Wisconson – sign of more to come?
Corporate welfare is the worst, no question. Often it is used to prop up buggy whip economy items whose time in the marketplace has passed: like GM in a post-peak oil economy. And QE II was certainly corporate welfare!
If you look at the whole video the palm trees are not in Wisconsin, they are in Sacramento, CA. The full Fox video states this.
There was also an assault in Atlana, GA.
I’m sure there were hard feelings on both sides during Saturday’s protests. What disturbs me is that I understand that the (union) police in WI are siding with the protesters against orders and the police in GA will not allow the assaulted man to press charges.
Okay, back on the ignore list you go along with your other Marxist friends.
thanks rhare, I wasn’t aware there was an ignore function !
First, sorry about bringing up fracking in a thread about the power struggle in Wisconsin between Democrats and Republicans over state unions. Because I’m not an expert I don’t know how pools of fracking chemicals could affect the wooded northwest environment versus the southwest desert. And only a Geologist expert in the rock formations and water tables could determine how safe fracking really is in the Northeast. Sorry also for not believing anyone’s claim to be an expert here.
I think the arguments over state unions are ultimately arguments about power. For example, the argument that state unions could potentially bankrupt the state, even though statistically state workers in both union and non-union states have the same pay and benefits (benefits are better than for private workers but public pay is less).
This could be the beginning of the end for Democrats. First they lose a base of power. Next solutions of more government stimulus and boondogle alternative energy projects fail to bring results. More privatization such as the sale of power stations in the Wisconsin bill will be popular. Doesn’t this mean the end result is a one-party system? Are you sure this is a good thing, considering the difficult decisions to be made?
r, I have worked in oil and gas reservoir engineering for 29 years. I can say that there is really no difference between drilling in the northeast vs the southwest. The formations being fracked are at one to two mile depths in the northeast and two to three miles or more in the southwest. The wells are cased to depths below the deepest fresh water. In the southwest, the contaminated recovered frac water is injected into deep saltwater bearing formations. In the northeast the state regulatory commissions allow the disposal of the water in surface water treatment plants. This is insane and it is the only reason that there is a problem. This is only a problem for the backward corporate regulators in NY and PA. Commercially viable oil and gas production in the US would simply not be possible without hydraulic fracturing. I get very tired of the ignoramuses that think that there is any problem besides surface disposal of wastewater.
I like Rushkoffs work, but he is a better author than speaker. “Life Inc” is a must read book though, he is very good at articulating and explaining current events within a strong and relevant historical context. One thing he said did jump out at me on the video, his reference to unions being the corollary to corporations, and being formed to be a size appropriate counterbalance to the corporations size and strength.
This is exactly so, the aggregation of numbers gives meaningful push back to the dramatic size and inertia of a big corporation. This is an important concept, and largely lost in the current discussion.
He mentions that some unions also get too large, and can become corrupt in and of themselves, which is of course true. What he did not say, which at the risk of stating the obvious, is that this malevolence also besets corporations. An example might be Enron. There are no small number of corrupt corporations, and certainly a larger number of ethical corporations, but the point is you would not create an ideology to destroy the concept of management because of a bad example like Enron, and neither should anyone destroy the concept of unions based on an instance of corruption, yet that is precisely what we see. Beyond this, I am aware of no accusations of union corruption in the Wisconsin case, it is strictly an ideological agenda to crush the right of collective bargaining.
It also strikes me as to how similar Rushkoffs views, or at least his solutions are to what many hold dear on this forum. He makes much of the decentralization movement, small farms, small communities, and even advocates alternate and competing currencies, as well as a general downsizing of our society. He does however remain stringently anti-corporatist, and this mixture of corporatist nihilism with decentralization to small community based governments is interesting, refreshing, and a much needed coupling.
Sure to surprise many of the free market evangelists, this frame of reference is more common than not. I can honestly say I don’t know a single person who would advocate a large, centralized government if critical functions could be realized in other ways. And small, decentralized communities can provide a great deal of very useful organizational input.
To his anti-corporatist bent, Rushkoff also understands very clearly the pitfalls (and axiomatic predilection) for capital to always seek centralization, and consolidation (which are very different). These tendencies are extremely dangerous, and are virtually assured to occur if left to free market forces. This is true of banks, of car manufacturers, of insurance companies, and of course of Wal-Mart. The results are always the same, less choice for the consumer, and more price control (for labor, resources and products) allocated to the corporation. They can and do hire lobbyists to influence registration and tax codes, further enhancing profitability by deliberately stacking the playing field against competition. In our current society, this destabilization is blamed on the government, it is not, it is artifact of the massive financial influence which these entities wield. They in fact become more “statist” than the State itself.
The inability for our society to recognize this rather straightforward (and some would say self evident) set of circumstances is quite troubling. To call attention to this is to be called a Marxist or some such thing, when often, views very similar to Rushkoffs’ are being proposed. What comes out of his book, and of others’ writing in a similar vein, is that – to a point- much of the regulatory response to free market capitalism has been just that, a response. A response to a failure, and usually a pretty bad one. If you study history, and you go back to the turn of the 19th century for example, you see a consistent and successive series of catastrophes which can be clearly identified as intrinsic failures of the very basis of capitalism in general, and free markets in particular. Based on these horrific failures, corrective action was (almost always) undertaken, and like most thing political, there was one part good intentions, and three parts confounding of the corrective principles by specialized interests
Here would be a partial chronology:
The Panic of 1819 was the first major financial crisis in the United States, which occurred during the end of the Era of Good Feelings. The new nation faced a depression in the late 1780s (which led directly to the establishment of the dollar and, perhaps indirectly, to the calls for a Constitutional Convention), and another severe economic downturn in the late 1790s following the Panic of 1797. In those earlier crises, however, the primary cause of economic turmoil originated in the broader Atlantic economy. These crises and others that resulted from international conflicts such as the Embargo Act and War of 1812, caused widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. However, things would change for the US economy after the Second Bank of the United States was founded in 1816, in response to the spread of bank notes across United States from private banks, due to inflation brought on by the debt following the war. In contrast, the causes of the Panic of 1819 largely originated within the U.S. economy. The panic marked the end of the economic expansion that had followed the War of 1812 and ushered in new financial policies that would shape economic development.
The Panic of 1837 was a financial crisis in the United States built on a speculative fever. The end of the Second Bank of the United States had produced a period of runaway inflation, but on May 10, 1837 in New York City, every bank began to accept payment only in specie (gold and silver coinage), forcing a dramatic, deflationary backlash. This was based on the assumption by former president, Andrew Jackson, that government was selling land for state bank notes of questionable value. The Panic was followed by a five-year depression, with the failure of banks and then-record-high unemployment levels.
The Panic of 1857 was a financial panic in the United States caused by the declining international economy and overexpansion of the domestic economy. Beginning in September of 1857, the financial downturn did not last long, however a proper recovery was not seen until the American Civil War. After the failure of Ohio Life Insurance and Trust Company, the financial panic quickly spread as business began to fail, the railroad industry experienced financial declines and hundreds of workers were laid off. Since the years immediately preceding the Panic of 1857 were prosperous, many banks, merchants, and farmers had seized the opportunity to take risks with their investments and as soon as market prices began to fall, they quickly began to experience the effects of financial panic.
The Panic of 1873 surrounded a severe international economic depression in both Europe and the United States that lasted until 1879, and even longer in some countries. It is nowadays referred to as the Depression of 1873 by historians. It was triggered by the fall in demand for silver internationally, which followed Germany’s decision to abandon the silver standard in the wake of the Franco-Prussian war. In 1871 Bismarck extracted a large indemnity in gold from France and ceased minting silver thaler coins. The first symptoms of the crisis were financial failures in the Austro-Hungarian capital, Vienna, which spread to most of Europe and North America by 1873. It was one of a series of economic crises in the 19th and early 20th centuries. In Britain, the result was two decades of stagnation known as the “Long Depression“, which weakened Britain’s economic leadership in the world. In U.S. literature this global event is usually known as “Panic of 1873”, while in Europe it is known as Long Depression or Great Depression.
he 1880s were a period of remarkable economic expansion in the United States, an expansion that eventually became driven by railroad speculation. Railroads were over-built, and many companies continued growth by taking over competitors, endangering their own stability. In addition, many mines were opened (frequently with rail connections), and their products, especially silver, began to flood the market. Farmers, particularly in the Midwest, suffered a series of droughts which left them short of cash to pay their debts, which drove down the value of their land. The Free Silver movement arose, gaining support from farmers (who sought to invigorate the economy and cause inflation, thus allowing them to repay their debt with cheaper dollars) and mining interests (who sought the right to turn silver directly into money). The Sherman Silver Purchase Act of 1890, while falling short of the Free Silver movement’s goals, required the U.S. government to buy millions of ounces of silver (driving up the price of the metal and pleasing silver miners) for coining money (pleasing farmers and others).
One of the first signs of trouble was the bankruptcy of the Philadelphia and Reading Railroad, which had greatly over-extended itself, on February 23, 1893, ten days before Grover Cleveland‘s second inauguration. Upon becoming President, Cleveland dealt directly with the Treasury crisis,  and successfully convinced Congress to repeal the Sherman Silver Purchase Act, which he felt was mainly responsible for the economic crisis.
As concern of the state of the economy worsened, people rushed to withdraw their money from banks and caused bank runs. The credit crunch rippled through the economy. A financial panic in the United Kingdom and a drop in trade in Europe caused foreign investors to sell American stocks to obtain American funds backed by gold. People attempted to redeem silver notes for gold; ultimately the statutory limit for the minimum amount of gold in federal reserves was reached and US notes could no longer be successfully redeemed for gold. Investments during the time of the Panic were heavily financed through bond issues with high interest payments. The National Cordage Company (the most actively traded stock at the time) went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC’s financial distress. The company, a rope manufacturer, had tried to corner the market for imported hemp. As the demand for silver and silver notes fell the price and value of silver dropped. Holders worried about a loss of face value of bonds and many became worthless.
A series of bank failures followed, and the Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). According to high estimates, about 17%-19% of the workforce was unemployed at the Panic’s peak. The huge spike in unemployment, combined with the loss of life savings kept in failed banks, meant that a once-secure middle-class could not meet their mortgage obligations. Many walked away from recently built homes as a result.
And of course the mother of all crashes:
The Panic of 1907, also known as the 1907 Bankers’ Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell close to 50% from its peak the previous year. Panic occurred, as this was during a time of economic recession, and there were numerous runs on banks and trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered into bankruptcy. Primary causes of the run include a retraction of market liquidity by a number of New York City banks and a loss of confidence among depositors, exacerbated by unregulated side bets at bucket shops.
The crisis was triggered by the failed attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York City’s third-largest trust. The collapse of the Knickerbocker spread fear throughout the city’s trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.
The panic may have deepened if not for the intervention of financier J. P. Morgan, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system. At the time, the United States did not have a central bank to inject liquidity back into the market. By November the financial contagion had largely ended, yet a further crisis emerged when a large brokerage firm borrowed heavily using the stock of Tennessee Coal, Iron and Railroad Company (TC&I) as collateral. Collapse of TC&I’s stock price was averted by an emergency takeover by Morgan’s U.S. Steel Corporation—a move approved by anti-monopolist president Theodore Roosevelt. The following year, Senator Nelson W. Aldrich established and chaired a commission to investigate the crisis and propose future solutions, leading to the creation of the Federal Reserve System.
I’ve skipped dozens, they occurred every 5-7 years like clockwork from 1787 to the Great Depression. As in today’s times, the Austrians were in their with their currency explanations, (many of these are eerily familiar to today’s rejoinder) but what was consistently exhibited was the instability and destructive nature of free market capitalism (for most, if your name was JP Morgan it was great times).
These are however, responses, however well meaning and ultimately perverted, they were deemed as necessary to correct something that was fatally broken (and remains so).
Of course the Austrians just explain it all away as currency manipulation, but this was widely rejected by the time of the Great Depression, and the subsequent emergence of Keynesian theory, which took a very different (and quite offensive to the Austrians) direction. The Austrians were however, discredited by the time of the 1929 Crash, the US economy was “beaten sweetly reasonable” and was more than ready to accept another explanation, which Keynes provided.
And now of course we find this theory wholly inadequate, and the search for truth continues anew, with yet more hand waving by the Austrians.
I think Rushkoff has got the right idea, and for the right reasons.
Nice work DK. Deserves to be published somehwere as an article. Does Glenn Beck ever talk about how the Founding Fathers viewed corporations?
Brian Murphy, a history professor at Baruch College in New York, knows a whole lot about corporations in the early days of the American republic. When the Supreme Court struck down restrictions on political spending by corporations in January, the ruling (pdf!) struck him as dramatically at odds with how the Founding Fathers saw the role of the corporation. As he put it in a comment to this blog:
The majority opinion is discovering corporate rights in a Constitution written by people with a dramatically different conception of corporate power and the limits thereof, and an understanding of citizenship as something based on accountability and membership in civil society.
That intrigued me, and an e-mail discussion with Murphy followed. After writing that it would be nice to hear more from historians in today’s economic debates, it seems only right to hand the podium over to a historian, so here’s a slightly condensed version of our virtual chat.
Q: The corporations of the early days of the republic were very different beasts than those of today. They seem to have been creatures of government — or at least of politicians — right?
A: That’s right. Americans inherited the legal form of the corporation from Britain, where it was bestowed as a royal privilege on certain institutions or, more often, used to organize municipal governments. Just after the Revolution, new state legislators had to decide what to do about these charters. They could abolish them entirely, or find a way to democratize them and make them compatible with the spirit of independence and the structure of the federal republic. They chose the latter. So the first American corporations end up being cities and schools, along with some charitable organizations.
We don’t really begin to see economic enterprises chartered as corporations until the 1790s. Some are banks, others are companies that were going to build canals, turnpikes, and bridges — infrastructure projects that states did not have the money to build themselves. Citizens petitioned legislators for a corporate charter, and if a critical mass of political pressure could build in a capital, they got an act of incorporation. It specified their capitalization limitations, limited their lifespan, and dictated the boundaries of their operations and functions.
I should add, too, that as part of this effort to democratize corporations, state charters specifically spelled out how shareholder elections were to be conducted to choose directors. Corporations were supposed to resemble small republics, with directors balancing interests among shareholders. When they printed material or conducted correspondence, it was usually in the name of the “President, Directors, and Shareholders of the X Company.”
A couple months ago the Supreme Court ruled that restricting corporate political spending amounted to restricting free speech. In this view, corporations are pretty much equivalent to people. Would that have seemed reasonable to the Founding Fathers?
In a word, no.
I read this opinion carefully — I’m trained as a historian, not a lawyer. Chief Justice Roberts lays out an ideologically pure view of corporations as associations of citizens — leveling differences between companies, schools and other groups. So in his view Boeing is no different from Harvard, which is no different from the NAACP, or Citizens United, or my local neighborhood civic association. It’s lovely prose, but as a matter of history the majority is simply wrong.
Let me put it this way: the Founders did not confuse Boston’s Sons of Liberty with the British East India Company. They could distinguish among different varieties of association — and they understood that corporate personhood was a legal fiction that was limited to a courtroom. It wasn’t literal. Corporations could not vote or hold office. They held property, and to enable a shifting group of shareholders to hold that property over time and to sue and be sued in court, they were granted this fictive personhood in a limited legal context.
Early Americans had a far more comprehensive and nuanced understanding of corporations than the Court gives them credit for. They were much more comfortable with retaining pre-Revolutionary city or school charters than with creating new corporations that would concentrate economic and political power in potentially unaccountable institutions. When you read Madison in particular, you see that he wasn’t blindly hostile to banks during his fight with Alexander Hamilton over the Bank of the United States. Instead, he’s worried about the unchecked power of accumulations of capital that come with creating a class of bankers.
So even as this generation of Americans became comfortable with the idea of using the corporate form as a way to set priorities and mobilize capital, they did their best to make sure that those institutions were subordinate to elected officials and representative government. They saw corporations as corrupting influences on both the economy at large and on government — that’s why they described the East India Company as imperium in imperio, a sort of “state within a state.” This wasn’t an outcome they were looking to replicate.
What changed in the interim?
Well, we have a Civil War, and to prevent former Confederate states from infringing on the rights of freed slaves, the 14th Amendment extends “equal protection” to all American citizens. Section 1 specifies that this applies to all “persons” and in an 1886 Supreme Court case involving a railroad, the court’s reporter — a former railroad president — writes a note saying that the justices agreed that a corporation qualified as a person. This isn’t in the opinion itself, and some legal historians think it’s a moot issue, but Justices William Douglas and Hugo Black later cite it as a momentous event. Either way, what’s clear is that in the late 19th century, far more equal protection cases were heard by the Supreme Court where corporations were plaintiffs than freedmen. The Court — not the legislatures or the Congress — allowed the personhood distinction to slip away.
Some legal scholars defend the granting of personhood to corporations as a useful innovation — it allows corporations to enter into contracts, for instance. Do they have a point?
Yes. One of the original purposes of corporate charters in the United States was to allow groups of people to file lawsuits, and be sued, in courts. But it wasn’t absolutely necessary — if you and your partners formed a joint-stock company, you created an entity that had bylaws and directors and could enter into contracts and enforce them in courts. What the corporate charter did was grant additional privileges to this basic joint-stock company framework. In the case of state-sanctioned infrastructure projects — turnpikes and bridges — corporations usually held monopolies or exclusive rights of some kind. In the case of early American banks, their biggest privilege was limited liability and favored status as deposit institutions for state revenues, which usually gave them de facto monopolies.
So the corporation doesn’t merely arise because it’s a convenient legal form. Instead, it was a useful tool for capital formation because it carried economic privileges that protected investors and enabled them to externalize all kinds of risks and costs. That’s why charters are difficult to obtain in early America. You have to spend political capital to get one passed through two legislative houses and signed by a governor’s pen.
When general incorporation acts are eventually adopted by states in the early nineteenth century, the states’ intent is to level the playing field and disentangle themselves from the political power — and burden — of choosing among rival groups of charter-seekers. The intent of these laws is therefore the opposite of what the Court asserted in Citizens United. Free incorporation was meant to limit the power of corporations by democratizing the corporate form through dilution. It was supposed to be a giant leap in distinguishing between public and private spheres of activity.
comment to the above article:
I find the views and foresight of the Founding Fathers enlightening.
They foresaw, as early Americans saw, the propensity for unfettered corporations to become imperia in emperiae if I recall my Latin correctly.
This is exactly the case we are facing now, which some define as mutant capitalism, diminishing the original importance of social consciousness in corporate decision making.
A court decision to allow corporations unlimited political spending goes against the principles of the Founding Fathers and early Americans because it implies a risk of a government beholden to corporations instead of ” government of the people, by the people, for the people”. Lincoln quite rightly added only such a government “shall not perish from the earth” and I think we will ignore his words at our peril.
I agree wholeheartedly with Dana Stefanelli therefore that it could lead us to a environment with multiple British East India companies, evidence of a society which most early American settlers tried to escape for a better life. It seems that it only takes 200 years to go full circle, as she states, and I am not sure many are actually aware of this slow and insidious take over.
In my opinion, a radical and thorough review of the principles and thoughts emanating from the Age of Enlightenment, that led to the key documents enshrining the values of the world’s pre eminent democracy needs to be undertaken and taught at educational institutions. This in order that all persons,including legal persons, have a firm “understanding of citizenship as something based on accountability and membership in civil society.” to quote Brian Murphy from his blog.
History has great relevance as long as we devine the intent rather than get hung up on the semantics and environmental clutter linked to any time period. I am glad to soon read a thoughtful discussion on a very important episode in the US and the world’s history and development which we all disregard at our peril.
“Eventually, State governments began to realize the greater corporate revenues by providing more permissive corporate laws. New Jersey was the first state to adopt an “enabling” corporate law, with the goal of attracting more business to the state”.
Looks like the Supreme Courts and State legislatures of the day created the beast, much like the US Congress unleashed the Federal Reserve on the population. The question is why?
Massive transfers of money to the already wealthy – Corporate Welfare destroying America.
Please, do watch this Jon Stewart comedy clip on this page.
Liberal mainstream media, right? A media bought and paid for by liberals? Right? I guess that’s not always true… (It is true sometimes, but it’s also very untrue at other times.)
Maybe, just maybe, it’s really about corporations being in charge.
Maybe, just maybe, it’s really about corporations being in charge.
Coming into this conversation late (hello!) – but I just wanted to say in response to this –
Corporations are made of people. People are the problem, not “corporations.” A corporation is simply an organization of people doing business. That is all.
And it seems to me that certain people on all sides – bottom, top and middle – will take advantage of the system. I know people who have taken advantage of welfare and disability. There are unions that are filled with corrupt people. Then there are the corporations run by corrupt people at the top who take advantage of their workers and take bonuses they don’t deserve.
The common thread here is this: Certain people, no matter what position you put them in, will try to take advantage and try to get the most reward for the least amount of effort. These are people who solely want to TAKE instead of GIVE.
If you can change that element of human nature, then you’ll solve most of the world’s problems.
But see, when I see one side solely blaming unions but ignoring Wall Street corruption, and the other side solely blaming all corporations while ignoring union excess and corruption, I feel we’re totally missing the bigger picture. Both sides are out of control.
We as a species need to evolve emotionally and spiritually. That’s the key. Everything else is simply what side of the tracks you were born on.
Massive transfers of money to the already wealthy – Corporate Welfare destroying America.
Mike I’m confused. Walker says there are many folks in the private sector paying much more than the 5.6% for pensions and 12.8% for health care that the public workers pay, in some cases 2 and 3 times.
Now if these are percentages of earnings then some of the folks in the private sector pay (5.6+12.8) X 3 or 55.2% of earnings for these benefits. Maybe these benefits are earned income that the employer pays directly and so the wager earner gets 155.2% of net income. How are these payments made and are these numbers accurate?