A potential disaster or an opportunity?

In 1776, Adam Smith’s Wealth of Nations was published and the U.S. Declaration of Independence was signed. This was no coincidence: Both were reactions to a widespread economic depression that had begun in the previous decades. England reacted to their economic distress with a series of efforts to raise revenue - the Stamp Act, the Townshend Acts, and the Tea Act (among others); the colonists reacted with the Boston Tea Party and the Declaration of Independence.

There was war and upheaval, and a new nation was born.

Fourscore (80) years later, Abraham Lincoln was a lawyer in private practice, working for the railroads. On August 12, 1857, he was paid $4800 in a check, which he deposited and then converted to cash on August 31. That was fortunate for Lincoln, because just over a month later, in the Great Panic of October, 1857, both the bank and the railroad were “forced to suspend payment.” Of the 66 banks in Illinois, The Central Illinois Gazette (Champagne) reported that by the following April, 27 of them had gone into liquidation. It was a depression so vast that the Chicago Democratic Press declared at its start, the week of Sept. 30, 1857, “The financial pressure now prevailing in the country has no parallel in our business history.”

Soon there was war and terrible upheaval: Four years later the nation was split asunder by the Civil War. A transformed and more powerful federal government emerged, changing forever our government’s role in managing the country.

Seventy-five years later the Great Depression bottomed out, and again: war and upheaval, on a greater scale than ever before, accompanied by dramatic transformations in the role and nature of our federal government.

Today we’re approaching that same interval, and people are nervous about another worldwide economic crisis - with good reason. Even beyond the economic consequences, depressions have led to huge political changes. They have ushered in the rise of fascism, the consolidation of communism, the overthrow of monarchy (the American and French revolutions, for example), and the creation of the new and experimental democratic republic of the United States of America. And they’ve almost always led to major wars, with massive suffering worldwide.

But the crisis may bring the opportunity to transform one of the most important mistakes in American history, with consequences that will last for generations. Just as the Chinese character for “crisis” is made of two parts representing “danger” and “opportunity,” so, too, we now face a two-sides-of-the-coin potential for either a positive or negative transformation of America.

Few doubt we’re sliding into the jaws of a worldwide economic disaster- nations are in revolt against their own leaders and the IMF; stock-market-based savings of the middle class have been wiped out across America, Japan, and Europe, destabilizing the future of a billion people; bankruptcies are at their highest levels since the last Great Depression.

Nor do many doubt that modern civilization teeters at the edge of a worldwide war, both in the Middle East and in Asia, that could be far more calamitous than any preceding it.

But what will come out of this time of danger/opportunity? What sort of future can we fashion? Will we use the crisis to create positive change for our children and grandchildren, or allow forces of oppression to have their way? The oppressors too are fighting for survival, and history shows what lengths they’ll go to.

When Germany faced the last depression, its government turned to a hand-in-glove partnership with corporations (German and American) to solidify its power over its own people and wage war on others. Benito Mussolini first named this new form of corporate/state partnership fascism, referring to the old Roman fascia, or bundle of sticks held together with a rope, that was the symbol of power of the Caesars.

This time, Mussolini said, the bundle was the police and military power of the state combined with the economic power of industry. The fascist system was adopted by Italy, Spain, Japan, and Germany.

Mussolini also noted that there was a more accurate word to describe his political/economic system: “Fascism should more appropriately be called corporatism,” he wrote in the Encyclopedia Italiana, “because it is a merger of state and corporate power.” And indeed, the results of fascism can look very good, at first; in Germany it worked so well that Adolf Hitler was named TIME magazine’s Man of the Year on February 2, 1939.

Democracy is rarer than we think

We think of our civilization as having a democratic heritage, but that’s a mirage. For most of these thousands of years, kings, emperors, Caesars, Popes, and warlords have ruled the lives of ordinary people. Democracy was tried for just 185 years, from 507 BCE to 322 BCE, on the Greek island of Athens; the experiment came to a bloody end with the conquest of the area by warlord Alexander the Great.

The idea lay dormant for two thousand years. The rule of kings and warlords resumed, until the American experiment birthed it again - in the midst of an economic crisis. There have been just three of these 75-year economic cycles in our history, and both of the previous ones threatened the very foundations of human liberty.

Yet as rare as democracy is in history, the concept is immensely compelling to the human spirit, and American expressions of the ideal have been the beacon that has lit the path. From the French Revolution in 1789 to the people’s uprising in Beijing in 1989, people around the world have used language and icons from the pen of Thomas Jefferson and his peers. The Greek-Roman-Masonic-Iroquois-American idea of a government “deriving its just powers from the consent of the governed” is one of the most powerful and timeless ideas in the world - even if we didn’t quite get it right at first (it was only true for propertied white males), and even if it’s been strained since its inception.

On May 29th, 1989, over twenty thousand people gathered around a 37-foot-tall paper mache statue in Beijing’s Tiananmen Square. They placed their lives in danger, but that statue was such a powerful archetypal representation that many were willing to die for it…and some did. They called their statue the “Goddess of Democracy”: it was a scale replica of the Statue of Liberty that stands in New York harbor on Liberty Island.

It is tremendously ironic that today some students of American history assert that our “founding brothers” intended that power belonged to the moneyed elite. Is that a principle for which people would die in Tiananmen Square? No; they died for the goddess of democracy, inscribed “Give me your tired, your poor, your huddled masses yearning to breathe free.” They died for the oppressed, and for their own hopes for personal freedom.

“Corporatism” returns - in people’s clothing

But while much of the world moves to emulate the American experiment, contemporary America is moving in the direction of the corporate-state partnership. Executives from regulated industries are heading up the agencies that regulate them. Another symptom of increasing corporate control of the nation is widespread privatization -- a euphemism for shifting control of a commons resource (like water supplies) from government agencies to corporations. And corporations and their agents have become the largest contributors to politicians, political parties, and so-called “think tanks” which both write and influence legislation.

The distinction between corporate control and human control is absolutely pivotal: governments that derive their just powers from the governed are responsible to citizens and voters, and their agencies are created exclusively to administer and protect the resources of the commons used by citizens and voters. Corporations are responsible only to stockholders and are created exclusively to produce a profit for those stockholders. When aggressive corporations are in seats of power, the results are predictable.

We have recently seen, all too often, the strange fruits borne by placing a corporate sentry where a public guardian should stand: for instance, we now know that the California energy crisis was manipulated into existence by Enron and a few other Texas energy companies. The cost to humans, for this corporate plunder, was horrific; but who was accountable, and who will go on trial? And more to the point, how did it come to be that corporations had the ability to do such things while the public protested vigorously?

I turns out, says the Supreme Court, that they have human rights. In several different decisions, all grounded in an 1886 case, the Court has ruled that corporations are entitled to a voice in Washington, the same as you and me.

But that is a peculiar thought. Our nation is built on equal protection of people (regardless of differences of race, creed, gender, or religion), and corporations are much bigger than people, much more able to influence the government, and don’t have the biological needs and weakness of people. And therein lies the rub - a subtle shift that happened 136 years ago, which put us on this road.

The path from government of, by, and for the people to government of, by, and for the corporations was paved largely by an invented legal premise that corporations are, in fact, people - a premise called “corporate personhood.” This sates not just that people make up a corporation, but that each corporation, when created by the act of incorporation, is a full-grown “person” - separate from the humans who work for it or own stock in it - with all the rights granted to persons by the Bill of Rights.

This idea would be shocking to the Founders of the United States. James Madison, often referred to as “the father of the Constitution,” wrote, “There is an evil which ought to be guarded against in the indefinite accumulation of property from the capacity of holding it in perpetuity by…corporations. The power of all corporations ought to be limited in this respect. The growing wealth acquired by them never fails to be a source of abuses.”

And in a letter to James K. Paulding, 10 March 1817, Madison made absolutely explicit a lifetime of thought on the matter. “Incorporated Companies,” he wrote, “with proper limitations and guards, may in particular cases, be useful, but they are at best a necessary evil only. Monopolies and perpetuities are objects of just abhorrence. The former are unjust to the existing, the latter usurpations on the rights of future generations.”

Yet like democracy itself, the concept of “corporate personhood” hasn’t been around forever; it arrived long after the death of James Madison (and the entire Revolutionary Era generation). It happened in 1886, when the U.S. Supreme Court’s reporter inserted a personal commentary called a headnote into the decision in the case of Santa Clara County v. Union Pacific Railroad.

For decades the court had repeatedly ruled against the doctrine of corporate personhood, and they avoided the issue altogether in the Santa Clara case, but court reporter J.C. Bancroft Davis (a former corporate president) added a note to the case saying that the Chief Justice, Morrison R. Waite, had said that “corporations are persons” who should be granted human rights under the free-the-slaves Fourteenth Amendment.

Davis had recorded a remark made in a side conversation that was never part of a ruling by the Court; he phrased it in a way that implied it was part of the decision, but it wasn’t. To the contrary: in the Library of Congress archives, we found a note in Waite’s handwriting, specifically saying to Davis, “We avoided meeting the constitutional question in the decision.”

Nonetheless, the headnote for that decision was published in 1887 (a year Waite was so ill he rarely showed up in court; he died the next year). Since then corporations have claimed that they are persons - pointing to that decision and its headnote - and, amazingly enough, in most cases the courts have agreed. Many legal scholars think it’s because the courts just didn’t bother to read the case, but instead just read the headnote. But at this point, after a century of acceptance, the misreading has essentially become law, like a common law marriage.

The impact has been almost incalculable. As “persons,” corporations have claimed the First Amendment right of free speech and - even though they can’t vote - they now spend hundreds of millions of dollars to influence elections, prevent regulation of their own industries, and write or block legislation. Before 1886, in most states this was all explicitly against the law. Since 1886, they sued to have these “unequal” restrictions removed.

As a “person,” corporations can (and do) claim the Fourth Amendment right of privacy and prevent government regulators from performing surprise inspections of factories, accounting practices, and workplaces, leading to uncontrolled polluters and hidden accounting crimes. Before 1886 this was also, in most states, explicitly against the law. (Interestingly, corporations have also successfully claimed that when people come to work on their “personal private property,” those people are agreeing to give up their own constitutional rights to privacy, free speech, etc.)

As a “person,” corporations can claim that when a community’s voters pass laws to ban them, those voters are engaging in illegal discrimination and violating the corporation’s “human rights” guaranteed in the Fourteenth Amendment - even if the corporation has been convicted of felonies. Ironically, the laws the corporations overturn are often referred to as “bad boy laws” because they reference past crimes committed by the corporations (which cannot be jailed, so they pay fines instead). The result has been an Alice In Wonderland situation where a corporation convicted of felonies can and does own television stations (GE, for example, has been convicted of felonies but owns many television stations), but when a man in the Midwest was recently convicted of a felony the FCC moved to strip him of his TV station.

The terrible irony is that corporations insist on the protections owed to humans, but not the responsibilities and consequences borne by humans. They don’t have human weaknesses - don’t need fresh water to drink, clean air to breathe, uncontaminated food to eat, and don’t fear imprisonment, cancer, or death. While asserting their own right to privacy protections from government regulators, they claim that workers relinquish nearly all their human rights of free speech, privacy, and freedom from self-incrimination when they enter the “private property” of the workplace.

This is an absolute perversion of the principle cited in the Declaration of Independence, which explicitly states that the government of the United States was created by people and for people, and operates only by consent of the people whom it governs. The Declaration states this in unambiguous terms: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

The result of corporate personhood has been relentless erosion of government’s role as a defender of human rights and of government’s responsibility to respond to the needs of its human citizens. Instead, we’re now seeing a steady insinuation of corporate representatives and those beholden to corporations into legislatures, the judiciary, and even the highest offices in the land.

We stand before an historic opportunity

Economic downturns have historically represented social and political transition points, times of great difficulty but also of great opportunity. The next few years may be one of those rare windows in time.

We have reached the point in the United States where corporatism has nearly triumphed over democracy. If events continue on their current trajectory, the ability of our government to respond to the needs and desires of humans - things like fresh water, clean air, uncontaminated food, independent local media, secure retirement, and accessible medical care - may vanish forever, effectively ending the world’s second experiment with democracy. We will have gone too far down Mussolini’s road, and most likely will encounter similar consequences: a militarized police state, a government unresponsive to its citizens and obsessed with secrecy, a ruling elite drawn from the senior ranks of the nation’s largest corporations, and war.

Alternatively, if we awaken soon and reverse the 1886 mistake that created corporate personhood, it’s still possible we can return to the democratic republican principles that animated Jefferson and brought this nation into being. Our government - elected by human citizen voters - can shake off the past thirty years of exploding corporatism and throw the corporate agents and buyers-of-influence out of the hallowed halls of Congress. We can restore our stolen human rights to humans, and keep corporate activity constrained within the boundaries of that which will help and heal and repair our Earth rather than plunder it.

The path to doing this is straightforward, and being taken now across America. Ten communities in Pennsylvania have passed ordinances denying corporate-owned factory farms the status of persons. The city of Point Arena, California passed a resolution denying corporate personhood, and other communities are considering following their example. Citizens across the nation are looking into the possibility of passing local laws denying corporate personhood, on the hope that one will eventually be brought before the Supreme Court so the Court can explicitly correct its reporter’s 1886 error. Taking another tack, some are suggesting that the Fourteenth Amendment should be re-amended to insert the word “natural” before the word “person,” an important legal distinction that will sweep away a century of legalized corporate excesses and reasserting the primacy of humans.

The concern is not corporations per se; the bludgeon of corporate personhood is rarely used by small or medium companies, only by a handful of the world’s largest, to force their will on governments and communities. This means a very small number of parties (the biggest corporations) are all that stand in the way of reform, which means the corporate personhood doctrine is the weakest link in the chain of corporate power. And it’s a link that can be broken by alert and activist citizens, thus steering America away from Mussolini’s view of government and back on course toward that of our nation’s Founders. What is required is that we undo that 1886 court reporter’s incorrect headnote, by any of the means people are beginning to try.

Once again in America, we must do what Jefferson always hoped we would: “the people, being the only safe depository of power, should exercise in person every function which their qualifications enable them to exercise, consistently with the order and security of society.” We must seize the moment to take back the power, for our children and our children’s children’s children.


cerindependent's picture
cerindependent 10 years 29 weeks ago

First off, I belong to no political party. I would like to see change for the better for everyone in this country. Everyone, includes rich people, poor people, corporations, left wing whackos, right wing wackos, what ever your political bent.

I have been looking into the effect of the flat tax that Russia implemented. This has to be something that left-leaning leaders such as yourself would consider, if only BECAUSE it was tried in what has to argued to be a left-leaning country/society. After all, how could you have more progressive reform that the 1917 revolution in Russia? As a left leaning individual, you owe it to yourself to truly examine the effects the flat tax has had on Russia.

Please at least examine what has happend there. Do not automatically dismiss it because it does not fit into your current world view of what is right and just, from your perspective.

The flat tax is working in Russia. So much so that I am considering moving there with my family. Read the follwing summary below, think about it, and give me an honest, and reasonable response. How can you argue with the success the flat tax has had in Russia? They are your fellow travelers for goodness sakes, and they have seen the light.

Russia went to a flat tax several years, taking the tax
down to a mere 13%. When Medvedev, Putin &
Company made the cut they did so simply to send a
signal to the wealthy that it was far better to pay taxes
at 13% that were going to be strongly enforced than to
face that enforcement. In the past, at much higher
rates, the urge to cheat… measured for the risk vs.
reward in doing so… was high enough that the wealthy
and the middle class cheated whenever and wherever
they could. Tax revenues were anemic. When the flat
tax went into effect, after a short lag, revenues
exploded higher, with the government at one time
suggesting that revenues were so high and the paying
down of sovereign debt was so swift that the Central
Bank feared that all of the government’s debt would be
retired making open market operations problematic at
best. ‘Tis an outcome devoutly to be wished.
Now, Russia has announced only last week at the
international economics symposium in St. Petersburg
during the “White Nights” celebration that it was ending
any and all capital gains taxes. The new “non-tax’ will
go into effect, we are told, as of January 1st of 2011.
We can only imagine that Russia’s capital markets will
explode to the upside next year, and that most
certainly their markets will rise relative to almost any
other market anywhere in Europe and North America.
We shall have no choice but to own Russian shares
while selling others short against it. Common sense
shall mandate that we do so.
Is this not an interesting world in which we live where
Russia has a flat tax and no capital gains where we, in
the US, are allowing taxes to rise given the expiration
of the Bush tax cuts, and we are debating increasing
capital gains taxes. Incredible; truly, and really

Dear Thom, this was an excerpt from the Gartman Letter from yesterday Friday, June 24.

I'd love to see how you can argu against a flat tax now, although, I am sure you will. Your mind is made up. No need to bother you with the facts.

And I am neigher left wing or right wing. If i had a party, it would be called, "The Leave Me Alone Party." or the "Hermit Party"... If I had my way, I'd live like Thoreau in Walden Pond. So you can't characterize me with one of your broad brush generalizations.

I've listened to your show. You are very intelligent, but your agenda is skewed to attract an audience so you can sell adds. We all have to make a living, and I admire the fact that you have carved out your own niche. I really do... I just can't wait to see how you will argue against a flat tax in the US, even after you have evidence of how it has had such benefits in Russia. Of all places.

Best to you , Sir.

infomess 10 years 22 weeks ago

A flat tax is an argument and benefit for the very wealthy. Russia has a history of waking up and throwing the rich on their butts when they absolutely have had it. A flat tax is really regressive with the burden placed on the poor. Hey, it's a great advantage for the the rich and they like it for a reason.

I have had friends that visited Russia and warned me of its shortcomings and read certain articles that make me believe it can be a bit worrysome over there to say the least.

Good luck if you move there and watch your wallet.

Add comment

Login or register to post comments

The inescapable truth about rightwing billionaires and Trump

Thom plus logo Hint: It's all about the money

Some very wealthy people helped put Donald Trump in office, and have continued to subsidize the Trump presidency and those Republicans who enable it.
From Unequal Protection, 2nd Edition:
"Hartmann combines a remarkable piece of historical research with a brilliant literary style to tell the grand story of corporate corruption and its consequences for society with the force and readability of a great novel."
David C. Korten, author of When Corporations Rule the World and Agenda for A New Economy
From The Thom Hartmann Reader:
"Through compelling personal stories, Hartmann presents a dramatic and deeply disturbing picture of humans as a profoundly troubled species. Hope lies in his inspiring vision of our enormous unrealized potential and his description of the path to its realization."
David Korten, author of Agenda for a New Economy, The Great Turning, and When Corporations Rule the World
From Screwed:
"Once again, Thom Hartmann hits the bull’s eye with a much needed exposé of the so-called ‘free market.’ Anyone concerned about the future of our nation needs to read Screwed now."
Michael Toms, Founding President, New Dimensions World Broadcasting Network and author of A Time For Choices: Deep Dialogues for Deep Democracy