Wednesday, November 12, 2008

Tumor, Inc.

Very interesting, if somewhat dense, essay on how free market principles and Big Business' corporate interests are not the same, and why everybody confuses the two.

Call me a rube, but I don't understand this notion of a business being "too big to fail." How does this happen? As I recently wrote to a friend whose professional expertise I sought to tap for an answer: If a skyscraper was discovered to be built on sinking sand, with rotting i-beams, wouldn't it have to come down regardless of how big it was, or how many people would be put out of work due to the high number of offices it housed? Maybe the analogy is too simplistic, but I just don't understand how sheer corporate size and the variety of tentacles a company has embedded throughout our economy insulate the company from the consequences of mismanagement, unhealthy risk-taking, or an obsolete business model. Hmm . . . a large mass with complicating tentacles making removal impossible. AIG or cancer? You make the call.


  1. What you said, Lance. Bailing these companies out just guarantees that government bailouts will be factored into ever financial risk assessment from here on. It's a perversion of the market and will be its ultimate downfall.

  2. This dovetails with something I was discussing with the Oyster Wife today. I have had some thoughts percolating regarding the differences in approach and attitude between private and "public" sector workers, and the long-vanished idea of being a trrue "public servant." I will post more on those later (probably in my own space), but for now let me concentrate on this: there is easily a much greater focus on efficiency and results in the private sector. Failure is punished, actively or passively, in the business world. As we were discussing this, and what could be done about it, I realized that wasn't entirely accurate. Most of the business people I know are involved in small businesses and/or self-employment. In those circumstances, everyone is on the front line when it comes to the positive or negative outcome of their actions. In a small company of less than a hundred employees, one person's mistake or critical success very quickly shows results one way or another, and that person is directly affected. But as businesses grow larger and more complex, that direct accountability diminishes. The individual is more insulated from the effects, in part because the effect itself is usually lesser. This is the beginning of the attitude sometimes referred to as "corporatism." As you say, Lance, corporatism and conservatism are not the same. In this regard, and with this perspective, it is easy to see the national government of the United States of America as the most bloated corporation in the world. It is the most horrific of all the beasts with "tentacles embedded throughout our economy." And it's about frelling time we did something about that. Oyster out.

  3. The larger point, that established players in the economy seek not a free market, but one which confers advantages upon them against challengers, is solid.

    I'll quibble just a bit with this:

    The funding of public highways through tax revenues, for example, constitutes a de facto transportation subsidy, allowing Wal-Mart and similar chains to socialize the costs of shipping and so enabling them to compete more successfully against local businesses; the low prices we enjoy at Wal-Mart in our capacity as consumers are thus made possible in part by our having already indirectly subsidized Wal-Mart’s operating costs in our capacity as taxpayers.

    The trucks that deliver goods to Wal-Mart on those highways use motor fuels that are taxed to pay for the highways. The idea is to account for the revenues from those taxes, and the expenses on highways, and adjust them to maintain long-term parity. That makes those taxes more like "user fees" than some arbitrary way to collect money. It also minimizes any "subsidy" that the financing system may impart.

    Last I knew, the national "trust fund" into which motor fuel taxes are collected, which is supposed to be used solely for highway/bridge construction, had grown substantially, as Congress was using that surplus to conceal its profligate spending elsewhere. So long as such accounting shenanigans continue, those Wal-Mart trucks are not only paying for the construction and maintenance of the highways they traverse; they're actually subsidizing other spending.

  4. Thank you, Monster. I knew something in that part of the essay was bothering me, but I couldn't put my finger on it. You got it dead on.

  5. What Monster said...

    Lance - one point:

    Your skyscraper analogy isn't necessarily "too simplistic", but - in some cases - out-of-scale.

    I suppose that AIG might be scratching at the underside of the "legitimately too big to fail mark", but if we were to be generous enough to give them even that - it would still have to be with the caveat of "only just".

    In other cases (i.e. Citigroup), you would have to shift your analogy from "a skyscraper" to "the state of New Jersey" (I worked in a Global department @ Citi for nearly 5 years before I was able to grasp that I didn't understand how big that company is).

    There does come a point where it would ultimately cost more to let a company fail than it would to bail them out - of course, the question becomes: "Which price are we willing to pay?"

    - MuscleDaddy

  6. ~Paules says,

    Capitalism at its very best is a dynamic system that relies on the destruction of old and inefficient corporations in favor of new, better, more dynamic companies. Destruction is both necessary and healthy for a capitalist economy in the same way that periodic forest fires clear out deadwood to make room for new growth. Intervention by government to save the sick is socialism pure and simple. What government fails to apprehend is that labor is fluid. People will find new jobs. The economy will create new jobs; it always does.

    Intervention by government is based on political considerations, not on the dynamics of the market. The truly sad thing is to see Republicans jumping on the socialist bandwagon. The short term political gain to politicians is paid for dearly by consumers and taxpayers. We are seeing that today in spades. There's a name for government socialized auto production: Yugo. And it one save a damn thing in the long run. Not a corporation and not a single job. John Galt where are you?

  7. "John Gault, where are you?"

    If you find him, please post the coordinates and I will beat you to the gulch!

    I got more out of Roderick Long's essay than I expected to. As a devout Capitalist, I used to have somewhat of a knee-jerk defense reaction to Leftist bashing of Corporations of any size, even though I am a small businessman. That business of late (past 12 years) has been a private Montessori school, so the condition of the public school system in America has been a particular focus of mine.

    Then, I read a mind blowing (and opening) book by John Taylor Gatto entitled, "The Underground History of American Education," which is available as a free e-book at that link. The scales started dropping from my eyes. It explains in excruciating detail how and why our children are being deliberately dumbed down. Almost more importantly, SO WERE WE! The process has been underway for over a hundred years! It still pisses me off when I think about it.

    The history of the Progressive Movement is covered well in Jonah Goldberg's "Liberal Fascism" and Amity Shlaes' "The Forgotten Man"; but if I only had time for one of the three, I would recommend Gatto's. Further to the detailed history of the Progressives, it documents how the early industrialists like Rockefeller, Carnegie, et al, were very much behind the effort to create mindless little cogs for the tedious chores in their corporate machinery.

    There is a reason that public schools resemble factories in so many ways. Humans have to be programmed to accept the tedium of spending the day metaphorically chained to a desk or machine in a cubical or factory, and the younger one starts, the easier the chore. Further, the industrialists didn't want us to be educated any more than absolutely necessary to perform the required tasks and be easily persuaded to desire their products. Thinkers tend to become entrepreneurs and eventually bothersome competitors who can disrupt their well laid plans with innovation and guerrilla tactics unsuited to the behemoths.

    This is the reason that the Montessori Method of education is eschewed by the factory schools in America. Children are given freedom of movement and learn how to think - critically and for themselves - not what to think in a Montessori classroom, and these are dangerous notions to the oligarchy. It almost makes me want to cry when I think of what this nation could be like, if the minds of our children were unleashed, and the government got the hell out of our way.

    The thing I got most out of Long's essay was a clearer picture of how the Right slope, away from individual Liberty, represents not just the trend toward theocracy; but embodies corporatism, which can be as statist as Marxism, and almost as dangerous to our Liberty. Another piece of the puzzle falls into place in my mind... Thanks, Lance, for sharing the link. ◄Dave►

  8. I'm glad I came back to check on this thread. You reminded me of an article I read quite some time ago and have dredged up from time to time: The "Real" School Is Not Free. It gives the history of the origins of the public school system, and the dangers it poses. Not too long, and very informative.

  9. Great article, Oyster. Thanks for sharing it.

    He has the essence of the subject distilled as well as I have seen it. For what it is worth, I am old enough that as a child there was no such condition as "ADD." We had a different term for what are now considered mild cases of it, "All Boy." The serious cases so prevalent today, simply didn't exist then, because the causes of it did not exist. ADD is an acquired affliction, caused by poor parenting, a frenetic home life, and particularly TV (about the worst thing one can do to the developing brain of a toddler is to allow him to watch Sesame Street). Modern lifestyles simply don't offer many opportunities for a child to quietly concentrate on something, without interruption, long enough to wire up their brains properly. I have personally "cured" many a symptomatic preschool-aged child, without drugs, in my Montessori school if parents are willing to listen to advice and change their home environment to a more serene atmosphere (particularly without an ubiquitous babble box constantly filling their heads with fantasy) that does not daily undo our progress. Without such parental cooperation, it is hopeless; and the child is condemned to a life with a chaotic mind and/or psychotropic drugs to numb it. My heart weeps over such child abuse. ◄Dave►


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