We're in 'big' trouble
In recent years, businesses—particularly insurance companies, banks, automakers, and defense contractors—have consolidated into bigger and bigger entities. Is this ethically beneficial to a burgeoning capitalistic society? The beauty of capitalism is that good products/services provided at desirable prices will capture a market. Good decisions and implementation are rewarded. Poor ones result in failure. Bigness changes this equation. Let’s look at five arguments against the bigness trend:
Bigness hurts consumers. Economies of scale drive bigness. For example, every bank has a government-compliance unit. As regulations change, this unit helps the bank keep pace. The big banks can spread the cost for this department over more assets, making the expense for small banks 100 to 1,000 times greater. When watchdogs ask what regulations are sensible and needed, they tend to ask the big banks, and the advice they get is skewed. Big banks have a self-interest—not a consumer interest—in more regulation. It gives them a competitive advantage and helps drive out those pesky little banks that often provide better customer service. In the end, the competitive advantage trumps consumer benefit. Bigness creates businesses run for the benefit of management, not shareholders. Most big companies are publically owned with hundreds of thousands of shareholders. When only one person owns a business, that person is accountable for all decisions. But a business with even as few as 1,000 owners is answerable to virtually no one. How else can you explain the exorbitant salaries and bonuses paid to executives at poorly run public companies? Management in those situations runs the company for managements’ sake, not for the shareholders. Bigness makes products/services less important than survival of the business. “Too big to fail” is the common argument. If the beauty of capitalism is to reward good decisions and punish poor ones, then to take failure off the table is to change the game. “Too big to fail” is no longer capitalism, but “survival of friends” or “crony capitalism,” which is neither friendly to consumers nor capitalism. Remove the possibility of failure, and success depends on favor, not merit, and products/services suffer. Bigness does not always equate with efficiency. Smallness and lack of capital creates the need for resourcefulness and efficiency. Necessity is the mother of invention, but bigness is the mother of red tape and wastefulness. Big can result in incredible invention (e.g., Apple) but it does not automatically lead to efficiency (e.g., the federal government).Are these problems with bigness in business sinful? Several violate a spirit of humility, of thinking of others more highly than yourself, and of using different measures for different customers. Bigness can be driven by unbridled ambition for power, money, and security, which is sinful. Is there an ethic of bigness? There should be. We have lost perspective of how we should think of “big” biblically. In the short run some may benefit greatly from “big,” but in the long run the foundation of a sustainable system is irreparably damaged.
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