Dear Friends,
It seems to me… corporatism and monopoly are cancers on the free enterprise system. They drain the vitality from an economy. The incentives for corporate executives is upside down, creating pernicious incentives that result in corruption of government, as well as the corruption that is systemic within the corporate paradigm. Monopolies take that systemic corruption and pernicious incentives up an order of magnitude. As corporations age, they become ever more susceptible to decay from within, loosing the innovative streak, and without the drive of an entrepreneur, they then loose their talent. Once the talent is gone the only way to sustain a corporation, is through regulations and tax schemes, that protect it. Corporations, far from being an innovation, have done irreparable harm to the world economy.
Corporatism and monopoly create pernicious incentives for executives like the principle agent dilemma. Logically, if the person who is in charge of a corporation has no skin in the game, has a golden parachute if the corporation fails, and huge contract cancellation fees if they ruin the company, and with their connections they can quickly get another company to ruin… that person has no skin in the game. As this Harvard study indicates. Take the example of Wells Fargo. The most corrupt bank known. They have been caught multiple times, defrauding customers in a myriad of ways, and fined billions of dollars for it. Yet not one executive has so much as lost their bonus let alone their job. Where a little guy would see the inside of a super max for stealing much less.
The more powerful government is, the more the cancer of corporatism and monopoly grows. The innate corruption of the corporate system oozes into government, along with the “hack jobs” that are available to politicians who help out the company. Regulations, are written by the companies that are to be regulated, and are kept secret from everyone else! Net Neutrality was kept secret from the public, but written by Google. Is it possible to set up a system more rife to be exploited? Protecting a monopoly and creating an insurmountable barrier to entry for would be competitors? Expecting such a system to be clean is like expecting a cesspool to be free of bacteria. Moreover, any power given to government to stifle this predilection, flows directly to the corporations themselves!
I am not a fan of FDR but as far as breaking up monopolies go, I am right there with him. The elimination of corporations for entrepreneurial enterprises as the norm should be our goal. How would I get there you ask? By lowering the power, scope and role of government. Cutting regulations designed to keep zombie corporations alive, and prosecuting the wrongdoers rather than their victims, no matter who the wrongdoer is. Deregulate and standardize. Instead of regulating how things are done, standardize the parameters, set standards of safety, not regulate the size of a D ring, standardize operating systems and let anyone create one, within that standard. Do the same with everything. Create standards within which any firm can compete. Then let the market work.
I am not saying there is not place for a corporation. I am saying that as they exist today they are nothing more than a cancer feeding on our corpus economic. Before the corporate structure can be fixed the pernicious incentives must be addressed. While their regulators are in their thrall any attempt would be useless, worse than useless, because the psychopath executives would write and twist the regulations to their own benefit! The ability of the common man to invest money in a firm and see a return must continue. The corporate structure and system however, is not set up for investors, it is set up as a means to defraud investors, customers and employees. The first step to stopping a fire is to stop feeding it fuel, in the case of corporate and monopoly corruption, that fuel is the regulations that sustain them.
Sincerely,
John Pepin
