What does it mean when corporations are as economically powerful as governments?

In 2016, a non-governmental organization by the name of Global Justice Now, based out of the UK, produced a report listing the largest governments and corporations by revenue. Their report stated that the “10 biggest corporations make more money than most countries in the world combined and that 69 of top 100 economic entities are corporations not countries.” The complete listing of governments and corporations is here.

An article in the Journal of Economic Perspectives by Luigi Zingales of the University of Chicago provides the following commentary about corporations that rival the size of governments:

In some cases, these large corporations had private security forces that rivaled the best secret services, public relations offices that dwarfed a US presidential campaign headquarters, more lawyers than the US Justice Department, and enough money to capture (through campaign donations, lobbying, and even explicit bribes) a majority of the elected representatives. The only powers these large corporations missed were the power to wage war and the legal power of detaining people, although their political influence was sufficiently large that many would argue that, at least in certain settings, large corporations can exercise those powers by proxy.

The 2015 list produced by Global Justice Now consisted of 26 governments and 24 corporations in the top 50. Walmart was number 10, ahead of Spain, Australia and the Netherlands. I’ve updated the list for 2016 (see below). Walmart is now number 9 on the list, and there are 26 corporations in the top 50 in terms of revenue.

What does it mean when corporations are as large and economically powerful as governments? Is this a good thing? Governments can coerce people, while companies grow by persuading people to buy their products, unless businesses use their economic power and resulting political influence to suppress competition—a common practice in both the developed and developing world. But are governments a more effective and appropriate steward over the vast wealth they control than corporations? Politicians and government bureaucrats are not likely more altruistic or caring of people than business executives and managers. (This reminds me of an excellent interchange between the late Milton Friedman, a Nobel Prize winning economist and academic at the University of Chicago, and talk show host Phil Donahue about the relative greed of people in business and government, here). Perhaps the more important question is whether appropriate checks and balances remain between business and government when businesses rival the size and economic power of governments. I don’t know. I’m just asking questions.

Here is the ranking of governments and corporations by revenue in 2016. Data on government revenue (not GDP) from the CIA World Factbook for 2016 and on business revenue from the Fortune Global 500 list.

Rank Type Name Revenue, $billion
1 Government United States 3,363.0
2 Government China 2,300.0
3 Government Japan 1,696.0
4 Government Germany 1,523.0
5 Government France 1,308.0
6 Government United Kingdom 996.3
7 Government Italy 842.5
8 Government Canada 594.7
9 Corporation Walmart (US) 485.9
10 Government Spain 461.3
11 Government Australia 420.5
12 Government Netherlands 340.8
13 Corporation State Grid (China) 315.2
14 Government Brazil 311.9
15 Government South Korea 297.3
16 Government India 273.3
17 Corporation Sinopec Group (China) 267.5
18 Corporation China National Petroleum (China) 262.6
19 Corporation Toyota (Japan) 254.7
20 Government Sweden 248.3
21 Corporation Volkswagen Group (Germany) 240.3
22 Corporation Royal Dutch Shell (Netherlands) 240.0
23 Government Belgium 232.3
24 Government Mexico 224.3
25 Corporation Berkshire Hathaway (US) 223.6
26 Government Switzerland 215.9
27 Corporation Apple (US) 215.6
28 Corporation Exxon Mobil (US) 205.0
29 Government Norway 199.8
30 Corporation McKesson (US) 198.5
31 Government Austria 187.3
32 Corporation BP (UK) 186.6
33 Government Russia 186.5
34 Corporation United Health (US) 184.8
35 Corporation CVS Health (US) 177.5
36 Corporation Samsung Electronics (South Korea) 174.0
37 Corporation Glencore (Switzerland) 173.9
38 Corporation Daimler (Germany) 169.5
39 Corporation General Motors (US) 166.4
40 Corporation AT&T (US) 163.8
41 Government Denmark 156.9
42 Corporation Exor (Italy) 154.9
43 Corporation Ford Motor (US) 151.8
44 Government Saudi Arabia 149.7
45 Corporation Industrial & Commercial Bank of China (China) 147.7
46 Government Turkey 146.4
47 Corporation AXA (France) 143.7
48 Corporation Amazon (US) 136.0
49 Corporation Foxconn (Taiwan) 135.1
50 Corporation China Construction Bank (China) 135.0
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When should we erect statues of prominent public figures?

The violence in Charlottesville, Virginia, centers on a proposal by the city council to remove a statue of Robert E. Lee, the leading general of the Confederate Army during the U.S. Civil War. One of many news articles about the statue and the controversy over its removal is here. Some groups approve of the plan to remove the statue. Some groups oppose the plan to remove the statue. Some group oppose the groups approving or opposing the plan. It’s a real mess.

Rpbert E Lee statue

But the situation in Charlottesville is not just messy and ugly. It is also complicated by persistent and unresolved problems of racial prejudice and discrimination that exist in the country. Therefore, it is not surprising that the question of the statue removal has resulted in arguments fueled more by emotion than by reason.

I don’t pretend to have an answer to these problems. But I would like to revisit the plan to remove the Confederate general’s statue. Is removing the statue the right thing to do? The answer to this question depends on understanding why we erect statues of prominent public figures and when it is necessary to remove them.

I can think of two reasons why we erect statues of or monuments to public figures. One is to honor the person and the other is to honor the cause supported by them. For instance, placing the faces of George Washington, Thomas Jefferson, Abraham Lincoln and Theodore Roosevelt at Mount Rushmore would be appropriate because by most standards these men were honorable and the causes they promoted were as well. In saying this we need not approve of all aspects of their lives. But if we can respect persons and want to acknowledge and remember the causes they advanced, then a statue or monument would be appropriate.

What would we say about a statue of Adolf Hitler in Berlin? Well, if we erect statues to honor the person and their cause, then a statue of Hitler would fail on both counts. No reasonable person can argue that Hitler was a good person and that the causes he advanced were honorable. If we want to ensure that we don’t forget our history, then museums, well-written history books, etc, can accomplish this without the need for a statue.

But what if a person was good and honorable but the cause they advanced was not desirable? Of course, we can consider the other possibility, too. What about a statue to someone who was neither good nor honorable but who supported, promoted or advanced a worthy cause? Would we erect a statue to this person? I’m supposing that we would not. So if we won’t erect a statue for someone who is not honorable but who advanced a worthy cause, is it appropriate to erect or maintain a statue for someone who is honorable but who advanced an undesirable cause? I think this question points to why the issue of the removal of Robert E. Lee’s statue is controversial. There may be things we want to acknowledge, remember and emulate about General Lee as a person, but is the cause he fought to uphold—a political and economic system based on slavery—one of them?

Regardless of how we feel about the statue of Robert E. Lee in Charlottesville, Virginia, we need to agree in principle on the conditions that warrant the creation and maintenance of statues of prominent public figures. Once we have decided on this we can determine whether it is appropriate or not to remove a statue. If statues should exist when these two conditions are met—for honorable persons whose works and ideals promoted socially-desirable outcomes—then the answer to question of what to do about the statue in Charlottesville becomes clearer.

If we can’t agree on general conditions or principles for erecting and maintaining statues of prominent figures in public spaces, then debates about the removal of some will degenerate into claims that all statues and monuments will eventually be removed, an outcome that is neither healthy nor desirable for society.

 

Colonel Chamberlain’s speech to Gettysburg mutineers

Our family has a tradition around the 4th of July. We watch the 1993 movie Gettysburg. The movie is based on Michael Shaara’s 1974 book, Killer Angels. The book is an excellent and well-researched account of the Gettysburg battle that combines historical detail with attention to understanding some of the key players. The movie covers the battle at Gettysburg on July 1-3, 1863, where more than 50,000 union and confederate troops lost their lives in battle.

We have this tradition not just because Gettysburg is a great movie (it is), but because it helps us remember the sacrifices so many people have made to make and preserve this great nation of ours, the United States of America. After watching the movie we often read the “Gettysburg Address,” the speech President Abraham Lincoln gave at the dedication of the Gettysburg field as a national park. He ends with the plea “that government of the people, by the people, for the people, shall not perish from the earth.”

We celebrate the 4th of July as Independence Day, the anniversary of the birth of our nation. But we also recognize July 4 as the anniversary after the day of the bloodiest battle on our land since the founding of our country. It was fought in defense of our nation and the principles it was founded upon. Good men died so that children could grow up and become even better men and women. It is important that we remember who we are and who and what came before us, and that we renew our desire to preserve this great nation of ours and make it and our world a better place.

One of the central characters in the movie is Colonel Joshua Lawrence Chamberlain, who commanded the 20th Maine, a part of the Union Army’s Fifth Corps. Early in the movie (about July 1, 1863), Colonel Chamberlain was given charge of a group of mutineers from another (disbanded) Maine regiment. One of the best scenes of the movie is Colonel Chamberlain’s comments to the mutineers. Because of it, most of the men took up arms and joined the 20th Maine, which proved pivotal in the upcoming battle at Gettysburg. This speech, as rendered in the movie, is a classic. Here it is.

This regiment was formed last summer in Maine. There were a thousand of us then. There are less than three hundred of us now. All of us volunteered to fight for the union, just as you did. Some came mainly because we were bored at home — thought this looked like it might be fun. Some came because we were ashamed not to. Many of us came because it was the right thing to do. And all of us have seen men die.

This is a different kind of army. If you look back through history, you will see men fighting for pay, for women, for some other kind of loot. They fight for land, power, because a king leads them or — or just because they like killing.

But we are here for something new. This has not happened much in the history of the world. We are an army out to set other men free. America should be free ground — all of it. Not divided by a line between slave state and free — all the way, from here to the Pacific Ocean. No man has to bow. No man born to royalty. Here, we judge you by what you do, not by who your father was. Here, you can be something. Here, is the place to build a home. But it’s not the land. There’s always more land. It’s the idea that we all have value — you and me. What we’re fighting for, in the end, we’re fighting for each other.

Sorry, I didn’t mean to preach. You, you go ahead. You talk for awhile. If you — If you choose to join us, you want your muskets back, you can have ’em. Nothing more will be said by anybody anywhere. If you choose not to join us, well you can come along under guard, and when this is all over I will do what I can to see you get a fair treatment. But for now, we’re moving out. Gentlemen, I think if we lose this fight, we lose the war. So if you choose to join us, I’ll be personally very grateful.

I wonder if it would help if our elected representatives in Washington watched this movie together.

Doing good makes you want to do more good

Can you learn to be kinder, more charitable and helpful? If so, then what can you do to increase such virtuous feelings and tendencies? A recent study published by economists (no kidding!) showed that there is a correlation between altruistic acts and increased preferences for doing altruistic acts. The study, “Altruistic Capital,” was published in the American Economic Review.

Most economists assume that preferences are fixed. That is, my preference for being kind or for wearing blue colored shirts or for eating chocolate will not change. In contrast, the authors assume that preferences for altruism can change. They liken altruism to a type of capital. Just as physical capital (machinery, buildings, etc) or human capital (learning, skills, etc) can be enhanced through investments in machinery or learning, altruistic capital can be enhanced through investments. What investments increase altruistic capital? Doing altruistic acts. In other words, doing good increases the desire for and perceived benefits from doing good.

The authors conducted a study of persons working in the banking industry and showed that “altruistic capital grows proportionally to the effort devoted to altruistic tasks,” consistent with Aristotle’s assertion that “virtue is an asset that grows through righteous acts” (quoting the authors). Specifically, the authors found that “employee’s perceived returns to altruistic acts … are [positively] associated with more prosocial behavior at work.” In other words, getting people to do good can create a “virtuous circle”, where doing good increases the perceived personal benefits of doing good, which in turn increases the desire for and tendency to engage in good acts, such as cooperation with others.

We need more good in the world. So do some good, and bring someone with you when you do.

The connection between strong families and secure property rights

While doing background reading for a research project I am conducting, I came across a book by Bertrand Russell entitled Marriage and Morals, which he published in 1929. The purpose of the book is to advocate a new way of thinking about marriage and sexual morality.

Russell is a too liberal for my liking, and he doesn’t hold a high opinion of religion. For example, he gives two objectives for the book. The first is “to eliminate the elements of superstition” or religion in defining what sexual morality ought to be. The second is “to take account of those entirely new factors which make the wisdom of past ages the folly instead of the wisdom of the present.” Here he refers to things like contraception and other “modern discoveries” that supposedly enhance the sexual freedom of people by removing the worry of creating an unwanted child or experiencing other concerns. At one point in the book Russell laments that people still have “fears” that are “irrational,” because of the “failure of psychological adaptation” to the new morality he advocates.

While I disagree with the overall message of the book, Russell makes a rather interesting observation about the importance of the family and the connection between family and secure property rights. In the first chapter, Russell states that one of the most important reasons that people engage in economic activity is to provide food and other benefits not merely for themselves but “for the sake of the family”. He then says that “as the family system changes, economic motives also change.” For example, without a family there is little motive for an adult to purchase life insurance. Moreover, “most forms of private saving would nearly cease if children were taken away from their parents and brought up by the State as in Plato’s Republic; that is to say, if the State were to adopt the role of the father, the State would, ipso factor, become the sole capitalist.” He continues by saying “that if the State is to be the sole capitalist, the family, as we have known it, cannot survive … [for] it is impossible to deny an intimate connection between private property and the family, a connection which is reciprocal.”

In other words, we need private property for the good of the family, and we need family for the preservation of property rights. If property rights are weakened, then we weaken the family. If the family is weakened, then we lose the basis for protecting private property. One feeds the other. In the extreme, if family is incapable of properly rearing children–or if the government claims that the family cannot effectively raise children–so that the State must take over that responsibility, then the power of government to take and control property will be at its greatest. I should add that Russell was an admirer of the Soviet Union, although he never fully embraced communism.

I’ve never thought about the connection between family and property rights until now. I find the connection very interesting. Implications? Well, if you believe in the importance of family, then fight to preserve rights to property. And if you believe in the importance of protecting private property, then fight for strong families. We need both for a stable and healthy society.

Declining moral values in the U.S.

An important area of research for me involves the study of how moral values relate to economic conditions of society and the well-being of individuals. For example, a few years ago I published a study (here) describing how to measure the generalized morality of countries, and I linked that measure to economic conditions within countries. Currently I am trying to understand trends in moral values and how and why they change over time.

It is not uncommon for people to bemoan a decline in moral values. For example, in 2015 a Gallup Poll (here) found that “Most Americans (72%) continue to believe the state of moral values in the U.S. is ‘getting worse,’ while 22% say it is ‘getting better.'” But is there evidence supporting the ‘decline in moral values’ story? Yes, at least in the United States.

I like working with a database called the World Values Survey, which is a compilation of face-to-face interviews with adult citizens ages 18 and older conducted in many countries around the world. Respondents are asked many questions about what they believe, such as perspectives about religion, politics, social values, and so forth. The survey is conducted in multiyear waves about every five years or so. It began in 1981. The most recent wave in which data is available (number 6) began in 2010 and involves work in 57 countries around the world with more than 85,000 respondents. The organization behind the study is currently preparing for the next round of studies.

Note the following two charts for respondents in the United States. The data are reported for each of the six waves. The number of respondents in each wave is at least 1,000 (and so allows for meaningful statistical analyses).

Social trends

This first chart (‘trends in social values’) shows the percent of people who believe that different social issues are not justifiable. There is a clear downward trend. If these represent genuine moral values, then here is the evidence. I could add others. For example, in 1981, 69 percent of people believed that prostitution was not justifiable, but in 2005 the number declined to 47 percent.

Economic trends

This next chart (‘trends in socio-economic values’) shows the percent of people who believe that certain actions by individuals are not justifiable. There is also a downward trend, although it is not as pronounced as is the case for social values. I call these ‘socio-economic values’ because I use them to construct my measure of ‘generalized morality’ mentioned above.

Why is there a decline in moral values? Well, that’s the million dollar question. While we can easily point to correlations, identifying causality is notoriously difficult in social science research. But sometimes correlations suggest patterns and plausible explanations. For example, declining religiosity and confidence in churches might be an explanation. Religions have traditionally played a major role in articulating moral standards in society. If people become less religious and are less tied to churches over time, then that might explain why moral values decline.

Religion

Consider this chart (‘importance of religion’), which shows various indicators of religiosity. While most people in the United States continue to believe in God (almost 90% according to the most recent wave of the World Values Survey), they are becoming less connected to Him. For example, only about 60 percent of people believe that God is important to them. There is also an alarming decline in confidence in churches. In 1981, 46 percent of people had a lot of confidence in churches, but in 2010 the percent had declined by more than half to 19 percent. If we don’t trust our churches then we will not trust what is taught there, such as being moral and having high moral standards.

At the risk of being accused of confusing correlation with causation and overlooking the many complicated factors affecting moral values in society, I am tempted to call this one. We need a spiritual and religious revival in the United States if we want to see a reversal of declining moral values in society. We need to go back to church. We need to listen to preachers and Sunday School teachers. We need to study scriptures and pray and do other religiously meaningful things. If we believe in God, then we need Him to be important to us. Why not. We’re important to Him.