Saturday, March 19, 2011

Are Corporations Evil ?

As per the current dated rules, A corporation in America is technically equivalent to a person. There is an discussion with respect to Citizens United v. FEC case and corporate money in American elections. Some activists are suggesting to change US Constitution, to not treat Corporation (Corp) like a person.

I would say not allowing to treat corp as a person, is a good thing. But it is like treating the symptom and it won't bring overall benefit if we don't treat the root cause of this problem.

There is no point in demonizing the Corporation. We know it is a non living thing; it can't do good or bad without the people who own those corps (Read shareholders). It is their motive to make money which decides each move of the corporation.

As long as the owners of corps have an incentive to extract more money in terms of profit from the corp, they will and there is no stopping that, unless they all decide to become Buddha. ;)
The only way to prevent corp from doing evil things even though it is bad for the employees, customers and society, is to minimize the incentive for corp owners to make profit their main motive.

And how to do that ? Simple, have progressive income tax rates to a high percentage. Check the facts that highest individual income tax rates were over 80% for a long period during 20th century in the US. What is the highest tax rate now ? 35%. The wealthy have an incentive now to make more money, they pay very less tax.

What would wealthy people do if highest tax rate now was 80% ? It acts as a discouragement for wealthy to make or extract more money. Too much money anyway is useless for anybody. Think about it.

PS: Money is power. Nobody would like to lose power and become weak. Rich would always like to stay rich or become more rich.