REGULATIONS DO NOT PREVENT CORPORATIST CRISES

   A huge chorus is always clamoring for new regulations on corporations. Regulations, for many in politics, the media, and academia seem to have become the silver bullet that will not only "solve" the omnipresent economic crisis here in the U.S. but will also prevent future meltdowns. Many labor leaders and voices on the left agree. 

  FDR advocated his New Deal regulations as a solution in the 1930s. But his regulations failed to get the U.S out of the Great Depression and they obviously failed to prevent subsequent economic crises. Today's depression is the second major crash in 75 years, while nearly a dozen other, less severe downturns have occurred since the Great Depression. Regulations have repeatedly proved incapable of ending American capitalism's inherent instability, its proclivity to boom and bust cycles with huge social costs. 

   Economic regulations fail because of two fatal flaws. First, they 
may be poorly enforced or simply ignored. When political conditions permit leaders to be selected and/or controlled by the enemies of regulation,  they can block the state's enforcement of regulations.  Second, even when politicians try to enforce regulations on corporations, the rich and powerful corporations evade, weaken, ignore, or eliminate most of them. It is the organization of American corporations that explains both flaws and their repeated sabotage of regulations.

   Counter-recessionary regulations always more or less constrain corporations' freedom of action in pursuing market share and profits. However, past regulations stopped short of changing the basic structure of capitalist corporations. Obama certainly isn't going to tinker with the basic structure of American corporations. Thus, the vast majority of people participating in corporate enterprises, the workers, have always exercised little or no control over the decisions governing what the enterprises would produce, and what would be done with the resulting profits. 

   Those decisions were always made by each corporation's board of directors, usually 15 or 20 white men chosen by and responsible to the corporation's MAJOR shareholders. Shareholding in the US is highly concentrated. Federal Reserve data show that the vast majority of US families own either no shares or so small a portion of outstanding shares that they exercise no influence over the selection or the decisions of boards of directors.

   Inside corporate enterprises, the huge majority --- the workers --- depends on the jobs, incomes, and working conditions determined by the tiny minority, the board of directors. While the whopping tenth of US workers who are unionized wield some limited influence over boards of directors, most US workers cannot participate in deciding what, how, and where of production or how corporate profits are used.  The corporate organization is undemocratic.  This lack of internal democracy dooms counter-recessionary regulations to failure. 

   From FDR to Obama, capitalist crashes brought state interventions into the economy that always included new or increased regulations. Immediately after (or sometimes during) every phase of regulation, boards of directors and major shareholders and MAJOR SHAREHOLDERS of many US corporations began to undermine that regulation. They used corporate profits to pay for lobbying, publicity and mass media campaigns, "think tank research," and so on.  By shaping public opinion and academic understanding, they bribed politicians to ignore or minimally enforce the regulations. At the same time, they hired lawyers, accountants, and economists to evade the regulations and public relations experts to mask or justify their evasion. When politically feasible, their opposition to regulation ramped up another notch. They got Congress, federal agencies, and state and local governments to first weaken and eventually eliminate many regulations. 

   Corporate boards of directors have every incentive to undermine regulations that limit their profits and market share. MAJOR SHAREHOLDERS demand that and reward them accordingly. Boards of directors have the corporate profits needed to finance the defeat of unwanted regulations. The capitalist structure of corporations thus provided both the incentive and the means for corporations' boards of directors to undermine FRD's New Deal regulations. FDRs tragic legacy was failing to federalize the incorporation of business enterprises and take such power away from states such as Delaware. If we say "shame on them" for undermining regulations imposed after capitalism's 1930s crash, we will have to say "shame on us" for continuing to allow the organizational structure of American corporations.