Businessmen and Reform

Citizens United (2010) was a watershed, to be sure, because it abolished the long-standing legal distinction between a natural person and a corporate person—the distinction the Supreme Court had sustained since Santa Clara (1886), which designated corporations “persons” as per the second clause of the 14th Amendment, thus affording them substantive rather than procedural rights of due process at the law.

The specious premise of the Citizens United decision was that money spent by corporate persons is the equivalent of speech acts made by natural persons—as if noise were music. Only penitent men in purgatory like Antonin Scalia can appreciate the simple fact, and the great irony, that this premise repudiated the “original intent” of the founders, which, in James Madison’s phrasing, meant balancing the “two cardinal objects of Government,“ the rights of persons and the rights of property. Madison spent his entire adult life trying to extricate the American polity from the mistakes of previous republics, ancient and modern, which “sacrificed the poor to the rich”—his words—by assuming that the rights of property were paramount.

Now, corporations are old news. You could say that the USA is a country created by corporations. The European invasion of North America was led, after all, by the Massachusetts Bay Co. and the Virginia Co.

But their sentimental and political significance was magnified in the 19th century, as the courts and the electorate woke up to the power of concentrated wealth. This awakening reached its apogee in the 1890s, when the Populist Revolt overlapped with a fiercely anti-corporate majority on the Supreme Court (the Harlan majority of 1897-1911, which ignored the “rule of reason,” that is, the common law distinction between lawful and unlawful combinations in restraint of trade).

Still, corporations as we know them are specific to the very late-19th century, when they were no longer chartered by states for specific public purposes—and, more important, when they spread from railroads and extractive industries to manufacturing. By then businessmen could consolidate their enterprises for just about any purpose without much supervision by state governments. The New Jersey statute of 1889, written by James B. Dill, a New York investment banker, was the template and the incentive. 80% of the 500 new industrial corporations created in the great merger wave of 1898-1904 (still the largest) were chartered in New Jersey.

II

The American Left has identified itself as anti-corporate since then, and has been incapable, accordingly, of understanding how businessmen would be interested in reform, then as now. It has ignored Marx’s copious remarks on the matter, and, if I may, it has also dismissed my explanation of why corporate executives wrote the signature legislation of the Progressive Era, including the Food & Drug Act, the Federal Reserve System, and the Federal Trade Commission—all of which created a new role for the federal government in regulating commerce and subordinating economic forces, including the market power of corporations, to social goals.

Marx first. In volume 3 of Capital, he emphatically claimed that the convergence of modern credit—banking as we know it, everybody using other people’s money—and modern corporations made for a new, socialized mode of production. The corporation accomplished “the abolition of capital as private property within the boundaries of capitalist production itself.” The historical standard Marx used to measure this epochal change was the transition from feudalism to capitalism. I’m not going to quote him yet again: see the Kerr edition, volume 3, pp. 516-19, or just wander around in chapters 27-32. The point is that Marx glimpsed the transition from capitalism to socialism in the rise of the corporation.

Now me. I have argued that capitalists were losing the class struggle of the late-19th century, in the US at least, where the scope of that struggle was wider, deeper, and more consequential than in Europe, and that they resorted to the legal device of the corporation as their salvation. The larger regulation and reform of the market was the alternative to subaltern triumph. Businessmen weren’t co-opting anybody, they were saving themselves. They invented the industrial corporation as the means to that end. Their question was not whether but how to reinvent the market so that its civilizing content might be sustained. But they did meanwhile sentence themselves to social death by separating ownership and control of corporate assets—just as the landed nobles of England did when they handed control of agricultural production over to rent-paying commoners in the 15th and 16th centuries.

III

Since 1898, businessmen are reform, in other words. They want to keep up with the times because if they don’t, they lose market share. Their “brand” suffers. But these truths apply most stringently, most consistently, to retail enterprise. A consumer backlash against or boycott of, say, a manufacturer of construction equipment is improbable, even inconceivable, because that manufacturer is selling his product to contractors, not to consumers.

Notice, then, that the more the economy is driven by consumer demand rather than investment decisions—as the Eastern European economists of the 1950s put it, when growth becomes intensive rather than extensive—the more reformist businessmen will tend to be. To the extent that consumers can amplify their demands via social media, whether mimeographed manifestoes or Facebook, this reformist imperative becomes unavoidable, no matter how politically backward these businessmen may be in person.

The new corporations invented at the turn of the last century socialized property and goods production, and led the way toward an intensive model of growth which grants priority to consumers rather than investors in deciding the shape of the future. In this sense, the legal device we call the corporation is something to be deciphered, not denounced as such. Its political valence is totally unpredictable.

James Surowiecki of The New Yorker captures that mystery in his recent column on corporate opposition to LGBT legislation in North Carolina, Georgia, and Mississippi. He notes that executives from more than 80 companies signed a letter to the governor of North Carolina protesting the law he recently signed which would allocate bathroom privileges according to gender declared on birth certificates. The corporations ready to leave these three states include Disney, GE, Pepsi, Dow, Lionsgate, and PayPal.

Surowiecki also ponders the implications. Here’s the key passage:

“The emergence of companies as social activists is complicating traditional attitudes on both the left and the right. Progressives have long complained of corporate influence over government policy. They’ve pilloried companies that threaten to move operations in order to extract favors from state legislatures; they’ve attacked the Koch-funded American Legislative Exchange Council for its role in drafting a slew of pro-business state laws; they’ve called for overturning Citizens United. Now, though, progressives are confronted with a situation where [corporate] meddling with the legislative process and overriding popular opinion seems desirable.” (my italics)

Which is to say that social justice and majority rule are now at odds, at least in these states—and that the monetized voice of large corporations here speaks on behalf of justice, not majority rule. The Jim Crow South was ruled by majorities, after all, and they sacrificed justice on the altar of white supremacy. Do the interests of the Left now intersect with the voice monetized by Citizens United? That’s Surowiecki’s real question—the bottom line.

IV

Democracy prevails where the rights of persons and the rights of property converge—where state power is justified by the consent of the governed. But the practical embodiment of consent is public opinion. So, to ignore or override it is to discard democracy in favor of rule by the well-educated, the well-informed, and the wealthy, who must know better than the rest of us—you know who I mean, all those philosopher kings and queens from Harvard or Yale. To pay attention to public opinion it is to know that in a modern society, persuasion, not power, is the fulcrum of political change. “He who molds public opinion goes deeper than he who makes or enacts statutes,” as Lincoln put it.

Progressives, as we now call them, have always been willing to challenge public opinion, from the abolitionists of the 1830s to the civil rights activists of the 1950s and 60s. The question Surowiecki raises is more fundamental. Are they willing to make a pact with the devil to override it?

But that question raises two others. Can corporate persons be admitted into a body politic that defines itself as democratic? And, more urgently, is the Left itself committed to democracy, or is it willing to override public opinion in the name of better, scientific knowledge? The first question boils down to whether money is a form of protected speech specific to the corporate person. The Court said no until Citizens United. As late as Bellotti (!978), the most-cited precedent of the 2010 decision, the justices held that precisely because the monetary resources of corporations were both greater and more variegated than individuals—stockholders, those natural persons, have conflicting political views—their expenditures for political purposes could not be protected by the 1st Amendment as if they were unitary, natural persons speaking their minds in public.

The second question boils down to whether public opinion and majority rule are inviolable principles of democratic governance. A majority of money is no better than a majority of numbers or weapons, or a preponderance of intelligence, in the attainment of democracy. The Left rightly rejects Citizens United and its corollaries on these grounds. But how to make majorities that are not themselves undemocratic—the kind that reflect public opinion and yet lead directly to oppression?

And these questions leave us with the larger one of how to define democracy as such. I am one of those historians who think that the prospects of social democracy have improved since the rise of corporate capitalism, ca. 1890-1930. In other words, I think the Populists weren’t our last best hope. I think the cultural and political ferment of this period let us imagine the selves and the societies we can now demand without apology. The corporation was and is at the very center of our imagining, not least because it was and is an “artificial person”—something like ourselves, what we can remake in the image of the future we want.

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