FT135: “If corporations aren’t people than neither is government.” —Old Pithy

Posted by PITHOCRATES - September 14th, 2012

Fundamental Truth

Corporations get Wealthy by either Pleasing their Customers or Pleasing Government

Mitt Romney said during the Republican primary campaign that corporations are people.  And the Left castigated him.  While late-night comedy made jokes with that snarky, all-knowing condescension.  Because everyone on the Left knows that corporations aren’t people.  They’re evil, soulless entities.  Unfeeling and cruel.  Who care only about profits.  While poisoning our environment.  Everyone on the Left will agree with this.  And those CEOs?  They’re the worst.  A bunch of greedy, old, white men.  Except those women who shattered the glass ceiling.  Who the Left celebrates.  Even though they run evil, soulless entities.

So what is a corporation?  Other than something that comes from the bowels of hell?  Well, perhaps the simplest explanation is this.  A corporation is a business structure that lowers consumer prices.  Which reduces the cost of living for poor and middle class families everywhere.  Huh?!?  No.  That can’t be right, you say.  Because corporations are evil and soulless.  On top of that they’re not people.  So why would some evil, soulless non-humans do something that is very beneficial to humans?  In a word, greed.

There are two ways corporations can get wealthy.  Either by pleasing their customers.  With high quality, great selection and low prices.  Or by pleasing government.  Allowing them to give their customers lower quality, poorer selection and higher prices.  Because their friends in government limit competition.  So they don’t have to please their customers.  Wal-Mart is an example of a company getting rich by pleasing customers with high quality, great selection and low prices.  Wal-Mart shoppers enjoy going to Wal-Mart.  The American auto industry is an example of companies getting rich because of government.  Which restricted free market competition as much as possible in the auto industry.  Raising prices and lowering quality.  Because of this auto shoppers don’t enjoy buying American cars as much as foreign imports.  Which has made Toyota the number one car company.

The more Corporations Pursue Profits the more Choice, Quality, Variety and Lower Prices Consumers Have

Selling a large variety of high quality goods at low prices will attract customers.  And increase sales volume.  That leads to profits.  Which is what those greedy corporations want.  And one of the best ways to do this is through economies of scale.  Growing larger to have greater purchasing power.  And selling so many units that you can charge less per unit to recover overhead costs.  Thus allowing you to sell at lower prices.  And the bigger you get the more you can lower your prices.

But to get big you need to take a lot of risks.  And the biggest risk is borrowing enormous sums of money.  Because it takes money to make money.  The kind of money one person typically doesn’t have.  So how to get it?  By incorporating.  Becoming one of those evil, soulless entities.  So you can give your customers a large variety of high quality goods at low prices.  When a business incorporates a few things happen.  First of all the business becomes a legal entity.  Which protects the people running the business.  By diversifying risk to its numerous shareholders.  Who assume that risk in exchange for ownership.  Incorporating also opens the capital markets for them.  Where they can sell bonds to finance growth.  Or sell stock.  Allowing them to raise the large sums of money to open more stores/plants.  Hire more people.  And achieve economies of scale.

The more corporations that do this the more choice consumers have.  The better quality.  And the lower prices fall.  Just think of something you’ve bought recently.  And the choices you had.  The stores you visited.  The websites you visited.  How you found exactly what you were looking for and paid what you thought was a fair price.  And how you enjoyed the whole process.  Now compare that experience with, say, renewing your driver’s license.  Where you have no choice in quality or price.  Compare the friendly faces at your favorite store with the joy of waiting for them to call your number at the DMV.  When the number being served is 76.  And you have number 12.  Worse, when you make the “I have places to go look” to the civil servants behind the counter working at a snail’s pace you don’t get a friendly smile in return.  You get a look of contempt.

People in Corporations put on a more Human Face than Government Workers because they Want to Please You

When you get poor service at a store you will complain.  You will talk to management.  You will threaten to take your business elsewhere.  Or you will just take your business elsewhere without telling anyone at that business.  Giving them no chance to correct a problem that will discourage customers shopping with them.  Which is the worst thing that can happen to a business.  Because they can’t fix a problem they don’t know about.  But if they know about it they will fix it.  Because if they don’t you will take your business elsewhere.  The last thing they want you to do.  So they will strive to make your experience a good experience.

If you get poor service at the DMV, though, you don’t want to get the people who can make you wait forever angry.  Instead you smile and tell them what a great job they’re doing.  Because you can’t go anywhere else.  Which is par for the course whenever you have to deal with the government.  Where customer service is not in the employee handbook.  Which is why people usually feel fear and/or dread whenever they have to deal with a government bureaucrat.  Especially the IRS.  Which is why the dark world George Orwell wrote about in Nineteen Eighty-Four was about the oppressive world of socialism.  Not an oppressive world where corporations take over.  Because they could never do that in a free market economy.  They could only do that in a world where government chooses winners and losers in the private sector.  Which would be a world without competition.  Where there was no large variety of high quality goods at low prices.  But the grey world that Orwell wrote about in Nineteen Eighty-Four.

So what’s the difference between corporations and the government?  The people.  The people in corporations put on a more human face because they want to please you.  Because they have to please you to stay in business.  The people in government, though, don’t.  Because government doesn’t have to please you.  And don’t try to.  For where else are you going to go?

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