How Corporations Became 'People' - and How You Can Fight Back
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.
In the absence of the controls recommended by the Founders and early state regulation, corporations have continued to grow in size and power without limit. But they haven’t done it just by creating new wealth in the economy. Much of it, instead, has been accomplished by increasingly consolidating existing wealth, moving it out of the hands of the middle class and into the hands of the top few percent of Americans economically. Of course, some new wealth has been generated, but nowhere near enough to explain the observable facts.*
The past thirty years has, in fact, seen the largest transfer of wealth from working people to the rich and very rich in the history of both this nation and any nation on earth.
Consolidation: Mergers, Acquisitions, and Interlocking Boards
If you were to define and rank nations according to their gross domestic product, fifty-two of the world’s one hundred largest “nations” are actually corporations. Tracking the growth of the largest companies can be problematic because they’re constantly merging with or buying other companies. This trend has accelerated in the decreased regulatory environment of the 1980–2010 period—just a few generations after Americans busted the trusts during the Populist Movement of Teddy Roosevelt and William Jennings Bryan.
One-third of 1980’s Fortune 500 companies no longer existed in 1990— not because they failed but because they had been merged or acquired. This accelerated in the 1990s: two-fifths of the Fortune 500 vanished in the five years from 1990 to 1995. They’re still there and still powerful; it’s just that now they’re even more powerful and wealthy, and they have less competition. Statistics since 1995 are nearly impossible to find because the Clinton administration stopped the tracking of this sort of information and corporations don’t publish it. (And conservative think tanks have, over the past decade, systematically employed a small army of Libertarian true-believers to scrub the Internet and rewrite thousands of Wikipedia and other pages.)
The combined GDP of the world’s two hundred largest corporations is greater than all but nine nations, and just as the European royal families are interrelated, so too are the boards of directors of most of the world’s largest corporations.
Corporate observer Robert A. G. Monks reports that today 86 percent of billion-dollar company boards contain at least one CEO of another company, while 65 percent of outside directors serve on two or more boards. He documents how 89 percent of inside directors are outside directors on other companies’ boards, and 20 percent of all directors serve on four or more company boards. Ralph Nader has testified about this extensively before Congress, suggesting that these interlocking boards violate antitrust statutes, and there are entire Web sites devoted to it, such as www.theyrule.net.
For example, the following is a 2002 snapshot showing how interconnected these companies are in that each has at least one board member who’s also a board member on another, creating a continuous daisy-chain:
IBM shares a board member with Coca-Cola
Which shares a board member with AT&T
Which shares a board member with Citigroup
Which shares a board member with Lucent Technologies
Which shares a board member with Chevron
Which shares a board member with Hewlett-Packard
Which shares a board member with Boeing
Which shares a board member with Sara Lee
Which shares a board member with Bank One Corporation
Which shares a board member with Cardinal Health
Which shares a board member with Freddie Mac
Which shares a board member with Lehman Brothers Holdings
Which shares a board member with PepsiCo
Which shares a board member with Bank of America
Which shares a board member with Motorola
Which shares a board member with J. P. Morgan Chase
Which shares a board member with ExxonMobil
Which shares a board member with SBC Communications (owns Ameritech, PacBell, and Southwestern Bell, among others)
Which shares a board member with PG&E Corporation
Which shares a board member with Home Depot
Which shares a board member with General Electric
Which shares a board member with Delphi Automotive Systems
Which shares a board member with Goldman Sachs Group
Which shares a board member with Ford Motor Company
Which shares a board member with Sprint ? Which shares a board member with Allstate
Which shares a board member with AMR (owns American Airlines)
Which shares a board member with Aetna
Which shares a board member with Dell Computer
Which shares a board member with Prudential Insurance
Which shares a board member with Dow Chemical
Which shares a board member with Met Life
Which shares a board member with Verizon
Which shares a board member with USX (formerly U.S. Steel)
Which shares a board member with Lockheed Martin
Which shares a board member with Enron
Which at this writing shares board member Ken Lay with Compaq
Which shares a board member with Dynergy
Which shares a board member with CVS/Pharmacy
Which shares a board member with Fannie Mae
Which shares a board member with Conoco
Which shares a board member with E. I. du Pont de Nemours
Which shares a board member with IBM
Which shares a board member with Coca-Cola (which is where we started)
There is strong evidence that this much concentration of wealth and power is not healthy, and prior to the last century it was considered criminal behavior in many states, as interlocking boards were banned and most states had specific caps on how big a corporation could be.
But that was then and this is now. Today the world’s largest two hundred corporations, which employ fewer than 0.8 percent of the world’s workforce, account for more than 27 percent of the world’s total economic activity, more than all nations in the world combined except the top ten.
The corporations of Samuel Adams’s day, like the East India Company, were the bald economic instruments of monarchy and imperial power, but during and after the American Revolution they were put firmly under the control of state legislatures and local municipalities. Today, empowered with human rights, they roam free, with few checks on their power or growth; and they have, in fact, reversed the old East India Company model by becoming the agents that more directly control democracies than do their individual citizens.
The United Nations reports that “about two-thirds of all world trade” is in the hands of transnational corporations, which “increasingly shape trade patterns” of the planet.
Corporations reaching out from their home countries and into other countries have become “the main force in international economic integration,” according to the U.N.’s Trade and Development Conference.
Sales of the two hundred largest corporations in the world equal
27.5 percent of the world’s economic activity.
If you added together the sales of every nation in the world except the top ten, the total would be less than the combined sales of the world’s two hundred largest corporations.
The 1999 sales of General Motors were greater than the GDP of 182 nations. The same is true of Wal-Mart, ExxonMobil, Ford Motor, and DaimlerChrysler.
The eighty-two largest American corporations contributed $33,045,832 to political action committees in the year-2000 election cycle (and that doesn’t include “soft money,” for which statistics are unavailable), outspending labor unions by 15 to 1. This was apparently useful to candidates: in 94 percent of U.S. House of Representatives races, the candidate who spent the most money won. By the 2008 election it had become much more difficult to track corporate money or that coming from wealthy individuals, particularly when that money was used to fund nonprofit (we pay their share of taxes) astroturf groups that spring up and seem to be grassroots advocacy efforts. A good guess, though, is that the numbers have increased about tenfold.
As this shift in income has happened, along with it came a shift in who owns pretty much everything.
In 1976 the richest 10 percent of America’s population owned 50 percent of American wealth. By 1997 they owned 73 percent. (In other words, 23 percent of America’s total wealth shifted from the poor and middle class to the very wealthy in twenty-one years.)
This was not just because the economic pie got bigger: 44 percent more people work multiple jobs than did in 1970, and American workers are putting in, on average, a full month more at work than they did twenty years ago. And hourly earnings of America’s nonsupervisory workers, in 1998 dollars, have fallen by 9 percent since 1973, from $14.09 to $12.77.
Looking at the same numbers from “the other end of the telescope,” in 1976 the lower 90 percent of the population owned half the wealth. By 1997 their share was down to 27 percent.
In 2000 the top 1 percent of American households had financial wealth
greater than that of the bottom 95 percent combined.
In 1998 the net worth of just one American, Bill Gates, at $46 billion, was greater than the bottom 45 percent of all American households combined.
It’s not just an American phenomenon anymore. Worldwide, according to the United Nations Development Program, the difference between the richest and poorest nations in the world was 1 to 3 in 1820, 1 to 35 in 1950, and 1 to 72 in 1992. The gap has continued to grow since then.
How can this be? What’s happening?
Spengler’s The Decline of the West
In his book The Decline of the West, first published in German in 1918 and then in English in 1926, Oswald Spengler suggested that what we call Western civilization was then beginning to enter a “hardening” or “classical” phase in which all the nurturing and supportive structures of culture would become, instead, instruments of the exploitation of a growing peasant class to feed the wealth of a new and growing aristocracy.
Culture would become a parody of itself, people’s expectations would decline while their wants would grow, and a new peasantry would emerge, which would cause the culture to stabilize in a “classic form” that, while Spengler doesn’t use the term, seems very much like feudalism—the medieval system in which the lord owned the land and everyone else was a vassal (a tenant who owed loyalty to the landlord).
Spengler, considering himself an aristocrat, didn’t see this as a bad thing. In 1926 he prophesied that once the boom of the Roaring Twenties was over, a great bust would wash over the Western world. While this bust had the potential to create chaos, its most likely outcome would be a return to the classic, stable form of social organization, what Spengler calls “high culture” and I call neofeudalism.
In all high Cultures, therefore, there is a peasantry, which is breed stock, in the broad sense (and thus to a certain extent nature herself), and a society which is assertively and emphatically “in form.” It is a set of classes or Estates, and no doubt artificial and transitory. But the history of these classes and estates is world history at highest potential. It is only in relation to it that the peasant is
seen as historyless. [All italics are Spengler’s from the original text.]
More-recent cultural observers, ranging from billionaire George Soros in his book The Crisis of Global Capitalism, to professor Noreena Hertz in The Silent Takeover: Global Capitalism and the Death of Democracy, have pointed to deep cracks in the foundational structure of Western civilization, traceable to the current legal status of corporations versus humans. The extent of the problems within our structures is laid bare with startling and sometimes frightening
clarity by a wide variety of books.*
The origin of many of modern global society’s problems are clearly laid out in The Trap by now-deceased billionaire speculator Sir James Goldsmith, and it appears that perhaps that “crazy old coot” (as the media would have us believe) Ross Perot—with his charts and graphs and warnings about corporate money in the political process, GATT, and NAFTA—was right in many regards, at least from a nationalistic American point of view.
The summary version of these and dozens of other books documenting Spengler’s decline of the West is this: We’re entering a new and unknown but hauntingly familiar era. It’s new because it represents a virtual abandonment of the egalitarian archetypes the Founders of the United States put into place in our Constitution and Bill of Rights. And it’s hauntingly familiar because it resembles in many ways one of the most stable and long-term of all social structures to have ever established itself in the modern history of Europe—feudalism.
Boston Tea Party participant George R. T. Hewes mentioned the idea that the situation then was beginning to resemble feudalism, and there are those today who have made the same comparison.
The New Feudalism
Feudalism doesn’t refer to a point in time or history when streets were filled with mud and people lived as peasants (although that was sometimes the case).
Instead it refers to an economic and political system, just like democracy or communism or socialism or theocracy. The biggest difference is that instead of power being held by the people, the government, or the church, power is held by those who own property and the other necessities of life. At its essential core, feudalism could be defined as “of, by, and for the rich.”
Marc Bloch is one of the great twentieth-century scholars of the feudal history of Europe. In his book Feudal Society, he points out that feudalism is a fracturing of one authoritarian hierarchical structure into another: the state disintegrates as local power brokers take over.
In almost every case, both with European feudalism and feudalism in China, South America, and Japan, “feudalism coincided with a profound weakening of the State, particularly in its protective capacity.” Given most accepted definitions of feudalism, feudal societies don’t emerge in civilizations with a strong social safety net and a proactive government.
There is a slight debate, in that some scholars like Benjamin Guérard say that feudalism must be land-based, whereas Jacques Flach and others suggest that the structure of power and obligation is the key. But the consensus is that when the wealthiest in a society take over government and then weaken it so that it can no longer represent the interests of the people, the transition has begun into a new era of feudalism. “European feudalism should therefore be seen as the outcome of the violent dissolution of older societies,” Bloch says.
Whether the power and wealth agent that takes the place of government is a local baron, lord, king, or corporation, if it has greater power in the lives of individuals than does a representative government, the culture has dissolved into feudalism. Bluntly, Bloch states, “The feudal system meant the rigorous economic subjection of a host of humble folk to a few powerful men.”
This doesn’t mean the end of government but instead the subordination of government to the interests of the feudal lords. Interestingly, even in feudal Europe, Bloch points out, “The concept of the State never absolutely disappeared, and where it retained the most vitality men continued to call themselves ‘free’…”
The transition from a governmental society to a feudal one is marked by the rapid accumulation of power and wealth in a few hands, with a corresponding reduction in the power and the responsibilities of government. Once the rich and powerful gain control of the government, they turn it upon itself, usually first eliminating its taxation process as it applies to themselves. Says Bloch, “Nobles need not pay taille [taxes].”
Bringing this to today, consider that in 1982, just before the Reagan-Bush “supply side” tax cut, the average wealth of the Forbes 400 was $200 million. Just four years later, their average wealth was $500 million each, aided by massive tax cuts. Today those four hundred people own wealth equivalent to one-eighth of the entire GDP of the United States.
Extreme Concentrations Are Destabilizing
Too much concentration of anything makes it vulnerable to toppling. Most historians and economists recognize that a root cause of the Great Depression was a severe economic imbalance. The sharp increase in concentration of wealth described in this chapter also has much in common with the statistics of the 1920s.
This is also the history of civilizations. As wealth and power accumulate into fewer and fewer hands, the rest of the populace loses its sense that there’s any point in trying to keep up. Whether on a national or a worldwide stage, revolutions and terrorism result when enough people perceive too great a gap between the most rich and the average poor.
In the 1980s the Reagan and Bush administrations effectively ceased enforcement of the Sherman Antitrust Act, just as the Coolidge administration had done in the 1920s. This led to a mania for mergers, acquisitions, and neotrusts, just as happened in the Roaring Twenties, and with a similar reconsolidation of power and wealth and rise in the stock market. In the 2002 edition of this book, the sentence that followed the previous one said: “Hopefully, the same cycle will not play itself out: If we act promptly, we can set in motion forces that will change the direction of the current trend.” Unfortunately, we did not act, as the Great Crash of 2008 showed.
The End of the American Dream?
Martin Luther King Jr., in his “I have a dream” speech, referred to how the people who wrote the Declaration of Independence and the U.S. Constitution “were signing a promissory note to which every American was to fall heir.” The contents of that note King referred to were identified by Jefferson when he wrote, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
The American Dream is something every schoolchild understands. It’s the heart and soul of democracy. It means opportunity and freedom, the ability to raise a family or pursue one’s own dreams. It means the strong participate in the protection of the weak, lest they lose their own rights if they become oppressors.
In the Federalist Papers (No. 51), Alexander Hamilton wrote, “In a society under the forms of which the stronger faction can readily unite and oppress the weaker, anarchy may as truly be said to reign”; and under such circumstances, eventually, even “the more powerful factions or parties will be gradually induced, by a like motive, to wish for a government which will protect all parties, the weaker as well as the more powerful.”
Are we approaching that time Hamilton mentioned?
At the same time that the concentration of wealth has taken place over the past three decades, the entry-level wage of an American male high school graduate has declined 28 percent (in real dollars).
Twenty percent of American workers now earn income below the official poverty rate defined by the U.S. government—and that doesn’t include the unemployed.
The top 20 percent of American families have seen their income go up by 97 percent in the past two decades.
Meanwhile, the bottom 20 percent fell 44 percent in their real income, although most were working harder and working longer hours and many carried multiple jobs.
Oswald Spengler noted that cycles of growth and collapse are built into the culture, and at a certain point it “hardens” and then becomes feudal or “classical.” The warning signs, he says, are easily seen: replacement of human and spiritual values with slogans and self-indulgence, concentration of wealth into the hands of a few as poverty increases exponentially, citizens who are politically disengaged and ignorant, and a culture that becomes a parody of itself as it obsesses on its slogans and symbols but ceases to live out its ideals.
The fall of the Roman Empire is a classic example, and we may be another.
In a 1998 survey of American teens, 2.2 percent could name the then– chief justice of the Supreme Court (William Rehnquist), but 59.2 percent could name Curly, Larry, and Moe as the fictional Three Stooges.
An impressive 74.3 percent of teens knew that Bart Simpson lives in Springfield, Massachusetts, but only 12.2 percent recognized that Abraham Lincoln lived most of his life in Springfield, Illinois.
Only 21.1 percent knew that there are one hundred U.S. senators, 1.8 percent could identify James Madison as a father of the Constitution, and a thin 25 percent knew what human right the Fifth Amendment protects. But 98.7 percent knew that Leonardo DiCaprio starred in the hit movie Titanic, and 75.2 percent knew the ZIP code associated with the popular television show Beverly Hills 90210.
Ironically, and probably unknown to the National Constitution Center at the time they designed their poll, the Three Stooges, Bart Simpson, the movie Titanic, and the television show Beverly Hills 90210 were all owned by the same multinational corporation. Such single-corporation influence over popular culture would not have been the case two hundred years ago or even fifty years ago.
To blame all or even most of this on the Santa Clara “decision” would be overreaching: Wealth was concentrating and moving around the world well before the modern corporation came along. Rome had concentrations of wealth, as did Sumer and Greece. Medieval Europe and Japan were cultures of extreme wealth and poverty, as was India with its multimillennia caste system. Even Victorian England, not so very long ago, was a hellhole for all but the well born and the industrialists, as Charles Dickens reminds us in graphic, tragic prose. “This is nothing new,” some would say.
But there is. The difference between then and now is twofold:
The wealth in those days had a face and a name. Without corporations to blur who does what, the warlords and nobles and the high caste were identifiable. We know who the kings and queens of old were, from Gilgamesh six thousand years ago in Sumer to the King of France before the revolutionaries executed him and his family. Because that wealth had a face, saying things like “Let them eat cake” could be dangerous for one’s survival.
More important, those governments never claimed to be democratic. In the past six thousand years of modern worldwide agriculture-driven civilization, there were only two governments—Athens for about two centuries, and the United States for a century or so—that rose out of a dominator culture and claimed that they were truly democratic, truly government by the people, even the poorest of the people. Since the American experiment, almost a hundred countries have joined the club in various forms, but it’s still very much a new experiment worldwide, one that was tried only once before in all these millennia—Athens, 300 bce—and they were conquered and thrown back into oppression by the concentrated wealth and power of the warlord who called himself Alexander the Great.
In a Democracy…
The “great experiment” of a democratic republic is at a critical crossroads. Can it recover the “government of, by, and for the people” ideal that it held so recently and implement it again in the halls of governments in America and across the world?
Or has de Tocqueville’s worried vision come to pass? Have we become anesthetized and helpless as humans in the presence of a mighty machine that puts on a good face but, when push comes to shove, takes no prisoners and destroys its competitors without a second’s thought?
The answer will depend, in some part, on whether the doctrine of corporate personhood is allowed to stand. Will the people take back their government and assert democratic controls over the misdeeds of the fabulously powerful corporations among them?
To some extent, that will depend on whether We the People demand that our elected officials return to the time-tested principles of national trade policy and fair trade instead of the “free for multinationals trade” that has been so aggressively peddled to the world in the past two decades.
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