The Instigator
voxprojectus
Pro (for)
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The Contender
Jevinigh
Con (against)
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0 Points

Free Market Capitalism Inevitably Leads to Corruption

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Voting Style: Open Point System: 7 Point
Started: 6/4/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 1,744 times Debate No: 56046
Debate Rounds (4)
Comments (6)
Votes (0)

 

voxprojectus

Pro

First Round Will be opening statements without rebuttal. All following rounds may be free-form.

My opening statement: It seems to be inevitably the case that the further a given municipal, provincial, or national government works to de-regulate and "get government out of the way" of the private sector, the end result seems to be Private institutions/businesses leveraging their freedom for greater political power, often legally or illegally supplying money to lawmakers along the way.

The cases of this are numerous (the US was recently reclassified as an oligarchy according to one Princeton study) and while I would not be in favor of a totalitarian state as an alternative, it seems that un-tethered market freedom seems to have a very similar result.
Jevinigh

Con

The problem is not in how many or how few the regulations but how effective and how meaningful. Further it is not the freedoms of the market that inherently corrupt but rather corruption that begets more corruption. In a Democratic government ( which is not mandatory for a free market system counter to popular believe) the ability to lobby is a mechanism of the public sector and not the private sector how ever exploited it maybe. The fundamental problem is not in the private sector but in the structure and form of the public sector.

The United states in particular but all of the developed nations as well face a system that is better known as Corporatism. A system that first reared its head in the financial crisis, which though initiated through deregulation (reference: CFMA2000 ) culminated in the "too big to fail" mantra of 2008-2009. How ever, while the corruption of the private sector is obvious the fundamental corruption is in the public sector, it was the ability to influence politicians with money that ensure public resources would be used to monetize the losses. On it's own, No institution in a natural market-environment can become too big to fail due to an inherit self correcting nature of the market.
Debate Round No. 1
voxprojectus

Pro

Thank you so much for taking up my debate, and for launching with such eloquent gusto. I'm going to enjoy this!

First to rebut: I would agree completely that democracy and a free market aren't really connected in any way other than perception, but that being said, the free-er a market is, (i.e. the less regulated, less taxed, less monitered) the more businesses that find success will be able to leverage that success into a tilted playing field that favors them. The public sector could be entirely absent, yet this would still be true. Merchants better able to control the flow of resources, distribution or (in truly anarchistic conditions) violence will rise to the top, command all power, and rule by default in a system that is wholly corrupt. A weak public sector produces the same result.

I'm glad that you brought up Corporatism (the unholy alliance of government machinery with corporate interest so that the two leverage against everything else for the success of the private sector) because it is my contention that Corporatism is the innevitable result of any system that begins to try a free market approach to meet public needs.

I categorically reject the notion that in a free-market system no business could become too big to fail. What's to prevent it? If I get to the point where I control all the grains in a given market, what keeps me from snowballing that control into greater and greater and greater benefit for myself? There was a time in the late 1800's that saw newly industrialized businesses taking full advantage of an unregulated market, and despite the whines of Robber-Barons that regulations were somehow unfair, without them, monopolization and direct and unfair control of the stock market was the result.

I feel I have addressed your points, and, to my satisfaction at least, shown that free markets have the capacity to result in unchecked corporate power just as well as a weakly regulated market.
Jevinigh

Con

I will first address the premise that corporatism is the inevitable result and than go on to explain a fundamental understanding of the balance of power between Public and private sectors and why that balance should favor the private sector in terms of regulations and so forth.

Corporatism is really the same effectively as fascism but the process of reaching that system is reversed. In a typical model of Fascism, the Government nationalizes and takes over industrial sectors until it controls the industrial world "To a T". Corporatism is the process in reverse, Corporations are taking over the role of government to the point where Big Industry and Big government are indistinguishable from one another. But for a fundamental understanding of this process you have to understand that a corporation is not a business. A corporation is a set of Legal protections, it is literally a legal entity designed to redirect liabilities. http://legal-dictionary.thefreedictionary.com...

So, in a free market... one that did not have special legal protections to favor one business over another and limited abilities to redirect liability, a corporation could not become too big to fail... If there was no public sector corporate welfare, the mortgage bubble would have gotten to half its size before it exploded and collapsed around have the major financial banks. Leading to a great recession but one that would have corrected it self significantly faster as the remaining bigs recovered and the financial that didn't leverage them selves to the hilt would gradually pick up the slack of the fallen ones.

The down side... grandma's retirement is gone... Sorry grandma it REALLY IS your job to pay attention to who invests your money and where. On the bright side, a good deal of those banks fucked people over in blatant violations of agreements or snuk in agreement changes... most of which would not have held up in a court system that had its head on straight. A good deal of the losses would be recovered and the ones who lost the most at the end of the day would be the business owners,managers and stock holders.

What actually happened, is the business owners got golden parachutes and the stock holders got bailed out at the direct expense of Grandma and her investment money... but hey, ^%$# grandma if she can't afford her own congressman. This is the stark contrast between "&$#@ you grandma" and a free market. In "%$#! you grandma" regulations are huge in number... none of which have much relevance in the business of huge corporations, they convoluted,hard to understand and full of loop holes just encase one of them happens to cross the path of a huge corporation. In a free market... or should I say Free* market (* some conditions apply) Regulations are few but clear and concise.

Think of it for a moment form the enforcement perspective. The more regulations you have...especially ones that are a 1000+ pages... The more resources are required to enforce the regulation ( or law) and the more absurd is the law, the more absurd will be the enforcement. The result is that when regulations are huge and vague the enforcement agencies tend to find soft target violators ( the little guys who don't have legal teams to fight back) as well they tend to focus on regulations about the way a shoe has to be tied ( only a slight exaggeration) rather than regulations that stop Mr.WallStreet from $#@!ing over grandma. ... Not even using lube.

That said lets look at some fundamental understandings of the Public sector and the private sector and some attributes of each. For example, The public sector is.
Pros:
Stable
Effective ( at certain things)
Consistent
Powerful
Slower to corrupt

Cons:
Slow moving
Inhabiting of internal innovation
Costly & Inefficient
Must be externally reformed from time to time.

The private sector is:

Pros:
Fast moving
Fast to evolve
Self correcting
Efficient ( sometimes too much so)
Effective ( at certain things)

Cons:
Easily corrupted
Not inherently stable

=========================

The Public sector being stable and slow moving is good at BIG THINGS.... think the Apollo project, the Eisenhower highways. ( I like Ike) It is good at using the hammer to solve problems.... and that's important. The public sector is BAD at dealing with day to day needs and issues... The Public sector always has to be Huge to be effective because it is inherently Inefficient. Bureaucracy is the reason for this. Bureaucracy is the DNA of the Public sector and even though it can be and often is upgraded from time to time it is SLOW to do so and the Public sector does not have mechanism s for self correction. It takes massive movements of voters and huge amounts of resources to reform an agency that has become corrupt and ineffective. So though it's true that corrupting the public sector is a massive project that it self requires alot of time and effort, once it is corrupted that corruption becomes entrenched and extremely hard to remove.

By contrast, the Private sector is harder to organize. So many people doing things with different motivations and different end-games... It suffers from its inherently fast moving nature. In A free market, products are born and die at a furious pace though the good ones tend to stay around for a while. As a system it is inherently unstable but it does allow for stable instance to arise. It is exceptional at meeting day to day needs and wants but it is fundamentally bad at big projects... No, big sky scrapers don't really count.

While the private sector could competently provide infrastructure needs, the Public sector is better suited for that. this is an example of a balance of power that needs to exist a fundamental understanding of this is important.
Debate Round No. 2
voxprojectus

Pro

Rebuttles:

1. While a Corporation is not strictly a business, corporations have historically not sprung up at the behest of government, only as an option. No business *has* to incorporate, yet most choose to because of the advantageous footing this has come to put them on in terms of legal protection. In a well-regulated market, in which the end goal is not corporate protection, corporate status means little in terms of power, it's only a logical extension of recognizing an entity that is bigger than an individual. In the most reasonable ways (to say nothing of recent SCOTUS decisions mind you,) incorporating is not unlike marriage. There isn't really an explicit reason that government need be involved in either, but it's just easier from a legal standpoint to have SOME recognition of union, whether it be the many shareholders of a business or a pair of spouses. It is my contention that absent incorporation, government would have no way to recognize OR limit corporate power. In the absense of such regulation, an individual business (not a corporation) would have literally no check or balance on its ability to control a given resource, or, ultimately, all the given resources.

Let us take the example of water rights in Venezuela. While it is true that the Venezuealan government is absolutely complicit in granting CAF all water rights so that they can sell it to the populace at horrifically inflated rates, there isn't really anything keeping a company of sufficient size from simply "claiming" legal rights over water. In the case of CAF, their legal rights to the water are largely enforced by their own militia, not government thugs. Without government, the potential for actual military deterence to the corporation wouldn't exist. Without corporation, there wouldn't even be any legal basis with which to challenge CAF for holding all the water, just a void of reasonable standards in which whoever controls the most guns to hold what they want has the right to parcel that control out however they choose.

2. I don't feel you really back up exactly why corproations wouldn't become "too big to fail". A large failing corporation may drag down an economy, but I'm far more concerned about corporations for whom failure is not the issue. What is to keep corproations of great success only becoming more succesful, even if they use unscrupilous tactics and manipulations to make it happen? Without legal recourse, and what little regulation exists, companies like Enron would run rampant. At no poitn were they "bailed out" or deemed "too big to fail" they simply fleeced the public allowing their most prominent CEO's to either flee the country or die before legal precedings had even begun to be sorted out. None of that was propped up by government, and what little good came out of it in terms of redressing the victims or surviving criminals came from what little power government had to regulate. What prevents an Enron? What prevents a new Standard Oil or Carnagie Steel from being born and running roughshod over people? These monopolies did not form in times of heavy government regulation, and so far you have given no evidence what would prevent them from happening again in a less regulated market.

3. If find the "F-you Gramma" portion of your argument to be fascinating. By your logic, if businesses toy with and manipulate stocks, just as they did before the crash of '29, that's just fine because Grandma should have been paying attention and KNOWN somehow that they were in fact cheating the system. That's absurd. How could we expect consumer/investor knowledge to extend to shady background deals made between individuals who control vast percentages of the whole market?

The reality is, whether the attitude is "F-You Grandma!" or "Oh well, Grandma should have payed better attention" the result, a dead grandma, is the same. I would argue that only through strong government involvement is there any hope for grandma, or else we simply leave her to the wolves of the free market to cull like any other weak member of the herd.

4. Lastly, as my time is more limited than I'd like, I'm just going to touch briefly on two things you've said that i think far more to make my point than I have.

A.) There is a balance of power between the public and private sector. Yup. I agree with that. By that logic, it would seem the optimal system would be one evenly balanced between the two so that they can hold the other in check. By my reckoning, if we have to favor one, I say favor government because in a system NOT totally bought and paid for by unchecked private enterprise at least we all get a vote, and "voting with your dollars" as the free-hand types love to say is limited to those who HAVE dollars and are somehow well-informed. As stated above, I don't think we can rely on a market regulated by information consumers may have no access to.

B.) You state the pros of government to be stability, consistency, and that it is SLOWER TO CORRUPT. In an argument on whether or not the unregulated free-market is more likely to lead to corruption, I think this says it all. Government is at least somewhat less inclined towards corruption, that is exactly my point. The speed, cost, and need for occasional reform is hardly a good tradeoff for a system that is both unstable and easilly corrupted.

Ball's in your court.
Jevinigh

Con

"While a Corporation is not strictly a business, corporations have historically not sprung up at the behest of government"
- You kind of missed the point. It is still sanctioned favoritism.

"corporate status means little in terms of power, it's only a logical extension of recognizing an entity that is bigger than an individual."
- You need to do more research. Think BP oil spill, when the government levied that fine what was it 400bn... who do you think paid it? The CEO? the Board? .... no the Corporation paid it which really means, the stock holders paid it. We have a system heavily tied to corporate legal protections that allows for the most severe punishments to be passed down to those least responsible... those with no actual management of the situation.

"It is my contention that absent incorporation, government would have no way to recognize OR limit corporate power."
- You are neglecting a fundamentally self correcting nature in the market. Corporations who cheat their customers tend not to stay in business long. GM din't go bankrupt for the hell of... their cars where ^%$# and they where %$#@ for along time. Some contend there has been little improvement, GM created an inferior product and it should have been destroyed... instead the state played favorites, is this what you mean by Recognition? Bad news for you, GM is yet again on the edge of Bankruptcy.

" I don't feel you really back up exactly why corporations wouldn't become "too big to fail"."
- Do Tell.

"A large failing corporation may drag down an economy, but I'm far more concerned about corporations for whom failure is not the issue. What is to keep corporations of great success only becoming more successful, even if they use unscrupulous tactics and manipulations to make it happen?"

- The sentiments behind this sentence have just a hint of paranoia behind them. Mc. Donalds is a good example, a lot of people know these days that their business practices suck and their product is at best..questionable. They've been #1 for a long time but in the last 2 quarters 2013 they have seen something they haven't seen in a very long time. A NET Decline in business. The Corporate leaders are no fools, they pay attention to the Anti-McDonalds groups popping up and realize the market is all ways able to build momentum against them.
No business is to big to lose,except those who are in bed with regulators. In a market place that's free of unreasonable restrictions, Mc donalds faces a Million mom and pop stores as competitors and the threat of regional chains as well. Though I am not a big fan of Fast food and I Categorically refuse to do business at Mc. Donalds, this is just one example of a high competitive market, one which for now still has a sane-balance of regulations in most states.

Let's contrast that with "Strong government involvement".

http://www.miamiherald.com...

hm... an entrenched special interest group is using regulation to keep out competition.... No have EVVVVER seen that before. http://www.nytimes.com...;

http://money.cnn.com...
http://www.ij.org...
http://www.ij.org...
http://www.ij.org...
http://www.capecodonline.com...;
http://cnsnews.com...

And last but not least:
http://www.newson6.com...;

==== Government is an Entrenched, slow moving force... when it does bazarr and rediculious ^%$ it may even seem humerous to read about like requiring 400 hours of state classes to be a Interrior designer in Florida. Far more than the 40 hours it takes to gat a Class A Drivers licence needed to operate a 10's of tons 18 wheeler. But given your responces so far i am conerned that you may look at that graphic and conclude that truck drivers need more training.



" By my reckoning, if we have to favor one, I say favor government because in a system NOT totally bought and paid for by unchecked private enterprise at least we all get a vote, and "voting with your dollars" as the free-hand types love to say is limited to those who HAVE dollars and are somehow well-informed."

- You defeated your point in the same breath you made it. Once again the entrenched nature of Government means it is liable to exploitation and the more power the government has the more business will seek to use that power to their benefit. In the Absence of that power, there is nothing for businesses which betray their products and customers to cling on to after they go bust.


Debate Round No. 3
voxprojectus

Pro

As this is the last round, I am electing to rebut anything new you've added, point out which of my arguments I don't feel you've addressed, and write my conclusion. You are welcome, though not required to do the same in your finale. Thanks for a terrific debate!

- You need to do more research. Think BP oil spill, when the government levied that fine what was it 400bn... who do you think paid it? The CEO? the Board? .... ... those with no actual management of the situation.

We can both absolutely agree that both Fascism and Corporatism is the worst that both Private Enterprise and Government can offer, you will get no disagreement from me. However, it does nothing to address the overall point of *this* argument that corruption inevitably rises out of unrestrained capitalism. When government is weak and markets unregulated, what, pray tell, is to keep massive private entities themselves from using their clout to influence and ultimately increase the role of government towards favoritism?

I perfectly understand what you're saying in terms of government being the machine that big business may use to oppress or cheat, but what you fail to substantiate is what keeps business itself from creating that machinery in the absence of strong government? Why do you assume big government comes first in the equation?

We're going to get back to this after the rebuttals, so stick around.

- Do Tell.

Okay, I'm telling. You've made it very plain in both previous rounds that yes, business with the aid of government is capable of achieving the status "too big to fail". I do not disagree there. To counter this I've mentioned other companies that were "too big to fail" in the absence of big government or really ANY regulation.

Standard Oil.
Dole Fruit.
Carnegie Steel.
The Salt Commission.
Da Beers.
Dutch East India Company.
HBC

just to name a few. All of these companies stand or stood without any risk of failure in their time, and some were even able to leverage their weak overseeing governments into serving them. They were unregulated, yet still took advantage of military resources for their profit needs and wants. This is the result of both a completely free market, and a military.

And before you jump in say that this is still somehow a government problem since militaries were engaged, I would remind you that at least half of the names on this list employ their own personal militias totally absent government.

And that's really my point: Whether we're talking a corporatist state (something we both abhor) or a totally free-market approach, the end result is the same: Small groups of people with way more power and leverage that they are ultimately able to use with impunity. Only people, i.e. government, has any hope of checking that power.

The sentiments behind this sentence have just a hint of paranoia behind them
No business is to big to lose,except those who are in bed with regulators

See my above examples of companies that attain total control despite not having the backing of strong government. The fact that McDonald's may see diminishing profits for a quarter or two is not actually the same as failing, and without government involvement (say those which ban them in greater numbers in some countries and cities) it's unclear how exactly these numbers would lead to a collapse of the McDonald's corporation.

Government is an Entrenched, slow moving force... it may even seem humorous to read about like requiring 400 hours of state classes to be a Interior designer in Florida. Far more than the 40 hours it takes to get a Class A Drivers licence needed to operate a 10's of tons 18 wheeler. But given your responses so far I am concerned that you may look at that graphic and conclude that truck drivers need more training.

Not off the cuff, no, I don't think that. But the occasional government oversight that results (generally temporarily before the matter is re-examined and re-legislated) isn't an issue of corruption, just poor policy. The fact that the process of rectifying this may take longer than a business *may* choose to "self-correct" doesn't make it inherently more corrupt or more likely to lead to corruption, only, as you point out, ultimately more stable.

And this is to say nothing of how often business doesn't self-correct. When government officials learn that a given policy may be causing more harm than good, that, coupled with the threat of being voted out, tends to result in positive change. A company on the other hand, if its policies are hurting a small number of people, they have literally no incentive to stop that harm, because the only motive is profit. All of the market's efficient little self-corrections are only made in response to data coming out of the next fiscal quarter. Does Monsanto give a *&^% that people are generally pretty pissed off about a lot of what they do? Absolutely not, and even if they were not bolstered by corporatism as they are, they would still have no reason to care. Limiting regulatory power does nothing to address harm.

- You defeated your point in the same breath you made it. Once again the entrenched nature of Government means it is liable to exploitation and the more power the government has the more business will seek to use that power to their benefit. In the Absence of that power, there is nothing for businesses which betray their products and customers to cling on to after they go bust.

This gets into a fairly major point you've utterly failed to address: Why are you starting from the assumption that government was strong, and then corporations somehow came along and exploited it? The worst exploitations of our day didn't emerge from a strong government, but rather one that conservative elements in the country sought to hack to pieces for the last 5 decades. Government was weak, and that was what allowed business, (because it is a power struggle, as you say) to move in and take advantage of that weakened government. A strong, well-funded, government backed by the votes of the majority has the capacity to hold rampant corporatism at bay.

In conclusion, I think you've done two things just magnificently in this debate:

1. You've demonstrated the much greater harms that come from corporatist favoritism.
2. You've illustrated the qualities of both business and free enterprise in a way that I think is largely accurate.

But here are the things you have failed to address, prove, or really support:

1. You've given no answer to the unchecked corporate powers of the past, those that existed before strong government regulation came into play. I've brought them up at least twice and you haven't acknowledged or addressed this. I hope you will use your last round to.

2. You've argued that Government is both slower to corrupt, and that business is unstable. While I don't want to narrow this debate merely to the initial terms (because I like debates that range and actually get interesting instead of turning into semantic wankery) it is still worth mentioning that even as we agree corporatism and fascism are the worst evils at either end of the spectrum (or circle if you like) the base point I raised was about corruption, and you've largely supported that.

3. The concept of "Too big to fail" as defined narrowly by "receives government bailouts" which you seem to bring up as the big problem I think gets much bigger. Take mining towns in which a given business owns the mine, effectively creates and maintains the legislatures, and, in the absence of government involvement, forces its workers to simply buy things back from the company with the wages they pay. I would argue that is "too big to fail" in the sense that business has grown to encompass all essential parts of life. To me that's a lot scarier than bailouts, and it doesn't take government for it to happen.
Jevinigh

Con

Jevinigh forfeited this round.
Debate Round No. 4
6 comments have been posted on this debate. Showing 1 through 6 records.
Posted by voxprojectus 2 years ago
voxprojectus
No worries, I hope you still get votes, and if you'd like to make any final points here in the comments, I won't respond so they get to go unanswered as your last round should have.
Posted by Jevinigh 2 years ago
Jevinigh
Sorry about the 4th round, things got crazy around the house.
Posted by voxprojectus 2 years ago
voxprojectus
All the more respect to you, Jevinigh for doing so. It's always very hard for me to argue sides I don't 100% agree with.

I hope you've had as much fun with this as I have.
Posted by Jevinigh 2 years ago
Jevinigh
I am half and half on Projectionist trade barriers. Global competition is important but too little over sight definitely leaves the door open to exploitation. Certain trade barriers exist to protect us some exist to protect the world from us.

Though I am arguing from a free market stand, I am really a Technocrat, so my actual stances on economics are far from what I am posting in the debate.
Posted by americafirst 2 years ago
americafirst
Free market capitalism benefits capital. It also creates equilibrium in the global force. For example : the removal of tariffs placed US labor in direct competition with 3 billion subsistence factory workers.
Posted by Baconzd 2 years ago
Baconzd
I'm adding this to my favorite debates i am very interested by this topic and both have good arguments so far.
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