Sunday, February 5, 2012

Why nothing works anymore: thoughts on governments and corporations.

I like to give credit to ideas I pick up. The following is partly based on memory of a book, see footnote.* It was a brilliant observation, and once you read it you can't imagine why you didn't think of it. 

If memory serves the main idea was this: things are dysfunctional because we expect corporations to perform tasks that are the job of government, and we hold government enterprises up to the standards of corporations. 
They have different duties. We need to be clear about the nature of each.

Let's elaborate.

Corporations exist to earn money for their shareholders. That is their job description. Individual companies may have a conscience and do good in the world. But that is a bonus. Transnational corporations are just that: not bound to a nation. The corporation is not in business to create jobs. Jobs are a byproduct of making profit. Basing national policy on the expectation that corporations will work for the good of the country they happen to have a factory in inevitably leads to disappointment and betrayal.

It is irrational to get angry at the corporation in question. It is simply aiming to maximize profit, which is its function, unless the shareholders decide otherwise. Anger should be directed at the government that failed to create a framework to force the corporation into being a good local citizen.

We can, and should! argue about the details of what the role of government should be. 

Anything that exists, be it a corporation, a labour union, a government agency or a blade of grass wants to grow and expand its sphere of influence. Anything that exists needs a counter force to keep it in line.  I am a solidarity-forever-gal, but do not want to see a theater production come to a halt because only a unionized electrician can change a light bulb. 

Most of us 99%ers can agree that governments exist to serve society as a whole. We may have different ideas about how that is best done. Some of us are glad to trade higher taxes for more public services, while others prefer to leave as much as possible up to the individual. Some of us have a greater tolerance for inequality than others. Ideally governments alternate between the two views, so we have a more or less harmonious balance, created by relatively small correcting swings in each direction. Balance is never a steady state. 

Governments are NOT in the business of earning a profit. They do well when they play even. Moreover, the point at which they play even needs to take into account factors that do not come into play for a business.

Let's take as an example a government-owned railway. If the government loses some money on the operation of the railway, but that loss is smaller than the amount of money the railway saves it on road maintenance, it comes out ahead. In a sluggish economy the cost of railway workers' wages can be a bargain compared to the cost of unemployment, paid either in social payments or in social unrest. Looking at the railway simply as an operation that either makes money or doesn't misses the big picture.

Recent years have seen the rise of the neo-liberal view that governments exist to create the right climate for business. In turn, business is supposed to create jobs and prosperity for all. 
And, how has that been working? This post has been brewing for a while, but it was prompted by the closure of a plant in London, Ontario

Perhaps we have no choice when it comes to manufacturing. The Chinese can do it cheaper and that is the end of it, until the cost of transport makes re-localization profitable. But when it comes to resource extraction, guess what? Those tar (it ain't oil) sands are not going anywhere. Governments could demand greater accountability from the companies, and give generous compensation to displaced people, and get away with it.

More on this coming....

*Foot note:
Some time in the eighties I read a little book with the intriguing title: "Why nothing works anymore". It was a library book. I do not remember the name of the author, and have not been able to find it in the library catalogue, or anywhere. Perhaps the phrase I remember was a sub title, and perhaps I got it wrong. The name Richard floats up as author. Google suggests it may have been "Why nothing seems to be working anymore" by Richard Farmer, pub. 1977. In that case this topic was only a chapter. 

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