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CORPORATISM -
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The Rights of Living Persons

Posted in the database on Thursday, February 03rd, 2005 @ 20:03:56 MST (1770 views)
by David Korten    Third World Traveller  

Untitled Document

p183
Thurman Arnold
The idea that a corporation is endowed with the rights and prerogatives of a free individual is as essential to the acceptance of corporate rule in temporal affairs as was the ideal of the divine right of kings in an earlier day.


Human rights secure our freedom to live fully and responsibly within life's community. We are finding, however, that as corporations have become increasingly successful in claiming these same rights for themselves, they have become increasingly assertive in denying them to living people. For example ... they use property rights as an instrument to deny the economically weak the most fundamental of all human rights-the right to live-by denying them the right of access to a means of living. The conflict between the person's right to a means of living and the presumed right of the corporation to the security of its property and profit is perhaps the ultimate confrontation between the natural rights of living people and the rights that the institutions of capitalism have presumed for themselves, but it is only one of many.


Supported by legions of corporate lawyers and sympathetic judges, corporations have worked through the courts to acquire ever more of the rights and freedoms that living persons gained only through long and difficult political struggle. They have in turn used the rights so acquired to extend their control over the institutions of democracy and the material, communications, and knowledge resources on which people depend to secure their living. Now, in a further move to consolidate their power, the institutions of money are well on their way to declaring themselves owners of the whole of life through the systematic effort to expand the private patenting of genetic materials.
There seems to be an ironclad relationship. The stronger the rights of corporations, the weaker the rights of persons to live fully and well with freedom, responsibility, and dignity. Thus, to restore human rights and dignity we must establish clearly the principle that human rights reside solely in living persons.

From Property Rights to the Rights of Property
In the American colonies the vote was reserved for the owners of real property-a mechanism widely favored by the landed aristocracy in the early days of democracy to confine political control to the presumably more diligent landed classes. In effect, that law connected political rights to property rather than to the person, an idea that to this day carries the seed of democracy's undoing. When a person's rights are recognized only in proportion to his or her property, it is as though rights reside in the property rather than in the person.
We have since vested the vote in personhood rather than propertyhood and assumed that all is right with democracy. Meantime, in other spheres of political and economic life, the rights of property and the propertied have steadily expanded at the expense of the rights of the person. Of special significance was a decision by the U.S. Supreme Court to name the corporation, which is created by government and claimed by its shareholders as property, an honorary person entitled to the rights thereof.
In the United States the natural rights of persons are enshrined in the first ten amendments to the U.S. Constitution, known as the Bill of Rights. Indeed, the individual states approved the Constitution only once assurances were given that a Bill of Rights would be added through amendment. Each provision was thoroughly contested, publicly debated, and subject to ratification by all of the state legislatures. Since the time of ratification all other U.S. laws have been subject to the test of consistency with these constitutionally guaranteed human rights. The U.S. Constitution, however, does not use the term "human" rights. It speaks rather of the rights of persons, which most people would take to be the same thing.
In 1886, however, in the case of Santa Clara County v. Southern Pacific Railroad, the U.S. Supreme Court decided that a private corporation is a person and entitled to the legal rights and protections the Constitution affords to any person. Because the Constitution makes no mention of corporations, it is a fairly clear case of the Court's taking it upon itself to rewrite the Constitution.
Far more remarkable, however, is that the doctrine of corporate personhood, which subsequently became a cornerstone of corporate law, was introduced in this 1886 decision without argument. According to the official case record, Supreme Court Justice Morrison Remick Waite simply pronounced before the beginning of argument in the case of Santa Clara County v. Southern Pacific Railroad that
The court does not wish to hear argument on the question of whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of opinion that it does.
The court reporter duly entered into the summary record of the Court's findings that:
The defendant Corporations are persons within the intent of the clause in section 1 of the Fourteen [sic] Amendment to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.
Thus it was that a two-sentence assertion by a single judge elevated corporations to the status of persons under the law, prepared the way for the rise of global corporate rule, and thereby changed the course of history.
The doctrine of corporate personhood creates an interesting legal contradiction. The corporation is owned by its shareholders and is therefore their property. If it is also a legal person, then it is a person owned by others and thus exists in a condition of slavery-a status explicitly forbidden by the Thirteenth Amendment to the Constitution. So is a corporation a person illegally held in servitude by its shareholders? Or is it a person who enjoys rights of personhood that take precedence over the presumed ownership rights of its shareholders? So far as I have been able to determine, this contradiction has not been directly addressed by the courts.
Without addressing this question directly, the courts have moved persistently, however, in the direction of expanding corporate rights and increasing the autonomy of corporate management, even from intervention by the corporation's titular owners. Corporations now enjoy unlimited life; virtual freedom of movement anywhere on the globe; control of the mass media; the ability to amass legions of lawyers and public relations specialists in support of their cause; and freedom from liability for the misdeeds of wholly owned subsidiaries. They also enjoy the presumed right to amass property and financial resources without limit; engage in any legal activity; bring liability suits against private citizens or civic organizations that challenge them; make contributions to individual candidates, political parties, and political action committees and deduct those contributions from taxable income as business expenses; withhold potentially damaging information from customers; and avoid restrictions on the advertising of harmful but legal products in the name of commercial free speech. Although their owners hold the ultimate decision-making power and the corporation is obliged to manage its affairs for the sole benefit of its owners, these owners bear no accountability for corporate misdeeds or liability beyond the loss of value of their shares. Step-by-step, largely through judge-made law, corporations have become far more powerful than ever intended by the people and governments that created them.


To Restore the Rights of the Living
Those concerned with curbing the excesses of the corporation have generally focused on one of two losing strategies. The first is to appeal to the conscience of the corporation to act more responsibly. As Robert Monks reminds us, however, in The Emperor's Nightingale, Corporations are not people; they have no conscience. Although corporate acts are carried out by individuals, even individuals with high moral standards often find themselves caught up in a corporate action that is beyond their control-or even, in some cases, their knowledge.
The corporation is a legal instrument and the people of conscience who work for it are legally obligated to set aside their own values in favor of the financial interests of the institution and its shareholders.
A further barrier to corporate responsibility resides in the extent to which the existence and profitability of many corporations depend on successfully promoting harmful products and encouraging behaviors damaging to one's self and society. Could the R. J. Reynolds corporation, for example, really commit itself to discouraging anyone under twenty-one years of age from smoking, knowing this would virtually eliminate its future market for tobacco products? Could the Coca-Cola corporation decide to stop encouraging children to consume large amounts of flavored sugar water and encourage them to substitute clean tap water and fresh fruit juices? Could the General Motors corporation become a serious advocate of urban growth boundaries and improved public transportation to limit dependence on the automobile?
When the Monsanto corporation announced it was divesting itself of most of its industrial chemicals production to concentrate on genetic engineering, its stock price doubled in anticipation of major increases in earnings. Can the management of the Monsanto corporation now afford to hold a new genetically engineered product off the market until it is certain there is no serious possibility of harmful environmental or health consequences? In each instance, making the socially responsible choice would be equivalent to corporate suicide and surely cost the CEO his job.
The second losing strategy is to oppose corporate misdeeds corporation by corporation and deed by deed. The victories are costly, few, and generally only temporary because they do nothing to change the nature of the corporation or reduce its staying power. A major case in point is the legendary citizen boycott of the Nestle corporation demanding that it stop encouraging poor mothers in Third World countries to favor bottle feeding over breast feeding-a practice responsible for untold numbers of infant deaths. To end the boycott, Nestle agreed to change its practices. Meanwhile, other infant formula producers continued similar promotions, and Nestle itself was soon back to doing the same. On the other hand, the losses are often permanent, as when children die, or when citizens lose the battle to keep a Wal-Mart out of their town or to stop the clear-cut of an ancient forest by a timber corporation.
Any initiative that raises public consciousness of corporate misdeeds makes a useful contribution and we must surely oppose corporate abuses with all the means at our disposal. However, although we may win some battles, we will continue to lose the war so long as capitalism's dysfunctional structures remain in place. To restore the rights and powers of the living we must eliminate the autonomous rights and powers of money and its institutions through a six-fold agenda aimed at restoring political democracy; ending the legal fiction of corporate personhood; establishing an international agreement regulating international corporations and finance; eliminating corporate welfare; restoring money's role as a medium of exchange; and advancing economic democracy.
Each of these six agenda items defines an important goal for citizen action. Although the agenda has universal relevance and is already being advanced by citizen initiatives in a number of countries, most of the examples I will use center on the United States. Our government and our corporations have been the major architects of the global capitalist system and hold the major levers of power. We therefore bear greater responsibility than any other country for the global crisis and for taking steps to dismantle the system that has created it.
Each agenda item defines an important initiative in its own right requiring the development of specific legislative proposals, programs of direct action, and political mobilization strategies. The purpose here is only to identify the critical focal points for citizen action aimed at transforming the existing system of economic power.

AGENDA ITEM 1: RESTORE POLITICAL DEMOCRACY
To raise the money required to wage successful campaigns, politicians must spend a large portion of their time courting favor with and tending to the interests of the biggest corporations and wealthiest investors. It has become a vicious cycle. The more the politicians bend the rules to channel an ever greater share of society's real wealth to the already rich, the more money the rich can channel to politicians to gain further advantage.
There are few issues in America on which public consensus is so clear and unanimous. Eighty-six percent of Americans believe campaign contributions influence the policies supported by public officials moderately or a great deal. Seventy-nine percent favor "putting a limit on the amount of money candidates for the U.S. House and Senate can raise and spend on their political campaigns." Eighty-one percent favor "limiting the total amount of money which business and industry can contribute to U.S. House and Senate campaigns each election." Sixty-four percent believe it would be a good idea for the federal government to provide a fixed amount of money for the election campaigns of candidates for Congress and prohibit all private contributions. And 48 percent think they are more likely to see Elvis Presley in person than to see the U.S. Congress pass real campaign finance reform.
Increasingly of the opinion that political bodies have become too corrupt to reform themselves, citizens in the United States are turning to state ballot measures. In November 1996, voters in the state of Maine passed a clean-money campaign-reform initiative by a 56 to 44 percent vote after the state legislature had rejected more than forty reform proposals during the previous decade. Eleven-hundred grassroots volunteers collected more than sixty-five thousand signatures on Election Day 1995 to place the measure on the ballot. The initiative, passed in 1996, did what no state or federal legislative body had ever done-offered full public financing to candidates for state office who reject special-interest contributions and agree to campaign-spending limits. Spurred to action by the Maine initiative, Vermont's state legislature passed a similar measure by a wide majority. By mid-1998, diverse grassroots coalitions and reform-minded legislators were pursuing similar measures in fourteen other states. Although state-level measures change the election rules only for state-level offices, the spreading and strengthening of these efforts sends a powerful signal to national-level politicians that the voters care.
No issue is more central to restoring the rights of living people than serious campaign finance reform. If a democracy of people based on one person, one vote is to be restored, then we must have strict limits on political giving and spending and get corporations out of the political process.
Meaningful reform will necessarily include a combination of public financing of political campaigns and provision of free television and radio time to qualified candidates as a public service obligation of those licensed to use the public airwaves, and a prohibition on any effort by a corporation to influence the outcome of an election, legislation, or referendum, or the negotiation of an international agreement or treaty.
The matter of excluding corporations from political participation merits elaboration. The authority by which a government issues a corporate charter is derived from the sovereign authority of its people. It is appropriate that those who have created the corporation determine the rules under which it will exist and function and that the corporation accept those rules or relinquish its charter and operate as an unincorporated entity. Barring the corporation from politics affirms the principle that political rights and freedoms reside in the person, not in properties or artificial legal entities.

AGENDA ITEM 2: END THE LEGAL FICTION OF CORPORATE PERSONHOOD
The legal fiction that the corporation is a natural person is a major lever by which corporations have acquired the rights they now use to deny the right of living people to a means of living. Similarly, this legal fiction is used by corporations to claim free speech rights for themselves in promoting their products without public oversight and in seeking to influence public policy, while they use a combination of speech and property rights to prohibit the exercise of the right to free speech by real people. Thus union members are barred from engaging in organizing activities on company property. Citizen activists are barred from exercising their speech rights in shopping malls. The corporations that control the mass media reserve the right to decide whose voices will and will not be heard on the public airwaves.
Step-by-step, a small number of corporations are privatizing ever more of our public spaces and reserving them solely for the exercise of their own speech rights to the exclusion of the speech rights of real persons. In these and other ways the doctrine of corporate personhood actively endangers the rights of people and presents a barrier to citizen efforts to hold corporations accountable to a larger public interest.
The time has come to launch a serious challenge against the legal fiction of corporate personhood on the principle that the natural rights of persons belong only to living persons. Although the longer-term goal is to eliminate the for-profit, publicly traded corporation as we know it, the interim objective is to restore the doctrine that a corporation enjoys only those privileges specified in its charter to facilitate the conduct of a business in the public interest and that these privileges are subject to periodic public review and withdrawal. Furthermore, the privileges extended are exclusive to the jurisdiction of the governmental entity that issued the charter and do not extend to any other jurisdiction except by the explicit action of the appropriate governmental authorities in that jurisdiction. This doctrine would place strict limits on corporate privileges, without in any way restraining or limiting the recognition and exercise of the universal rights of living persons.
There are few actions we might contemplate with comparably far-reaching positive consequences than the elimination of corporate personhood. Progress on this issue in any country would be a positive step, but it is especially important that we engage the cause in the United States, for it is here that the doctrine originated.

AGENDA ITEM 3: ESTABLISH AN INTERNATIONAL AGREEMENT REGULATING INTERNATIONAL CORPORATIONS AND FINANCE
International trade and investment agreements such as GATT, NAFTA, APEC, and the others have become the favored venues for further extending corporate rights at the expense of democracy and the right of people to govern their own economic affairs. Created largely outside any democratic process, these agreements override democratically enacted laws protecting human and environmental interests. So deeply have our governments aligned with the interests of global capitalism that, following the Uruguay Round of the GATT negotiations that established the World Trade Organization, there was a flurry of initiatives led by the United States to put in place agreements on international investment and finance, including a Multilateral Agreement on Investment (MAI) that would preclude virtually any governmental regulation of the free international flow of speculative money and require governments to guarantee foreign investors against any losses they might incur from the subsequent introduction of environmental or health and safety regulations.
A number of trade disputes between the United States and Europe brought to or resolved by the World Trade Organization (WTO) show how these agreements and institutions are used to thwart the ability of democratic governments to respond to the wishes of their citizens for responsible laws on social goals, food security, and food safety. Consider two cases in which the WTO ruled in favor of the United States and against the European Union. One was a U.S. complaint against Europeans for giving preference to bananas produced in the Caribbean over those grown in Latin America. The bananas from the Caribbean were being produced largely on small family farms and were one of the only foreign exchange earners of several small Caribbean island economies. The bananas from Latin America were being grown by U.S. agribusiness corporations-Chiquita, Dole, and Del Monte, which together control almost two-thirds of the world's banana market-on large plantations that have displaced hundreds of small farmers from their lands. The United States thus used the WTO to force Europe to end its preference for the small producers and open its markets to unrestricted access by global megacorporations. Government and company representatives maintain that political donations of $1.1 million to the Democratic Party and $1.4 million to the Republican Party by the Chiquita corporation and its chairman had no influence on the U.S. government's interest in the case.
The second case involved a U.S. complaint against a European ban on the import of beef from cows treated with hormones. As the use of hormone supplements is routine in U.S. beef production, the United States complained that the ban discriminated against U.S. producers. The WTO agreed with the United States, ignoring the widespread concern in Europe that the hormones may involve health risks and a strong consumer preference to avoid eating meat from hormone-treated cows. " The U.S. corporations involved in the production and use of the hormones argue that such concerns are groundless and unsupported by scientific data and therefore should be disregarded-claims similar to those long made by cigarette companies regarding concerns about the dangers of tobacco smoke.
On a third issue, Europe yielded voluntarily to U.S. pressure to relax restrictions on the import of furs from the United States obtained by use of leg-hold traps, restrictions many feel were fully justified on humanitarian grounds. Unresolved was a U.S. threat to bring a WTO action against France for blocking imports of genetically engineered corn on the grounds that it was simply a measure to protect French corn farmers. Here again many European consumers are concerned about the implications of genetically altered food in relation to health, ethics, and the environment, but such concerns are likely to carry little weight with the WTO unless backed by conclusive scientific findings. Even if there were no health issue, from a human interest perspective there is a strong case to be made that national governments have an obligation to both their own and the world's people to maintain food production capacity and national food security in a world likely to be threatened by severe food shortages in the near future. But there is no sympathy for such concerns in the WTO if they lead to the restriction of trade.
Managed borders are essential to the very existence of life - a principle that applies to economies as well as to cells and organisms. To create mindful markets people must be able to protect the coherence and integrity of their domestic and local economies, which is virtually impossible if their borders are wide open to foreign corporations and financial institutions they are forbidden to control. If we are to take economic democracy seriously, decisions regarding economic policies and choices must be firmly in the hands of a country's citizens.
Citizen groups have become increasingly active in opposing trade agreements that undermine the democratic rights of people. It is important that these resistance efforts continue. We must block further efforts to use trade agreements to circumvent democracy. The time has come, however, for a citizen-led initiative to demand that our governments put in place an entirely different kind of international agreement aimed at holding global corporations and finance accountable to the human interest.
This may logically begin with an international alliance of citizen groups joining to draft a prototype international agreement affirming the rights of people to set their own health, safety, employment, and environmental standards and to establish standards and mechanisms for regulating international corporations and financial flows. The document should establish mechanisms to discourage financial speculation, break up international concentrations of corporate power, and phase out the World Trade Organization, the World Bank, the International Monetary Fund, and other international agencies whose primary mission is to advance the interests of transnational capital. It should also recognize and secure the right of each individual country to set its own economic priorities and standards and determine the terms under which it will trade with others and invite others to invest in its economy. The process of drafting such an agreement should be designed to engage the broadest citizen participation and build a significant citizen political constituency demanding that our governments sign and enact the agreement as a replacement for existing corporate-sponsored trade and investment agreements.


AGENDA ITEM 4: ELIMINATE CORPORATE WELFARE
Corporate welfare is not limited to direct public subsidies and tax breaks. It includes a much wider range of externalized costs relating to such things as substandard wages and working conditions, worker health and safety, environmental damage, and dangerous and defective products. Chapter 2 noted the estimate by Ralph Estes that in the United States alone corporations annually externalize more than $2.6 trillion in costs per year, roughly five times the amount of corporate profits. The global figure may be on the order of $10.7 trillion. There is a strong case to be made that corporations provide handsome returns to their top managers and shareholders only at an extraordinary cost to the rest of society. Many would surely go out of business if required to pay their own way as market principles dictate.
An obvious starting point toward the elimination of corporate welfare is to eliminate direct public subsidies and tax breaks for corporations, because these are direct financial transfers from taxpayers to corporate managers and shareholders. The next step is to charge environmental use fees for the full public costs of natural-resource extraction and the release of pollutants into the environment. Such action would align with current tax-shift proposals that call for reducing or eliminating taxes on employment, basic incomes, and essential consumption and making up the lost income through fees for resource extraction and pollution. Such a shift from employment and consumption taxes to environmental fees would encourage employment, eliminate the most regressive sales taxes, reduce pollution and resource extraction, and encourage recycling-all highly beneficial outcomes. If the environmental fees reflect actual costs to society, it would also be a significant step toward eliminating market-distorting public subsidies.
A third step would be to establish procedures for estimating the amount of other indirect subsidies enjoyed by individual corporations and assessing a public facilities fee in that amount. The fee would recover idle costs to society of corporations that fail to provide a living wage adequate to support a family, health insurance, pension contributions, and safe working conditions for their workers on the grounds that these costs are thus borne by the larger society. Similarly, it would recover the public costs of harmful and defective products such as cigarettes and unsafe automobiles. For example, cost-recovery fees would be assessed on the basis of actuarial experience with the health costs of smoking-related diseases in the case of cigarettes and accident rates and consequences in the case of automobiles.
Ideally, all countries would choose to move toward the elimination of corporate subsidies in unison. Given, however, that there is almost no prospect of this happening, it is important to establish the principle that each nation has the right to protect its own producers from predatory competition from subsidized producers by imposing compensating tariffs.


AGENDA ITEM 5: RESTORE MONEY'S ROLE AS A MEDIUM OF EXCHANGE

Money serves a useful social function as a medium of exchange. In the hands of speculators, however, it becomes an anti-democratic, anti-market instrument of instability and unjust extraction. A central goal of economic policy should be to eliminate financial speculation and restore money's primary role as a medium of exchange.
Nearly $2 trillion now changes hands in the world's currency exchange markets each day. Perhaps 2 percent of that money is related to trade in real goods and services. The rest, which is largely pursuing speculative profits, creates massive international financial instability while serving little if any public purpose. The following are reforms that merit consideration.
Prohibit banks from financing speculators.
... the financial speculation that destabilized the Asian economies in 1997 was fueled by reckless bank lending that financed the creation of large stock and real estate bubbles. The 1998 collapse in the United States of a single highly leveraged hedge fund, Long-Term Capital Management, that made bad bets on the Russian ruble posed such a threat to the U.S. banking system that the Federal Reserve stepped in to arrange a private bailout. LongTerm Capital's gambling habit was financed with $25 in bank loans for every dollar of equity. There are an estimated 4,000 hedge funds in the world. Some have as much as $100 in loan financing for every dollar in equity. Bear in mind these bank loans represent money that banks created out of nothing and you begin to see how the enormous speculative overhang in the global money system is being created. This lending is a key source of speculative bubbles and the related financial instability that has been rocking the world.
Gambling with borrowed money is a bad idea under any circumstances. When it is done on a scale that threatens the integrity of national financial systems, there is a compelling rationale for strong public measures to eliminate it. Appropriate measures include prohibiting banks from accepting financial assets as loan collateral and from lending to hedge funds and other financial institutions for the purpose of leveraging the purchase or sale of financial securities or derivatives. Buying stocks on margin should be similarly prohibited.
Tax short-term capital gains at rates substantially higher than earned income.
Giving a tax advantage to those who live from speculative gains over those who do productive work for a living is unjust and bad policy. It is appropriate to tax away virtually all gains from capital assets held less than a month as they are almost certainly speculative in nature. It is appropriate that gains from assets held for longer periods of time enjoy more favorable treatment, but in general gains from an asset held less than five years should not enjoy a tax advantage over earned income. This should be true for corporations as well as for individuals.
Encourage the use of local currencies.
Money's value is based solely on a social contract-an agreement among a group of people that they will accept a particular tender in the payment of debts. A common currency not only facilitates exchange but also defines a community with a mutual interest in productive exchange among its members. The community thereby affirms its own existence and creates a natural preference for its own products. Bernard Lietaer estimates that fifteen hundred communities around the world have issued their own local currencies to facilitate local commerce. The idea is not to eliminate national currencies but rather to supplement them with local currencies that necessarily stay in the community that issues them so that local workers and assets need never stand idle for a simple lack of the money to facilitate exchange.
Make the creation of national currencies a public function.
A nation's money supply is created by either government's spending new money into existence or a bank's loaning it into existence. The former approach allows a government to pay for public services beyond the amount of its tax revenues. The latter generates large profits for private bankers. Though it's not generally recognized by the public, virtually all money is now loaned into existence by private banks, which means a nation's money supply and the stability of its money system depend on continuously expanding debt to create enough money to repay the old debts and avoid bankruptcy-a primary reason why capitalist economies are prone to collapse if they do not grow exponentially. Placing a 100 percent reserve requirement on demand deposits in the banking system and returning the function of creating national currencies to government would largely eliminate the federal government's need to borrow, reduce the power of the banking system, and eliminate an important source of the money world's growth imperative.
Place a demurrage charge on money.
Holding virtually any real asset involves a cost to the holder. Forests, factories, farmland, and buildings must be protected and maintained. Personal skills and technologies must be updated. Even holding gold involves costs for secure storage. Only those who hold money as a future claim against the wealth that others are creating and maintaining expect a secure, cost-free interest return with no effort on their part. This feature of money encourages the conversion of real wealth to money to be held in inflating financial assets, though the interests of society are best served by encouraging the creation, stewardship, and augmentation of real wealth. Money expert Bernard Lietaer suggests that the resulting distortions be corrected by charging a small demurrage fee for holding financial assets-say a quarter of a percent a month or 3 percent a year. This might, for example, make it more profitable to invest in growing trees than to hold money in a bank account. Banks would continue to pay interest on savings accounts and charge interest on loans as they do now. The government, however, would levy the demurrage fee against any outstanding financial balances.
Restore the concept of community banking.
At one time the United States had what is known as a unitary banking system, which means that each bank was individually owned and functioned as a community institution. Local savings were deposited and the money was loaned back to the community for local housing and business investment. It is appropriate to restore this concept by using antitrust rules to break up banking conglomerates and limiting federal deposit insurance to funds deposited with community banks that lend locally.
Restrict the conversion of national and local currencies for purposes other than tourism and trade in real goods and services.
Beneficial foreign investment necessarily involves the importation of real capital goods, skills, and technologies that increase a country's future productive potential. Purely speculative foreign investment involves no such transfer. It simply creates financial instability, transfers ownership of productive assets to absentee owners, and increases foreign claims against the country's future foreign exchange earnings. As speculative investment flows create public hardship without increasing public welfare, governments have both the right and the obligations to regulate, and even to prohibit, them in the public interest.


AGENDA ITEM 6. ADVANCE ECONOMIC DEMOCRACY
The previous elements of the agenda focus on constraining the power of global corporations and finance in order to open economic spaces within which people can create the institutions of economic democracy and a true market economy. In addition to such defensive measures, there is room for public policy to be proactive in promoting human-scale, stakeholder-owned enterprises to displace the subsidized megacorporations whose hold the earlier measures are intended to weaken.
Many such enterprises already exist in the form of family businesses, cooperatives, community-owned businesses, worker-owned enterprises, and others. New ones are being formed each day. Here the need is to acknowledge the central role of these enterprises as the foundation of the new economy and expand the spaces in which they can flourish as the corporate superstructure is cleared away.
We can also salvage much from existing corporate structures by breaking down megacorporations into human-scale, stakeholder-owned firms. The measures already suggested, such as getting corporations out of politics, restoring the integrity of national economic borders, and eliminating corporate welfare, will likely make most megacorporations unprofitable and thereby increase the receptivity of their managers and shareholders to selling off their component businesses to stakeholders at appropriately depreciated prices.
Measures to support stakeholder ownership might include requiring that before a major corporation is allowed to close a plant or undertake a sale or merger of significant assets, the affected workers and community must be given first option to buy out the assets on preferential terms. There might be preferential tax treatment for shareholders who sell their shares to stakeholders under an organized stakeholder buyout program. Similarly, relief on estate taxes might be used to encourage the conversion of larger family-owned corporations to stakeholder ownership on the death of their founders. Procedures could be established for converting worker pension funds into meaningful worker ownership programs. Banks might be given incentives to provide loans on preferential terms to finance stakeholder buyouts. Financing might also be mobilized by what Jeff Gates calls a user fee on personal financial accumulations in excess of $10 million "for the privilege of utilizing the nation's private property tradition as a vehicle for accumulating assets totally disproportionate to any conceivable notion of need." This would be a wealth redistribution initiative addressed directly to the need to redistribute asset ownership.
Efforts to move toward stakeholder ownership must take into account the history of worker ownership schemes that have not led to meaningful worker participation and empowerment. As noted in Chapter 9, many employee stock ownership plans (ESOPs) in the United States place the control of employee shares in the hands of management. The result is a perversion of the concept of stakeholder ownership that gives the titular stakeholder owner less power and say in management than an ordinary absentee owner. Our goal should be exactly the opposite-a much larger and more meaningful role in management by stakeholder owners than by absentee owners.
There is need to reform the legal framework and mechanisms of ESOPs to enable and encourage ESOP owners to engage in real ownership participation. Consideration might also be given to expanding existing employee ownership plans to facilitate broader participation by other nonfinancial stakeholders. Significant investment will be needed in educational programs designed to prepare workers and other stakeholders for meaningful and responsible participation. An imaginative and reinvigorated labor union movement could take the lead in advancing stakeholder ownership and providing educational support as part of an agenda to secure the rights of working people and create people-friendly working environments.
It will be appropriate to supplement these initiatives in support of stakeholder ownership with the rigorous application of antitrust legislation revamped to establish the presumption that smaller is better until proven otherwise. Thus, mergers and acquisitions would be approved only in those rare instances in which their proponents make a compelling case that the combination would significantly advance the public interest. Any firm with more than a 10 percent share in a major market might be required every five years to make a compelling case in a public regulatory hearing as to why it would not be in the public interest to break it up into more human-scale stakeholder-owned firms.
The proposed six-fold agenda attacks the foundation of unaccountable financial and corporate power and opens the way to a radical redistribution of economic wealth and power by returning human rights to living persons. Although the agenda is based on solid, conservative principles of individual responsibility and local control, it does require a frontal assault on the institutional and intellectual underpinnings of our present system of elite privilege. One might for that reason expect a massive backlash against such ideas from within the establishment. But although such a backlash must be expected, the unanimity of the present power holders should not be assumed. There is evidence of deep and growing concern among thoughtful corporate leaders, bankers, and even economists, that they may be sitting atop an increasingly unstable system on the brink of collapse.
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Seeds of a New Citizen-Led Politics
As we look to the formidable task ahead, we should remember that slavery was once legal in the United States, as was discrimination based on race. There was once a Roman Empire, later a Soviet Empire, a Berlin Wall, and until recently, apartheid in South Africa. Corrupt and unjust regimes have a way of falling once ordinary people decide their time has come.
In Silent Coup: Confronting the Big Business Takeover of Canada, Tony Clarke, a leader of Canada's growing citizen movement against corporate rule, points to the need to build a political movement that sets the end of corporate rule as one of its top priorities. Corporate rule is the megaton gorilla in the middle of the room that most discussions of political and economic failure have too long avoided mentioning. Acknowledging the gorilla is an essential step toward action.
The depth and seriousness of the massive dysfunctions of global corporations and the contemporary capitalist economy have only recently gained prominence in the public mind. Already, new initiatives are emerging that draw attention to the need for serious structural mechanisms to hold corporations accountable to the public interest. Indeed, the seeds of a new popular movement toward serious reform are emerging from across the political spectrum. A few of those centered in the United States are mentioned in the following paragraphs. They merit broad and enthusiastic public support from those who are seeking ways to participate in the creation of a post-corporate world.
The New Party, a grassroots citizen-led political party working under the banner of "A Fair Economy. A Real Democracy. A New Party," is systematically building a citizen-led politics around an agenda that centers on strengthening the rights and capacities of people to self-organize democratically in both political and economic affairs. It is racially diverse; works m alliance with labor, community, environmental, feminist student, gay, and lesbian groups; and is built around values rather than personalities. Its strategy is to build political strength by winning local elections while concentrating on problems that can be addressed at the local level. It is taking a serious and systematic approach to building what ~t hopes may one day become a new majority party. As of 1997, 152 of the 231 candidates it had supported in election contests had won their races Roughly half of New Party candidates are women and more than a third are people of color.
A former corporate executive and staunch Republican who held a number of high-level appointments in the Reagan and Bush administrations, Robert Monks has for some years been organizing retirement and other investment funds to exercise their shareholder voting rights to oust and replace complacent managers who take more interest in increasing their personal compensation and entitlements than producing returns for shareholders. Now he is taking on the larger issue of the corporation's social performance. Monks believes that pension funds are the key to increasing corporate responsibility, because they serve a broad clientele with a long-term interest in the health of society as well as the health of the corporations in which their money is invested. He is thus organizing pension funds to take the lead in advancing shareholder resolutions holding corporate executives accountable to shareholders for (1) obeying the law; (2) fully disclosing in their financial reporting what they know or strongly suspect regarding the costs imposed by their firms on the function of society; and (3) minimizing their involvement in political processes. These ideas are radical only in the extent to which they depart from current practice. Ideally, his proposals will become a centerpiece of the socially-responsible-investing movement.
The Politics of Meaning is a grassroots nonparty political movement with chapters in ten major U.S. cities promoting a value-oriented politics based on ideas articulated by Michael Lerner, editor and publisher of Tikkun magazine, and lawyer and educator Peter Gabel. It has announced two major initiatives to increase the integrity of economic life. The first is a model resolution for adoption by city, county, and state governments committing them to take into account the history of social responsibility of corporations, as measured by an "Ethical Impact Report," in awarding public contracts. Its second initiative is a proposed "Social Responsibility Amendment" to the U.S. Constitution. It would require every corporation with annual revenues of $20 million or more to apply for renewal of its charter every twenty years. To secure its charter renewal, the corporation would be required to "prove that it serves the common good, gives its workers substantial power to shape their own conditions of work, and has a history of social responsibility to the communities in which it operates, sells goods, and/or advertises." Each five years the corporation would have to prepare and make public an Ethical Impact Report with one section prepared by management, another by its employees, and another representing community stakeholders.
The Alliance for Democracy is a progressive populist movement with forty-nine local chapters around the United States. Following in the footsteps of the populist movement of the late 1800s, it aims to provide a vehicle for citizen action to end government-corporate collusion against the public interest and expose the antidemocratic nature of rule by global capital. The Alliance is carrying out long-term citizen education on issues of corporate governance and campaigning for legislative action to increase corporate accountability. It is considering a campaign in support of an amendment to the U.S. Constitution to establish that corporations are not persons and not entitled to the rights thereof. Related efforts center on redefining the processes and requirements for corporate chartering and charter revocation. The Alliance is also drafting a model international treaty on the responsibilities of international investors as an alternative to corporate-sponsored agreements aimed at freeing global investors from regulatory restraint.
The international NGO Taskforce on Business and Industry, under the leadership of Jeff Barber of the Integrative Strategies Forum, is a citizens' alliance that functions within the framework of the United Nations Commission on Sustainable Development. It is working to counter initiatives from the corporate sector aimed at keeping issues of corporate accountability off the U.N. agenda. The Taskforce is also helping make visible within the U.N. system the consistent failure of voluntary codes of corporate conduct.
The Program on Corporations, Law, and Democracy (POCLAD), a national alliance of individuals concerned with corporate rights co-directed by Richard Grossman and Ward Morehouse, is spearheading a campaign to restore the concept that corporate charters are limited and revocable and to pursue a wide range of legal initiatives intended to restrict corporate rights and increase corporate accountability.
These and related initiatives too numerous to list are still new and small. Each, however, is growing in size and momentum, carried forward by the concern and commitment of citizens who are fed up with political corruption and the abuse of corporate power. The most prominent barrier to turning the widespread disgust into a powerful political movement is the lack of credible and well-articulated alternatives and of an awakening to the belief that change is possible.
Those to whom a living-world politics offers potential appeal come from all classes and segments of society: working people concerned with job security, respect, and honest pay for honest work; religious groups seeking to bring moral values back into everyday life; members of the women's movement concerned with equity and the balancing of work with family and community life; minority group members who advocate a political and economic agenda that meets the needs of all; members of environmental groups working to restore and protect the health of living systems; peace and human rights groups concerned with equity and the possibility of replacing global competition with global cooperation.
Other constituents for change include small business owners and managers struggling to survive as the backbone of community economies; the growing ranks of ecological economists who are providing intellectual leadership in challenging the hegemony of neoliberal economists; heads of business seeking to make business more responsible and humane; socially responsible investors, community bankers, community development foundation leaders; and the members of groups such as the Social Ventures Network, Business for Social Responsibility, and the World Business Academy.
Then there are the downsized whom capitalism has discarded and the disaffected who remain within the corporate establishment while longing for alternatives. There are the retired executives who know the system from the inside and are deeply concerned for the future they leave their children. There are the youth who are rightly concerned about their own futures. There are the journalists concerned that the integrity of their profession suffers from concentrated corporate control of the media. There are the teachers concerned about the integrity of the educational process as corporate advertising and propaganda infiltrate the classroom. There are the farming households that are committed to stewardship of the earth and the production of healthful foods.
The goals of stakeholder ownership and individual responsibility affirm the values of conservatives. The emphasis on one person, one vote democracy and the recognition of government's dear and necessary role affirm the values of political liberals. It all adds up to a substantial and potentially unstoppable constituency behind the politics of a post-corporate world.
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There is no more powerful expression of a society's values than its economic institutions. In our case, we have created an economy that values money over all else, embraces inequality as if it were a virtue, and is ruthlessly destructive of life. The tragedy is that for most of us the values o global capitalism are not our values.



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