws that were written by those early American's wouldn't have ever been overturned.
MikeBee| 11.9.11 @ 11:43AM
Jennifer,
Please cite even one law that the founders enacted, which sought to restrict the formation and activity of corporations. The founders sought to restrict the power of Governments, not Corporations. At that time, Corporations didn't even exist. Please read the Constitution of the United States. It's really a very short document, and states NOTHING about Corporations. It's all about restricting the power of governments.
POST American| 11.9.11 @ 12:07AM
----AND still, as FUKISHIMA goes into its
9th month of Globalist world depop op cover-up,
not a word about the awesomely sinister,
ultra rich, TAX FREE foundations, NGOs
and their ON RECORD sourcing of EUGENICS.
And scarcely a mention of their prime instrument
of control, the PRIVATE, USURY driven,
foreign owned, 'Federal' Reserve.
"The Federal Reserve has pumped so
many BILLIONS into ---( NAZI )--- Germany
that they dare NOT name the total."
-REP. Charles McFadden
1935
(the height of the FED instigated
'Great Depression')
Even as the long infitrated Vatican's Benedict
Arnold is pushing for world 'govern---ants'
and as FAKE 'conservative', indeed, FAKE
Christian, Pat Robertson nonchalantly brings
in EUGENICS X--speediency over Christ
uttered doctrine---ALL WITHOUT COMMENT.
Even as the bennie and rectum worshippers
of the 'MEEE---dia' look the other way. . .
MikeBee| 11.9.11 @ 11:51AM
The main argument of the OWS protestors, and of Socialists everywhere, that they are FOR the people, and AGAINST big Corporations, belies their fundamental ignorance. The U.S. Supreme Court has laid out, in various rulings, what the true nature of a Corporation is. What they have said is that, without the people who work at Corporations, Corporations cannot exist. Corporations are, essentially, groups of people (you know, the little guys, like you and me?) who have come together to pool their individual talents, and to work together for their better benefit, and for the better benefit of Society as a whole. Folks have found that, if they pool their resources and talents, TOGETHER they can make something much better and more beneficial to Society. The Whole is greater than the sum of its parts (a very Socialist dream, in fact). The people who work at Corporations are the eyes, ears, mouth, nose, and hands of the Corporation, without whom it cannot exist. So, when you try to hurt a Corporation in any way, what you are doing is hurting PEOPLE, including little guys, like you and me.