Many thanks for your kind feedback. I thought your review and deconstruction of the issues were excellent and I concur with many points that you make. I have updated the Google Doc version of the manuscript that I believe you also kindly commented on. I might update this post to reflect this if I choose to do another version of this post.
Please see my inline response below.
>>It is definitely true that there are incentives for firms to grow up the their efficient size. However, equally there are incentives not to grow further
You are absolutely right that I ignored mentioning that there are indeed some incentives for corporations not to grow further. However, overall, I think on net incentives to grow are slightly stronger than to stay at the current size, as evidenced by growth in corporate size.
>> one of your proposed policies would actually increase corporate revenue as a % of GDP.
I’m really sorry for being unclear: I did not actually propose breaking up corporations, because I do not think it’s politically tractable. I merely mention it because people will probably think about this.
>>Revenues of the Fortune 500 increased from 58% to 73% of US GDP
>>This is very misleading.
>>People more commonly look at S&P profits as a % of GDP, which is better, but still not great. You mention as an aside that this is partly due to international revenues, but without noting how this undermines the point. Over the last few decades we have seen considerable globalisation, as US companies have expanded into overseas markets, so this ratio would have increased even if the compositition of the domestic US economy remained totally unchanged.
I’m sorry I was being unclear here — the point here is not the size of states relative to their domestic firms, but the size of the largest corporations (proxied by the Fortune, even though Fortune Global would be better) and the largest state actors (the US).
Why compare corporate revenue to state tax revenue?
>> There is no actual justification for assuming that a company with revenues of $100bn is more powerful than a state with taxes of $90bn.
I agree that the authors of that paper could have provided more reasoning on the measure and source they cite (you there original source is here). I absolutely agree that better measures of corporate power are conceivable — however I only found this one dataset.
However, I feel like there’s something to be said for using revenues instead of profits. As I write, the revenue is the budget a corporation has to fulfill its goal (often to sell things), which I had defined as being roughly proportional to its power. Profits usually benefit shareholders and not the corporate entity itself. There are corporations might have high profits but that are somewhat small and can’t use much revenues to fulfil its objectives.
You also outline some very telling differences between Australia and Walmart that I absolutely agree with. However, there might be more similarities between corporations and states that it might at first superficially appear. For instance, yes states ‘can imprison people’, yet, corporations can decide on supply chains and effectively keep many people in modern slavery.
>>This article, however, rather than interrogating the claim that corporate revenues can be directly compared to state taxes, instead accepts it completely.
I did mention that “corporate revenue is a crude, but useful proxies for their power (despite corporations and states spending on different things).” My thinking here was “All models are wrong, but some are useful.”
In the space of a few short paragraphs we move from proposing it as an interesting idea to accepting it as the basis for claims like:
71 out of the 100 most powerful actors are corporations
Sorry I did postulate that I use revenue as a proxy for power, but have changed this (will be reflected in a future version of this doc). I did optimize for brevity while writing and so I agree that the reasoning can move quite fast, and a future version could benefit from much more hedging.
“Shell’s revenue/budget to sell fossil fuels is $272bn”
Where does this number come from? I checked their 2018 numbers on bloomberg and got revenue of $388bn.
I’m sorry I should have cited this more clearly—this is from the paper I cite, which is based on the Fortune Global 2017.
More importantly, revenue is not at all the same thing as ‘budget to sell fossil fuels’. That would be part of SG&A, which is obviously much smaller—around $11bn. Instead, most of their revenue is spent buying physical inputs for e.g. their refining business.
That’s an excellent point—fixed costs for buying physical inputs can significantly curtail corporate power. I agree that ‘budget to sell fossil fuels’ was poorly worded. What I meant by that is the budget available to get fossil fuels to the consumer (which includes extraction of fossil fuels etc.).
According to OpenSecrets, the largest US corporate spender on lobbying in 2018 was Alphabet (Google), spending just under $23m. It is technically true that their budget could increase to over a billion; however, this would require a >33,000% increase.
Yes, I do cite numbers on lobbying expenditures, and agree that they are not as big yet. My point was merely that in theory there is a potential for large increases. In fact, corporations might spend significantly more—as your source suggests: https://www.opensecrets.org/dark-money
If states are weakened by entitlement spending, it is because they choose to do so.
In staunchly democratic states where many people receive entitlements, political realities being what they are, it is difficult, but agreed, not impossible, for states to cut spending.
smaller pieces would only reduce externalities if those externalities were super-linear in corporate size. This doesn’t seem to be the case however—if you split up corporation with two factories, you still have two companies with one factory each, producing just as much pollution in total.
I do agree that in some cases externalities might not increase with corporate size. However, because bigger corporations have bigger economies of scale, and one big corporation is often better at increasing consumer surplus and growth, they should also be ‘better’ at explointing profits from untaxed externalities. My intuitions here might be bias me though because I have never understand why anyone would want to fight 1 horse sized duck, effectively a dinosaur, as opposed to 100 tiny duck sized horses.
The article might also have benefited from discussion of the track records of non-capitalist systems,
My agenda was probably a bit simpler than you might have supposed – I just wanted to highlight that there might be something about corporate power that needs altruists attention.
I wholeheartedly agree that non-capitalist system are strictly worse than capitalist ones and have cited evidence that corporations do a huge amount of good in the world.
Although my agenda was fairly simple, the issues raised may well require more serious consideration – of the sort that you have offered.
You might be surprised to hear that I consider my own political leanings very free market.
I’m not denying that reducing ill-effects from socialist systems (see Venezuela) still deserve a lot of attention.
However, I think it’s a false dichotomy that we cannot worry about the ill effects that socialism can have while at the same time seriously considering whether corporations can have increasingly ill effects as well and perhaps deserve more regulation/attention.
It is not possible to reduce corporate power in a vacuum—the proposed solutions largely instead transfer it to governments.
My policy solutions come in different flavors. True, the sovereign wealth fund idea would be more statist, but with minimal government interference in the market. Tax incentives for private individuals would be a more market-y solution, even though that too is technically state interference.
Entities which in the past have repeatedly brought mankind to the brink of nuclear war—an externality far greater than that of any mere corporation.
I agree that states have historically created more risks (such as nuclear war), however, I myself was quite surprised by the evidence of corporate influence when it comes to nuclear war. In particular, the dilution of the Biological Weapons Convention protocol by the bio industry. I would want altruists to look into this more.
I wholeheartedly agree that non-capitalist system are strictly worse than capitalist ones and have cited evidence that corporations do a huge amount of good in the world.
I’m not denying that reducing ill-effects from socialist systems (see Venezuela) still deserve a lot of attention.
Let me start by agreeing that the people of Venezuela are in deep distress, and ill served by the ruling government.
I am not a fan of -isms and labels. Is public education socialist? how about public universal healthcare (like in Europe or Japan)? North Korea calls itself DPRK (Democratic.. Republic) I laugh at it and don’t take it seriously, why should we take it seriously when Venezuela claims that it is socialist? Anyway what do broad terms like socialism and capitalism mean? When did USA become capitalist? How about Britain? India? China? South Africa? Guatemala?
Socialist/communist/capitalist institutions are steeply hierarchical and with few exceptions have male leaders, likewise kingdoms before that were male led and steeply hierarchical. I see more similarities between the various -isms than differences.
I think the world we see today is an effect of industrialization, and the political systems today are reflections of that, on an evolutionary substrate of human behavior that is atleast a million years in the making.
==== added later ====
sigh the questions are serious ones, if downvoting please tell me why either via private message or as a reply
I downvoted the post because I didn’t learn anything from it that would be relevant to a discussion of C-GCRs (it’s possible I missed something). I agree that the questions are serious ones, and I’d be interested to see a top level post that explored them in more detail. I can’t speak for anyone else on this, and I admit I downvote things quite liberally.
Many thanks for your kind feedback. I thought your review and deconstruction of the issues were excellent and I concur with many points that you make. I have updated the Google Doc version of the manuscript that I believe you also kindly commented on. I might update this post to reflect this if I choose to do another version of this post.
Please see my inline response below.
You are absolutely right that I ignored mentioning that there are indeed some incentives for corporations not to grow further. However, overall, I think on net incentives to grow are slightly stronger than to stay at the current size, as evidenced by growth in corporate size.
I’m really sorry for being unclear: I did not actually propose breaking up corporations, because I do not think it’s politically tractable. I merely mention it because people will probably think about this.
I’m sorry I was being unclear here — the point here is not the size of states relative to their domestic firms, but the size of the largest corporations (proxied by the Fortune, even though Fortune Global would be better) and the largest state actors (the US).
I agree that the authors of that paper could have provided more reasoning on the measure and source they cite (you there original source is here). I absolutely agree that better measures of corporate power are conceivable — however I only found this one dataset.
However, I feel like there’s something to be said for using revenues instead of profits. As I write, the revenue is the budget a corporation has to fulfill its goal (often to sell things), which I had defined as being roughly proportional to its power. Profits usually benefit shareholders and not the corporate entity itself. There are corporations might have high profits but that are somewhat small and can’t use much revenues to fulfil its objectives.
You also outline some very telling differences between Australia and Walmart that I absolutely agree with. However, there might be more similarities between corporations and states that it might at first superficially appear. For instance, yes states ‘can imprison people’, yet, corporations can decide on supply chains and effectively keep many people in modern slavery.
I did mention that “corporate revenue is a crude, but useful proxies for their power (despite corporations and states spending on different things).” My thinking here was “All models are wrong, but some are useful.”
Sorry I did postulate that I use revenue as a proxy for power, but have changed this (will be reflected in a future version of this doc). I did optimize for brevity while writing and so I agree that the reasoning can move quite fast, and a future version could benefit from much more hedging.
I’m sorry I should have cited this more clearly—this is from the paper I cite, which is based on the Fortune Global 2017.
That’s an excellent point—fixed costs for buying physical inputs can significantly curtail corporate power. I agree that ‘budget to sell fossil fuels’ was poorly worded. What I meant by that is the budget available to get fossil fuels to the consumer (which includes extraction of fossil fuels etc.).
Yes, I do cite numbers on lobbying expenditures, and agree that they are not as big yet. My point was merely that in theory there is a potential for large increases. In fact, corporations might spend significantly more—as your source suggests: https://www.opensecrets.org/dark-money
In staunchly democratic states where many people receive entitlements, political realities being what they are, it is difficult, but agreed, not impossible, for states to cut spending.
I do agree that in some cases externalities might not increase with corporate size. However, because bigger corporations have bigger economies of scale, and one big corporation is often better at increasing consumer surplus and growth, they should also be ‘better’ at explointing profits from untaxed externalities. My intuitions here might be bias me though because I have never understand why anyone would want to fight 1 horse sized duck, effectively a dinosaur, as opposed to 100 tiny duck sized horses.
My agenda was probably a bit simpler than you might have supposed – I just wanted to highlight that there might be something about corporate power that needs altruists attention.
I wholeheartedly agree that non-capitalist system are strictly worse than capitalist ones and have cited evidence that corporations do a huge amount of good in the world.
Although my agenda was fairly simple, the issues raised may well require more serious consideration – of the sort that you have offered.
You might be surprised to hear that I consider my own political leanings very free market.
I’m not denying that reducing ill-effects from socialist systems (see Venezuela) still deserve a lot of attention.
However, I think it’s a false dichotomy that we cannot worry about the ill effects that socialism can have while at the same time seriously considering whether corporations can have increasingly ill effects as well and perhaps deserve more regulation/attention.
My policy solutions come in different flavors. True, the sovereign wealth fund idea would be more statist, but with minimal government interference in the market. Tax incentives for private individuals would be a more market-y solution, even though that too is technically state interference.
I agree that states have historically created more risks (such as nuclear war), however, I myself was quite surprised by the evidence of corporate influence when it comes to nuclear war. In particular, the dilution of the Biological Weapons Convention protocol by the bio industry. I would want altruists to look into this more.
Let me start by agreeing that the people of Venezuela are in deep distress, and ill served by the ruling government.
I am not a fan of -isms and labels. Is public education socialist? how about public universal healthcare (like in Europe or Japan)? North Korea calls itself DPRK (Democratic.. Republic) I laugh at it and don’t take it seriously, why should we take it seriously when Venezuela claims that it is socialist? Anyway what do broad terms like socialism and capitalism mean? When did USA become capitalist? How about Britain? India? China? South Africa? Guatemala? Socialist/communist/capitalist institutions are steeply hierarchical and with few exceptions have male leaders, likewise kingdoms before that were male led and steeply hierarchical. I see more similarities between the various -isms than differences.
I think the world we see today is an effect of industrialization, and the political systems today are reflections of that, on an evolutionary substrate of human behavior that is atleast a million years in the making.
==== added later ====
sigh the questions are serious ones, if downvoting please tell me why either via private message or as a reply
Thanks
I downvoted the post because I didn’t learn anything from it that would be relevant to a discussion of C-GCRs (it’s possible I missed something). I agree that the questions are serious ones, and I’d be interested to see a top level post that explored them in more detail. I can’t speak for anyone else on this, and I admit I downvote things quite liberally.