The Corporatocracy

Written by Barry Beck

Here are some thoughts about abuses concerning the economy and how we have moved toward Corporatism, a form of government of, by, and for high-income people. The trends over the last thirty years have allowed presidents and Congress to turn over the creation and destruction of laws to corporate lobbyists. It has caused a situation where representatives from corporations write and approve every new law, even the ones that regulate their own industry. This has encouraged more downsizing (layoffs), outsourcing of jobs, privatization, deregulation of industries, consolidations, mergers until a few companies dominate each business sector that is deregulated. Added to this came the weakening of antitrust and banking rules and contracting out services that should be regulated.

At the same time, antitrust regulations were repealed and media conglomerates have merged into five to seven major companies (for example, GE (NBC), Disney (ABC), NewsCorp (Fox), Viacom (CBS), AOL/Time Warner (CNN.) If we include two more major companies, we have virtually every major movie studio, record company, internet outlet, magazine, and telephone company. (In other words, most communication.)

These tendencies starting during the Reagan Administration, only slowed slightly when Clinton was president or Democrats controlled Congress, but has never stopped during the last thirty years, privatizing even aspects of the military, emergency services and services that should not be deregulated and split. Conservative commentators have made it seem like privatization, the weakening of unions, and deregulation have been beneficial to the nation, but it has only opened the door to gross incompetence, negligence, and greed when an industry is allowed to go in this direction. It can hardly be called capitalism. It is corporatism. It is more like socialism... but only for extremely high-income people and large corporations and conglomerates.

The privatization of everything has so run amok that even the military (through outside and unregulated contractors) and Medicare (and Social Security if Republicans had their way) are becoming privatized with less and less regulation, oversight, and accountability.

Philosophically these ideas derive from the political theories of Leo Strauss and the economic theories of Friedrich A. Hayek and Milton Friedman (sometimes called the Austrian School or the University of Chicago school of economics.) It is a belief that the only role of government is to protect property and enforce contracts. Trickle-down economics is the belief that if the rich are allowed to get richer, they will invest and grow the economy with mazimum efficiency and the whole society will benefit. That might be a reasonable idea, except it never seems to work that way. Stock prices have usually been high; that used to be an leading indicator that the entire society is benefiting. But today, the stock price can be high, the company executives can lead a company to failure, the executives and CEO are paid a fortune, employees are laid off, and jobs are sent oversees where wages are minimal. This trend was reinforced by NAFTA and free trade. Deregulation and privatization presupposes that the market will cause CEO's self-interest to lead to the public interest, but the failure of voluntary compliance and self-policing with lobbyists writing the very legislation that regulates them has caused much harm. During WWII, corporations paid 50 percent of war, today it's 7 percent. CEO to worker pay ratio in 1980 was 40:1; now it's 350:1. In 2006, the Congress passed major legislation on bankruptcy, credit, finance, and revamped Medicare. These changes benefit the corporation and not the citizen.

When a government's leaders or businesses routinely seek out private sector individuals or businesses and, in exchange for political support, bestow favors on them, the society is said to be in the grip of crony capitalism. The favors generally take the form of monopoly access to certain markets, preferred access to sales of government assets, and special access to those in power.

Theodore Roosevelt proclaimed that the New Nationalism "maintains that every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require it."

Adam Smith's The Wealth of Nations is somewhat misunderstood. The invisible hand actually refers to the unintended consequences of too much protectionism. Adam Smith was not for unregulated laissez-faire markets, but maintained there must be some regulation of trade and some provision set aside by society for the poor, sick, and aged. He also believed that though the state (government, sovereign, commonwealth) is very inept at regulating trade, it is also true that tradesmen (corporations) are also bad at running (regulating) government and writing laws. He advocated a social policy (that people should act in their own self interest), and described an observed economic reality (that people do act in their own interest). Smith was not claiming that all self-interest has beneficial effects on the community. He did not argue that self-interest is always good; he merely argued against the view that self-interest is necessarily bad.


Articles and books by Naomi Klein:
Ownership Society
Baghdad: Year Zero
No Logo: Taking Aim at the Brand Bullies
The Shock Doctrine: The Rise of Disaster Capitalism

Other resources:

Why the Media Can Legally Lie
When Corporations Rule the World
- David C. Korten
Neo Classical and Austrian Economics
- Peter J. Boettke
Why I Am Not an Austrian Economist
- Bryan Caplan
The Corporation - a documentary
Confessions of an Economic Hit Man - John Perkins
A Game as Old as Empire - introduction by John Perkins
Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism - Ha-Joon Chang
FISA and the Telecoms - Keith Olbermann
Republican Gomorrah - Max Blumenthal

William Rivers Pitt has written an excellent summary detailing how, in spite of the grave and appropriate mistrust that early Americans had of corporate power, corporations (with the help of the 1886 Supreme Court decision granting that corporations are persons) become supercitizens, whose enormous financial resources and resulting ability to manipulate policy has resulted in a government overwhelmingly aimed at serving their interests, rather than ours.

Here's a quick précis. For the first 100 years or so of U.S. independence, and reflecting the U.S. experience of large British corporations (such as the British East India Company) as the henchmen for British rule, U.S. corporations were appropriately regulated and easily dismantled if they became a threat to the public trust. Then came the Civil War, which allowed the profits and power of corporations to mushroom. This power enabled corporations to buy legislatures and courts, and soon thereafter the Corporate Supercitizen was born, when corporations seized upon the 14th amendment to the Constitution (which was intended to ensure the rights of freed slaves to legal due process) as a means of gaining legal recognition as persons.

With the carte blanche this protection allowed, the power and influence of corporations exploded, in an effective coup d'état. WWII and the impending Cold War led to the entrenchment of corporate power, and its further insinuation into government, via the permanent Military-Industrial Complex, which Eisenhower identified as a threat to democratic sovereignty in his 1961 farewell address. Thanks to the Cold War, along with Korea and Vietnam (and by this time, it becomes hard to see whether wars are driving corporate power, or vice versa) and the concomitant untold billions spent on expanding the U.S. military, coupled with the rampant deregulation of corporations initiated during Reagan's administration and which continues apace today, "what can only be described as total victory over democracy was achieved by the corporate powers-that-be"---a victory that the never-ending 'War on Terror' in place will serve to solidify, in perpetuity, as the U.S. becomes a government run of, by, and for Corporate Supercitizens.

This is quite frightening, and rings very true as one---perhaps the most----foundational driving problematic in the calculus of U.S. economics, politics, and culture. Pitt tells us that sixty years after the personhood decision, Supreme Court Justice William O. Douglas concluded that it "could not be supported by history, logic or reason." This decision needs to be overturned; else it is very unclear how lasting reforms in any other area (corporate consolidation of and influence on media, lack of healthcare and other appropriate human services, an end to universal war, the need for campaign reform, etc.) will ever be accomplished.


Conservatives were at an all time low in 1964 after the defeat of Goldwater. It was followed by ten years of very progressive legislation. As a response, several conservative think tanks, magazines, mail order, and media outlets were founded and funded by Richard Viguerie, Grover Norquist, and the Coors family. Read more about think tanks and former Senator Bill Bradley's summary of the trend.

In the 1980s, the Fairness Doctrine was revoked and media companies were deregulated and merged into five or six major companies (for example, GE (NBC), Disney (ABC), NewsCorp (Fox), Viacom (CBS), AOL/Time Warner (CNN.) If we include two more major corporate groups, we have virtually every major movie studio, broadcast or cable company, record producer, internet outlet, magazine, and telephone company. (In other words, most sources of communication to the public.)

Regarding media sources, consider that forty years ago there were three TV networks with a half hour of news each day. Today we have hundreds of TV channels, three major all-news networks, and the Internet where anyone with a modicum of technical aptitude can give information and make their views known. One would think that would make us better informed.

Yet the opposite is true. These are some possible reasons:

  • The FCC's Fairness Doctrine (which encouraged greater social and political responsibility on the part of media) was ended.

  • There are now five corporate conglomerates that control 80% of TV, radio, movies, computers, telecommunications/telephones, print media, cable, and Internet. Thirty years ago, over 500 companies owned 80% of the media.

  • Just as everyone can choose a radio station that plays the music they like, everyone can now choose the TV station that reflects their own interests and opinions. So we no longer have a common experience in what we are hearing or how we are taking in information.

In part, due to the above, news networks are not driven to present the news based on what people need to know. They are under enormous pressure to present what will grab immediate interest (since people can just flip the channel if they get a little bored.) News now is geared to offend the least amount of people. Companies don't want to offend the government and Congress who are making important decisions on mergers and additional properties that the parent company of news organizations want approval to buy. So we have the "O.J. phenomenon." The news getting the highest ratings are what we get. We get the latest breaking news on Michael Jackson, Jennifer-Brad breakups, the British royals, Jon-Benet Ramsey, Scott Peterson, car chases, and Superbowl wardrobe malfunctions. If it involves dramatic moving pictures, sex, sports, race, murder, it's considered important national news. The so-called "reality" shows are what we are taking for reality, for real life, and for information that we need to know.

Aside from the mainstream media, we need to be aware that the internet is a totally horizontal electronic publication medium. But quality will vary widely, and hierarchical control over content is extremely minimal. So there is a greater responsibility for selecting what we hear and read and accept. Broadcasters and publishers are responsible for providing content. Hopefully, they will seek to provide balanced and accurate content and abide by general ethical standards. However, there are no guarantees, and the whole thing depends on a pair responsibilities: those of the receiver and of the sender or information. Our best defense is choice, awareness and critical thinking and judgment. Maintaining standards of quality and credibility is everyone's responsibility.

"The first stage of fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." Benito Mussolini, the inventor of fascism

Defining Fascism


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