1 Answer | Add Yours
As the Great Depressions proved, the invisible hand is not infallible, in fact it is as fallible as anything else related to man. The conduct of Monopolies during the 1800s in America also proves that corporations should not be free to do whatever they want, lest they get to be "above the law."
Adam Smith's invisible hand, is also one of the seven deadly sins. It is the sin of avarice or greed. Seeking ones own well being even at the detriment of others. While this is a powerful motivator, the fact that it sometimes requires the detriment of others is extremely problematic. It is widely recognized that paying less than the cost of living for labor that is beyond human capabilities is absolutely immoral, but the invisible hand, doesn't take this into account. Since the invisible hand doesn't recognize morality (being a sin) it is fallible.
Corporations are business organizations owned by people with limited liabilities. This protects the owners and operators from liability, but it also gives the corporation responsibilities. One corporation corners a market, and then can charge way more than is necessary to pay all the employees and generate a profit, because there's nothing to undercut its market. That is the definition of a monopoly, and a possibility that Adam Smith never considers in Wealth of Nations. More troublesome is that as a Corporation grows, it can begin to corner other markets and eventually you end up with a corporation that is the law, and becomes corrupted by its power into believing it is "above the law." The people need some way to keep this from happening, and Government regulation on Corporate conduct is the solution. The Corporation, like all persons, is subject to the law, and faces consequences for violations of the law.
We’ve answered 318,915 questions. We can answer yours, too.Ask a question