Saturday 5 June 2010

Corporations use force to exploit me? Give me a break!

A lot of people don't seem to understand what a "corporation" really is. Inspired by lunatics like Michael Moore, the general opinion is that these are some kind of blood-sucking entities through which white guys in expensive suits exploit everything and everyone around then (their employees, customers, and "the environment"). This is, of course, completely false. Corporations are not evil monsters. A quick definition of a corporation would be that it is "a legal entity established by a group of like-minded people so that they may more efficiently and effectively invest their resources". Shareholders own corporations, just the same as my local butcher owns his small business. There is little difference between them aside from the scope of operations of each. There is, however, another nasty myth about corporations - that they engage in some sort of greedy exploitation. Let's tackle this misconception with simple logic. Some misinformed individuals claim that "corporations" (here I am using their socialist terminology - "corporations" are evil monsters, not people) exploit their own employees by forcing them to work for low wages. This is plainly false. Each employee has a contract to which he agrees beforehand - which states his wages and working hours. If he was being exploited, he would not agree to sign the contract and would find other work. In a capitalist market economy each party to a contractual agreement or trade benefits ex ante. When both parties agree they both acknowledge that the contract (in this case the employee selling his labour and the employer buying it) is beneficial to them. Not just to the corporation! So there is no exploitation present at all.
Usually at this stage of my explanation the commies (at least those that can follow logical argument) play what they think is their "trump card". Namely, they present me with the following scenario: What if a corporation lowers or cuts their employees wages after the contract has been signed, or changes their working hours and conditions? The answer is simple: If one side breaks the contract the other side is released from its responsibilities and may be entitled to compensation. So if the corporation lowers a person's wages he can simply walk away! If he chooses not to leave despite worse conditions he obviously still judges the employment to be a benefit to him, and if there is a willingly-accepted benefit there can be no exploitation. Again - all parties to the contract benefit.
Corporations earn profits and money by pleasing people and working to satisfy the needs of both their emplyees (through wages and good conditions) and customers (through providing a satisfactory product at a low price).

To quote the great Ayn Rand: "Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value... The businessman's tool is values."
As a meaningful contrast let's read her opinion on government action: "...political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction... the bureaucrat's tool is fear."
Which is really force, the former or the latter?

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