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Save Our Corporations from the Crash -- Senna, Smith, Marx and Rules

By       Message Larry Butler       (Page 1 of 1 pages)     Permalink

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Ayrton Senna Headstone
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On May 1, 1994, Ayrton Senna died in a horrific crash during the San Marino Gran Prix -- a racing incident with nobody to blame. In that year, Formula One racing consisted of fourteen teams, and none of the team owners or managers wished harm upon their drivers. But competition, mixed with technology, can be a deadly combination. Speed drove the teams' development efforts, and safety was a secondary consideration. They couldn't help themselves. Teams knew that diverting resources to safety would render them uncompetitive; they were trapped in a deadly quest for speed. To save the lives of their drivers, they needed outside help.

That help came in the form of increased regulation by FiA, the governing body of Formula One racing. F1 Supremo Bernie Ecclestone sought advice from teams, drivers, engineers, and Dr. Sid Watkins. Within a season, new rules governing fuel containment, driver protection, crashworthiness, track design, and medical evacuation plans were implemented. Today, the quest for speed goes on within a finite structure of safety regulation. Although spectacular crashes still occur at a pulse-quickening rate, the last fatality of F1 remains to this day that of Ayrton Senna in 1994. Who is better off for this regulation? Drivers, of course, as well as the teams and the sport as a whole.

Today's corporate environment is no less competitive than F1 racing. Technology has sharpened competition by arming it with rapid product cycles, access to global financial markets, unprecedented demographic marketing information, and decision modeling capabilities that demand quick and decisive implementation of strategies -- no matter what the cost to society, markets, or the environment. Each corporate contender must use all of the competitive resources available to it, or risk losing out to those which do and paying the ultimate price of business failure. Corporations, like F1 teams, can't help themselves -- they are trapped in a deadly quest for survival and profits. And to save society, the environment, and themselves, they need outside help.

Adam Smith imagined an invisible hand of market demand that could temper the voracious appetites of suppliers; perhaps he did not appreciate the degree to which supplier power could be concentrated. Karl Marx predicted that private capital -- corporate wealth today -- would become so dominant that it would burn itself out in a revolutionary conflagration; perhaps he did not appreciate the regulatory potential of a powerful democracy.

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Concentrated capital is its own worst enemy, and that of its host society. In order to fortify Smith's invisible hand, and to avoid Marx's revolution, permanent and consistent regulation is required. Markets that are free from monopoly, oligarchy, and extreme concentration are good for society, the environment, and even business enterprise. Free markets require rules that prevent unsafe competitive practices such as deceptive advertising, marketing hazardous products, pumping emissions into the air and water, exploitative labor practices, predatory pricing policies, colluding with competitors, forming trusts to restrain trade -- and perhaps the most damaging practice of all: tainting the legislative, regulatory, and enforcement processes with the coercion of unmatched volumes of money and power.

Individual corporations and industries fear the regulatory potential of a powerful democracy. Compliance can be expensive, and always restricts the strategic options available. So regulation will always be vigorously resisted -- corporations just can't help themselves. Like each F1 team, each corporation and industry must compete with every weapon at its disposal, and will consider any restriction to be a threat to its very survival. Consequently, industry has a history of rigging the structure of public policy to its advantage. This is reflected in a tax code that subsidizes capital, cutbacks in any government spending that threatens to raise corporate taxes, banking regulation rollbacks, and today's attempts to defund regulatory agencies like the EPA and FTC. And yet, the regulatory potential of a powerful democracy may be the only thing that stands between corporations and their own destruction.

If we are to save American industry from itself, we must first reclaim our democracy for the people. Start with a constitutional amendment, if necessary, to rectify the damage done by Citizens United and McCutcheon. Then reform federal elections with carefully-allocated public funding. Then, and only then, we can pursue real reform to create a level competitive playing field within the economy. This will require fundamental tax reform and careful regulation of business and industry. And don't count on getting any help from corporations, because they are too immersed in looking after their own short-term interests; they just can't help themselves.

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Years ago I made a decision to commit to a life of business management. After thirty five years as a small business consultant, CFO, and university educator specializing in quantitative business and economic modeling, everything changed. A (more...)

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