#7 - Corporations and Democracy

Huge majorities of the American people agree that corporations are too powerful, have too much control over our daily lives.  What are the mediums, the pathways that enable three Americans to own as much wealth as 40-50% of the rest of us and while many suffer from food insecurity and homelessness?  Where does that power, that control, come from, and how does money get really, really big in the first place and come to overwhelm our politics?

The primary source of big money in First World countries is the control of consolidated and potentially immortal artificial entities -- corporations.  Anything that is permitted to grow indefinitely is almost sure to overwhelm the powers, the rights of mortals who have a productive work life of only a few decades.  How did the corporation become so powerful a force, and what does it do that overpowers the birthrights of ordinary, mortal human beings?

The corporate form of organization dates back at least a millennium.  The Roman Catholic Church is probably the oldest, longest lived such organization.  During monarchic times royalty frequently created companies to exploit the natural resources of colonies, push into new regions and expand the empire.  The East India Company, for example, was a corporation chartered by the British Monarchy in 1600 and tasked with trading in the Indies and moved into the tea and opium trade in Asia.  Its tax exemption and subsidization by the crown to advantage it against colonial merchants was the spark that led to the Boston Tea Party.

From the most ancient of times, the corporation was universally understood to be an artificial entity with limited personhood which gave it the privilege of operating under its own set of by-laws; of entering into contracts; of suing and being sued; of buying, owning and selling property.  It was universally understood that it had limited privileges, only those needed to accomplish the purposes for which it was formed.  As such it was responsible for obeying the laws and regulations of the jurisdictions in which it operated.  Failure to accomplish its mission or obey the laws, etc. could, and often did, result in termination of its charter, its existence.

The industrial revolution brought into being the modern, secular corporation that replaced individual artisans and merchants.  Over time, one corporation after another bought up its competitors, its suppliers and/or its distributors.  Size became a source of power as one corporation after another grew far beyond its local origins, hiring hundreds, then thousands and now, sometimes, millions of people to buy, make, distribute and sell or lease products and/or services.

The central point of controversy that created the dominant corporation is its legal status.  What is a corporation, anyway?  Is it all the people who own it, run it or work for it?  No.  A corporation is legally separate from its owners, its operators or any other human being.  A corporation is a legal document, called a charter that is, usually, granted by a state government.  Those pieces of paper create and officially recognize the existence of X, Inc. and authorize it to do the activities specified, these days very, very broadly stated, with no time limit and with very few specifics, unlike the practices of the era in which the US Constitution was written.  And there is no mention of incorporation anywhere in our constitution.

What changed about the legal status of corporations?

Internationally, almost nothing has changed.  But in the US, the Supreme Court of the US (SCOTUS) has dramatically revised the status of artificial entities.  During the Civil War, the companies in the northeast and Midwest that supplied materiel for the war effort grew very, very large by the standards of the day.  And thanks in large part to the Homestead Act, railroads and the companies making their equipment became prime movers of the American economy.  As railroads grew, their owners came into frequent conflict with local governments.  In the early 1880s, California, under a new constitution, declared that corporations could not deduct expenses that human beings were able to deduct when paying taxes. The principal railroads refused to accept that, and Santa Clara County and the state of California sued Southern Pacific and Central Pacific railroads for the value of fence posts running along the rights of way.  The California Supreme Court sided with the state and county.  Not willing to accept those decisions, the railroads petitioned the Supreme Court of the US to overturn those decisions.

The Supreme Court of the US overruled the California courts and decided in favor of the railroads; however, their opinion said nothing about what was to become the basis for granting corporations many of the birthrights of human beings.  The Court Reporter, Bancroft Davis, a former president of an eastern railroad, summarized the ruling in a “headnote” that even though the judges did not rule on whether corporations were “persons” with constitutional rights, he added that all the Justices agreed that corporations did possess the same 14th Amendment “equal protections” that any citizen, including the former slaves for whom the 14th was written to protect, was able to enjoy.  That headnote opened the floodgates of claims by corporations against taxation, regulations and each other.  From 1890 to 1910 the SCOTUS ruled on over 300 cases regarding the 14th Amendment.  Only 9 of them were brought by former slaves.  And that was only the beginning; year after year, decade after decade, corporations have successfully taken cases to the state and federal courts and won favorable rulings granting more and more “rights” under the Constitution of the US related to the 1st, 4th, 5th and 14th Amendments.

Now these stacks of papers called charters have the right to speak, not to speak and to lie.  Now a corporation need not display posters informing its workers of their legal rights as that would “violate” its right not to speak.  A corporation is under no obligation to honor a working person’s constitutional rights under the 1st Amendment.  Now corporations are able to demand advance notice via court proceedings of snap inspections by regulatory agencies per the 4th Amendment.  Now corporations cannot be “excessively” punished (or hardly punished at all) because that would be a violation of due process and equal protection clauses under the 14th Amendment and a “taking” under the 5th Amendment.  Corporations now owe zero financial responsibility to anyone or anything other than to its shareholders.  A corporation may surveil its employees in manners no government is allowed to do.  Recently corporations have been given the ability to spend unlimited amounts of money on pushing propaganda during election season.   A corporation is permitted to own other corporations and to grow into such dominant powers that “competition” is virtually nonexistent in industry after industry.  A corporation may, and frequently does, buy up its competitors to prevent innovative or less expensive products from competing with its own products.  And the list goes on and keeps growing decade after decade

Thus, corporations grow ever bigger, ever more dominant, not only in marketing terms, but also in political terms.  Once a corporation dominates a federal, state or local economy, its labor “market”, what government would dare do anything to an offender that would put its employees out of work or diminish the tax base?  What government would deny such a dominant corporation any tax break, subsidy or benefit if it is promoted as a way to improve the tax base and expand employment (though almost never being required to actually produce the claimed benefit)?

Thus, our meager anti-trust legislation has been limited by court decisions and governmental negligence and is now rarely, if ever, enforced.  Thus, modern corporations operate with wide ranging impunity.  And the rights of We the People are continuously diminished relative to these artificial entities every hour of every day.

How do we restore the birthrights of We the People?  How do we defend ourselves against government of, by and for the corporations?

Successes

During the years leading up to the 2016 election, FDF (its predecessor), MoveOn Seattle, Occupy Seattle, many local Move To Amend chapters and WAmend worked individually and collaborately to get Olympia to pass resolutions to address money in politics and corporate constitutional personhood.  Despite overwhelming popular support, our legislature refused to act.

So, WE did.  With our support, WAmend launched Initiative 735 which called on Congress to pass a constitutional amendment clarifying for the SCOTUS that:  1.  Corporations are not “persons” under the Constitution, and 2.  Spending money in elections is not the equivalent of free speech under the Constitution.  Not surprisingly, our efforts were not endowed by BIG MONEY.  The only way we could get the signatures required was with a major effort by volunteers.  Despite all the assertions by the “smart people” in national advocacy groups that it couldn’t be done, we got more than the signatures required.  And once on the ballot, we won in 2016 with 62.8% of the voters voting “Yes”.

Since then FDF and WAmend merged.  Similar groups across the country have asked us for advice and help in their efforts.  The movement continues and grows.

---

Next Democracy Story: Summary: What’s it all Mean?

Share this post
Related posts
Books
Local Elections and the Politics of Small-Scale Democracy

This book offers the first comprehensive analysis of electoral politics in America's municipalities.

Books
‍They Don't Represent Us: Reclaiming Our Democracy

Written by Lawrence Lessig, this book charts the way in which the fundamental institutions of our democracy, including our media, respond to narrow interests rather than to the needs and wishes of the nation’s citizenry

Democracy Story
#1 - The Short Story of Democracy’s Demise

Democracy is all about equality in political power. But this doesn’t work for everybody.