Whether through minimum wages, environmental regulations, or health standards, formal laws often stand as barriers to the complete minimizing of costs (or maximizing of profits) for the capitalist firm. Laws act as deterrents, forming the “rules of the game” that all corporations are expected to play by. But sometimes there can be benefits to breaking the rules. If the cost of being caught breaking the law (fines, bad publicity) can be measured against the benefits of breaking the law (profit, profit, and more profit), then obeying the law presents itself as a simple cost-benefit analysis. If the potential costs of breaking the law are less than the benefits, the rational, self-interested, profit-seeking choice would be to break the law. The modern globalized economy presents many new opportunities for tremendous profits to be made by not following the law, through ignoring environmental standards, “softening” pharmaceuticals by using substandard ingredients, ignoring trade sanctions and embargos, or employing illegal labor. The lowering of costs by the formation of monopolies and oligopolies, (legal) exploitation of labor, stifling of innovation, branding, and price collusion are recognized as “natural” outgrowths of modern capitalism by Sackrey et al., but to this list must be added the stretching or transcending of the law in the process of accumulating profits. In this light, illegal practices are not actions apart from or in defiance of the capitalist system, but are rather the logical product of a system with unrelenting downward pressure on costs with simultaneous upward pressure on profits.
It seems that multinational corporations will condone illegal behavior in the face of substantial profit opportunities. The various scandals of the past decade, including Enron, Worldcom, Blackwater, Halliburton, and more recently, Société Générales, all point to some general acquiescent involvement at the tops of these organizations. Through explicit encouragement or by simply “looking the other way,” corporations reap large profits through deception and disregard of laws. Many analysts were rightfully skeptical that Jerome Kerviel, a mid-level trader, would be able to bet over $70 billion without setting off any alarms. Kerviel later implicated his bosses, saying that they knew of his illegal trading but wouldn’t intervene as long as he continued to make profits. There have been many cases of corporations selling products to war-torn countries, bypassing trade restrictions and arms embargoes. All it takes are forged customs papers and mislabeled shipping containers (new label: foreign aid). The pull of profit opportunities, not just in selling arms but in the natural resource contracts often secured in return, are often worth crossing the law for. Profit-seeking and capital-accumulating behavior not only promotes the formation of oligopolies and monopolies among modern corporations, but provides incentive to actually break the law. The law, from the perspective of the corporation, simply exists as a cost to be minimized – minimized by not following it.
Sean
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