Business and Power

When people think about the power of business or “big business,” they often think of the way in which business in the form of major companies, corporations, and major firms dominate the lives of their employees, the communities in which they are located, and government. Business power in this sense comes in several different, though often subtly related, forms. We consider each in turn.

Obviously business affects the lives of employees and their families. The livelihood of the workforce and their families depends on their employers. This immediately makes for a complex relationship between employees and the business that employs them. On the one hand, the managers of the firm, following the interests of the owners or shareholders, want to get as much from each employee as possible for as little as possible to maximize profits. This does not necessarily mean paying as low a wage as possible for the job to be done; managers [Page 80]can realize that giving incentives to workers in the form of better pay and working conditions can maximize output and revenue. Nevertheless, the workers have an interest in higher wages and less control, whereas their managers have an interest in reducing the overall wage bill and getting as much output at possible. On the other hand, the workers also should have an interest in the business being profitable. Otherwise, it might go out of business, leaving them unemployed; so workers do share interests with stockholders.

It is not enough merely for a firm to keep in profit. Listed companies can be subject to hostile takeover bids where other businesses believe that their profits are not being maximized. Hostile takeovers often lead to reductions in the workforce, the closure of some factories or offices, harsher terms of employment, and so forth, in the attempt to get more profit from the capital stock than the current company manages. At this level, the interests of stockholders and workers diverge, or at least the interests of some of the workers and stockholders diverge.

In some communities, interest in the firm staying in business goes beyond the workforce and workers' immediate families. In some “company towns” the entire economy is dominated by the local business. Here, the livelihood of everyone is at stake if the firm goes out of business. Other local companies' business depends on the company's contracts, and the entire local economy of shops, service agencies, and so on, depends on the company's employees spending their money locally. And the local government depends on the business for taxes both directly and through any local income tax or sales tax that is generated by that business. This gives the company enormous influence over the lives of everyone. This local power comes in various forms.

First, local power comes about directly. Because the firm is vital to the welfare of everyone, if its managers state that certain local policies are important to its continued existence—whether they claim competitive pressures or pressures from some corporate headquarters elsewhere, even in another country—then local politicians are likely to acquiesce. Thus, if a company wants some land rezoned to allow it to build a factory extension, the local community is likely to facilitate this. Or if company owners are concerned with local environmental laws affecting the company's profit line, the company might be able to have the laws changed. In a classic book from the 1970s, The Unpolitics of Air Pollution, Matthew Crenson was able to demonstrate that towns dominated by a single business had lower environmental controls than did similar towns less dominated by one company. It is not simply that firms can force their interests on recalcitrant local communities; rather, the power relationship is more subtle. The local community also sees these policies in their interests in the sense that the company sustains the local economy. If it is true that the company “must leave” without the rezoning or relaxing of environmental controls, then it is true that those policies are in the community's interests too, even if, in some sense, the community wants clean air, does not want the land rezoned, and so on. Such issues sometimes take the form of collective action problems.

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