How Corporations Came to Rule the World
by Richard Heinberg
The corporation was invented early in the colonial era as a grant of privilege extended by the crown to a group of investors-usually to finance a trade expedition. The corporation limited the liability of investors to the amount of their investment, a right not held by ordinary citizens. Corporate charters set out the specific rights and obligations of the individual corporation, including the amount to be paid to the crown in return for the privilege granted. Thus were born the East India Company, which led the British colonization of India, and Hudson's Bay Company, which accomplished the same purpose in Canada. Almost from the beginning, Britain deployed state military power to further corporate interests-a practice that has continued to the present. Also from the outset, corporations began pressuring government to expand corporate rights and to limit corporate responsibilities.
The corporation was a legal invention-a social-economic mechanism for concentrating and deploying human and economic power. The purpose of the corporation was and is to generate profits for its investors. As an entity, it had and has no other purpose; it acknowledges no higher value.
Many people understood early on that, since corporations do not serve society as a whole, but only their investors, there is therefore always a danger that the interests of corporations and those of the general populace will come into conflict. Indeed, the United States were born of a revolution not just against the British monarchy, but against the power of corporations. Many of the American colonies had been chartered as corporations (the Virginia Company, the Carolina Company, the Maryland Company, etc.), and were granted monopoly power over lands and industries considered crucial to the interests of the crown. Much of the literature of the revolutionaries was filled with denunciations of the "long train of abuses" of the crown and its instruments of dominance, the corporations.
As the yoke of the crown corporations was being thrown off, Thomas Jefferson railed against "the general prey of the rich on the poor"; later he warned the new nation against the creation of "immortal persons" in the form of corporations. The American revolutionaries resolved that the authority to charter corporations should lie not with governors, judges, or generals, but only with elected legislatures. At first, such charters as were granted were for a fixed time, and legislatures spelled out the rules each business should follow. Profit-making corporations were chartered to build turnpikes, canals, and bridges, to operate banks, and to engage in industrial manufacture. Some citizens argued against even these few, limited charters, on the grounds that no business should be granted special privileges, and that owners should not be allowed to hide behind legal shields. Thus the requests for many charters were denied, and existing charters were often revoked. Banks were kept on a short leash, and (in most states) investors were held liable for the debts and harms caused by their corporations.
All of this began to change in the mid-19th century. According to Richard Grossman and Frank Adams in Taking Care of Business, "Corporations were abusing their charters to become conglomerates and trusts. They were converting the nation's treasures into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners intent upon dominating people and nature."
Grossman and Adams note that "In factory towns, corporations set wages, hours, production processes and machine speeds. They kept blacklists of labor organizers and workers who spoke up for their rights. Corporate officials forced employees to accept humiliating conditions, while the corporations agreed to nothing." The authors quote Julianna, a Lowell, Massachusetts factory worker, who wrote: "Incarcerated within the walls of a factory, while as yet mere children-drilled there from five till seven o'clock, year after year . . . what, we would ask, are we to expect, the same system of labor prevailing, will be the mental and intellectual character of future generations . . . a race fit only for corporation tools and time-serving slaves? . . . Shall we not hear the response from every hill and vale, "EQUAL RIGHTS, or death to the corporations?"
Industrialists and bankers hired private armies to keep workers in line, bought newspapers and (quoting Grossman and Adams again) "painted politicians as villains and businessmen as heroes. Bribing state legislators, they then announced legislators were corrupt, that they used too much of the public's resources and time to scrutinize every charter application and corporate operation. Corporate advocates campaigned to replace existing chartering laws with general incorporation laws that set up simple administrative procedures, claiming this would be more efficient. What they really wanted was the end of legislative authority over charters."
During the Civil War, government spending brought corporations unprecedented wealth. "Corporate managers developed the techniques and the ability to organize production on an ever grander scale," according to Grossman and Adams. "Many corporations used their wealth to take advantage of war and Reconstruction years to get the tariff, banking, railroad, labor, and public lands legislation they wanted."
In 1886, the U.S. Supreme Court declared that corporations were henceforth to be considered "persons" under the law, with all of the constitutional rights that designation implies. The 14th amendment to the Constitution, passed to give former slaves equal rights, was actually invoked in their behalf only a few times; corporations invoked it repeatedly. Likewise the first amendment, guaranteeing free speech, was invoked to guarantee corporations the "right" to dominate public discourse. Corporations, after all, were "persons" with qualities and powers that no flesh-and-blood human could ever possess-immortality, the ability to be in many places at once, and (increasingly) the ability to avoid liability. They were also "persons" with no sense of moral responsibility, since their only legal mandate was to produce profits for their investors.
Throughout the late 19th and early 20th centuries, corporations reshaped every aspect of life in America and much of the rest of the world. The factory system turned self-sufficient small farmers into wage earners and transformed the family from an interdependent economic production unit to a consumption-oriented collection of individuals with separate jobs. Advertising turned productive citizens into "consumers." Business leaders campaigned to create public schools to train children in factory-system obedience to schedules and in the performance of isolated, meaningless tasks. Meanwhile, corporations came to own and dominate sources of information and entertainment, and to control politicians and judges.
During two periods, corporations faced a challenge-the 1890s (a depression period when populists demanded regulation of railroad rates, heavy taxation of land held only for speculation, and an increase in the money supply), and 1930s (when a profound crisis of capitalism led hundreds of thousands of workers and armies of the unemployed to demand government regulation of the economy-and to win a 40-hour week, a minimum-wage law, the right to organize, and the outlawing of child labor). But in both cases, corporate capitalism emerged intact. In the words of historian Howard Zinn, "The rich still controlled the nation's wealth, as well as its laws, courts, police, newspapers, churches, colleges. Enough help had been given to enough people to make Roosevelt a hero to millions, but the same system that had brought depression and crisis . . . remained."
World War II, like previous wars, brought huge profits to corporations via government contracts. But following this war, military spending was institutionalized, ostensibly to fight the "cold war." Despite occasional regulatory setbacks, corporations seized ever more power, and increasingly transcended national boundaries, loyalties, and sovereignties altogether.
In the 1970s, capitalism faced yet another challenge as post-war growth subsided and profits fell. The U.S. was losing its dominant position in world markets, the Vietnam war had weakened the American economy, and Third-World countries were demanding a "North-South dialogue" leading toward greater self-reliance for poorer countries. President Nixon responded by doing away with fixed currency exchange rates; later, newly-elected president Reagan, at the 1981 Cancun, Mexico meeting of 22 heads of state, refused to discuss new financial arrangements with the Third World, thus effectively endorsing their further exploitation by corporations.
Meanwhile, the corporations themselves also responded with a new strategy. Increased capital mobility (made possible by floating exchange rates and new transportation, communication, and production technologies) allowed First-World corporations to move production "off-shore" to "export-processing zones" in Third-World countries-usually, military dictatorships like Korea. Corporations also undertook a restructuring process, moving toward "networked production"-in which big firms, while retaining and consolidating power, hired smaller firms to take over aspects of supply, manufacture, accounting, and transport. (Economist Bennett Harrison defines networked production as "concentration of control combined with decentralization of production".) This restructuring process is also known as "downsizing," because it results in the shedding of higher-paid employees by large corporations and the hiring of low-wage contingent workers by smaller subcontractors.
Jeremy Brecher and Tim Costello write in Global Village or Global Pillage that "As the economic crisis deepened, there gradually evolved . . . a 'supra-national policy arena' which included new organizations like the Group of Seven industrial nations (G-7) and NAFTA and new roles for established international organizations like EU, IMF, World Bank, and GATT. The policies adopted by these international institutions allowed corporations to lower their costs in several ways. They reduced consumer, environmental, health, labor, and other standards. They reduced business taxes. They facilitated the move to lower wage areas and threat of such movement. And they encouraged the expansion of markets and the 'economies of scale' provided by larger-scale production."
All of this has led to a globalized economy in which (again quoting Brecher and Costello), "All over the world, people are being pitted against each other to see who will offer global corporations the lowest labor, social, and environmental costs. Their jobs are being moved to places with inferior wages, lower business taxes, and more freedom to pollute. Their employers are using the threat of 'foreign competition' to hold down wages, salaries, taxes, and environmental protections and to replace high-quality jobs with temporary, part-time, insecure, and low-quality jobs. Their government officials are justifying cuts in education, health, and other services as necessary to reduce business taxes in order to keep or attract jobs."
Corporations, no longer bound by national laws, prowl the world looking for the best deals on labor and raw materials. Of the world's top 120 economies, nearly half are corporations, not countries. Thus the power of citizens in any nation to control corporations through whatever democratic processes are available to them is receding quickly.
It remains to be seen: given a situation in which environmental, health, and economic conditions are worsening, how will the general population respond? Here again, a little history may help us understand the options available.
Hurdles in the Path
The populism of the 1890s failed for two main reasons-divisiveness within and co-optation from without. While many populist leaders saw the need for unity among people of different racial and ethnic backgrounds in attacking corporate power, racism was strong among many whites. Most of the Alliance leaders were white farm owners who failed, in many instances, to support the organizing efforts of poor rural blacks-and poor whites as well-thus dividing the movement. "On top of the serious failures to unite blacks and whites, city workers and country farmers," writes Howard Zinn, "there was the lure of electoral politics. . . . Once allied with the Democratic party in supporting William Jennings Bryan for President in 1896 . . . the pressure for electoral victory led Populism to make deals with the major parties in city after city. If the Democrats won, it would be absorbed. If the Democrats lost, it would disintegrate. Electoral politics brought into the top leadership the political brokers instead of the agrarian radicals. . . . In the election of 1896, with the Populist movement enticed into the Democratic party, Bryan, the Democratic candidate, was defeated by William McKinley, for whom the corporations and the press mobilized, in the first massive use of money in an election campaign."
Today, a new populist movement could easily fall prey to the same internal divisions and tactical errors that destroyed its counterpart a century ago. In the coming American presidential election, populists face the choice of supporting their own candidate (Ralph Nader) and thereby contributing to the election of the "right-centrist" pro-corporate Republican candidate (Dole), or supporting Clinton and seeing their movement co-opted by "left-centrist" pro-corporate Democrats.
Meanwhile, though African Americans, Asian Americans, Hispanic Americans, European Americans, and Native Americans have all been victimized by corporations, class divisions and historical resentments often prevent them from organizing to further their common interests. Currently, ultraright candidate Pat Buchanan is appealing simultaneously to "populist" anti-corporate and anti-government sentiments among the working class, and to xenophobic white racism. Buchanan's critique of corporate power is shallow and of questionable genuineness, but at present it is the only such critique showing up in the corporate-controlled media. One cannot help but wonder: Are the corporations looking for a lightning rod to rechannel the anger building against them?
While Buchanan has no chance of winning the presidency this year, his candidacy does raise the specter of another kind of solution to the emerging crisis of popular resentment against the system-a solution that again has roots in the history of the past century.
A False Revolution
In the early 1900s, workers in Italy and Germany built strong unions and won substantial concessions in wages and work conditions; still, after World War I they suffered under a disastrous postwar economy, which fanned unrest. Meanwhile, heavy industry and big finance were in a state of near total collapse. Bankers and agribusiness associations offered financial support to Mussolini-who had been a socialist before the war-to seize state power. Within two years, the Fascist party (from the Latin fasces, for a bundle of rods and an axe, symbolizing state power) had shut down all opposition newspapers; crushed the socialist, liberal, Catholic, democratic, and republican parties (which had together commanded about 80% of the vote); abolished unions; outlawed strikes; and privatized farm cooperatives.
In Germany, Hitler led the Nazi party to power, then cut wages and subsidized industries. In both countries, corporate profits ballooned. Understandably, given their friendliness to big business, fascism and nazism were popular among some prominent American industrialists (such as Henry Ford) and opinion shapers (like William Randolph Hearst).
Fascism and nazism relied on centrally-controlled propaganda campaigns that cleverly co-opted the language of the left (the Nazis called themselves the "National Socialist German Workers Party"-while persecuting socialists and curtailing workers' rights). Both movements also made rational use of irrational symbols-scapegoating minorities, appealing to mythic images of a glorious national past, building a leader cult, glorifying war and conquest, and preaching that the only proper role of women is as wives and mothers.
As political theorist Michael Parenti points out, historians often overlook fascism's economic agenda-the partnership between Big Capital and Big Government-in their analysis of its authoritarian social program. Indeed, according to Bertram Gross in his startlingly prescient Friendly Fascism (1980), it is possible to achieve fascist goals within an ostensibly democratic society. Corporations themselves, after all, are internally authoritarian; and as they increasingly dominate politics, media and economy, they can mold an entire society to serve the interests of a powerful elite without ever resorting to storm troopers and concentration camps. No deliberate conspiracy is necessary, either; each corporation merely acts to further its own economic interests. If the populace shows signs of restlessness, politicians can be hired to appeal to racial resentments and memories of national glory, dividing popular opposition and inspiring loyalty.
In the current situation, "friendly fascism" works somewhat as follows. Corporations drive down wages and pay fewer taxes (through mechanisms outlined above), gradually impoverishing the middle class and creating unrest. As corporate taxes are cut, politicians (whose election was funded by corporate donors) argue that it is necessary to reduce government services in order to balance the budget. Meanwhile, the same politicians argue for an increase in the repressive functions of government (more prisons, harsher laws, more executions, more military spending). Politicians channel the middle class's rising resentment away from corporations and toward the government-which, after all, is now less helpful and more repressive than it used to be-and against social groups easy to scapegoat (criminals, minorities, teenagers, women, gays, immigrants). Meanwhile, debate in the media is kept superficial (elections are treated as sporting contests), and right-wing commentators are subsidized while left-of-center ones are marginalized. People who feel cheated by the system turn to the Right for solace and vote for politicians who further subsidize corporations, cut government services, expand the repressive power of the state, and offer irrelevant scapegoats for social problems with economic roots. The process feeds on itself.
Within this scenario, Pat Buchanan (and similar ultra-right figures in other countries) are not anomalies, but rather predictable products of a strategy adopted by economic elites-harbingers of a less-than-friendly future that could ensue if "moderate" tactics for the consolidation of power were to fail.
Cause for Hope?
These circumstances are, in their details, unprecedented; but in broad outline we are seeing the reenactment of a story that goes back at least to the beginning of civilization. Those with power are always looking for ways to protect and extend it; and to make it seem legitimate, necessary, or invisible, so that popular protest seems unnecessary or unfeasible. If protest comes, they always try to deflect anger away from themselves.
The leaders of the new populist movement appear to have a good grasp of both the current circumstances and the historical ground from which these circumstances emerge. They seem to have realized that, in order to succeed, the new populism will have to:
avoid being co-opted by existing political parties
heal race, class, and gender divisions and actively resist any campaign to scapegoat disempowered social groups
avoid being identified with an ideological category-"communist," "socialist," or "anarchist"-against which most of the public is already well inoculated by corporate propaganda
keep the public discussion narrowly focused on the most vulnerable link in the corporate chain of power-the legal basis of the corporation
internationalize the movement so that corporations cannot undermine it merely by shifting their base of operations from one country to another.
The formation of the new Alliance was announced in an article by Ronnie Dugger in the August 14, 1996 issue of The Nation. In that article, Dugger wrote: "I propose the emphasis on Populism because the 19th-century Populists denied the legitimacy of corporate domination of a democracy, whereas in this century the progressives, the unions and the liberals gave up and forgot about that organic and controlling issue. I propose that we seize the word Populism back from its many hijackers, its misusers-the George Wallaces, David Dukes, Irving Kristols, Newt Gingriches-and restore its original meaning in American history, that of the anti-corporate Populist movement of the 1880s and 1890s. Our point, our purpose, is the well-being and enhancement of the person."
As Lawrence Goodwyn noted in his definitive work, The Populist Movement, the original Populists were "attempting to construct, within the framework of American capitalism, some variety of cooperative commonwealth"; this was "the last substantial effort at structural alteration of hierarchical economic forms in modern America." The new populists are, in Dugger's words, "ready to resume the cool eyeing of the corporations with a collective will to take back the powers they have seized from us." The more specific tactics and goals of the Alliance are to be determined by "democratic conversations" to be held in and among local Alliance groups, which are now forming around the country. In his article, Dugger makes a few policy suggestions, with the caution that they represent "only one person's contribution to those conversations"; these include: a prohibition of contributions or any other political activity by corporations; single-payer national health insurance with automatic universal coverage; a doubling of the minimum wage, indexed to inflation; a generic low-interest-rate national policy, entailing the abolition of the Federal Reserve System; statutory reversal of the court-made law that corporations are "persons"; a national public oil company; limitations on ownership of newspapers, magazines, radio and TV stations to one of any kind per person or owning entity; and the halving of military spending.
The Alliance draws at least some of its inspiration from the work of Richard Grossman (one of its founders), whose Program on Corporations, Law & Democracy explores the legal basis of corporate power. Grossman believes that it is possible to control-and, if necessary, dismantle-corporations by amending or revoking their charters. For the past two years, the Program on Corporations, Law & Democracy has been organizing "Rethinking Corporations/Rethinking Democracy" meetings around the country.
Since the largest corporations are now transnational in scope, the new populism must confront their abuses globally. The International Forum on Globalization was founded for this purpose in 1994, as an alliance of 60 activists, scholars, economists, and writers (including Jerry Mander, Vandana Shiva, Richard Grossman, Ralph Nader, Helena Norberg-Hodge, Jeremy Rifkin, and Kirkpatrick Sale) to stimulate new thinking and joint action along these lines. In a position statement drafted in 1995, the IFG says that it "views international trade and investment agreements, including the GATT, the WTO, Maastricht, and NAFTA, combined with the structural adjustment policies of the International Monetary Fund and the World Bank, to be direct stimulants to the processes that weaken democracy, create a world order in the control of transnational corporations, and devastate the natural world. . . . The IFG will study, publish and actively advocate in opposition to the current rush toward economic globalization, and will seek to reverse its direction. Simultaneously, we will advocate on behalf of a far more diversified, locally controlled, community-based economics. . . . We believe that the creation of a more equitable economic order-based on principles of diversity, democracy, community and ecological sustainability-will require new international agreements that place the needs of people, local economies and the natural world ahead of the interests of corporations. . . ."
Leaders of the new populism appear to realize that anti-corporatism is not a complete solution to the world's problems; that the necessary initial focus on corporate power must eventually be supplemented by a more general critique of centralizing and unsustainable technologies, money-based economics, and current nation-state governmental structures; efforts to protect traditional cultures and ecosystems; and a renewal of culture and spirituality. Nevertheless, the Alliance and IFG provide useful rallying points for citizens' self-defense against tyranny in its most modern, invisible, effective, and occasionally even seductive forms.