Chapter 6: Wealth Reigns
The Principle of Sovereignty:
Corporations assert that they are private and the free market will self-regulate, much as feudal barons asserted a sovereignty independent of the Crown.
Economic sovereignty trumps political sovereignty in the corporation. Stockholders are sovereign because they believe they are the corporation, much as King Louis XIV believed he was the state (“L’etat, c’est moi“). This leads to the conclusion that the only legitimate, legally protected rights related to the property that is the corporation, belong to the shareholders.
The history of democracy is the history of people repeatedly and successfully challenging various forms of property rights. The king was once thought to be sovereign over the entire nation, because he owned it, thus intertwining political and economic sovereignty. The Magna Carta limited the king’s ability to take other’s property and was a seminal moment in the history of democracy. With the Glorious Revolution, property and sovereignty were still linked but were devolved from the king to the aristocracy. The American colonies were originally property of companies chartered by the British Crown. The king dechartered these companies and converted them to royal colonies before they were in turn taken by Americans and converted into a new United States of America.
Economic property is today centered on property because this was once true for all sovereignty – economic and political. It is only in the age of democracy that the two were split asunder. The property that provided people with sovereignty was originally just land. Over time, this property evolved to include other forms of wealth – including companies.
Political sovereignty evolved from the king to the aristocracy, to propertied white males, to unpropertied white males, to black males and finally to women. Economic sovereignty has not similarly evolved. It never made it past the financial aristocracy of shareholders. Assuming this is an inviolate law is just as absurd as assuming that political sovereignty should have been similarly stopped in its evolution.
Economic sovereignty has an internal and external aspect to it. Internally, stockholders are sovereign because the corporation is said to be private and hence out of bounds from external interference. Externally, stockholders are sovereign because the free market must be allowed to self-regulate. Internally, rising shareholder income is good, while rising income for employees is not. Externally, a rising stock market is good while rising wages is considered inflationary and bad. It’s really a question of whose interests are considered one with the health of the economy – shareholders’ or employees’.
With political sovereignty, each person has an equal vote, but not so with economic sovereignty where the wealthy have more votes. The wealthiest 10% of households own about half of all stock and since the bulk of our GDP is corporate revenues, running corporations to serve shareholders equates to running our economy to serve shareholders. Corporate profits for shareholders have been growing at 10% a year, while GDP grew at only 3%. When one group’s slice of the pie grows three times faster than the pie itself, other people are going to lose their portions of the pie.
Economic sovereignty was ceded to the wealthy through a series of legal fictions, the prime one equating the corporation with absentee stockholders rather than the community of people engaged in the actual work of the firm. Another important legal fiction is that the corporation is a person, an individual just like you or me competing for its own self-interest in the free market. This would have been a valid notion long ago when companies were not much more than the individual entrepreneurs who ran them, but as major corporations evolved, economists simply substituted the word firm for entrepreneur and pretended nothing fundamental changed.
In 1886, the Supreme Court ruled in Santa Clara County v. Southern Pacific Railroad that the corporation is a person, with the same Constitutional protections afforded actual citizens, such as free speech and the right to participate directly in the political process through lobbying and political contributions. This ruling has been upheld despite the fact that corporations are immortal and stretch across the national borders that still bind actual citizens.
Hundreds of years ago, to explain the apparent contradiction of the king being both divine and human, theorist developed the notion that the king had two bodies. The Body natural was the physical body, subject to mortal afflictions. The Body politic was imortal and lived on forever, transferring from one king to the next upon death. Stockholders today have assumed the mantel of the body politic. Much like the divine king, thanks to limited liability, they can do no wrong.
|Chapter 1: The Sacred Texts|
|Chapter 2: Lords of the Earth|
|Chapter 3: The Corporation as Feudal Estate|
|Chapter 4: Only the Propertied Class Votes|
|Chapter 5: Liberty for Me, Not for Thee|
|Chapter 6: Wealth Reigns|
|Chapter 7: Waking Up|
|Chapter 8: Emerging Property Rights|
|Chapter 9: Protecting the Common Good|
|Chapter 10: New Citizens in Corporate Governance|
|Chapter 11: Corporations Are Not Persons|
|Chapter 12: A Little Rebellion|