Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It (19 page)

The Hoover Institution and others have probed the problem of “crony capitalism” and how it hampers economies in other parts of the world. These studies tend to associate pay-to-play crony capitalism with Indonesia, Russia, Egypt, and other countries with less of a tradition of freedom and democracy. It may be time to look closer to home. Stephen Haber’s description of crony capitalism as an economy where “those close to the political authorities who make and enforce policies receive favors that have large economic value,” increasingly fits the American economy.

Now, even the most gifted economists probably could not definitively answer the question that titles this chapter. Nevertheless, I would suggest that two propositions are worth serious consideration: First, the
Citizens United
vision of American government as a corporate marketplace, where citizens are reduced to consumers, rewards old, entrenched corporations that can leverage their last-generation economic muscle to delay and obstruct new rivals. Innovative businesses and nascent industries waste precious capital trying to keep up politically, rather than economically. As with the unions, however, new businesses, small businesses, or disfavored businesses do not have a prayer in the multibillion-dollar corporate lobbyist playground or in the corporatized courts. As a result, opportunity wanes, private costs in the favored corporations are shifted out to the public or onto potential competitors, and economic vitality declines.

Second,
Citizens United
’s elimination of the last modest restraint on corporate power—the limitation on spending in elections—is likely to be the endgame of the transformation of our economy into one where only a few people, rather than most people, have a shot to prosper. In our present corporatist era, good wages, benefits like health care or pensions, and such notions as craftsmanship and job stability have become bad things that should be crushed. They are costs to be reduced, avoided, or eliminated altogether, rather than good things to which society might aspire. It may be hard to remember, but we used to think that higher wages with more benefits for working people was a worthy goal rather than a problem to overcome so that corporations can be more “competitive.” Now CEOs who find a way to eliminate jobs and benefits or destroy a union are celebrated and paid tens or even hundreds of millions of dollars, while the stock price rises and the analysts and media cheer.

If we accept the false metaphor of corporate money as a “voice” and the fantasy that big corporations are no more of a threat to our political life than big people, you can count on coal and oil corporations prospering and solar, wind, tidal, and geothermal energy corporations struggling. When you call government for help after coal corporations crack your walls and poison your fish pond, you can count on being told to fill in your pond and move on. And we all can count on a low-wage, low-benefit economy with a great divide between the rich and everyone else.

In crony capitalism, distorted policies corrupt and tilt markets to favor connected, rather than good, businesses. Too often the “free-market” advocates concerned about “government” or “excessive regulation” propose the elimination of regulations on
even the most complex and potentially destructive businesses.
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If this argument ever made sense, it no longer does. Eliminating regulations, or obtaining regulatory advantage, is the essence of inefficient, pay-to-play corrupt capitalism.

The perceived absence of regulations is neither the absence of government nor the presence of a market economy. The choice is not between regulation and no regulation; the choice is between a government that regulates in service of the public interest or one that regulates in the service of powerful corporate interests. Sometimes it’s
more
regulation (as in the case of laws prohibiting Medicare from negotiating with pharmaceutical companies for market rates),
less
regulation (as in passing a law prohibiting regulators from regulating the derivatives market), or
different
regulations (as in expanding the rights of patent protection to delay increased competition and lower prices). Under any of these scenarios, government action shifts public assets and benefits to a favored slice of powerful people and interests while allocating huge costs to powerless people and interests.

Unremitting hostility to regulation that serves the public does not create more efficient business—just the opposite. Weak government oversight of transnational corporations rewards bloated enterprises that use political power to dump their inefficiencies off their balance sheets and onto society, at the expense of new and more efficient enterprises.

Coal is a good example. Corporate and investor calculations about energy production will differ if the cost of coal does not include the cost of preventing the destruction of what belongs to other people—water, air, mountains and valleys, fish ponds, and house foundations. Coal appears “cheaper” than wind, solar, or other sources of power only if its costs do not include the very large costs—externalities—that coal corporations and coal burning utilities can, in the absence of effective regulation, displace
onto others outside of the business. This is the corporate “externalization” problem.

Robert Monks, a businessperson, investor, and former chair of the Republican Party in Maine, says, “The corporation is an externalizing machine in the same way a shark is a killing machine.”
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That is just what it does. If it is legal to dump untreated waste or toxic pollutants into a river or the air, corporations will do so. They will do so not because corporations are evil or because the people who work for corporations are bad; they will do so because it is legal. If it is legal to dump pollution onto others, then the market price assumes “free” pollution disposal. If one corporation does not do that, another will. The one that dumps wastes and emits pollutants may have lower costs than the one that spends money to treat or prevent pollution. The one with higher costs will go out of business because it cannot compete, and “the market” then will require dumping waste into rivers and toxins into the sky.

In theory, this is a human problem, not a corporation problem. In the real world, it is a corporation problem. Corporations fund campaigns against the “out-of-control EPA” and “regulatory jihad” because they seek more profit. If allowed, coal corporations pour money into electing whomever they consider “friends of coal” and to defeating whomever they regard as enemies, because the corporations seek more profit. Without government regulation to control greenhouse gas emissions, the destruction of mountains, the poisoning of streams, and so on, we can be sure that someone else (or everyone else) will bear the cost while the corporation reaps the profit.

What makes the hostility to regulation more perverse is that those problems—global environmental catastrophe, for instance—are caused in large measure by government’s creation of the corporate entity and its advantages. Without the laws permitting
incorporation, conferring limited liability and other advantages, it would be difficult to marshal the scope of investment and operations capable of eliminating five hundred mountains in a few years (unless the government itself coerced the capital for such operations, as in the Soviet Union or other state-enterprise regimes). Would you invest in Massey Energy or the Alpha Natural Resources coal corporation if you were personally held responsible for its actions?

That is not to say that we should not have corporations. Rather, we should not pretend that corporations are natural products of “the market” and that government has no business regulating them. As Theodore Roosevelt wrote about corporations a century ago, it is “folly to try to prohibit them, but … also folly to leave them without thoroughgoing control.”
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So crony capitalism may be un-American, but do not fall for the idea that “government” or “regulation” is un-American. A true libertarian might not want any government or any regulation, but such a libertarian would not stoop to ask government for a corporate charter and would not hide behind limited liability and other government favors. Maybe we could live with a true libertarian society if we could get there, but we cannot live with a government that creates, protects, and serves corporate power but leaves corporations unsupervised and unregulated.

A lot of data suggest that the success of the corporate drive to power in our country over the past three or four decades has helped transform our economy from a broad-based growth engine for all into a plutocracy. It now is very difficult for any but the rich to prosper in healthy, strong communities.
⁶

In the corporate era, most Americans no longer make enough money. Per capita income is now around $27,000, and “household”
income (i.e., husband and wife both working in many cases) is around $50,000.
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Wages for most people have been flat for three decades. Personal savings have plummeted, and debt has soared.

This was not true in the previous thirty years: from 1950 through 1980, when the economy was growing, wages for most people grew too. The average income for nine out of ten Americans grew from $17, 719 to $30,941 in that period, a 75 percent increase in constant 2008 dollars. Since 1980, however, the economy continued to grow but the gains went overwhelmingly to the top fraction of Americans. The top 1 percent received 36 percent of the income gains between 1979 and 2008. The top sliver (again, 1 percent) received 53 percent of income gains from 2001 to 2006.
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Wealth now is more concentrated in the top 1 percent of American incomes than at any time since 1928.
⁹

For average Americans, income went from $30,941 in 1980 to $31,244 in 2008, a gain of only $303 dollars in twenty-eight years.
¹⁰
Total household income rose a little more than that, but only because most households required two paychecks and more women entered the workforce.
¹¹

The top 1 percent of income-earning Americans now takes a larger share of income—24 percent of the total—than ever before, and they own a larger share of total net worth—34 percent—than ever before. Ninety percent of Americans own just 29 percent of total net worth.
¹²
Between 1993 and 1997, “corporations enjoyed double-digit profit increases for five years in a row…. Meanwhile, over the 1990s, hourly wages fell for four of every five workers.”
¹³
CEO pay rose 600 percent in the same decade.
¹⁴

In the past decade, the United States has lost thousands of factories, and thousands more are on the precipice.
¹⁵
By 2009, fewer Americans worked in manufacturing jobs than at any time since 1941.
¹⁶
Most other measures of the American middle class are just as bad. Hours worked? Since 1979, married couples with
children are working an additional five hundred hours (equivalent to more than sixty-two eight-hour days).
¹⁷
Vacation time? We have by far the lowest standard for vacation time in the developed world. Debt? With incomes stagnating, savings rates are near zero, and most Americans live under pressing burdens of credit card, mortgage, auto, school, and other debt. Affordability of housing? Ability to pay for college? Retiring with a safe pension? Health care? Most people have it much worse on these measures than thirty years ago.

Some people say that this steady decline is just the way it is, due to “globalization and all that,” as if globalization were a meteor from outer space rather than a trend that democratic societies can shape. The intentional offshoring of American jobs to low-cost countries has taken a terrible toll. An accountant in India makes $5,000 per year, compared to an American accountant’s average salary of $63,000. And as one well-paid CEO noted, “If you can find high-quality talent at a third of the price, it’s not too hard to see why you’d do this.”
¹⁸
Even if that is true as a mathematical calculation, should our government really enable, encourage, and reward so richly those who “do this”?

Could the struggles of American workers be a productivity problem? That might be an explanation; if American productivity (how much is produced per unit of labor, capital, and other inputs) steadily declined in those years, then noninflationary income gains for American workers would be unlikely. The problem with that explanation is that American productivity did not decline but instead continued to improve. Productivity continued to rise after 1979, but we distributed the gains from that rise differently in the corporate era than we did before. According to a 2005 analysis of data from the Bureau of Labor Statistics, between 1947 and 1973, productivity and the median income rose by almost exactly the same amount (productivity increase, 100.5 percent; median
income increase, 100.9 percent). Between 1973 and 2003, however, things changed. Now, even though productivity continued to increase (71.3 percent), median incomes increased much less (21.9 percent). In other words, the gains were no longer going to all Americans but were increasingly going disproportionately to a very few people at the top.
¹⁹

This did not “just happen.” Gains from economic growth that used to be widely shared now go disproportionately to the extraordinarily wealthy because government chooses that outcome. The crony capitalist “intermingling” of political and economic elites and the corporate campaign envisioned by Lewis Powell have built an antiregulation, antigovernment theology that works to enrich a very few individuals and to prevent choices that previously distributed wealth and opportunity more evenly. Tax policy is a good example.

Although corporations are not people, people control corporations, and a very few people control the largest, richest corporations. As Stephen Haber noted regarding crony capitalism elsewhere in the world, “The intermingling of economic and political elites means that it is extremely difficult to break the implicit contract between government and the privileged asset holders.” That intermingling is on full display in Washington and state capitals when government allocates the tax burden.