corporate politics in America, a three part harmony
part I ‘recycling’
In the late 60’s and early 70’s, we got involved in the ‘natural’ movement – since rechristened under a number of labels: ecology, green, organics etc. etc. – something that became a major force in the politics of the times. At the height of the first round, the force fell primarily on the idea of recycling, packaging things in reusable containers, and recycling the materials so that they would not wind up in landfills.
The landfills were relatively new. In the old days, the city found a gulch or old quarry and dumped the city garbage in it. Spontaneous combustion was inevitable, so every three or four months – or continuously, if the dump were large enough – the garbage would catch fire. The fire department might come and hose it down, but mostly they let the fire burn itself out. So the dump never particularly expanded.
But now, all of that was anathema – and, considering the increasing toxicity of the garbage as well as an exponential increase in the amount, a necessary change. Recycling centers sprang up. But soon the politicians felt obliged to join. ‘America recycles’ became the cry. And in little more than a decade we had laws for mandatory recycling in most communities, often initially subsidized by state grants.
So how did we do?
In 1965, if I bought a soda in a bottle, I paid a nickel deposit. When I brought the bottle back to the shop, I got my nickel back. The bottler paid to pick up the bottle, wash it and reuse it. Plastic was already coming in, if I remember correctly, so I had a choice. But I did have a choice.
Today, all the larger drink containers are plastic. Only the smaller single portion bottles are sometimes glass or metal. But even these are non-returnable. Some states require a deposit, but apparently that’s window-dressing. The bottler has no ‘post-consumer’ responsibility. In other words, today there is no such thing as a ‘returnable’ bottle.
Because my city ‘recycles’, I’m charged a $15 or $20 annual fee – I can’t remember if it went up, since it’s folded in with my water / sewer bill – and I put my recycling bucket out every other week. It’s picked up by a trash hauler in a special recycling truck.
On the macro-economic scale, we are now using billions of plastic bottles every year, most of which wind up in the landfills. Only now, I’m paying for it.
In other words, the so-called ‘recycling’ law was in fact an oil-chem / giant cola law. ‘America recycles’ should have read, instead, ‘America pollutes’.
part II health care
Only two years ago, I read a letter in our local newspaper purveying the old canard that if we ‘socialize medicine’ I won’t have a choice of doctors. I don’t have a choice of doctors now. I have the choice of a clinic. But when I get sick, I get the doctor on duty. Perhaps if I were the kind of rich that can lose track of the count, I could find a doctor willing to have me call at night. But as long as I’m down here on the street with the other shmoes – and if you’re reading this, this means you – then we’re going to have to take it like we find it.
But the reason the doctors got together in clinics is not because they wanted a reasonable night’s sleep – my experience is that there’s something slightly masochistic about most doctors in any case – but because of the changes wrought in the health care ‘industry’ by the insurance companies. The history is self-evident. Look it up.
When are we going to have a politician with the golden yo-yos to say that the problem is not with health care, but with the insurance companies?
Because I am less than middle class, my insurance company only allows me four co-pay visits to the doctor every year. Apparently, my insurance company has done a conclusive survey that shows that poor people never need the doctor more than four times a year. And we all know that the poor are hypochondriacs. We can’t let them clutter up the system with their false claims about sickness and injuries.
When my shoulder was injured and I needed extended therapy (I was on better insurance then – my present insurance doesn’t allow physical therapy) it was not my doctor or my physical therapist that determined when I was ‘healed’. It was my insurance company, which terminated its coverage for the therapy.
When did my insurance company become a doctor? Maybe I should become an insurance company : then I could practice medicine. Undoubtedly a certified insurer is as good as a doctor.
And if you want to understand why doctors charge so much, look at how much they get from the insurance companies. Depending on procedures, the insurance companies discount the bill by 60, 70 or even 80 percent. This is totally legal on their part. But if the doctor gives you or me a discount, legally it’s fraud. So, because the insurance companies have been demanding these progressively gouging discounts, you and I, if we have to pay a bill inflated by systemic fraud, are risking the law if we ask that it be reduced.
Which, of course, is just fine by the insurance companies.
But do we hear a peep out of the politicians? All these wonderful plans to ‘close the gap’ for the uninsured. And all of them mandate that the uninsured buy essentially private insurance. Of course, for the most desperately poor, the government will pay the insurance companies to provide coverage. But I’ve already told you exactly what kind of coverage they will get.
If the health care industry ‘gets socialized’, what gets socialized is not health care or medicine, but insurance. And the insurance companies are fairly clearly the problem when it comes to the inflationary pressures on health care costs. Others have pointed out how much the American insurance industry adds in administrative costs in the health care figures, both in terms of their own administrations and the administrative structure that this piecemeal pooling of insurance money forces on doctors, clinics and hospitals. But the administrative costs are only part of it. The insurance companies have no interest in containing health care costs in general. They only have an interest in limiting the outlay that they are required to make for their own insured. If health care costs rise, generically, they get to charge higher rates and hold larger pools of money. The idea is to maximize the costs the other guy has to pay, so that, as an insurer, I can hold a larger pool of money, make larger investments and reap higher profits on both sides, both by limiting my outlays for actual health care and increasing investment income.
But, of course, a big dollar buys a ‘big’ politician.
part III corporate cannibalism
A few weeks ago, I read about a medium sized corporation that has been bought and sold 15 times in something like 20 or 25 years. Obviously, the corporation is not going bankrupt. There must be something profitable in the transaction itself, if it is repeated over and over again. Of course, the purchaser and seller in each case was a substantially larger corporation. I would assume, just the reverse, that the ‘victim’ corporation is a relatively profitable cash business. In the last quarter century, arbitrageurs have shown how to pump profitability ‘out the top’, so to speak, by buying and selling corporations, thus essentially denying profits to their rightful recipients, namely the stockholders. But, invariably, the stockholders are offered a ‘bonus’ for the deal. That is, the buyer offers a stock price over the current average. Thus, in most cases, the stockholders are agreeable.
So, in fact, I assume our ‘victim’ corporation, in this instance, is actually highly profitable. But, in that case, one wonders why the corporation keeps being bought and sold. Part of it, of course, might be the debt structure inherent in such purchases. But the profitability should obviate the debt. Why is no one holding the corporation long term?
Part of the answer, of course, is that the extraction of the high profit margins ‘through the top’ can only be effected by sale and purchase. But one also has to assume that the turnover is the result of accounting practices, amortization rules and the present tax structure, all of which are mandated by law. Part of the profit is taken out by the sale. But part of the profitability involves the subsequent paperwork in terms of the legal structures for tax exemptions and write-offs.
I am not a tax expert nor a trained economist, so I don’t understand the details, but the behavior of the largest corporations makes it obvious what’s happening. The largest corporations are now holding companies. Even where heavy capital investment is involved, such as the auto industry or steel, the ‘home office’ and the ‘plants’ are structured either overtly or de facto as separate corporations. ‘Units’ are bought and sold with impunity. In a sense, the central managerial structure is more like a specialized commercial bank dealing in the specific arena of production than a corporate manager in the old sense. ‘Financial engineering’ has largely replaced direct formal management of the process. If the corporate head wants to move in a particular direction, the result is as likely the purchase of an outside corporation as an ‘in house’ development.
In this environment, profitability trumps production. Corporate resources are credit lines rather than production units. If, for any reason, the production unit lags in profitability, as defined by the central office, the solution is as likely divestment as any kind of management directive or profitability team sent out from headquarters.
And so, equally in this environment, the central office tends to become a feeder corporation, feeding on the schools of smaller fry, the smaller corporations rising into prominence. Start-ups that survive the first cycle of venture capitalization commonly are simultaneously highly profitable and technically inefficient. Over and over, in the areas that gain the most publicity – the areas of most rapid economic development – we see these startups rise into prominence and get swallowed by the giants, the so-called multi-nationals. What we generally don’t see is what follows, the inevitable cycle of squeezed-out profits and corporate inanition or attrition. Profitability, and not internal growth, is the concern of the larger fish.
And so these larger fish have become the corporate predators in the present environment. But I would suggest to you that their very existence is dependent on the political structure. If the laws did not favor the largely financial entities, many would fall tomorrow morning. Why do we keep subsidizing the largest corporations? The financial laws already favor them inordinately.
Obviously, they are not dinosaurs. The latest inventions in the legerdemain regions of credit are at their disposal. But if we had a truly ‘free market’, that is, a truly ‘level playing field’, in terms of a lack of political favoritism, I expect they would rapidly vanish.
They only employ a small percentage of the American workforce. And they are exporting the jobs as fast as they can. They are gutting the American economy and devouring the most creative corporate entities, often spitting them out as skin and bones. Their inordinate skewing of the laws with respect to such things as corporate insurance and workman’s comp place an overbearing burden on the smaller business, the present backbone of American employment and the emerging core of the American economy.
But big bucks buy ‘big’ politicians, and ‘big’ politicians are still making the laws.
Enjoyed the post. Brings some right thought and clarity to some vital issues.
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A gentle disquisition....you sure do have a way with words...and where is that politician with the golden yo-yo's?
A harmony in 3 parts. Wonderful.
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