Why Large Businesses Can Be a Social Problem

The scientific and industrial revolutions made possible the development of a wide array of consumer products. However to manufacture and sell such products at affordable prices meant introducing mass production. This required very large initial investments. The solution to funding such large capital requirements was the public corporation. It allowed thousands or millions of small investors through the purchase of its shares to widely distribute risk. Thus “economies of size” became the driving force that has established the modern economy.

To satisfy its many investors required that “making money” be the primary goal of such businesses. The financial system values corporate shares exclusively on this basis. A necessary consequence is that the importance of maximizing quality and minimizing price to best meet the needs and wants of customers has become merely an important by-product of large company operations. This has consequences.

Planning to “make more money” is far more certain when focused on the short term. Also senior management of public corporations are rewarded exclusively on short term results. Thus little serious consideration is ever given to long-term consequences. What we have been experiencing recently is the predictable outcome when the economy is dominated by large businesses whose primary focus is on “making money”.

Over the past few decades we have seen the collapse of most U.S. airline and automobile companies, some energy companies, and many banks, S & L Corporations and other financial houses. These were the cumulative longer term consequences of management decisions that were expedient and “made money” in the short term. In the longer term they proved devastating.

Another inevitable outcome when businesses get large is that their management acquires power. Unhappily this brings with it the corrupting temptations that always accompany the accretion of power. The legal prosecution of corporate malfeasance and senior executives for egregious actions, that are becoming ever more frequent, are merely the tips of the iceberg of the more modest corruption that can readily pervade large corporate structures. Such behavior is magnified by the need for government regulation. This replaces moral judgment by legal considerations. Whatever isn’t prohibited by careful analysis of the letter of regulatory law, become acceptable practices for large corporate entities.

These are ways that “largeness” can lead to social problems.