Feedback Loop

You may have noticed an article in the Washington Post comparing the popularity of various institutions to that of Congress. The approval rating of the U.S. Congress, at 9%, beats Fidel Castro (5%) and ties Hugo Chavez, but is below the approval for the concept of the U.S. going Communist, at 11%. The fact that at least one in ten Americans is willing to reverse the Cold War is interesting in itself. However, my focus is on Congress, and why even BP during the Macondo oil spill (16%) beats their approval rating.

I have written in earlier posts about the concept of hyperscopic life. (You may wish to review here, here, here, and here.) The short version is that a corporation fulfills all the qualities that scientists use to identify a living organism. My conclusion – if it walks like a duck and quacks like a duck, etc. The problem with corporations is that a duck is a lot smarter than a corporation but a corporation has political power.

Human beings serve corporations, and so naturally corporations have many of the characteristics of human beings. To be more specific, psychopathic human beings, as defined by their behaviors and psychiatric literature. One thing that humanity does very effectively is to modify our environment. We cut down forests, drain swamps, build roads, dam rivers, and blast the tops off of mountains. We build houses and breakwaters and other barriers against the forces of nature. Corporations modify their environment as well, but we must consider that their environment is both physical and legal. We might say that the legal environment is as physical to them as air, water, and land are to us. Law is also DNA and connective tissue to a corporation, meaning that it can modify both its internal and external environment.

As with the physical world, there is resistance to this modification. It is institutional, active, and consequential. By institutional I mean that human beings put into place legal strictures that limit corporate agency. These could be campaign finance laws, lobbying restrictions, conflict of interest laws, and transparency laws. By active I mean groups of citizens actively opposing corporate reach into legislation. By consequential I mean that corporations are too short sighted and narrow of vision to properly calculate the consequences of their actions. If either law or enforcement is inadequate they end up like Enron or Lehman Brothers, collapsing from the excess they pursued.

The tide turned for corporations back in 1976, with the Buckley vs. Valeo decision by the Supreme Court. The Court decided that donating money was the constitutional equivalent of political speech, thus making plutocracy official and ending our progress towards democracy. Corporations have gained ground continuously since then. It is a positive feedback loop. As they gain more political power they are able to reduce the resistance to their modification of their environment. This includes all three of the modes of resistance I outlined above.

The millionaires and billionaires who engage in symbiotic parasitism on the corporate herd have veto power over entry into politics. Candidates have to raise those two-thousand dollar donations in order to stand a chance. This restricts the boundaries of legislation to initiatives acceptable to corporate remoras, which means fewer restrictions on corporate power. Once enough presidents and senators have been elected this way, then the Supreme Court can be stacked, and the Constitution gets interpreted to benefit further corporate power. Witness the Citizens United decision.

Similarly, information (or, more likely, disinformation) is supplied to citizens by a shrinking handful of ever larger communications conglomerates. Citizens can’t oppose what they don’t know about, and they won’t oppose what they have been convinced is in their interests. The internet has provided some outlet for human voices, but the behemoths of the business are always making efforts to fence that in as well. The latest outrage is the ProtectIP/SOPA bills, which would allow the big media players to shut down competing sites without due process.

Even the consequential restrictions on corporate action have been buffered by massive government intervention. Instead of taking over bankrupt financial firms and writing down mortgages to market prices, the government just stuck a funnel in the top of the banking industry and poured in a trillion dollars.

So there is a feedback loop going on. The accelerating accumulation of power by corporations allows the increasing acceleration of their accumulation of power. The problem for corporations in this situation is that some restrictions are necessary to prevent them from destroying their own environment. The idiocy that culminated in the 2007 financial meltdown is one symptom of corporate self-direction. Another symptom is the congressional approval rating.

Corporations are so short sighted and so programmed for self interest that they habitually overreach. Eventually even the cleverest psychopath buries too many bodies in the backyard and it begins to stink. The stink of political corruption has gotten so obvious that even the propaganda efforts of corporate media can’t cover it. In good times a certain amount of corruption can make it past the public with a knowing eye roll, but when everybody knows (or is) someone who is one of the long term unemployed, and when everyone knows (or is) someone on the wrong end of an underwater mortgage, public consciousness shifts. As long as most people were on an upward economic trend, or at least there was a promise of upward mobility for the next generation, people could put up with their lot. Now we’re looking at structural unemployment and underemployment, while college has become too much of a financial burden for too many, with no reasonable guarantee of a benefit. Corporations and their elite parasites have simply sucked too much wealth out of the economy.

This has given them the power to change the economic rules so that they can suck out even more. Up to a point. Another symptom of the ever tightening feedback loop is the Occupy Wall Street movement, as well as dozens of other movements focused directly on taking power away from corporations. Review any number of opinion polls from the last decade and you’ll find that a consistent 75% (or more) of respondents say that big business and their lobbyists have too much power. The question is whether these various political movements can turn this sentiment into real action and a real power shift. The corporate grip on the means of communication and legislation is firm. On the other hand, who would have thought a couple of years ago that Tunisia, Egypt, and Libya would have pitched out their dictators? I have no conclusion here, except to note that the fight is out in the open now. I guess that’s half the battle.

The Good Corporate Citizen

Apple Computer (Stock symbol APPL) makes a metric buttload of money. They make a gross margin of 60% on their computers, roughly five times what any other computer company makes. Their stock price is plump as a result. One of the many reasons they make this kind of money is that they have close control of their supply chain, one end of which is in China. Having 100,000 workers in one place, working for peanuts and putting in 40 hours of overtime a week results in great cost savings.

Now, I don’t want to pile on Apple over their sweatshop suppliers. The use of sweatshop labor in the electronics industry is universal. It isn’t my point. Let me illustrate my idea with a fairy tale.

Steve Jobs, the founder and CEO (now former CEO, but this is a fairy tale) looked upon the teeming masses at Foxconn and the teeming masses of unemployed people in the U.S. and had an epiphany. He went before the board of directors of Apple and said “I have had an epiphany!” The board of directors Googled the word “epiphany” and then said, “Ok Steve, did you get religion, or what? Are we going to market an iPray?”

“No,” Steve responded, “I have had an epiphany about sweat labor and U.S. unemployment. I am a compassionate man and a loyal and patriotic American. I propose that we move all our iPhone production from China to the parts of the U.S. that need jobs the most. We’ll have to knock our margin from 64% down to 50%, but we’ll still be making four times as much per computer than any other company. Then our potential domestic customer base will be expanded and the dead end of the U.S. trade deficit will be slowed.”

The board of directors of Apple paused for a moment with their mouths open and then nearly pissed themselves laughing. One of them, wiping tears from his eyes and catching his breath, managed to say, “Steve, Steve, that’s why we love you. Not just a great designer, but a great comedian. Damn, I think I pulled a muscle. 50% margin, oh god!” He collapsed in merriment.

Steve Jobs stood up, put his hands on his hips and glared at the board. “I’m serious!” he shouted. “Americans need jobs! Our trade deficit is climbing! In-sourcing is the morally right thing to do! I insist!”

The directors sobered up fast at that. They looked back and forth at each other. They exchanged significant looks, raised eyebrows, and subtle nods. Finally, one of them spoke.

“You’re serious about this, Steve? In sourcing the iPhone and accepting a 50% margin?”

“Absolutely.”

“Well, Steve, we know you’ve been ill, and you’ve been dealing with the specter of end-of-life issues, and you’ve still been working really hard. Maybe too hard. Maybe you deserve some time off.”

Do I even need to continue the story at this point? Steve gets the heave-ho, the shareholders keep the 64% margin, U.S. workers stand in the unemployment line, Foxconn employees keep their 80-hour weeks, and the Apple juggernaut rolls on.

As I said before, I don’t mean to pile on Apple, except that they have margin to spare compared to their competition. CEOs at Dell or HP would sell their mothers for even 20% margin. And maybe that’s the point.

Imagine Tony Heyward, the former CEO of BP, getting religion after the Macondo oil spill and proposing that BP go all environmental to the detriment of profit. Same result. Same result at any corporation. This is no shock to anybody.

It’s the concept of fiduciary responsibility that is the problem. Fiduciary responsibility is part of corporate law. It means that the officers of a corporation are legally obligated to maximize shareholder value, meaning stock price and dividends. It also means that corporate officers need to practice fiduciary psychopathy, the choice of corporate profit over human life and health.

Consider the infamous Ford Pinto memo, where Ford executives pointed out to the Highway Safety Administration that letting a predicted 180 people burn to death in their cars was less than half the cost of fixing the Pinto’s fuel tank problem. In the end, it turned out that the Pinto wasn’t any more dangerous than other similar vehicles, but the execs were willing to make that calculation.

Consider Kellogg, Brown, and Root, the Halliburton subsidiary and military contractor. KBR had a fuel trucking contract in Iraq and got paid by the mile. KBR managers decided to run empty trucks up and down the dangerous highways of Iraq, risking (and sometimes sacrificing) the lives of drivers and soldiers. (The soldiers called it “sailboat fuel.”) It was a singular combination of greed, fraud, cold-bloodedness, and disloyalty.

That’s wishful thinking. It wasn’t singular. It was, and is, all too common.

It is why there is no such thing as a good corporate citizen. If you get the impression that a corporation is behaving morally, it is due to one of several factors:

The corporation is too small to get away with much.

In this instance the corporation has been successfully restrained by regulation.

The interests of the corporation have momentarily aligned with those of society; a chance event.

The corporation is engaged in effective public relations.

A corporation is not just incapable of moral judgment. It is actively bent in the direction of immoral behavior. Acting morally requires some amount of self denial and self restraint, and those concepts act against shareholder value. A corporation pursues ever more resources, preferential laws, pointless subsidies, low wages, and unrestrained polluting, among many other wretched things.

I cringe when CEOs and the politicians they selected go on about lifting regulations off the backs of business. Yes, let the saber-toothed beast root about in our guts more freely. Businesses do more for us when they are properly regulated. They innovate instead of monopolizing. They create real products instead of defrauding. If you want to ponder the results of eased regulation, look no further than the derivatives market that just collapsed our economy. If you are a nostalgic type, look back to Enron or the Savings and Loan crisis of the 1980s. Bolster your blood pressure with thoughts of the speculative oil market that probably adds a 20% premium to our gasoline and heating bills.

Just don’t ever, ever, fall for the myth of the good corporate citizen.