Re: Corporations

[Julio Huato <juliohuato@xxxxxxxxxxx>]

You guys are too quick.  I'll be repeating points others made while I was
typing or sleeping.  Here it is anyway.

*  *  *

David B. Shemano wrote:

> What is that word Marxists like to use to describe unreal objects that
> people think are real?  Fetish?  You see a bogeyman called a "corporation."
>  You are fetishing the corporation.  I see tens, hundreds, thousands of
> contracts between real people intended to actualize a real end.  The entity
> is an acknowledged legal fiction that minimizes transaction costs.  That is
> all.  "Exxon" is simply a shorthand way to describe thousands of real
> people acting in a united way, and the corporate form provides an expedient
> way of organizing those real people.

In my reading of Marx, when people produce things that take an objective
existence separate from them (the producers), that's objectification. When
the objects take an autonomous life of their own, get out of the control of
their individual producers, and even turn against them, that's fetishization
or -- more generally -- alienation.  Objectification can't be avoided,
because we humans live through our engagement with the objective world.  But
alienation can be undone if individuals change the social conditions in
which they produce and live.  Since these conditions are social, they need
to change them collectively.

There are different levels of alienation, depending on how hardened the
underlying level of objectification is.  For example, we collectively create
fashions.  We may ignore them at a cost.  But it's relatively harmless for
individuals to ignore fashions.  Michael does it all the time.  :-)  But
money or the state are forms of alienation on steroids.  We ignore them at
our peril.

The fetishization of corporations is not an optical illusion, the mere
result of our inability to see the legal contracts that underlie it.  They
are a hardened objective reality because they are backed up by laws, i.e.,
by the power of the state, which is to say the power of individuals out of
their immediate control.  (Similarly, marriages -- even without children --
often spin out of the control of the partners, and yet people are trying to
extend marriages rather than ban them.)  These contracts are binding for
individuals.  We cannot close our eyes and dispel them, but -- if we were to
marshal enough power against them -- we could certainly change the law that
makes them possible.

With corporations, there are several layers of alienation overlapping.
Under certain social conditions (Engels: class divisions), people produce
and reproduce a state.  Again, the power of the state is the productive
force of the individuals, but alienated from them.  The state enacts and
enforces a law that allows for individuals to form corporations, where these
are legal entities invested with certain rights above and beyond those
recognized to their individual stockholders (e.g., limited liability).

In Marx, ownership is effective control over the utilization of an object.
That's the content of the legal fiction.  To the extent creditors, workers,
communities, consumers, etc. have some influence on a corporation behavior,
then they are in a small way co-owners of the corporation.  Individuals or
the citizens of a state (particularly workers) have an infinitesimally small
amount of control over a corporation, unless they are organized and
militant.

Jim Devine says that, if corporate liabilities are limited, then the rest of
the liability is imposed on others.  David's reply, that those who could be
harmed by the legal re-distribution of liabilities can choose not to enter a
contract with the corporation, ignores the fact that it all depends on the
underlying social conditions.  Entering a legal transaction (e.g., trading
in a market, which entails the enforcement of an implicit contract) with the
parties having roughly equal power ab initio cannot fall far from a win-win
outcome.  However, if the initial power is unequally distributed between the
parties, the transaction will tend to be a thinly disguised mechanism for
the strong to abuse the weak.  Perhaps a big bank can deal with a big
corporation on a fair basis, but workers are not equally poised as the
corporation to walk away from an employment contract.  Workers are at a
disadvantage because they need their jobs.

The rights of corporations impinge upon the rights of individuals.
Individuals can try to shape laws encroaching on private ownership (on whose
basis corporations exist) and/or directly on the laws that regulate the
existence and life of the corporation.  But individual stockholders
(somewhat in proportion to their stock) are in much better position to undo
or alter their corporation.  The corporation is alienated from them (the
individual stockholders) as well, but they are in a much better --
privileged -- position to control it than regular citizens or workers.  We
need to change the law, they just need to vote their directors out, fire
their CEO, change the bylaws.

IMO, the real or supposed alienation of corporations from the stockholders
is not something that should concern workers too much.  In their economic
struggle (wages, working conditions, etc.), workers have to deal with the
corporations as such.  They must deal with individual managers and
executives as representatives of the corporation.  But, politically, the
workers should seek to hold individual capitalists responsible for what
their corporations do.  In other words, workers should not accept the
copping out story that stockholders unable to rein in their ugly monsters.
Politically, they -- the capitalists -- are responsible for the actions and
omissions of their creatures.  If they need to act in concert with other
stockholders to effect change, so be it.  As the right-wingers often say,
individual responsibility is the basis of morality in every society.
Left-wingers only need to add that, in a particular setting, individuals are
not equally powerful.

Workers in turn form unions and organizations, which are not immune to
bureaucratization and lack of accountability from below -- that is, they are
alienated phenomena as well.  And some workers get to have benefits, pension
plans, etc. that in the U.S. are usually managed by the corporation's HR
department through mutual funds, insurance companies, etc. with some weight
in the financial markets.  Well, again, it's up to the ultimate owners to
take responsibility for what their entities do on their behalf.  Just like
some cities have laws that require pet owners to pick up after their pets
(regardless of the size of the pet), individuals should take responsibility
and not pass the buck to corporations.  Again, this implies that if people
want to change something, they should go to the root (be radical) and start
with the individuals.  In changing society, an individual ethical attitude
precedes political action.  The emphasizes on collective action (versus
individual victimization) begins by having individual recognize their power.
 Basically, people need to become agents of the history they've been
suffering until now, stop being the victims.

In economics, this has been a topic of interest under the rubric of
"principal/agency."  The problem in the principal/agency models is to align
the interests (utility functions) of the agent to those of the principal.
If stockholders complain about how corporations are so out of their control,
recommend them to hire economists and have them figure out the optimal set
of incentives that will make the boards and chief executives pull the cart
in the direction desired by the stockholders. :-)

I'm reading Baran & Sweezy's Monopoly Capital, and they make the corporation
the focus of their study because, they claim, corporations are the locus of
economic power in advanced capitalist societies.  They wrote their book in
the 1960s.  I guess when the cycle is on the way up the chief executives and
directors rule and appear omnipotent, while on the way down stockholders are
prone to re-discover that they have powers and that CEOs are fallible.
While I understand how as a trend corporations -- particularly large ones --
take away power from the individual stockholders and tend to concentrate it
on the inside and top, it is also a very convenient alibi for individual
capitalists with names and faces to elude the responsibility for the social
consequences of their corporate offspring.  Capitalists as individuals may
not be able to dictate the concrete behavior of a corporation, but by
pooling their wealth in the markets (even if they skip their annual
meetings), they certainly determine in the last analysis the roughly
profit-maximizing bent of corporations.  It is all for the sake of the
individuals who have a claim on their residual income.  I bet that if those
rich stockholders had to (say, in a generalized Disney situation), they
could rein in their corporations.

The antecedents of modern corporations are the colonial commercial ventures
formed in the mercantilist period of European capitalism.  Obviously,
corporate law -- by limiting the liability of individual stockholders --
made it easier for capitalists to take more chances in the face of
uncertainty and risk (something a Keynesian would appreciate).  As Marx
notes in Capital III, proto-corporations (joint-stock companies) accelerated
the development of capitalism.  But IMO the enemy then and now was not
"joint-stock" or "corporate capitalism"; that may be the enemy of crybaby
individual capitalists.  As far as I'm concerned, the enemy is still the
capitalist class -- a bunch of rich people with names, faces, and addresses.

Julio

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