Unequal Citizenship and Access to the Commons

How Corporations Became 'People' - and How You Can Fight Back

Unequal Protection explains the 14th Amendment and its misuse

Back in 2002, when I wrote the first edition of this book, most Americans thought the Boston Tea Party was a revolt against “excess taxes” and that “corporate personhood” was something the Supreme Court conferred on companies back in 1886. This book blew up both myths, pointing out that the Boston Tea Party was a revolt against the British government giving the East India Company the largest corporate tax cut in history (so they could unfairly compete with small colonial tea merchants) — basically a revolt against the Wal-Mart-ization of the colonies — and that the Supreme Court did not rule that corporations are persons and thus entitled to rights under the Bill of Rights in 1886 (it was a corrupt scam by a bribed SCOTUS justice and Court Clerk). In the 20 years since Unequal Protection first came out, this “new” knowledge is now widespread. With permission from the publisher, Berrett-Koehler, I’ll be sharing most of the book (the most recent updated edition) with you, one chapter at a time (and not always in order), over the next dozen or so Sundays. If you find it useful, forward or use parts of it in normal “fair use” fashion with my enthusiastic assent.

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(Image: Jared Rodriguez / Truthout)There are resources and there are resources. For corporations, resources include raw materials, labor, the property and the equipment they use, the talents of the people they employ, and cash. For humans, resources include air, water, food, shelter, clothing, health care, and the means of exchange to ensure these.

I remember growing up fifty-plus years ago in an America where an employer’s responsibilities to their community were so well understood that bosses who laid off people were considered either evil or failures. There was a dramatic recalibration of this during the 1980s, as the word layoff was replaced with the more politically tolerable euphemism downsizing and then further euphemized to rightsizing. In England the same event is described much more directly: “I was made redundant.”

This chapter is about what has happened to humans as their protections have been given to entities (corporations) that have entirely different values from those of living beings. Ironically, the bigger companies get, the more ability they have to influence people’s lives for better or worse—but the bigger they get, the fewer choices are available to workers and customers. And in recent years, health researchers have identified that the inability to do anything about one’s problems is a key contributing factor to stress.

Stress Kills

For many Americans a lengthening workweek, increasing debt, and dwindling job security are now part of life. Not surprisingly, this triad produces stress. Debt carries risk. A longer workweek reduces options for enjoying life and for escaping from debt. The decline of job security increases the risk of complete economic disaster—a scenario that corporations rarely have to confront.

The Clinton administration’s ratification of NAFTA and GATT/WTO (as well as numerous other “trade agreements” since then) made it possible to shift manufacturing and production jobs from the United States to the developing world. The American situation is mirrored throughout the world, as industrialized nations lose manufacturing jobs and developing countries become spotted with sweatshops like a child with measles. Humans require passports and visas to travel from nation to nation, but corporations can now move anywhere with virtually no restrictions.

• The U.S. Centers for Disease Control notes, “From 1952 to 1995, the incidence of suicide among adolescents and young adults nearly tripled. From 1980 to 1997, the rate of suicide among persons aged 15 to 19 years increased by 11 percent and among persons aged 10 to 14 years by 109 percent.”1

• Between 1972 and 1994, the number of Americans living below the poverty line almost doubled from roughly 23 million to about 40 million. By 2009 poverty had become so widespread and systemic in America that 58.8 percent of all Americans have or will spend at least a year of their lives in poverty.2

• Across Latin America, Africa, and Asia, the United Nation’s International Labor Organization catalogs more than 250 million children between the ages of five and fourteen who are working in hazardous industries and slave labor.3

• The World Health Organization lists unemployment as one of its risk factors for child abuse.4

Elizabeth Warren, Harvard law professor and chair of the Congressional Oversight Panel for the so-called TARP funds used to bail out the banks in 2008 and 2009, noted bluntly in a posting on the Huffington Post on December 3, 2009:

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can’t make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put 10 million homeowners out on the street.5

While this has been tragic for the people who are affected, a cynical view is that an increase in the number of desperate people can be beneficial to business: wages drop when more people are out of work and competing for available jobs. In fact, wages are lowest when the worker literally has no choice.

The Prisoner as Employee

Under the new WTO and NAFTA rules, an importing country cannot consider the conditions under which a product was produced. So, some corporations have discovered that they can profit by using prison labor to manufacture export products or perform services for offshore clients.

Although corporations can’t be put in prison, they find it very profitable to put humans there: corporations in nations like Myanmar (Burma), China, and the United States have opened manufacturing or service facilities in prisons, paying their laborers anywhere from a few cents an hour down to nothing at all.

It’s an enormously profitable enterprise, and some nations have moved to capitalize on it by passing laws that are easy to violate (so that people end up in prison who would not otherwise have been there), increasing the severity of penalties for existing crimes, more heavily criminalizing health problems (such as drug use), or criminalizing “anti-state” behaviors (such as practicing religion in China).

Although China and Myanmar don’t publish their figures, in the United States (the nation with the world’s highest incarceration rate), the “correctional population” in 2006 was 7.2 million adults, resulting in one in every thirty-one Americans (3.2 percent of the U.S. adult population) in jail, on parole, or on probation. The consequence was a substantial pool of potential prison labor— about one in every one hundred Americans.6

Since the 1985 passage of new laws increasing criminal penalties for drug use and sale, drug convictions accounted for more than 80 percent of the increase in the federal prison population, driving up the budget of the Federal Bureau of Prisons by 1,954 percent.7 Prison populations in the United States were relatively stable compared with population growth from the early years of the twentieth century until the election of Ronald Reagan, whose administration blessed the private prison industry in the United States.

We were at a quarter-million prisoners in 1930, a number that slowly rose with population growth to a half-million in 1980. During Reagan’s decade of the 1980s, prison populations in the United States doubled to more than 1 million people in 1990. The next decade they doubled again, hitting 2 million in 2000.8

From its birth in the 1980s, the American private prison industry has grown to be worth more than $1 billion today and is now moving international, with the two largest players having moved into direct construction or alliance partnerships in more than sixty nations.9

The percentage of American prisoners in private prisons who are now working for multinational corporations more than doubled between 1993 and 1998, according to www.prisonactivist.org. (Detailed and more recent statistics are hard to come by because the industry is not required to release such information and therefore chooses not to.) At the same time, American corporate prisons carry the highest rates of tuberculosis and HIV infection (and new infections) in the nation, and have a suicide rate twenty times higher than the country as a whole.10

But they can be very profitable: On February 8, 2002, America’s largest private prison corporation “reported record high annual revenues for fiscal year 2001 of $2.8 billion, a 12.1 percent increase over its 2000 revenues of $2.5 billion” and that the security part of its business was doing well. The company’s president said, “The North American security operations had a very strong quarter and year with a margin increase of 20 basis points for the fourth quarter, and a margin increase of 80 basis points for the year.”11

Privatizing the Commons

Privatization is the idea of taking commons functions or resources out of the hands of elected governments responsible to their voters and handing their management or ownership over to private enterprise answerable to shareholders. Many arguments have been advanced about privatization; those in favor argue that corporations run for a profit can be more efficient than government, and those opposed usually argue that the resources of the commons should always be held in the hands of institutions that are answerable only to the people who use them—the citizens—and thus must be managed by elected and responsive governments.

Opponents of privatization of the commons also usually point out that whatever increases in efficiency a corporation may bring to a utility, the savings produced by those increases in efficiency rarely make their way to the consumer but instead are raked off the top by the corporation and distributed to shareholders. One of the more high-profile examples is Enron and its role in the privatization of electricity worldwide, with particular focus on how Enron’s privatization of electricity in California worked to the detriment of California’s citizens but produced millions in profits for a small group of Texas stockholders; another example is an Enron subsidiary’s meetings in 1999 with Governor Jeb Bush of Florida in which it proposed to privatize and take over much of the state’s water supply.12

Supporters of privatization point to the creative ways corporations can extract profits from things governments previously just supervised in a boring and methodical fashion. For example, an article in the Houston Chronicle in January 2001 titled “Enron Is Blazing New Business Trail” noted the “extraordinary year” the Houston-based company was having, with most of the company’s revenues coming “from buying and selling contracts in natural gas and electricity.”

The article quoted Kenneth Lay, who, the newspaper said, “has a doctorate in economics,” as extolling the virtues of profiting from trading in previously regulated or government-run commodities. “The company’s emphasis on trading to hedge against risk has been emulated by other firms in energy,” the article said, including “Duke Energy, Dynegy, Williams Energy—and increasingly in other industries.”13

Who Owns the World’s Water?

While Enron started the discussion in Florida in 1999 about privatizing that state’s water supplies and the Everglades, the process was already a done deal in Bolivia. In 1998 the Bolivian government requested a $25 million loan guarantee to refinance its water services in the community of Cochabamba. The World Bank told the Bolivian government that it would guarantee the loan only if Bolivia privatized the water supply, so it was handed over to Aguas del Tunari, a subsidiary of several large transnationals, including an American corporation that is one of the world’s largest private construction companies.

The next year Aguas del Tunari, in an effort to squeeze profits out of Bolivia’s water, announced that water prices were doubling. For minimum wage or unemployed Bolivians, this meant water would now take half their monthly income, costing more than food. The Bolivian government, acting on suggestions from the World Bank and Aguas del Tunari, declared all water corporate property, so even to draw water from community wells or to gather rainwater on their own properties, peasants and small farmers had to first pay for and obtain permits from the corporation.

The price of water was pegged to the U.S. dollar to protect the corporation, and the Bolivian government announced that none of the World Bank loan could go to poor people to help with their water bills.

With more than 90 percent of the Bolivian people opposing this move, a people’s rebellion rose up to deprivatize the water system. A former machinist and union activist, Oscar Olivera, built a broad-based coalition of peasants, workers, and farmers to create La Coordinadora de Defensa del Agua y de la Vida, or La Coordinadora. Hundreds of thousands of Bolivians went on a general strike, brought transportation in Cochabamba to a standstill, and evoked violent police response in defense of the Aguas del Tunari corporation’s “right” to continue to control the local water supply and sell it for a profit. Victor Hugo Danza, one of the marchers, was shot through the face and killed: he was seventeen.

The government declared martial law, and members of La Coordinadora were arrested and beaten in the middle of an early April night. The government seized control of the radio and television stations to prevent anti-corporate messages from being broadcast. But the uprising continued and grew.

The situation became so tense that the directors of the American corporation and Aguas del Tunari abandoned Bolivia on April 10, 2000. They took with them key files, documents, computers, and the assets of the company— leaving a legal shell with tremendous debt.

The Bolivian government handed the debts and the water company, SEMAPA, to La Coordinadora. The new company is now run by the activist group—essentially a local government itself now—and its first action was to restore water to the poorest southern neighborhoods, more than four hundred communities, which had been cut off by the for-profit company because the residents didn’t have the money to pay profitable rates for water. Throughout the summer of 2000, La Coordinadora held hearings through the hundreds of neighborhoods it now served.

In the meantime the American corporation moved its holding company for Aguas del Tunari from the Cayman Islands to Holland so that it could legally sue the government of Bolivia (South America’s poorest country) under WTO and Bilateral Investment Treaty (BIT) rules that Bolivia had signed with Holland.

On January 19, 2006, a settlement was reached between the government of Bolivia and Aguas del Tunari, and it was agreed that “the concession was terminated only because of the civil unrest and the state of emergency in Cochabamba and not because of any act done or not done by the international shareholders of Aguas del Tunari.” With this statement both parties agreed to drop any financial claims against the other.14

Why take such extraordinary steps against such a poor country? There’s more at stake than the immediate situation. If this citizens’ group is successful in turning a water supply back from private to government hands, and thus improving water service and making it more egalitarian and less expensive in this poverty-stricken country, it could threaten water-privatizing plans of huge corporations around the world.

The stakes are high, even as cities across India, Africa, and other South American countries hand their local water systems to for-profit corporations. Nonetheless politicians around the world are stepping up the rate at which they’re pushing for a transfer of the commons to the hands of for-profit corporations. Checking voting records and lists of corporate contributors, it’s hard not to conclude that there is a relationship between this political activity and the generous contributions these corporations give to pro-privatization politicians.

“Private Equity” Can Erase a Firm’s Values

In today’s business environment, when corporations are run in ways that benefit the environment or their workers as much as their stockholders, they’re at risk. When good salaries and pension plans are cut, it’s referred to as “unnecessary fat” that can be trimmed. (Note that such cuts are made much more feasible when wages are forced down by exporting jobs from the local economy.) Similarly, behaving in a more expensive but environmentally friendly way is “not efficient.”

In an article in Yes! magazine, economist and author David C. Korten pointed out that for many years the Pacific Lumber Company was, in many regards, a model corporate citizen. It paid good salaries, fully funded its pension fund, offered an excellent benefit package to employees, and even had an explicit no-layoffs policy during soft times in the lumber economy. Perhaps most important to local residents who weren’t employed by the company, Pacific Lumber “for years pioneered the development of sustainable logging practices on its substantial holdings of ancient redwood timber stands in California.”15

In a nation where such employee- and nature-friendly values were both valued and defended, Pacific Lumber Company would have a bright future. But in a world where profit is the prime value, and humans and ancient trees are merely excess fat, Pacific Lumber was a sitting duck.

As Korten documents in his article, a corporate raider gained control in a hostile takeover. He immediately doubled the cutting rate of the company’s holding of thousand-year-old trees, reaming a mile-and-a- half corridor into the middle of the forest that he jeeringly named ‘Our wildlife-biologist study trail.’ He then drained $55 million from the company’s $93 million pension fund and invested the remaining $38 million in annuities of the life insurance company which had financed the junk bonds used to make the purchase and subsequently failed. The remaining redwoods were the subject of a last-ditch effort by environmentalists to save from clear-cutting.16

In the end the government stepped in to save some of the old-growth forests, but the business and its employees were already screwed, and the private equity artist had already taken his cut.

Once upon a time, America had laws that corporations couldn’t own other corporations. If that were still true, situations like that chronicled by Korten would become illegal rather than the norm. (And people who become multimillionaires by employing such predatory leveraged-buyout and private equity techniques, from Mitt Romney to T. Boone Pickens, would actually have to work for a living.)

The reason Madison and Jefferson—and even Hamilton and Adams— worried so loudly about “associations and monopolies” growing too large and powerful is that they would begin to usurp the very lives and liberties of the humans who created them. It becomes particularly problematic when companies are bought and stripped of their assets by other companies that aren’t even in their industry but are simply asset hunting.

In the realm of government, the Founders kept power close to the people with the Tenth Amendment and other constitutional references to the powers of states over the federal government. A similar principle could apply to corporations.

The breakup of AT&T between 1974 and 1984 led to vigorous growth in the telecommunications industry, although that industry is once again reconsolidating in the absence of Sherman Act enforcement.

Seizing Other Nations’ Commons via Patent

Because international courts have recently held that life forms and their by-products are patentable, multinational corporations in wealthy nations have been busily patenting the living products of poorer nations.

For example, people in India have been using the oil of the neem tree as a medicine for millennia: but now more than seventy patents have now been granted on the tree and its by-products in various nations. One European patent on its use as a fungicide was recently thrown out, but others stand.17

In similar fashion, Maggie McDonald notes in the British magazine New Scientist that “a botanical cure for hepatitis traditionally used in India can be patented in the U.S.” She notes that Vandana Shiva documents how this is not a process that is driving innovation or competition, as multinationals often claim, but instead, “a survey in the U.S. showed that 80 percent of patents are taken out to block competitors.”18

Ironically, that same issue of New Scientist has a feature on recruitment news that extols the wonders of becoming a patent agent. In the new world of international biotechnology, the article says, “Wealth is measured not in gold mines, but in the new currency of ‘intellectual property.’” Eerily echoing Shiva’s claim, the very upbeat article on getting a job in the patent business says, “The aim is to lock away these prize assets [for your company] so they can’t be plundered by commercial rivals.”19

And the business of locking up these assets pays very well. Ted Blake of Britain’s Chartered Institute of Patent Agents is quoted as saying, “You’re looking at six-figure salaries for those who make it as partners in an agents’ firm.” Not only is the pay good but the work is also very chic. Reiner Osterwalder of the European Patent Office told the magazine, “Patents are no longer stuck in a dusty corner. They’re sexy, and touch questions of world order.”20

The British Broadcasting Corporation notes that not only can plants and their uses be patented but the very genetics of the plants can be nailed down. An article about the patenting of the neem tree published in 2000 on the BBC Web site says, “Genes from nutmeg and camphor have also been patented with the aim of producing their oils artificially—a move which would hit producers in developing countries.”21

And it’s in developing countries where the race to patent indigenous life forms is most rapid, particularly by American-based companies, because U.S. patent law doesn’t recognize indigenous use of a product as “prior art,” meaning once a use for a plant is “discovered” by an American company—even if that plant has been used in that way for ten thousand years by local tribes, it’s considered new and thus patentable. The Web site www.globalissues.org notes, “In Brazil, which probably has the richest biodiversity in the world, large multinational corporations have already patented more than half the known plant species.”22

The consequences of this behavior are profitable for corporations but can be devastating to the humans who find that their food or medicinal plants are now the property of a multinational corporation. Corporations say that this is necessary to ensure profits, but the thriving herbal products industry— made up mostly of domestic plants that cannot be patented—testifies to the untruthfulness of this assertion. Selling plants may not be as profitable as selling tightly controlled and patented plants, but it can be profitable nonetheless.

This is not to say that plants should or should not be patentable. In a democracy the benefits or liabilities of corporations’ patenting life forms would be discussed and decided by popular vote. Because of the Santa Clara “decision” and its consequences, however, corporations have exercised their “right” to get patent laws changed and exemptions established that would be difficult to impossible for an ordinary human to accomplish.

Changing Your Citizenship in a Day

For a human to change his or her citizenship from one country to another is a process that can take years, sometimes even decades, and, for most of the world’s humans, it is practically impossible. Corporations, however, can change their citizenship in a day. And many do.

The New Hampshire firm Tyco International moved its legal citizenship from the United States to Bermuda and, according to a 2002 report in the New York Times, saved “more than $40 million last year alone” because Bermuda does not charge income tax to corporations while the United States does. Stanley Works, which manufactures in Connecticut, will avoid paying U.S. taxes of $30 million. Ingersoll-Rand “saves” $40 million a year.23 Offshore tax havens figured big in the Enron debacle, as that corporation spun off almost nine hundred separate companies based in tax-free countries to shelter income and hide transactions. Through this device the company paid no income taxes whatsoever in four of its last five years and received $382 million in tax rebates from Uncle Sam.24

Generally, when a human person changes citizenship, he is also required to change his residence—he has to move to and participate in the country where he is a citizen. But Bermuda and most other tax havens have no such requirement. All you need do is be a corporate person instead of a human person, pay some fees (it cost Ingersoll-Rand $27,653), and, as Ingersoll-Rand’s chief financial officer told the New York Times, “We just pay a service organization” to be a mail drop for the company.25

Ironically, the Bush administration justified rounding up human people and holding them incommunicado in jails without normal due process after September 11 because as “nonpersons” they lacked the full protections of citizens under the U.S. Constitution. (Over the weekend of Christmas 2009, the Obama administration successfully argued the same logic, allowing it to constitutionally render persons as “nonpersons” simply by having the president declare them “enemy combatants.”)

Similarly, if you or I were to open a post office box in Bermuda and then claim that we no longer had to pay U.S. income taxes, we could go to jail. Corporate persons, however, keep their rights intact when they decide to change citizenship—and save a pile in taxes. And, notes the New York Times, “There is no official estimate of how much the Bermuda moves are costing the government in tax revenues, and the Bush administration is not trying to come up with one.”

Corporations are taxed because they use public services and are therefore expected to help pay for them.

Corporations make use of a workforce educated in public schools paid for with tax dollars. They use roads and highways paid for with tax dollars. They use water, sewer, power, and communications rights-of-way paid for and maintained with taxes. They demand the same protection from fire and police departments as everybody else, and they enjoy the benefits of national sovereignty and the stability provided by the military and institutions like NATO and the United Nations, the same as all residents of democratic nations.

In fact, corporations are heavier users of taxpayer-provided services and institutions than are average citizens. Taxes pay for our court systems—the biggest users of which are corporations, to enforce contracts. Taxes pay for our Treasury Department and other government institutions that maintain a stable currency essential to corporate activity. Taxes pay for our regulation of corporate activity, from ensuring safety in the workplace, to a pure food and drug supply, to limiting toxic emissions.

Taxes also pay (hugely) for our military, which is far more involved in keeping shipping lanes open and trade routes safe for our corporations than protecting you and me from an invasion by Canada or Mexico (our closest neighbors, with whom we’ve fought wars in the past). It’s very difficult to calculate because government doesn’t keep track of it, but it’s not hard to see that corporate use of our commons—what is funded with our taxes—is well over half of worker use.

Yet, as professor of political economics Gar Alperovitz points out, “In the Eisenhower era, corporations paid an average 25 percent of the federal tax bill; they paid only 10 percent in 2000 and [following the first Bush tax cuts only] 7 percent in 2001.”26

In a Democracy…

One of the foundational principles of democracy is that all people are treated equally in regard to issues of the law, citizenship, and their access to the commons. As Lawrence Mitchell, a John Theodore Fey research professor of law at the George Washington Law School and author of Corporate Irresponsibility, said, “The function of corporations in light of their constitutional personhood is effectively to foreclose access to the commons for most citizens. The entire proposition that a corporation is a person is ridiculous.”27