High production, high consumption models are so many people are able to have discretionary income in the modern era. And this is true for every modern economy whether it be democratic, socialist, communist etc. Maximizing productive capacity has a lot of social and environmental consequences and while we are free to hate on the corporations that make it possible, we must also admit that our way of life entirely depends on it. We are of course free to dream of other ways of life, but looking back in history there have been no alternatives that have offered our current quality of life to such a large collection of people.
What if the existence of a middle class is transitory? The billionare preppers certainly think our current social order is on borrowed time[1], not that I agree with their outlook, but I take that attitude as evidence that today's capital class does not particularly care for the continued existence of a middle class, unlike Henry Ford.
Once off sales are passé now, and recurring revenue is in. I suspect the middle class gets in the way of profit maximization because of the class' propensity to saving and ability to cross-shop since they have free time.
Selling Patagonia vests for leisure activities may be profitable, but it will lose out to PE squeezing out the middle class from buying homes and making them perpetual renters and unable to afford leisure activity
1. https://www.theguardian.com/news/2022/sep/04/super-rich-prep...
I’ve been stuck in that rabbit hole for atleast 2 years now. At the macro level it seems as if it was all planned but upon deeper reading I came to a conclusion that it was a sequence of events which while individually would have made sense collectively lead to the current mess.
To get a whirl wind tour and as a starting point I highly recommend Adam Tooze’s book “Crashed”. In it he chronicles the 2008 crisis beginning with Nixon’s abolishment of gold standard. The book is full of excellent references.
I would add one other thing, some of those steps have opportunists in them.
Once you realize that, you realize you can be an opportunist too. You can play the game at the same level, by pushing chess pieces at a small level.
You can’t lobby to abolish the gold standard or influence federal appointees
you can. you can get your people in agencies and courts when the time looks favorable, and they will transcend the Senate committee composition and the President's administration.
> You can’t lobby to abolish the gold standard
odd example since that's gone for 50-90 years already, but again you can.
==
think about it this way. periodically there's a conspiracy documentary about people pulling the strings of the elected President. what they neglect to mention is that every possible permutation of potentially electable Presidents have opportunists already waiting. You don't have to be a partisan. You don't have to actually be a partisan. Loads of people are doing things beneficial to them.
These assumptions are approximately correct, so maximizing shareholder value is approximately optimal. It maximizes prosperity.
It's better to create more value than less value all things being equal. If you put it this way, it's obvious.
It's more profitable to dump waste in a lake than to clean it up. It's more profitable to hire children for 10 cents a day than adults for a living wage. It's more profitable to keep using ingredients even after they've started turning bad. None of these deliver value to society.
Getting into my more controversial political opinions, I believe now these corporations and their executives also control the government almost exclusively but they at least pretend they’re separate from the State.
Yep
I don’t think DEI is new. The original affirmative action legal cases in the 60s was in employment, particularly in breaking up the homogeneous of all-white labor unions and other all-white labor forces. Remember that the Jim Crow laws and racial segregation in the public sphere was still occurring in the 50s and early 60s, and affirmative action policies occurred in the workplace as a response to try and actually enforce desegregation in the corporate sphere.
I just don't think it's progress to go from "it's good to burn down the forest to extract a dollar" to "it's good to burn down the forest to extract a dollar, as long as 50% of the torches are held by women."
1. They believe there is investor demand for funds that take environmental and social impact into account
2. They believe that companies with better environmental, governance, and social Impact ratings will have higher or more stable returns over time
You can disagree, but I think there are good arguments to be made for both of those points.
I also doubt the people you have in mind have enough financial capital to really force everyone’s hand _unless_ their arguments are actually persuasive
Generally its not as profitable to go by DEI guidelines, but it does have an anticompetitive effect because smaller orgs simply cannot afford to do it.
It's similar to how regulations effect businesses. If there are enough regulations the only ones that can afford to stay compliant are the ones with teams of lawyers. Which is why megacorps lobby for more regulations. It prevents competition from sprouting up.
But even if I accept it as true, it doesn’t contradict point 2, which is that investors think they’ll see better or more stable returns
And, as 'Apocryphon notes, this is much older than you think besides.
I have never met a single person at any level of any organization or otherwise who has expressed this sentiment. This characterization is a strawman.
Usually the idea that shareholder wealth maximization is central comes with a whole bunch of other economic ideas. Like that long-term wealth is what matters, not wealth tomorrow. And that corporations aren’t the center of all life or meaning for everyone involved, just a way to generate stuff. And that in order to generate more wealth you need to constantly provide more goods for more people at lower cost.
These distorted strawman characterizations of capitalists are just outrage porn, they don’t help move the world forward at all.
It may not be the exact same statement, but it's very close in spirit. This should be beside the point; we should do things that are good because we can, not just because they make us money, but I usually tend to see there being a ton of potential for the engineer's idea to help make money.
I like a bunch of the gist of what you are saying, but I feel like most capitalism is bad capitalism, that the short-sightedness's prevalence is almost always outrageous & deserves the hate it attracts.
Organizations have extremely short reward loops. People come and go & dont try to do the right thing for next year, much less the next 5 years. Markets & investors punish poor quarterly reports. Maybe there's an idealized version of capital where folks can play it smart, but it doesnt seem to be happening on this planet.
If I hire you to fix my car I’m not paying you if instead you fix the neighbors car
I didn’t say that. We put rules on corporations to protect shareholders. Nothing prevents shareholders from taking profits and giving them away.
But we don’t want the execs deciding to give away the shareholders moneys for them.
This is also where taxes come in. While others are maximizing profits we take a cut and distribute it to hopefully add some more good to the world
> i dont think a mutual benefit ought be required to do a little good
My personal cynical belief is that there is always a mutual benefit, it could be of different kind but everyone gets something in return. We value goods/actions differently and don’t place $ on every action, but every action has a cost.
> shareholder class
at the end of it. But make no mistake, every discussion I've had as been "how will this make us money, and will that impact the stock price" -- which has an implication.
Cuz retail investors don't count for much w/r/t stock ownership.
Plus Milton Friedman's "companies exist only to generate profits for shareholders" has been a mantra since I went to Uni in the 80s.
Would you invest your 401k/retirement in companies that don’t generate profits for you ?
Is the goal to maximize profits this quarter, or shareholder value (share price) this quarter, or over the course of a decade, or a century, or a millennium ?
Merely changing the answer over those four options would entail massive changes in management goals and choices.
The entire pernicious concept merely enables exploitative behavior — exploiting employees, the people in the surrounding community/society, and the environment, externalizing costs on everyone else while internalizing profits.
If we are going to treat corporations as effectively persons, it is far past time to expect them to behave as good citizens.
(and if they do not behave as good citizens, then treat them as bad citizens, i.e., jail or execute them)
I actually prefer to see companies as entities such as their only goal is maximizing profits, all else be damned. They will exploit every worker and will externalize every negativity in their profit-driven mandate. And typically short term profits will trump long term anything.
It's the role of governments, as representatives of society, to rein in companies so that they don't act in ways that damage the society where they are inserted in. Cue in labor and union protections, environment regulations, etc and so forth.
And yes, companies that break regulations should be treated as criminals, including termination.
We have seen all of these happening in modern times.
That is the standard of behavior.
Regulation is what stops companies selling you contaminated food, working conditions similar to slavery, factories polluting the air and water with dangerous chemicals, so on and so forth
> you need incredibly strong rules and almost perfect enforcement.
And that's what citizens should demand of their governments
They clearly don't do this though. There are less profitable and more profitable industries and companies don't move out of the less profitable ones. If they were out there exploiting anyone and everyone, they'd all be selling crack instead of furniture. Or at least mandating the employees be on it for productivity.
Entering a different market is expensive and takes a lot of time. It’s also not guaranteed you’ll succeed.
> they’d all be selling crack instead of furniture. Or at least mandating the employees be on it for productivity.
Selling crack is against the law and afaik so is requiring employees to use PEDs (see the parent’s idea of governments deciding what’s out of bounds). The tactics Purdue used to push OxyContin are a good example.
That's a strategy risk…
> Selling crack is against the law and afaik so is requiring employees to use PEDs (see the parent’s idea of governments deciding what’s out of bounds).
and that's a legal risk…
…but acceptance of risk is how profits are made and they know it. So basically this is just saying they're single-minded in pursuit of profits except for when they aren't. It doesn't seem to have predictive power.
I think a better explanation includes things like how, since most American companies are owned by the same retirement fund managers like Vanguard, their owners aren't necessarily interested in them competing maximally hard.
(and yes, Purdue is an example of _actually_ doing this, so are tobacco companies.)
Forgive me for perhaps being blind, but I fail to see it with the same clarity as you do.
Typically, what stops companies from ruthlessly exploiting workers, selling products that damage society, polluting the environment, et cetera and so forth is only government regulation, not the goddwill of executives and chairmen.
When the companies engage in the ordinary big-business practice of regulatory capture, absolutely nothing.
It is just treated as a game to be hacked. And hack it, they do.
Because according to your standards, companies don't need to treat everyone fairly (as a good citizen), but the govt must treat them fairly.
That's how earlier this week we saw headlines that Tesla employees in Buffalo NY were organizing a union drive. Then the very next day, we see headlines that Tesla has fired 10 workers, the ones organizing it.
It is illegal as hell, but they did it anyway. Why? Because Tesla knows that it'll take years for all the hearings to work their way through the courts, and the result will be a fine, which they can appeal, and delay further. Meanwhile, they figure the end cost will be less than having to deal with giving workers a fair deal. So, despite all the "excess govt regulation", the workers get exploited and screwed.
It is also how Norfolk rail donated to both Trump and the Ohio gov and had regulations eased, e.g., requiring fewer workers on trains and not needing to update their technology with "extra" brakes. And now we have an environmental disaster as a result. And those costs will be 'socialized' to the taxpayers and victims in the town, while the company keeps most of it's profits (it will not pay even a small fraction of the costs and it will be years from now).
So yeah, the govt structurally CAN NOT be as nimble as the companies, so the companies exploit that weakness. Great for them. Sucks for society.
I'm not saying they're all bad or evil, but this over-simplistic "shareholder value only" concept /structure is not good for a sustainable society or even for sustainable corporations.
I do not believe this is how NLRB enforcement works.
Though if the US had sectoral bargaining like other countries it just wouldn't be an issue in the first place.
The answer for that is more regulation, stronger and more independent institutions that can rein those companies in. Not wishing thay companies magically become nicer.
I fully understand that that will not happen by itself.
What I'm advocating is changing the STRUCTURE in which they operate so that "becoming nicer" is prompted by the system. The current system fully expects only the primary goal of maximizing profit/value for the shareholders/owners, and minimal compliance with anything else.
This is despite the fact that EVERY corporation enjoys massive benefits of operating in a country that provides everything from transportation infrastructure, a reliable legal system, an educated workforce, to military protection of global shipping lanes.
It would help to embedding into the law the concept of corporate responsibility, by providing a cause of action for irresponsible corporate actions. Expecting the corporation to take care of the workers, and the environment. E.g., In Germany, it is required that workers have seats on the boards and workers have much greater rights.
The point is that the law is now, as you say, just [corps are expected to take care of only their shareholders] and [corps are subject to some regulation].
This system has been tried for nearly 250 years, and is obviously lacking.
I don't think iron-fisted regulation will provide a solution. That's already been tried, everyone got annoyed at the overhead, and it was backed off (see Reagan administration), and the corp destruction has ramped up ever since. It literally just becomes a higher priority to corps to do regulatory capture then.
We need to make the system harder to capture, spin a wider web. And that can be done by broadening the social and legal compact with corporations ('tho they'll fight like hell against it).
Those are interested ideas. But it begs the question: How to enforce compliance without regulation?
For example, corporations are strictly creatures of law; they exist IF and Only If, and in the form that the law allows, at the pleasure of the government.
So, rewrite the enabling laws to state specifically and explicitly that corporations have affirmative responsibilities not only to the shareholders, but also to their workers, the community, the nation, and the environment, etc.
That alone immediately gives cover to any executive or board taking action that benefits those entities and perhaps not so much the shareholders. So they have a defense against shareholder suits that seek to force action or compensation away from corporate responsibility. Plus, there would also be a cause of action from the other parties for failure to take care of their interests. Obviously, this could go too far in either direction, so it must be carefully written, but this is the general idea.
There are many other ways, but that's the idea, don't rely solely on regulation.
Specifically, would you actually prefer to see people as individuals whose only goal is maximizing their personal interests, all else be damned? Should they exploit every interpersonal relationship and externalise every negativity in their selfish-driven mandate? Should short-term personal wants trump long term anything?
If yes, I don't like the society that would result, but I respect the consistency in the idea. And if not, why should individuals be subject to more stringent moral rules than companies?
People are already pretty selfish, and without any regulation and oversight they will definitely act in ways that are detrimental to society. That's why we have laws and law enforcement.
The only difference from corporations is that people do not only pursue money. They may have different goals (sex, pleasure, power, influence). That makes people notoriously difficult to parse, and dealing with them is extremely frustrating.
Corporations are easy, they are the incarnation of greed. For them money is all that matters.
But they are entities designed to pursue profits as their primary motivation. With proper regulation, when the pursuit of profits align with the needs of society, they can be great to have around.
Problems arise when regulation is insufficient, when regulators are complacent or corrupt, or when governments look after the desires of corporations instead of the benefit of the people.
When that happens, then yes, they become a threat to society.
This is the absolutely crucial core question that gets skipped over so, so often.
It is no frills and quite scholarly, but that is often the case for hyper focused, niche subjects.
It is as niche as studying a specific subject area in the broader field of Egyptology, which again I don’t think would be a stretch to consider niche.
Perhaps a takeaway we can both agree on is niche may not be the best word for describing what I’m talking about. Perhaps subfield of an academic discipline is.
Most folks don’t even know money wasn’t really used until the like 1500s. The wealthy bartered and used coins as a sign of wealth, using them (coins) was typically faux-pas. And even then, the church hated money because it stripped them and the monarchy of power…
Do you mean in Europe? Pretty sure money has been used quite a bit in many other places.
I mean pretty much everywhere. Money wasn't used the same way it is today, and it wasn't until the 1500s that really emerged as a result of the Dutch being prolific traders. Coins existed but money wasn't spent, or used, like it is today... Barter was the primary way for people, both rich and poor, to acquire goods.
This isn't obvious to me. The idea is to pursue profits above all else, but also that giving people what they want will result in maximal profits. Is giving people what they want insidious?
I love how people rail against shareholder value.
But then, they fail to forget that…
Shareholders are also pension funds, people with 401k’s and rank and file employees.
The actual problem is wealth inequality and the fact that a select few burden the majority with most of the risk while they reap most of the rewards.
In one way or another employees are always shareholders even when they’re not holding any certificates.
We don’t forget that. It is simply a reality that we can’t avoid. All the profit is siphoned into the stock market, if you opt out of it (if you are even allowed to; in many European states, these funds are mandatory), you’ll loose your savings to inflation.
Could we have a better system? yes. Does it make sense to add this caveat every time we complain that shareholders are exploiting workers for their own profits? No, that would be a waste of nuance.
Shareholders are simply the owners of the corporation. The difficulty arises when we try to figure out what the shareholders want given the diffuse ownership (especially if you trace funds and pension plans to their ultimate owners/beneficiaries), but "maximize returns" is a reasonable assumption in absence of other expressed preferences.
Moreover, I'm pretty sure if you tried to get the preferences from an average shareholder you would find out they support all the good things and are against all the bad things, as long as it's free. It would end up like the recent poll they had in Western Oregon: "Do you think we should keep Eastern Oregon as part of Oregon?" "Yes!" "Eastern Oregon is net tax subsidized, how much in taxes are you personally prepared to pay to keep Eastern Oregon?" "$0!")
The entire concept of limited liability was created with the public interest in mind. Limiting personal liability encourages business creation, which encourages growth, which is in the interest of the public.
> It's reasonable to expect some duty to act in the public interest in return.
What is it that you're wanting to make these companies do, specifically?
I wish the history of corporatocracy was taught more in schools, it seems like there was this massive, sudden leap between "the king gives you the right to build a bridge and collect tolls on it" and "the purpose of all human life is to build financial structures to increase the wealth of the shareholder class." I want to know more about how that shift occurred.