UNDERMINING CORPORATISM: SOME OLD AND NEW IDEAS

Posted on July 8, 2004 by Dave Pollard

Corporatists believe that government, and government regulation, are inherently inefficient, and should be minimized or even eliminated, except as a mechanism to funnel tax dollars from consumers to corporations to ‘subsidize’ activity (like agriculture and military adventure) that is deemed necessary to grow demand and protect supply of goods and services, but is not inherently highly profitable. As Joel Bakan argues compellingly in both the book and the film entitled The Corporation, the single-minded pursuit of profit by corporations, endowed with ever-increasing rights and powers and protected more and more from citizen and consumer action by stifling law, has made such corporations pathological, and this threatens our democracy to its core. As I argued in an earlier article:

As in the Corporate Robber-Baron era at the end of the 19th century, the only things separating us from global corporatism today are the democratic ballot box and the vigilance of public interest groups and non-mainstream media. The mainstream media, owned and controlled by big corporations, already self-censor news that is anti-corporatist. The collapse and privatization of public education is leading to the corruption of what our children learn — to a corporatist-friendly message. Public health and well-being are deteriorating because dominant private providers can generate superior ROI by serving only the rich. The continuing dumbing-down of the electorate, and its disillusionment due to gerrymandering and other anti-democratic political abuses, plays right into the hands of corporatists. And the sale of public land, forests, resources and institutions to private interests is a sale of our future, and the birthright of our children, to anti-democratic forces that have no interest in the welfare or well-being of people.

Many people think the answer is political and legal reform of corporations to make them responsible to non-shareholders, communities and the environment. Bakan argues this is naive, and quotes the usually-moderate Peter Drucker as saying corporations can’t be all things to all people, and should stick to doing what they do well: “If you find an executive who wants to take on social responsibilities, fire him”. Corporatist apologists like Milton Friedman argue cynically that public organizations don’t work, because people are inherently selfish and self-interested, and will always put their personal interest ahead of others’ well-being. Bakan reminds us, however, that “the corporation was originally conceived as a public institution whose purpose was to serve national interests and advance the public good”, and that state Attorneys-General do have the power (and some would say, the responsibility) to simply dissolve a corporation for wrongdoing and sell its assets to others who will run it in the public interest. He lays out a discouraging case that “not only is the state playing a diminishing role in protecting citizens from corporations, it is playing an expanding role in protecting corporations from citizens”. But like Peter Singer, Bakan is pragmatic and warns that the job will be difficult: Corporations cannot be relied upon to reform or restrain themselves, but at the same time governments which are already the handmaidens of corporatist interests are not going to be inclined to institute new regulations and restrictions that bite the hand that feeds them. His prescription contains a mix of regulation, vigilance and self-education:

Re-conceive and re-legitimize government regulation to bring corporations under democratic control and ensure they respect the rights and welfare of citizens, communities and the environment
Staff the regulatory enforcement agencies at realistic levels
Increase personal liability of corporate directors and managers
Bar repeat offender corporations from government contracts
Suspend corporate charters of companies that flagrantly violate the public interest
Introduce the “precautionary principle” to govern corporate responsibility for the environment and public health & safety (i.e. prohibiting and prosecuting actions that are “reasonably likely” to cause public harm, not just those “proven beyond doubt” to have done so)
Make regulatory agencies more citizen-facing, responsive and inclusive
Protect and enhance the standing of worker associations, environmental, consumer and human rights organizations in monitoring and regulating companies
Publicly finance elections, ban corporate donations and constrain lobbying
Introduce proportional representation and end gerrymandering
Preserve public institutions and regimes to manage and govern education, health, welfare, culture, law enforcement, emergency services, parks and natural resources, public spaces and advertising to children (all areas where profit motive should not drive decisions)
Shift practices of the WTO, World Bank and IMF away from privatization and market fundamentalism and towards protecting the greater public good
Educate and remind citizens that corporations are our creations and we can choose to do with them whatever we want

I have no quibble with these recommendations, except that they’re not terribly novel, they mostly lay out a general strategy rather than specific “how to” steps, and they’re likely to be extremely difficult and fiercely resisted by the powers that be. But they need to be done.

I started thinking about what we could do that might be more positive, less confrontational, and achieve some more immediate benefits relatively simply. I’m new to pragmatism, so cut me some slack here, but here are some additional ideas I came up with:

Require all government contracts to be awarded to small, local businesses that meet specified social and environmental standards, in order to encourage and stimulate entrepreneurship and level the business ‘playing field’
End all corporate subsidies of business, cold turkey, and make them, and government budget deficits, illegal except during times of national emergency
Shift taxes from ‘goods’ (i.e. employment, ‘clean’ income) to ‘bads’ (i.e. waste, pollution, use of non-renewable resources)
Allocate 20% of major media advertising time to consumer education and consumer advocacy spots, produced by a consortium of labour, environmental, consumer and human rights organizations, completely funded by a 20% surtax on corporate advertising
Introduce substantial taxes on currency speculation, commodity and land speculation, and on foreign investment and offshoring
Eliminate extraterritoriality provisions (those that allow corporations to sue governments for restraint of trade when they enact laws protecting their workers and the environment) from NAFTA and other so-called ‘free’ trade agreements
Re-permit the use of import duties under ‘free’ trade agreeements to protect domestic industry (notably, to offset the impact of massive US and European agricultural subsidies)

I have one idea that is more radical, but still simple: A phased-in size cap for corporations. The cap would limit the revenues, assets and number of employees of any one corporation, and be lowered each year; and no individual or group of individuals would be allowed to beneficially own or control more than one corporation. The complexities of beneficial ownership and control have already been worked out in most Western nations’ tax codes. The use of multiple corporations serves no social or business purpose other than to evade taxes, obscure the true ownership of ‘anonymous’ corporations and evade legal responsibility and liability for corporate wrongdoing. Spinning off businesses from those that exceed the size cap would not be hard to do, and would democratize corporations and make them more manageable and resilient, and redistribute wealth equitably and painlessly. I truly believe that most of the emergent evils of corporations are more a function of their sheer staggering size than their profit motivation.

And if very wealthy citizens question what they should be doing with the money they are forced to divest from their myriad corporations, the answer is that they should invest it in their country — in government bonds and T-Bills that will start to lessen their governments’ dependence on foreign debt. I know the idea that wealth and power brings with it commensurate responsibility is considered quaint and unfashionable these days, but it’s not such a bad idea, and if we start teaching it to children now, they might one day tell horror stories to their children of the ‘old’ days when corporations were Frankenstein monsters that ruled the world.

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14 Responses to UNDERMINING CORPORATISM: SOME OLD AND NEW IDEAS

Yenayer says:

July 9, 2004 at 03:24

In a democracy, the king is not the customer but the CITIZEN… very big difference. I think you miss this point Miguel.Citizens should have means to control both Government and Corporations. “Citizen” and “Education” are the keys words ..
James Drogan says:

July 9, 2004 at 04:31

One of my Baruch colleagues sent me an article, But can you teach it?, from the May 20 edition of the Economist. In the article is the line “Business schools sell themselves as a way for students to raise their incomes.” Perhaps the seeds of bad behavior are sown early and unwittingly.
Renee Stephen says:

July 9, 2004 at 09:05

John Ralston Saul points out how very romantic the corporatist ideas are: that corporations are people, have lives and loves; they have children, parents, and intense relationships with one another. They eat and breathe and perspire, and they die. Isn’t that lovely? Unfortunately, it removes responsibility from real people and allows a level of abstration from the real world that is truly astonishing. The corporate entity is treated as our special children: they’re given perks and windfalls allowed, and allowed to have no social conscience or responsibilities.
Johnny Nemo says:

July 9, 2004 at 10:03

How long until corporations, as legal people, get the right to vote?The argument would probably be something like, “As legal people, corporations are just as affected the governments they must live under, and it’s not fair that they shouldn’t have a say in that government.”
Derek says:

July 10, 2004 at 01:35

Some thoughts on your additions:14. are small companies going to be able to supply all the services that the government needs? can small companies build military transport planes? I’m not so sure.15. when you mention ending all subsidies, does that include farmers? is this really possible?18. actually, land speculation is taxed at twice the going rate for property taxesAs to trade and competition, the new problem is not NAFTA, its China. Not only are they going to continue to export a large amount of products to this country, they also hold a danger quantity of the US currency. This is going to end up causing a mess no matter what is done.
Sorin says:

July 12, 2004 at 02:03

I was preparing to write a polemic comment to your post but discovered Miguel’s one and breathed with relief – he’s done the job I was peparing to undertake : shake the amazing amount of shit out of your post. Your post sounds so much as Communist Party propaganda to me.Just a few “selected pieces” – point 12 (ok, it’s not you, it’s Bakan, but you “have no quibble” with it) – “shift practices of the WTO, […] towards protecting the greater public good” ??? Who’s to say what the “greater public good” is, Dave ? Who defines the “greater public good” You ? Me ? The CEO of the “World Corporation” ? I thought you were a supporter of democracy and the ballot box. Well, bad news for you, Dave. Indirectly, VERY indirectly maybe, I agree, but still, the exercise of DEMOCRACY has led to the WTO, World Bank and IMF supporting whatever they support NOW, which apparently doesn’t please you.One of the most naive and laughable recommendations – 14 – this one is a pearl from you – “require ALL govenrment contracts to be awarded to small, local businesses …” ??? What a joke ! I might not agree with the way most government contracts are awarded, but I certainly wouldn’t support having major public works such as sewers, water purification, power generation, transportation infrastructure contracts awarded to “small, local businesses”. Because all business is created in order to GENERATE money, businesses are here FOR PROFIT. Small business is even more reckless in the quest for profit than big corporations. Small business KNOWS it can get away with far worse practices than big business, because they are not under the same level of public scrutiny. There is this old, middle age saying that goes “Only fools and crooks rejoice when the king changes” and encouraging small business to replace the big ol’ corporations equates to that : supporting a new king to the throne, but one that, unlike the old one, hasn’t filled its personal coffers yet with the gold of the peasants, and isthus avid for gain and many times more exploitive than the old king was.
Renee Stephen says:

July 12, 2004 at 09:15

Sorin, the next time I hear somebody bitch about “those greedy small businesses” I’ll give you a call, I promise.In a large business, your share prices per quarter are all that matter. Whether or not they’re inflated because of excessive stock market gambling or a good currency exchange rate that day, they’re far too divorced from the actual amount of product being sold and produced. What’s the old saw? “Don’t raise prices, fire a few vice presidents.” Small businesses are more responsive and definitely more closely involved with their actual service. Their lack of infrastructure for handling large jobs is still an issue that I don’t see addressed here, but that’s no reason to be a jerk.
Burkhard Kloss says:

July 13, 2004 at 03:15

I could take issue with lots of your ideas, but I’ll focus on just point 20:# Re-permit the use of import duties under ‘free’ trade agreeements to protect domestic industry (notably, to offset the impact of massive US and European agricultural subsidies).Why not just stop agricultural subsidies. Full stop. If food is produced abroad more cheaply because of subsidies, that’s fine – how do you loose if a foreign govermnent spends its money subsidising your food?
Jon Husband says:

July 13, 2004 at 14:36

Here’s a nice little pick-up and interpretation of your post at the blog GiftHub, which is concerned with the flourishing of Giving as a path towards a more civil society.
Jon Husband says:

July 13, 2004 at 14:40

I wonder … hmmm… if sorin is Raging Bee ?
Sorin says:

July 14, 2004 at 00:55

I am a jerk because I don’t agree with Dave’s naive, utopian ideas ? Because I don’t join in with the yesmen and sycophants that plunged the half of Europe I’m coming from into Stone Age ? What I say is based on my personal experience. Thus I wasn’t counting on you to call me when you see something, because I see it everyday : I’m in a small business working for big business. Big business is under constant scrutiny from the press and the authorities and spends lots of money trying to demonstrate they behave. This of course is not synonimous with actually behaving, but does result in a pretty decent overall behaviour. Meanwhile, small business is getting away with practices that would provoke a serious stir were they to be adopted by the bigger companies. Which actually is not saying that they aren’t more flexible and more involved with their actual service. What I was pointing out is that in as far as I can tell, this flexibility and increased level of care to customers is achieved by decreasing the level of care to employees to barely acceptable levels. At least where I am, big business pays more, provides more benefits to employees and shows more social responsibility than their smaller brethren. Of course, to their customers, they provide less value at a higher price, but I thought this was out of scope for this discussion.
Dave Pollard says:

July 16, 2004 at 17:36

Renee: Thanks — glad to see someone else who has dicovered Ralston Saul. And the corporation-as-spoiled-child analogy — beautifully put.Miguel: Your worldview and mine are so different, probably because we grew up in very different cultures. I hope we have a chance to talk face to face sometime — I think it would take a few hours for us to understand each other.Derek: re #14 — if enough of them work together, yes; re #15 — yes, ending farm subsidies is possible and essential (if people can’t afford food there are better ways to solve this than giving $ to food conglomerates); re #18 — glad it’s taxed somewhere (the absurdly low cap gains tax encourages this speculation and is just a sop to the rich). And I agree completely on China — ticking bomb.Burkhard: Ideally if you could stop subsidies you wouldn’t really need import duties; the problem is a lot of the subsidies are hidden, disguised as other things.Sorin: Where are you? I don’t know of any countries, even in W.Europe, where big business is more socially responsible than small business. And in the US there is very little scrutiny of big business, especially privately owned big business, which is why we had Enron and the other megafrauds and Koch Industries and the other megapolluters, all essentially unpunished for their irresponsible criminal behaviour.To the other commenters, thank you — this is an interesting thread. And Jon, no, Sorin’s ISP domain is European, unlike the ‘Bee’s’ (Actually, the Bee voluntary bowed out of commenting on this blog at my request, so I give him credit for respecting my wishes — a lot of flamers don’t quit until you block their IP address)
Sorin says:

July 19, 2004 at 06:30

Dave, I’m in W. Europe and I talk from my personal experience. Maybe yours is different. The bigger the company, the more socially responsible they are, because they know they are under the spotlights. Everybody talks for instance about layoffs at big companies, but precisely because of that, those laid off get far better packages than those who lose their job because they worked for a small company and something wrong happened – either the company went belly up, or the managing director left with the safe, or this or that. I can’t say whether Total and its series of eco catastrophes (we learned about) was possibly matched by the tens or hundreds of micro eco aggressions perpetrated by smaller companies (and that haven’t made it in the prime time)Anyway, more to the point, I believe your agenda (in this post at least) is dangerously bordering communist utopia. I feel far more connected with the way Miguel sees the reality. However, you do say a lot of smart things in many other posts. Just my two euro-cents
SomeGuy says:

January 25, 2009 at 22:38

You moron, a coporatist is, according to Wikipedia, is a person who believes in a “Third Way” a.k.a a cross between capitalism and socialism. This was a belief supported by Bill Clinton,Tony Blair and Adolf Hitler. So before you go calling people or organizations something, look up their definitions.