I'VE BEEN THINKING ABOUT the economic crisis, and about what the various ultimate causes might be.
One thing that seems clear is that much of the problem was caused, one way or another by extremely large corporations.
There's a whole variety of ways this happened:
- They were so large they couldn't be allowed to fail, and they knew it, so they stopped worrying about failure—the government would just have to bail them out. This attitude led to greater risk-taking than a smaller corporation would have dared.
- They were so large that they could influence government policy. They spent the last eight years convincing our representatives to remove every regulation in sight—every barrier to risky or dishonest or simply stupid and counterproductive behavior.
- They were so large that they spent a great deal of time and effort getting larger, not by improving their products or efficiency, but by absorbing other, smaller, companies.
- They were so large that they could dictate terms to their customers. They operated without any real or effective competition.
Enormous corporations are a danger, to our democracy, to our economy, and to the whole idea of a free market. A market is not free when the majority of the wealth is held by a handful of organizations.
These behemoths create few of the jobs in this country, compared to small business, and monopolize much of the wealth and power.
So, here's an idea which might provide the government with some short-term cash-flow to pay for the stimulus package, decrease the amount of regulation required to keep corporations in line, improve the functioning of the free market, and protect us from these giants that threaten to take over our economy.
I propose a graduated corporate asset tax. We should simply tax corporations on how much they own, and make the tax progressive, like the income tax we all pay every April. The larger the corporation, the higher the tax rate.
Although this would certainly raise quite a bit of money in the short term, that's not really the purpose I have in mind. The real purpose has to do with a problem that even conservatives—perhaps especially conservatives—will understand.
These enormous corporations simply have too much power. We could try to control that power through greater and greater regulation, but, as much as I respect the need for government regulation where necessary, it's likely that there is a limit to how much it can do.
Government could enact something like the anti-trust laws, and force these giants to break up into smaller companies, but chances are that divisions mandated by a court would not be the best divisions for the companies, their customers, or their stockholders.
So the idea of a tax, which, by taxing enormous companies at a much higher rate than smaller companies, and small businesses not at all, would give the largest corporations an incentive to break up into smaller, less-taxed, companies. They would do this on their own schedule, and in whatever way suited them and their share-holders, and they woul probably do a better job than a judge.
And, of course, smaller companies would have an incentive not to get bigger just for the sake of getting bigger.
The result would be more, smaller, and faster companies, all in competition, which would make the market do a better job.
If the American auto industry consisted of twenty or thirty or a hundred small auto companies, all competing with each other for consumer interest, don't you think we'd have smaller, cheaper, greener, and better cars?
If the banking industry consisted of small banks, all competing to survive and serve the consumer, do you think they'd have been able to pressure congress to allow the creation of derivatives, so they could make loans they never expected to be repaid?
And if some of those smaller companies did make horrendous mistakes, they wouldn't be too small to fail. We could let the free market weed them out, and the rest of the small companies in each industry could just pick up the load.
Some regulation is necessary, but wouldn't it be smart to arrange things so that we needed as little regulation as possible?
At least, that's what I think today.
