Rise of Corporate Power in America
from the book
When Corporations Rule the World
by David C. Korten
published by Kumarian Press, 1995
The fact that the interests of corporations and people of
wealth are closely intertwined tends to obscure the significance
of the corporation as an institution in its own right. The corporate
charter is a social invention created to aggregate private financial
resources in the service of a public purpose. It also allows one
or more individuals to leverage massive economic and political
resources behind clearly focused private agendas and to protect
themselves from legal liability for the public consequences.
Less widely recognized is the tendency of corporations, as
they grow in size and power, to develop their own institutional
agendas aligned with imperatives inherent in their nature and
structure that are not wholly under the control even of the people
who own and manage them. These agendas center on increasing their
own profits and protecting themselves from the uncertainty of
the market. They arise from a combination of market competition,
the demands of financial markets, and efforts by individuals within
them to advance their careers and increase their earnings. Members
of the corporate sector also tend to develop shared political
and economic agendas. In the United States for example, corporations
have been engaged for more than 150 years in a process of restructuring
the rules and institutions of governance to suit their interests.
Some readers may feel uneasy with my anthropomorphizing the corporation,
but I do so advisedly.
Corporations have emerged as the dominant governance institutions
on the planet, with the largest among them reaching into virtually
every country of the world and exceeding most governments in size
and power. Increasingly, it is the corporate interest more than
the human interest that defines the policy agendas of states and
international bodies, although this reality and its implications
have gone largely unnoticed and unaddressed
The corporate charter is a grant of privilege extended by
the state to a group of investors to serve a public purpose. Its
history goes back at least to the sixteenth century. At that time,
an individual's debts were inherited by his or her descendants
and could result in the descendants' imprisonment through no doing
of their own. Those who sailed forth from England to trade for
spices in the East Indies faced not only the inevitable perils
of the dangerous sea voyage but also the prospect that they and
their families could be ruined, even into future generations,
if their cargo were lost to bad weather or pirates. The corporation
represented an important institutional innovation to overcome
this barrier to international commerce. Like so many important
inventions, the corporate charter opened enormous new opportunities
to advance the interests of human societies-so long as civil society
held in check the potential abuse that the concentration of power
Specifically, the corporate charter represented a grant from
the crown that limited an investor's liability for losses of the
corporation to the amount of his or her investment in it-a right
not extended to individual citizens. Each charter set forth the
specific rights and obligations conferred on a particular corporation-including
the share of profits that would go to the crown in return for
the special privilege extended. Such charters were bestowed at
the pleasure of the crown and could be withdrawn at any time.
Not surprisingly, the history of corporate-government relations
since that day has been one of continuing pressure by corporate
interests to expand corporate rights and to limit corporate obligations.
Holding Corporations at Bay
America was born of a revolution against the abusive power
of the British kings. The corporate charter was an institutional
instrument of that abuse. Chartered corporations were used by
England to maintain control over colonial economies. In addition
to such well-known corporations as the East India Company and
the Hudson's Bay Company, many American colonies were themselves
chartered as corporations. The corporations of that day were chartered
by the king and functioned as extensions of the power of the crown.
Generally, these corporations were granted monopoly powers over
territories and industries that were considered critical to the
interests of the English state.
The English Parliament, which during the seventeenth and eighteenth
centuries was made up of wealthy landowners, merchants, and manufacturers,
passed many laws intended to protect and extend these monopoly
interests. One set of laws, for example, required that all goods
imported to the colonies from Europe or Asia first pass through
England Similarly, specified products exported from the colonies
also had to be sent first to England. The Navigation Acts required
that all goods shipped to or from the colonies be carried on English
or colonial ships manned by English or colonial crews. Furthermore,
although they had the necessary raw materials, the colonists were
forbidden to produce their own caps, hats, and woolen and iron
goods. Raw materials were shipped from the colonies to England
for manufacture, and the finished products were returned to the
These practices were strongly condemned by Adam Smith in The
Wealth of Nations. Smith saw corporations, as much as governments,
as instruments for suppressing the competitive forces of the market,
and his condemnation of them was uncompromising. He makes specific
mention of corporations twelve times in his classic thesis, and
not once does he attribute any favorable quality to them. Typical
is his observation: "It is to prevent this reduction of price,
and consequently of wages and profit, by restraining that free
competition which would most certainly occasion it, that all corporations,
and the greater part of corporation laws, have been established."
It is noteworthy that the publication of The Wealth of Nations
and the signing of the U.S. Declaration of Independence both occurred
in 1776. Each was, in its way, a revolutionary manifesto challenging
the abusive alliance of state and corporate power to establish
monopolistic control of markets and thereby capture unearned profits
and inhibit local enterprise. Smith and the American colonists
shared a deep suspicion of both state and corporate power. The
U.S. Constitution instituted the separation of governmental powers
to create a system of checks and balances that was carefully crafted
to limit opportunities for the abuse of state power. It makes
no mention of corporations, which suggests that those who framed
it did not foresee or intend that corporations would have a consequential
role in the affairs of the new nation.
In the young American republic, there was little sense that
corporations were either inevitable or always appropriate. Family
farms and businesses were the mainstay of the economy, much in
the spirit of Adam Smith's ideal, though neighborhood shops, cooperatives,
and worker-owned enterprises were also common. This was consistent
with a prevailing belief in the importance of keeping investment
and production decisions local and democratic.
The corporations that were chartered were kept under watchful
citizen and governmental control. The power to issue corporate
charters was retained by the individual states rather than being
given to the federal government. The intent was to keep that power
as close as possible to citizen control. Many provisions were
included in corporate charters and related laws that limited use
of the corporate vehicle to amass excessive personal power.' The
early charters were limited to a fixed number of years and required
that the corporation be dissolved if the charter were not renewed.
Generally, the corporate charter set limits on the corporation's
borrowing, ownership of land, and sometimes even its profits.
Members of the corporation were liable in their personal capacities
for all debts incurred by the corporation during their period
of membership. Large and small investors had equal voting rights,
and interlocking directorates were outlawed. Furthermore, a corporation
was limited to conducting only those business activities specifically
authorized in its charter. Charters often included revocation
clauses. State legislators maintained the sovereign right to withdraw
the charter of any corporation that in their judgment failed to
serve the public interest, and they kept close watch on corporate
affairs. By 1800, only some 200 corporate charters had been granted
by the states.
The nineteenth century emerged as a time of active and open
legal struggle between corporations and civil society regarding
the right of the people, through their state governments, to revoke
or amend corporate charters. Action by state legislators to amend,
revoke, or simply fail to renew corporate charters was fairly
common throughout the first half of the century. However, in 1819,
the U.S. Supreme Court ruled against the state of New Hampshire
in a case in which New Hampshire had attempted to revoke the charter
issued to Dartmouth College by King George III before U.S. independence.
The Supreme Court overruled the revocation on the ground that
the charter contained no reservation or revocation clause.
This decision was seen as an attack on state sovereignty by
outraged citizens, who insisted that a distinction be made between
a corporation and the property rights of an individual. They argued
that corporations were created not by birth but by the pleasure
of state legislatures to serve a public good. Corporations were
therefore public, not private, bodies, and elected state legislators
thereby had an absolute legal right to amend or repeal their charters
at will. The public outcry led to a significant strengthening
of the legal powers of the states to oversee corporate affairs.
As late as 1855, in Dodge v. Woolsey, the Supreme Court affirmed
that the Constitution confers no inalienable rights on a corporation,
ruling that the people of the states have not released their power
over the artificial bodies which originate under the legislation
of their representatives.... Combinations of classes in society.
. . united by the bond of a corporate spirit . . . unquestionably
desire limitations upon the sovereignty of the people.... But
the framers of the Constitution were imbued with no desire to
call into existence such combinations.
Spoils of the Civil War
The U.S. Civil War (1861-65) marked a turning point for corporate
I rights. Violent anti-draft riots rocked the cities and left
the political system in disarray. With huge profits pouring in
from military procurement contracts, industrial interests were
able to take advantage of the disorder and rampant political corruption
to virtually buy legislation that gave them massive grants of
money and land to expand the Western railway system. The greater
its profits, the more tightly the emergent industrial class was
able to solidify its hold on government to obtain further benefits.
Seeing what was unfolding, President Abraham Lincoln observed
just before his death:
"Corporations have been enthroned.... An era of corruption
in high places will follow and the money power will endeavor to
prolong its reign by working on the prejudices of the people .
. . until wealth is aggregated in a few hands . . . and the Republic
The nation was divided by the war against itself; the government
was weakened by the assassination of Lincoln and the subsequent
election of alcoholic war hero Ulysses S. Grant as president.
The nation was in disarray. Millions of Americans were rendered
jobless in the subsequent depression, and a tainted presidential
election in 1876 was settled through secret negotiations. Corruption
and insider deal making ran rampant. President Rutherford B. Hayes,
the eventual winner of those corporate-dominated negotiations,
subsequently I complained, "this is a government of the people,
by the people and
for the people no longer. It is a government of corporations,
by corporations, and for corporations." In his classic The
Robber Barons, Matthew Josephson wrote that during the 1880s and
1890s, "The halls of legislation were transformed into a
mart where the price of votes was haggled over, and laws, made
to order, were bought and sold. " These were the days of
men such as John D. Rockefeller, J. Pierpont Morgan, Andrew Carnegie,
James Mellon, Cornelius Vanderbilt, Philip Armour, and Jay Gould.
Wealth begat wealth as corporations took advantage of the disarray
to buy tariff, banking, railroad, labor, and public lands legislation
that would further enrich them. Citizen groups committed to maintaining
corporate accountability continued to battle corporate abuse at
state levels, and corporate charters were revoked by both courts
and state legislatures. Gradually, however, corporations gained
sufficient control over key state legislative bodies to virtually
rewrite the laws governing their own creation. Legislators in
New Jersey and Delaware took the lead in watering down citizens'
rights to intervene in corporate affairs. They limited the liability
of corporate owners and managers and issued charters in perpetuity.
Corporations soon had the right to operate in any fashion not
explicitly prohibited by law.
A conservative court system that was consistently responsive
to the appeals and arguments of corporate lawyers steadily chipped
away at the restraints a wary citizenry had carefully placed on
corporate powers. Step-by-step, the court system put in place
new precedents that made the protection of corporations and corporate
property a centerpiece of constitutional law. These precedents
eliminated the use of juries to decide fault and assess damages
in cases involving corporate-caused harm and took away the right
of states to oversee corporate rates of return and prices. Judges
sympathetic to corporate interests ruled that workers were responsible
for causing their own injuries on the job, limited the liability
of corporations for damages they might cause, and declared wage
and hours laws unconstitutional. They interpreted the common good
to mean maximum production-no matter what was produced or who
it harmed. These were important concerns to an industrial sector
in which, from 1888 to 1908, industrial accidents killed 700,000
American workers-roughly 100 a day.
In 1886, in a stunning victory for the proponents of corporate
sovereignty, the Supreme Court ruled in Santa Clara County v.
Southern Pacific Railroad that a private corporation is a natural
person under the U.S. Constitution-although, as noted above, the
Constitution makes no mention of corporations-and is thereby entitled
to the protections of the Bill of Rights, including the right
to free speech and other constitutional protections extended to
Thus corporations finally claimed the full rights enjoyed
by individual citizens while being exempted from many of the responsibilities
and liabilities of citizenship. Furthermore, in being guaranteed
the same right to free speech as individual citizens, they achieved,
in the words of Paul Hawken, "precisely what the Bill of
Rights was intended to prevent: domination of public thought and
discourse." The subsequent claim by corporations that they
have the same right as any individual to influence the government
in their own interest pits the individual citizen against the
vast financial and communications resources of the corporation
and mocks the constitutional intent that all citizens have an
equal voice in the political debates surrounding important issues.
These were days of violence and social instability brought
on by the excesses of capitalism that Karl Marx described to powerful
political effect. Working conditions were appalling, and wages
scarcely covered subsistence Child labor was widespread. By one
estimate, 11 million of the 12.5 million families in America in
1890 subsisted on an average of $380 a year and had to take in
boarders to survive. Both organized and wildcat strikes were common,
as was industrial sabotage. Employers used every means at their
disposal to break strikes, including private security forces and
federal and state military troops. Violence evoked violence, and
many died in the industrial wars of this era.
These conditions gave impetus to a growing labor movement.
Between 1897 and 1904, union membership rose from 447,000 to 2,073,000.
Unions provided fertile ground for the thriving socialist movement
that was taking root in America and called for the socialization
and democratic control of the means of production, natural resources,
and patents. These were times of open class warfare, with zealous
new recruits joining the army of the dispossessed in growing numbers-ready
to fight and sacrifice for the cause. Socialists who sought to
organize labor along class lines vied for primacy with more conventional
unionists who preferred to organize along craft or industrial
These movements united ethnic groups. An emergence of black
pride and culture began to unify blacks. The women's movement
took hold, with women forming their own labor unions, leading
strikes, and assuming active roles in populist and socialist movements.
In 1920, female suffrage (the right to vote) was guaranteed by
a constitutional amendment.
In the end, the conditions of chaos and violence that characterized
the period of explosive free-market industrial expansion were
not conducive to the interests of either industrialists or labor.
Competitive battles between the most powerful industrialists were
cutting into profits. There was considerable fear among industrialists
of the growing political power of socialist and other popular
movements, which threatened to bring fundamental change that might
eliminate their privileged position.
These conditions set the stage for consolidation and compromise,
which transformed social and institutional relationships. Industrialists
merged their individual empires into larger combines that consolidated
their power and limited competition among them. Formerly bitter
rivals, J. P. Morgan and John D. Rockefeller joined forces in
1901 to amalgamate 112 corporate directorates, combining $22.2
billion in assets under the Northern Securities Corporation of
New Jersey. This was a massive sum in its day, equivalent to twice
the total assessed value of all property in thirteen states in
the southern United States. The result was:
The heart of the American economy had been put under one roof,
from banking and steel to railroads, urban transit, communications,
the merchant marine, insurance, electric utilities, rubber, paper,
sugar refining, copper, and assorted other mainstays of the industrial
Eventually, major industrialists came to realize that by providing
better wages, benefits, and working conditions, they could undercut
the appeal of socialism and at the same time win greater worker
loyalty and motivation. There was a parallel interest in the regularization
of loosely organized craft-based production processes to take
greater advantage of the methods of industrial engineering and
mass production. This meant organizing around more highly structured
rule-driven production processes that demanded worker stability
Big business came to see advantages in working with large
moderate (nonsocialist) labor unions that negotiated uniform wages
and standards throughout an industry and enforced worker discipline
according to agreed rules. These arrangements increased stability
and predictability within the system without ultimately challenging
the power of the industrialists or the market system.
These reforms took place against a backdrop of continuing
struggle. A pro-business judicial system that consistently ruled
against labor interests helped prompt the labor movement to become
increasingly political, resulting in labor's development of a
legislative agenda and an alliance with the Democratic Party.
Reform legislation at local, state, and national levels began
to set new social standards and reshape the context of labor relations.
Particularly important to labor was the Clayton Anti-Trust Act,
which banned court injunctions against striking workers.
Even so, during the Roaring Twenties, corporate monopolies
were allowed to flourish within a loosely regulated national economy.
A stock market fueled by borrowed money seemed to be a limitless
engine of wealth creation. With faith in the free market and the
power of big business at its peak, an ebullient President Herbert
Hoover proclaimed, "We shall soon with the help of God be
within sight of the day when poverty will be banished from the
nation." Irving Fisher, perhaps the leading U.S. economist
of the day, announced that the problem of the business cycle had
been solved and that the country had settled on a high plateau
of endless prosperity.
It was evident that the average American family was better
fed, better dressed, and blessed with more of life's amenities
than any average family in history. This reality masked the enormous
underlying inequality of an America in which just 1 percent of
families controlled 59 percent of the wealth. In October 1929,
only a few months after Fisher announced the end of business cycles,
the highly leveraged financial system came crashing down. Financial
fortunes evaporated almost overnight. It took World War II to
provide the impetus for a new social contract between government,
business, and labor based on Keynesian economic principles that
set the global economic system back on the track of prosperity.
Ascendance and Reversal of Pluralism
By the time Franklin D. Roosevelt became president in 1933,
business excesses of the 1920s, the depression, and the resulting
plight of farmers, laborers, the elderly, blacks, women, and others
had produced a wave of political and cultural radicalism throughout
the United States. Roosevelt feared that without dramatic action,
this radicalism might overwhelm the entire structure of government.
He set about to save the system by pushing through an epic agenda
of social and regulatory reforms. Congress's passage of his National
Industrial Recovery Act (NIRA) was key, as it gave government
a mandate to play a more active role in achieving an economic
recovery that market forces alone seemed unable to manage.
On May 27, 1935, the Supreme Court voided the NIRA and ruled
that states could not set minimum wage standards. This decision
continued a century-old pattern of Supreme Court defense of business
and corporate interests over civil or human rights. Some observers
believe that the Supreme Court's action on NIRA and the minimum
wage radicalized a furious Roosevelt, motivating his commitment
to a sweeping reform of American institutions. He set about to
break up the business trusts, strengthen the regulation of business
and financial markets, and push through legislation providing
stronger guarantees for worker rights. Programs of public employment
were started. A social safety net was put into place.
Roosevelt attacked the Supreme Court with a vengeance and
tried to expand its membership with new appointments of his choice.
His attempt to "pack" the Court failed, but his charges
had a distinct impact on the justices themselves, and the majority
became more supportive of progressive initiatives. In the end,
Roosevelt's long period in office allowed him to appoint justices
to fill seven of the Court's nine seats, setting the Court on
a liberal course that lasted until the 1970s, when Republican
President Richard Nixon began to re-create the Court in its earlier
World War II brought the government into an even more central
and politically accepted role in managing economic affairs. The
government placed controls on consumption, coordinated industrial
output, and decided how national resources would be allocated
in support of the war effort. A combination of a highly progressive
tax system put in place to finance the war effort, full employment
at good wages, and a strong social safety net brought about a
massive shift in wealth distribution in the direction of greater
equity. In 1929, there had been 20,000 millionaires in the United
States and two billionaires. By 1944, there were only 13,000 millionaires
and no billionaires. The share of total wealth held by the top
0.5 percent of U.S. households fell from a high of 32.4 percent
in 1929 to 19.3 percent in 1949.34 It was a great victory for
the expanding middle class and for those among the working classes
who rose to join its ranks.
Pluralism flourished into the 1960s, a period of cultural
rebellion in the United States. A new generation, the flower children,
vocally challenged basic assumptions about lifestyles, the military-industrial
complex, foreign military intervention, the exploitation of the
environment, the rights and roles of women, civil rights, equity,
and poverty. The U.S. corporate establishment was badly shaken
by the apparent threat to its values and interests. Perhaps most
threatening of all was the fact that the young were dropping out
of the consumer culture. This generation was rebelling not against
poverty and the deprivations of exploitation so much as against
the excesses of affluence. This rejection of materialism by a
new generation of Americans in some ways presented a more fundamental
threat to the system than had earlier generations of angry workers
seeking a living wage and safe working conditions.
The names of consumer activist Ralph Nader and environmentalist
Rachel Carson became household words. Liberal Democrats had firm
control of Congress and were passing important legislation that
extended the scope of governmental regulation to strengthen environmental
protection and product and worker safety. The government was aggressively
pursuing antitrust cases to break up monopolies and keep markets
Abroad, U.S. corporations were under attack on two fronts.
Japan and Asia's newly industrializing countries (NICs)-Taiwan,
South Korea, Singapore, and Hong Kong-had become enormously successful
in penetrating U.S. markets. At the same time, U.S. corporations
were being prevented from fully penetrating Southern economies,
including those of the NICs, by Southern governments' aggressive
support of domestic industries, protectionism, and foreign investment
restrictions. These Southern government policies militated against
a "level playing field" for U.S. corporations. With
high taxes on corporations and investor incomes and rigorous enforcement
of environmental and labor standards at home, U.S. corporations
felt doubly handicapped in global competition.
It was a critical historical moment, and the corporate establishment
rallied to protect its interests-as will be examined in more detail
in Part III. The election of Ronald Reagan as president in 1980
ushered in a concerted and highly successful effort to roll back
the clock on the social and economic reforms that had created
the broadly based prosperity that made America the envy of the
world and to create a global economy that was more responsive
to U.S. corporate interests.
In his insightful book Dark Victory, Philippine economist
Walden Bello provides a Southern perspective on the Reagan agenda:
[A] highly ideological Republican regime in Washington. .
. abandoned the grand strategy of "containment liberalism"
abroad and the New Deal modus vivendi at home. Aside from defeating
communism, Reaganism in practice was guided by three other strategic
concerns. The first was the re-subordination of the South within
a US-dominated global economy. The second was the rolling back
of the challenge to US economic interests from the NICs, or "newly
industrializing countries," and from Japan. The third was
the dismantling of the New Deal's "social contract"
between big capital, big labor, and big government which both
Washington and Wall Street saw as the key constraint on corporate
America's ability to compete against both the NICs and Japan.
The debt crisis of 1982 provided the opportunity to address
the threat of prospective new NICs. The U.S.-dominated World Bank
and International Monetary Fund moved to restructure the economies
of debt-burdened Southern countries to open them to penetration
by foreign corporations. The "structural adjustment"
imposed by these institutions rolled back government involvement
in economic life in support of domestic entrepreneurs, eliminated
protectionist barriers to imports from the North, lifted restrictions
on foreign investment, and integrated Southern economies more
tightly into the Northern-dominated world economy. Trade policy
was the weapon of choice for imposing similar "reforms"
on the NICs.
The full political resources of corporate America were mobilized
to regain corporate control of the political agenda and the court
system. High on the political agenda were domestic reforms intended
to improve the global competitiveness of the United States by
getting government "off the back" of business. Taxes
on the rich were radically reduced. Restraints on corporate mergers
and acquisitions were removed. And the enforcement of environmental
and labor standards was weakened. The government sided with aggressive
U.S. corporations seeking to make themselves more globally competitive
by breaking the power of unions, reducing wages and benefits,
downsizing corporate workforces, and shifting manufacturing operations
abroad to benefit from cheap labor and lax regulation.
As these measures took hold in the United States, unemployment
became a chronic problem, and labor unions lost members and political
clout. Wages began to decline, as did the incomes of the poorest
households. A fortunate few profited handsomely. The earnings
of big investors, top managers, entertainers, star athletes, and
investment brokers skyrocketed. The number of billionaires in
the United States increased from one in 1978 to 120 in 1994.39
Lending abuses by a deregulated savings and loan industry left
U.S. taxpayers with a bill for $500 billion to clean up the mess.
They were hard times for ordinary citizens. Greed had a field
As the Reagan initiatives took hold abroad, backed by similar
conservative revivals in other Western nations, there were parallel
declines in most of the other Western countries as well as the
indebted countries of the South. Inequality increased within and
between countries. Unemployment rose to alarming levels, and many
social indicators that had shown steady improvement over the previous
three decades stagnated or in some instances began to decline.
Many of the indebted Southern countries fell even further into
international debt. The number of billionaires in the world increased
from 145 in 1987 to 358 in 1994.
The Reagan administration had pledged to arrest U.S. decline.
However, it made a number of strategic policy blunders that strengthened
U.S. military might and economic growth in the short term but
seriously weakened the U.S. position in the global economy over
the longer term. First, massive deficit spending on the military
contributed to making the United States the world's leading international
debtor country. The main holder of that debt was Japan, the major
competitor of the United States. Second, by denying any government
role in economic planning and priority setting, the Reagan administration
left the economic future of the United States entirely in the
hands of corporations that were being pressed by the capital markets
to focus only on short-term profits. Third, by allowing corporations
to pursue their anti-labor strategy, the United States squandered
its key resource in the competitive global marketplace-its human
capital.' The overall result was a significant weakening of U.S.
economic strength compared with that of Japan and Western Europe.
The consequences were clearly harmful to ordinary American citizens.
In the end, they may have been harmful to U.S. corporations as
This was not the result of a conspiracy. Major shifts in national
policy do not come about as a consequence of corporate and political
elites gathering in a conference room to define a strategy for
imposing global adjustment. They are far too independent minded
and represent too broad a range of conflicting interests. As Bello
What usually occurs is a much more complex social process
in which ideology mediates between interests and policy. An ideology
is a belief-system-a set of theories, beliefs, and myths with
some internal coherence-that seeks to universalize the interests
of one social sector to the whole community. In market ideology,
for instance, freeing market forces from state restraints is said
to work to the good not only of business, but also to that of
the whole community.
Transmitted through social institutions such as universities,
corporations, churches or parties, an ideology is internalized
by large numbers of people, but especially by members of the social
groups whose interests it principally expresses. An ideology thus
informs the actions of many individuals and groups, but it becomes
a significant force only when certain conditions coincide....
Market ideology became a dominant force only when a political
elite which espoused it ascended to state power on the back of
an increasingly conservative middle-class social base, at the
same time that the corporate establishment was deserting the liberal
Keynesian consensus in its favor, because of the changed circumstances
of international economic competition.
A Question of Governance
Interwoven into the political discourse about free markets
and free trade is a persistent message: the advance of free markets
is the advance of democracy. Advocates of the free market would
have us believe that free markets are a more efficient and responsive
mechanism for political expression than even the ballot, because
business is more efficient and more responsive to people's needs
than are inefficient and uncaring politicians and bureaucrats.
The logic is simple: In the free market, people express their
sovereignty directly by how they vote with their consumer dollars.
What they are willing to buy with their own money is ultimately
a better indicator of what they value than the ballot, and therefore
the market is the most effective and democratic way to define
the public interest.
Given the growing distrust of government, it is a compelling
message, and it embodies an important truth: markets and politics
are both about governance, power, and the allocation of society's
resources. It is also a misleading message that masks an important
political reality. In a political democracy, each person gets
one vote. In the market, one dollar is one vote, and you get as
many votes as you have dollars. No dollar, no vote. Markets are
inherently biased in favor of people of wealth. Even more important
in our present world, and less often acknowledged, is that markets
have a very strong bias in favor of very large corporations, which
command far more massive financial resources than even the wealthiest
of individuals. As markets become freer and global, the power
to govern increasingly passes from national governments to global
corporations, and the interests of those corporations diverge
ever farther from the human interest ...
People, even the greediest and most ruthless among us, are
living beings with needs and values beyond money. We need air
to breathe, water to drink, and food to eat. Most of us have families.
All but the most truly demented among us find inspiration in things
of beauty, including a natural landscape or a newborn baby. Our
bodies are of flesh, and real blood runs through our veins.
Behind its carefully crafted public-relations image and the
many fine and ethical people it may employ, the body of a corporation
is its corporate charter, a legal document, and money is its blood.
It is at its core an alien entity with one goal: to reproduce
money to nourish and replicate itself. Individuals are dispensable.
It owes only one true allegiance: to the financial markets, which
are more totally creatures of money than even the corporation
The problem is deeply embedded in the structure and rules
by which corporations are compelled to operate. The marvel of
the corporation as a social innovation is that it has the ability
to bring together thousands of people within a single structure
and compel them to act in concert in accordance with a corporate
purpose that is not necessarily their own. Those who revolt or
fail to comply are expelled and replaced by others who are more
As Washington journalist William Greider writes in Who Will
Tell the People?
"[The corporations'] . . . tremendous financial resources,
the diversity of their interests, the squads of talented professionals-
all these assets and some others are now relentlessly focused
on the politics of governing.
This new institutional reality is the centerpiece in the breakdown
of contemporary democracy. Corporations exist to pursue their
own profit maximization, not the collective aspirations of the
society. They are commanded by a hierarchy of managers, not the
collective aspirations of the society. "
Human societies have long faced the question whether the power
to rule will reside with the rich or the poor. We now face a different
and even more ominous question, which-to the extent that its implications
are fully understood-should unite rich and poor alike in a common
cause. Will the power to rule reside with people, no matter what
their financial circumstances, or will it reside with the artificial
persona of the corporation?
During this critical historical moment, in which one of the
most fundamental challenges our species faces is to rediscover
the purpose and unity of life, we must decide whether the power
to govern will be in the hands of living people or will reside
with corporate entities driven by a different agenda. To regain
control of our future and bring human societies into balance with
the planet, we must reclaim the power we have yielded to the corporation.
One important step will be to free ourselves from the illusions
of the ideology that legitimates the policies that are freeing
the corporation as an institution from human accountability.
Corporations Rule the World