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Controlling Our Corporations: Containment versus Rehab

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Message Tom Cobb

The New View of Capitalism

Liberals are finally gaining their voice on the problem of corporate capitalism. As corporate power has grown and consolidated over the last 25 years, they have honed their position on this rising concentration of power. By revealing how the granting of corporate privileges has corrupted the workings of both our marketplaces and our politics, a new view of American – and global - capitalism has begun to take hold. This view sees through the claims of conservatives regarding the "free" nature of our markets.

Thom Hartmann has exposed the far-reaching influence the legal construct of corporate personhood has on our economy. Marjorie Kelly has written about how the corporate mission of maximizing profits has become so elevated, we can now speak seriously of an economy entirely given over to the "Divine Right of Capital". And Joel Bakan, the author of the "The Corporation", has described the corporate "person" as being a sociopathic personality.

All of these perspectives have contributed to a unified view of the corporation. Rather than being a "natural" condition of free markets, the privileges of incorporation are granted by government, and serve as tools by which power is concentrated. Thus it is that corporate capitalism produces the very concentrations of power from which conservatives claim free markets will spare us.

Containment Strategies

Unfortunately, this clearer view of corporate capitalism hasn't yet translated to a clarified plan for reform. Despite our keener understanding of the true nature of corporate privilege, liberals are mired in a 1960s-style strategy of containment. Containment strategies depend upon the holy trinity of liberalism, regulation, taxation, and entitlements.

On the regulatory front, liberals have pressed for greater public compliance requirements (for example, the Sarbanes-Oxley Act), while also pushing for more energetic private efforts at corporate governance. Concerning taxation and entitlements, these are regarded as a means of paying reparations for the economic injustices stemming from the concentrations of corporate power.

All of these methods create multiple problems for liberal reformers. First, they are inherently uneven in their application, creating their own injustices, and producing their own moral hazards. Conservatives have perfected their methods for spotlighting these problems, and laying the blame for them at the feet of liberals. Liberals then play into their hands by denying these realities. This state of denial at least partly accounts for the political gains made by conservatives over the last 25 years.

The second problem is that these methods are expensive. All of them require the creation and perpetuation of bureaucracies to administer the various programs. And last, both liberal and conservative academics have exposed the ways and means by which corporations co-opt their regulators. By creating lucrative career paths for former regulators, industry ensures their ability to shape regulatory policy to their own purpose.

Thus it is that containment strategies have been a losing game for some time now. Cons get to portray them as both expensive and ineffective, and then lobby for rollbacks and budget cuts. Regulators then become even less effective, thus providing the justification for yet further cuts in regulatory funding.

Rehab Strategies

The alternative to this losing game is a program of rehabilitation. Instead of trying to contain the poor behavior of corporations – behavior that is inherent to their design – we should improve the design of our corporations. In short, we should subject our corporations to a personality makeover. How would we go about doing this? This could most simply be done by restructuring our corporations so that corporate workforces controlled all voting shares.

Under such an ownership arrangement, every decision made by every stakeholder in our economy would be recalibrated, and each recalibration would be for the better. The corporation's mission would not be to maximize profits, but to maximize the interest of workers. Corporate leaders would be dedicated to preserving workers' jobs rather than outsource them. There would be far greater scrutiny of their leadership abilities as well, given how much closer workers are to the action than absentee investors now are. Workers would also make out better as consumers since corporate work forces would be naturally organized to bargain collectively as consumers. And as citizens, corporate workers would heighten their awareness of how our political process is influenced by business interests.

Under this entirely different arrangement, much of the need for "reparations" would go away. Workers would settle amongst themselves each others' relative worth, but one can be relatively certain no workforce would rate their leaders as being worth eight figure salary packages. There would thus be far less need for a steeply progressive tax system.

With the increased job stability that would arise in a work world where workers enjoyed the right of self-determination in handling business downturns, the need for entitlement and safety-net programs would be reduced. More importantly, because the drivers of economic instability – unstable financial markets, and rising disparities in wealth and income - would be reduced, economic volatility would decline. In short, all the problems we now try to address through regulation and reparations would be alleviated by way of a simple design change. This change would radically alter the motives and means by which we all behave as economic players.

Making the Impossible Happen

Up to this point, readers might find this essay intriguing but glib. Some may be asking how could it ever come to pass that investors would cede voting control of our corporations to workers? It didn't, after all, work out well for the shareholders at United Airlines. Here, I can only say for now is that there is a fine line behind a well-designed ownership structure, and a disastrous one. What's more, United Airline's misfortunes had more in common with the Enron debacle than with true worker ownership.

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As the author of "A Real Ownership Society", I advocate for socializing the behavior of our corporations, and democratizing their benefits. By discarding the conventional model of corporate ownership that now relies upon absentee ownership, and (more...)
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