Corporations Are Not Human : Not Even Close ----Episode 5

                         HOLDING CORPORATIONS AT BAY 

    Much of America's history has been shaped by a long and continuing struggle for sovereignty between people and corporations. Although there have been similar struggles in other Western democracies, the U.S. experience assumes special importance because of the dominant role the United States has had in shaping the institutions of the world economy since the end of World War I. This global role became increasingly self-conscious and assertive when the United State emerged from World War II as the world's most powerful nation. Even as its economic power declined compared with that of Japan and Europe, the United States remained the dominant player in shaping international institutions such as the United Nations, the International Monetary Fund, the World Bank, and the World Trade Organization. As we shall see later, corporate interests have figured prominently in how the United States has defined its national interest in relation to these and other global institutions. Thus the history of corporate power in the United States is more than purely national significance. America was born of a revolution against the abusive power of the British kings and the chartered corporations used by the crown to maintain control over colonial economies. 
   The English Parliament, which during the seventeenth and eighteenth centuries was made up of wealthy landowners, merchants, and manufacturers passed many laws intended to protect and extend their private monopoly interests. One set of laws, for example, required that all goods imported to the colonies from Europe and Asia first pass through England. Similarly, specified products exported from the colonies also had to be sent first to England. The Navigation Acts required that all goods shipped to or from the colonies be carried on English or colonial ships manned by English or colonial crews. Furthermore, although they had the necessary raw materials, the colonists were forbidden to produce their own caps, hats, and woolen and iron goods. Raw materials were shipped from the colonies to England for manufacture, and the finished products were returned to the colonies.
   
              Adam Smith Strongly Condemned Corporations 

   The practices mentioned above were strongly condemned by Adam Smith in The Wealth of Nations.( 1776 ) Smith saw corporations, much as he saw governments, as instruments for suppressing the beneficial competitive forces of the market. His condemnation of corporations was uncompromising. He specifically mentioned them twelve times in his classic thesis, and not once did he tribute any favorable quality to them. Typical is his observation that : "It is to prevent this reduction of price, and consequently of wages and profit, by restraining that free competition which would most certainly occasion it, that all corporations, and the greater part of corporation law, have been established." 
   It is noteworthy that the publication of The Wealth of Nations and the signing of the U.S. Declaration of Independence both occurred in 1776. Each was, in its way, a revolutionary manifesto challenging the abusive control of markets to capture unearned profits and inhibit local enterprise. Smith and the American colonists shared a deep suspicion of both state and corporate power.  The U.S. Constitution instituted the separation of governmental powers to create a system of checks and balances that was carefully crafted to limit opportunities for the abuse of state power. It makes no mention of corporations, which suggests that those who framed it did not foresee or intend that corporations would have a consequential role in the affairs of the new nation.
   In the young American republic, there was little sense that corporations were either inevitable or necessary. Family farms and businesses were the mainstay of the economy, much in the spirit of Adam Smith's ideal, although neighborhood shops, cooperatives, and worker-owned enterprises were also common. This was consistent with a prevailing belief in the importance of keeping investment and production decisions LOCAL and DEMOCRATIC. 
   The corporations that were chartered were kept under watchful citizen and governmental control. The power to issue corporate charters was retained by the individual states rather than being given to the federal government so that it would remain as close as possible to citizen control. Many provisions were included in corporate charters and related laws that limited use of the corporate vehicle to amass excessive personal power. The early charters were limited to a fixed number of years and required that the corporation be dissolved if the charter were not renewed. Generally, the corporate charter set limits on the corporation's borrowing, ownership of land, and sometimes even its profits. Members of the corporation were liable in their personal capacities for all debts incurred by the corporation during their period of membership.  Large and small investors had equal voting rights, and interlocking directorates were outlawed. Furthermore, a corporation was limited to conducting only those business activities specifically authorized in its charter. Charters often included revocation clauses. State legislators maintained the sovereign right to withdraw the charter of any corporation that in their judgment failed to serve the public interest, and they kept close watch on corporate affairs. By 1800, only some 200 corporate charters had been granted by the states. 

  In the nineteenth century an active legal struggle emerged between corporations and civil society regarding the right of the people, through their state governments, to revoke or amend corporate charters. Action by state legislators to amend, revoke, or simply fail to renew corporate charters was fairly common throughout the first half of the century. However, this right came under attack in 1819 when New Hampshire attempted to revoke the charter issued to Dartmouth College by King George III before U.S. independence. The Supreme Court overruled the revocation on the ground that the charter contained no reservation or revocation clause. 
   Outraged citizens, who saw this decision as an attack on state sovereignty, insisted that a distinction be made between a corporation and the property rights of an individual. They argued that corporations were created not by birth but by the pleasure of state legislatures to serve a public good. Corporations were therefore public, not private, bodies, and elected state legislators had an absolute legal right to amend or repeal their charters at will.  The public outcry led to a significant strengthening of the legal powers of the states to oversee corporate affairs. 
   As late as 1885, in Dodge v. Woolsey, the Supreme Court affirmed that the Constitution confers no inalienable rights on a corporation, ruling that the people have not 

   released their power over the artificial bodies which originate under the legislation of their representatives. . . Combinations of classes in society. . . united by the bond of a corporate spirit. . . unquestionably desire limitations upon the sovereignty of the people . . . But the framers of the Constitution were imbued with no desire to call into existence such combinations.