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SquirrelEStuff's avatar

Why are corporations permanent entities?

Asked by SquirrelEStuff (9116points) October 3rd, 2008

Ive been thinking about the whole regulation deregulation thing. I’ve come to the conclusion that yes, we need regulations. But we need regulations due to the fact that corporations number one objective, is profit. This could lead to unethical operation and greed of corporations and stockholders.

After hearing Biden say in the debate, that 95% of small businesses make under $250,000 a year, that says to me that besides wealthy individuals, only 5% of the serious wealth is in small businesses and the rest is in corporations.

When this country was founded, corporations were given limited charters and had to benefit the public. For instance, when a railroad was going to be built, the charter was given until the project was complete and then the corporation was eliminated. It also benefited the public. Now corporations are given free reign and can also move overseas, bypassing our labor laws and environmental laws.

Wouldn’t it make more sense to abolish permanent corporations and go back to the original intent of corporations? In my eyes, it would be allow us to shrink the size of government and allow the free market to operate as it should. If we relocalized industries, the public would be able to hold businesses accountable for their actions.

When John McCain says that we have the best workers in the world, it makes me wonder how long it will be before we are all working for the same handful of corporations. I believe we need to move back to small businesses taking charge of what happens in our country, not trying to compete with corporations who go overseas where people have little rights.

Why are corporations permanent and should we go back to be a small business oriented country??
Why or why not?

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10 Answers

critter1982's avatar

I think the idea of a free market which allows large corporations to exist is that the desire for money will drive company innovation and new thinking which has enabled America at least to this point to be a leading nation with an incredible amount of GNP. Unfortunately, I would agree with you that the desire for money can change people into GREEDY SOB’s. The issue I have with controlling a companies revenues to keep them from becoming large corporations, is that it will absolutely hinder the overall companies thought process which will drive many companies into sustaining business units rather than innovative R&D business units. This will gradually slow down our GNP, economy, and the value of the dollar.

Corporations are capable of doing a lot of good, as long as their efforts are harnassed in the best interests of society, and society’s only viable means of control at this point seems to be the government. Other problems start when corporations interfere in the political processes that would otherwise serve to restrict their behavior. There is a balance of governmental regulations and free market that need to be established and unfortunately we have yet to find this balance.

SquirrelEStuff's avatar

Doesn’t a free market mean no regulations though? When government regulates corporations, we get what we have now though. Corporations get in the pockets of the politicians, because they have so much money, and as long as they have control of the media, as they do now, how do we gain back the power to even know that something is wrong?

critter1982's avatar

@chris: A free market is not one that exists without regulations. A free market is a market in which the supply and demand is unregulated and is defined simply by the market itself. Supply and demand will control prices. We currently live and exist in a free market where tons of governmental regulations exist. Unfortunately, those regulations do little to control the amount of money they can line politicians pockets with.

SquirrelEStuff's avatar

Gotcha.

I understand how supply and demand control prices. Does the value of the dollar ever play a factor in prices? If the value of the dollar is worth less, wouldn’t it take more dollars to buy the same items?

critter1982's avatar

Yes. Just look at how the price of gas can fluctuate with the value of the dollar.

cwilbur's avatar

Your math is wrong; you’re drawing a conclusion that isn’t warranted.

Suppose it’s true that 95% of small businesses make less that $250K a year. You can’t conclude from that that only 5% of the wealth is in small businesses, because you don’t know the relative numbers. The scenario is very different if there are 50 million small businesses and 10 large corporations, compared to 5 million small businesses and 1 million large corporations.

It is definitely true that economic health comes from a large number of diverse small businesses. But the same corporate laws that protect large businesses also protect small businesses.

The real problem is that large businesses are answerable to the stockholders (= the mutual funds, the 401(k) plans, the individual stockholders) who are looking at quarterly profits above all else.

And, on another note, the value of the dollar really matters only when there’s international trade involved—such as with computers (where most of the manufacturing is overseas) or with gasoline (where there’s an international market in the raw materials). Both of these affect the supply curve. If all the parties involved and all the raw material production is based in the US, the value of the dollar worldwide doesn’t affect the cost of goods.

critter1982's avatar

@cwilbur: True regarding the value of the dollar but “almost” every single company purchases either directly or indirectly internationally. Just for one example, look how prices of just about everything went up when oil prices jumped.

cwilbur's avatar

Yes, but the almost and the reasoning behind it matter.

The change in the value of the dollar doesn’t affect prices directly—it’s the effects of the change in value, specifically, that resources that must be obtained overseas cost more, that affects prices, by shifting the supply curve.

critter1982's avatar

Agreed. I should have been more precise.

TaoSan's avatar

The corporation, a living creature without a soul to burn and without a body to lock up :(

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