D. Dowd Muska


What Bernie Doesn’t Know About Corporations

December 31, 2015

A bumper sticker, spotted on a dirty and dilapidated subcompact: POLITICIANS SHOULD DRESS LIKE RACE CAR DRIVERS SO WE KNOW WHO THEIR CORPORATE SPONSORS ARE.

Above it, another sticker: BERNIE FOR PRESIDENT.

Bernie Sanders is ticked that the “middle class has been disappearing.” He’s steamed over “massive wealth and income inequality.” He raged-tweeted that “Americans already work the longest hours in the western industrialized world.” But it’s clear that what makes the socialist senator sorest is ... corporations.

Vermont’s angriest man is an acolyte of what economist Alan Reynolds called “the gospel according to Ralph Nader, which goes something like this: The nation is at the mercy of a few hundred giant corporations, run by a self-perpetuating oligarchy of managers who are not accountable to stockholders, workers, consumers, or society at large. These ‘private governments’ employ advertising to sell us things we do not need, with little concern for the safety and health of workers or consumers.”

Sanders and his NPR-totebag-wielding followers have a tenuous grasp of rudimentary economics to begin with, but when it comes to corporations, their unhingeness is intense. To the left, the American economy all went wrong more than a century and a half ago, when sole proprietors and small enterprises began to give way to ginormous, continent-traversing businesses. Driven by the rise of railroads, states started to enact general-incorporation laws. Industrialization, combined with innovations in communications, created companies so vast, many are still in operation today.

It was an era marked by what the ignorant call “robber barons.” But credible economists and historians have a better understanding of the period. As Walter Block and J.H. Huebert observed, “there used to be something else of a completely different character called a ‘corporation,’ which … enjoyed unjust state-granted privileges.” General-incorporation laws, the scholars wrote, served “to eliminate monopoly power that had been granted to … businesses under the older, genuinely monopolistic corporate form.”

John Steele Gordon, in An Empire of Wealth, described the pro-consumer policies of John D. Rockefeller’s behemoth: “[A]s the grip of Standard Oil relentlessly tightened on the oil industry, prices for petroleum products declined steadily, dropping by two-thirds over the course of the last three decades of the nineteenth century.”

In a 2003 column, Bloomberg’s Peter Coy argued that where “competition is vigorous, even the largest companies are slaves to market forces. They must charge low prices, respond to changing consumer tastes, and embrace new technology as quickly as possible -- or fail. Think about it: Who really has more power, giant Ford Motor Co. or Ford’s customers, who can buy a Lexus or a Jeep?”

For those still skeptical, two words: New Coke. But there are thousands of costly, but far-less-notorious failures to peddle mediocre products and services. In 2001, The Wall Street Journal reported on Burger King’s multi-year, $70 million effort to overhaul its French fries. The revamp fared disastrously. The fries “turned out to be so unappetizing, so brittle -- some snap like potato chips -- that people are passing on them in droves.”

Okay, corporations are the victims of revisionist history, and at the mercy of the all-powerful consumer. But what about unbridled “corporate power” in Washington? It’s undeniable that many fedpols gleefully dole out aid to dependent businesses. A conservative estimate of the price of corporate welfare is $100 billion. Appalling, but the sum is dwarfed by Sanders-approved spending. Social Security and Medicare alone surpass $1.4 trillion. In the sleazy game of rigging the tax code, Big Business loses as well. In an analysis released this summer, the Tax Foundation’s Alan Cole, using figures from the Office of Management and Budget, estimated that $131 billion in “tax expenditures” for corporations in fiscal year 2015 were offset by $1.2 trillion in perks for individuals.

The small-business lobby extols the nobility of its members, and their contributions to jobs and GDP. But even in the “gig economy,” working for the man remains common. U.S. Census Bureau data show that more than half of employed Americans get their paychecks from firms with more than 500 workers. In addition, a majority of us own stocks in publicly traded companies, either directly or through pension plans. That’s a remarkably sizable portion, given what the Great Recession did to Wall Street’s reputation.

Sanders and his followers yearn for an economy that resembles a farmers market -- locally made, locally consumed. (And every vendor knows your name.) But that’s North Korean economics. It’s a vision that cannot be grafted onto a nation built, largely, by bigness.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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