The Myth of Powerful Corporations
One of the biggest myths of our age is the idea of big evil powerful corporations. One example of the myth is the common comparison of companies’ sales to countries’ GDP. As Forbes explains here, Exxon is not bigger than Thailand. This is a fallacy of basic economics, comparing value added to turnover. However companies’ sales will continue to be compared to countries’ GDP, because it makes a good headline.
The Reality of ‘Powerful Corporations’
The unpopular reality is that corporations are actually very fragile and weak. Half of small businesses don’t survive 5 years. Even big businesses go bankrupt regularly and sometimes suddenly.
Changes in technology, commodity prices and competition can bankrupt a large corporation overnight. RCA, Nortel, Lehman, Pan American Airways, Blockbuster, RadioShack, Adelphia, Compaq, Drexel Burnham, WorldCom, Kodak, A&P, Borders, Netscape, Barings Bank. There is a long and growing list of bankrupt corporations. Not only is there no sympathy for failed corporations, people seem to rejoice at the downfall of big business.
In addition to risks such as technological obsolescence, the 2008 financial crisis resurfaced an old risk. Government expropriation.
Greedy vs. Generous
A common criticism of businesses is that they are greedy, profit seeking and cost cutting. Critics fail to realize that a corporation that isn’t ‘greedy’ will probably soon be bankrupt. A business that spends too much on labour, taxes or CSR will soon be out-competed by a business that doesn’t. Corporations pay workers as little as possible and relocate in cheaper countries because their position is weak, not powerful.
Everyone Hates Powerful Corporations
While small businesses are the darlings of the media and politicians, everyone hates large corporations. Politicians of the left and right, the media, consumers and workers love to criticize the evil powerful corporations. However if people didn’t want powerful corporations, they could stop giving them their money. If politicians didn’t want large corporations, they could tax, regulate or expropriate them. If the news media thinks big business is bad, they could un-incorporate themselves.
But they don’t. The reality is that consumers and politicians love big businesses. Everyone loves the supply of products, jobs and tax revenue. Above all, society needs scapegoats. Corporations have become the perfect scapegoat. Consumers, workers and governments love to blame businesses for their own failures. Government failures especially are blamed on businesses. Equality, the environment, even health issues, all formerly known as government responsibilities. Or unthinkably, individual responsibility.
The firm doesn’t pay me enough, that’s why I’m poor. The bank forced me to spend on this credit card. Corporate taxes aren’t paid, so there’s not enough government services. McDonald’s is making me fat. Corporations are polluting, not me.
The sins of modern society are blamed on businesses. While the powerful corporations are too afraid to defend themselves.