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Housebreaking the Corporations

One obstacle to constructive change in the face of peak oil I didn’t discuss recently on The Archdruid Report is the role of corporate influence in contemporary society. That factor is of course real – the influence of large corporations has checked, and at times checkmated, quite a few useful reforms in recent decades – but it has been overstated fairly often; the same thing could be said with equal truth of nearly any other large and well-funded institution in American life, from the retiree lobby to the American Medical Association.

The principle behind that effect is simple enough to grasp. Whenever power has been diffused to the point that no one power center can carry out its agenda without the consent of many others, any well-organized faction becomes a power broker. It can drive whatever bargains it wishes in exchange for supporting the agendas of other factions, and use that clout to defend those positions it considers nonnegotiable.

A good deal of the stalemate that puts necessary reforms out of reach in Washington DC just now is a function of this process; it’s hard to think of any such reform that won’t step on the toes of at least one well-funded power center, and so business as usual proceeds on its merry way, even though almost everyone recognizes that the end result will be to nobody’s benefit. Consider, as one example out of many, the way that the retiree lobby keeps the single sanest response to America’s looming budget crisis – a simple means test on Social Security and Medicare – from ever coming up for discussion. The same logic, enforced by one or another power center, keeps every other effective reform out of reach.

This is not, to be sure, the way a significant fraction of today’s radicals describe the situation. Since I first started The Archdruid Report, and more particularly since economics began to move toward center stage in these essays, I’ve received a regular stream of comments and emails insisting that corporations play the role of Sauron the Dark Lord in an updated remake of Tolkien’s The Lord of the Rings. Another example of the species showed up in the inbox a few days ago; this one insisted that corporations had become the new dominant life form on Earth, and were ruthlessly squeezing out all the others, including us.

The Tolkien metaphor may not be quite on target in that case, as the author seems to have taken his metaphors from the Terminator movies instead. Still, the quest to identify somebody in today’s society as evil incarnate, and blame him, her, or it for the world’s problems, is much the same. (I ought to write a post someday on the way that a plot device Tolkien adopted for literary effect has been stood on its head and turned into one of our time’s most misleading metaphors, but that’s a job for another day.) The problem with such identifications, as I’ve suggested repeatedly in these essays, is that the root of most of today’s problems is the simple fact that most of the people on our badly overcrowded planet demand lifestyles that the Earth’s resources will not support for much longer. Until that changes, nothing else is going to change – and nobody has yet suggested a plausible way for that change to happen that doesn’t involve a vast number of deaths and the decline and fall of industrial society.

That being the case, we’re in for a rough future. Still, as I’ve also suggested here rather more than once, this unwelcome news doesn’t make constructive change pointless. Bad as the unraveling of the industrial age will inevitably be, there’s still plenty of room for choices that could make matters noticeably better, or noticeably worse, in the deindustrial age beginning around us. One of those changes, I suggest, has to do with the way corporations relate to society as a whole – for it’s not necessary to project mythic images of absolute evil onto today’s corporations to realize that there are significant problems with that relationship.

The core difficulty is simple enough to describe. Corporations, under the laws of the United States and most other nations, are legal persons; they have many, though not all, of the same rights that “natural persons” – that is, you and me – have under the law. Still, the most obvious difference between corporate persons and natural persons these days is that the corporate kind are noticeably more antisocial. They pursue their purposes – primarily, making money – with a single-mindedness and a lack of concern for consequences that, in natural persons, would be accurately labeled psychopathic; they’ve proven themselves consistently willing to lie, cheat, steal, and kill whenever the likely return on these acts outweighs the risk of punishment.

Any number of writers in recent years have pointed this out, of course. Some of them have simply turned up the rhetoric of moral denunciation, with the usual results – that is, a warm glow of self-righteousness on the part of the denouncer, and no effect at all on the denouncee. Others have proposed various means for forcing corporate persons to behave themselves. One popular proposal would subject corporations to regular review by some independent body which could annul the charter of any corporation that refused to be properly housebroken, forcing its dissolution. What would keep this body honest in the face of the fantastic potential for corruption, the proponents of this notion do not say, but there’s another issue here: we’ve actually got a tolerably effective way of responding to antisocial behavior; we just don’t apply it to corporate persons the way we do to natural persons.

A glance back into the history of law may help clarify the matter. I’m not sure how many people these days know that the earliest version of English common law, from which our American legal system descends, operated entirely on the basis of fines. The principle of wergild, as it was called, gave each person a cash value; if a murder took place, the murderer had to pay the family of the victim that cash value as wergild for the death. Lesser injuries and insults called for lesser fees. The same thing was true of nearly all the old Indo-European tribal law codes. It didn’t work very well, not least because anyone who had enough money could act the way mainstream economists think we all ought to act, on the basis of a simple cost-benefit analysis. If you could afford to pay the wergild for killing somebody, and decided it was worth the expense, why not?

So as the Dark Ages gave way to less chaotic times, legal codes in England and elsewhere replaced wergild with punishments that were a good deal less easy to shrug off. This is why natural persons who are convicted of felonies, by and large, can’t get away with just paying a fine; they go to jail, or if the crime is heinous enough and it happens in a jurisdiction with capital punishment, they die. While it has its failings, this approach to antisocial behavior generally works a good deal more effectively than the wergild principle.

From this perspective, the problem with corporate persons is simple enough: the only risk they run in breaking the law is that they have to pay wergild, and that doesn’t constrain antisocial behavior any more effectively now than it did in Anglo-Saxon times.

My more perceptive readers may be wondering at this point whether I’m seriously proposing that corporations should be thrown in jail or put to death. Yes, that’s what I’m proposing, with the adjustments needed to account for the differences between corporate persons and natural persons. What’s the essential nature of imprisonment for a crime, after all? The criminal ceases to be a free person; for a specified period of time, he is a chattel of society, and society has the right to profit from his labor during that period. And capital punishment? The criminal, having proven that he isn’t willing to abide by even the most minimal standards of social existence, ceases to exist by act of society. Both of these can be applied to corporations easily enough.

Imagine, then, that a corporation – we’ll call it the Shyster Company – has just been caught selling worthless securities to widows and orphans. The district attorney files charges of felony fraud and theft. The trial date arrives, the lawyers bicker, the jury finds the defendant guilty as charged and the judge sentences the corporation to the equivalent of ten years in the slammer. The judge appoints a trustee, who takes control of Shysterco and all its assets. For the following ten years, Shysterco is a wholly owned subsidiary of the state government. Its stock pays no dividends and has no voting rights, its directors have to find something else to do with their time, and if the trustee decides that the CEO and other overpaid office fauna get to find new jobs, they get to find new jobs – assuming that they’re not doing time themselves, as they probably should be. All profits earned by Shysterco during its period of imprisonment go to the state government, subject to set-asides that pay restitution to the victims of the crime.

Meanwhile another conglomerate – we’ll call this one Dirty Rotten Scoundrel Inc. – has been caught knowingly selling food products tainted with deadly bacteria, and a dozen people have died. This time the district attorney files charges of aggravated first degree murder. The trial date arrives, the media has a field day, the lawyers bicker, the jury returns a verdict of guilty as charged, the judge sentences DRSI to death and the appeals court upholds the sentence. On the scheduled date of execution, DRSI ceases to exist. Its stock becomes worthless, its assets are sold off in an auction in which no former shareholder is allowed to bid, its name and trademarks can never again be used by anybody under penalty of law, and its creditors get whatever scraps are left once the victims’ families receive their settlements.

It’s crucial that the stockholders in both cases, and the creditors in the latter case, suffer for the behavior of the corporation. The stockholders of a corporation are its owners, in fact and law; they profit from its activities, and therefore should pay for its crimes. The laws governing corporations limit the liability of stockholders to the value of their investment, and there’s no need to overturn that principle; it simply needs to be applied to criminal cases in the same way that responsibility is applied in cases involving natural persons. Notice that under this system, if word gets out that a corporation is pushing the limits of legality, the stockholders have a very strong incentive to sell, driving down the value of the stock. Notice also that if lenders become aware that a corporation is engaging in really egregious behavior, they have a very strong incentive to charge higher interest rates or even to stop loaning money to the corporation. Neither has any such incentive under the current system, which is one reason why corporations act as though their quarterly profit statements are the only things that matter; to their stockholders and creditors, this is essentially the case.

Finally, notice that the government has a powerful incentive to enforce the law, which current corporate regulation schemes generally lack. Governments always need money; raising taxes is unpopular, but catching a crooked corporation that has violated the law and making the rascals pay for their crime will make excellent press, and five or ten years of corporate income in the state treasury is likely to gladden the heart of even the most unregenerate corporate stooge in the state legislature.

My more perceptive readers may be wondering at this point whether I seriously think such a proposal has the chance of a snowball in Beelzebub’s back yard of being enacted. Yes, as it happens, I do. One of the repeated lessons of history is that the political power of business waxes during times of relative stability, and crumples in times of turmoil and crisis. The long European peace of the 19th century saw business interests dominate most Western governments; when that peace shattered in 1914, it took the power of big business with it, and by the time the rubble stopped bouncing after 1945, every Western country had either embraced some degree of socialism outright, or adopted radical economic reforms that would have been considered unthinkable before a flurry of bullets at Sarajevo tipped the world into chaos.

We are facing a similar age of crisis now, in case you haven’t noticed, and it’s worth noting that a number of countries have already seen governments square off against corporate powers and win. (Consider Russia, where the seizure of the nation’s fossil fuel reserves by local magnates backed by multinational corporations drew a brutally effective counter from the government once Putin took office.) When the power of money faces off against the power of violence, money comes out a distant second. As the Great Recession deepens, the peaking and decline of world petroleum production begins to bite, and rising world powers contend with declining America and each other to settle whose will be the next global empire, this equation is likely to play a major role in the balance of power. I suspect that by the time the current mess gets any deeper, business interests will be facing organized efforts to do things much more drastic to them than simply hold corporations responsible for their crimes, and may be willing to bargain in the hope of survival in exactly the same way their predecessors did in that earlier time of troubles.

Yet there’s another factor that needs to be addressed. As I suggested toward the beginning of this essay, the power of corporate interests might more usefully be seen as a response to the general weakness of all other parties. That weakness is the product of a power vacuum at the core of the American political system, and this vacuum will be the theme of next week’s post.

What do you think? Leave a comment below.

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