Role of Private Corporations in America

Corporations are the trademark of the United States of America and other liberal capitalist societies. Everywhere in the United States emblems, symbols, and brands of all the top corporations can be seen. Everything from skyscrapers to baseball stadiums are owned by corporations; so it is easy to imagine that corporations are some of the most, if not the absolute most, powerful entities in liberal capitalist societies. Entities as powerful as corporations have become should not have free reign to do what they like despite the laissez faire system we have set up. Regulation of companies has recently been one of the biggest issues in the news. Corporations seemed to do whatever they wanted whenever they wanted with out having any oversight. To laissez faire businessmen the failure of these companies was just an issue of social Darwinism and the market would eventually correct itself. However, if the government were to allow the "invisible hand of the market" to work itself out, the country would be headed for an extreme depression and economic collapse. European countries have had this happen on several occasions and letting the market work itself out only hurt the countries economy. Attempting a short term bailout plan never worked for them either; most European leaders claim that government regulation on corporations is the only failsafe way of keeping the economy stable and corrupt corporations in check. Regulation is a touchy subject, not enough regulation and companies can become inefficient or they can take hold of a certain market and hold a monopoly. If there is too much regulation you enter the realm of socialism; it is a fine line that must be carefully walked. The government should by no means take control of companies but they should not allow monopolies, corruption, and Fraud.

Monopolies on a certain product will have a drastic effect on the economy. Imagine one single oil company controlling all the oil coming in and out of the United States. There would be absolutely no competition allowing that company to control the price of gasoline. With no incentive to have low prices, the company will charge whatever they like and thus creating a ripple effect in the economy. For example, more money spent on gas means a higher bottom line for companies that rely on vehicles to run their business. Small businesses would be absolutely destroyed by this which in turn would cause even more monopolies of the powerful corporations that can afford high gas. The government absolutely must control this sort of behavior. A good example of government regulation is the Microsoft case. The U.S. Government forced Microsoft to split into separate companies in order to create competition. Windows was basically a necessity for any sort of PC, which disallowed other software companies to even be competitive and Microsoft drove prices sky high.

Another aspect of corporations that needs regulation is fraud and corruption. The biggest case of fraud and corruption in recent history is the insider trading of Enron. High ranking officials of Enron knew the company was bound to go belly up but they basically kept attracting clients and eventually sold their shares before the company tanked, losing people millions of invested dollars. In the Neo-classical sense, this is fair game. However, fraud is irresponsible and an unfair way to basically steal money from investors. Government regulation is an absolute must. This can absolutely destroy investors confidence and hinder the market and the economy. Saying that fraud is 'unfair' isn't argument enough for regulation; it is the fact that it deters investors and people from spending which in turn hurts the economy. The government has to go against the laissez faire capitalism in this case in order to ensure the efficiency and survival of the markets.

Corporations are a staple of the American culture and are the driving force behind our economy. The current downturn of the American economy comes from years of deregulation and ignorance. Corporations have been allowed to do whatever they wanted whenever they wanted and it absolutely caused the mortgage crisis and the eventual downturn of banks and companies. It is absurd to think that companies should not be regulated, for the simple fact that it would destroy our economy. However, over regulation would also be a bad thing and that line needs to be walked very, very carefully.

Sources:
www.forbes.com/2004/11/10/04privateland.html
en.wikipedia.org/wiki/Corrections_Corporation_of_America