How did we get here anyway? A look back at the history of corporations
Penny Nelson interviewed Douglas Rushkoff for HiLobrow magazine at a particularly sweet spot in time: a month and a half after the beginning of the occupation of Wall Street. Much like OWS and its global precursors and offshoots in 2011, we feel that the issues raised are just as, if not more, relevant today. We’ll be presenting the full interview in three parts. Today we kick off with the intro, the origin of the chartered corporation, the gross mis-characterization of the late Middle Ages, and the God that lives inside money. In a couple of days, tune in for more.
How did we get to where we are now, with Wall Street occupied by a mini-tent city while financial instruments increasingly funnel funds towards the already-wealthy? How did we get to a state where corporations seem to have more legal (and financial) access to life, liberty and the pursuit of happiness than the average citizen? How did we get to a point where money is invisible and computerized, yet distributed ever more unevenly?
One thing is certain: we didn’t get here overnight. In his book, Life Inc., author and media ecologist Douglas Rushkoff traces the rise and rise of the corporation, from its beginnings in the late Middle Ages, through its adolescence in the Industrial Revolution, to its present global and virtualized maturity. Life Inc. remains as relevant as when it was first published in 2009, as the public debate over the economy becomes more widespread, and the need for an accurate long view intensifies.
In this #longreads interview, Rushkoff locates the roots of the corporation in the Renaissance, explains how the corporation has made us over into its own image, reveals why there’s a God on the money, and warns what we’re really buying into when we buy that mortgage. But it’s not all talk. In addition to looking back, Rushkoff looks forward to offer some practical — and provocative — ideas on how to unincorporate, and better occupy, our lives.
1. Vaal Is Hungry, We Must Feed Vaal
[The Apple, Star Trek, dir. Joseph Pevney, 1967]
Peggy Nelson: The corporation is not a recent phenomenon; it goes back hundreds of years. What is the origin story of the corporation? Where did it come from, and what is it, exactly?
Douglas Rushkoff: The corporation is the result of two innovations: the creation of centralized currency, and the creation of the chartered monopoly. In the late 1300s the upper classes — the aristocrats, the people who had been feudal lords — were becoming less wealthy relative to real people. As the merchant class and people in towns were producing and doing, the relative wealth of the aristocracy was going down, and this was a problem; the aristocrats wanted to continue the system that had been working for them for the last 500 years wherein they didn’t have to “do” anything to be rich. So they hit upon the idea of passively investing in other people’s industries.
Suppose I am the monarch. I want to make money through your shipping company; how do I get you to let me invest? Well, I use what power I have as a monarch to write up a charter, which means I give you a monopoly in a certain area, and you give me 30% of the shares in the company. The chosen merchant avoids competition and gains protection from bankruptcy, while the king receives loyalty, because the merchants’ monopolies are based on keeping him in power. He doesn’t mind if a few of the merchant class are as rich as he is, as long as he is able to get still richer as a result.
But this was not the promotion of free-market capitalism. It was the promotion of monopoly, non-market capitalism. It was locking into place a set of players and a set of systems that had nothing to do with the free market. And it changed the bias of these merchants away from innovation; in other words, from “how do I innovate and maintain my competitive edge” to “how do I extract wealth from the realm that I now control?”
PN: Then they’ll tend to be conservative because they’ll want to maintain what they have and not risk losing it.
DR: Conservative in that sense, but rapacious in another. Say I’m now in charge of the Colonies. What I want to do is extract their wealth; I want to prevent the people who live in the Colonies from creating any value for themselves. If the colonists are going to grow cotton, that’s fine, but they’re going to use my seeds, my agricultural tools, they’re going to use everything from me. If you are a farmer you’re allowed to grow the cotton but you have to sell it to me at my prices. You’re not allowed to make fabric out of that cotton! Fabricating is creating value. And then you’re going to — what? You’re going to make it into clothes? Those are clothes you could have bought from me! No, no, no, you must give all the cotton to me, I’ll put it on my ship and bring it back to England, then the king’s other chartered monopoly, the clothes manufacturer, will make it into clothes, and then I’ll ship them back and sell them to you — at a profit.
PN: So it’s all export crops?
DR: Right. And anything else I will shoot you for.
PN: And they did!
DR: And they did.
2. Single-handedly Rehabilitating the Middle Ages
[Monty Python and the Holy Grail, dir. Terry Gilliam and Terry Jones, 1974]
DR: So for about three centuries, the middle and merchant classes were doing really well. Towns that had been in shambles since the fall of the Roman Empire and had lived under strict feudalism were finally coming into their own. This all hinged on the use of local currencies — grain receipts — through which people transacted. They were what we would now call “demurrage” currencies that were earned into existence. Towns ended up creating more value than they knew what to do with. They started investing in their infrastructure and their windmills and their water wheels; and also in their future in the form of cathedrals and other tourist attractions.
PN: They didn’t get money from Rome to fund their cathedrals?
DR: They did not. The Vatican and central Rome did not build the cathedrals. The funds came from local currency, which was very different than money as we use it now. It was based on grain, which lost value over time. The grain would slowly rot or get eaten by rats or cost money to store, so the money needed to be spent as quickly as possible before it became devalued. And when people spend and spend and spend a lot of money, you end up with an economy that grows very quickly.
Now unlike a capitalist economy where money is hoarded, with local currency, money is moving. The same dollar can end up being the salary for three people rather than just one. There was so much money circulating that they had to figure out what to do with it, how to reinvest it. Saving money was not an option, you couldn’t just stick it in the bank and have it grow because it would not grow there, it would shrink. So they paid the workers really well and they shortened the work week to four and in some cases three days per week. And they invested in the future by way of infrastructure — they started to build cathedrals. They couldn’t build them all at once, but they took the long view — with three generations of investment they could build an entire cathedral, and their great-grandchildren could live in a rich town! That’s how the great cathedrals were built, like Chartres. Some historians actually term the late Middle Ages “The Age of Cathedrals.”
They were the best-fed people in the history of Europe; women in England were taller than they are today, and men were taller than they have been at any point in time until the 1970s or 80s (with the recent growth spurt largely the result of hormones in the food supply). Life expectancy of course was still lower; they lacked modern medicine, but people were actually healthier and stronger and better back then, in ways that we don’t admit.
That was right before the corporation and the original chartered monopolies were created, before central currency was created and local currencies were outlawed. When everything gets moved into the center, things began to change.
PN: It seems like the Dark Ages were not perhaps so “dark.”
DR: Yes, I think that’s disinformation. I’m not usually a conspiracy theorist about these things, but I think the reason why we celebrate the Renaissance as a high point of western culture is really a marketing campaign. It was a way for Renaissance monarchs and nation-states, and the industrial age powers that followed, to recast the end of one of the most vibrant human civilizations we’ve had, as a dark, plague-ridden, horrible time.
Historically, the plague arrived after the invention of the chartered corporation, and after central currency was mandated. Central currency became law, and 40 years later you get the plague. People got that poor that quickly. They were no longer allowed to use the land. It shifted from an abundance model to a scarcity model; from an economy based on annual grain production to one based on gold released by the king.
That’s a totally different way of understanding money. Land was no longer a thing the peasants could grow stuff on, land became an investment, land became an asset class for the wealthy. Once it became an asset class they started Partitioning and Enclosure, which meant people weren’t allowed to grow stuff on it, so subsistence farming was no longer a viable lifestyle. If you can’t do subsistence farming you must find a job, so then you go into the city and volunteer to do unskilled labor in a proto-factory for some guy who wants the least-skilled, cheapest labor possible. You move your whole family to where the work is, into the squalor, where conditions are overcrowded and impoverished — the perfect breeding ground for plague and death.
3. There Is A God, And He’s On All The Money
PN: The money that the king was releasing, what was that based on? The other currency was based on grain, it’s a direct relationship to how much grain there is, and as the grain degrades, the currency degrades . . .
DR: The king’s currency? It was actually not even gold: king’s currency was based in the king’s imprimatur. It was coin of the realm because his face was stamped on it.
PN: That’s fairly abstract.
DR: It is. And because people don’t believe in that abstraction, because they’re used to grain receipts being based in something real, precious metal was required for the king’s currency — silver, gold; they had to use something that was considered valuable so people would believe.
Fast-forward to the 1970s. After four or five centuries of people believing it, Nixon realized that people now do believe, so the currency can be taken off the central metal and just be based on belief. That’s when they started putting “In God We Trust” on paper money, when it was taken off the gold standard.
PN: That phrase hadn’t always been on there?
DR: No, it was on coins, but it wasn’t on bills. Because finally, belief is all that’s left.
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