Friday, April 19, 2013


Many of us don’t think much about the how corporations have influenced the history of the USA.  Maybe it’s because corporations are such an integral part of our lives, like the food we eat and the work we do and the air we breathe that it’s impossible to step back and get perspective on what they do.  While there’s a lot of books about big companies like U.S. Steel there’s been very little written about how the laws and court rulings have evolved that protect as well as regulate the corporate entity.

I’ve been reading Ted Nace’s excellent book Gangs of America: The Rise of Corporate Power and the Disabling of Democracy.  Much of this post summarizes information in Nace’s book.  Another excellent book about the development of corporations is Thom Hartmann’s  Unequal Protection: How Corporations Became “People” - and How You Can Fight Back.

Maybe there’s not much discussion about corporations because the corporate presence is so pervasive and all powerful in our lives that we’d rather not think about it.  That’s too bad because when people tune out and sit in front of the television they are barraged with yet more corporate messaging.  We accept the relentless message from the media and our elected leaders that whatever is good for corporations must by extension be good for the rest of us.
It was later in my life when I finally took a course on how corporations operate.  I was one of those college students who entered college when the Vietnam war was going full out.  It’s hard to describe the anger of those times, but there was the widespread belief then, as there is now, that the people in power were dismissive, arrogant, even contemptuous of the rest of us.  I dropped out of college.  I wanted to work with my hands where I could see the results of my efforts.  I wanted something that made sense, because few of the possible career paths that college was preparing me for made much sense.  After a few decades I got tired of barely making enough to live on.  I went back to college, got a degree in science and then a job with a Fortune 500 company as a medicinal chemist.  That was when I got a real education.

What I found out at the big pharma company was this:  big corporations hold the power in this country.  Government works for big business.  Simple as that.   All the hair on fire rhetoric about big government running our lives somehow ignores the elephant in the room – corporate power. 
There’s been a movement called the Tea Party that wants, among other things, a return to the days of tri-cornered hats, when we had a “free market.”  I’ll just say that there’s no such thing as a totally free market, never was, any more than there’s such a thing as a football game with no officials.  Markets always need a set of rules, or guidelines, in which they function.  In medieval times some of those rules were laid down by the Church, but later that function went to government.  And of course in recent times we have been seized by the notion that big business will establish its own guidelines. 
The background for the early citizen’s attitude about corporations begins with the East India Company.  Not only was it the largest corporation in the world for 200 years, it was more powerful than any nation on earth.  It’s quarter million man army, mostly sepoys, was twice the size of Great Britain’s.  It conducted it’s own criminal trials and had it’s own jails.  It controlled the Indian subcontinent with a brutality that surpassed any country with dreams of empire and literally bled the place dry. 
The East India Company pioneered the raising of capital by joint-stock offerings to third party investors.  The East India Company also became a separate entity from its owners, giving it’s owners limited liability for the actions of the company.  These are two of the essential elements of a modern corporation.

The colonists in America had their own experiences with the East India Company.  In 1772 Europe went through a depression and the company was sitting on a 3 year supply of tea in its warehouses.  The company came up with a plan to dump the tea on the American colonies at a very low price, undercutting in price the supply of tea brought in by Dutch smugglers to the colonies at the time.  The plan didn’t stop there.  The British governors in the colonies were to appoint local consignees – think nepotism - to sell the tea, sidestepping the network of American merchants .  It was a case of a vertically integrated large corporation pushing out the local merchants with the support of government, in this case the British government.

Much has been made about the injustice of taxation without representation, but that was not the impetus for the Boston Tea Party.  The merchants of the colonies were not about to let a the East India Company take away their livelihood.   They formed a raiding party, boarded three ships in Boston Harbor and emptied most of their tea into the water.  It wasn’t just symbolic either.  When they were finished 90,000 pounds of tea was in the water, 8% of Americans yearly consumption of tea. 
From a handbill distributed prior to the Tea Party:

“The East India Company, if they once get Footing in this (once) happy country, will leave no Stone untruned to become your Masters. . . They have a designing, depraved, and despotic Ministry to assist and support them.  They themselves are well versed in TYRANNY, PLUNDER, OPPRESSION andBLOODSHED.  Whole Provinces labouring under the Distresses of Oppresion, Slavery, Famine, and the Sword, are familiar to them. Thus they have enriched themselves, ­-thus they are become the most powerful Trading Company in the Universe. . .”

The Boston Tea Party was a revolt by local merchants to stop a large and abusive corporation backed by the British government from destroying their livelihoods.  Up until that time the colonists relationship with the British government had been an uneasy but working relationship.  The British had repealed many of the most onerous taxes on the colonists, who had the knack for being quarrelsome and vocal enough to extract some concessions from the British.  Still most colonists retained loyalty to Britain. 
Fast forward and today corporations can do pretty much what they want.  Influence an election?  Money is speech according to a recent supreme court decision, and corporations have lots of money.  Hide money in offshore tax havens?  Not a problem.  Set up holding companies and shell corporations to gain advantages?  Get laws written for your benefit using your influence on congress?  Sue a municipality that makes a regulation you don’t like?  Sue an individual who says something you don’t like?  All those capabilities and much more are now in the corporate toolkit.

The framers of the constitution had long discussions about how (not if) corporations should be regulated.  Ben Franklin and George Washington wanted the federal government to control certain types of corporate charters, mainly those for building canals, roads and bridges.  But the fear of another East India Company developing from a federally chartered corporation led the framers to delegate the issuing of charters to the states.

Synposizing from Mr. Nace’s book, here’s a list of the typical controls that were put into corporate charters in the first half of the 19th century: 
·         The chartered corporation was permitted one specific function, such as building a canal.
·         The corporation had a predetermined lifespan, usually 20 to 50 years
·         Corporations could only own property that was relevant to their function
·         The amount of capital that a corporation could control was limited
·         Corporations could not own stock in other companies
·         Profits were regulated.  Some charters required the corporation to buy back stock with its profits and then convert to a public entity
·         Some charters required a minimum number of shareholders.  Some charters required unanimous consent of all the shareholders for major decisions
·         Limited liability of shareholders was a rarity. 
·         Activities not expressly granted in the charter were not allowed
Yes folks those were the controls put in place by government in the so-called free market of the early 19th century.  It’s not that the early citizens were anti-business, that was hardly the case.  Most commerce and industry at the time was in the form of family businesses and partnerships, and the country’s economy grew rapidly during that time.  But those people understood the dangers of a large corporation that answered to nobody, was driven only by profits, was immortal, shielded its owners from liability for its actions,  and could hide its activities with little accountability.

Today do most of us understand the dangers of giving such a business entity nearly unlimited powers?  Do many of us understand that the pundits and politicians who rail against “big government” actually carry the water for corporations that in fact actually like government as long as it does their bidding?  It's time to examine and question what role the corporation should play in our lives, and what powers "We the people" will allow those corporations to have.  


No comments:

Post a Comment