Parachute Minds

The Resource Curse >

Psycho, Inc.

“One could easily confuse an unethical corporation for a psychopath”


During our three days at sea, news would trickle in over the radio about a deteriorating U.S. economy. A reduction in consumer demand was causing rising unemployment, which caused a further drop in demand, resulting in a vicious downward economic cycle. With less tax revenues, public services were dropping and governments at all levels were going into greater debt.


Perhaps this was the unintended consequence of too much ‘progress’ from automation, off-shoring, deregulated trade, market instability from excessive financial speculation, and a cheap-labor immigration policy. As we have been led to believe, in our growth-oriented economy, any reduction in consumer demand is always temporary and demand always picks up again and debts get repaid — until they don't.


And consumer uncertainty can have negative ramifications for the financial system and for the economy as well — ramifications that are reinforcing rather than self-correcting. For example, once the economy starts to falter, the same positive feedback mechanisms that worked during expansion now work in the opposite direction, pushing the economy further into recession.


Add to the mix a growing and aging population, and the dangers of a downward economic spiral are exacerbated as higher levels of growth are required to maintain the same average income levels and provide sufficient revenues for increased health and social costs.


Bob, Lua, and I were sipping coffee and tea on deck one morning before any of the passengers were up and about. 


I commented to Lua,


“Isn’t it crazy that we Americans now think of ourselves as consumers first and citizens second? After 9/11, when our ‘freedom’ was threatened, we were told to courageously and defiantly respond to those evil-doers by — are you ready for this — going shopping.”


Now I do understand that a strong consumer culture is what helped propel our economy to top ranking in the world. We are a rich country because Americans have been conditioned to always want more, bigger, better, faster, sooner.


Economists argue that growing economies can avoid the political difficulties of redistribution by making everyone better off — a rising tide lifting all boats, and all that jazz. This argument is also used to increase the rate of growth even in countries that are already rich and heavily in debt. Growth itself is never challenged.


But who has really benefited the most from this excessive consumption and the rising class of debt slaves? Why are so many people now on food stamps or burdened with crushing debt? And all this is happening while the environment is getting more and more stressed and starting to respond in freakish ways.


Lua responded,


“I can understand your concern, Mister Rico. It seems to me that the purpose of an economy should be to serve life, not money. And an economy that serves life must learn from Nature to live as she lives, organize as she organizes, and learn as she learns.”


Your economy favors corporations at the expense of the health and well-being of individuals, families, communities, and ecosystems, she explained.


Why do global profit-seeking corporations take center stage in the economy over happiness-seeking households and over small local businesses that serve a genuine community need and offer their owners a valued form of self-expression?


Doesn’t a corporation strive to hire as few workers as possible and at the lowest wages to maximize its profits, while households want good jobs with high wages? And aren’t those completely opposite goals?


“That simply does not make sense to me.”


She continued,


“On my island we value a healthy local forest as a source of economic resources, sure, but also as a place of beauty, a place to hike and camp, a source of freshwater from its streams, roots that stabilize the soils of a steep hillside and as a filter that cleanses the air of dust and impurities. For a timber company, however, all that value would be reduced to a simple commodity to be harvested and sold for a one-time profit, then on to the next community and its stock of natural resources. And the timber company would prefer to hire as few workers as possible, for as short a time as possible and at the lowest possible pay. Who benefits the most from all this? On our island, economic power stays local, with households and communities. It would be absurd to hand over our economy to outside corporations that are only interested in maximizing returns to distant shareholders that have no stake in the health and well-being of our people and our communities.”


Hearing Lua’s account of her fellow islanders’ low regard for outside corporations, it occurred to me that today’s product-producing, profit-seeking corporations are the principal economic actors on the world stage. Yet they are not internally constrained, by design, to avoid damaging any public goods; nor are they required to produce any public benefits beyond the products they offer. How did we get here?


The story of the gradual morphing of public-benefit chartered companies into today’s free-range, private-benefit, publicly traded, shareholder-beholden, globe-trotting transnational corporations is quite illuminating.

Originally, a corporation could only act within a narrow set of powers allocated to it by its articles of incorporation. Only shareholders in the corporation had recourse against their corporation for failure by its directors and officers to pursue the purposes that had been agreed upon.


But because corporations could pursue internally established purposes — policed only by the corporation’s own shareholders and the market for shares — corporations gradually became more and more shareholder-centric.


As traditional chartered companies evolved into today’s modern corporations, they shed themselves of any imposed requirements to provide a public benefit. So what had started out as a license to operate with state-delegated authority for state-designated purposes gradually became an open invitation to pursue private advantage.


In the process, large corporations also became ‘externality’ generating — producing large and detrimental spillover side effects onto ‘the commons,’ like pollution and — more socially corrosive — the gradual erosion of local community life.


These negative externalities have grown exponentially as corporations have grown in size — transnational corporations today make up about seventy percent of the world’s largest economies. Unsurprisingly, they’ve also grown enormously in financial and political influence.


In what could end up proving to be the greatest market failure in human history, these negative externalities have never been ‘priced in’ to offset the damage to ‘the commons’ from their products, services, and activities. Historically, acts of corporate social responsibility have been, more often than not, about reducing harm rather than producing net social benefits.


In fact, U.S. corporations pursuing a beneficial public purpose at the same time as making a private profit can invite punishing lawsuits over liability — for failure to only pursue maximum value for shareholders.


Tellingly, given just a brief list of their fundamental traits, and the fact that they both enjoy legal personhood status, one could easily confuse an unethical corporation for a psychopath.


What do they both share? A callous disregard for the feelings of people, the incapacity to maintain human relationships, reckless disregard for the safety of others, deceitfulness in order to maximize gain, incapacity to experience guilt, and failure to conform to social norms and the spirit of the law.


Such a description begs the question: Could a corporate entity with a social conscience ever really exist? After all, a corporation is legally recognized as an ‘artificial person’ seeking nothing more than personal gain in the form of profit.


But alas, it has no body to be imprisoned and no sleep to lose after engaging in an unconscionable act. It is an intangible and unaccountable fictional entity. An idea. A brand.


Maximum freedom with minimum liability — what's not to like, when you're an ‘artificial person’!


And what happens when you combine unethical, profit-seeking, transnational corporations with sociopathic, return-seeking, place-agnostic, highly mobile globe-trotting transnational financial capital?


You get global economic actors that ravenously convert real natural wealth, mainly from the Global South, into digital virtual wealth (money), mainly for the Global North.


And you get a tragic phenomenon known as The Resource Curse.

Parachute Minds

The Resource Curse >