The corporation as a legal person, the stock market, and other things Occupy Wall Street protesters don't like

While it is impossible to state exactly what everyone associated with the "Occupy" movement is for or against, some general themes are emerging, some of which are captured in the above video. Some of the things that emerge in that video include:
  • against: the concentration of wealth among "the 1%" of rich persons and corporations.
  • against: the concept that a corporation can be a legal "person."
  • for: the idea that "corporations" and "the rich" need to "pay forward" by giving "a hunk" of their profits to "the next kid," since "nobody gets rich on their own" but brings their goods to market on streets that "the rest of us paid for" and employs employees who were educated in schools that "the rest of us paid for" as well.
Economist and Professor Emeritus of Economics at Pepperdine University George Reisman recently wrote an extensive discussion which deals with all three of these (especially the first one), entitled "In Praise of the Capitalist 1 Percent." In it, he points out that even if you accept the existence of a 1% / 99% split in the US for the sake of argument, the protesters are failing to realize that "the wealth of the 1 percent provides the standard of living of the 99 percent" (his italics).

By way of explanation, he points out that "in the modern world in which we actually live, the wealth of the capitalists is simply not in the form of consumers' goods to any great extent" but rather the wealth of the capitalists is "overwhelmingly in the form of means of production" and that "those means of production are employed in the production of goods and services" that are sold to voluntary buyers in the market.

He points out that everyone in a capitalist economy benefits from the vast concentrations of wealth that are required to buy the enormous tanker ships that bring oil to those who need to put it into their cars (after it is refined in refineries that also require huge capital investments to build and maintain), or the vast concentrations of wealth that are required to build the massive plants that are required to build those cars, or the vast concentrations of wealth that are required to create the ever-smaller and ever-more-powerful microchips that power their ever-less-expensive mobile connected devices.

In fact, since everyone depends on food and clothing that is delivered by these same trucks powered by this same fuel, it is quite accurate to say, as Professor Reisman does, that "the protesters and all other haters of capitalism hate the foundations of their own existence." Even the corporations that make products that compete with the products that individuals actually buy are helping them, by driving down the prices of the goods that they do end up buying.

One of the biggest reasons for the legal status of corporations as they exist in the US today is to limit liability for entrepreneurs and innovators and others who would otherwise not risk the loss of all their personal property. It is essential to create a tool whereby the legal personal property of a person engaged in business can be separated from the legal property held by the corporation. Without the legal ability to separate that, few if any innovators would risk the losses that often occur when starting a new business.

Without the concept of the corporation, access to capital would be severely limited, and the ability to bring together the resources needed to turn inventions like iPhones or iPads into reality would be severely limited. Professor Reisman explains why the ability to sell shares of corporations in a stock market is critical to this ability in his book Capitalism (available in its entirety on-line). Anticipating by several years the anti-Wall Street tone of the current protesters, he writes:
A widespread misconception is that the stock market is divorced from genuine productive activity [. . .]. It should be realized that the ability to sell their shares provides a major inducement to the purchase of those shares in the first place. If it were not for the existence of the stock market and its continuous trading in already issued stock, any purchaser of newly issued stock would be faced with the prospect of not being able to sell his stock, or of being able to so only with great difficulty. Such a prospect would greatly discourage the initial purchase of stock from the issuing corporations and would greatly reduce the availability of capital to those corporations. 466.
The protesters are thus shown to be squarely against aspects of modern economic life that are extremely beneficial to their own lifestyle -- and in fact to their very survival. It can be argued that governments can also accumulate capital in sufficient quantities to build automotive plants or oil tankers, although after the dismal record of the twentieth century experiment with that alternative, few sane people would recommend it. However, the last bullet point listed above shows that the protesters are indeed "for" the idea of requiring those with wealth (wealthy individuals and wealthy corporations) to "give back" a chunk (after all, as Elizabeth Warren says starting at about 3:30 in the above video, they used the roads "the rest of us paid for" when they were making that money).

Setting aside the fact that if it is true that "the rest of us paid for" those roads and schools, it is also true that the corporations who used those roads also paid for them out of their fairly substantial corporate taxes, the whole idea that the government needs to get involved in forcing certain people or businesses to give up some additional "hunk" to "pay forward for the next kid who comes along" may sound nice in principle but actually leads to all kinds of tyranny in practice. Once widespread redistribution (beyond what is needed to take care of the neediest members of society who might otherwise die without food, clothing or shelter) becomes the accepted role of government, all kinds of evils ensue. Just look at those countries where such a situation prevails, and you will find that people and companies spend their energy figuring out how to get those government (or UN) handouts rather than in coming up with the innovations and production that create growth and new wealth.

While it is not possible to make a blanket statement about the largely amorphous "Occupy" protests as they have developed so far, it is safe to say that the general tenor of many of the positions they are against as well as some of the things that they are for, reveal that many of their ideas would be extremely harmful to everyone if implemented, including to themselves.

Although we are not members of "Wall Street," we feel it is important that investors understand the benefits of the legal concept of the corporation, and the stock market and bond market and other institutions that enable those corporations to assemble the capital they use to bring those goods and services to market on which everyone in society relies.

There are certainly areas where the system in the US could be improved -- most notably in those areas where the government's willingness to benefit one group over another, whether on Wall Street or on Main Street, has created obstacles to innovation, entrepreneurship, and the ability of individuals to improve their situation through the very structures of capitalism that the protesters are mistakenly attacking -- but the institutions that are being attacked in the video above are institutions that actually protect and benefit the 100%, not just the 1%.