Originality and the Love Song

17 Aug

I am an artist. I express what I am compelled to express. My art might be shit. It might be great; The main thing is that I express whatever the concept or thought might be, in an attempt to articulate and communicate the idea. Expression of a thought is as important a human function as breathing, eating or taking a piss. If you don’t satisfy the urge, it doesn’t go away. Pressure builds until the need satisfies itself in an often catastrophic outburst. It is my belief that un-satiated creative urges are at the root of a lot of mental health issues. I know it was for me for quite some time.

Recently I have been writing a prolific amount of love songs; or at least love has been the central theme given that most of the songs have been inspired by my own profound feelings of pain and loss following a failed relationship. I have been doing this purely to help me pick my way through the inevitable emotional debris, of which there is apparently quite a lot. It got me thinking about  how many love songs the world already has and whether the world really needs any more of them.

Certainly there is a general backlash against the theme by a lot of artists because they find the topic trite. I recall listening to an interview Dudley Benson gave on New Zealand’s National Radio in which he said that he actively avoided writing love songs because he felt the topic had been covered comprehensively by so many artists for so long that there was really nothing more to be said on the subject. This was my own feeling on the topic for a while, as was the general opinion of most of my artist friends – though we all broke the unspoken pact from time to time.

But why? If love songs as a product are so played-out, why can’t we help ourselves but produce them?

I have been haunted by something I’m pretty sure John Mill said about originality and the human experience. That just because someone has experienced something before, it doesn’t lessen the significance of that experience to anyone who subsequently goes through the same thing. There are countless experiences that we all go through as human beings significant and insignificant, but they all inspire the same feelings in each of us when they happen to us. Grazing your knee as a child, eating something for the first time that blows your mind with its deliciousness, the death of a loved one etc. We empathise with each other when we talk about our common experiences. They are equally significant to each of us not because they are original but because of the strength of feeling we attach to those experiences. And love inspires the most profound feelings of all.

When each of us has gone through a break up, countless songs come to mind that seem to succinctly describe what we are feeling. My brother thought my father was taking-the-piss when every song that came on the radio the following day seemed to apply to what he was going through. Of course it wasn’t Dad’s fault, but the radio was switched off for at least the next week and a half. I myself could rattle off a list of songs that I believe accurately describe what I have been through and what I felt at each point in time, when listened to in say a playlist.

So why then do I and countless others persist in writing songs about love and the loss of a loved one, when I can quote the applicable song titles? Because my urge is my urge. Quoting “Train in Vain” by The Clash doesn’t have the same emotional effect as singing what I’m actually feeling at that point in time, in words that I have put together to reflect my thoughts with musical accompaniment that evokes the approximate emotional tone of what I’m experiencing. Any line or chord may not be original when taken on its own, but when arranged in a way that expresses exactly what the artist feels at that point in time, it transcends the unoriginal to join the ranks of the innovative. Of course inovation is measured on a scale, but its a far fairer standard by which to measure art than that of true originality. It has been said countless times before, that there is nothing original under the sun; but within anything that is the slightest bit innovative lives a kernel of originality. The usefulness of the love songs must be to help others perhaps to create a more accurate playlist to reflect their own emotions and experiences. (Remember when we used to be discerning about what music made it into our personal collection – why was that?).

What I suppose I’m saying is that using originality as the yard stick by which you measure a love song’s value is to use the wrong tool. The correct tool to use is your own heart to measure the significance of how a love song reflects feelings you have had or are currently experiencing.

Now if you’ll excuse me, I have a song to write.

Advertisements

On Asset Sales

2 Apr

I just wanted to make a quick comment on asset sales. I know the issue is both infuriating and boring, but I’ll keep it short.

I was guided to this page on the Greens website to make a submission on the issue. I think the main points made by the greens as recommendations to include in a submission are pretty good, but they still miss the main issue. I am yet to find anyone commenting on the far bigger and more fundamental issue that underpins the sale of NZ Assets (Energy or otherwise). They all seem to get close, but no one that I have come across has pointed out that privatization fundamentally changes the nature and purpose of the core asset.

Consider this: An Energy company is founded and owned by the Government to satisfy the nation’s need for, say, electricity. This is done in the first instance because it is acknowledged that the nation can not function in the modern world without electricity, and the country’s economic wellbeing is dependent on it. The purpose of the Energy company is purely to supply electricity to the national grid, for use by everyone in the Country. That’s normal people, industry, everyone and everything. The cost of setting it up and operating the Energy company is covered by what it charges the users. This cost should be (in theory) set at a level that covers the costs of production, with no-one really making too much of a fuss if the government makes a bit of profit and puts it in its coffers.

The Energy company exists only to serve the needs of the people of the Country.

The Government realises, “well if this company is making us a profit, it must have a value greater than what we have paid for in setting it up and operating it. If we sell shares in the company (whether they amount to 1% or 100%) we can make more more money based on the market value of the Energy Company, than just on the product the Energy Company makes”.

Now at first glance this is all well and good. If in the current case the Government sells 49% of an Energy Company as shares on the open market, it still maintains control of the Energy company. But this isn’t about who controls the asset. This is about the purpose of the asset.

Once you start selling shares in a company, you are making promises to the new shareholders that the company is making a profit, and will continue to make a profit. Investors do not care whether the company supplies enough energy to its users to service their needs, or whether the price it charges its users is fair. All they care about is whether they make a profit. The larger the profit the better.

Suddenly the purpose of the Energy company has fundamentally changed. It now exists to make a profit for its investors and no longer to serve the needs of the people of the country.

So what about the fact the Government still controls the company through holding the majority of shareholders voting rights? Well control over voting rights doesn’t even come close to getting around the change in purpose.

If the Government for instance were to choose not to raise the cost of electricity to its users when all the other energy suppliers were doing so, and the minority shareholders took issue. The minority shareholders can require the Government to buy back their shares. The Government is bound by law to do that. At very least it would negatively effect the share prices and the value of the company. So in practice there is no benefit to the Government holding the majority of shares in a privatized asset. It is bound by pure economics to prioritize the pursuit of profit over supplying the service for which the asset was created. The private shareholders would be lining up to demand a refund of their investment otherwise, and the share prices would drop therefore defeating the purpose of privitizing the company in the first place.

It therefore follows that there is no such thing as “Partial Privatization” of public assets. They are either private assets which exist to make a profit for its shareholders, or it is a public asset that exists to service a specific need for the people and businesses of the country.

Internet Piracy: How it’s a McGuffin, and an excuse for bullies to bully

26 Jan

Late last year I was approached by a friend who works at the head office of one of the largest record companies in the world. They told me that it looked like there was a position in the Intellectual Property/Legal team and that I should apply for it. They told me that the Label wanted someone who was aware of the problems that the company was facing and had some “fresh ideas”. I took this to mean that they wanted someone who might have a solution to the overall decline of sales of recorded music, which had effected not just this particular label, but the entire music industry for over a decade.

Well it just so happened that I had dedicated a lot of brain hours to dissecting the problem of declining music sales since the advent of the Mp3, and I may have a solution to the problem.

I spent quite some time putting together my job application, fantasizing about meeting with the execs, telling them they had to hire me before I give them my idea, and then (having got the job) successfully enacting my plan.

Whether my idea could have solved the problem became moot when I didn’t even get an interview. In digesting my disappointment it dawned on me that, maybe the Label wasn’t looking for a workable solution to mitigate or reverse the issue that had been slowly eating away at it for so long. Maybe they wanted someone with “fresh ideas” that might advance their current agenda.

So what was my idea? Not rocket science; I won’t even presume that it was original; But I’m sure that if it was done right it would have helped. It was basically this:

If the record labels really wanted to stem the problem of illegal internet downloading of copyrighted music and film they would need to change the way they have been behaving toward the massive number of people that have been downloading music, without paying the Labels for it. Instead of trying to beat music listeners into submission through draconian legal proceedings, why not try educating them about why dowloading music without paying the copyright holder for it was wrong. Why not try having a large scale public discussion about it? Instead of defining the Label’s relationship with the public as that of adversaries, why not show the public how their interests are aligned, and best served by having copyrighted material bought and paid for. The issue may have been touched on in the media here and there, but I don’t think it can be said that an open public discussion on the issue has ever happened.

It is now 12 years since Lars Ulrich et al sued Napster, and major labels have attempted countless times to sue individuals (successful or otherwise). Yet illegal internet downloading is more prevalent today than it has ever been; aided by improving technology, faster broadband and countless ways to share files without shedding a cent.

It would appear that suing music consumers hasn’t worked……yet.

Instead of quitting a failed strategy when it was obviously not working, the Labels have instead chosen to intensify their efforts.  If the Labels hadn’t been taking the scalps they wanted through legal action, it appears obvious that the problem remained a legal one, i.e. the law wasn’t good enough to protect their rights.

The labels were faced with this: First of all it’s costly constantly suing private individuals (corporate or natural) on your own dime. Second of all if theft is a crime punishable by the state, why shouldn’t the state be prosecuting private individuals for copyright infringement? Thirdly, maybe there is some other way of making someone else uphold the Label’s property rights?

The answer to the first is provided by the second. This is what happened in the USA where the SOPA and PIPA legislation has been introduced. It is also the technique used in the current Megaupload debacle, whereby the FBI (and for some reason the NZ Police) have been acting as mercenaries for a conglomerate of major labels and studios.

The answer to the third is what has been provided for in New Zealand under the so called 3 Strikes legislation, whereby it now falls upon internet service providers to police the usage of its customers.

Now, there is a ginormous stratagem that is being played out at the moment, in which the end of internet piracy is but a McGuffin. It has been years in the making, and the crescendo of its gathering momentum is building steam.

If the issue at the heart internet based copyright piracy was the fact that most people did it because it doesn’t feel wrong, wouldn’t the obvious solution be to make it feel wrong? If there are 100 children at a playcentre, and each of them steals lollies from the teachers jar, how many children learn not to steal from the jar if the teacher only takes one aside and  tells them off? What is the child being disciplined likely to say? “Everyone was doing it. It didn’t feel wrong.”

A lot has been said over the years about the inability of the law to deal with copyright infringement over the internet; That technology moved faster than the law could keep up with – but most of it has been untrue. Copyright law has always allowed civil claims for infringement, and has also been a crime if the unauthorized activity was on a large enough scale.

What changed was the effectiveness of the legal system to solve what was essentially a problem of cultural values presented by the new technology. There are even hints at the where the crack in the dyke started in the offence provisions of the NZ Copyright Act (see 131 (6)).

You see where copyright as property differs from physical property is that the crime of stealing physical property stems from the exclusive nature of holding that property: e.g, if you steal my book, you have excluded me from having the use of that book. Whereas if you copy an Mp3 of my music from my computer, I still have the use of the original file. It may also be difficult to determine whether my Mp3 has been copied at all, let alone whether you unlawfully duplicated it.

The other factor to bear in mind with copyright is that copyright holders tend to only care about it insofar as it makes them money. It is the money that they make from the copyrighted material that is of central importance, not the intrinsic value of the idea or expression contained in the material itself. Copyright was only invented as a way for artists to make money from their ideas. The delegation of those rights to third parties was inevitable once they became a tradeable commodity.

There is another reason why it is difficult to prosecute casual downloaders and that has to do with how proportional any punishment will be to the crime committed. The cost of copyright infringement is notoriously hard to pin down because like any saleable commodity, its cost is dependent on market forces. If people suddenly value copyright so little as to not be prepared to pay for it at all, how can the copyright holder fairly say that a song was stolen if the lions share of the market are taking it for free?

One of the basic tenets of criminal justice is that the punishment should be exactly proportional to the crime. The problem with proportionality is that the scale of the crime tends to shrink if its taboo nature is lost, and the crime essentially becomes socially acceptable. This usually ends up either with a law change (e.g homosexuality or prostitution law reform), or the law remaining in force but never being used (e.g. the crime of blasphemy).

Currently the criminal offence of copyright theft (bar a few exceptions) is mostly limited to infringing copyright for business purposes, and it is here where the main battle has been fought. This is because if someone sells copyrighted material without permission and does not pass on any of the proceeds from that sale to the copyright holder, they have in fact stolen the only thing that matters to the copyright holder: Money.

If we look at the Megaupload case, the FBI has accused the site owners of a “MEGA CONSPIRACY” involving copyright theft, racketeering and money laundering. I have had a quick glance at the Indictment, and the Racketeering and Money Laundering charges all hinge on whether the copyright theft is proved. The Indictment makes the crimes that the Mega Conspiracy have been accused of sound grandiose, designed by a criminal mastermind of Blofeldian proportions; but in truth they are essentially accused of using a standard Premium Subscription business model to steal copyright on a massive scale for profit. In my opinion the FBI should really struggle to make the charges stick because Megaupload does not provide any content to its users itself. Kim Dotcom himself likens the websites service to that of an external hard drive. All of the sites content is supplied by its users. Yet you don’t see the FBI rounding up the CEO and Directors of Western Digital, Maxtor or Seagate. I’m not the only one who is of this view. There’s also an interesting discussion on it here.

There is another far more disturbing facet to this case and it is just how far the arm of US law enforcement has been able to effortlessly reach. Dotcom and his compatriots were rounded up in New Zealand on the issue of the indictment with apparently no procedural hold-up, in an exercise that was so well planned and carried out – it eerily mirrored the Birthday Party drug bust in the Johnny Depp film Blow.

One could have expected there to be some form of  delay between the issuing of the Indictment on 5 January to the date of the bust in NZ; but it only took two weeks, and was carried perfectly to plan to coincide with Dotcom’s birhday party. It seems somewhat unnerving to know that the NZ Police had been working with the FBI on planning the raid since August.

I think everyone one should be worried that somehow a German national who is a New Zealand resident can somehow find themselves facing extradition to America to face trial. America’s status as world police no longer operates only on a military level, but effectively on any level it wants. The Megaupload story seems a lot like this story from a few years ago turned up loud.

Don’t for a moment think that because our own cyber-Megacriminal didn’t get extradited that it won’t happen to a NZ resident or citizen in the future. This guy has been fighting extradition from his home country for 7 years. Seeing how chummy our governemt and its subsidiary bodies are with US law enforcement, it seems only a matter of time before NZ citizens can look forward to a trip to the states to face charges.

People should be really pissed off that the sovereignty of their own nation’s justice system has been hi-jacked by an international cartel of companies via a foreign law enforcement agency. The “F” in FBI stands for federal – as in the federal union of the united states – not “I” as in international.

I have so far focused on some of the detail which has gone missing or unconnected by the media in evaluating the area of internet piracy and cyber-crime, but the big question – and the most important question – still remains unaddressed: Whos is behind the push and why?

On the face of it, it would seem obvious that the the record labels and music studios are behind it, but if you were to follow the money, or more particularly the labels’ lack of it, and their stark defiance of following basic logic in solving the problem of internet piracy by treating the symptom but not the cause; I think you would find that there are probably other forces at play behind labels themselves.

If record labels are bleeding money in lost sales; If record labels are spending tens of millions of dollars in mixed result law suits; If record labels are going out of business, or being bought out by other companies in droves – how can they afford to continue with a failed strategy to stem internet piracy? And how do they think it will improve sales when their PR has been about as bad as it can possibly be? And where are they even going to get their reserves of copyrighted ideas to keep selling into the future if they don’t sign new acts, but insist on selling re-issues of old artists and acts?

So yes, how awfully naive of me to offer my services to solve a problem that never was.

Corporate Greed is an Oxymoron

22 Nov

Lets get one thing straight; a corporation is incapable of greed. Greed is a human emotion. Corporations are not human.

A corporation can no more be greedy than a cup can be sympathetic or a political voting system feel angst about the possibility of being usurped (see MMP).

That does not at all mean that there isn’t a problem though. It just means if you are looking for somewhere to lay the blame for the effects of what is generally termed “Corporate Greed” you need to dig a little deeper.

A corporation is a tool designed for a purpose. A hammer is designed to hit nails into wood, a car is designed to transport people, and a corporation is designed to make a profit. Just like a hammer or a car a corporation needs people to operate it.

However there are two curious ways in which a corporation (or more accurately a “limited company”) differs from any other tool known to man:

  1. there is not inherent limit to its purpose; and
  2. unlike any other tool, a corporation has the rights of human beings under the law. It is a legal person.

When I say that there is no inherent limit to its purpose, what I mean is that every tool is designed to achieve a particular, finite goal. Once a hammer has driven home every nail required in a building, and the construction is complete, the hammer goes back in the builders tool belt until it is required to hammer nails into a different building. It does not continue to hit nails into every hard surface of the building, ad infinitum, until it renders the building completely useless for its purpose. A car is designed to transport people to a particular destination. It does not continue to drive, aimlessly, constantly increasing speed, infinitely – or until its tank is empty.

But a company isn’t like that. It is designed to make as much money as it can (over and above its production and running costs) for as long as it can. They call this making a profit.

The term “a profit” sounds benign. It sounds like it is just this one small thing, like a lamp or a knife, when it is in fact something far more difficult to define by reference to limits. It only comes into existence once all the costs of running the business can be paid (wages, rent, materials, utilities etc.) but can differ in size from a fraction of a cent, to an infinitely large sum of money. It isn’t “a thing” at all, but a potentially “infinite number of things”. It is not a dollar but a fluctuating number of dollars, from moment to moment. It may even not exist at all, but that is alright so long as the company is working to achieve it, howsoever large or small it may be. (Curiously there are even companies that are designed to accumulate losses, which begs an even wider range of mind bending questions).

It is difficult to imagine endowing an inanimate object like a hammer or a car with human attributes, but this is what we have done with limited companies to aid it in its pursuit of profit. A company can own property, run businesses, pay people, incur debt, hold money on trust for the benefit of others, write to people, influence politics, enter partnerships and do all manner of things under the law that a normal human being can do. It can even die without having drawn a single breath.

Fine. Seems harmless enough. If a human being can do all those things, why shouldn’t a legal person be able to do the same things. Presumably it’s still restrained by the same laws as a human being, right?

Well, yes – but no. This is where the seemingly subtle differences between a human being and a company come into play. While a company as a legal person, can live and die without ever drawing a breath, a human has the privelege of having the length of its life measured precisely to a finite number of breaths and heart beats. A company can remain in its state of not breathing but not dying for as long as it serves its purpose. A company can out-live a human being by generations. Think: Henry Ford or Walt Disney.

Then there is the purpose. As a race human beings have lived and died pondering their purpose for around 50,000 years. Vast fields of knowledge have been created in trying to understand their purpose. Religion, Philosophy, Astronomy, even Physics, are just some of the fields of thought that have attempted to discover the purpose of a human being, albeit via different routes; but a company is born knowing it’s purpose, and simply knowing your purpose can give you an invaluable advantage in achieving it.

Now we know what a company is, and we know its purpose it is probably time we give it a context within which it can play out it’s ongoing pursuit of fulfilling its purpose, so here we have a little story:

A person starts with a piece of property. They are ambitious, hard working and innovative, and decide to develop their property and sell the resulting product for a profit. Once they have done this through their own labour they end up owning more property than what they started with and they can repeat the cycle to generate more property for themselves.

It goes without saying that the person in the above folk tale should be entitled to keep the extra property created through their ingenuity and efforts, (It should be noted that money and therefore profit is a form of property) but what happens when you start fiddling with the objects and subjects involved in this tale? If you alter any one of the key aspects of this fable does it change the way the story should end? What happens  when the person isn’t human? What happens when product that is being sold for a profit was not made from any pre-existing property (i.e. made from literally nothing)? What happens if the product they sold for a profit caused harm to the person that bought it? Does it make a difference whether the person who produced it was human or not? And what if the person who owned the property invested neither labour nor intellect into the production?

These are some fundamental questions that have essentially remain unanswered in our society. The above tale is the fable that sits at the core of capitalist theory. It is the moral cornerstone of the system, and the foundation of  millions (possibly billions) of commercial ventures that have occurred since its inception. Yet how many of these commercial ventures can rightly claim a moral justification for their existence based on the fable?

If you have based your society’s economic system on a folk tale/myth, is it so inconceivable that a monster might creep into it like a wolf in sheep’s clothing? If you want to project human emotions onto inanimate fictions, at the other end of the scale you had best be prepared to also have sympathy for the devil.

Emancipation

28 Oct

What if the very basis on which every large corporation relied for its social currency was known to be a lie by anyone who bothered to look at it, but next to no-one else really knew it?

That’s basically the scenario I dealt with in the second essay answer to my Law and Society exam.

There is a basic myth on which capitalism is based that is used to communicate the core idea at the heart of the system.

If a person who owns property is ambitious, diligent, smart and hard working in how they develop and use that property, they should be entitled to the benefits of their labours by way of trading the resulting product for a profit in an open market.

This story seems so simple, obvious and over-recited (in one form or another) so as to appear boring,  benign or to have lost all meaning; but this simple little folk story of the man who tills his land while his neighbours sit and watch, is exactly what the modern corporation has abused throughout its development; to such an extent that its own make-up resembles nothing of the hard working property owner from the capitalist fairy tale.

The corporate structure has evolved itself well beyond any credible hint of a constraint by the forces it maintains it must contend with. It has emancipated itself from the “Market” – but keeps the word alive to serve as a the bane it must contend with, like the monster in a children’s bedtime story…..

Does the growth of the large, publicly traded modern business corporation exhibit a progressive emancipation from the constraints of both the law and the market?

The Market:

As corporations grow they are affected less and less by the constraints of the market. It is common knowledge that the market is particularly volatile to small companies which are just starting out. Few even make it through the first year and this is usually down to market pressures. Not being big enough to compete is a mantra which is repeated often when they fail, so at the other end of the scale it could perhaps be said that large corporations are too big to fail [ed. my emphasis added].

The large corporation has a number of obvious advantages when it comes to competing in the market system. Firstly just having more money than its competitors helps in securing more voting rights within the system itself. This means that the company can afford to withstand the pressures of competition or even buy them out which is often the case.

Secondly once a company has exhausted its opportunities for growth it will usually look for opportunities in other markets. By entering other markets it has therefore escaped the constraints of its original market and can continue to bolster its position in the original market as it continues to grow.

Management itself plays no small role in determining the effects of the market. As Chandler put it the visible hand of management has replaced Adam Smith’s invisible hand of the market.

There are many creative ways in which management finds ways to control aspects of a market. For instance corporations may use transfer pricing to move capital to where it is most desirable for the corporation to have it while evading certain production costs elsewhere in the production process. The effect of such a managerial circumvention of the market is to distort each of the Markets which it has operated in, in order to make its end profit.

The large corporation could argue that it is constrained by the market because it does not flourish in all areas. However it could also be argued that the reason the corporation doesn’t flourish in all areas is due, at least in part, to anti-trust, anti-monopoly laws acting in most areas.

Competition buy-out illustrates how a corporation need not flourish in all areas itself, but can acquire smaller companies with success in areas of a market where the corporation could not have gained access to. For instance in the music industry major record labels have tended to buy up the small independent labels catering to niche markets which the major label could not appeal to. In recent years there has been a major downsizing of competition via mergers between the major labels themselves creating less competition – the cornerstone of the market system.

Vertical Integration is another method whereby the corporation can consume other markets and escape the constraints of the market system. Vertical integration is when a corporation that makes one product buys the smaller firms which supply them the goods and services necessary to make their own products. Although this may not have significantly distortive effects on its own market it can have gross effects of the markets in which those suppliers were operating. For instance in 2003 Apple computers bought e-magic, a German software company which made high end audio production software for both the PC and apple computers. Once the merger was complete e-magic was no longer allowed to produce its product for the PC and effectively disenfranchising half of its market. Apple now entirely controls the market for that software and in order to use it the consumer must purchase the much more expensive hardware made by Apple.

A whole other set of major problems in constraining large corporation via the market system were illustrated by Christopher Stone in “Why Shouldn’t Corporations Be Morally Responsible?,” p. 434, in James E. White, ed., Contemporary Moral Problems, 5th ed. Stone believed that people who believe in the market system hold a few ill founded assumptions. They were based around how effective the communication and interpretation of market signals really was in reaching a desired outcome.

First there is the case of a person who is not aware of the fact that they are being harmed by the corporation. Such as when prior to the 1960s, the harmful health effects of smoking were not known so customers could not express their dissatisfaction with the company by boycotting the product.

Secondly, people who are dissatisfied with a corporation do not know where to apply pressure. That although they may boycott the product with which they are dissatisfied, and switch to an alternative they may still be supporting the same company because consumers are generally concerned only with the brand name, not who made it.

Stone’s argument therefore proposes that the system fails in this respect because the signal sent by the consumer is cancelled out by their support of a like product made by the same company. This idea may not exactly stand up under close scrutiny because corporations will usually stop manufacturing products which no-one buys.

Stone’s second example on this point may have more purchase. That some large corporations are so nebulous, a confusing mix of small companies and departments, that it is difficult to discern which point of the corporation to apply pressure to. Even governments have problems doing this.

Stones third example of ill held assumptions of the market systems efficiency is that people are always in a position to apply pressure of some sort to the corporations. The market system does not offer an appropriate negotiating interface where grievances can be communicated. Consider the situation where a corporation may make products with which there is great dissatisfaction in the general populace but the market system fails to offer them a means of sending these signals because the products manufactured are not available to the dissatisfied consumer, for example an aeroplane manufacturing facility which has huge negative effects on its surrounding environment, or a weapons manufacturer.

Stone’s final example of an ill held assumption is that the pressure does not get translated into the right kind of changes. He cited the example of the metal lids on children’s yoghurt which cut their tongues when licked. After the company fielded a lot of complaints they began an advertising campaign on the correct way to use the lids ignoring the fact that “it is easier to change the design of the can than it is to change the natural tendencies of a child.” Eventually the company was forced to change its containers but at what cost to the children.

Stone also points out that when consumer action against a corporation is effective via market signals, it may result in unintended or disproportionate consequences. If a product is pulled it could cost the jobs of hundreds of workers and have little effect on the company itself.

Escaping Legal Constraint.

The very inception of the modern corporation as an unincorporated joint stock company was an act of legal escape. Since then the law has failed to keep up with and sufficiently control its development. Instead it has tended to ratify the developments which the corporate form has undergone under its own steam and claim them as its own, only rarely pulling it up when the unintended consequences are no longer conscionable.

Even this description does not go far enough to explain just how stretched the legislature has been in accommodating the modern corporation throughout its development. The race to the bottom is the perfect example of how governments have used their legislature to attract corporations for their own financial gain. It is also helpful in identifying how governments have become disproportionately influenced by business interests via an array of political pressure techniques at the disposal of the corporate sector.

There has been a constant erosion of the law used to keep corporations from growing too big. For instance it used to be the case that a corporation could not own shares in another company. Since that law was overturned it opened up the market to the possibility of mega-monopolies. Some of the mega-corporations of today would exemplify the examples which law makers had in mind at the time that law was made. The finite lifetime rule in which a corporation had to end at some point (like a trust) would have helped this situation too.

The myth that big business hides behind, that they are analogous to small private property owners, has been used effectively to subvert the law and the public’s general perception about what it actually is. The corporation has been responsible for stretching the meaning of private property so far and so fast that the law has failed to properly adapt to it. Although most critical writers point out this fallacy, the corporations have been successful in perpetuating its acceptance by ignoring the arguments existence.

Also possibly the most common method corporations use to escape the law is to escape the laws jurisdiction. If a country has a legal framework which is no longer favourable to the corporation’s interests, they can simply relocate their operations while still reaping the rewards of continuing the sale of its products in that market.

When this occurs it effectively undermines the governments of such places favourable treatment to the corporations in any case.

Public or Private

26 Oct

I recently visited the University where I studied and gained my Law and Commerce degrees. I wanted to use the internet so I visited the library, sat down at a computer, and tried to login; testing to see if my username and password were still accepted by the system. Low and behold it worked!

Not only was I able to use the internet, my favourite bookmarks from almost a decade ago were still available. More of a suprise came in what was still contained on the server: all of my documents from my last year of study.

I opened a document that was an essay answer to one of my final exams. It was for a paper called simply “Law and Society”, which I always thought was a strange name because the paper dealt with the history of the rise of the corporation and its effects on society. I thought that “Corporation” or “Capitalism” should have appeared somewhere in the title because when I signed up for it I had no idea that the topic would be so focussed on that subject.

In the end it was probably my favourite paper during my time at uni, and one of the most useful in informing my world view. You see most people take the current social structure, where corporations weild so much power, governments give in to almost every corporate whim and most of the populace feel powerless to effect meaningful change in their society, as a given. But the corporation in its current form is really only a new development; less than 150 years old in fact.

Its proliferation and success at achieving its aims for the private investors that its structure services, has had an effect on global society akin to the introduction of a foreign species into a virgin ecosystem. It has thrived to the detriment of all the natural resources that sustained it.

I reproduce the essay answer here for your information. It summarises an important history particularly in the wake of the Global Financial Crisis, and the Occupy Wall Street movement. I also have two other essay answers to the same exam that I will post in the near future because they contain information that I believe everybody should know. I also provide them as background to a future blog on the Occupy Wall Street movement.

Is the large publicly traded modern business corporation better characterized as public or private?

History

Originally corporations had to be set up by parliament and were limited to carrying out public services. Incorporated joint stock companies allowed private citizens to pool their money to get shares in the joint undivided stock, but a large portion of the profits always belonged to the crown.

This corporate form was most successful during the colonisation period of the 16th-17th centuries when in England the Crown would grant national charters allowing merchants to trade in particular parts of the world. The important aspect of the joint stock company is that it was primarily set up to collect revenue for the crown.

The public purpose of a company was an important aspect from the very beginning. When the parliament incorporated a charter it was always done to achieve some public purpose. Even if the granting of monopolies got out of hand the state maintained the ultimate control over the company.

The thin end of the wedge came when private actors who wished to enjoy some of the features of the corporate form began to take some of its attractive characteristics and put them to use outside of government control and without serving a public purpose. This was the advent of the unincorporated joint stock company.

The main feature which unincorporated joint stock companies sought to approximate was the ability for a number of individuals to pool their money in order to reach greater economic goals than they could separately. Although they appeared similar, in law they were treated merely as partnerships and the owners were still subject to personal liability.

Once the limited liability corporation was really given the go-ahead during the US railroad boom, the corporation really started to take on a life of its own. Limited liability gave the owners of the company a high degree of protection from prosecution in their personal capacity, and publicly traded stock did away with the idea of partnership.

The most significant departure from the corporation’s traditional role in this period was the loss of the public aspect to its constitution and therefore loss of democratic control. Previously under the British system the government had full control over a company’s behaviour, whether it was in its commercial interests or not. Now though the corporation was free to develop on its own.

The Private aspects of the Modern corporation

The starting point for looking at the characterization of the corporation as a private entity is its ownership and control. Because the modern corporation is not owned by the state, or controlled by the state the argument runs that it must therefore be a private entity.

Bowman however believes that although the ownership of a corporation is in the hands of private actors, it is diffused over so many people, and controlled by an oligarchy of managers who are not necessarily driven by personal gains via profit, that the corporation takes on its own political character.

Therefore the question now arises; if it is a body of political power, where does this place it in the public / private distinction?

Traditionally the first argument to be presented that the corporation is public is due to its public effect. Because large corporations are so big and have such a large number of stakeholders a large public effect is inevitable.

Often entire communities are based around the operations of a single company who play a very state like role in many instances. The film “Roger and Me” follows the effects on the community of Flint Michigan which was completely centred around a General Motors manufacturing plant as GM decided to close up shop and leave. Because most of the town worked at the plant when the company left it turned the town into (supposedly) America’s worst place to live. Its public effect was obvious, the unemployment it caused meant people couldn’t afford to pay their rates, property prices plummeted, and the city council suffered a massive loss of revenue because it could no longer claim tax from the company; it destroyed the towns economy.

The leaving of a community does frame a companies public effect quite well, but even in cases where corporations continue to prop up entire communities, they wield so much political power that they can appear to be integrated with local bodies of government.

Another common argument is that corporations exist to provide services for society, and as such they are a public body. Consider the case of a town where its groceries are sold through only one store, a supermarket. When the supermarket set up there had been a number of grocers, but it put them all out of business. One day however the super market chain folds and the supermarket closes leaving the inhabitants of the town without a food supply. Often in such cases the government will have to step in to ensure the supply of goods to the people, therefore fulfilling the public role that the supermarket had filled.

Corporations also conduct state functions. Increasingly corporations are taking over functions traditionally carried out by the state. Either through privatisation or contracting services out. The usual argument given in support of these actions is that corporations are more efficient at carrying out these roles.

The question therefore becomes; what exactly are corporations more efficient at doing? The answer is of course making a profit. In the case of State Owned Enterprises (SOEs) this can work to the advantage of the government when such SOEs do in fact return a profit, but the scope for the benefit of the consumer/ society as a whole narrows.

A capitalistic corporation only seeks to turn a profit by squeezing the resource for as much as they can get. This may in turn afford the state good revenue to put into other areas but at the cost of a cheap efficient service vital to the needs of the public. An Example of this in New Zealand might be the railroads which were sold to private investors in 1996. Each owner would speculate about how much the service and the land which was attached would increase in value and sell it on without maintaining or improving the safety or the service. Eventually the Government had to step in and buy it back because it was too valuable to the public to allow it to continue to erode.

This pattern of governments is becoming more and more common as more and more state assets are sold off. Corporations care little for the public roles they are filling but only the pursuit of profit. When they fail at either providing the service or turning a profit the government is required to step in to clean up the situation or bail them out. In such instances it can leave little doubt that corporations should be characterised as public.

Traditionally big business has been held to belong in two separate compartments. This goes back to the classical liberal stance that the state should not interfere with private property, but as the corporation has developed faster than the State has been able to cope with, it has as we have seen, adopted many of the states functions. Here a tension arises between the private nature of a corporation’s ownership and the public nature of its function.

In “Global Reach” Barnett and Muller illustrate the dichotomy of how the corporation has managed to out-adapt the state in terms of control, political power and acquisition of resources. Corporations have become so efficient in the central planning of their operations that they have gained sufficient political power to gain a strong influence over the state.

At this point it begins to appear that the public/ private distinction cannot be maintained. The State and Corporation have developed so closely and have become so intertwined that their separation may no longer be possible.

The classical liberal maxims got so caught up in what they were trying to achieve that it now appears to be an unsolvable case of wanting their cake and to eat it too. It was fine to keep the state from entering their private commercial affairs, but they didn’t see a problem with trying to influence the state to meet their own ends, or to take on public functions in a profit seeking exercise.

Front On

9 Oct

I am totally baffled by the disgusting quality of Australian television advertising.

I was enduring the long ad breaks they seem to have in this country and couldn’t help but remark at how mind destroying-ly bad the ads were to my 14 year old brother. Being the tack that he is, he pointed out that the reason most of the advertisements in Australia are so bad is because most of them use the exact same production technique of filming the entire ad from a camera placed directly in front of the subject person.

No panning, no profile shots, nothing of the like. A dolly shot? – you must be joking! You are lucky if you are indulged with a zooming shot.

It begs the question what the marketing company’s are paid for by the corporates in this country. The quality of dreck they force viewers to sit through to get to the next slither of programming shows just how cynical the advertising agencies are here. Although it is hard to see where to draw the line between the advertising agency and the client when attributing the blame.

I don’t know if it makes the outlook better or worse whether the corporate client was complicit in filming techniques. Obvioulsy they would have had to give it the go-ahead at some point so lets just say they’re in on it.

But why so many? Where’s the imagination? Advertising agencies have massive departments called simply CREATIVE. I can only imagine the creative department must be the place artistic souls go to die of mediocrity. At least in this country.

I dated a marketing exec from one of the big three advertising agencies for some time so I have a pretty good insight into how cynical an industry it really is. 18 months of being intimately involved with people in the industry did nothing to dispell my Hicksian view of the franchise.

A New Zealand audience wouldn’t have a bar of it. You can bet your bottom dollar ratings would drop through the floor if someone tried to spill that shite into their loungeroom. It got me thinking “What is the difference between NZ and Australia that would allow such a low quality of advertisement to be industry standard”?

I think that that there are probably a couple of interconnected factors at play here. First are the obvious cultural differences, and second is the some degree of social conditioning.

To view Australian television advertising’s lack of diversity, it would help to see why NZ is so much better (please don’t interpret this as a suggestion I think NZ advertising is good! There are varying degrees of terrible).

NZ as a culture has a sense of creativity at its very core. Whether it be in the arts, or making the most from a length of number 8 wire, kiwi’s are creative people and expect, on some level, to be challenged by new ideas. They also bore easily. Given its small population and remoteness NZ has done pretty well in spite of other culture killing factors like – not having any money. As a result New Zealand almost completely lacks a defineable mainstream culture.

Sure commercial radio still plays the same tunes it plays everywhere else in the world; The newspaper runs the same stories in essentially the same format as their foreign counterparts, and TV plays the same episodes of desperate housewives a week after they air in the States – but try and appeal directly to the “Mainstream New Zealanders” for anything and you find them out to lunch. Just look at Don Brash’s 2005 election campaign if you need any proof.

But I digress; What I’m basically trying to say is that if you are being forced to sit through a set of ads to get to the next section of programme you shouldn’t be insulted with a creative and mentally stimulating vacuum for 5 – 7 minutes. It’s cynical beyond words, but if that is the general level of quality that passes for an ad, you can hardly make a complaint to the AMCA.

I suppose the most frustrating aspect of all of this is that we are expected to vote with our remote, and by NOT buying the products in question. The effect of switching the channel and not patronising the companies who’s products are advertised in such a mind numbing fashion, is so far removed from the creatives that make the ads that you can’t really expect the advertising companies to connect the dots; particularly when we’re talking about the status quo. The only way to turn it around is for there to be a significant and prolonged shift in creative style and for that, I’m not holding my breath.

PS: I tried to find some video links to examples of the ads that I was talking about but couldn’t find any. Apparently they’re too inane to even bother posting on youtube.