Is Corporate America Self-Centered, Self-Serving, Greedy and Materialistic?
By Richard P. Halverson

Recently Meridian received this e-mail:

Meridian publishers assured me that they were not looking for an answer from Meridian. However, the more I thought about it the more I felt like there were some points I would like to comment on. In so doing let me be clear these are my thoughts and do not necessarily represent those of Meridian or its publishers.

I do not know where this particular e-mail originated. However, I know people who could have written it. I mean no disrespect when I say those I have known are generally angry, unhappy, bitter and, in my view, terribly confused about the way things really work in a democratic capitalist society. Worse, not only do they fail to understand how things work in the real world, but they also fail to see how relatively well things work compared to the alternatives. (The people I refer to would disagree with me.)

Although I believe the sentiments expressed in this e-mail are extreme, I think most of us share some of these questions from time to time and that makes them worth commenting on. I believe it is well to remind ourselves how well things really do work, even though things are far from perfect. There are lots of problems and lots of inequities. But if you think the current system of democracy and capitalism that exists in most of the western world has problems you should see the problems with the alternatives. Let me start with the basics.

The Distribution of Scarce Resources

Human beings must consume scarce resources to live — food, water, shelter, and so on. Beyond simply living, human beings consume scarce resources for comfort and pleasure.

Economics is about the distribution of scarce resources. Wherever there are two or more people, there must be a method of deciding who gets what. Even in a simple agrarian economy, one plot of ground is better than another and one plow horse is stronger than another. Somehow a decision must be made to allocate the scarce resources of ground and plow horses. As the number of people in a society increases, difficulty of distributing scarce resources expands enormously.

Who decides which patients get the best doctor? Who decides which students get the best teacher? Who decides which person gets the best house with the best view and finest landscaping? How about food, vacations, clothes, cars, haircuts, computers, and other goods and services?

Here is a fact. Scarce resources will always need to be distributed by some method.

Here is another fact. The distribution will never be equal.

No Government vs. Total Government — Both Extremes are Disastrous

Because humans are intelligent social animals, they have always recognized that some form of organization needs to be involved in distributing scarce resources. We generally think of these organizations as governments. There are two extremes: no government control or anarchy to complete government control or communism.

Throughout history the world has seen both extremes. Today, for example, Somalia is an example of anarchy and North Korea is an example of communism. As has been the case throughout history, neither one works. Both extremes are disasters. They are not only disasters with respect to the distribution of scarce resources — they are disasters in virtually every aspect of human well being from health to freedom.

When anarchy reigns, history tells us that the strongest 2 or 3% will quickly own all the resources and the rest will have none. We see a system of warlords, or feudal royalty, or theocratic rule. There are large areas of the world that do seem to want, or at least tolerate, repressive theocratic governments. Some of these religious zealots reject much of what the West considers modern advancements. These governments are hostile to many of the comforts and freedoms taken for granted in the West. I do not hear many people in the West agitating for such a system. Indeed we are at war with those embracing this philosophy who would seemingly impose it upon us.

At the other extreme is a concept where all the people come together, creating a government that distributes the resources to everyone according to their needs. The world has experience with systems similar to this. It is called socialism and eventually communism. Despite the West’s long struggle with communism, I continue to hear voices in the West agitating for movement in the direction of socialism and communism.

With due respect to the writer of the above e-mail, the logical conclusion of his/her sentiments is some form of communism. All the perceived evil corporations with their power and materialism are taken over by some benevolent government that somehow operates only in the public interest for the good of all its people. This will not work! It is always a disaster!

Despite Its Terrible Failures, Many Still Want Communism

If you think that struggles with communism ended with the cold war, think again. We are currently witnessing an interesting drama unfolding in Venezuela. Hugo Chavez was popularly re-elected in December. In January the Venezuelan Congress voted to relinquish their authority and give him dictatorial authority to rapidly nationalize major elements of the country. According to the news the vote was nearly unanimous and there was dancing in the streets following the action.

The appeal is that some seem to be getting more of the scarce resources in Venezuela than others. There are rich and many poor. Chavez promises to get even on behalf of those that are feeling left out.

As I write, the news is reporting that Chavez is planning to nationalize the food chains. I do not believe grocery stores were on his original list of targets. The problem is that the government has imposed price controls on food like milk and meat. (Note: imposing price and other controls on independent businesses is just a form of nationalization without compensation.) The prices for milk and meat established by the government just happen to be lower than the cost. Not surprisingly the grocers are not willing to sell at a loss and shortages result.

As is typical in these types of centralized planning fiascos, the government will not admit that there needs to be a profit. They simply want low prices for the people. So Chavez may nationalize the food stores and try selling milk and meat at a price he feels is fair to the people. When he discovers it actually is costing more than he is selling it for, he will blame someone else. The bottler, for example. Eventually, he will nationalize everybody but the farmer. But the farmer will quit producing milk because he is unwilling to sell at a loss and he will be nationalized as well. Nationalized farmers have no incentive to be up at 4:00AM with their cows, and milk production will plummet. The established government price of milk in the stores will be very low. Unfortunately, there won’t be any to buy.

Complete Government Control, a Proven Failure!

Please make special note that not only will milk supplies decline so will all sorts of personal freedoms. Start with all those business owners who saw their property and farms confiscated. Think about those who want to voice opposition but are thrown in prison for doing so. Chavez has already announced that he will not renew the license of a large TV station in Caracas because it has spoken out in opposition too many times. It is impossible to have centralized government control over the distribution of scarce resources without also exercising centralized control over individual freedom as well.

This is easy to predict because Hugo Chavez is no smarter than any of the communist dictators that have gone before him. It is rare in economics that we can accurately measure the effects of one system against another. But with communism we can. What we see is that there is not one single solitary successful experiment with communism anywhere in the world!

After World War II, politicians drew an arbitrary line through Germany. The people were the same on both sides — same language, same religion, same ancestry, and so on. Within a few years West Germany was free and prospering, while East Germany was enslaved and poor. Only their system of democratic government and capitalism was different.

After the Korean War, politicians drew an arbitrary line through Korea; same people on both sides. Today South Korea is free and prospering while North Korea is enslaved and deeply impoverished.

Some might say China is a successful example of communism because we are hearing much about their current economic growth. However, just look at Hong Kong and Taiwan compared to mainland China and you start to get a sense how far behind China is. And the current gains are coming only because the government has in recent years begun to embrace some capitalist principles.

Communism fails for several simple reasons. First, the creation and distribution of scarce resources among a large population is way to complex for any government and its bureaucracies to manage. Second, human incentive is destroyed and incentive is the engine to solve all problems. Third, all the power shifts to the government. Lord Acton said, “Power tends to corrupt; absolute power corrupts absolutely.”

I have spent much time on communism because communism is the logical end of socialism. Not all socialists expect to wind up as communists but with each attempt to correct some perceived injustice through government control the socialist moves a step closer to communism.

A Freely Elected Government that Embraces Free Market Principles Including the Legal Creation of Corporations is Best

I actually believe the day will come that we will live in such a utopian society with a centralized theocratic government, but it will only occur after we are perfect and Christ heads the government. In the restoration of all things the principles of United Order (which incidentally was not communism) were revealed to the Prophet Joseph Smith. United Order was subsequently withdrawn because the Latter-day Saints were not yet able to live it. Latter-day Saints are good people, but none of us are yet perfect people.

In the mean time we must live with something else. Please note, I am not arguing for zero government. As said earlier that is anarchy and that is also a disaster.

What has proven superior is a government by the people, for the people and of the people. An elected government of laws with proper checks and balances to avoid any element of the government or society from becoming too powerful. A government that embraces free markets and capitalism as the principle source for the distribution of scarce resources. A logical result of embracing capitalism is the legal creation of an entity called the corporation.

Free markets and capitalism have at their very root the concept of personal self-interest: everybody is trying to do the best for him/herself. In order to produce any good or service four productive elements are necessary: raw resources, financial capital, human labor, and intellectual capital*. These are not listed in order of importance. Indeed the order changes with each item being produced.

Pulling these productive elements together successfully presents many challenges. To meet this challenge governments have legally defined the concept of a corporation. A corporation exists on paper; it is not a real being. But the law grants the corporation certain rights as though it were a real being. Through the use of a corporation those with the intellectual capital, the person with the idea, can amass the other productive elements to produce goods and services for society. Those goods and services will be distributed through the market place.

People Control Corporations — Not the Other Way Around

Here are some of the things this system means. People get to vote every day on what they want. They vote with their money and their labor. If they don’t like the corporation’s product they don’t buy it. If they don’t like the corporation’s employee practices they don’t work for it. No feudal lord, no communist dictator is telling them what they want.

Further — and this is very important for the writer of the e-mail to understand — no corporation is powerful enough to tell you what you want either. I cannot tell you how many times I have heard in life the idea that, “We only get the products the corporations want us to get.” I am sorry to be so blunt, but people that think this way are completely clueless.

If you think I’m clueless, ask yourself how frequently you are asked to fill out some survey about how you liked a particular product or service and what you would like to see changed. Corporations are desperate to figure out what you want. Sure, they spend billions advertising a product so that you will know that it exists. Sure they try to make the advertising appealing. Sure they are driven by a profit motive. But in the end they cannot make you like it or buy it.

If the consumer doesn’t want it, no amount of advertising can make them buy it. If you think I am wrong ask yourself why so many products fail. Governments can force you to do things you don’t want, but corporations cannot.

Corporations Must Strike a Balance between Many Stakeholders

People run these legal entities. Each corporation has many stakeholders; for example, the vendors, the investors, the workers, the idea generators, the management, the community, the customers and even the competitors. Each of these stakeholders operates in his own interest, and that provides important checks and balances.

It is a fact that the power can shift among these stakeholders. Generally, however, it cannot shift too far or for too long without destroying the corporation. If labor gains all the power, costs may rise to a point that consumers will not buy. If the intellectual capital gains too much power, they may find they cannot attract the financial capital.

The community can destroy the corporation with excessive taxes or regulations. Competitors are always trying to best the corporation. Success means finding the right balance among the stakeholders and this does and will continue to occur.

Often either outside observers or stakeholders conclude things are not fair from their point of view. That is when they frequently petition government or some other powerful outside body to fix things. This can lead to some powerful stakeholder like the government upsetting the balance for the corporation. What typically follows is the ultimate decline of the corporation, which winds up hurting all the stakeholders. I believe firmly that history and long observation proves no government can establish this delicate balance better than the stakeholders operating within the free market.

I find some serious flaws in the logic of those that are constantly agitating for aggressive government control of corporations:

There are Lots of Problems, but Since Book of Mormon Times Free Governments and Free Markets Have Served the People the Best

I wish to assure readers that I do understand the world faces many serious issues — it always has. I also want to emphasize there is a need for government. Markets driven by the self-interest of millions of consumers and businesses do not always look at the long term. Governments can do that. Governments also represent the communities that are legitimate stakeholders in the process.

This article has emphasized the importance of freely elected governments that support free markets because our friend that sent the e-mail sees things from a very dark and depressing view. He/she sees only greed corruption overpaid powerful executives that control everything including the politicians. The email writer is just as wrong as Malthus was.

I know of no better tutorial than the Book of Mormon. Although the Book of Mormon does not tell us whether the Nephite society understood the genius of corporations, it does make clear that a society of elected officials and laws is superior to kings and dictators. At least until such time as we can have a truly righteous king and that will not happen until Christ returns to run the government.

*Not all economists include intellectual capital among the productive elements for creating goods and services, but they should. The person with the new idea, the invention, and the ability to manage is key to an advancing society.

I mean no disrespect when I point out most of us are worker bees in society. Many people can be taught our job. However, many others have ideas for doing things better. A few of these have so much intellectual capital that they change the world — people like Henry Ford, Thomas Edison, Bill Gates, Steven Jobs. Many others with intellectual capital may just improve the world a little.

A free society rewards those with true intellectual capital, sometimes greatly. That motivation of reward drives people to try. Many will fail but others will succeed. Please note the motivations are not all money. Everyone’s motivations are different. You may not respect my motivations and I may disrespect someone else’s, but a free society must allow for all types of motivations if it wants to solve problems and make progress.