The Corporation, Globalization and their Pathologies and Potential

http://cchronicle.com/2010/12/the-corporation-globalization-and-its-pathologies-and-potential/
 
Written on December 1, 2010 

by Craig Bowman, Ph.D.
      
As we emerge from a long and deep economic and psychological blow to the American foundation, we find ourselves dusting off clothes, patching wounds, and clearing rubble.  The quake felt first in the board rooms of select but behemoth companies, spread in tsunami-like fashion around the globe.  This left much of the world awaiting U.S. response and recovery.  What was once a catchy term to describe corporate and free-trade trends, is now a clear reality—national economies are intertwined as one universal and global phenomenon.

A Century of Technological Advance and Economic Expansion

Let us first imagine the striking difference between one’s experiences in the 19th century versus those of the 20th. Folks living in the 20th century witnessed a civilization develop groundbreaking technologies one after the other. Nineteenth century inhabitants could barely envision machinery to cool the air, let alone conceive how to to ride a vehicle throughthe air. Successive advances in technology included a series of important communication devices that would one day shrink the world.  Almost parallel to this was the ever-strengthening of the capitalistic engine known as the American economy.  This super powerful economy drastically grew in GDP throughout the century and fueled the country’s heightened political and military might and influence.

Arguably, today’s manifestation of globalization emerged out of the industrial revolution’s successes.  But as I will remind the reader, it was through a series of important maneuvers, all connected with the American political process, which gave rise to over-sized private organizations whose reach would ultimately circle the globe. The costs have been numerous, including a stripping away of our citizen-based democracy and a species threatening ecological crisis.  The result appears to be an international corporatocracy existing without an equally powerful political body to properly supervise its agendas.

Ideally and theoretically, capitalism can and should produce improved lifestyles for the population in the way of quality products, services, and employment.  And the intended role of government is to morally and legally see that the country’s economic, social, legal, and educational systems further both the health of the economy and the welfare of its citizenry.  This is to occur in proper relation with the checks and balances built into the American political system.

Unfortunately, economics fuels politics, which can be witnessed across time, culture, and political systems.  No system—feudal, monarchal, communistic, dictatorial, city-state, or democratic—has proven this false.  Economic interests have always molded, manipulated, and circumvented the systems through which they have operated.

Balance of Power

The American debate, older only in age to the question whether or not to revolt against King George, is the question of how powerful the central government should be.  The pro-centralizing wing, represented by the Federalists, won the first battle.  Our country, however, has witnessed a continual tension between local, state, federal, and the various branches of power, as well as the private sector.  For example,Andrew Jackson, the populist and seventh US President, spent much of his political might in the 1830s fighting against what he warned would be imperial-like means to shape economic policy via the second national bank (Second Bank of the United States).  He argued that its power would be out of reach from the democratic process.

Jackson’s administration was successful in the short-term, but the President’s warnings were not heeded as centralized banking has only gained in strength, possibly proving again that the few and very elite have been able to bypass or exploit any governmental system, no matter how well designed.  Consider some of Jackson’s reasons to resist a national bank: (a) it centrally concentrates the nation’s financial strength into a single institution, (b) it exposes the government to control by foreign interests, and (c) it serves mainly to make the rich richer.

While one could argue both for and against the benefits of having a federal reserve system, it is clear that much economic policy is enacted outside the legislative process.   Also, the fact that the United States government is increasingly vulnerable to the interests of governments, like China, is irrefutable, as it continues to borrow enormous sums of foreign money.  Finally, the Reserve, in all its wisdom, failed miserably to prevent the recent series of bubbles and bursts, the latest of which nearly took down the entire national economy and devastated many others.

The Rise of the Corporation

Earlier in this country’s life, rare organizations incorporated to perform a service, such as completing a municipal project.  If the service of the corporation was completed or was no longer relevant to the interests of those it served, the corporate charter was discontinued.  As time passed and as these corporations became more common, groups of individuals took advantage of the opportunity to organize capital and expand the scope of corporate projects.  Nothing helped this more than when those representing corporate interests successfully lobbied to gain the rights constitutionally reserved for a person.

This “right” was gained via an added provision to the 14th and post civil war amendment to properly extend citizenship to freed slaves and their descendants.  The move, perceived as minor at the time, proved to be a major event that would help reshape the balance of power. The provision provided corporate collectives the ability to lobby for rights, spend unlimited amounts of money for campaigns, and maintain the right to privacy and free speech.  Greatly aided by these rights, corporations now influence elections, maintain tax havens, and successfully resist reforms that could minimize their power.

The Burden of Growth

Let us recognize what should be a glaring problem.  That is, publicly-traded corporations are burdened by their motivation to continually increase profits so their stock prices rise and appease investors and stock holders.  This scenario, which serves those who have had the power to build and further such businesses, undercuts the less destructive intentions behind healthy competition and consumerism.  When big business requires continued profits to increasingly produce an inflow of money to the investors and bloat salaries and bonuses, a binding incentive builds.

The incentive naturally produces self-survival decisions and an emphasis on short-term gains.  The corporate locomotive is also tempted to influence legislation that keeps the machinery unclogged, unfettered, and unchecked.  The agenda to increase size has also fostered a drive to keep corporate pathologies and closed-door maneuvers unseen to best minimize public concern.  Meanwhile, the federal reserve system, often criticized for lacking transparency, typically works in tandem with the locomotive to ensure the health of the stock market and the corporate agenda.

Imbalances of Power and Priority

Our country’s formation began with a painstaking process to prevent abuses of power.  We now witness nearly obscene imbalances.  This appears most obvious when examining loophole exploitation of campaign financing and lobbying.  The lobby system originated as part of the first amendment’s right to free speech so that voices of special interests would be heard.  A democracy, based on majority rule, could naturally overshadow the needs of certain groups.

Time has elapsed, however, and this system has morphed into what some legitimately describe as legalized bribery.  Certain super powerful interests groups spend unGodly sums to finance candidates at all levels and on both sides of legislative floors.  It is safe to say that these groups–such as the pharmaceutical, oil, auto, defense contracting, tobacco, and media industries–cannot be considered disenfranchised and therefore in need of special provision to be heard.

Let us also consider the role of the military.  It existed primarily as a defensive requirement during the country’s formative years when America was relatively weak and vulnerable to various powers around its borders.  But soon the United States began its expansion that has yet to abate.  Expansion has required an ever-strengthening military to ensure imperial growth.  The country particularly flexed its brute throughout the twentieth century, acquiring lands and building bases.  It became a legitimate superpower after World War II and quickly became embroiled in an arms race for decades with the Soviet Union.  Various presidential administrations exercised executive will around the world, often-times without legislative backing.

The Cold War, pragmatically and politically, appeared to be an ideological battle between capitalistic consumerism versus a warped brand of socialism.  The United States has fervently preached the values of freedom, liberal democracy, and the rule of law since its conception.  The U.S., however, has backed extreme dictatorships that often have been cruel to its people.  Support was offered to such governments as long as they supported US trade interests and were in alignment against US enemies (against the Soviet Union during the Cold War, for example).

As oil became increasingly important as an economic commodity after World War II, the United States became more involved in Middle Eastern affairs.  The only major consistency found in U.S. foreign intervention has been the intention to maintain or expand the kind of security that allows for economic power and growth.  Such policy is often sold to the public through the preaching of freedom and the preying on fear.  Rarely has America dramatically intervened militarily in a significant regional crisis primarily to help alleviate injustice.

The priority to strengthen the military has helped produce a heavy tax burden and now insufficient funding for what really matters to the population, such as education, health care, and ecological sustainability.  And under the corporatocracy, even well-intended presidents and congressman have been impotent.  Meanwhile, many U.S. states have been suffering from fiscal dysfunction for decades. Consider the following and intertwined practices of the American Corporatocracy:

(a)    We witness a co-dependent marriage or legalized collusion between the private and public sectors.  Common is the “revolving door” practice that sees influential people of power flipping from side to side to further corporate and military interests.  Former Vice President Dick Cheney possibly serves as the best ‘worst example’ of this.  Cheney had a long and powerful public service life, including Chief of Staff in the Ford administration, before serving for five years as CEO of Halliburton, the world’s second largest oilfields services corporation.  He stepped down from Halliburton in 2000 and earned $36 million in severance and stock options.  Soon after and as Vice President, Cheney served as a major proponent, planner, and executor of the Iraq war, during which his former corporation allegedly received unlawful special treatment for projects in Iraq, Kuwait, and the Balkans.

(b)   Corporations have the incentive to take advantage of third world labor and have avoided responsible adaptations, in part through successful lobbying (e.g., not investing in cleaner technologies).

(c)    Many corporations intentionally make products designed not to last to ensure increased and ongoing sales.

Conditioning through Mass Media

Many witness the cycle of operation, described above, as modern imperialism, which is considerably more subtle than practices during past eras.  This brand of empire often relies on conditioning of the public through mass media and a culture of marketing and public relations.  Education and the media have been highly influenced by corporate interests.  Once independently operated, newspapers and their television counterparts are mostly owned by corporations.  As a result, investigative reporting has shrunk to a fraction of what passes as today’s news.

This helps the corporate world keep dissenting opinion at bay and flies in the face of the American Republic’s original vision and built-in freedoms.  And because powerful interests have best funneled their influence through the strengthening of the private sector, they have molded conservative ideology under the banner: big government is bad and takes away from the common citizen.  Ironically, conservative administrations, most notably Reagan and Bush II, have bloated government spending and national debt by beefing up military action and providing tax relief to the wealthy and corporations.

Meanwhile, we do not even require that advertising, much less news, be truthful. Truth, research, science, and education are often swept under the rug as the public is left in a state of confusion, inaction, and powerlessness.  This atmosphere is extremely unhealthy for a real democracy, as well as binding to the health and wellness of both domestic responsibilities and international relations.

Actions from past “superpowers” were a bit more obvious and brutal.  The conquering of neighboring lands for precious resources and greater power was relatively common. The subtle but strong imperialism of the West, with its desire to use a vast majority of the world’s resources, has been highly successful in the game of power brokering.  Because of its subtle nature, it is much easier to deceive the public and keep up the appearance of benevolence. American imperialism, however, has not helped much in the way of alleviating the huge disparity between wealth and poverty and has created a whopping level of waste and pollution.

I believe, however, that this hierarchical arrangement, with a relatively small number of very wealthy and powerful people at the top, is weakening.  If so, what then is in its wake?  Is there reason to believe that our now global family can rise to the vast challenges of the day?  I explore some of the variables contributing to structural change, as well as some positive potential for  globalization, in Part II of this series.

Corporate Past - Corporate Future…? An Interview with Joel Bakan

Posted on Wed, 02/03/2011
Author:  Joel Bakan and Alex Doherty
Originally published:  New Left Project, 8 March 2010

http://corporate-rule.co.uk/drupal/node/165

Joel Bakan, author of The Corporation and co-maker of the film with the same title, is interviewed by the New Left Project on the problems of corporate power, and his strategy for change. This interview originally appeared on the New Left Project website.

How did the corporate form arise?

Various forms of the corporate form have been around for quite a while. Even Roman law had concepts of corporate identity that resemble modern corporate personhood. But the corporation as we know it today is really a product of the 19th century. Industrialization, and particularly the invention of the steam engine, made large-scale enterprise possible for the first time. The prevailing business form, the partnership, could not raise the kind of capital required by these enterprises because the number of investors was limited to the number of people who could practicably work together to run the enterprise.

The genius of the modern corporate form is that it separated ownership from management and thus made it possible for thousands, even millions, of individuals to be owners – to invest in various-sized chunks (shares) of the enterprise, and thus finance it. The task of running things would then be delegated by the shareholders to directors and professional managers. The corporate form could thus pool investment capital money from large numbers of investor/owners and finance large enterprises, such as railroads, steamship lines, and industrial works.

But this new class of anonymous and distant owners, having no real say or role in the conduct of a company’s day-to-day operation, demanded legal protection, whether to ensure their invested capital was used in ways that would benefit them, or to ensure they were not liable for debts and wrongs committed by companies they had no effective control over. Corporate law was reformulated, beginning in the mid-19th century, to provide those protections. The “best interests of the corporation” principle was added, requiring that all decisions made by managers and directors had to be geared to serving the best interests of the corporation and its shareholders; and so too was limited liability, which ensured shareholders would not be liable for company wrongs and debts.

A third principle, corporate personhood, was also necessary. If the people in the corporation – shareholders, managers, directors – were not legally liable or relevant, who was? Who would buy and sell businesses’ property, enter contracts of employment and supply, assume liability at law, and so on? Rights and duties do not exist in thin air. They must attach to a legal subject, a person. So, bingo!, the law invented one. By the strangest of legal alchemies it deemed the corporation itself – an abstract set of legal and institutional relations – to be a person (and so it has remained).

What in your view is wrong with the corporate form?

What’s wrong with it is the very thing that makes it so effective in creating financial wealth – namely, its legal and institutional compulsion to take whatever action is necessary to create such wealth for its shareholders, regardless of the consequences to others and the natural environment. Workers, members of the community, children playing in the toxic sludge downriver, or suffering from environmentally-induced birth defects, air, water, animals, trees, oceans, law, morals, social conventions, essentially every being, thing, interest, concern and idea in the world and universe – these are all mere “externalities” for corporations. By law, they cannot be ends in themselves for corporations, but only strategic targets to exploit, or avoid liability for harming, or use for marketing or public relations, in pursuing their self-interested ends. The corporation must always and only act out of self-interest – that is a legal requirement.

What is your take on so-called “corporate social responsibility”?

It is an oxymoron. A corporation has only one responsibility – to serve its and its owners’ financial interests. It is not authorized to act out of responsibility to the social – unless its managers can justify such action as strategies for serving corporate interests, which they sometimes do or can. That calculated and strategic cast defines a quite limited scope for CSR, which should probably better be called “corporate social strategy.”
Corporations do a fine job of doing well by doing a bit of good and then boasting a lot about it. They attract customers in this way and ward off regulators. But to believe we can truly and meaningfully promote and protect social and environmental values by relying on corporations’ strategic sense of when doing some good will serve their interests is profoundly misguided.

The documentary based on your book The Corporation did not touch upon the experience of people working in corporations in the more affluent countries. How does the corporate form impact upon the lives of the relatively privileged?

This is too big a question for this interview. I am currently working on a new book (which will be published by Random House in the UK) and film on children and childhood, mainly in affluent countries, and how they are affected by corporate behaviour. That work will provide a fuller answer to the question.

In general, what I can say here is that the answer to the question you ask depends on which people you are referring to in affluent countries. Many in affluent countries do not share in the affluence, and they, like their brothers and sisters in developing countries, tend to be the hardest hit by the externalities created by corporations, whether in terms of capital flight, environmental degradation, workplace exploitation, union busting, or unsafe and unhealthy consumer products.

The question of exactly how they, and those who are affluent in affluent countries, are affected is, again, too big for this interview. Suffice to say, for the moment, that affluence does not protect one’s kids from BPA in their teething rings.

The documentary presents the example of interface inc. in a very favourable light. Does that example not undermine the thesis of the book?

No, I don’t think so. No one at Interface Inc., including Ray Anderson, will say they are losing money, or prepared to lose money, by taking the course they have. To the contrary, the company is doing quite well, and its green approach to manufacturing and supplying carpet tiles is likely a part of its success.

What the example shows is that it is possible – if you have a smart, creative and committed founder/leader, a customer base responsive to environmental concerns, and a narrowly defined product that can be manufactured and distributed in ways that cause a minimal environmental footprint – to become more sustainable and still make money. As Ray Anderson himself says, this can’t be done with all products – napalm and weapons are examples he gives. We might add tobacco products, pesticides and numerous other toxic chemical products, petrochemicals, fast food, silly financial products (such as repackaged debt), and so on. Some products, by their nature, are not sustainable; others depend upon cheap production, which usually means exploitation of workers and the environment, to be profitable. In a way, Anderson’s Interface is the exception that proves the rule.

It is important to note that Anderson does not see himself as a model. He does not believe the solution to the world’s ills lies with waiting for corporate titans to have epiphanies, as he did, and become enlightened. To the contrary, he says that “someday people like me will be put in jail.” What he means by that is that in the future, the rules governing corporate conduct will be different. We – the public, as a democratic society – will have changed the laws and regulations governing corporations to make plundering the earth illegal. Despite Anderson’s genuine personal efforts to be sustainable at Interface, he does not hold out such voluntary, unusual and private initiative out as a model for change. Public regulation is still necessary, in his view. That, to me, is an important point that some have missed in their interpretation of Anderson’s portrayal in our documentary (and I concede that perhaps we, as filmmakers, could have made this clearer).

What are some first step reforms that would change corporations for the better?

I think – following from what I have just said – that it is us, citizens, who need to take the steps, and the steps we need to take are to reinvigorate and democratize the public regulatory system that has been battered and beaten down by ideology and pressure from big business. Relying on the voluntary initiatives of business people is unlikely to do the trick. As well, reforming the corporate form itself is likely to have limited effect, especially if it leaves corporate managers to interpret and implement broad social and environmental standards that might be written into charters (such as Google’s famous “do no evil” – find me a corporate manager who thinks he or she is doing evil in helping create wealth for shareholders).

What kind of economic system do you advocate?

I am a pragmatist, so I routinely disappoint people on this question. But, just for a moment, I’ll get philosophical and say that the economy and the creation of wealth should not be separate from every other dimension of life and humanity, as they are, by design, within capitalism. The very notion of wealth needs to be broadened out from financial wealth to include human and planetary welfare.

The corporation, as currently constructed, is a manifestation of the belief that societies work best when economic production and financial wealth creation are untethered from all human and reasonable concerns about morals, principles, concern for each other, love, caring, beauty, respect for nature, and so on – essentially all the things that make us human and make life worthwhile.

But such inelegant waxing on my part doesn’t make for a useful suggestion about what to do in the stew we are in, what choices we can make, albeit in conditions not necessarily of our own choosing, that may serve to alter those conditions. So, here’s what I think about that: the ideals and institutions that constitute our extant democracies are quite decent. They are there, there is wide consensus they should be there (though profound disagreement about what they mean and what they should do), and, though short of utopian prescriptions for ideal economic systems, they provide a useful starting place for action.

Markets and the corporation, as an institution, are created, empowered and enforced by the state and governments. As such, their only justification and legitimacy is as tools to serve the public interest and common good. As a starting point, they, through democratic regulatory frameworks, need to be scaled back to that place. And, to accomplish that, we need to start seeing ourselves as citizens with democratic powers and responsibilities to create and govern an economy that nourishes nature and humanity, not as tools for serving the narrow purposes of markets and corporations.