Competition, Corporations, and Monopolies

Competition is the key to improvement, and it always has been and always will be. It applies at all levels, from productivity of each individual, to the competition between theories in the scientific method, to the evolution of the species. Therefore, a robust competitive economy must be maintained by ensuring that public corporations make up the vast majority of economic activity.

To maximize competition and efficiency, information technology must be applied in all spheres of human endeavor. For example almost all corporations should be public, with control and information on revenues and share values available to all The People. This rule will apply to even the smallest businesses, providing them access to capital and experience that they would otherwise lack and yet simultaneously constraining founders from running the business solely for their individual benefit.

Corporations shall be highly regulated by The People to prevent them, or individuals associated with them, from exploiting their shareholders (i.e., via insider-trading laws), their workers (i.e., via worker safety and wage supplements), or The People (i.e., via environmental and land/resource use laws, undisclosed advertising, etc.).

Technology and simplification of the tax and legal system can greatly reduce the burden of forming and running a public corporation, allowing even sole proprietors to avail themselves of this protection and opportunity for growth. It also gets around the “family farm” red herring that authoritarians and other conservatives use as an argument against inheritance taxes: If it’s big enough to be worth passing on to your children, it’s big enough to be publicly incorporated so that it will survive the founder’s death. Being a public corporation also allows for investors in a good business to provide capital to expand it, and for investors in an unprofitable business to merge it with a more successful business to at least improve economies of scale. The exact time and scale of going public will vary depending on the specific business, but it should be expected that business that are more than 5 years old, have annual gross revenue of more than one million USD, or have more than 10 employees (full or part time) should be public corporations.

Corporations will be organized exactly like the government, with individuals (shareholders) using The System to choose the company executives and make other policy decisions. No more supposedly-independent Boards who are overpaid to provide what is generally ineffective and unnecessary “advice” and which have the corrupt bias to overcompensate executives who may someday be in a position to return the favor. This problem affects non-profits as well, and is harder to solve for them because there are no shareholders available to check up on their operation. Elimination of income taxes eliminates the main need for non-profits. To facilitate the transition, the organizational structure of these organizations could be modified such that “donations” will be converted to shares in the company, and those shares used to determine voting rights. More on this later in the section On Charity.

Corruption from corporate lobbying is an insurmountable flaw in representative democracies, but is still an issue in a direct democracy. The System itself will be relatively resistant to direct influence from it because only individuals will be contributing (corporations are not people, and so cannot even create accounts). It will also have a robust spam flagging capability to prevent individuals from becoming mere shills for the corporations. Still, it can be expected that corporations will still try to hire or otherwise encourage the most erudite individuals to create or endorse proposals that would benefit them. This is not always a bad thing, and individual freedom requires that it be allowed. But The People have a right to any information that they might find useful in deciding whether or not to back any particular proposal. Therefore any compensation to individuals from corporations must be disclosed in their Credentials.

The best weapon against the corrupting influence of corporate lobbying or vote buying on The People directly is information: All advertising must include sufficient information in it for The People to determine who paid for it. This brings social engineering into play by providing individuals with the capability to reject a questionable source of information or even organizing a backlash against the corporation(s) that are attempting to influence them. Courses on “Advertising Analysis” must be included as part of the education in psychology every student receives so that can recognize the techniques being used in any particular advertisement or other propaganda (i.e., the 5 classes of behavioral engineering). This will make everyone less susceptible to ads that exploit tribalism, susceptibility to fearmongering, and/or other maladaptive traits in humans. If statements in any particular ad are proven to be false by an independent organization, the penalty could be requiring the offender to pay to run a retraction/correction in the same time/place as the original ad. We may even want to put some of these things into the criminal code: Although we have special laws to protect children and the elderly from being exploited by unscrupulous individuals, why do we allow corporations (and SDAP candidates for President) to run advertising campaigns designed to instill fear in the general population with the goal of manipulating them into behaving in ways that are against their own best interests?

Corporations will pay sales tax on the items they use, but not on products and materials they resell. Sales tax rates can be adjusted to encourage investment in particular industries or types of equipment (e.g., to improve energy or water use efficiency, encourage investment in manufacturing capacity, etc.). Since there would be no income tax, there would be no need for to keep track of depreciation or file corporate returns, liberating large amounts of capital and labor that can then be put to productive use instead. Simplifying and regularizing contracts will do the same for resources expended on the constant need for lawyers to customize and enforce them. For example, The People will define a Standard Sales Contract that includes terms that all sales contracts should have (e.g., loser pays attorney fees limited to some percentage of the damages, severability of clauses, etc.) which will be added to all sales contracts by inclusion (e.g., “This contract includes terms of Standard Sales Contract version 1.2”). In most cases, this will mean that the only thing that will differ between contracts will be the price and product/service description, eliminating the need for an attorney to produce the contract (for one party) or review it for suitability (the other party). It will also better protect both buyer and seller by eliminating “the battle of the forms” (where RFP/invoice/delivery documents have incompatible clauses), the possibility of accidentally omitting an important clause or making a modification that renders it ineffective, or having the party writing the contract try to slip something non-standard into it in an attempt to give them an unfair advantage over the other party.

All corporations should naturally grow to the largest size possible, economies of scale increasing efficiency. This must be counterbalanced by the need for competition because an industry with no competition becomes stagnant and prone to corruption and inefficiency. Therefore, no corporation shall grow such that it controls more than 50% share in any particular market, either individually or as the effect of collaboration with other organizations. Once it reaches that threshold, the proprietary nature of the product or service shall either be released to the market (e.g., open sourced), municipalized, or the corporation split up into separate, independent, and competitive companies.

“Natural Monopolies”, for example roads and other ground-based transportation, basic protective services such as fire and police, and the distribution portion of utilities (including high-speed Internet access) shall be owned and/or managed by The People. Securing the benefits of competition is still necessary, however, so these services and maintenance of this infrastructure must be contracted out using a public competitive bidding process.

Regulated (or in many cases unregulated) monopolies in the US have resulted in poor performance, poor quality, and high costs for the consumer. Particularly problematic areas include electricity generation and distribution, TV/cable, and high speed internet access, which is simply unavailable in large areas of the country and relatively slow and very costly in most others. The obvious solution is for The People to own the distribution infrastructure and for them to contract directly with producers. Unfortunately despite its obvious advantages there are few places where this has been tried, primarily due to lack of political will or the corrupting influences of these monopolies themselves. The one notable exception is Texas’ “Power To Choose” system through which consumers can save about 30% over what electricity costs from regulated monopolies, but which comes with its own problems because the distribution infrastructure is not actually owned by The People and that there are no incentives to switch away from coal-fired power plants (i.e., no carbon tax which could be used to fund subsidies for solar or wind power).

An even worse situation exists with US railroads which are incredibly poorly managed and waste most of their vast potential because there is no opportunity for competition. Amtrak (the national passenger rail system) has an on-time record of less than 50% for most routes, due primarily to delays from the poorly managed and maintained freight system it shares infrastructure with. These delays are often hours long in western states, rendering the system unusable for business travel. But because the freight companies own the rails, there is no incentive for them to increase reliability or allow competitors (or even non-competing passenger rail service) to build additional infrastructure to provide better service (e.g., using the existing rights-of-way to build a high-speed rail line parallel to the freight lines). High-speed passenger rail service requires less than half the energy per person per mile travelled as airline service and this energy can be generated carbon-free from renewable or nuclear power, something that is impractical with air travel.

The freight component of the US rail system is unfortunately also very poorly managed, and many companies finding it more cost effective to actually unpack shipping containers into over-the-road trucks and drive products to their distribution centers, despite this consuming more than three times the fuel and incurring vastly higher personnel and public safety costs. Inadequate inspection and maintenance schedules results in thousands of derailments every year, causing billions of dollars in damages to products and devastating and often fatal consequences to surrounding areas. We would not tolerate this frequency of failure in the airline industry, why do we tolerate it from the railroads?

Rather than rely on 100-year old diesel locomotive technology, train cars should be self-powered (electric) and autonomous, using separate engines only when necessary for climbing grades (and feeding that energy back into the electric grid on downgrades). When a train arrives at a city, it should disassemble itself with each car driving to the siding it is directed to, with individual cars supporting the more efficient end-loading the way over-the-road trucks do. The rights-of-way and the rails should be owned by The People, and the moving parts owned by private companies who would bid for use of the infrastructure, providing a strong incentive for them to use that infrastructure as efficiently as possible. This transition will never happen with the US’s current monopoly-based rail and representative-based political systems, but would be straightforward to implement through the will of The People in a Matchist system.

Next: Patents and Copyright