<\/p>\n

Date of recording: December 21, 2023, The Savvy Street Show<\/em><\/p>\n

Host: Roger Bissell. Guest: Vinay Kolhatkar.<\/p>\n

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Editor\u2019s Note: The\u00a0<\/em>Savvy Street Show\u2019s AI-generated transcripts are edited for removal of repetitions and pause terms, and for grammar and clarity. Explanatory references are added in parentheses. Material edits are advised to the reader\u00a0as edits [in square brackets].<\/strong><\/em><\/p>\n

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For those who prefer video, click here<\/a>.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

If you want numbers and the alphabet, that\u2019s over on Sesame Street. But, here on Savvy Street<\/em>, we concentrate on insight and inspiration.<\/p>\n

Welcome everyone to the Savvy Street Show<\/em> where we talk about ideas and issues that matter. And if you want numbers and the alphabet, that\u2019s over on Sesame Street. But, here on Savvy Street<\/em>, we concentrate on insight and inspiration. So, if that\u2019s what you\u2019re looking for, you came to the right place. My name is Roger Bissell, and I\u2019m again the host who will inundate our guest, Vinay Kolhatkar, with possibly unanswerable questions about the corporation.<\/p>\n

We each made an error or two last time. So, before we get into the tall weeds, first Vinay, and then I will issue our corrections. So go ahead, Vinay, you are on.<\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

Hello to Roger, and a hello to all the viewers on this wonderful Thursday evening\u2014definitely our last session before Christmas on Monday. Well, I actually have three corrections. First is a minor one. I’d mentioned academics, Michael Jensen and William Meckling are their names, and I did call them Jensen and Meckling, but once I think I said Robert<\/em> Meckling, it’s William<\/em> Meckling. Now, secondly, I did point out that the market capitalization of Amazon was around 1.7 trillion, but I accidentally called it one of the top two in one spot, and what I meant was Apple and Microsoft [not Amazon and Microsoft].<\/p>\n

Apple has crossed the three trillion-dollar mark in market capitalization. It’s somewhere just below now. And Microsoft is in number two place. Then I also made a slightly wrong comparison with GDP, [GDP of] Germany and Japan being $4 trillion each. And I said, well, the biggest corporations are comparable to some of the big nations around the world. And that point is still valid, but not nations as big and economies as big as Germany and Japan, because the GDP is like an annual production number. The market capitalization is a valuation number, typically 10-, 20-, even 30-times annual net earnings.<\/p>\n

Those are my three corrections. I shouldn’t have compared GDP with market cap, but the larger point, that some large corporations are very large and comparable to certain economies or nations, is still valid. Over to Roger.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

Well, a trillion here and a trillion there, and pretty soon you’re talking about some real money, right? Vinay and I were talking about how government sometimes leans on corporations to do certain things. And I said, erroneously, that Murray Rothbard was arguing that corporations are given a special status by government, and that an economist named Robert Hessen countered his argument, but it turns out that they were both on the same side, making the same reply to other people just at different times. In the 1970s, the one who claimed that government gives special monopoly status to corporations was\u2026well, actually there were two people: Ralph Nader, who had a book in 1973 called Corporate Power in America<\/em>, and then three years later, Mark Green had a book called Taming the Giant Corporation<\/em>. Robert Hessen, who was associated in the 1950s with Murray Rothbard and, also for a longer period of time, with Ayn Rand, wrote a book in 1979 called In Defense of the Corporation<\/em>, and he answered Nader and Green’s argument.<\/p>\n

Many years earlier in 1943, Walter Lippman made the same claim [as Nader] in his book, The Good Society<\/em>. He was answered in 1970 by Murray Rothbard in another excellent book, Power and Market<\/em>. Both these books are good books to have on your freedom bookshelf, and they’re not really very expensive. You might even be able to get a copy of Power and Market<\/em> from the Ludwig von Mises website. They do have quite a few free downloads, but in any case, check them out if you haven’t read them.<\/p>\n

This fallacy never totally goes away, and we’re probably overdue for the next attack on the corporation. So, that’s why we talked about it last time, and we’re going to talk about it some more. And now to the actual questions we had planned to talk about. There’s another issue that’s raised about corporations, and it has to do with just what kind of thing is a corporation. Robert Hessen said the state does not create a corporation. It just recognizes it, but it already exists. So, it’s just an official legal recognition. If this is true, Vinay, then if it’s not a legal fiction, exactly what is a corporation prior to the state recognizing it?<\/strong><\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

That phrase \u201clegal fiction\u201d has proven to be a valuable phrase for leftists and Marxists who want to invade the corporation.<\/p>\n

Thank you. I personally quite dislike that phrase \u201clegal fiction,\u201d and it has proven to be a valuable phrase for leftists and Marxists who want to invade the corporation. So, I want to go through an illustration. Let us say you and I, Roger and Vinay, want to contract with each other, and it’s a free-contracting world so we contract with each other. And each of us\u2026we’re going to put in $5,000 each, so $10,000, to create a publishing company that specializes in books of history, books such as Robert Hessen’s book. So far so good, we can do that. And then we say, well, but we need another $10,000, and we go around to various banks, and they say, well, we’ve never heard of you\u2026sorry, unless you’re going to give us some more collateral, we are not going to give you debt against what you’re claiming is just the collateral of books and IP that you have embedded etc. So, by contracting we are limiting the liability of our association. We have a bank account in a joint name, and let’s say we’re back in the g \u201970s. We have checkbooks and we’re writing checks. We could still do that, but [for] the cheque to be honored by the bank, it needs both our signatures. We are assuring investors that there will not be any fraud. We are assuming that our only customers are, let\u2019s say, two libraries and three bookshops in our little town, and we are assuring them that the book is, or the books are, what we said they would be. We\u2019ve authorized ourselves only to publish books on history and nothing else. Yes, limited editions of, and so ultimately, we find these other friendly bankers since we said our bankers are not willing to lend to us against that collateral alone. We find Walter Donway in New York. He says, oh yes, I’ll put in $5,000 as a loan. So, we\u2019ve got $10,000 plus five, he puts in five, we\u2019ve got $15,000; his $5,000 ranks ahead of us. And we have essentially replicated a limited liability corporation without the state getting involved, other than to say this is an economy where it’s free, it’s laissez faire<\/em>, and contracting rights are respected. Now, if you take that little mini-corporation and try to make it bigger and bigger, you can see that the contracts are going to get more and more complicated. If you have taxes due to the IRS, it says, no, we don\u2019t recognize this Roger and Vinay as anything, as a legal entity. We\u2019ll charge you separately for taxes. Okay. But we have three employees, and [say] it grows to 17 employees. Whose employees are they? And we have some arrangement that is spelled out contractually, that they are employees of both of us. We are not liable for more than what we put into this bank account and whatever you can get out of the sales of our inventory should we go bankrupt. So, you can see as that company gets larger and larger, if we have 10,000 shareholders and a million customers and 40,000 employees, something like an Amazon Limited, it will get unmanageable pretty much well before you reach that stage. So, what the state has said is that we are facilitating free contracting being between individuals; and by inserting a single entity, that contracting has become a lot easier. Even then, you will find when you open the annual report of a big company, and you go through it, at the back normally they list all their subsidiary and associate companies. Anything as large as Amazon, my guess is almost surely, at least the ones I’ve looked at, have 80-, 100-, 150 special-purpose companies and entities, all different legal entities. And you can imagine how complex that documentation gets anyway, but if we did not have that legal entity status, it is going to get virtually impossible. So, Hessen is right in that sense, that the state hasn’t created<\/em> the right of free association. It’s a natural<\/em> right of free association, and embedded in that corporation is the outcome, in my opinion, it’s the outcome of that free association right. So, it is a bunch of contracts that the standing legal entity has entered [into], and that bunch of contracts, is one unified whole that can be traded in its own right. It doesn’t have to be split apart, which gives it synergy<\/em>. That’s why we said, \u201csynergistic bundle of contracts that are alienable from its current owners.\u201d If it’s a listed company, you can just sell it. You might need the approval of the shareholders, but it isn’t tied to who the specific shareholders are. You define them as security holders as at a certain date, and then you can sell it. And when you sell it, it is a bit like [selling] a car. Let me take the analogy of a car. If you have a functioning car, you don’t strip it and disassemble it into four tires and four wheels and seats and all the rest of it and try to sell it that way. You may consider that if it is not a functioning car anymore, it’s been destroyed, and then you might get more out of the parts. Normally, the totality of a car is more than the sum of the individual parts. And it’s the same with a functioning company. The whole bundle of contracts represents everything it has, its assets, its liabilities, its employees. It’s better sold as a single unit. So, to answer the question, what we have is a free-contracting entity, it’s saleable as a unit, and it’s no different. It’s not like the state has created it. The state has merely created the right of free contracting, which is a natural right.<\/p>\n

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Roger Bissel<\/strong>l:<\/p>\n

Okay. I was going to follow up with a question about the family or the household, but instead, it came into my mind just as you were speaking in the last minute or two, in Atlas Shrugged<\/em>, the novel by Ayn Rand, Hank Rearden, who was an industrialist, was really getting into a lot of difficulty with the government. They had passed some laws or regulations that were going to require him to divest his [assets]. He had become so successful that in order to be able to work his steel mills in the most reliable, effective way, he bought a lot of resources like iron and copper and companies that would supply the raw materials that he needed. So, he was very horizontally integrated. I’m not sure if that’s the right term, but he had formed sort of a conglomerate of companies that all worked together in a synergistic way. So, you said that you can transfer ownership of a corporation as a whole, but sometimes I hear about corporations having to be broken up or deciding to break up. How much chaos and damage does that cause, or is it sometimes a really good thing to break up a corporation?<\/strong> Not for the government, but I mean just for the owners.<\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

Firstly, even the trouble that Hank Rearden gets into is because the government invades the right of free contracting. It doesn’t allow him to do what he wants to do. And what he wants to do is always subject to free market constraints. If he did have bankers or creditors, depending on the contract they signed, [they can] leave him because they said, no, we don’t want a broken-up entity, and so on. So, there are always negotiations that take place. When you break up a company, it can be beneficial sometimes, because the company, a conglomerate in particular, can get very large and unwieldy and unfocused because it’s doing too many things. It might be doing pharmaceuticals, it might be doing fertilizers, it might be doing childcare, and retailing food products. And the theory now is that investors are better off diversifying their risks themselves rather than it being done at the corporation level, because it’s pretty hard to get management at the very top level of the holding company that is an expert in everything.<\/p>\n

There is another very clever entity that made the news in corporate finance for many years<\/a>.<\/p>\n

But having said that, there are some conglomerates that are successful like Berkshire Hathaway and Wesfarmers here in Australia. They’re well managed. There is another very clever entity that made the news in corporate finance for many years<\/a>. It’s called Thermo Electron, and what they used to do is equity carveouts. They didn’t sell off all the divisions, but they sold a 49% minority interest of their divisions and listed it on the stock exchange so that they got a transparent, external valuation of each of their divisions. Instead of them being valued by internal politics, they were valued by external agents. And that was very useful. So, as long as we have the free-contracting right, every company can merge or break up or do equity carveouts or whatever they wish.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

Okay. [Here\u2019s] another question prompted by what you said\u2014we’re not going to get through this list are we\u2014the issue of size sometimes comes into play. I read somewhere more than once that in a given group, like a self-sufficient community or even a business, that there’s some upper limit on the number of people working in that unit or in that business. It is somewhere around 150- to 200 people. And if it gets much above that, it becomes unwieldy, inefficient. There’s a communication breakdown. I mean, there can be anyway\u2014you and I might somehow, someday start having trouble talking, but in general, there is a size limitation. And I wondered, is how do corporations in general deal with that?<\/strong> Do they just sort of insulate divisions so they’re at least semi-autonomous, or how do they do that?<\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

I\u2019ve heard of the 150. It used to be between 30- and 150, and the jump from 30- to 150 was made possible, it seems by language, audio, not the written word. So, this is when you’re a tribe and you recognize everyone else in your tribe facially, but it supposedly gets too hard to manage and control a tribe of more than 150 people. I’ve seen this argument from the anthropologists or historians. But, they\u2019re are flawed arguments for limiting the association of people in a modern economy to 150 people because we are not stuck with having to deal with everyone by name and face. We’re not in a tribe. We can spread globally. We have the technology to communicate globally. We have email and smartphones and Zoom and all sorts of things, airplanes to go around and meet people. And by and large, companies are managing very well, even when they have 40,000 employees and 10 million customers.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

All right. Well, look at all the trouble just two people could stir up when you give them some modern technology, right?<\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

That’s exactly right, yes.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

This is no trouble. This is fun. Okay, moving on. You have written previously that this, I call it a newfangled idea, stakeholder capitalism<\/em> is kind of a camel’s nose\u2014well, you didn’t use the phrase\u2014camel’s nose under the tent, but it’s kind of a pathway toward fascism. And explain<\/strong> what that means, what you mean by fascism and how stakeholder capitalism is kind of a pathway to that.<\/strong><\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

Thank you. Yes, I did write about that a couple of years ago. I used the phrase \u201cTrojan Horse,\u201d and it’s not a new idea, except that it is a new phrase. You go back to Ralph Nader, and he was arguing that the corporation bears a grant of a monopoly status by the state. Therefore, it owes society something. And it’s that same idea being brought in like a Trojan Horse into the idea of appropriation. So, let’s go over our definition again. We have a synergistic bundle of contracts in the free-contracting world. In the free contracting world, we are not obligated to take into account the interests of parties that are not a party to the contracts we have. So, to say that employees and customers are stakeholders is kind of obvious. Even if the constitution of our corporation says, if the articles of incorporation say, we will only create nothing more than one feature film or TV series of Atlas Shrugged<\/em> and then we will fold it down, we have to deal with employees and customers and suppliers, and it is in our interest anyway\u2014even if you want to turn a profit or just get the film or TV television series done, it is in our interest to deal with them fairly and squarely to give them what they are owed and what they are worth. Or in fact, like Henry Ford, give them more<\/em> than what they’re worth so you attract the best people to your [venture]. Once you’ve done that, the size that a corporation gets to doesn’t matter. All that matters is a free-contracting right. Now, some of the other stakeholders that are introduced are like community interests or the environmental and social obligations of the company. And the social obligation may be diversity, equity, etc. In our free-contracting world, if we set up a company to do a TV series, we don’t have that obligation, and a third party who’s not a party to the contract doesn’t have the right to invade the contract. But, unfortunately, the corporate contract has always been invaded. Governments have always invaded the free-contracting right. And the more they invaded, the better it was for those specific government people. And it is better eventually, it becomes better for large corporations to become crony corporations. And you get this…what I would call kind of a government-industrial complex, it’s not just the military industry, it’s the whole of government and the whole of industry is one complex of an incestuous kind of relationship. And what is happening with stakeholder capitalism<\/em> is that a phrase being thrown around as if the theory and the practice and the ontology of corporations requires it as a moral duty for them to look after interests that are not party to the existing contracts. And other than the tort liability, they don’t actually owe anything to outsiders.<\/p>\n

What I would call kind of a government-industrial complex, it’s not just the military industry, it’s the whole of government and the whole of industry is one complex of an incestuous kind of relationship.<\/p>\n

If you damage somebody else, then whoever is being negligent is included [caught] in his or her personal liability sense. It’s not limited to the assets of the corporation anyway. But other than that, we don’t have any fiduciary duty at large. So, stakeholder capitalism<\/em> smuggles in that same Ralph Nader concept that we have some fiduciary duties at large beyond shareholders, beyond the contractual rights to employees, beyond the contractual rights to suppliers, in some fuzzy DEI way and in some even more fuzzy way towards the climate of the earth [etc.]. And the danger in stakeholder capitalism<\/em> is another one, which is that of the World Economic Forum. In relation to the size of nations or large corporations, the World Economic Forum is not that large, but its influence is way beyond its size. It’s an NGO that was set up by the United Nations, and to give you a little sprinkling of who the members of the World Economic Forum are, the sponsoring partners include 100 of the world’s largest corporations. That list includes BlackRock, Bridgewater Associates, Bank of America, Coca-Cola, Johnson & Johnson, JP Morgan, Dell Computers, McKinsey, Microsoft, PayPal, and the last [three] won’t surprise you: Pfizer and AstraZeneca\u2026and Johnson & Johnson, too. So, all these people are ganging up, and the World Economic Forum is pretty explicit about what their aims are. It’s not a conspiracy theory. It’s on their website that what they want to do is sort of some kind of rule by technocratic elite. They don’t say that, but you can infer that. They say things like you will own nothing, but you will be happy. Now if you own nothing, who owns it? You know, is the wealth of the whole world going to be destroyed? And if it’s not being destroyed, then somebody else is going to get it. It might be reduced by 20%, and it’ll be owned by a few technocratic elitists who go to six-star hotels in a ski resort like Davos every year to argue what we should do and we shouldn’t do. So yes, stakeholder capitalism<\/em> is very dangerous, and anything hyphenated capitalism is invalid. And I was surprised to see Nikki Haley, the presidential candidate, say that as soon as you have hyphenated capitalism, like Rubio’s common-good capitalism or Bill Gates’ compassionate capitalism, what you actually have is \u201csocialism lite.\u201d But she understates the danger. This isn’t socialism lite. This is fascism intense. Why I called it fascism was I was using Rand’s definition of fascism, which says that if the government owns all property, then it’s socialism. But if the government controls the property and your private sector is a nominal owner, then it’s fascism. So, it’s a partial fascism in that the government isn’t controlling each and every decision. But they\u2014certainly the government or third parties, NGOs that are not party to our original set of contracting\u2014they are able to influence many decisions, unfortunately.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

“…this mongrel notion of stakeholder [capitalism]\u2014Ayn Rand would call that a \u201cpackage deal.\u201d<\/p>\n

Well, perhaps we wouldn’t be surprised by Nikki Haley’s position if we had a peek into the contents of her investment portfolio. I think that a person’s economic or financial involvements are sometimes a good clue. Follow the money, like they say. What you were describing, this mongrel notion of stakeholder [capitalism]\u2014Ayn Rand would call that a \u201cpackage deal.\u201d And you had said any hyphenated capitalism is a dangerous thing.<\/strong> Well, I think the package deals are often very sneaky ways to smuggle in something that is really not good or right. In particular, you’ve got on the one side, in this stakeholder umbrella or tent, you’ve got the people who are involved in making voluntary transactions, trades between the customer and the businessman, between the employer and the employee, etc. And on the other hand, you have the people out in the community and, of course, the government, who\u2019re always there with their fingers in it. So, I’m surprised that for the environmental people like the EPA, that there isn’t some similar idea about the external effects of the corporation. And maybe there is, and I just am not aware of it, but there’s always, the more government involvement, the more that their power expands and the regulations grow, that at any moment when they want to achieve some policy thing or political thing, they can just come in from left field with another regulation and snap the trap shut, and you didn’t even see it coming, and then all of a sudden there it is.<\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

That is a massive danger, and so before we had stakeholder capitalism, we’ve had cronyism. In fact, I read a book by Hunter Lewis about cronyism in the United States, and he says that cronyism pretty much is as old as history, as old as any kind of governance, so it has always existed, but it has gotten quite worse, and let’s just talk about it a little bit, about why it happens, and what are the effects if it happens. So firstly, you have a set of government officials that are either bureaucrats or elected officials, and they\u2019re not typically as bright or as entrepreneurial as, say, Elon Musk or even Bill Gates and Mark Zuckerberg, who made their fortunes in the private sector. Unlike some of the others like Al Gore, supposedly now worth 300 million, Nancy Pelosi worth more than 200 million on a salary of 220K that she’s drawn her entire life. She has not ever been an entrepreneur. Obama is worth 70 million. He charges $400,000 per speech. He has zero experience in business, even as a middle-level manager, let alone as an entrepreneur. Why are businesspeople listening and paying such a great amount to listen to him speak for an hour or two?<\/p>\n

And what they do is\u2026they only employ lobbyists, and they make donations that are called \u201cdark web\u201d donations.<\/p>\n

So, let me take a simple analogy. Let’s say you and I enjoy a soccer game. Probably you don’t, but let’s say we do because it’s a simple game. It’s not as complicated as baseball or cricket, or NFL football. There’s a goal, there’s a ball, there are 11 people on either side. And as long as the game is fundamentally fair, we enjoy it even when our team or the team that we’re backing loses. What we expect of the referee and administrators is nothing less than implementation of the rules of the game, fair and square. But, let’s say the referee and the administrators had an arbitrary right to suddenly change the rules of the game. They can say, oh, I’m sorry, Denmark is losing to the Netherlands in this game. So, from now on, I’ll allow Denmark to have 14 people playing instead of 11, and I will constrain Netherlands to eight. Well, Denmark’s going to win. Or you literally move the goalpost into a corner, or you turn it around so that the player has to go around and kick the goal, or you suddenly make the goal a lot smaller or much bigger for the other team, the defending team. If that can be done, you and I would lose our interest in watching that [game] as a spectator sport because it’s just like gambling. You never know what they’re going to do. But, what if they know what they’re going to do even a little bit in advance? They can profit immensely from insider trading.\u00a0 There’s an allegation that Nancy Pelosi got a huge amount of money, unearned profit, if you will, from a land deal that she knew beforehand was going to happen. It’s not been proven so she’s not out of office, but you know after the President Obama stimulus package, 71 percent of it went to Obama donors, and it was all related to \u201cGreen\u201d funding. If you\u2014like you said, if you follow the money, you know how Al Gore became so rich. And because he’s one of the referees, and they’re either one of the referees on administrators or once they’re out of office, they’re part of a big lobbying firm. Have you heard of a lobbying firm called BIO? That stands for Biotech Innovation Organization. Well, in 2020, they raised $77 million, according to a report. And what they do is\u2026they only employ lobbyists, and they make donations that are called \u201cdark web\u201d donations. So, they’ve been making donations to both political parties on behalf of their customers, and their customers include Johnson and Johnson, AstraZeneca, Pfizer\u2026much of Big Pharma, but they’re not limited to Big Pharma. Let’s see what happens when you have this lobbying and the power that is given to referees and administrators. Let’s take the case of Pfizer. In March 2020, Pfizer’s shares are worth $28. By the end of December 2021, they doubled to $56. No stock splits here, just trading, doubling plus whatever dividends [they issued]. Now that they’re being sued by the state of Texas, they’re down to $28 again. So, you can see the effect of the government influence, of indemnities particularly. The United States spend $31.9 billion in R&D plus the purchase of vaccines\u2026the mRNA vaccines alone, in the course of two years.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

So, let me interrupt. You basically say that Pfizer’s value is now only $28 too high (a tongue-in-cheek remark that Pfizer should be worth zero).<\/p>\n

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Vinay Kolhatkar:<\/strong><\/p>\n

Moderna and the others were guaranteed billions of dollars of sales because you had both those effects, the free [effect] and the compulsion.<\/p>\n

Yes, well, they have a range of products. I’m sure in the past they’ve done some good things. But over the last three years, if you ask Pfizer executives, was it a good idea to have millions of dollars paid to lobbyists? And the answer is, well, you’ve got to look at the investment here. Millions of dollars invested, the return is in billions of dollars. I mean, in the Obama administration, someone had calculated for every dollar you put in, you got something like $24 back in benefits. I’m not across the detail of that calculation, but that’s the kind of return a corporation gets or can get by becoming a crony. And the system of referees and administrators operates with both very large sticks and very large carrots. So, if you don\u2019t invest in a lobbying firm…It\u2019s not a question of saying, well, I\u2019m not interested in super profits by lobbying the government. If you don\u2019t lobby, if you don\u2019t campaign, if you don\u2019t give campaign funds, you could be struck down one day by something like lightning. UPC, which is the biggest competitor to FedEx, had FedEx\u2019s regulator changed by influencing certain senators. And they had hoped that because they were more unionized, they would break the back of FedEx because it was less unionized. They didn\u2019t succeed, but those are the kinds of things you can do. To take the share prices again, AstraZeneca went from $37 to $54 from March 2020 to the end of 2021. Now it\u2019s still on its upward trajectory at $66. It\u2019s not being sued. Maybe someone will, in the UK or Europe.<\/p>\n

Moderna was trading at $22 in March 2020. By December 2021, it was $250 a share.<\/p>\n

Moderna was fresh out of its IPO. It was a relatively smaller company not expected to get this huge contract. It was trading at $22 in March 2020. By December 2021, it was $250 a share, it\u2019s still trading at $89 a share. It had reached a high of $485. Now even the 22- to 250 is over 10 times. And if you had friends in the government such that you knew they’re going to be awarded this contract where all you have to do is produce and the sales are guaranteed because it’s not even just the United States. Governments all over are going to buy your product and they are going to be asked to. First of all, when the product’s free, we tend to take more of it. If chocolates are free, we might take five instead of two. When Medicare makes the doctor free, you go there.\u00a0But if he was charging $50 a visit, you might decide to wait. So, the vaccine was free, but it was worse than being free because it was a whole set of employers, universities, schools\u2026making it compulsory to get the vaccine, to keep earning your livelihood, or to keep studying. So, Moderna and the others were guaranteed billions of dollars of sales because you had both those effects, the free [effect] and the compulsion. And if by any chance you knew that it was going to happen, and you bought Moderna shares, whatever you invested would be worth a lot more now, especially if you sold at the high of $485. If you knew the winds were going to change. And unfortunately, that’s where the game has gone so incredibly awfully wrong.<\/p>\n

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Roger Bissell:<\/strong><\/p>\n

I’m not privy to that sort of information, but there are probably some people in the United States Congress who are, and maybe that would explain why they’re sitting on such big piles of money that their salaries would not explain<\/strong>. So, you know, you said a few minutes ago that any kind of hyphenated capitalism is a dead giveaway, that it’s not the real deal. Well, I think a doubly hyphenated capitalism would be an even better thing. Not better for us, but a clearer signal. Like how about \u201cphony baloney capitalism\u201d?<\/p>\n

 <\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

Well, pretty much we\u2019re there at the moment. I forgot to say the other thing that the price that was set for these vaccines in Israel, it was 24 times cost, according to Oxfam. So, you know, the estimate is that Big Pharma is earning $1,000 in revenue each second, $65,000 every hour from what are essentially guaranteed sales, and those sales are not even at cost price\u2014one more guarantee that was given even by people who were otherwise claiming to be for social equity. Now you and I, or at least me, I wouldn’t support forcing Big Pharma to give away their IP to poorer countries, right?<\/p>\n

\u00a0<\/strong><\/p>\n

Roger Bissell:<\/strong><\/p>\n

No.<\/p>\n

 <\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

Those people who are saying, well, we’re helping Big Pharma for social equity reasons, they took out all the provisions out of that bill because there was a lot of political wrangling and discussion and negotiations. So, they took out the provisions that would effectively guarantee a transfer of technology and a generic manufacture, which would have been much cheaper. And made it very expensive for all governments, and they gave some discounts, I believe, to Senegal and other poorer countries, and they charged Israel 24 times cost, instead of letting the free market determine the price of a vaccine.<\/p>\n

 <\/p>\n

Roger Bissell<\/strong>:<\/p>\n

Well, this reminds me, back in probably the 1970s, there was a U.S. Senator from Wisconsin. I think he was a Democrat. His name was William Proxmire. He was more of an independent, moderate Democrat than anything, but he was very tuned into government waste, and he gave an award every month for the latest outrage. I don’t know if he called it the Golden Screw award or the Golden Toilet Seat award or something like that (Golden Fleece). He’d find cost overruns and just enormously inflated prices that the military and other bureaucracies and the government were paying for their hardware, their supplies, etc. And I thought that was quite amusing, but that sort of thing is\u2014when you have government compulsion, that sort of thing is almost inevitable. And you say, well, this is where we are. How do we get somewhere different and somewhere better? What’s the answer to this situation<\/strong>? Do we just have to ride along in the rowboat until we go over the waterfalls? Or is there some pathway to salvation?<\/p>\n

\u00a0<\/strong><\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

You thought there was a stimulus bill at the end of the financial crisis and a stimulus bill at the end of Hurricane Katrina even. If you go through those bills, you\u2019ll find those little earmarks, which are unconnected to the disaster that happened in Katrina.<\/p>\n

Well, I hope we can do something because, you know, the way the wave in the United States is going, it’s not too far from what’s happening in Russia and China, where everything is captured by the Vladimir Putins of the world. And we have at least got some freedom of speech, some limited freedom of speech. For instance, those fact-checking NGOs, even their money many times has come out of taxpayer funding. You thought there was a stimulus bill at the end of the financial crisis and a stimulus bill at the end of Hurricane Katrina even. If you go through those bills, you\u2019ll find those little earmarks, which are unconnected to the disaster that happened in Katrina. And then they siphoned off funding: $20 million here, $30 million there. I mean, it’s there in black and white. In that sense, it’s not illegal. The problem is that it’s not what the public thought they were getting. And, you know, they can’t go through 300- , 600-page documents to find, oh, shit, there was an earmark for, you know, this property development, which just so happens to be very near where this senator owns land nearby. So, this is a very big problem, of course. And the way around that would have been in the first instance to appeal to the courts because regulation itself is arguably against the US Constitution because regulation acts like it is law. But it isn’t law made by a legislature. It isn’t law that has passed both houses of Parliament [Congress]. It is law that is being drafted and ruled by bureaucrats who can change it that quickly. So, the courts ought to outlaw these things and bring it back into the legal process, but they haven’t done that. The right of free contracting has been abrogated and the courts have not held up the right of free contracting. So our second choice is the electorate. And maybe something like Milei in Argentina happens when everything is broken down. But, if the electorate was extremely well-educated and knowledgeable, then they would hopefully only vote for really genuine politicians who don’t see the political ticket as a ticket to a huge career for people who are not otherwise that talented. I mean, I’ll use the example of Barack Obama. Harvard had racist policies. That’s why he probably got into Harvard. I imagine. And then, you know, being an ex-president, he’s able to charge what is [extreme]\u2014there is no real knowledge in there\u2014the whole emphasis of these meetings is to get to know someone who is connected internally (they are paying for his connections, not knowledge). And he obviously is still active and connected internally. And the Republicans are not that much better. The BIO firm that I was talking about was headed by a former Republican who earned two and a half million dollars. Anyway, he’s retired now. The new CEO of the lobbying firm is a former executive of Johnson and Johnson. So, there is this incestuous relationship between government, lobbying firms, and [industry]\u2014it’s not just Big Pharma\u2014Big Oil, Big Banks, everybody. And then there are revolving doors between the top executives, and it’s all intended to say the things that the public wants to hear about the environment and about other things but do things that people are not well aware of. But fortunately, some investigative journalists have dug in. And they are able to find that out. So, while we are in this phase, I think part of the solution is to keep exposing not only campaign donations of all major organizations, but also these earmarks and places where benefits have accrued to politicians. And of course, keep fighting for a true laissez-faire<\/em> economy because what we\u2019ve got to remember, cronyism is a phenomenal disease. It’s grown very, very large. And it’s not the fault though of the structure of the corporation. The corporation is like a player who can be made to play fairly in a soccer match. But when the referees and the administrators can change the goalposts quite literally in a soccer match, change rules haphazardly, and you just want to play and win, it serves your interest to take the administrators out to lunch, so to speak, and then out to dinner again and shower them with gifts, so that at the very least, if the rules don’t swing in your favor, at least you know what the new rules are going to be in advance of your competitors.<\/p>\n

 <\/p>\n

Roger Bissell:<\/strong><\/p>\n

Yes. What we’ve got now is kind of a hybrid, it’s sort of a combination of cronyism and I guess you could say, welfare-ism. And Ayn Rand used to refer to fascism as socialism for the rich or welfare for the rich.<\/strong> And so, you\u2019ve got the middle class, I think is being whittled away and drained in order to feed these various constituencies. It\u2019s such a daisy chain\u2026the money goes here, the money goes there, it\u2019s hard to tell what the ultimate impact is, except, you know, that it passes through so man\u2019 hands that people are taking their cut out of it. And we producers just go on and we work. Then we drive on our subsidized roads and we send our children to subsidized schools if we can\u2019t afford private, and so on. Then when we retire, we get Social Security that someone else is now paying for because our contributions have already been spent. They weren’t put in a lockbox or anything. So, it’s a very tangled, muddled stew. It’s not really a nice clean neat system like we had when the country started.<\/p>\n

\u00a0<\/strong><\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

No, it’s not any of that now. It’s the dominant way to describe this economy worldwide, in fact, it\u2019s just a crony economy and only the degrees are different between Russia and the United States. If Trump had won, he might have been poisoned physically and hasn’t been.<\/p>\n

 <\/p>\n

Roger Bissell:<\/strong><\/p>\n

Right. Not yet.<\/p>\n

 <\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

“…to encourage that kind of investigative journalism, which really opens the eyes of the electorate about just how much cronyism there is, and it’s not just at the expense of the middle class. It’s at the expense of anyone who’s honest and not part of the feeding trough.”<\/p>\n

And as much as I wouldn’t vote for Trump, I don’t think it’s a good idea to lock out people from being on the ballot. But, coming back to the crony economy, all we can do right now is education because the courts are not willing to reverse the abrogation of contracting rights\u2014a massive education, both in terms of why a laissez-faire<\/em> economy would be the best and take away the rights of these administrators and the referees to do anything other than the proper thing, which is to supply independent courts of law to arbitrate between contractual disputes in a civil and peaceful manner. And you’ve got to limit them to that role and take away all the excess rights from the government. And that will end cronyism. But that’s a very long-term project, if we ever succeed. But the short-term project is to encourage that kind of investigative journalism, which really opens the eyes of the electorate about just how much cronyism there is, and it’s not just at the expense of the middle class. It’s at the expense of anyone who’s honest and not part of the feeding trough. It could be a rich person. It could be a very poor person.<\/p>\n

 <\/p>\n

Roger Bissell:<\/strong><\/p>\n

I think that part of the eye-opening that needs to happen is that people need to understand that when they’re voting, a lot of the time they’re not voting for who’s going to make the actual laws that restrict them, govern them. They’re voting for people to go in and hold an office. And a lot of the people making the actual regulations and laws that control us are not elected, they are career bureaucrats or civil servants. They’re appointed and sometimes they’re answerable to the president, but a lot of the time they’re in there, they’re part of what’s called the Deep State or the Swamp or whatever.<\/p>\n

 <\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

Indeed, even those who are elected are able to hide under empty phrases, so they’re not quite so easily discovered about what their true nature is.<\/p>\n

 <\/p>\n

Roger Bissell:<\/strong><\/p>\n

Well, I think this is a great way to end the year 2023. You cut quite a wide swath through that list of questions there and did a great job. The Savvy Street Show<\/em> will be back with another episode very soon. We’re going to jump on the horse and ride in the New Year and come up with a lot more really interesting content for you. So, Vinay Kolhatkar, thank you so much for all of your good ideas and thoughts. And I’m Roger Bissell, and maybe he’ll turn the tables and be asking me some questions soon. We have other guests planned, too, so it’s not just going to be these two faces that you see.<\/p>\n

 <\/p>\n

Vinay Kolhatkar:<\/strong><\/p>\n

Indeed. Thank you very much, Roger. And shall we say good night and good luck?<\/p>\n

 <\/p>\n

Roger Bissell:<\/strong><\/p>\n

Good night, good luck.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

On the nature of cronyism and the nature of the corporation, part II.<\/p>\n","protected":false},"author":3,"featured_media":9809,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"footnotes":""},"categories":[5,8],"tags":[367,741,714,101,693,488,117],"class_list":["post-9807","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-art-of-living","category-commerce","tag-capitalism","tag-corporation","tag-cronyism","tag-economics","tag-fascism","tag-finance","tag-philosophy"],"acf":[],"_links":{"self":[{"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/posts\/9807","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/comments?post=9807"}],"version-history":[{"count":5,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/posts\/9807\/revisions"}],"predecessor-version":[{"id":9818,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/posts\/9807\/revisions\/9818"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/media\/9809"}],"wp:attachment":[{"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/media?parent=9807"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/categories?post=9807"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thesavvystreet.com\/wp-json\/wp\/v2\/tags?post=9807"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}