How Corporations Came to Have
So Much Power
Inventing Ethical Institutions
excerpted from the book
Democracy vs. Capitalism
by William H. Boyer
Apex Press, 2003. paper
The central American myth is that democracy is the American way
of life. Democracy, however, requires an educated public. The
sad reality we face is that the prospect of a public educated
to issues and alternatives is perceived as threatening to the
privileges of the minority that hold most of our wealth and power,
so virtually all of our institutions work to disarm this threat.
Operating with an effective confusion of "information"
with propaganda, our media, our schools, our corporations, and
our government support information technology and produce an increasing
flood of its product. Through what I call "the strategic
use of trivia," members of the public are under the illusion
that the "information" they receive is educating them
on subjects that matter. In fact they are by and large being fed
what the institutions that perpetuate the power of corporate America
wish to feed them.
Robert Reich, former Secretary of Labor
"There's no longer any countervailing
power in Washington. Business is in complete control of the machinery
HOW CORPORATIONS CAME TO HAVE SO MUCH
Many of the original 13 colonies were
actually corporations created (chartered) by the King of England
to extract timber, animal pelts, and precious metals to benefit
England. The charters of these colonies were not written to create
democracy or to promote the welfare of the colonial communities,
and abuses of power were widespread. The power of non-colony corporations
was also a problem for the colonists: the "Boston Tea Party"
was a protest over how the British East India Tea Company had
pressured the King to raise the tea tax. The tea tax forced colonial
merchants to raise their prices so they could not compete with
this tea corporation and it was not hard for the colonists to
see how a corporation could control their economy.
After the Revolutionary War, citizens
of each state (via their legislatures) issued not-for-profit charters
to establish such community ventures as firehouses, libraries,
and colleges. Legislatures also chartered profit-making corporations
to work on such infrastructure projects as the construction of
bridges and canals. In exchange for the charter, a corporation
was obligated to obey all laws, serve the common good, and cause
no harm. Chartering by the legislatures was a privilege-not a
right-and charters automatically expired after five to 30 years
unless renewed. In the first few decades after the War, very few
charters were granted and the citizens of this new country made
sure that the abuses they had suffered as colonies were not repeated
(Grossman and Adams 2001, 62).
In those days, people were very cautious
about creating institutions which could overpower them. There
were many limitations written into corporate charters and state
constitutions. Corporations had limits on capitalization, debts,
land holdings, and sometimes profits. They could not own stock
in other corporations nor could they keep their financial books
closed to public representatives. They were prohibited from making
political contributions. In dramatic contrast to the situation
today, corporate stockholders and directors were held personally
responsible for crimes and harms committed and debts incurred
by the corporation (Grossman and Adams 2001, 61-2).
As David Korten points out, the Civil
War changed all this. Public scrutiny of corporations was difficult
to keep up during the Civil War when the states were warring among
themselves. State legislators took bribes from corporate executives
to loosen legal restrictions, grant lucrative business contracts,
and to have the government subsidize their businesses (Korten
President Abraham Lincoln was moved to
use these stunningly strong words to describe the situation in
I see in the near future a crisis approaching
that un-nerves me and causes me to tremble for the safety of my
country. As the result of the War, corporations have been enthroned
.... An era of corruption in high places will follow, and the
money power of the country will endeavor to prolong its reign
by working upon the prejudices of the people .... until wealth
is aggregated in a few hands... and the Republic is destroyed
(Wasserman 1983, 89-90).
Following the Civil War, a battle of a
different nature emerged as states competed against each other
with weakened chartering requirements designed to attract corporations
and their money. This bidding war reached such a magnitude that
President Rutherford issued the following striking statement in
This is a government of the people, by
the people, and for the people no longer. It is a government of
corporations, by corporations, and for corporations (Wasserman
THE SANTA CLARA CASE
This slackening of legal restraints on
corporations culminated in a U.S. Supreme Court decision in 1886
known as Santa Clara County vs. Southern Pacific Railroad. It
opened the floodgates for the accumulation and consolidation of
corporate power. Without even any allowance for discussion or
debate, the Supreme Court accepted the Santa Clara decision that
corporations are "persons." Even though they are artificial
entities, they were grant-
ed the same legal status as real human
beings and were entitled to all the same Bill of Rights protections
including freedom of speech. In one fell swoop, essentially all
pretense of meaningful control over corporations was abandoned
for the corporations since they can use the First Amendment provision
for "freedom of speech" as the basis for making contributions
to political candidates. The result, as we know too well, has
been to transfer the economic power of the corporation into control
of the political system.
From 1886 onward, corporations have used
their court-conferred wealth to overwhelm the democratic process.
Having now the same rights as real people, they were allowed to
participate in the political process. Their unlimited spending
in elections permitted them to gain majorities in legislatures
and eliminate all remaining troublesome language in state constitutions.
Any attempts at control were defeated as "unconstitutional"
infringements on their right to "free speech."
The Supreme Court used the Fourteenth
Amendment to rationalize its decision by saying that it "forbids
a State to deny to any person within its jurisdiction the equal
protection of laws." (Santa Clara County v. Southern Pacific
Railroad Company, 118 U.S. 394 (1886), available at www.tourolaw.edu/patch/santa.)
The logic was inescapable once the corporation was deemed a "person."
Corporations increasingly use their economic
power to influence government and consider this a normal part
of the costs of doing business. Campaign money for political candidates,
lobbying in the halls of Congress, soft money to political action
committees and political parties often helps provide the kinds
of legislation which serves the corporations. This rapidly expanding
private power of corporations is often at such variance with the
public interest, that the phrase that we now "have the best
government money can buy" is understood by the general public.
People know that money now buys government.
Back in the 1930s, when Thurman Arnold,
an astute political philosopher, wrote The Folklore of Capitalism,
he saw the effect of "personhood" and stated: "The
idea. that a corporation is endowed with the rights and prerogatives
of a free individual is as essential to the acceptance of corporate
rule in temporal affairs as was the ideal of the divine right
of kings in an earlier day (1937, 185)." And he also pointed
out that "Institutions once formed have the persistency of
all living things. They tend to grow and expand. Even when their
utility both to the public and their own members has disappeared,
they still survive (395)."
His prediction is accurate for our present
day. As soon as a "legal" right was established to use
corporate money to control the political system the contest between
capitalism and democracy had a pre-determined outcome. Corporate
power was greatly increased when television became crucial in
elections for it is so expensive that the preponderant wealth
of corporations over individuals made the personhood fiction exactly
what was needed to use money as speech. Once political candidates
got most of their campaign money from corporations the tax benefits
and access to public resources soon followed. Those same legislators
could also make sure that the right people were put in the Federal
Communication Commission to keep television under private control
and out of reach of the public. When the major nation in the world
is under de-facto control of the major corporations, their power
will reach everywhere on this planet (Nader 2002, 156,161-162,
So as corporations have grown into multinationals
they have gained massive power on a global scale. Corporations
are taking the further step of establishing international agreements
(such as the North American Free Trade Agreement (NAFTA), the
General Agreements on Tariffs and Trade (GATT), and the Multilateral
Agreement on Investment (MAT)) through which they are attempting
to gain even more power by insulating themselves from all meaningful
legislative oversight. Although states still technically retain
the legal authority to revoke corporate charters, the exercise
of this right has languished virtually to zero as corporations
gained more wealth and power to corrupt government officials.
As William Greider points out, NAFTA was
adopted in 1993, and ... "has enabled multinational corporations
to usurp the sovereign powers of government, not to mention the
rights of citizens" (2001, 5).
Mexico, Canada, and the United States
forfeited sovereign immunity when they signed NAFTA, which means
countries cannot control their own resources. Corporations and
"free trade" override nations. Corporate investors from
other countries even override the laws created through national
Few people, even among college graduates,
know that corporation power was initially usurped in 1886 when
the corporation became a "person" and could use the
first Amendment of the Constitution as the basis for "money
is speech." The lives of ordinary Americans are controlled
substantially by the power that resulted from personhood.
Understanding how we lost control and
what to do about it is of the utmost importance for the American
future and, because of American corporate dominance, for the rest
of the world as well. There are steps that can be undertaken to
reverse this usurpation of American democracy and various groups
have been developing and testing strategies. Since corporations
are chartered in States, the responsibilities of corporations
can be defined at that level. Changes usually involve a Catch
22, for corporations will use their economic power to protect
their privileges. Yet the contest between democracy and oligarchy
involves potential power that has not yet been mobilized.
INVENTING ETHICAL INSTITUTIONS
The danger of the past was that men became
slaves. The danger of the future is that people may become robots.
TELEVISION: THE SUPREME OPIATE OF THE MASSES
The political power of television is enormous
and now eclipses religion as the true "opiate of the masses."
It represents the ultimate in "deflection politics."
Appealing to the worst part of human nature, programs have provided
enough violence, sensationalism, and silliness to keep people
attentive even during repeated soporific commercials that try
to turn them into unthinking consumers. t is an example of technology
in the service of the corporate system, providing symbols that
show us that (1) people are fools and willing to behave stupidly
in commercials, (2) that the system is willing to engage in any
manner of deceit to obtain profits, and (3) that putting balls
into hoops is central to the meaning of life.)
One channel, public television, has been
reserved to serve an educational role and to help create an informed
citizenry. In its early days, it was exemplary. In the 1980s,
the Reagan administration reduced the budget and forced PBS to
use commercial sponsors. Within 20 years, public television has
gone largely in the direction of commercial television. A safe
group of commentators is repeatedly used to respond to a safe
set of questions. However, nature and cultural films (including
good music) are available through corporate sponsorship because
they are non-controversial. Programming on politics, history,
and economics, however, is usually so weak that it provides little
basis for developing an informed public. Wall Street Week and
The Nightly Business Report, appropriate only to commercial television,
have been on public television for decades.
Legally and technically, however, the
reform of television is far easier than the rehabilitation of
the press. The airways are public property that is leased by corporations.
The public has the legal power to impose any requirement for content
or commercials. For the commercial stations to distort the political
system during elections by becoming the most expensive element
of campaigns is entirely unnecessary. Conditions of licensing
should include free political time to candidates on both PBS and
PBS should be financed by public money
and run by a board directly elected by the public. Statutory law
could mandate Congress to allocate guaranteed funding and ensure
that the standards for program content are guided by a statement
of purpose to be followed by the elected board. Commercial television
could be charged license fees high enough to support public television.
The entire plan is simple and logical, but it first requires the
public to know the truth about current public ownership of the
The same principles apply to radio, which
is at least as dismal on commercial stations that usually offer
perpetual commercials in place of public education. But since
radio is less costly, there is a greater variety of stations.
Some have provided the most intellectually and politically useful
information available to the public. The Pacifica Network stations
are among the most well known. Some public radio stations are
reaching out and broadcasting local lectures-an outstanding example
is an organization called Alternative Radio (located in Boulder,
Colorado) that supplies penetrating taped speeches, often recorded
at universities. Many of these speeches have a strong social justice
and anti-corporate emphasis-the kind of material that fits the
social ethics goal that should be driving twenty-first century
institutions in a transition from the twentieth century.
Low costs of transmission have allowed
radio to achieve this desirable educational objective. Television
is inherently expensive and uses the subsidy of public property
rights through free licensing. The potential power of public ownership
of the airways needs to be fully utilized to make sure that television
actually serves the public interest. The public owns the airways
and should control them. Radio and television models in other
countries such as Germany, which have avoided much commercial
corruption, should be examined for policy suggestions.
In light of its long-stated commitment to upholding human rights
at home and in its foreign policy, the U.S. government today poses
a threat to the universality of human rights.
Human Rights Watch 1999
Jimmy Carter 2002
There is a sense that the United States
has become too arrogant, too dominant, too self-centered, proud
of our wealth, believing that we deserve to be the richest and
most powerful and influential nation in the world ...
In 1976 a U.S. Supreme Court case, Buckley vs. Valeo, ruled that
the first Amendment of the Constitution permits all forms of free
speech and that the use of corporate money to influence elections
is a legitimate example of "speech."
In 1886 the courts had ruled that corporations
are entitled to the same First Amendment-freedom of speech-protection
as real "natural" persons by ruling that corporations
are also "persons." This personhood status has been
used by corporations to defeat the votes of real people, for grass
roots organizations are usually overwhelmed by massive and expensive
disinformation campaigns that corrupt the democratic process.
... The important goal of shifting power
back to the public is tied largely to overthrowing Buckley vs.
Valeo since this decision by the Supreme Court supports corporations
in their use of funds as "free speech" to buy campaign
ads on television and often control the outcome of an election.
This distortion of "speech" means we have created "the
best government money can buy."