Corporations for Dummies

In the wake of the Octopi Wall Street protests, One of Nine contributor Publius (Annie Leonard he's not) comments on all the fuss: 

Corporations – Hamilton v. Jefferson

Why is it that the Wall Street protesters hate corporations so much?  Perhaps they have little knowledge of how corporations work, what corporations do for us, and what life would be like without profit making corporations.

Early in the history of our republic, a tension arose between those who followed Alexander Hamilton and saw the United States as a commercial nation that could take on privately large scale projects and those who followed Thomas Jefferson and preferred that the United States remain a country of small family farms and land cultivators.  The former became the federalists (predecessors of the Whigs and then the Republicans), the latter the Democratic Republicans (predecessor of today’s Democrat Party).

That tension still exists and is exemplified by the protesters in New York City and by the “Banana” people (build almost nothing anywhere near anything) that we see here in Central New York and particularly in Tompkins County.  The Wall Street protesters carry signs condemning corporations.

Just what is a for profit corporation?  Corporations are groups of people who pool wealth and risk that wealth to achieve gain.  Most large corporations are publicly held.  Their stock is owned by many people, some directly, some via pension plans and other investment vehicles.  Employees of the corporation find jobs through it.  Vendors and suppliers obtain business.  The government taxes it before it passes on wealth to others, then taxes the wealth passed on to individuals.  Corporations are convenient legal fictions, ultimately all taxes are and must be paid by individuals.

But, first and foremost, modern corporations are indispensable to life in today’s complex world.  Few if any individuals could organize and fund massive enterprises such as natural gas drilling or the design and production of new airplanes, some of which take years before providing a return on investment.  Corporations make possible the doing of things that individuals can’t do.

All this aside, corporations are groups of people, working cooperatively together for a common end result, economic growth.  They share all of society’s virtues and all of its faults.  They are no better than the rest of us, no worse.  There are a few bad apples, most respect and operate within the law, concerned with our safety and our environment to the same extent we are.

Image, if you will, what society would be like if the protesters were successful and for profit corporations disappeared?  Who would take on projects such as building a telecommunications system?  Government would be the only entity left with large enough resources.  But, would you want a government that took years for Hurricane Katrina relief to try to figure out and meet market demand and market wages?  You simply cannot effectively run a complex technological society without corporations.

We could of course return to a bucolic pastoral existence and live as Jefferson wanted us to live, as rural people growing food for our subsistence.  Or we can embrace change and development and live in a Hamiltonian world, a dynamic economic place, not afraid of change or growth.

                                                                                    Publius Ithacanus
                                                                                    October, 2011

Michael Ramirez' take: