"Change" you say?

Part 10: Corporations William C. Shelton (The opinions and views expressed in the commentaries of The Somerville News belong solely to the authors of those commentaries and do not reflect the views or opinions of The Somerville News, its staff or publishers.) Candidates in last November's presidential election all promised to bring major change. We continue to wait. In this series, I've tried to describe how promises to solve our most pressing problems run up against the economic and political institutions that are those problems' primary cause. I would hope that, having eliminated the threat of world communism, we can have an open discussion about the institutions of corporate capitalism. We are blessed with the democracy and protections provided by our Constitution. When it was written, almost all Americans were farmers, merchants, tradesmen, or slaves. Those who wrote it did not know concentrated power. They could not have anticipated the emergence of the modern corporation in the mid 19th Century. They did not know that the very capitalism that spawned democracy, individual freedom, and more prosperity for more people contained internal dynamics that, over the centuries, would threaten each of these values. One such dynamic is that at the end of every profitable transaction, investors must reinvest the profit to gain even more profit, or consume it and cease to be investors. This expand-or-die competition produces winners and losers. Over time, fewer and fewer winners remain in any industry, and they have more and more concentrated power, wealth, and capacity to influence everyone else. They are the largest corporations. Only about 20% of U.S. businesses are corporations. They make important contributions to our lives. They bring us new technologies, develop life-saving drugs, keep us entertained, and provide jobs to a lot of people. I have worked with senior managers and shareholders in large corporations, and I know them to be decent people who have no particular desire to harm others. They merely accept the institutional rules as they exist and play very hard by them. But those rules give corporations inherent characteristics that enable them, even compel them, to do harm. Corporation law separates management from ownership. It shields owners from liability for a corporation's misdeeds, except to the extent of the money that the owner has invested. It requires directors and managers to act in the "best interest of the corporation," which is interpreted as maximizing shareholders' wealth. Investment flows to those companies that can sustain the absolutely highest rate of profit, whether or not they must harm their community, employees, small businesses, future generations, and the planet to produce it. In fact, shareholders can sue management if it does not pursue such opportunities. Mainstream economists call these injuries "externalities"-other people's problems. Corporations enjoy the protections of the Constitution that its framers only intended to apply to human beings. This has been used successfully to strike down laws that limit what corporations spend to influence politics. Of the world's 100 largest economies, 53 are corporations. Exxon Mobil is larger than the economies of 180 nations. They are growing stronger as states grow weaker. They have replaced the self-organizing market with the corporate equivalent of central planning. While their own individual interests sometimes conflict, they cooperate on issues that affect their general welfare. They do not and cannot exercise absolute power, but they can and do shape the economic and political frameworks within which everyone else has to operate. Government is focused on short-term election cycles, corrupted by money, and poorly informed. It is little match for giant corporations. In 1968, there were fewer than 1,000 Washington lobbyists. Today, there are about 35,000. Of the 100 largest lobbying efforts between 1998 and 2004, corporations and their trade associations conducted 92. Corporations own and influence the media as well, shaping public policy debate. Attempts to solve at their roots such critical problems as healthcare, energy policy, military spending, financial industry regulation, and poverty, are blocked or warped by the focused power of corporations with vested interests in conditions remaining the same. Tiptoeing around this reality produces piecemeal solutions that add large costs, reward those responsible for the problems, and do not solve them. This would appear to be the fate of the current healthcare debate. For those serious about change, here are a few entirely legal actions that could begin to make a difference. Governments charter corporations. Governments could revoke the charters of corporations that do great harm to the public good. Changes in corporation law could also make officers, directors, and owners personally liable if their corporations are grossly negligent. Corporations did not acquire the same legal status as people because Congress passed a law or a court made a decision. In an 1886 Supreme Court case, the Chief Justice remarked that he thought Southern Pacific Railroad was entitled to 14th amendment protections. Somehow this became legal precedent. Congress has the authority to pass legislation that would eliminate this status. Doing so would allow placing legal limits on the money that corporations can spend on elections and lobbying. And Corporations should not be allowed to use shareholders' money to lobby without the oversight of the shareholders themselves. Sharply limiting campaign spending and publicly funding elections would encourage more serious discussion and fewer meaningless sound bites and distortions. Closing the revolving door between the highest positions in government and those in the largest corporations would make a big difference as well. To some, these measures may seem radical. They are merely reforms rooted in our nation's founding values, and they are modest in comparison to the changes that Americans must soon contemplate. The inevitable escalation of energy prices, the emergence of China and India as powerful economic competitors, the continuing disappearance of jobs, and the declining possibility of cheaply financing America with other people's money will, together, fundamentally change how Americans live. We must have a conversation about how the pain and opportunity brought by these changes will be distributed, act effectively in response to them, or become victims of them.