The Corporation Serves the State ... Not The Other Way Around

Public Discourse on Capitalism and Greed Begs a History Lesson on State & Corporate Relations

Guest Contributor Riff

by Alton Drew | originally altondrew | @altondrew

During recent debates among candidates for the 2020 Democratic presidential nomination, a number of candidates - including Cory Booker of New Jersey and Elizabeth Warren of Massachusetts - criticized corporations operating in various industries for the greed they perpetrate on Americans. From internet to health care to energy companies, the candidates took issue with predatory prices for health care, the anti-trust implications of large internet companies, and the tax breaks companies receive while rank and file Americans struggle.

In short, corporations should be feared … or should they?

History of the Fear

As usual, when selling a fear narrative it is important to leave out the education component from any assertion that there is a bogey man to be afraid of.  What consumers of the political narrative should be asking is …

“What is a corporation?” 

“Why should I be afraid of it?”

A corporation is an extension of the State.  A corporation’s purpose is to extract resources, process them, convert them into goods and services, and distribute those goods and services using price as the allocating mechanism in order to generate tax income for the state and private income or profit for itself.

To varying degrees this has been the corporation’s role for the last 400 years.  Americans have been so programmed to believe that America was discovered by adventurous Europeans that they overlook or are simply ignorant about its corporate beginnings.

Prior to the 17th century, corporations, originally not-for-profits that received charters from the British monarch, were established to meet some public works need with their duties overseen by government. During the 17th and into the early 18th century, colonial corporations had the primary responsibility of expanding the British monarch’s empire, creating monopolies and controlling trade.  These companies bought or extracted raw resources, sent then to England for manufacture, and then imported the manufactured goods into the colonies for purchase by the colonists.

Americans have forgotten (if they ever knew) that although their ancestors were miffed by the trade monopolies held by these companies and the economic oppression they contributed to, post-American Revolution corporations were the structure that drove the private investment into the American industrial revolution.

The problem for American government by the 1820s and 1830s - like the monster from Mary Shelley‘s Frankenstein: or, The Prometheus Man - was that the corporation sought their own version of self-awareness and increased freedom from the strictures of the State. 

It has been a back of forth battle between the State and the corporation, with the State taking a more interventionist approach by stepping up regulation in the areas of banking, energy, securities, and telecommunications.  Corporations had been created to carry out the State’s bidding in maximizing America’s resources.  Intervention via regulation is indication that the State fears that it may lose control over the corporate power it relies on to administer the Nation’s resources.

Spreading the Fear to the Consumer

It wouldn’t be good social policy for the State to drop the hammer on corporation monopoly over resources if the sentiment of the public were not incorporated in its policy actions.  The optics of an arbitrary application of administrative power does not fare well in a democracy.  There must be an excuse, and in a democracy the excuse should include a discussion on the harms an unregulated corporation could have on the consumer.

Americans may be uncomfortable with the ability of corporations to engage in predatory pricing, but they have a bigger fear of a government that exercises power on a whim.  One can always substitute the product of a corporation with another product, but one cannot easily get away from a State with a monopoly on force.

To stem the fear of arbitrary and capricious application of force, the State gives the impression of fairness and due process in its rule-making by asking the public to comment on or, when applicable to the decision, to vote.  The State gets the public to buy into regulation of the corporation by painting the corporation as harmful to the public’s interest. It makes the corporation the bogey man; the entity that transfers wealth from the consumer to its treasury unjustly via high prices or non-disclosure of prices, terms, and conditions.

Conclusion: To Serve the State

By substituting the fear of consumer abuse for the fear of reduced power over the Frankenstein monster, the State accomplishes two goals. First, it keeps the public in check by holding itself out as a consumer protector. Second, it reminds the corporation of its role in the American political economy: that the corporation serves the State and not the other way around.