Monday, June 23, 2008

The Freeman Essays--VII The Merciful Scale

This is the last of the essays that I submitted to the Freeman Magazine that I will publish here. I actually submitted one entitled, "On Frowning in Pocatello" that I have lost. I plan to publish later essays on P.G. Wodehouse, Rafael Sabatini, Agatha Christie and G. A. Henty but those need considerable work yet.

This essay contains an obvious flaw (and undoubtedly many others not obvious to me) for someone who claims to believe in Austrian economics, which I did not catch at the time I submitted it. I hope to rework this essay later using Portia's "Quality of Mercy" monologue as a springboard.

The Merciful Scale--On the Impossibility of Corporate Compassion

Occasionally one of our judges, wishing to see his or her name in the paper, I suppose, makes a plea to the other judges in the district to be more merciful. Why this should invariably make the news is beyond me. What is even more baffling, is the fact that a person as learned as a judge should be, cannot see the utter impossibility of a judge, in his official capacity, of being merciful. Of course, if the judge means that judges have lots of extra time and money and that they should be more generous with their personal means, I can have no quarrel, but that is never what they mean.

Even a few minutes of thought shows how impossible it is for a judge to be merciful. In my younger days, justice was frequently represented as a blindfolded lady with an old fashioned set of balance scales in one hand and a sword in the other. The sword, of course, represented the executive, i.e. the police. The balance, the judicial, and the legislative was represented by the weights used in the balance. A judge can no more be merciful than can a balance scale. A scale is either accurate or inaccurate. A judge is either just or unjust.

If a fellow weighing three hundred pounds steps onto a scale and the scale reads one hundred twenty five, some may say that the scale is merciful. In reality, of course, it is merely inaccurate. The sad thing is that the inaccuracy may have tragic consequences. If the heavy chap really believes the reading on the scale he may set aside his resolve to get more exercise and eat fewer fattening foods, feeling that since he weighs so little he can afford, indeed, he may feel he should, put on more weight. Likewise, a judge who gives a very light sentence for a very serious crime, frequently congratulates herself (and is congratulated) with being merciful, when, in fact, she is simply being unjust. The felon, feeling, based upon the reading of the scales of justice, that he has hardly done anything wrong, sets aside any real resolve to reform and hence, quickly finds himself hoping again for a judge who is as "merciful" as the last.

I have often pondered why such injustices, so clear to almost everyone, should be so impenetrable to those on the bench. And yet, we all know that such things are common in modern jurisprudence. We read almost daily of people with injuries who receive millions of dollars in return. In effect, the ancient system of the equivalent of an eye for an eye, has been replaced by a system in which a person is rewarded with the equivalent of many lives for an eye--and all in the name of mercy. The person without the eye, appears in court, while the hundreds and even, thousands of people who must sacrifice the equivalent of a finger, or a toe, not only do not, cannot, appear in court, their claims are simply ignored.

At least part of the reason for all this, I believe, is that our people in general, and those of our people involved in law, in particular, have come to believe in, not only the possibility but even the value of, corporate mercy or compassion. I think it would be helpful to examine an example of what we often see as corporate or group compassion in order to see why they are really not corporate compassion at all, but are really examples of either individual compassion somehow organized, or are really examples of injustice disguised.

The most obvious example of corporate compassion is organized charity. But the very name tells us what it really is. It is individual compassion organized for a definite purpose. If I, for example, decide, upon hearing of starvation in some remote corner of the earth, that I have $10 to spare to help alleviate that suffering, I would quickly find, that by myself, I would be hard pressed to get so much as a slice of bread to those starving people with my $10. If I could convince a thousand other people of the need and they also would each contribute $10, I could hire a shipping company to send a load of groceries to those people. Of course, in getting a thousand people to contribute $10, I have given considerably more than my initial contribution in terms of time and effort. Before I make such an effort a second time, I may decide that I need to be reimbursed for that effort. If I accept in return for my effort exactly what I could get working in some other endeavor, I have merely converted from one job to another. I am no longer being merciful in my work for the starving people in that far-away place, but I am being just. If, however, I take more than I could receive for other work, I am being much less than compassionate, and probably even less than just. Likewise, if I take the money contributed to help the starving people and buy textbooks for illiterate people, I am committing fraud. There is no corporate charity here, that as the director or president of the corporation, I am entitled to use in any way I see as being compassionate. It is a group of individual mercies organized for a very specific purpose to help those mercies become more effective.

Likewise, when the president of a large corporation decides to use some of the profits of the corporation in order to benefit a personal favorite charity, he is not being somehow corporately compassionate. Of course, if he is using money that the board of directors has given him as salary or recompense, he is being privately charitable. But to take corporate funds and donate them to charity is an act of stealing or fraud. It happens and is not prosecuted largely because the tax laws have turned it, in many instances, into a wise business move. Between the tax write-off and the favorable publicity, it is not really charity at all, but merely another act of business. If done entirely as a tax benefit, it is merely another form of government "compassion".
A more difficult situation arises when a corporation is compassionate with their own employees. The most obvious example is health benefits, or indeed, "benefits" in general. These were originally not given as compassion at all, but were given as a means of competing in the labor market when salaries and wages were tightly regulated. When a dispassionate historical analysis of our time is written, I believe, that in these acts of corporate compassion we will find the greatest injustice. All of us who have worked for a large corporation that is proud of its many "benefits" know that there are people in the corporation who have little use for them, and others that abuse them. It is certainly an open question as to whether the wide spread extending of health insurance by our corporations has resulted in any real improvement in health, any more than the use of socialized medicine in foreign lands, and the consequent availability of "free" medical care, has resulted in any real improvement in the health of those peoples.

Of course, the ultimate giver of corporate compassion is the government. Bastiat showed long ago that the only way a government can be seen as being compassionate, is by focusing on the short term immediate appearances and ignoring the long-term more diffused results. A government can be seen as producing compassion only in the same way as a lottery can be seen as producing wealth.

Another way to recognize the impossibility of corporate compassion is to focus on the definition of mercy and what is required to produce it. One of the advantages of the use of money is that it enables us to better understand what mercy or compassion is. Generally, we think of mercy as the giving of something for which nothing--or at least nothing of the same kind of thing--is expected in return. Because we all have very different desires, ambitions, and needs--or, at least, perceived needs--we all have very different ideas of what exactly constitutes justice, and consequently, mercy, in every human transaction. One of the values of a money system is that it makes the understanding of the limits of justice and the beginning of mercy more universal. If I give you two nickels for a dime, my act, in our society, is almost universally perceived as being just. Someone looking at it from another society may view it as being very merciful because I have given you two large coins in exchange for one very small coin. The reason that I and almost everyone I know and associate with on a daily basis can view this exchange as being perfectly just is that all of these people, on the question of the relative value of a nickel and a dime, are "of one mind".
That is possible largely because when I exchange two nickels for a dime I have not, in any meaningful way changed my condition. Of course, if I desperately want something from a vending machine that accepts only nickels, I may be willing to give more than their worth for nickels, but, in 99% of the exchanges in our society, two nickels is exactly the same as a dime. The reason is that money is not something we exchange at all ultimately. It is a device invented by man to make exchange more convenient,i.e. we speak of it as a medium of exchange. Ultimately, we exchange what we ourselves have produced, or what we have acquired by exchange, by inheritance, or by force or fraud.

It should be clear that it is really not possible to speak of being merciful or compassionate with something we have obtained by force or fraud. It is really possible to be compassionate only with something I have produced directly, or with something I have acquired by exchanging something I have produced, or finally, by something that someone has given to me. In addition, it is also possible to be merciful only with what I have in surplus. If I give of my means to charity and must, as a result, resort to charity myself, or worse, use force or fraud to maintain myself, I have not shown mercy at all, I have merely been the means of redirecting charity, or if I resort to force or fraud, to the redirecting of resources.

And herein lies the reason that corporate compassion is impossible--because corporations do not produce surpluses. For a corporation to really produce a surplus all parties to the creation of the output of the corporation must agree to the fact that part of it is surplus. They must be as much "of one mind" of the surplus, as the person exchanging two nickels for a dime. In theory, this might be possible, but in practice it is rare, if not impossible. What is not rare, what happens all of the time, is for some small minority of the parties involved in the production of the corporate output to decide that part of it is surplus. Usually, it is the party or party whose own share of the output is undiminished in the declaration of part of the output to be surplus. And, of course, just as there are always neighbors, friends, miscellaneous onlookers, and, above all, politicians, who are ready to declare that certain individuals have "more than they need", there are also observers a plenty who are ready declare that corporations have surpluses or "excess profits" that should be applied to their own favorite charities.

If a corporation, private or government, is lucky enough to have produced, or obtained by exchange or contract, more than its contracted obligations, it must in justice, distribute that uncontracted portion to those who helped produce it. The reason is that the production of that "surplus" or extra, could only happen because the individuals involved in its production, have also given more than they were contracted to give. It has been shown over and over again, that the quickest way to destroy a corporation or even to bring an entire society to its knees, is for those involved in the corporation, or the society, to refuse to do anything that they have not been specifically contracted to do. If, therefore, material above and beyond that contracted for is available, it is only because effort above and beyond that required has gone into its production. For the leaders of a group, to simply ignore that and declare the extra a "surplus" to meted out as compassion, is to commit an injustice. Those men, whether they are the city council, the state legislature, the Federal congress, or the board of directors of a large corporation, like the judge in the courtroom, have only a balance when it comes to the distribution of the proceeds of the corporation. That balance of itself can never be merciful, it can only be accurate or inaccurate. Likewise, a corporation can distribute what it receives justly or unjustly, but, in practice, never compassionately.

No comments: