Is the Corporation an Enemy of Democracy? How to Give the Corporation a Little Soul
| Jurisdiction | United States,Federal |
| Publication year | 2018 |
| Citation | Vol. 5 No. 2 |
Is the Corporation an Enemy of Democracy? How to Give the Corporation a Little Soul
Paul J. Zwier
Emory University School of Law
In his masterful book, GREAT TRANSFORMATION,1 Karl Polanyi theorized that laissez faire market capitalism had within it the eventual demise of democracy. He argued, in effect, that the myth free markets would magically most fairly distribute goods and services among its citizens would become a "bad seed," that would grow to choke out democratic decision-making. In other words, once citizens in a democracy lose jobs and pensions, and get pay cuts, and pay ever increasing prices for medical care, they start to see themselves as pawns in a rigged system justified by free market formulas that are hard to understand. Add in further loss of life savings and investments when markets correct, and the combination of theory and loss will make these people to feel that their lives and fortunes were beyond their control. Polanyi predicted that the resulting loss of morale among them would cause them to favor fascism to the slow working of the free market democracies. They would prefer the corruption of oligarchs and dictators who could at least pretend to "do something" to respond to the punishing impact of the soullessness of the market, than to wait for the market to make it all right.
Polanyi wrote before economists argued for government regulations to curb the destructive tendencies on citizens from laissez fare capitalism. Recognizing that markets work best where there is full information and transparency, which almost never seemed to exist in the real world, governments provided different regulations: antitrust regulations, regulations of securities, and created institutions to regulate money supply and interest rates to provide fundamental protections.
Still, the vulnerability of citizens to unregulated market forces did not go away.2 Recent events in the US since WWII tell the story here. First there was Big Oil and the Middle East, and high interest rates, then the Savings & Loan crisis, and then, more recently the Big Banks and mortgaged backed securities crisis in 2006-7. Added to this is the continue escalating costs of medical care.
[Page 144]
What is sometimes overlooked in analysis of these event is the legal structure of the market actors that drive these crises. Private financial institutions, oil companies, and medical care providers, and other major economic actors act as corporations, and therein may lie the problem. After all, as the 18c English Lord Chancellor Thurlow famously wrote, "Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like."3
Though it may seem a bit antiquated to refer to souls, (even in individuals4 ), it is worth remembering what Plato meant when he referred to individuals as having souls. That individuals have souls is evidence both by their continued attempts to create the ideal city state and by their attempts to live virtuous lives.5 The evils and imperfections of the physical world are the result of matter. That matter is evil does not take on really serious proportions, however until Plato introduces his understanding of the nature and destiny of the soul. The soul has fallen into a sensible world, and it must return to the supersensible world if it is to attain it proper destiny. Without a clear understanding of the need for soulful decision-making, the logic of materialism is unrestrained, and hedonistic.6
The legal structure of the corporation was born out of the theories of unregulated capitalism and give permission and emphasis to matter, or profits, for profit's sake. It provides corporate managers the protection of the business judgment rule. Its board's duty of loyalty to the shareholders insures that managers put profits to the shareholders ahead of community responsibilities or manager's virtues or values. In other words, the corporation was given the legal structure that would continue to promote the myth of free market magic--decisions based on profit maximization will best distribute goods and services, but also justified devastating effects from corporate decisions on labor,
[Page 145]
communities, and potentially sowed the seeds of discontent that can threaten democracies.
In the push for profits, greed is good. It is not only the banks that get caught up in the myth, but the even the medical care industry, initially born out of a need to provide patient care, who also loses its way to free market ideologies imbedded in their corporate structures.7 When losses occur only band-aids are applied and then quickly torn off. When people lose their jobs they demand Dodd Frank regulations. When they can't get health care, they demand lower cost options. But democratically elected representatives soon respond to the myths of free market theories and roll these back. No one goes to jail. The distance between rich and poor is exacerbated. When jobs that return after financial downturns are low paying or require skills that are hard to come by, politicians don't blame the free market. Many start to scape goat: anti- immigrant sentiment arises, then there is nationalism, followed by racism. The rise of the global corporate actor acerbates the sense of disconnect between the community and business interests. George Soros is blamed in Hungary. Mexico is blamed in the US. Even when local businesses are squeezed, their loss is explained by the importance of the free market. Jobs are lost and moved over seas. But, the consumer is told he is better off because he can get goods and services at low prices.
Two markets are particularly troubling and are examples of the problem. One, we have already mentioned, health care, and its particular problems in the pricing of pharmaceuticals.8 Price of drugs keeps rising. Martin Shkrieli raises the price of life saving drugs by 3000 percent. Hepatitis C drugs rise. Cancer drug prices deplete the savings of most who have need of them. Such price hikes exacerbate feelings of loss of control. Yet the market tells the public that
[Page 146]
high prices are necessary to discover even better drugs and or a new generation of drugs. It leaves both patients and families baffled by health care and devastated by both the inevitable physical and financial cost of end of life care.
The pharmaceutical market is soulless. The aim of its products is seldom to cure. The manufacturer does better when the patient doesn't get better, but needs the drug to live, and so will pay for the drugs until there is nothing left. Health care costs skyrocket for end of life care, and the fight is often over insurance and coverage, without realizing that the market is simply not capable of regulating drug...
To continue reading
Request your trial