The Land Rant
| We are pleased to present another of the "Land Rant" series of provocative essays created by the Henry George Institute. Let us know how you like it. |
by Lindy Davies
The demonstrators at both of the Republocrat political conventions this year, like those at the WTO meetings last year in Seattle, have been portrayed by unsympathetic commentators as lacking focus, rabble-rousers protesting any- and every-thing. And while that may be true to some extent -- certainly there were a wide variety of banners being waved -- there was unanimity on one area: people are fed up with corporations. They want to re-take control of the public debate, the media, health, safety and environmental regulation, international trade, and all the other areas they see as having been taken over by the multinationals. Corporate power has overtaken the political process, has corrupted the media and enslaved the workers. This is not exactly the freshest of news. In 1979, Agnes George de Mille wrote this, in her introduction to the centenary edition of her grandfather's Progress and Poverty:
The great sinister fact, the one that we must live with, is that we are yielding up sovereignty. The nation is no longer comprised of the [fifty] states... but of the real powers: the cartels, the corporations. Owning the bulk of our productive resources, they are the issue of that concentration of ownership that George saw evolving, and warned against. These multinationals are not American any more. Transcending nations, they serve not their country's interests, but their own. They manipulate our tax policies to help themselves. They determine our statecraft. They are autonomous. They do not need to coin money or raise armies. They use ours.
Yes, corporations are big. The annual revenue of General Motors, for example, exceeds the GDP of Denmark; the annual revenue of Wal-Mart exceeds the GDP of South Africa. Their bigness allows them to spend quite a lot to get the media saturation and the political leverage to remain big.
The point that Agnes de Mille made 21 years ago has (at last) made it into the public dialogue. Many people are talking about how sovereignty is being usurped by the Big Corporations. How they have assumed nearly limitless power to pillage and despoil. Yet if those things are true -- and on many levels they certainly seem to be -- it's hard to imagine the rulers of today's commercial empires being anything but amused at the current round of protests.
For what, specifically, is being protested? And at whom are the screams of outrage being directed?
At the corporations themselves? Should they start acting like responsible citizens and clean up their behavior? Their stockholders might have some things to say about that. To be fair, though, some corporations have had success at making their operations friendlier to workers and to the planet. There is a niche market today for investors seeking to buy shares of "socially responsible" firms. There are even mutual funds that invest solely in such companies. But they are, of course, not the majority. The very fact that a market for socially responsible investments exists at all shows that the vast majority of companies are asocial at best. Most companies, indeed, are as socially responsible as they can possibly be -- under existing conditions, and without harming profits.
It has generally been a truism in market economies that it is not the entrepreneur's job to secure the rights of citizens. The entrepreneur's job is to make a profit. We want people to be decent and ethical individuals, yes, but such judgements are relative. My neighbor is free to engage in Satanic incantations, hedonistic excesses, all manner of naughtiness, as long as it doesn't infringe my rights. We generally consider it the job of the government -- and particularly the judicial system -- to secure the people's rights.
If we cannot expect corporations, by and large, to reform themselves, then who shall we scream at? The government? This is where we heard the laughter coming from before. The government has simply been doing, if not exactly what we told it to do, then certainly what we have failed (repeatedly) to prohibit. No matter how powerful they are, corporations are still subject to the laws of nations.
In the United States, our last three Presidents have been elected by fewer than half of the eligible voters, and in midterm elections the turnout is even lower. Congress has routinely failed to enact reforms that a majority of US citizens want. More people know who's getting kicked off of gilligan's island this week than who their Congressional representatives are, or what they have voted for. Corporations, on the other hand, make prudent and effective use of the political process. Are they to be blamed for doing that?
Perhaps in the US we have only ourselves to blame, but what about those little, developing countries who have no choice but to kneel to the corporate lash, lest they lose all job growth? That is how the state of affairs is portrayed, on both sides of the debate, but it is mostly a fantasy. Legislative and Executive decisions in most developing nations today (certainly in those with the largest and worst-performing external debts) are made by ruling elites. Policies friendly to multinationals, and to their real estate-owning cronies, are in their interest.
Now, I don't mean to say that Agnes de Mille was wrong. Indeed, multinational corporations are becoming more "sovereign", more unanswerable, all the time. My point is merely that "they" haven't done it to us. In fact, let's look again at Ms. de Mille's words. She said, "We are yielding up sovereignty." We are. If we repeatedly, openly and habitually invite them to plunder our wealth, how can we blame them for stepping in and taking it?
But perhaps there shouldn't be corporations at all. Perhaps shareholders should be held liable for a corporation's misdeeds. That would be the end of the corporation as we know it, of course. Why would I invest in a company if its employees could perpetrate illegal actions, without my knowledge, for which I could be held liable? The corporation itself can be held liable - - if an honest court can be found to hear the case. An offshore subsidiary with no hard assets is the nominal owner of the nefarious acts? Such practices can be made illegal (where they aren't already). It's very easy to miss seeing what we don't want to look at.
No, in fact a corporation is simply a particular type of business firm, suitable mainly for industries in which a large concentration of capital is efficient. Do they abuse the system? Indeed they do. Baseball bats are also used to assault people -- should we ban them?
If we were to (somehow) stamp out all preferential treatment afforded to corporations -- get rid of the tax preferences, the subsidies, the squirming-free of accountability, the give-aways buried in trade agreements -- who would benefit? Would the working people in rich or poor nations benefit?
Consideration of the most basic facts about wages shows that, indeed, they would not. Employers do not set wage levels because of what they think workers deserve, or how much they like their workers; employers don't set wage levels at all. It is the market for labor that sets wage levels -- and the supply side of that market is determined by the laborers' alternatives. If no better alternatives exist, wages won't go up.
So who will benefit, if the special favors bestowed upon corporations are taken away? Well, the elimination of subsidies and managerial fat will make large companies -- and hence the whole economy -- more efficient. (If some operations cannot survive without their pork supply, so much the better for the general welfare!) Productivity will go up -- and the owners of land and natural resources, which are fixed in supply and needed for all production, will ultimately reap the benefits. The private land-holder, who makes no contribution to production, but collects a reward for making production possible, is "the robber that takes all that is left", in Henry George's words (from his 1886 book, Protection or Free Trade).
So, to make a long story short: if we eliminate all forms of "corporate welfare", subsidy, graft & pork -- but leave our land-tenure and tax systems as they are -- the landowners will be the ones who benefit.
Now it is worth mentioning that in the United States, at least, landowners are not solely latifundistas or multinationals. Tens of millions of individual families own (or have equity in, at least) some land. A rise in overall production that raises land values is surely in their interest; real estate appreciation represents, for many Americans, the hope of a secure retirement and something to leave to the children. So what we are left with is the fact that eliminating "corporate welfare" will benefit one class of landowners (small ones) at the expense of another class of landowners (corporations losing their other privileges and subsidies). And those corporations, who are often the largest landholders themselves, will also reap the rewards of higher productivity in higher land values!
Corporate abuses of the environment, the rights of workers, and the public trust are severe. Nations -- at the democratic will of their citizens -- must use their rightful weapons to combat them. But let us not forget what the largest, most severe and most pervasive "welfare privilege" is: land monopoly. Until we reform that basic injustice, other reforms -- however genuine and just -- can only forestall the inevitable.
Lindy Davies
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Lindy Davies runs the Henry George Institute, the leading educational institution that teaches the ideas of Henry George.
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