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Corporations Aren’t Parasites

People who dismiss the unemployed and dependent as “parasites” fail to understand economics and parasitism. A successful parasite is one that is not recognized by its host, one that can make its host work for it without appearing as a burden. Such is the ruling class in a capitalist society. – Jason Read

Associate Professor Read’s catchy word-bite is making the rounds of gullible Facebookers. Read’s quote and blog seem to advocate for the intersection of modern Communization and the anarchistic breakdown of traditional culture; in short he is an ivory tower Occupier. As with Jeffrey Clements’s middling book Corporations Are Not People, a little thought reveals that corporations and capitalism reflect the highest ambitions of, and are the only mechanism that allows for, the wealth they take for granted.

So, what is a corporation? A corporation is a voluntary agreement between different sorts of people so that they may work together. A single family might be able to build a log cabin, raise some livestock, and spin wool to make clothes, but that is the limit. Civilization, a concept not especially well received by the Occupiers, requires the specialization of skills, which requires trade between those specialists. Today, it is commonly assumed that everyone is a specialist (e.g. plumber, lawyer, engineer), but for the vast majority of human existence, nearly everybody shared the same skills with his neighbors.

Specialization leads to the need for a corporation. Truly huge endeavors require more than specialized laborers, they require capital and management (i.e. ideas). For example, a jet airplane certainly requires a variety of specialists such as metalworkers and electricians to construct, but its design and planning also require the equivalent of thousands of lifetimes of labor before the first spar is set. How can those who would realize their idea for a new jet marshal the massive resources required just to get to the start of construction? Capital formation.

Contrary to Mr. Read’s sophistry, capital is always formed by a combination of someone working harder and spending less than his neighbors. He might then give it to his children, or it might be taken by thieves and taxes, but it started with work and savings. His savings, which came through sacrifice, are precious to him, so he wants to protect them. The capitalist would never simply give his money to any person with an idea for a new jet; indeed hardly any one person has enough capital to fund such a project.

The corporation is a means by which a large number of capitalists, or savers, can join together with labor specialists and a manger with an idea to create something none of these groups could on its own. The capitalist (saver) is protected from the errors of the manager beyond his investment. The manger is protected from liability should the venture fail. The laborers are largely protected from the responsibility for what they have built and can receive compensation now rather than years in the future. Without such an arrangement, established by law, truly big and beneficial ventures would be impossible. Corporations are a voluntary pact between managers with an idea, labor with specialized skills, and capitalists with savings to invest. And, absent government action such as bailouts, nobody outside of the corporation is at risk to lose his money. By the way, Mr. Clements, these are all people.

The absence of this voluntary pact is the communism that Mr. Read seems to embrace. Communist systems replace the capitalist and manager with parasite politicians. Politicians decide where to allocate labor, while savings and investment are outlawed. The result is proven and predictable – stagnation and eventual collapse. Most disheartening is the academics such as Mr. Read who should know the sickening track record of communism.

The corporation is the intersection of savers looking for the best place to employ their capital, managers seeking to profit from ideas and innovation, and laborers looking for the highest pay in exchange for their skills. The corporation is for people and by people, and it is the ultimate expression of the potential of capitalism. It is voluntary and there are no parasites. One only need visit communist China to see the parasites – party members with soft hands perpetually taking bribes. To the extent that US capitalism and corporations are corrupt, look to government graft and coercion. GE, GM, and Solyndra are not voluntary capitalism, they are government sponsored corruption. Comparatively free corporations like Microsoft, Facebook, or the humble local florist create the wealth that feeds their critics like Mr. Read and Mr. Clements.

Shout Bits can be found on Facebook:  http://www.facebook.com/#!/pages/Shout-Bits/191627784211089

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