May 16 2006
Community and Corporations
About a year ago I was reading a blog post at Dry Creek Chronicles and had a conversation with two friends about why I don’t shop at Wal-Mart anymore.
I explained to my friends that it’s about community. When I shop at Walmart, I am not encouraging the local economy. My products are made in China or shipped in from Chile, and the employees that are serving me are making minimum wage (if I get served at allâ€â€you can get in and out of many stores now without having to interact with a person with the “self-checkâ€? lanes). Very little help to the local economy.
I contrasted that with my own vision of how a local economy used to work (as I understand it) and how it could work again. I would like to open a restaurant when my boys get older. A restaurant is one of those businesses that depend upon local business. People rarely drive 100 miles to come to your restaurantâ€â€no matter how good the food is. If I go into the local hardware store where I’m waited on by the owner or one of his workers that gets paid well above minimum wage, I am investing in my restaurant. These guys now have more money than that Wal-Mart employee to spend, and more incentive to spend it locally (because they survive the same wayâ€â€from local business). If they choose to buy their groceries from the last independent grocer in town instead of the big chain, they continue the chain of dollars and interdependence that makes for a community.
If all of these workers decide to “save money� by shopping at Wal-Mart they may someday find that Wal-Mart and those companies like it are the only employers left in their city.
There are other reasons I don’t shop at Wal-Mart, but they are not germane to the topic today.
The blog at DCC, however dealt with the other side of this. We have very few self-owned businesses left in our nation. What we have is joint stock corporations, predominately made up of passive investors. Saenz traces the history (in brief) of this development and ends up being unsure of what he should think of it. He references two books, Ideas Have Consequences by Richard Weaver and The Company: A Short History of a Revolutionary Idea.
I don’t want to repeat the content of Rick’s post here, but I wanted to add something to it. The key to the joint stock corporation is the limited liability of the investor. The investor doesn’t have control over the corporation and so his liability is limited to his investment. Meaning if the corporation commits a great crime due to negligence of the managers or whatever his other personal assets cannot be touched.
I am convinced that this is unethical. At present, I can form a Limited Liability Corporation (LLC) that only is me, or a few investors who do have control over the corporation. That means if I open a restaurant as a LLC and then food poison several hundred people in a given night all I can lose is the restaurant. None of my own assets can be touched, no matter whether that is just or not. The litigiousness of our society notwithstandingâ€â€I find that to be over the top. I do something wrong and the person to whom I did it wrong has little to no recourse against me, the person who did something wrong. That’s because it’s not actually the person me who “did the wrongâ€? but the corporation me who “did the wrong.â€? And the “corporation meâ€? has a special get out of jail free card from the government called LLC. I file chapter 7 and I go home and my house and savings are untouched by my negligence.
This too, works against community. If I am not responsible for the consequences of my actions then my incentives to run my restaurant well are diminished. The system also favors heavily the giant corporate structure of the fast-non-food restaurants rather than the local guy who is running the restaurant in order to feed his family and to serve his community.
Businesses should exist, not merely to make profit, but to serve. And when one provides a legitimate service that people need and are blessed by then making a profit comes easily.
As Christians we need to reconsider this recent innovation called the corporation. And as we strive to form communities we need to think about how to depend upon one another rather than big corporations whose self-interest is not tied to the local community.
“The trust of a city street is formed over time from many, many little public sidewalk contacts. It grows out of people stopping by at the bar for a beer, getting advice from the grocer and giving advice to the newsstand man, comparing opinions with other customers at the bakery and nodding hello to the two boys drinking pop on the stoop… hearing about a job from the hardware man and borrowing a dollar from the druggist…
“Most of it is ostensibly utterly trivial but the sum is not trivial at all. The sum of such casual, public contact at a local levelâ€â€most of it fortuitous, most of it associated with errands, all of it metered by the person concerned and not thrust upon him by anyoneâ€â€is a feeling for the public identity of people, a web of public respect and trust, and a resource in time of personal or neighborhood need.”
Jane Jacobs
Fantastic quote, Chad! Exactly the kind of philosphy we’re looking for in the city.
Of course we’ll need some farmers to come sell us their wares. :0)
James, Chad,
To play the devile’s advocate, so to speak:
You say that you want to encourage local, small businesses, but then you also say you want to take away their protection. As we all know, it’s about risk. Do you really think that more people will start small businesses if they know that they could lose everything in an instant? Take your example of the restaurant, who would ever open one if your scenario was true? Why take the chance and liability of losing your house and assets when you could just go work for Wal-Mart?
Don’t bankruptcy laws and the like do more to encourage small business? I may be more likely to start a local business if I know that I can declare bankruptcy. Doesn’t the OT principle of the sabbath year debt forgiveness have something to do with this?
Christo:
There is certainly something to say about the jubilee, debt, and the seven year cycle in the OT when putting together a systematic theology of economics.
Your example, though, doesn’t sound attractive to me. I’d much rather put my assets at risk than work as a slave for Wal-Mart. Plus, if you take away the LLC protection for the local businessman you take it away for the mega-corp which actually levels the playing field for the first time since the LLC came about.
I don’t have life insurance. If I don’t wake up tomorrow morning my wife is in a pickle. That is unless somebody (or some somebodies) from the body of Christ come and take care of her and my five, soon to be six, children. We have made a deliberate decision NOT to buy life insurance. Does it put us at risk? I suppose by some definitions it does. But our trust is not in our ability to cover the bases but in Him who covers all bases.
Chad may have more thoughts if he sees this.
Oh, and if you open up a restaurant without debt (which I plan to do) why go bankrupt? My wife and I can go back to renting if we have to (if there happens to be a suit–but I would hope that the local nature of the business would keep people from suing instead of solving problems personally but that’s another matter) and if the business just fails all I lost is what I put in it–there’s no debt hanging over me.
There is a great documentary out called Independent America, the journey of two journalists to discover the state of “Mom and Pop†businesses in America and the fight to keep localization as an alternative to the corporate blandness represented by Wal-Mart.