Corporations, persons, tools, and fools

Corporations are persons?  Someone said that you know a corporation is a person when Texas executes one.

How did we get to this situation that corporations have “freedom of speech” and many other freedoms granted to actual living individual persons?

Corporations were originally created to give monarchs and other nobility a piece of the economic action.  As the merchant class rose in the cities, the monarch couldn’t tax them because they had no land.  By creating a corporation of a given business, the monarch could insist on a few shares of a corporation and rake in more in profits than he would have in taxes.  Also, by giving a monopoly to a corporation, he protected it from competition.

These monopolies soon expanded far outside the monarch’s country with colonization of other parts of the world.  An example is how British law forbade the American colonies from producing a long list of items or importing goods through any other organization than the British East India Company.  Was the British East India Company composed of Adam Smith’s “order of men” who “were not to be trusted” with proposing legislation?  The Boston Tea Party was an act of defiance against the corporate monopoly enjoyed by the British East India Company.

Is today’s Tea Party a tool of corporations who want to extract minerals without paying the full cost of such extraction?  These corporations are waging legislative, administrative, and public relations campaigns to allow them to operate on corporate terms.  Are these corporations composed of Adam Smith’s “order of men” who “were not to be trusted” with proposing legislation?  Also as the British East India Company was a “foreign” entity, many of the extractors of today are entities from out of state or even out of the country.

Does “Open for Business” or “Business-friendly” apply to locally-owned companies or to large corporations that will move elsewhere whenever they think an area is not bending to their wishes?  Does it mean that large corporations will be given subsidies, including reduced taxes, that aren’t given to locally-owned businesses?  If we want truth in government, maybe we should insist that states and localities that claim to be “Business-friendly” should admit being “Corporation-friendly”.

Can you find “corporation” in the U.S. Constitution?  That was deliberate.  Many of the delegates to the Constitutional Convention remembered well the dominance of a corporation over Colonial affairs and did not want a repeat of that stranglehold.  Many of the national politicians of the time had a vision of craftsman and farmers plying their goods in local markets.

But with advances in transportation, the economic situation changed drastically.  To build canals required capital.  To gather capital, groups of people had to organize to buy shares and/or borrow money.  If the enterprise failed, the shareholders didn’t want to be held individually responsible for the losses of the company beyond their own financial contribution.  Wouldn’t you?  Thus, the limited liability corporation came to the United States.

With the coming of the railroads came ever larger corporations.  The Illinois Central Railroad hired a lawyer to get special privileges for it like breaking unions, hiring foreign workers, and gaining privileges not held by people.  Yep, that lawyer was the “of the people, by the people, and for the people” guy.  Apparently, the Civil War opened his eyes to many things.  This excerpt from one of his letters shows this rather strongly:

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

My, how political parties morph over the generations!  I think only two Republican Presidents have had similar misgivings.

Many decades later another war-time leader worried about the “military-industrial” complex.  But one of his predecessors pulled a corporate branding trick on the American people.  The Department of War was now to be called the Department of Defense.  Now corporations weren’t in the business of selling war machines but were fulfilling “defense contracts”.

One of the political ironies is the political party the claims the federal government can’t do anything right bends over backward to lavish more money on the military-industrial complex.  Do they not know that snafu and fubar are terms coined by the guys in the foxholes?

So, are corporations the tools of the people or are the people the tools of corporations?  If we let the latter happen then we are the fools.

For a lot more about the abuse of and by corporations, see “Life, Inc., How the World Became a Corporation and How to Take It Back” by Douglas Rushkoff.

Mel owns shares in a few corporations and almost always votes against their overpaid executives and boards.

Quote of the day - Competition

"When, for instance, competition laws are not enforced, monopolies grow, and with them the income of monopolists. Competition, by contrast, drives profits down." - "Some Are More Unequal Than Others", Joseph E. Stiglitz, New York Times 2012-10-26

The article relates how the oligopolists are over and over driving down their costs, including taxes and wages, and increasing their profits.

My thought is that there may be a time when there are no profits to made because few can afford to buy the oligopolists' products and services and there will be insufficient qualified employees because there were insufficient taxes to educate a large number of people.

See "fastest to ruin" quote in "The Invisible Adam Smith".

The price of gas and other things, a perspective

Many are complaining about the cost of gasoline as the price approaches $4/gallon.  Consider that about fifty years ago gas was often 25 cents/gallon.  The price is now about 16 times as much.  But consider also the use of those gallons of gas.  Fifty years ago many cars got 10-15 miles per gallon; now many cars get 30 or more miles per gallon.  In other words we are getting an effective $2/gallon or better of travel compared to fifty years ago.  So, as far as our use of gasoline, the price could be considered only eight times as much.

Consider postage.  Fifty years ago the price of a first class stamp was three cents.  Now it is 47 cents (I don't know exactly because I buy forever stamps).  Hm!  That's about 16 times as much, about the same as the increase in the price of gasoline.  But postage is now a better deal.  Fifty years ago a first class letter would take five days or more to go across country.  Now it can go coast to coast in three days and even four or less to Hawaii.  To get that kind of service fifty years ago, you had to buy an airmail stamp at eight cents.  So, in one sense, postage has gone up about six times as much as fifty years ago.  Pretty low inflation considering it is a government service continuously hobbled by Congress.

Consider newspapers.  Fifty years ago the price of a daily paper was five cents.  Now it is one dollar, twenty times as much.  And they are a lot smaller.  And in most cities there is only one newspaper rather than two or three.  Worse, the last newsstand increase was from 75 cents to one dollar.  A 33-1/3 percent increase, and I never saw a single complaint in letters to the editor.  A newspaper is produced by a "free market" company.

The list of items whose prices have "skyrocketed" goes on and on.  I remember sixty years ago going to the movie (sometimes a double feature with a cartoon, a short, and the news) for ten cents for the ticket and ten cents for a box of popcorn.  I wouldn't buy a candy bar at the theater because they cost six cents compared to five cents at the drug store next door.  Ice cream cones were five cents a scoop.  Sundaes and milk shakes were 25 cents.  "Pepsi-Cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you!"

Free markets for big corporations but not others

The Senate defeated a measure to block new FCC rules on net neutrality; that is, providers could not or give priority to their own content or block competitors.

"[Sen. Kay Bailey] Hutchinson said the rules were yet another example of the 'Obama administration's relentless imposition of new and destructive regulations... (that) are freezing our economy.' "Senate defeats effort to block Internet rules", Reuters, 2011-11-10.

Duh, Senator, aren't monopolists the ones freezing our economy?

Cash is becoming obsolete, will credit cards follow?

Imagine this! You go into a store to purchase something. When it comes time to pay you whip out, not your credit card but your cell phone. The merchant gives you a number, you call PayPal, enter the amount of the purchase and the number the merchant gave you. A moment later the merchant receives a notice on his or her computer that the payment has been made. The merchant wraps your purchase and thanks you for your business.

Far-fetched? No, it is technologically feasible and has been implemented in many parts of the world, see "Mobile Payments". The above scenario is a four-step process. The purchaser calls his or her financial institution. That company approves the sale and calls the merchant's financial institution transferring the money. That company sends a message to the merchant's computer. The merchant sees the message and completes the sale.

Apple has this down to a three-step process for iTunes and PayPal has it down to a seven-step process. I would guess that Apple trusts most of its iTunes users and eliminates the approval process. See "From Credit Card to PayPal: 3 Ways to Move Money", Wired, February 2010. See also the main article, "The Future of Money: It's Flexible, Frictionless and (Almost) Free".

To think that Congress passed an enormous bill to rein in the reign of the credit card companies. It could have passed a one-page bill to authorize Federal agencies, including the IRS to accept payments through PayPal.

True capitalists should welcome this creative destruction, which really is the basis for innovation, not behemoth near monopolies. For more on creative destruction, see Wikipedia: http://en.wikipedia.org/wiki/Creative_destruction

Are there any monopolies left?

I've been thinking about writing this blog for some time because I think most monopolies have met competition. I was spurred to write such a blog on seeing an appeals court action in favor of Comcast over an FCC rule -- "Court rejects cap on cable market share – again".

Oops, I can't give you the URL because Yahoo Finance has some block from using it other than a Yahoo Finance page. So to read rejection article, first go to http://finance.yahoo.com and then copy and paste all of

http://finance.yahoo.com/news/Court-rejects-cap-on-cable-apf-4283410271.html;_ylt=ApfFZ31U4vvHDv99Cs8DBwC7YWsA;_ylu=X3oDMTE1M2NpMDZkBHBvcwM0BHNlYwN0b3BTdG9yaWVzBHNsawNjb3VydHJlamVjdHM-?x=0&sec=topStories&pos=2&asset=&ccode=

into the URL box of your browser.

I'm sorry about past Yahoo Finance references I've given you that may not have worked. Nobody I know complained.

Back to what I wanted to write.

Essentially the FCC had been directed by Congress to set a limit on how much national coverage any cable company can have. The appeals court ruled that the FCC did not consider all possible issues in determining what would compose a monopoly.

These include the competition for TV subscription service from satellite companies and telephone companies.

This same but not exactly the same competition exists in other fields.

An airline might have a monopoly on an air route between two cities, but flying is not the only way to get there. Many people can drive or take a bus, especially when the cities are close. Given the hassle of airport security, they may even arrive more quickly than flying. For some routes, like the Boston-Washington corridor, rail travel may be preferable, if for nothing more than being able to walk around frequently.

About the only routes that air travel has no meaningful competitors is across oceans. Few want to take the many, many days that a ship would take. Even then, most major routes have multiple airlines serving them.

All transportation modes have another major competitor – telecommunications. Why make an expensive, time-consuming trip when you can just make a cheap phone call or send email.

The Bell companies once had a monopoly on telephone service in most parts of the company. A court broke them up to give other telephone companies a better chance. The decision had its up sides and its down sides. But I bet the judge did not forsee the free-for-all in telephony competition that exists now.

You can have a cell phone from several carriers, or you can use your computer and Skype. For the latter, you don't have to use a telephone; see above about cable companies.

Electricity is still mostly a monopoly, but you can take many steps to reduce your reliance on the power company, other than conservation. You can install solar panels or wind turbines to augment or replace grid electricity; the extent you can do so depends on your location and your wallet.

Natural gas has not been a monopoly for a long time. Propane and electricity have been alternative cooking fuels. These plus oil and wood are alternative heating fuels.

Railroads were once monopolies. If you wanted to ship something to another city, you generally had once choice of railroad. Then highways got better and small loads could be shipped anywhere in the nation by truck. And a shipper didn't need access to a rail spur.

As time goes on, we will see more and more alternatives to monopolistic services. TV replaced newspapers for many people, the internet is replacing both newspapers and TV for more and more. What's next to fall?