Handling Finances

Corporations have no guaranteed rights. Corporations are simply legal constructs that allow people to limit their taxes and to limit their liability in business arrangements. Corporations are also not inherently evil, but as citizens with constitutionally guaranteed rights, we have to be careful not to treat corporations as if they’re more important than citizens.

What’s the big deal?

When I see how much corporations are contributing to political campaigns (and not toward one political position) I worry that the corporations have become as influential or perhaps even more influential than citizens in our political system. It’s often argued that strong corporations help the masses through a strong economy, but I think that misses the point. As corporations are owned by citizens, it’s really strong citizens who are willing to invest in business that produce a strong economy.

One thing that consistently bothers me is when corporations are handed money from our government when they perform poorly. We are essentially rewarding inefficiency — if a company can become large enough that bankruptcy would negatively affect a large portion of a state’s employees, that company no longer has to worry about efficiently producing a product. It can simply threaten to lay off thousands of citizens and we are happy to give them our tax money to keep them employed. Instead of rewarding inefficiency, wouldn’t it be much more effective to allow poorly-run companies, or companies that make unwanted products to go bankrupt and put that money toward helping unemployed citizens find and become trained for new jobs?

Similarly, when we pass laws to make it much more difficult to declare bankruptcy or limit the amount of money that can be awarded in negligence lawsuits, we are again saying that the corporations should have more protection than the citizens. Do we really think that there are more citizens trying to fraudulently declare bankruptcy than there are banks that are selling loans they know their customers can’t afford?

I’m not saying corporations should be powerless, or that citizens are blameless. However, corporations are much better organized and focus much more of their resources toward favorable laws than citizens. As citizens, it’s just important to remember that while we have rights given by the constitution (in America anyway), if we fail to exercise those rights through understanding the issues and voting, we can give those rights up to non-entities that only care about profits and shareholders.

What can we do?

In the upcoming elections, consider the implications of giving rights to corporations in your decision to vote and be sure to vote no matter how disillusioned you are with politics. Unless citizens band together and become better organized and better funded than corporations (something I find highly unlikely) our greatest tool toward preserving our rights as citizens will be our votes.

Comments?

I’d love to hear other views on this subject — especially ones that disagree with part or all of my conclusions. I’m far from certain where the best balance between citizen rights and corporate protection lies so although I might have some basic opinions, I think it’s incredibly important to keep learning and listening so my votes can be as informed as possible.

The size of government affects personal finances.  And no, it’s not as simple as “lower taxes means you get more money” or “more government support makes life better for the majority.”  I’m on the fence about the ideal size and function of government. I see a large potential for good from a large government as well as decreasing efficiency. I’m also a big fan of low taxes and generally being left alone by the government as much as possible but when I see injustice that is being ignored by the population, I wonder if the government shouldn’t get involved.

With that said, I just read a very interesting article about how a larger government could have prevented (or at least mitigated) the recent mortgage problems by proactively regulating subprime mortgages. It’s not as if the problem came as a huge surprise — the banks knew the mortgages were unprofitable long-term (leading most issuers to sell them immediately) and a range of academics warned of the lending problems.

The really funny thing is that we only want more government regulation when things go wrong. President Bush would have strongly opposed any regulation on subprime lending in 2003, but now he’s urging banks to change their lending policies to help bail out people and banks that made bad choices. In fact, the whole problem was undoubtedly exacerbated by the 2005 bankruptcy reform that cut borrowers’ ability to file bankruptcy and still keep their houses.

Since the September 11 attacks, many Americans demand governmental regulation to protect us from terrorists even though our daily commute is a much greater threat. Since Enron collapsed under deceptive accounting practices, we demanded more governmental regulation in business practices. Now, millions of borrowers have chosen poor mortgages advertised by now-suffering banks, and we demand that the government prevent it from happening again. As the article I read put it:

Have you heard any presidential candidate from either party explain why the appropriate response to the mortgage debacle is to let the culpable parties pay the price for their mistakes? Nothing teaches you about debt like losing your home to foreclosure. I’m still waiting for that speech. (OK, Ron Paul has probably given it — which is one reason he’ll never get more than 10 percent of the vote.)

Everyone loves small government in theory. We’re tired of being told that the coffee we’re about to enjoy is hot. But then we burn ourselves and expect someone to show up with ice. You can’t have it both ways.

I couldn’t have said it better myself. Again, I’m not trying to force my views on you — I’m not sure what I think about this whole issue — I just think it’s worth thinking about carefully (and blogging about). Smaller government is more efficient, costs less, and offers much less protection to its’ citizens. Even the largest government offering the least freedom will never protect us from inherently unpredictable terrorism, but a smaller government offers more dangerous cars and a lower standard of living to the poorest.

Because our economy and the government is so important to our personal finances, I think it’s important to look carefully at what ALL parties have to say. When the educated, informed voters are split 50-50, you know that both views are reasonable. If you usually vote for smaller government, consider the cost of corporations taking advantage of citizens. If you usually vote for larger government, consider that the price for preventing (or attempting to prevent) immoral or fraudulent action can be rather high due to bureaucratic inefficiency. This is far from the only point worth considering, but it’s much too important to ignore, and as we move into next year’s elections (in the USA anyway) keep the cost of both candidates’ (in the USA we usually only have two) position.

One last thing — if you come to the conclusion that your favorite candidate’s proposals cost nothing, talk to somebody who disagrees with you and see if you can clear up those rose-colored glasses.