||[14 Mar 2006|03:23am]
Throughout history man has strived, and sometimes struggled, to bring about equitable and beneficial systems of economic, social, and political order. Social evolution has created a world in which the two doctrines of capitalism and democracy have emerged as the dominant systems of trade and government. The primary feature of capitalism is the corporation, and when one analyzes the history of corporations, corporate motives, the role of the corporation in society, democratic rights of corporations, and corporations’ affect on people it is possible to draw stunning conclusions. Conflicting interests between economic and social systems cause corporations to undermine democracy.
In order to grasp a full understanding of the modern corporation it is necessary to analyze the history and development of modern corporations. The very first modern corporations were founded during the Industrial Revolution. Corporations were state-contracted for a specific purpose, usually one which required efforts beyond the state’s financial or legal means. As modern intellectual Noam Chomsky briefly summarizes, “corporations were originally associations of people who were chartered by a state to perform some particular function like, a group of people want to build a bridge over the Charles River or something like that” and were dissolved as soon as their task was completed (Corporation 10:30). Mary Zepernick of Law and Democracy’s Program on Corporations adds that early corporations had “…clear stipulations in their state-issued charters, how long they could operate, the amount of capitalization, what they made or did or maintained … was in their charter and they didn’t do anything else. They didn’t own or couldn’t own another corporation. Their shareholders were liable.” making corporations both well-regulated and temporary entities (Corporation 10:47). However, in 1889 the case of Minneapolis & St. Louis Railroad v. Beckwith, the Supreme Court of the United States ruled that a corporation is guaranteed the same rights as people for due process and equal protection, firmly establishing what is now known as “corporate personhood (Reclaim).” Since then, corporations have been granted freedom of speech, freedom from search and seizure, advertising freedom and tax exemptions in some cases. Most importantly, the 1976 ruling of Buckley v. Valeo declared that corporate donations are considered speech, and therefore corporations may contribute funds at their will to political parties and campaigns (Reclaim). Since the American Civil War, corporate restrictions have been severely diminished and almost entirely eliminated in many cases. Modern corporations are now given the same legal rights as humans, and have no restrictions put on the amount of capital gain they may make. The role of the corporation has also changed. The primary function of the corporation formerly was to perform a task such as building a bridge or maintaining roads, something which was beneficial to society in some way or another either through maintaining something which was previously built and freeing the government from maintaining it which saves tax money or through creating or supplying something which is useful. Early corporations also guaranteed jobs. This primary function of the modern corporation was changed however. In 1919 the corporation’s role officially changed to one of “stockholder primacy,” meaning that the primary function of a corporation is now to make profit for its shareholders (Reclaim). In fact out of the one hundred largest economies in the world, only forty-nine are countries while fifty-one are corporations (Global Issues).
Although the official motive of a corporation is officially to make profit for its shareholders, corporations have many more motives than simply that. The primary motive of the modern corporation is the accumulation of wealth. This strive for profit is not for the profit of shareholders, but for the profit of the corporate bank account which benefits the heads of the company the most. For example, multi-billion dollar corporation Wal-Mart generated 285.2 billion dollars in revenue in the fiscal year 2005. Their corporate executive officer, Lee Scott received over twelve million, four hundred forty-four thousand dollars for his job (Wal-Mart Wikipedia) for a total of about six thousand dollars an hour, assuming he works for forty hours a week fifty-two weeks a year. Meanwhile Wal-Mart employees received an average of ten dollars and eleven cents an hour, a total of twenty-one thousand twenty-eight dollars a year (Wal-Mart Facts). In 2002, Wal-Mart generated two hundred eighteen billion dollars in revenue, and their stock rose to an astounding sixty-three dollars per share. However in the year 2005, with Wal-Mart’s already gigantic profits, Wal-Mart shares were at only forty-two dollars and thirty-one cents (Wal-Mart Wikipedia) and the ‘compensation’ given to corporate officials rose nearly two million dollars each. These facts suggest that corporate motives are not for the stockholder but for the benefit of a select few individuals. Clearly the interest of the corporation is not in the employees or those with stock in the corporation, but rather the interest lies within those heading the corporation. The question arises, “if a corporation serves not for the good of the employee or shareholder, what purpose does it serve?” Within a democratic system citizens and corporations alike are taxed so that the government may function and keep the many social programs such as education, police, fire departments, waste management, unemployment benefits, military operations, and other necessary elements of society functioning. The government must collect taxes, and can do so either from a corporation or from a citizen. A corporation can gain profit from citizens and retain it for taxation, creating a sort of ‘middle man’ between the government and citizen, helping the government gain tax revenue while avoiding a portion of the tax burden directly on the citizen. Therefore, corporations serve a small positive purpose to the government and citizen alike.
Within the economic community, corporations have a much different role than that stated on paper. The modern economic system of capitalism was firmly established through the 1776 work The Wealth of Nations by Adam Smith (Smith). Modern opinion believes this work advocates a style of unregulated commerce which would supposedly regulate itself through an “invisible hand” which would benefit everyone. However this belief is highly misconstruing Smith’s work. Smith believed that economies could only function under relatively stable conditions of equality (Democratic). His primary belief was that liberty would lead to equality, thus the liberty of trade would bring about greater equality. “He held in fact that only under conditions of relative equality and tendencies toward equality would market competition be efficient or fair” says Noam Chomsky (Democratic). Adam Smith was also a great moral philosopher who spent time with other great philosophical contemporaries of his such as Ben Franklin, Voltaire and Jean-Jacques Rousseau. He published his Theory of Moral Sentiments in 1759 (Smith). Smith believed that equality would contribute to ‘further ends.’ “The further ends were realization of human capacities and potentialities” which could be achieved through the market under equal conditions, which would then bring freedom (Democratic).
Modern economics differs sharply from the sentiments put forth by Adam Smith however. The most prominent version of capitalism in modern time is that of neoliberalism, essentially the belief that large-scale corporations should not be regulated. This policy originated after World War Two with an economic model known as the Washington Consensus as became state policy during the Reagan presidency. This system gives corporations relatively free reign to do as they please. The essential fear of Adam Smith that a system of “all for ourselves amd nothing for other people” is now almost official policy (“Profit” 52). The advantages of this system are that a corporation is free to do what it deems in its best interests and the “invisible hand” is free to govern in accordance with what is best for the market at a given time. However there are also clear disadvantages. Important issues such as worker’s rights, the environment and equality are all but ignored, and a plutocracy is established. James Madison, one of the founding fathers of the United States of America expressed his concern in 1792 that the current capitalist system was leading to “a real domination of the few under the apparent liberty of the many (“Profit” 52).” That is the essence of neoliberalism, the economic domination of the few above the many and it is the primary system which allows corporations to dominate the economic and political spectrums of society. When one discusses the tax rates of both private citizen and corporation they may see some similarities which neoliberal doctrine has created. A corporation making 74,000 dollars a year will be taxed twenty-five percent, just as a private citizen with the same earnings would be. However, a private citizen earning 336,550 dollars a year will be taxed more than a private corporation earning the same amount, with the citizen being taxed thirty-five percent of their income, and the corporation being taxed only thirty-four percent (Tax Rates). This is stunning to consider that by a ratio of almost twenty to one the general public feel that corporations “should sometimes sacrifice some profit for the sake of making things better for their workers and communities (“Profit” 55)” and therefore the public is clearly opposed to corporations accumulating so much weath for their own purposes.
Major corporations are increasingly anti-union. The world’s largest retail corporation, Wal-Mart, believes that “there is simply no need for a third party to come between our associates and their managers” and therefore don’t believe in government regulation or unionization (Wal-Mart Facts). Under the Wagner Act of 1935, unions are given the right to organize and corporations are prohibited from interfering with unionizing efforts and disallowing workers to use their right to unionize and partake in union activities (Labor Laws). A corporation is legally entitled to become unionized after worker’s efforts to unionize through a democratic process are successful. Workers may insist a democratic process to form a union takes place, and the employer must allow this to happen. Should the union movement be successful, a business must then allow the union to operate. Corporate powers are still opposed to unionization. Wal-Mart has had charges brought before the National Labor Relations Board sixty times since 1995 (Wake Up) and had forty-three unfair labor practice complaints brought against them just in 2002 (Wake Up). Numerous accusations have also arisen that Wal-Mart has illegally fired workers for discussing unionizing (Wake Up). Unions are designed to ensure equitable wages, benefits, and work hours for employees. Corporations’ clear contempt for them shows contempt for democratic law.
A main element of corporate power is the privatization of wealth, industry, property and ideas. “Privatization does not mean you take a public institution and give it to some nice person. It means you take a public institution and give it to an unaccountable tyrrany” whose motives are not that of the public good, Noam Chomsky states (Corporation 1:09:02). Privatization occurs for profit motives. For example, most modern societies have universal public healthcare, but in the United States we do not. This is because more profit can be found in a private sector than a public one. Chairperson of the Council of Canadians, Maude Barlow says, “there are those who intend that one day everything will be owned by somebody. We are not just talking goods here. We are talking about human rights, human services, essential services for life, education, public health, social assistance, pensions, and housing. We are also talking about the survival of the planet. The areas that we believe must be maintained by the commons or under common control or we will collectively die. Water and air (Corporation 10:10:37).” This brings up some shocking and horrifying possibilities which modern philosopher Mark Kingwell points out used to exist, for example “fire fighters started out as private companies. If you did not have the medallion of a particular fire fighter brigade on your house, those fire fighters would just ride on by because you did not have “a deal”. We gradually evolved a provision of public trust for safety on that very specific level. This is important. We should not go back from that and say “why don’t we put that back on the market and see what happens... maybe it will make it more efficient.” There are some things where we should not tinker with the public trust for the sake of what might be a marginal gain in efficiency, and might well not be (Corporation 1:08:00).” There is no need to eliminate public service, if not simply for the horror which public safety might face. Chomsky further adds in great detail that “public institutions have many side benefits. For one thing they may purposely run at a loss. They’re not out for profit; they may purposely run at a loss because of the side benefits. So for example if a public steel industry runs at a loss, it’s providing cheap steel to other industries. Maybe that’s a good thing. Public institutions can have a counter cyclic property, which means that they can maintain employment in periods of recession... which increases demand... which helps to get out of the recession. A private company cannot do that. Recession comes- throw out the work force. This is the way that you make money (Corporation 10:09:19).” Advocates such as Michael Walker, Executive Director of the Fraser Institute admit that “It sounds outlandish that we want to have everything in the universe owned” but clarifies that “does not mean that I want to have Joe Blogs owning this particular square foot, but it means that the interests that are involved in that stream are owned by some group who are interested in maintaining it” and that it “is not such a loony idea (Corporation 10:11:15).” As private entities corporations are also legally allowed to privatize their interests. Because almost any non-governmental property may be bought and made private, it is possible for the entire world to become privatized, including water supplies, shelter, and even air.
Corporations are the cause for concern among many environmental activists as well. The United Nations Environment Program recognized what it called “a growing gap between the efforts to reduce the impact of business and industry on nature and the worsening state of the planet” and urged member nations to require stricter environmental protection (Global Issues). Corporations however, acting on behalf of their own interests find environmental laws hazaardous to them. The way to make profit is by squeezing the most out of the resources available. That means more output per man-hour, more cars per man-hour, more steel per man-hour, more computer chips per man-hour, all at the lowest price possible. Spending money to meet environmental standards is not the most efficient way, and it would be costly to first implement. Corporations are not willing to give up precious capital to meet the needs of the world’s future. Corporations have funded lobbyists with millions of dollars to lobby against political action to combat global warming (Global Issues).
Corporations affect the lives of citizens on a daily basis. The business community spends over one trillion dollars per year on marketing campaigns, roughly one-sixth the gross domestic product (“Profit” 58). There is very little space in society which is not subject to advertising, from public parks to baseball stadiums to television and the clothing people wear, it is nearly impossible to avoid corporate marketing techniques. With the globalization of corporations, the world has seen a stunning shift towards material values and a general indoctrination of them. An example of this is that of the most well-known words in the world is “Coke,” the nickname for popular soft drink Coca-Cola.
It has been believed that the complimentary economic system to democracy is capitalism. However, true democratic governments do not interact as well as this assumes. A democratic government is a government meant to give the people being governed the maximum amount of input regarding the affairs that affect them. In theory, this would range from the building of roads, the functioning of public schools, international affairs, and economic affairs. One of the founding fathers of America, Thomas Jefferson, expressed his fear that the country was becoming “a single and splendid government of an aristocracy founded on banking institutions and monied in corporations” and that if this were to continue it would “be the end of democracy and freedom” recognizing the conflicting interests of business or that of a select few who control corporate power and that of the common citizen. Speaking in 1826 at the 50th anniversary of the Declaration of Independence, Jefferson said that there were “those who fear and distress the people and wish to draw all power from them into the hands of the higher classes” and “those who identify with the people, have confidence in them, cherish and consider them as the most honest and safe depository of the public interest, even though not the most wise.” A democratic government supports the latter sort of government, which puts power in the hands of the people. However, when seventy percent of the populace believes that “business has gained too much power over too many aspects of American life” one can see clearly that it is in a corporation’s best interests to keep power out of the hands of those people, which form a majority of the common citizens. It is no surprise that the first major period within the fifty years where worker’s wages stagnated or even declined in some cases, and benefits provided by corporations were at an all-time low since the Industrial Revolution came at a time when the business press reported that “Mr. Clinton and his administration come down on the same side as corporate America.” This caused the 1996 elections to have the lowest voter participation, declined public interest and a lack of voter confidence (“Profit” 61). A record eighty percent of citizens believe the government is now being “run for the benefit of the few and the special interests, not the people (“Profit” 55).” This is not surprising however when it is taken into account that the vast majority of political campaigns are funded not by contributions of private citizens, but by private corporations. This naturally causes the government to cater to business, partially because of political contributions, and partially because of the amount of tax revenue generated. Consider this: The wealthiest man in the United States is worth 44.8 billion dollars. The wealthiest corporation in the United States is worth 285.2 billion dollars (Wal-Mart Wikipedia). Not only do democratic governments get influenced negatively by corporations, but they in turn protect corporations against the will of the people. Consider the chain of events surrounding the privatization of a Bolivian water supply by Bechtel Corporation in 2000. Bechtel, a company who has close ties with the American government and has contributed millions of dollars to campaign funds signed a contract with the Bolivian government to privatize the water supply in Cochabamba, Bolivia’s third largest city (Bechtel). This demonstrates a democratic government giving away its public resources to private sources. After Bechtel’s subsidiary, Aguas del Tunari, privatized the water supply, water rates raised over fifty percent on average than what was previously being payed (Bechtel). This caused massive organized protest and chaos. Parents were forced to choose between sending their children to school or obtaining health care and getting clean drinking water, something which is essential for human beings to live. During these protests, Bolivian police forces declared martial law and surrounded the area where Bechtel was situated. The government protected the corporation Bechtel over the common needs and interests of the democratic body of citizens to which it was supposed to serve. This is just one of many classic examples of the government putting profit over people.
The Bolivian government eventually withdrew Bechtel’s contract, but after much political unrest and the threat of being overthrown in a popular uprising. This properly demonstrates that although not the most highly considered, power always lies somewhat dormant within the masses. Bechtel Corporation sued the Bolivian government for twenty-five billion dollars. Yet another victory was handed two the people when Bechtel settled for just thirty cents due to the efforts of grassroots political activism (Bechtel).
Corporate power, when unchecked, can undermine the systems in which people place confidence in and deem just and fair. Corporations have evolved from highly-regulated temporary groups to sieze power and become somewhat immortal. As corporations gain more power and become even larger and corporate interests become increasingly contrasting to the public interest, it is necessary to keep the dreams of Adam Smith, James Madison and Thomas Jefferson alive by striving for an equal, free and fair society. A society where democracy may be cherished and preserved as a way of enacting the public good and securing the blessings of liberty for the present and future. The regulation of corporations can only extend democracy further.