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Can we control bad businesses?

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Can we find a way of controlling big business for the good of the general population? for the planet?

Over the years, governments have tried prohibition. But the moment a product or service is made unlawful, the customers must either abandon their consumption or trade with dealers who spring up ready and willing to supply, usually at inflated prices. This spurs the underworld into profiteering, into lucrative manufacture and supply. And because this trade is unlawful all points of the supply chain demand security against other traders the police etc. So grows the great illegal drugs industry, now worth billions and billions of pounds sterling, dollars, or any other currency you care to name. And the users are turned into thieves, liars, tricksters, and losers. Loosing their families, their health, respect, dignity, everything.

There are industries that manufacture and supply products that are manifestly against the interests of their consumers, yet governments in many countries are unable to find a means of controlling these businesses. Loathe to repeat the disastrous prohibition experiment of the USA , they seem left with the choice of banning advertising and restricting consumption. Both alcohol and tobacco are dealt with in these ways. Yet the men in the board rooms of these businesses remain untouched. Their bleat is “But I’m selling a legal product”, or “But it’s my duty to exploit sales”

Consider the board. It is their express duty to maximize the value of the equity in the business – on behalf of the business owners, the shareholders. That it is also the personal aim of the individual board members can be taken as given. People don’t take such jobs unless they buy into this basic ethic. But, the boards of tobacco companies are not accountable to the population, neither individually nor collectively. It is trivial for a large company to set up a splinter enterprise with – what is to you or I an eye watering budget, but which represents a very small percentage of the parent company’s costs – to tackle a “green” issue, or to promote “healthy consumption”. The board can then point to these activities as proof that they are “Truly responsible”.

Variable rates of taxes

Try this idea. We have three rates of corporate taxes: high; medium; and low. We assign a business into one of three categories according to the effects of their products, services or methods on the country, people, etc., and these categories are: bad effect; no effect; and good effect. The companies will be in the categories always or sometimes i.e. one might move from B to A and then back to B.

The profits of the companies designated “bad” will be taxed at twice the normal rate. They may be denied relief on VAT of their purchases, they might be required to fulfil more onerous Health & Safety conditions, or planning controls. The men and women who manage the business might also be forced to pay higher rates of personal tax, if not on their usual salary but at least on their bonuses.

Thus, all profit from tobacco (I am sure that there can be few serious objections to including this industry in the “bad” category) manufacturers would be taxed at the higher rate. Thought can be given to whether or not this is restricted to the manufacture only, or whether it should also include part or all of the distribution chain.

I expect that only a few industries would fit into the bad category, perhaps fewer than five. I’ve named one, but I have another candidate – the banks. We all know that they have been called to heel about their outrageous charges, but they have immediately taken other steps to recover their profits by equally bad means. They should be removed from “normal” to Bad for a year or two while they mend their ways. (Don’t get me wrong, I’m not against making a profit. But I object when businesses make two profits).

The vast majority, say 99%, will be in Normal, and again only a handful in Good. Can’t think of one offhand, but I’m sure there will be one or two.

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Written by dw

July 30, 2008 at 10:33 am

Posted in Finance, money

Tagged with , , ,