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.
If any grouping of humans wants to give some of the money
it’s accumulated to a political campaign, why should it be
prohibited? The first amendment says, “Congress shall make no law
respecting the establishment of religion, or prohibiting the free
exercise thereof; or abridging the freedom of speech, or of the
press, or the right of the people peaceably to assemble, and to
petition the Government for a redress of grievances.” Corporations
are simply one of the many ways people peaceably assemble. You
cannot restrict the rights of corporations without also restricting
the rights of the people who own the corporations. That was the
logic at the heart of the Supreme Court’s Citizens United majority
decision.
The occupiers fervently believe that corporations have far
too much political power and that what we’ve got is a
“corporatocracy.” If that’s true, why do we have the second highest
corporate income tax rate in the world (35 percent)? Why haven’t
corporations directed their political puppets to reduce it to
zero?
It would be easier to argue that labor unions have too
much power. The Democrat party ought to be called what its British
equivalent is called: The Labor Party, or better still, the Union
Party.
One complaint that has the potential of getting support
from both the left and right is “corporate welfare.” (Several
specific examples were discussed in the Wall Street
Journal’s lead
editorial Monday.) I know of not a single one of the countless
subsidies to businesses and industries that can be economically
justified. Any business that can’t survive without subsidies should
not survive. A broad-based focus on these ill-founded policies
would be a welcome addition to the current political season. Maybe
the OWS and the Tea Party share some common enemies.
