How We the People Became We the Corporation

We the People, the iconic line from the opening paragraph of the Constitution is firmly lodged in the American consciousness. It conjures up the idea of everyday people coming together, as one, to govern themselves. That singular idea, self governance, is as American as almost anything including Mom and Apple pie. However, democracy as we’ve known it in this country has radically changed. We have moved from an “up-from the people” idea of government to a “top-down” idea of government. This self-governance idea since has been twisted to include mostly the elite. Those with the dollars to pull the levers of power in this country for their favor have been busy taking power from the general people and sucking it up for themselves. America is slowly becoming one plutocracy under god. Vitriolic articles and whole activist organizations have been founded to solve this problem. However, considering American history, little has changed. From the start of the country there term “We the People” never really meant all “people.” In 1787 it means white, land owning males and then later all white males, and then all males, and then all people as long as you didn’t live in a place with literacy tests (most of the South) and even now with universal suffrage (voting rights) we know that the rights and privileges embodied in the Constitution must be assiduously defended in courts of law for people of a variety of backgrounds outside of the dominant caucasian culture. Besides those problems, our democracy has an economic problem. Thanks to rabid capitalism, “We the People” really means We the Corporation. Corporate interest has become prescient in the political system. Everywhere we look, our society serves the corporate-capitalist interest with a disregard for the interests of everyone else.

The corporation, as a vehicle of capital, has been an important part of modern economics. When like-minded individuals pool resources together with the mind of creating a return on those resources, there needs to be a structure for that kind of arrangement. Out of that need for legally structuring the production of capital: the corporation was born. Our nation has had a very interesting relationship with corporations. From the early days, as a reaction to the mercantilist practices of the British government, there was an open policy towards corporations (except in banking) and people were free to create whatever corporations they wanted and ask for charters from the several states to create their business as an enforceable contract. Corporations, due to their need for a charter, were actually fairly rare. While it seems like everyone and everything is a corporation, in the 18th and 19th century, corporations were not terribly common. Corporations were entities but it was the business partners who were responsible for its operation and the fulfillment of its contracts. Even under that system, the ability to form capital; a group of resources that generates a return, was powerful in starting businesses in everything from agriculture to shipping and eventually railroads/oil companies and so on.

What this essay seeks to help the reader understand is something very fundamental but overlooked. This system is not merely the result of “evil” people invested in tearing society apart. It is the natural result of the capitalistic system due to the ultimate goal of capitalism: frictionless return.

In the 21st century, the value of capital is greater than that of labor because such a system is the logical conclusion of capitalism which seeks a frictionless, pure return on the gathered wealth of capital. This is the basis of our modern economy and what is in control of our democracy.

A society serving the wealthy, corporate interest is not a new idea either. 

Let’s consider the Founders of the United States themselves:

James Madison was a wealthy plantation owner in Orange County, Virginia. He gained his plantation from his father when he reached adulthood and was a prominent member of the community.

George Washington came from modest means and married the wealthy widow Martha Curtis and became a planter of cash crops following service in the Virginia Militia during the French and Indian war.

John Adams also came from modest means and while he was never very wealthy, as some of the other men, he and Abigail were upper middle class and did fairly well in their Braintree, Mass. home engaging mostly in business and trade.

Alexander Hamilton may have died poor but his life was one of government service in the cabinet as the treasury secretary and as a partner in the first Bank of the United States and one of the authors alongside Madison of The Federalist Papers that argued for a federal union of states.

Benjamin Franklin came from poverty and even at the end of his life described himself as a simple printer. His business was very successful and loved longer than most people at that time.

When these illustrious men met in the Philadelphia Hall of Independence for the first hot summer of 1774. These men represented the intellectual and in some cases the economic elite of the colonies. The oppressive taxation of the British affected Middle and Wealthy class business people the most. As with most revolutions of the period, the bulk of political change rested on those with the resources and wherewithal to cause it. While in France the revolution began with the landed aristocracy who would later perish in the terror, in this country it started with landowners and business people. Once the dust of the revolution settled, they did not want to replicate the oppressive taxation and licensing schemes of the British and created a much more laissez-faire economy. This was revolutionary but thanks to the industrial revolution wouldn’t last long. Before we jump into the evolution of the American corporation, let’s think about the economics of what the Founders came from. You may have heard of this term: Mercantilism.

Never, Ever Leave the Manor

Capitalism is a product of two economic systems: manorialism and mercantilism.

Manorialism

Growing out of the feudal system, manorialism was the concentration of capital in its truest form. Like the feudal system, people were tied to the land. Where you were born was where you stayed both physically and in your life station. If you were born the son of a blacksmith, the likelihood that you would grow up to be a blacksmith was fairly high. If you were the oldest you would inherit your father’s business. Younger sons could apprentice elsewhere or with their father and then open their own shop (if they could afford their license/join the local guild) or work for their older brother and keep it all in the family. This was true for most professions but one of the unique things about manoralism is that even though you owned a business or farmed you had to pay rent to the manor or the local Lord who afforded you space to ply your trade and live. Between taxes and rents, wealth (which could be denominated in labor, produce and sometimes coin) tended to transfer upward. Everyone had to contribute and the system only finally ended in the 20th century when the last vestiges of feudal rents were abolished in Germany and Quebec. Manorialism had it’s advantages in economic security and the ability to leverage the labor of the community to achieve goals. Manorialism began to fall apart as the trading class in the 15th century arose and labor began to be denominated in money rather than simply itself. The new trading class were people not tied to land and usually imported goods and sold them to the aristocracy and others who could afford their exclusive goods and technology. This basis of money based trade slowly replaced the manorial system which was essentially a barter system.

Mercantilism

Out of manorialism, a new money based economy started to grow and trade between cities and nations began to rise in importance thanks to the new trading class who was in the business of moving goods around Europe and even as far away as China. Trade and new goods and services was the primary impetus behind colonialism. As these two things converged the economic system in Europe began to look more like a modern system but government control, licensing and taxation rose in importance. This system was called Mercantilism. Mercantilism is the first instance of the formation and investment of capital.

Capital is the resources usually denominated in money that is used for investment towards the production of a good or service to generate a return. As the feudal system came to an end and the nation-state as we know it rose in the 17th century starting in 1648, the government backed investment corporation known as a company began to rise to prominence. It was a public-private partnership in the truest sense of the word.

Companies like the Dutch East India company, the British East India Company, and others were commission and give special licenses with government kickbacks to take on the risky endeavor of exploring and dominating the New World. In this way, the crown didn’t have to bear all the expense or risk. In return the men in charge of the special companies received vast land holdings in the new world as well as create vast sums of wealth.

These people were usually not aristocracy although that wasn’t always true and within these companies, military or security forces gave others plenty of chances for advancement and wealth. This economic activity generated a new moneyed class of people. They weren’t poor and they weren’t the landed aristocracy; as such they were called the “middle” class because they weren’t wealthy like the aristocracy but they weren’t poor peasants. They were the middle children of the period. Although some countries embraced this new trading class and their intellectual pursuits, many countries weren’t ready or prepared for this rising class. This class was distinct, hard working, protestant, and believed in creating wealth. The idea of a stolid work ethic and a meritorious religion based on a personal relationship was much more synchronistic to the new trading class than the hierarchical, penance, and sacraments based Catholicism that preserved god-anoined monarchies and aristocracies both in the homily and in society. This new class of people were egalitarian to a certain degree. They believed in giving a chance for every individual to advance and that education was a large part of that chance. Investment and talent, no title or inherence were what really mattered in their new world. It was under these ideas that the fertile ideas of the enlightenment took hold in the consciousness of the 18th century middle class that produced America’s founders. Free property, free enterprise, less government regulation, market decisions and individual rights were prized above all. These ideas not only would foment revolution in the colonies but would come to define American success and “Americanism.”

Before these ideals were bogarted by people like the Tea Party and everyone in the Republican party since 1964, these people believed that while the government should not restrict economic activity to the degree of having a stamp for every binding contract or prohibitive licenses, these people believed that government had a place in fostering economic growth amongst the commonwealth. They believed that great civic undertakings including roads, bridges, canals, ports, and ferries were apart of creating “common wealth.” They believed that anything that increased the good of man and his relationship with god as well as his potential economic output was of concern to the public. The “up from your bootstraps” ideology is uniquely postmodern. Mercantile protestants were in favor at least starting you with some boots. Charity was also a huge part of their worldview. Giving to the less fortunate was something directly from scripture and even was essential to a good christian life. Between protestantism and global trade, the world was ripe for the rise of Capitalism.

How are Capitalism and Mercantilism different?

Mercantilism was much more government controlled and sponsored than our modern capitalist system. Capitalism had a freedom and a “Laissez faire” (loosely translated as Leave us alone from the french) nature to it that was not present in the mercantilist system. the idea that without government direction or interference the wealth and means of production should be geared towards the economic activity that its owners think best based on their ideas, information on price, resources and other factors. At one time, these ideas were new and unique. Adam Smith in his “Wealth of Nations” (the seminal work of capitalist economic thought) called this process and lack of central coordination the “invisible hand.” By the beginning of the 19th century this system was budding in the old world and exploding in the new.

The economic world of Adam Smith was far different than the economic world we have now. Economies of scale hadn’t yet come into being in his world. The economy was primarily agrarian and the other businesses that comprised the economy were shops, traders, and professionals.

Our modern economy is dominated by three types of business.

Business A: Small Main Street Shop (think nail/nail salons)

Business B: Service Professionals (doctors, lawyers, farmers, sales)

Business C: Major Corporation (Apple, IBM, Macy’s)

When Adam Smith said that government needed to get out of the way of business people he was thinking about Businesses A and B, not Business C and he certainly would not think that we need to spend taxpayer dollars “saving” businesses (as we’ve done with airlines and automakers). While it seems like the free market principle is a good one because it allows Businesses A and B to thrive in a way that they otherwise could not, the free market principle becomes grotesque when you get to Business C because of the scale of the business in question. The advent of Capitalism was for them, not for large massive, government funded corporations to take advantage of taxes, subsidies, and other incentives simply to do business or be so involved in the running of our economy that we can’t live without them. Modern capitalism is a perversion of its originating principle and the reason that has occurred is due to the rise of the corporation as a primary societal institution.

The Corporation

What is a corporation? Do you know? Can you definite one clearly? If you are like most people you can think of famous brands and even a few names but you can’t think of what the essence of a corporation is. A corporation is an entity an organization whose job it is to return investment on capital to its investors/shareholders. Notice the things missing from that definition. There is no place for “corporate” responsibility in the community and no place for taking care of the environment or the people that work for the company. Corporations are not here to contribute to society. Corporations exist to make money, full stop. I’m not saying this is good or bad; I’m pointing out a fundamentally flawed problem in our thinking. Most people view companies as something that is apart of the nation like they are apart of things when such an idea couldn’t be farther from the truth. A company will seek out the highest potential for investment regardless of where that value might exist.

Before the progressive movement of the early 20th century, corporations didn’t think about the people that worked for them. Employees were then and are now, mostly part of the process of wealth creation, nothing more. The 19th century was replete with stories in the newspapers of what we would consider egregious safety violations and worker deaths. The corporation and its associated modern regulations is an excellent vehicle by which to group together capital and invest that capital to create an ongoing return. The biggest advantage to the free market corporate model was its meritocratic nature that is the success of any company is based on its merits in the marketplace. Advancement within the company was also based on merit rather than by government decree as it was under the mercantile system. Anyone (theoretically) could form a corporation and group together capital and use that capital to invest in business and create return and increased wealth.

There are a few terms missing from the previous discussion.

Fair compensation for non-investors/capital holders

Worker Safety (or any care for workers)

Environmental Resources Impact

Community/National Involvement

These simply weren’t present until the 20th century when government regulation came back into the discussion of the economy in the US and especially in Europe. Only through the threat of violence can corporations be required to actually contribute to society. This is one of the downfalls of corporate capitalism. Capitalism at the scale in which we now have it has serious consequences.

At first glance, the idea of singular economic individuation sounds spectacular, especially at the local level. Quite simply protestant capitalism says that if your choose to own your body and its talents, as well as the talents of your mind you can, through the crucible work, find success. But this principle is more for individual people than the corporation. It sounds very American and it most likely rings true to the reader but it is this idea that has created the problems with income inequality that we now face yet again. To the populist it sounds like a great chance and to the conservative the idea of self reliance strikes a strong chord. But these ideas are unique to the US because of our national heritage. the whole of the US is based on people who were willing to pack up their lives and go to a land that is wholly new. Even now that spirit rages on. However in Europe the idea is wholly different. In the last 19th century there were several reactions to the unfettered capitalism that had taken root due to the industrial revolution.

Capitalism at Scale

The capitalism that is now so popular would have never thrived except for the industrial revolution. In some ways, the ability to form capital structures made the industrial revolution possible. The industrial revolution did a few things:

1. It allowed for fewer people to achieve more economic output

2. It allowed the pursuit of inventions, chemicals and processes that radically changed and improved human lives

3. It allowed wealth to perpetuate itself more quickly through greater return

4. Goods and services became democratized through mass production and scale

This was achieved by the ability of anyone to interrupt older technology by inventing a better way to perform a task.

Under the mercantile system, the established business people through associations and guilds would have had someone arrested for breaking the status quo but under capitalism there was no such regulation. If you were a button maker in Paris and Jean-Claude arrives with an automatic button maker you could be out of business due to his ability to produce 30 buttons for every 1 button you produced. The lower prices would have the guild out of business in a few years at best. In Europe, the process and transition was hastened by the Napoleonic wars and the success of British industry and the continental desire to keep up. But it was still haphazard, highly disruptive and in the case of the Luddites: violent.

In America, it was a lot less glamorous. New technology ranging from the mould board plow to the cotton gin radically changed the economic equation. The advent of steam power rapidly changed things. Once, the Civil War was over and westward expansion was underway, ever hastened by the railroad, the ripple of industrialization could be felt throughout the land. We were no longer content to produce goods and services for our local area. It was time to produce for the masses. These new technologies also created vast wealth and by the late 19th century this income disparity had become depressingly obvious leading to Samuel Clemens coining the term “Guilded Age” (in reference to a shiny exterior but cheap and poor interior). In Europe this was compounded by the strict class system that dominated the life of the citizens. There was little to no mobility for most citizens except for the lucky few that were able to gather wealth and ascend via their merits.

It was in this setting that Karl Marx would pen his famous work, “Das Kaptal” the most complete and accurate critique of Capitalism. He introduced the ideas of the working class, called the “Proletariat” uniting and attacking the “Bourgeoisie” or these who controlled the means of production. His theory of communally owned and controlled factories, farms and industry was called Communism. Marx believed in the public ownership of everything so that it would guarantee the well-being the proletariat and the relative subjugation and elimination of the Bourgeoisie. Marx extolled the virtues of the working proletariat despite never working or holding a job his entire life and being supported by his philosophical partner Friedrich Engles who ironically owned several factories in England and supported Marx and his family. Marx who called for the proletariat to unite was a member of (he had grown up upper middle class) and supported by the Bourgeosie. Marx wasn’t the only one who noticed the income disparity or the frequent currency shocks that plagued global markets in the 19th century. By the 1890s, it was a fairly common scene in the newspapers. The Progressive movement sought to level the playing field with new regulations like an 8 hour work day, required days off, and worker safety regulations. Their hard-work resulted in prosperity from 1945–1977.

The country to whom individual economic freedom had defined both western expansion and industrial economic output needed some regulations so that the whole nation could actually enjoy the benefits of the new economy and the new wealth. The wealthy men who owned utilities, railroads, and manufacturing weren’t going to be regulated so easily. They weren’t going to go without a fight. This is always true when you have any economic elite. Violence ensued in a variety of cases and the labor standards that we took for granted were fought for with blood, sweat, and tears from 1870 onward. Per usual, the wealthy realized that they were losing the battle and did what they do best: retreat to the halls of government. The seeds of modern plutocracy was born. The chance for plutocracy to take hold was ever-present from July 5, 1776 to now. Although it is not evident within the Federalist papers or elsewhere, the Founding Fathers were not particularly thinking of a preventing a plutocracy when they designed the system. It was assumed and presumed because they were apart of it. They knew that they had to protect minority rights and prevent government from being taken over by various factions but they did not think to prevent powerful monied interests from buying up government for their own economic gain. But that is one of the things capitalism does. If anything gets in the way of creating a return, it either has to be bought or destroyed. To understand why our economic system is flawed, let’s think about capitalism itself.

A Quick History of Capitalism

The Great Recession was a shock to the system because it made us reflect on a system that thanks to neo-liberalism we had practically taken as god-give, god blessed and necessary to the American dream. But how true is that now?

The history of capitalism before 2008 was not terribly well known. There just wasn’t much written. Most of the discussion was on the history of labor and the workforce. There wasn’t much writing about industrialists and their impact on the greater economy or even the wealthy in academia. But after 2008, when the world was going along just fine and suddenly we wake up and are told that if we don’t chuck billions of dollars/pounds/euros/yen at our banks that the modern economy will collapse, academics decided that perhaps we should turn a critical academic eye towards he underlying economic philosophy that has become synonymous with freedom and economic security.

Before industrialization, that is the years before 1840 or so, business was not something that happened at scale like we are used to now. The only area where masses of something were produced was agriculture and that was a balance between food and crops sold only for cash. A monetary based economy had been in place for awhile (see previous sections) but most businesses were small local affairs. Printers, blacksmiths, farmers, livery stables, inns, and other places were owned by local people who lived in the area or on the site of the business and usually only did was business with what was available in their local area and that is how they created their wealth. Manufacturing was labor and energy intensive and was not at the scale we are familiar with now. Cottage industry was common as people frequently sold products to other businesses that they could use. A farmer’s wife might spin her wool into thread and sell it to the tailor and the weaver herself for a modest sum. Factories and places of production were not terribly common and the assembly line was yet to come. These businesses were places where capital was gathered but the job of these resources was not for the generation of a return but to provide a living for the people that worked there. Capital generating a return was reserved for the investments of the aristocracy and trading classes that dealt with the import and export of items and resources for sale. Corporations, such as they were, existed with strict controls mercantilist and licensing and taxes.

Economic output studies are not a new phenomena to our modern age. The much-ballyhooed term: Laissez-Faire was first bantered about the french countryside in the 18th century. Laissez faire was never meant for big corporations producing at scale but rather small traders and other merchants common to rural France. These businesses had been crushed by the excessive regulations that local and national governments often levied as a way to raise money. The merchants wanted to be able to sell their goods with as little friction as possible because it meant that they could provide for their families; not shareholders. This makes sense at a local level. However, when this logic is applied to economies of scale, things get a bit more difficult. An open market that wasn’t burdened by government was the innovation of capitalism. Capitalism liberated people from those wornout institutions of guilds and government. Capitalism allowed people to invest their resources for a return wherever they wished within national boundaries for a return as well as sell goods and services to enlarge their wealth.

Capitalism encouraged more open markets where anyone could begin a new concern without an expensive license or charter or joining a guild and most importantly it encouraged competition. At the local level, this was disruptive but not life threatening for the local business. Some businesses succeeded while others failed without the guild/mercantilist protections they had before. Businesses also innovated to provide their products and services at a low cost. An excellent example of this occurring was in fashion. Before capitalism and under the guild and mercantilist systems I’ve walked us through, a tailor would be required to source all his goods from the appropriate specialized makers. From fabric to buttons he would have to source and purchase all those goods at some expense. The system was closed off to many newcomers and fiercely rejected innovation but was highly sustainable and kept people in those businesses and employed. There was a system of apprentices and people to work their way into the system. Although not as centrally planned, it was much like a corporation, especially in the large cities and had grown out of the Roman household system to start. Two things ended this tight-knit system: the rise of Mercantilism and trade as primary pursuits and the beginnings of industrialization and economies of scale.

It took a while to get the system we now have but there were plenty of ways it was built up. Textile manufacturing was one of the first, labor intensive areas to see the benefits of industrialization. Industrialization needs massive resources in order to produce the tremendous amount of goods at scale and at a low cost. This means the supply chain of raw goods must be plentiful. Early adopters had to struggle with a localized, non-industrial raw goods system to power their early factories. However, like any human institution, adaption came quickly and the industrialization of materials like wool and cotton were soon to follow. This also led to the industrialization of agriculture in an early and rudimental way. By the 20th century, tractors, and other equipment had reduced the amount of labor needed for agriculture to about 38% and by 2008 it was less than 2%. Meanwhile, production has steadily risen over time. The same story is true in manufacturing. Thanks to machines, the number of people needed to make appliances, cars and electronics is less than ever before and will continue to fall with automation.

From capitalism’s inception it was dependent on low-cost and slave labor for raw goods and manufacture. Slavery, low cost labor and coercive work is bred into Capitalism in order to create nearly frictionless return on the entity of capital. We are still living in a world where many of the raw resources that we rely on for the devices used to create and read this article are mined by very poorly paid workers in Africa and Asia where these resources are extracted. Emerging market manufacturing, reduces the cost-per-item of goods meaning that while companies can charge developed economy prices for an item, they can manufacture it at such a low cost and take the remaining money as profit, less other expenses like R&D and transportation. Not only that, these profits don’t go into expanding a business or employing more Americans at better wages in services, instead they go into the hands of shareholders because shareholders invest in a company with their capital to get a return. It is the duty of the corporation to generate that return.

Where does that leave the worker?

Where does that leave greater society?

Labor and everyday people who depend on working for a living, isn’t in the equation. That’s what unions in the 19th century and early 20th century learned. Through organization, they were able to insert themselves into the conversation. Unionization has been so undone that is little point in unionizing. They will simply find someone else to do the work, as what happened to the Air Traffic Controllers in 1982. When Ronald Reagan brought in new people, he made the protest of the union completely irrelevant. Unionization has never had the same sting. That is to the advantage of capital, as an entity, because capitalists never have to worry about the workers protesting because the workers know that it won’t do them any good; in our modern economy, they’re simply too broke. From time to time, you’ll hear a bold move of a union striking and it sticking until the negotiations can work themselves out. Many companies avoid the progressive nature of US union laws and make sure to stop unionization before it starts and in many cases they simply off-shore what jobs they can so that they don’t have to worry about unions or labor problems at all. The horror stories we see on documentaries now would have been familiar to workers fighting for better conditions and rights in 1880. Crowded, unsafe factories, people jumping from windows, and long working hours with 1 day a week off were all incredibly common in the 19th century. This is a modern reality for workers all over the world in emerging markets. Capitalism can’t help itself, this kind of exploitative labor is “baked” into the system.

Capitalism seeks one thing only: return on capital. All other concerns are secondary if considered at all.

Capitalism and exploitative corporations didn’t just spring up on their own. There is a system behind them as well. No history of Capitalism, even this short missive, would be complete without a discussion of banking, currency, and the origination of capital.

Banks and Banking

Capitalism would be nothing without banks and banking. Banking is the backbone of the modern global economy. Banks handle payments, store wealth, and provide trillions of dollars in loans to corporations to produce goods and services and to the government to finance the affairs of state. Banking is a very old system of storing wealth that stems from societies as early as ancient Babylon where banks used grain as a currency. Until the modern period, most Banks issued their own currency and exchanged it between themselves or a national currency. However, this led to unreliable currencies and people were often left with nothing if a bank suddenly went under to any number of reasons. Centralized, government backed currencies became far more reliable and were easier to use than real gold and silver. Now, most currencies are printed by private central banks and backed by a government. Central banks also provide security for smaller banks by allowing them to freely borrow money in order to stay solvent and destroy the savings and wealth of depositors.

When it comes to powering the industrial means of production, banks are an integral part of the equation. Most companies, until the 21st century borrowed from banks, the massive amounts of cash that were needed upfront to fund production. When it came to buying machines, building facilities and other capital-intensive projects, banks were on the front line of investing in businesses that would be able to pay back the loaned money with interest. This was the first rudimentary form of capitalist practices. Banks invested in projects that they thought had a good chance of making them money because their source of capital was the depositors of the banks. When people deposit money into banks, banks aren’t merely keeping that money there out of convenience, they invest that money, via loans to companies for a return. Then, from the interest that they have made (that’s the return), they give you a small portion for the use of your money and keep the rest for themselves. If you leave money in a savings account for 30 or more days, you’ll find that they pay you a small amount of interest because they have loaned your money out and made money from it.

Banks also make money from government. One of the ways banking expanded in a monetary based economy was through lending to governments. This was pioneered by Giovanni di Bicci de’ Medici who founded the Medici bank. Using his tremendous family wealth, they were able to finance a variety of artistic projects and later generations became one of the chief patrons of the arts and the conspiracies around the family and their banks is legendary in the shadows of the internet. The Medici family is an excellent example of the power of Capital. Giovanni expanded the fortune when he loaned money to governments to fund things from civil projects to wars. This is an area where banking, capitalism, governments and debt converge together in a confluence of interests.

Governments have a fundamental problem. Governments often take in massive amounts of money, but it is not available all at once. Taxes are paid several times a year and many people pay in installments. This means that while you may take in taxes totaling 1 Trillion dollars, those dollars are spread throughout the year. Medici allowed kings of the 13th century, who needed funds to wage war right away, to borrow the money using their future tax receipts as collateral. It’s the same idea as how banks now loan us money via credit cards on future pay from jobs. In those early days, banks loaned money to the landed aristocracy whose wealth was tied up in lands and future tax gain from agricultural and other yields. Banks allowed them to spend the wealth of tomorrow, today. Banks allow companies to produce the goods needed to make money tomorrow, today. Banks have made a global business and trillions in wealth on this process of loaning money and charging fees and interest that enlarge their pockets. Debt is an integral part of the economy. From the federal government and it’s $18 Trillion in debt to personal credit cards, everyone pays banks for the privilege of borrowing money from tomorrow to spend today. Our income taxes move from the federal government’s accounts right over to the owners of US treasury bonds so that the federal government can issue more debt that banks and financial institutions buy up. The cycle continues: more capital and more return.

Corporations wouldn’t be able to do business the way they do on a basis of industrial scale without banking and the ability to borrow wealth to create more wealth. This is another manifestation of the capitalistic impulse to take capital and create return.

Along the way, as wealth grew, banks went from small, local and regional institutions to global powerhouses of capitalism who have investments in locations all over the world. This ability was made possible by globalization and the global flows of capital. At first glance, it seems attractive. Capital seeks out places for a return and companies and banks look for places to create return, value and growth. New markets for goods and services are prime locations for those. Countries who need capital to begin their own industries are also places for increased chances on return. The Asian financial Crisis (triggered by the collapse of the Thai Baht) and the South American bank failures (triggered by a variety of problems stemming from socialistic governments to bad investments) have shown that this pathway is fraught with difficulties and those difficulties are frequently shouldered by people thousands of miles away from the problem. When I was in graduate school, I wrote a paper called, “The New Colonialism” and I talked about how wealthy countries use their tremendous resources to invest in poorer nations to generate a return on their investment and that this often leads to wealth leaving the country in question. When the wealth leaves (raw materials, goods, services) then there is no chance for the local people there to begin their own capital expansion. No capital to invest means no return and no return means wealth doesn’t grow no matter how you denominate that wealth. African countries that grow the world’s cotton should be tremendously wealthy. Instead, they remain poor while the profits of their labors line Western pockets and we get cheap t-shirts for our trouble and they end up in grinding poverty for their trouble.

What does this all mean to the reader? Banks and banking are an integral part of global capitalism because they are able to give the system of invested capital resulting in return a kickstart, indeed they began it. You cannot have modern capitalism without banks and I cannot discuss capitalism properly without the reader understanding the original capitalists: banks.

The Death of Mainstreet

Exploitation and the Fetish of Growth

Capital is always seeking a way to grow. “Put your money to work” was a common phrase in the 90s and early Aughts to encourage people to rigorously invest their savings into the global financial system. Modern corporatized capitalism is focused on growth and shareholder value. Shareholder value takes prominence over all other concerns. Even though it didn’t used to be that way, in the years from 1945–1977 where sustainable return from new products and happy employees were a bigger priority than mere return on investment, companies now chase growth.

The Cult of shareholder value and the idea that the economy works only with growth and more growth rather than a consistent return over time that also works for the improvement of general society. Thanks to the ideas of people like Jack Welch who declared a commitment to Shareholder value, in many areas of the economy from mortgage-backed securities to corporations the focus was on growth over a short period of time, not sustainable return, but growth and the more explosive, the better.

Everything that a corporation does these days is in the name of shareholder growth. From raising the price of drugs like in the case of Turing Pharmaceuticals to closing plants and mills to send the work overseas simply to save money, everything is done to increase profit and thereby shareholder value. What’s even worse is that this money never trickles down. It stays in the pockets of the wealthy and that is why trickle down economics does not work. The trickle only happens when there is an economy to invest in and business to expand and employees to hire. The economy trickled down in China but Main Street was left out of the equation.

The American economy used to be a robust place. Indeed many nations had robust local economies. Stores bought finished goods from manufacturers and placed them for sale. Those manufacturers bought raw materials from suppliers and so money moved to all the businesses involved. Their employees were paid and those employees were able to buy what they needed to live and support a variety of businesses. Although the 19th century was racked by currency crisis’ and other problems, this system generally worked. When a community did well, all the business benefitted. The money, goods and services generated in a community had an impact there. By the 20th century, thanks to the innovations of central banking and improved labor laws, the entire American economy had taken advantage of this system. Companies created goods and services and those dollars went out and supported a variety of small businesses who then were able to create a vibrant local economy. When wages remain high and corporate profits go to business expansion, the wealth created from capital is shared between both the shareholders and the workers who were integral in the process. This meant people could save money, stimulate the economy and build lives for themselves and their children.

This system did not create tremendous growth. The stock market did not reach 17,000 points, and corporate profits and CEO pay remained modest. In fact, many corporations usually held out a good deal of debt to deal with their day to day obligations. Corporations didn’t usually hang onto cash they way they do now because it was taxed as a much higher rate and that deterred them from keeping copious amounts of cash on hand. Now, they hold trillions offshore in tax-haven countries like Ireland and the Isle of Man.

By 1977, the trend was shifting. Larger stores with cheaper goods, billed as discounters and providing more “value” began undercutting smaller main street stores. These stores would buy in bulk, sell cheaply, and make higher profits which mean higher value for shareholders. The small main street stores didn’t have any shareholders to provide value for but simply couldn’t compete with the far lower prices of discount stores. Even other retail giants fell to the lower prices of discount stores. Not only were these stores killing main street shops but they did not pay the wages of those shops or department stores which meant that their employees were putting less money back into the community. When Sam Walton opened Wal-mart in 1962 he was paying $1.65 an hour ($9.96 in 2016 dollars) and actively resisted any raise in the minimum wage so that he could continue paying low wages. His low wages were a part of how he kept prices low at his stores and began and downtrend of the cost of labor.

The Squeeze of Labor

By lowering wages and reducing labor costs, we have people who are working and yet cannot make their bills. While this is not directly the fault of capitalism as an idea, it is the throughput of a system that prides itself on reducing costs to produce a greater return.

There are great examples the economization of labour and creating an economy that prioritizes the individual worker over the collective force of labor that is the proletariat. By making people self-employed and responsible for their own expenses and turning them into “little businesses”, corporations (like the manor before them) are able to offset the expense of actually having people involved in their business. In the UK, Ryanair pilots are independent contractors who have to buy their own uniforms and pay for their stopover hotels. Uber, Lyft, Washio, and other on-demand economy services also do this. It is very hard to unionize if you’re all your own little tiny one business/owned job who is dependent on a corporation for your survival.

Even as a hired employee things can be perilous. Corporate life can be so stultifying that it takes medication to stay there. The stereotype of the Wall Street trader who takes any combination of adderall, zoloft, xanax and ambien exists for a reason. The work is so soul-sucking that in order to do it, they have to be drugged to feel better, to be more balanced, to be anything other than confront the harsh reality of what they do and how they have traded some part of their humanity for the filthy lucre of money. Those that can’t handle that or can’t take enough drugs end up harming themselves or others and some simply overdose on illegal substances. Peter Fleming, in his book “The Mythology of Work” talks about the actively disengaged worker who spends his days in the office or cubicle reading things online and doesn’t offer solutions to help the organization. It’s about 23% and if you’re reading this at work you are apart of that.

According to Peter Fleming, Working anything more than 3–4 days a week for 20 hours is basically slavery . We need to reduce the fetishization of work. Thanks to the protestant/confucian work ethic, we define ourselves by work. It is less about who we are and more about what we do. It is one of the first things we ask someone when we meet them. It ranks right up with where they are from, are they married or single or if they have children. By tying up identity in work, we have reduced the importance of other status symbols in society. It doesn’t matter what club you’re apart of or where you live. People are tied to what they do for money, “You are what you do” is the cultural outgrowth of corporate capitalism.

People used to be tied to the land, they are now tied to corporations. Apps like Uber, Lyft, and Washio make this even more apparently. When someone’s income source is tied to a corporation who has no other interested in them beyond their providing a service to them, then that person cannot freely move or act in an independent way. Just like the manors before them, corporations and their offloading their expense of employment onto the workers themselves and corporations are creating new manors.

This is essentially digital feudalism; what is an Uber driver without Uber? A guy who picks up hitchhikers. 

And while we’re talking about this as a new phenomena, it is not, it is the result of decades of small changes that no one really noticed but made significant changes to our economy. Believe it or not, part of the on-demand economy changes started with chickens.

Tyson Chicken is one of America’s most iconic chicken companies. They are the largest distributor of chickens in this country. In the 1970s, they only controlled about 15% of the broiler chicken growth market (that means chickens that we eat). These companies usually supplemented their own growth operations by contracting with local farmers for so many chickens and left the growth of those chickens up to the local farmer and only came into the equation when it was time to process those chickens and sell them. In 1973, they found that most of their expenses at the corporate level were in raising chickens. They figured, that if they changed the contracting system to control every part of the growth process, they could pay the farmer a modest per pound fee for the work of raising the chickens while increasing quality, production, and reducing costs at the corporate level. By doing this they could off load the actual cost of chicken production onto their contract farmer. This has led to several small farmers losing their farms to debt collectors after they had taken out loans to meet the on-going requirements of Tyson. Farmers are finally fighting back and Tyson is building more of their own growth operations. Many people have been hurt and dispossessed by this simple system of basic corporate greed. Growing up during the summers in northwest Arkansas with my Grandma, it seemed like everyone had a story about Tyson and trying to make money off growing chickens and how well it had or had not worked.

The idea that the cost of something could be off-loaded to an independent contractor for less money has powered a corporate culture of outsourcing to someone else. Why own a factory, employ workers, and deal with the associative costs when you can pay someone else to build your product for less and simply deliver it to the consumer.

Why hire 100 software developers and be responsible for all that HR when you can simply hire them as contractors?

Why create a new on demand taxi company when you can simply hire hundreds of thousands of people to do it part time on a contract basis?

Services have been particularly hard hit by this trend. There are plenty of areas where people work as “Independent Distributors of Products.” The 1099 form is no longer reserved for car salesmen, real estate agents, and a handful of high powered consultants and freelancers. Fedex built its model on hiring it’s drivers as independent contractors and off-loading the cost of drivers onto the driver’s themselves. Long before Uber and the On-Demand economy became an economic buzz-problem, Fedex was exploiting its drivers and now will have to settle in court for billions of dollars that it owes to its drivers. Soon, workers themselves won’t even be a problem as their jobs are eliminated due to automation which only increases the ability for capitalism to create a frictionless return. The labor force is in danger like never before. The likelihood that the very institution of employment will exist in 100 years is at an all-time low. For low wage workers, the squeeze is already on and their jobs will be the first to go in the new economy even though low wages are the reason we have our current economic troubles.

The lowering of wages has reverberated throughout the economy. When people do not have money to spend they cannot keep mainstreet afloat and they flee to discounters offering them a good life for less money. That’s how Wal-Mart killed mainstreet. By lowering wages, lowering prices, and lowering the economic conversation they drove smaller businesses out of business and in time have put bigger stores like K-Mart, Sears, and JCPenney on the chopping block. It is good wages that keep the economy going. Wealthy people and their ability to create businesses and hire people are a component of that. In our modern age, the only people who are doing that are Business types A and B, small shops and professionals who essentially own their jobs. Corporations would rather lower wages by moving jobs elsewhere and in the cases where they do move jobs back to the American shore, the wages start at $9–11 an hour which is much lower than an inflation adjusted wage that would have been common in the 1970s and 1980s when those jobs left. The hollowing out of the American economy has killed mainstreet. How did that happen? What policies were put in place to let those jobs be moved overseas? For that we have to think about Globalization.

Forget the Global Village, It’s the Global MNC

“Soldiers do not pass over borders where goods do also.” Frederic Bastiat

Although globalization became the a buzzword in the 1990s, truly global trade is something corporations have been seeking and is just another step in the ideology of capitalism. Global trade isn’t a modern phenomena. Goods and services have been moving around the globe for awhile. Even in ancient times, raw materials and goods powered robust trade and trade routes have been vital to any civilization.

Industrialization accelerated this process and with the advent of faster and efficient travel with steam ships, global trade took off. Textile mills in Britain and France often imported cotton not only from their colonies but from cotton fields in the American south and from Africa. In the 19th century, trade deals among European powers were negotiated bilaterally or between two countries without other powers involved. Companies were restricted from engaging in trade without the express permission of their government. Those that sought to preserve peace on the European continent theorized that trade/profitable exchange would deter nations from going to war for fear that it would hurt business. This ethos powered the Bretton Woods system that was created to encourage global trade to rebuild Europe starting in 1945. The Bretton Woods system then led to the General Agreement on Trade and Tariffs (one of the first truly global trade agreements that standardized the tariffs/taxes on trade) which then lead to the World Trade Organization. Throughout the 20th century, when it comes to business, nations and their corporations have sought an ever closer union. Not only has this allowed the spread of goods and services but also the movement of Capital. Corporations weren’t happy simply making a return in their own countries, they wanted a chance to make a return wherever value could be found. These agreements have allowed corporations to spread themselves all over the world and to occupy almost every day of our lives.

We are confronted with the realities of globalization every day. If you have looked at a label on anything in the past 20 years you will have noticed that more and more things have said, “Made in China.” Those labels will also say, Vietnam, Malaysia, Singapore, Indonesia, India, and Bangladesh. We’ve all had to live through the horror of calling a customer service line and getting someone who speaks poor English or worse, someone you can’t understand. While products have been made overseas on a limited basis since the 1970s and raw resources have long been a global business, the internet has made the world much smaller and has allowed companies to have truly global supply chains and keep it all centrally managed. Even small businesses, increasingly order from far away places for their goods.

Convenient as it is, to order a variety of merchandise from around the world and to enjoy the lower prices of cheaply produced goods, globalization has taken a toll on the economy. Valuable manufacturing jobs that paid well and powered the middle class have largely disappeared. The associated jobs with them have also disappeared leaving massive holes in communities around the nation and leaving states to rebuild their tax bases around services, creative endeavours, technology and local businesses that are less affected by global shifts.

For better or for worse, these outsourced jobs will most likely not be seen again. While some companies have imported their jobs back to American shores, many of those jobs will soon be eliminated in favor of automation and expense-minded companies are not too likely to leave their Chinese investments behind, especially as China and Asia serve as a sector for growth.

And who can we blame all this for?

No one in particular. But I can tell you with certainty that it is the very system of capitalism that underlies the global economy that is directly responsible for the current problems we now face. In a system where profits are prized over people and the value of return on capital takes a higher precedence then the creation of a solid society or economy, you end up with the current system we now have. If one is wealthy and has capital, our system is beneficial. However, if one must work to earn money in order to survive then our economy puts that person at a severe disadvantage. That worker must now compete with workers from around the world. Those international workers are often in places where the cost of living is much less making them more competitive. As with many Americans, this has directly touched my life. In 2004, I started out as a freelance business writer with three services. I used popular freelance sites to get my work and I enjoyed the fact that I could work 2–3 days a week and make $300–400. As teenager/college student that was quite a bit of cash in my pocket for comparatively little work. I freelanced off and on through college and when I graduated in 2009, I set out to expand my business and continue on to grad school. I had some money that I was able to use for this purpose and I had high hopes. Even though things weren’t going well at that moment, I had made money in the past and I figured that I could expand my business and make money into the future. Plenty of places were talking about the wonders of freelancing and I believed the fantasy. The Great Recession was in high gear and being 21 at the time, I didn’t realize what that meant. For my business, it meant lots of clients that ordered work and never paid for it because their businesses had gone under and they were figuring out how to keep the lights on. For me, it meant poverty. It meant working long hours for overseas clients on a piece work basis of $1-$2 per item. I was barely able to scrape by and when I finally shut down my business in 2011, I was sick, tired, in debt and graduating from grad school. Fortunately, I was able to find a job. But I will never forget having to compete against Indian and Malaysian writers who could make $500 a month and live very well while we here in America couldn’t make it at all at the same rate. I felt like I was out of date and simply useless in the economy. Eventually, I had to move on.

This is not an uncommon story for the American worker. As plants and mills started to close around 1970–1977, many American workers struggled to find a way forward with decreasing opportunities. Families had to move; jobs in the service sector were taken and some people went back to school. It was on the back of that struggle that Ronald Reagan floated into office in 1980. Promising a new day for America, Ronald Reagan was offering a solution to the American people that corporations and poor trade deals caused in the first place. Promising people a chance to work and earn a living without pesky unions or regulations, Ronald Reagan sold the American people on a policy that ultimately would hurt them. Unfortunately, no one realized it until 2008, long after the policy had hollowed out the American economy and after it’s salesman had passed on.

Multinational corporations or MNCs wield an increasingly large share of power. Considering their wealth alone comprises the GDP of some small nations, how these companies move has an impact in every area of our lives, planet, and economy. Increasingly, these organizations are not tied to any particular state and they will move their wealth, if not themselves physically, to wherever the most advantageous place might be. Globalization has created the entire world as a giant competitive market that can create value and a return on capital. Nations, individual workers, and institutions no longer have to compete with just their counterparts in their geographical area. They have to compete in a global marketplace. This was sold as a great advantage. Every time new trade that is announced from NAFTA to CAFTA and the TTIP, the deal is always billed as something that will create jobs. The reality is that workers in developed nations cannot compete with workers in developing or poor nations without driving themselves into poverty and if we look around, especially in this post-recession environment, that’s exactly what has happened. The new manufacturing jobs that companies are bringing back from Asia pay much less than those same jobs paid when they left. The benefits and job security that were common under union-negotiated contracts have been wiped away in favor of wages between $9-$15 with sparse health benefits. Union membership is very low an unlikely to recover because that drives up costs. Corporations enrich their bottom line to “increase value to shareholders” and that means that those profits must come from the paychecks of the workers. In a global environment, it is important to “stay competitive.” That is a passphrase for keeping wages and benefits at the bare minimum to ensure shareholder value. That is not only something that we’re suffering from here in America, but the entire world is now subject to this economic system that prizes shareholder value over anything else. From raw resources in Africa to manufacturing in China and innovation in America; the fetishization of shareholder value has debased our entire economy, our political system, and our humanity.

Companies don’t just wake up one day and do this. They don’t merely create these deals all at once, indeed, it takes time to sell stakeholders on these deals. However, when a proper investment in government takes place, corporations can do quite a bit. It takes the meeting of government and business to create this economic environment.

Money in Politics

In our modern parlance you’ll hear a lot about “the money in politics” and campaign donations, super pacs (political action committees) and “dark money.” This all has contributed to the billions of dollars that we will spend in 2016 to elect the President and every position that is up for grabs. Even a mayoral election in a medium sized town is a $10,000 affair just to start. If you are not economically successful, it is hard to get started in politics without some wealthy backing. Although Barack Obama made a name for himself with the small donations he received from supporters via social media in 2008 and while Bernie Sanders has charted a similar path, you do not get from Chicago or Vermont to the White House without people who can donate millions (or at least hundreds of thousands) to your campaign via PACs and party committees. Elections used to not be that expensive but the increase in money reflects the stake that more and more businesses and wealthy people are taking in politics. They don’t merely fight bad laws but make sure that when they lobby congress and state houses that they have friends to actively promote their agenda. Bribes lead to scandal but if you can legitimize bribes through campaign donations and jobs after public service, then everyone is happy. No two men have done more of this for the GOP than the Koch brothers who run the massive Koch Industries that makes everything from paper products to chemicals. On the Left, George Soros and many others including celebrities have thrown money at various causes to promote their political agenda. From think tanks to lobbyist groups, politics is powered by money. If an interest group doesn’t have money to give to a politician, they don’t have much pull in Washington D.C. anymore and the pull in State Capitals is quickly evaporating. While it may seem that a protest movement like the Tea Party and the occupy movement can cause sweeping change and make the news, the difference between the long-lasting influence of the Tea Party and the irrelevance of Occupy is one thing: Money. The Tea Party raised funds and got people into office; occupy didn’t do any of those things. One can argue that those of us who participated in Occupy did more in terms of direct actions, actually helping people, and causing street-level change but the Tea Party was able to articulate their message in a way that had actual political change within the GOP and within the government. The Tea Party was able to speak the monetary language of politics.

Government for and by the Corporation

Ultimately, this change has led government, the only institution tasked to represent the interests of the people, to become an institution that does the bidding for wealthy interests. From the perspective of the corporation, their interests and the government are inextricably linked. Companies that don’t keep the government in pocket can suddenly find themselves under fire. Many of my readers are probably not old enough to remember the break up of AT&T, a phone company that grew so large it had an effective monopoly on phone service in this country. They never thought that the government would sue them, take them to court and use anti-trust laws (laws that govern the behaviors of companies and prevent monopolies, price gouging, and so on) to break up the company into several smaller companies split up by region. Microsoft, also had to spend the better part of a decade and millions in legal fees to defend itself in America and the EU as those governments accused them of having a monopoly on the PC Market. Microsoft never gave to political campaigns before their anti-trust suit. Now, they give regularly. As does Google, Apple, and every other company seeking to stay on the side of government that is most advantageous to them. Now these corporations aren’t giving this money out of the goodness of their corporate soul. Like any other form of capital, they expect a return. Those returns come in the form of favorable regulations, reduced threats of anti-trust problems, and in many cases attractive contracts and product subsidies. Subsidies have become so common that many corporations, after filing their taxes get a refund from the government. This is entirely legal because their lobbyists, oftentimes consulting firms, help write these laws and are paid to scrutinize legislation for clauses that may affect them as well as write in things that will help their business. This is no longer odd, it is simply expected due to their investment in government. Our government is no longer of and for the people, it is of and for the corporation and serves it’s purpose like any other vessel of capital; to provide a return on investment.

How Corporations Took over America

How did this happen? How did our government which was created to create an environment of self-governance and freedom become a vessel of corporate greed? Who represents the public? Who represents “we the people?” It’s supposed to be government but to some degree government’s hands are tied and between that and the money in politics problem, the public is underrepresented in corporate action. Original capitalism involved real people, modern capitalism is institutional. There were many incidents that helped bring this about and one of the biggest was the public-private partnership. In theory, the public-private partnership sounds like a pretty good deal. The Public, through government agrees to reduce taxes, contribute money or use its power of eminent domain to make something more feasible or possible than it would be in an entirely private deal. Corporations (because they look for return on their capital) are not likely to invest in things that don’t have great chances of return. They will simply move towards that which promises a better return. However, if a community wants the private sector to do something different, they have to offer a compelling reason and by compelling reason, I mean money. These partnerships can take a variety of forms. In fact, you’ve probably benefitted from one already. Toll roads are a good incidence of this as are convention centers and other public buildings. These are often built with taxpayer dollars but then contracted out to be run/managed by a private firm. It is not often that a municipality will actually deal with the day to day running of it’s public facilities. This translates into millions of dollars flowing from public coffers into private hands. Lately, energy has been a source of this as well. Business people always tout how much benefit we all gain in these partnerships, but the reality is that we the people are basically making it easier for them to make money often without the government/public interest gaining anything other than access (for a usual fee) and the ability to point at our new shiny object. When guaranteeing loans, if things go badly, the taxpayer is sent the bill while private industry moves on. Sometimes, if the company is paying a lease, the government will make some money but often this is simply not the case. Real estate is another area where government and business are close together. Government wants to redevelop an area or a building and to spur that on, the government partner creates a grant or simply finances the operation in yet another partnership. When it comes to things like Malls, historical downtowns, and other areas I know how expensive it can be for private industry to take on these projects on its own. I also know that zoning laws and parking lot requirements and other regulations can get in the way. But I smart at the idea of taxpayer dollars being funneled (often with corruption) into private hands simply to encourage them to do something that they will make money from for decades.

In some ways, we benefit and in other ways we lose. Capitalism is a philosophy that touches every single area of our lives. Nothing in our world hardly moves without a capital return. It takes work, dedicated people, and a bit of luck to make those few things happen. Politics is no different. If return on capital is what powers your world, government is no different and our current political system is a result of 30 years of unregulated, rabid capitalism. This is all supposed to somehow, benefit everyone. In many ways it has, in consumer products we have a variety of choices and there seems to be some new option coming to market everyday. But there are areas of our lives where capitalism is a bad philosophy and when it comes to essentials like healthcare, food, water, and shelter; capitalism unfairly advantages those with capital and leaves everyone else out in the cold (sometimes literally outside in the cold).

Corporate Involvement in Government

The men who have held office in this country have usually come from the political, social and economic elite. these have been some notable exceptions like Harry Truman and Andrew Jackson as well as U.S. Grant. But you also have presidents from the upper class including Howard Taft, Wilson, Harding, and Roosevelt. Although there have been a few exceptions in the 21st century, presidents are not too often common men of the people. They have been relatively successful and are usually connected with business interests as a way to fund their careers in politics. Savvy readers might notice a pattern in presidents. The closer we get to the modern age the less “of the people” the presidents get. Until recent times, this has been very necessary due to the fact that president’s were paid poorly and had no retirement. Harry Truman was the recipient of the first medicare card from then-President Johnson in 1965 as a part of the Great Society reforms. Obviously times have changed, but the fact remains that the men that choose to run are not people who might have worked a fast food job in their lives. In this country, due to culture and the money needed to have a political career of any note; not just anyone in elected president. This has allowed corporations to take a more active role in elections from the White House to state legislatures. However, that is simply not enough. Corporations also have another effective way of getting their way from Sacramento to Denver to Bangor. It is an institution as old as government itself: The Lobbyist.

The Lobbyist is one the oldest institutions in any kind of representative government. It is the job of the Lobbyist to go and represent an interest to a representative. In Washington D.C. some Lobbyists pay people to stand in line for them. Corporations have spent millions on campaigns as well as millions on Lobbyists to get legislation modified and to get bills passed. Many of the progressive victories of recent memory have taken place in the hallways of the Congressional office buildings. However, many losses have taken place in those same halls. Lobbyists have a significant and well- financed part in our political system. They also represent a huge part of what can be wrong with Lobbyists. While the informed expertise that a Lobbyist can provide is an important part of legislation, it is important to remember the interest that Lobbyist represents. However, there is no Lobbyist representing you and me. There are even Lobbyists for your favorite charities and organizations who don’t really represent you. Between corporate donations to the people who are tasked to represent you and the lobbyists paid to keep their attention, who does that leave to actually represent the interests of “we the people?” The simple answer in our modern system is no one. But of course, this is America and nothing is that simple. The interests of the business world in 2016 and the needs of the people or even what most would consider good governance do not often converge. Although companies are often pressured by PR reasons to make some concessions, little actual change occurs. Business gets what it wants and the people in government benefit. We the People are given platitudes and promises.

One of the areas where a little change has occurred is with the auto industry. Seat belt regulations, smog regulations and safety regulations are all things that protected people but would not have actually occurred without government help. As we speak, companies pollute rivers and streams and the only time it gets cleaned is when there is a tax incentive or, as in the case of BP, there is PR and government pressure. It often takes the force of law or public scrutiny to gain moral footing with a corporation.

Corporations aren’t moral; they create shareholder value. 

Political pressure notoriously does not work very well with corporations. They have enough money to be able to tell government (the entity that is to represent the masses) no. That should be concerning enough for democracy. In that way, because corporations have the power to work the levers of power in their favor and the ability to say no, they can adjust our democracy to fit their idea of what society should be like and how best to benefit themselves: this is exactly what has happened.

Capitalism as a Failure

Rather than creating a market with a free exchange of goods that allows for an open competitive environment of like goods and services from which we can all benefit, Capitalism aligns people, wealth and resources with only things that can produce a dynamic and sufficient return; it is not sustainable and is forever stuck in between scarcity and over-production. Under capitalism, this also includes essentials like food and water. Despite Capitalism as an innovation from Mercantilism, the government was involved with corporations from the start due to the licensing of corporations, enforcement of contracts, and the taxes that they have always exacted. Capitalism’s reputation as a system that doesn’t need, want or desire government has been a farce from the beginning. In modern times we’re familiar with corporations getting tax incentives to move to certain states and moving profits offshore to save on taxes. This is yet another example of what is fundamental in capitalism.

Corporations cost us money:

Walmart has spent 65.4 billion on stock buybacks in the past ten years (2005–2015) That could have become a $4,670 a year raise for each of its employees. It’s also very close to the $62 Billion we the taxpayer spend subsidizing their underpaid employees.

IBM doesn’t research much these days. But it does spend $117.5 Billion in stock buy backs since 2003 to maintain a high share price. These trillions of dollars in lost economic activity could solve pressing problems like healthcare, infrastructure, and student loans.

Regulation

Regulation isn’t the end of the world. Although modern economics would have us believe that regulation is the enemy of innovation and growth, that simply is not true. Usually, regulation spurs growth because it creates an environment in which business can proceed in a fair manner. When Congress created the Interstate Commerce Commission to regulate railroads in 1887, it was due to the explosive growth of the railroad and the schemes that the various lines used to compete with each other. In this case, regulation created stable pricing, profits, and allowed 4 railroad companies to operate together and serve the public. A similar story happened with airline ticket prices until the deregulation of airlines.

No matter what, capitalism works for a frictionless return. To increase profits and increase return and provide greater shareholder value, corporations have to cut costs somewhere. The reason trickle down doesn’t work is that it is supposed to mean new investment in jobs and business expansion but it frequently ends up with shareholders in stock buybacks. Trickle down works on mainstreet but not Wall Street. Modern capitalism is not the result of success or ingenuity it is the result of capitalists like Nick Haneur. These people are able to adjust the rules to their favor and basically create a system for legally-sanctioned theft. A variety of changes have occurred since my watershed date of 1977. Overtime pay for the middle class has disappeared as the requirement fell close to the poverty like. Now, more than 40 hours if allowed at all are simply paid are regular hours. By raising the threshold to $69,000 and making it mandatory for all professions, money would be pouring into the pockets of the worker. But that would take public action, regulation, and a variety of changes that are unlikely. It would interfere with frictionless return.

It’s time for a cleanse

Capitalism Detox

It seems that Capitalism isn’t all that is cut out to be for most people, especially if you derive your wealth from labor. If someone isn’t making money from capital than the current economic system that we have engaged puts them at a disadvantage. Most people work for someone else and among small businesses, most businesses provide a form of self employment to their owners and aren’t businesses in the corporate sense. If the owner disappears, so does the business and the jobs that go with it. Corporations tend to endure because the entity of capital can keep them together and continue in some capacity to generate a return no matter how meagre. The 21st century will be dominated by Capital as Thomas Piketty said. The new economy will be a backwards leap towards many things being made small time and artisanal. Items made at scale will be made in fully automated factories. People will provide specialized services for individual parts of corporations and to the public. In the beginning of the industrial revolution, the goal was to make things at scale and everything and everyone was centralized and then the finished product was distributed outward from that central hub. Small time specialized shops simply couldn’t keep up and went out of business in favor of large competition that could create cheaply at scale. In many ways we’re jumping backwards to the small shop system. Even Corporations understand this singular principle. Corporations are hoarding cash because they believe that the future will be very expensive and will require massive capital investment to adjust their businesses to the new economy. This is an indicator that the 21st century will be ruled by acquisition of and ownership of capital. This will eventually help people who derive their wealth from labor but that will take rising wages which will most likely not occur unless it is forced. Corporations have worked to reduce labor costs to increase the profits that they are stockpiling and as the years unfold they will reap the rewards of that in their ability to launch new technologies and products. If we want to move towards an economy of freelancers then we will need to completely rebuild every aspect of our economy from how we pay for things to housing and transportation.

That doesn’t do much for everyday people

What is next? What comes after Capitalism? What does the economy look like when people no longer derive their living from wages? There are a few solutions on the table:

Raise wages and reduce working hours (the early 20th century solution)

Universal Basic Income (we give everyone a set amount of money per month)

Socialism/Democratic Socialism

Higher Taxes (similar to the taxes levied in the middle of the 20th century)

A Global Tax on Capital (Thomas Piketty)

Resource based Economy

I’m not particularly excited about any of these solutions for a variety of reasons. Two things seem to be at odds, how do we keep the dynamism of capitalism and it’s ability to move people into new socio-economic statuses while also making sure that we retain opportunities to do that? How do we make sure that our economy had enough money to survive in an environment where full-time employment may become a thing of the past. How do we make capital work for everyone and not just the few? Most importantly, how do we take government back? I’ve spent about 2 years working on this essay trying to solve this problem. I always try to present clever solutions to problems when I write about them. This time, I have no clever solutions as to what comes after capitalism. It’s obvious the present condition is no longer workable and the new system must be collaborative and leverage talent wherever and whatever that might be. In some ways, we have a chance to increase the quality of human life to a degree not yet seen in the course of human history but deriving survival through wage-labor doesn’t seem to be that pathway anymore.

That is where you come in, what do you think post-capitalism looks like?

Links and Research

I always include my research and links when I do big pieces like this and this one is no different. This is not to be taken as an exhaustive list of the histories and everything I’ve ever read that went into this but these links are certainly a compendium of important things I read and collected to create this work.

Click to access businessofbroilersreportthepewcharitabletrustspdf.pdf

Life Under Contract: Poultry Farming in Arkansas

http://commonstransition.org/mapping-the-emerging-post-capitalist-paradigm-and-its-main-thinkers/#prettyPhoto

http://www.theguardian.com/sustainable-business/2016/feb/17/automation-may-mean-a-post-work-society-but-we-shouldnt-be-afraid

https://www.gilderlehrman.org/history-by-era/economics/essays/us-banking-system-origin-development-and-regulation

https://mises.org/blog/no-there%E2%80%99s-no-economic-case-minimum-wage

http://www.salon.com/2013/12/01/noam_chomsky_america_hates_its_poor_partner/?utm_source=facebook&utm_medium=socialflow

http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun

http://www.salon.com/2015/12/12/robert_reich_the_sharing_economy_will_be_our_demise_partner/?utm_source=facebook&utm_medium=socialflow

http://www.bloomberg.com/news/articles/2016-02-03/goldman-sachs-says-it-may-be-forced-to-fundamentally-question-how-capitalism-is-working

http://www.theguardian.com/business/2012/jul/21/offshore-wealth-global-economy-tax-havens

http://www.project-syndicate.org/commentary/fourth-industrial-revolution-innnovation-by-larry-hatheway-2016-01

http://www.thenextsystem.org/markets-in-the-next-system/

http://www.vice.com/read/what-is-the-point-of-your-job-389?utm_source=vicefbus

http://www.theatlantic.com/business/archive/2015/12/economy-fairness-rules/421809/

http://www.salon.com/2015/12/22/americas_great_divide_how_the_u_s_transformed_into_a_dual_economy_and_what_can_be_done_to_reverse_it_partner/

http://www.theatlantic.com/magazine/archive/2016/01/what-was-volkswagen-thinking/419127/

http://www.aljazeera.com/indepth/opinion/2012/03/2012319125340857774.html

http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun

http://www.salon.com/2015/12/27/the_game_is_completely_rigged_the_1_percent_has_more_than_ever_and_the_system_is_too_broken_to_deal_with_it/

http://www.salon.com/2015/12/27/bill_moyers_the_plutocrats_are_winning_partner/