The above-linked opinion piece by Chrystia Freeland, writer for Reuters, asks whether businesses add to the common good. It’s an opportunity for me to write about one of the most profound implications of the new economic theory I presented in Five Short Blasts – the divergence between the interests of business and the interest of the common good as increasing population density begins to erode per capita consumption.
The quandary is best illustrated by the example I presented in the book – the difference between Japan and the United States in the per capita consumption of dwelling space. In Japan, a nation ten times as densely populated as the U.S. (and nearly as wealthy, thus eliminating low income as an explanation for the disparity), the Japanese people live in homes that are only 30% the size of American homes (on average). The reason is clear. Japan is so crowded that space limitations don’t allow for anything larger.
The Japanese people would give anything to live in a home like the average American. Their tiny dwellings, often derisively referred to as “rabbit hutches,” are a national embarrassment. In terms of dwelling space (and in many other ways as well), the Japanese have effectively crowded themselves out of a better quality of life. This clearly isn’t in the best interest of the common good.
But look at it from the perspective of businesses engaged in building, furnishing and maintaining Japanese homes, not to mention those engaged in manufacturing the products used by those businesses. Although the average Japanese dwelling is more than three times smaller than the average American’s, the sum total of dwelling space is more than three times larger than it would have been if Japan’s population had leveled off at the same population density as the U.S. Thus, sales volumes and profits for these companies are more than three times greater, thanks to population growth and stuffing more and more people into the same limited space.
And so it is with virtually every business, regardless of the product or service they provide. Their best interests are served by advocating for public policy aimed at growing and exploiting the population, in spite of the fact that such policies are not in the best interest of the common good. And who wields the most power in terms of campaign financing and advertising to shape public opinion? Businesses and corporations, and not individual citizens. It’s the corrputing influence of corporate money.
It’s the very reason that our nation’s leaders turn a blind eye to illegal immigration and process as many legally as the sytem can handle. It’s the very reason that our trade policy has been hijacked by “free trade” advocates – not because they give a rat’s behind about free trade, but because it provides them access to more and bigger populations, the more densely populated the better, regardless of what it does to the trade deficit or the nation’s economy. It’s the very reason that public and private grant money has snuffed out any independent thinking by our business and academic economists, who must toe the line of corporations and the Federal Reserve if they want to keep the money flowing.
In 1952, Eisenhower’s Secretary of Defense, Charles E. Wilson, former CEO of General Motors, famously proclaimed, ” What is good for the country is good for General Motors, and what’s good for General Motors is good for the country.” A year later, Al Capp created a new character for his L’il Abner comic strip – General Bullmoose – whose motto was, “What’s good for General Bullmoose is good for everybody!” It’s exactly this attitude that permeates public policy and economic theory to this day.
While it may have been true in 1952, and throughout history up to that point, when the world population was less than half what it is today, that the best interests of both business and the common good were the same, it isn’t today. That relationship broke down when population density reached a critical level, beyond which people were forced to begin crowding together, eroding per capita consumption and driving up unemployment.
There’s nothing wrong with business wanting to make a buck. It’s what drives them to produce products and services that we need, and to do it efficiently. But it also drives them in a direction that, at some point, is no longer in our best interest. Boundaries need to be established to assure that business continues to function as our servant and not our master. That’s why I’ve advocated a major overhaul of the U.S. constitution, adding amendments that preclude business from using population growth and bad trade policy to stoke profit growth. It’s why the first amendment needs clarification of the now-ambiguous speech of our founding fathers who never imagined that “the people” could be interpreted to include global corporations, or that money would be equated with “speech.” This ambiguity and these interpretations have effectively silenced “the people,” drowning out their “speech” in a tidal wave of corporate money used to influence policy in a direction contrary to the common good.