Big Business, workers, and regulation

26 Oct

There is one god in capitalism, profit. This god is extremely powerful because it is fueled by a constant driving force, human greed. In some political circles, “regulation” is a four letter word, an inherently evil concept put in place to inhibit people from making money.

In pure free market capitalism the needs of the people are outweighed by what is most profitable. All concerns about safety and ethics are secondary to the power of the dollar. This is where regulation comes in. At the heart of government regulation is not some sinister plot to keep people from making more money, but to protect people from abuses by business to their health and security.

Sure it might be more profitable for a business to dump pollutants into a near by river instead of paying to properly dispose of them, but doing so would hurt the people living near that business.  One could counter “well, a business that does that would hurt its profit because the people in that area wouldn’t buy from them.” While this is a nice theoretical mechanism to protect people, reality shows that this is not the case. If big businesses actually cared about polluting the environment, we wouldn’t need the Environmental Protection Agency. Yet big businesses continue in harmful practices in the pursuit of profit, and so the EPA is a very busy agency.

Regulation doesn’t just protect the environment people live in from business, it protects people’s livelihoods and the economy. Everyone is painfully aware of the recent and devastating recession. People love to go on and on about the bail out, and how horrible it is. While I also hate the bailout and wished the banks and companies were just allowed to fail, the real villain here is deregulation.

Take the Gramm-Leach-Bliley Act for example. This act, pushed through by 3 republicans in 1999, repealed the Glass-Steagall Act of 1933. The Glass-Steagall Act put up a wall that kept investment banks separate from commercial banks, separate from insurance firms, etc. Without this protective legislation, banks from one field took over institutions from another, like Citibank taking over Travelers Group Insurance to create a super hybrid company, Citigroup. These institutions then spread their tentacles into every financial nook and cranny in the quest for more and more profit, and in the process became “too big to fail”. If they went down, they would take down everyone else with them.

The Glass-Steagall regulation was designed to keep catastrophes like this from happening. Also, take the Commodity Futures Modernization Act of 2000. This act made it possible for companies to engage in extremely risky practices like “credit default swaps” and “collateralize debt obligations”, free from the watchful eye of regulators. Companies could now make their balance sheets look good, even though they were engaging in very dangerous deals.

Unfortunately, we all now know the consequences of this type of deregulation. Without the safeguards in place, nothing was stopping businesses from making a buck, regardless of the risk and potential danger to society. In the end, wall street imploded and millions of people on main street who had nothing to do with this payed the price with their jobs and investments.

The last thing I wanted to touch on was workers. Keep in mind that profit is god. Reducing the price to operate a business means you make more profit. One of the most costly expenditures for a business is personnel. For a factory, the ideal worker is a robot. A robot can preform a task much faster than a human worker, it can often do it better, and best of all, they don’t get tired and you don’t have you pay them wages.

Robots, however, have a high one time price when you buy them, and then you have to maintain them. (Altogether this is still more cost effective than hiring workers) The next best thing to robots are slaves. Slaves also have a maintenance cost, but they work for free until they die. Unfortunately for big businesses, government regulation prohibits slavery.

Given these two realities, the next best thing a big business can do to minimize overhead is to try and make their workers as near to slaves as possible. The more you can work them, and the less you have to pay them the better. Whatever you do, don’t let them organize unions and try to improve their conditions.

There was an old theory by Ferdinand Lassalle in the 19th century called “Subsistence theory of wages“. The idea was to pay workers the bare minimum they need to survive. This way they wouldn’t breed uncontrollably, and the labor force along with wages would be kept in check. This theory has long been debunked, and labor unions have made a real difference in passing regulations to improve people’s lives, however, many of the sinister motives behind this theory remain.

To many big companies the worker is a commodity. In the US we have labor laws that regulate businesses when it comes to wages, working environment, etc. These regulations protect the people working in a company from abuses, and attempts to insure that they can afford to live. This in turn raises the overhead cost for businesses employing American workers. In turn, businesses outsource their jobs overseas to countries where there are fewer or no regulations to protect employees.

Here they can pay workers subsistence wages and work them to exhaustion. Businesses can afford to run sweatshop conditions in these countries given the high population of the work force and thus high demand for employment. (There is a website here where you can put in your zipcode and see what local companies are outsourcing jobs from your town overseas)

Without these regulations protecting American workers there would be sweatshops in the US. Corporate interests in the America actively work to try and weaken protective regulation and unions in an effort to make the American worker more like sweatshop workers. I honestly don’t know how we’re going to be able to protect the American worker and his/her job when so many people are willing to do the same work overseas for a fraction of the price, while at the same time being bared from unionizing for better living conditions.

Other big businesses have found even more ways to make money off of their workers through “dead peasant” insurance policies. Companies like Dow Chemical, Procter & Gamble, Wal-Mart, Walt Disney take out life insurance plans on their employees, only to cash in on them when their employee dies. Most of the time the employee doesn’t even know their company has this policy out on them. These company owned insurance policies make up 20% of all life insurance sold each year.

Just some thoughts.

One Response to “Big Business, workers, and regulation”

Trackbacks/Pingbacks

  1. Take the Tea Party seriously « The Godless Paladin - February 8, 2010

    […] big bankers who are still getting million dollar bonuses. Did conservatives get the message that repealing government safeguards on the economy causes this shit? Nope. This whole thing builds up under Bush […]

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