Corporations and Government
Some folks think just about everything should be left to the private sector, some think that government should do a lot more. Presumably, that must mean there are big differences between a modern American corporation, say, and a government.
A believer in the private sector can name a few:
1. One is the profit motive. In theory, corporations exist to maximize profits for their shareholders. Of course, in theory, a country exists to maximize the well-being of its citizens. Some, such as Sweden, apparently do a good job. Others, like North Korea, are abysmal. But even the Swedens leave a lot on the table. The same is true of corporations. Partly this is true because the profit motive doesn’t really apply to all the employees. (If you’ve ever worked for a Fortune 500 company, you know the waste and inefficiency have a DMV-like magnitude.) Usually, a few guys at the top get a lot of stock options that are supposed to align their interests with those of the shareholder, but most do not so their incentives may be very different. In fact, even the CEO’s incentive may not be aligned with that of shareholders. It isn’t possible to positively identify each person’s contribution, so if nothing else, the incentive to free ride is always there.
2. Closely tied to the profit motive is the fact that underperforming corporations can be taken over or go out of business. But so can underperforming countries – the USSR, for one, is gone. So is East Germany. And who would be shocked if North Korea didn’t exist in 10 years, other than a few million kept-in-the-dark North Koreans? And corporations don’t exactly go under all that easily. Ford and GM are still around. They’ll probably still be around for a while.
3. There are limits to the powers of the corporation. Giving a non-performing employee a beating is generally frowned upon in Corporate America. But in most countries, the executive is not the final arbiter of what is legal. For all practical purposes, it was the final arbiter in the old USSR, and GW has argued that he is the decider when it comes to anything he thinks is related to the War on Terror, but for the most part, there is a legal system putting limits on government just as there is a legal system putting limits on corporations.
4. Free association. Theoretically, you are free to leave your job with a corporation; this might force corporations to provide their employees with desirable incentives to work. You are also free to leave most countries, including the US.
5. Size. The largest corporation is still smaller than a country. (I mean the real countries, not the fake places like Vatican and Andorra.) But will this be for much longer?
Are there any other differences? Does it all come down to size?