Tuesday January 13, 2004

Modern corporation: more like a mini-state
 

Solomon Kebede

Continued from last week
No one on the right or the left suggests that everyone should decide every important question that might affect him or her. Clearly, in matters of fundamental import, where people's lives are affected in vital ways, we want to err on the side of self-determination. But we can and should opt to let others decide questions in areas where the requirements of technical expertise are high and the costs of delegation low. We ask government to inspect restaurant kitchens because we're not prepared or particularly eager to do it ourselves. We don't think we lose much autonomy or liberty by delegating this power to public agents. At the same time, the market alternative - waiting to see if anyone dies at our local eatery - is simply untenable. The same sort of calculation could be applied in a host of other areas, reducing both the scope of market transactions and the information costs associated with making them.
Corporations cause all sorts of harm too, unless they are closely supervised. Subject to elaborate personnel, management and surveillance systems designed to control their behavior and maximize their productivity, workers in large companies feel the impact on a daily basis. They spend half or more of their working hours governed by a system of private governance that would have been the envy of medieval princes.
One in four large employers admit to surreptitious spying on their employees with one or another form of electronic surveillance. Nearly three quarters of large companies subject employees to random urine tests. Employers eaves drop on employee conversations, read workers' email, and pin "active badges" on them so that they can electronically monitor their movements at the workplace. Jobs tasks are broken down into the smallest possible, easily repeatable, readily monitored unit to assure maximum productivity.
All the while, workers remain vulnerable to the profit-maximizing strategies and even financial chicanery of top management. Victimized by downsizing or fraudulent accounting schemes designed to increase stock prices and executive compensation, all but the most indispensable employees have little recourse. In some traditional industries, like meatpacking and food processing, the work is simultaneously low paid, hazardous, and insecure.
But even "new economy" companies abuse their workers, treating all but the most valuable as interchangeable commodities. The determined effort by high tech companies like Microsoft to hire part-time, contingent labor rather than full-time workers, and the technology sector's infamous and largely successful resistance to unions, threatens to turn millions of white collar employees into a 21st century proletariat.
Recent revelations about corporate criminality in the energy and telecommunications industries, while admittedly spectacular, illustrate just how much harm companies can do to their workers' financial well being. Enron fired 4,200 workers; WorldCom let 17,000 go. No doubt, many of these employees have already found other jobs. But what about their savings and pension funds, and the workers whose savings and pension funds were invested in these companies?
Thanks to Enron's and WorldCom's creative accounting, public employee pension funds lost at least $1.5 billion in the Enron debacle alone. AFL-CIO pension funds lost $3.3 billion in the two bankruptcies combined. Keep in mind the reality behind the figures. While a few executives may spend a bit of time in prison, and be forced to sell a house or two, as the Lays complained after the Enron collapse. For the next several decades, millions of people will be retiring on less, often substantially less, than they had planned, or working far into their senior years to close the gap.
The impact of corporate behavior on the communities that shelter them can also be devastating. Business boosters rightly stress the positive income and employment effects of corporate investment; these can be quite significant. But there are often considerable costs. Increasingly, companies demand all sorts of financial incentives (including lower taxes, less stringent environmental regulations, and substantial subsidies) from state and local governments before they will commit to a particular locale. But even these commitments can prove ephemeral because most corporations are prepared to fly when they see a better opportunity.
To no avail, Michigan gave General Motors $13.5 million in tax abatements to maintain its Ypsilanti assembly plant in the 1980s. A decade later, the company closed the plant and shipped the jobs to Arlington, Texas, citing lower costs and greater productivity. Michigan was left with a gaping whole in its tax base and little else. Decisions such as these are doubly devastating because the local community first gives up potential tax revenues and then loses the jobs and incomes it sought to secure with those costly concessions.
Recently, corporate flight has been taken to extremes, with American companies shifting their titular headquarters to offshore tax havens to avoid any financial obligations in the U.S. - despite maintaining domestic production and distribution facilities. Though much publicized, the 2002 effort of Stanley- Works, a billion dollar tool and hardware manufacturer incorporated in Connecticut since 1852, to reincorporate in Bermuda was entirely unexceptional. Stanley Works backed off after intense public scrutiny, but more than a dozen U.S. companies, including ones like Ingersoll-Rand, which earn millions from U.S. government contracts, remain incorporated in foreign tax havens, avoiding U.S. taxes. In 2003, Democratic efforts to force these American companies to pay their fair share of American taxes were killed by the same hyperpatriotic House Republicans that made their cafeteria serve "freedom" fries so that they could avoid having to even say the word "French."
Government could do more to control corporate power, but it's fighting an uphill battle. Old-style corruption plays a part in bending politicians to the will of the firm. Despite seemingly endless efforts to regulate them, campaign contributions remain a powerful source of political influence at all levels of government, enabling the financially well endowed to buy private access to decision makers. But corporate political power also derives from what Charles Lindblom has called business' "privileged position."
By this, Lindblom means the great deference we as a society pay to corporations, their top managers, and their big stockholders owing to the vital role these firms play in the U.S. economy. We have little choice in the matter, Lindblom says, because we are so dependent on them to create jobs and pay wages and salaries. Unless government plays a more active and directive role in stimulating and even organizing economic activity, Americans will have to continue to pay attention to the interests and preferences of these behemoths, even as they seduce and abandon us.
In fact, the U.S. government tends to treat the CEO's of the Fortune 500 as it treats other political leaders, as coequals, seeking their counsel, listening to their opinions, and respecting their turf. And because we defer to them, we tend not to ask hard questions about whether or not corporations really live up to the promises made by and for them. Apart from the occasional, egregious scandal, we simply do not pay close attention to the manifold ways in which corporations disrupt and injure individuals and communities.
Finally, corporate power has helped create what can only be called a corporate culture, which steadily debases public discourse by translating all questions of value into economic terms, encouraging Americans to equate consumer satisfaction with the public interest. However pleasurable this might seem in the moment, the impact on political life has been devastating, as people withdraw from public activities that are vital to democratic citizenship - walking the mall rather than their precincts, window shopping rather than knocking on neighbor's doors.
But everything we know about the nature of democracy suggests that it cannot survive without a lively, open, public discourse in which people confront each other's opinions in the course of talking about how to organize the things they have in common. Yet corporate America is replacing public debate with a massive and continuous campaign to manipulate consumer demand; to sell people things they didn't know they wanted, let alone needed; and to convince Americans that personal satisfaction can only be achieved by buying things. Indeed, the very idea that people have other interests and that they could live other kinds of lives is obscured by the relentless effort to market everything, whether over the nation's airwaves, in its public spaces, or on the Internet, Corporate apologists respond in all sorts of ways to these criticisms.
The firm, they say, is only a passive conduit, satisfying people's wants within the limits imposed by consumer demand and the costs of production and distribution. Or, as Murray Weidenbaum, chair of the Council of Economic Advisors during Ronald Reagan's first term, has put it, corporations "serve the unappreciated and involuntary role of proxy for the overall consumer interest. Market competition, surveillance by boards of directors, the need to raise investment capital, the judgments of large and small investors - these forces keep managers in check.
Supporters also remind us that corporations bestow enormous benefits on society, including a cornucopia of previously unimagined delights. If companies make employees toe the line, they also offer them quite a bit in return, paying people well for the time spent at work. In fact, corporate life is far less coercive or all encompassing than its critics imagine. Because corporations, unlike governments, cannot command our obedience, people have choices. They can opt out of the corporate world; they don't have to work for the Gap or IBM; or buy name-brand jeans; or worry about the kind of car they drive.
Workers can change jobs. Investors can sell their stock in one company and invest in another, or buy bonds, or invest in "socially responsible" mutual funds. People can live in communes, or monasteries, or in the backwoods of Wyoming. There is, in other words, choice. But these rebuttals do not stand up to close scrutiny. The modern corporation is not a direct descendant of Smith's capitalist entrepreneur. It is not only different in size but in power and motivation.
Rather, the modern corporation is more like a mini-state (sometimes not so mini) than a mom-and-pop affair, exercising power over workers, employees, consumers, local communities, national governments and global culture in ways that would have likely sent Smith reeling. Corporate defenders are also far too cavalier about what unregulated markets and unrestrained corporate power puts at risk. The panoply of consumer, environmental and workplace hazards are minimized or dismissed as second order problems that can easily be remedied, ignoring the fact that these remedies are only in place because people have used government to impose controls on what corporations do.
Finally, just because there are markets, doesn't mean that there is always real choice. Workers in particular have far fewer options than the corporation's defenders suggest. The existence of a job market doesn't mean that most people are free to move about at will, taking and leaving jobs that fail to satisfy. In fact, very few workers behave in the way that the market model imagines, picking up and moving from town to town, or state-to-state, in response to marginally better employment offers.
To the contrary, to the extent that they have settled lives, most people's geographic mobility is quite limited. And there's no guarantee that having changed jobs, a worker will find him or herself in a substantially better situation. Trained in the same business schools, enamored of the same management theories, most employers run their workplaces in very similar ways.

By solomonkebede@yahoo.com