On Citizens, Governments, and Corporations

By Ryan McGreal
Published February 10, 2005

Urban revitalization depends on creating an environment - physical, social, and regulatory - that serves the needs of citizens (citizen, after all, comes from the Old French word for city).

That means governments have to be involved, since governments are the only big public entities with the mandate and the power to enforce human rights and democratic goal setting.

However, a leading orthodoxy of our time is that governments can't do anything well, are concerned only with self-preservation, and bog the economy down with needless regulations. As an alternative, we are offered for-profit corporations in place of governments.

In light of this, I'd like to make a case for government as a legitimate public tool, a valid means for citizens to bring about meaningful goals, and a case against for-profit corporations as part of the solution. Corporations are accountable only to their shareholders and, the U.S.-style "ownership society" aside, real societies are made up of much more than just shareholders. In fact, shareholders themselves have values and responsibilities that extend beyond self-interest.

At best, corporations can be made to function in a regulatory environment that limits their capacity to do harm while allowing them to realize competitive efficiencies and pursue innovation - things they do well under the right circumstances.

Only as citizens - not shareholders, consumers, or even taxpayers - can people exercise their right to determine what values society should champion and how our shared living spaces should work.

With Friends Like These

Governments only ever do the right thing to the extent that they are browbeaten and shamed into it by their citizens. If citizens sit back and accept that governments can't or won't behave responsibly and ethically, then governments can pursue money and power shamelessly.

If, however, citizens refuse to be ignored and marginalized, then governments sometimes respond decently.

This has happened from time to time, for example in 1970, when the overwhelming support of the public prodded the federal government into introducing public health care over the hysterical opposition of doctors' associations and insurance companies.

It also happened in the 1840s when a bunch of poor farmers forced the Crown to make public education a core principle of the British North America act, against the will of the aristocrats who believed that educating farmers was a waste of money.

These events and others stand out against the grain, but they help define what is good about our society, what works about our governments.

It is because of good public education, a vigorous health care system, regulated utilities, food and water inspection, and so on that we have as comfortable a society as we do. Those services exist because citizens demanded them, not because the "free market" provided them.

In fact, they generally exist in spite of the market, and in all cases market forces are trying to undermine and scale back these services.

Ironically, the market benefits markedly from a healthy, well educated public, so current efforts to privatize and deregulate public services will only weaken the foundation of the market down the road.

However, the logic of markets does not extend to long term planning, only to the short-term interest of individual players.

No Fair!

Consider, for example, the United Parcel Service of America (UPS) lawsuit against the government of Canada.

UPS has accused Canada Post of using revenues from its government-subsidized letter mail operations to support its parcel delivery operations. Since NAFTA prohibits governments from distorting markets by subsidizing domestic companies, UPS is asking the Canadian government to pay it $230 million dollars in damages.

Canada's Competition Bureau has examined Canada Post repeatedly and has rejected the allegations, maintaining that Canada Post is a fair competitor.

Essentially, UPS is trying to exploit NAFTA's notorious Chapter 11 investor-state dispute settlement mechanism to shut down a competitor, something that will make the market less efficient and less competitive in the long term.

Purolator, Canada Post's competitive parcel delivery service, is profitable and maintains a strong market share. UPS is also profitable in Canada, but would be even more so without competition from Purolator.

Since Canada Post is a public company, it ought to be bloated, inefficient, and scandal-ridden, right? That it's not is an embarrassment to the bought priesthood of economists and PR flacks whose stock in trade is the claim that whatever government can do, the market can do better.

In this light, the lawsuit is a kind of "No fair!" call against the government for not screwing up the way it is supposed to.

With all respect due to the hardworking people at UPS, I say, "too fucking bad." If a public corporation can provide a competitive service that a private corporation cannot beat, the problem is not with the crown corporation but the private corporation.

The Corporation

I wrote above that governments pursue money and power shamelessly. Today, the money and power that governments pursue are tied into private corporations.

Corporations were only invented a couple of hundred years ago, but they've evolved a lot in that short time, acquiring indefinite longevity and the legal rights of "persons" along the way.

A corporation is only a sophisticated mechanism, the structure of an agreement among investors to combine their resources in a business enterprise. By pooling their wealth, they are able to enjoy economies of scale in development, purchasing, production, and distribution, the competitive benefits of cooperation (i.e. less competition so less downward pressure on prices), and easier access to financing.

There's nothing in this to suggest that the corporations themselves ought to be accorded the legal status of persons, any more than a trade union (what we call the structure of an agreement among workers to pool their resources) ought to have the legal status of a person.

Saying corporations have rights is like saying my television has rights - for example, to be left on all day.

Rational Business Practice

Corporations are strictly utilitarian. Decisions are made based entirely on what will bring the most return on investment (officially for the corporation as a whole but often just for the executives). Corporations are law abiding only when it is more cost-effective to obey the law than to break it.

Corporations are 'good citizens' only to the extent that the publicity will help to sell more products. Non-instrumental values are reduced to variables in a cost-benefit analysis.

A corporation will spend $10 million to create the illusion of improved working conditions before it spends $11 million actually improving those conditions.

A corporation will let people die from a faulty part if it is cheaper to pay out the death benefits than to replace the part. Corporations will attempt to have laws changed or repealed to make them less restrictive on corporate activities, regardless of whether the laws are just or unjust.

Corporations will attempt to influence politicians, populate newspapers and journals, and foster a favourable public opinion, all in order to make the regulatory framework in which they operate more conducive to their goals.

All of this is merely prudent business practice.

Psychopathic Creatures

UBC Law Professor Joel Bakan calls the corporation "a psychopathic creature" that "can neither recognize nor act upon moral reasons to refrain from harming others" (The Corporation: The Pathological Pursuit of Profit and Power, Penguin Canada, 2004, p. 60).

Martin Benjamin and Daniel Bronstein explain why in a 1987 essay, calling corporations "planned units, deliberately structured for the purpose of attaining specific goals" (Martin Benjamin and Daniel A. Bronstein, "Moral and Criminal Responsibility and Corporate Persons," Warren J. Samuels & Arthur S. Miller, eds., Corporations and Society: Power and Responsibility, Greenwood Publishing Group, 1987, p. 277).

In short, corporations are exclusively instrumental constructions. As such, it would be "fatuous to expect an industrial organization to go out of its way to avoid polluting the atmosphere or to refrain from making napalm bombs or to desist form wire-tapping on purely moral grounds. Such actions would be irrational" (ibid, p. 279).

As Bakan points out, corporations as "persons" display all the traits of psychopaths: manipulation of others, grandiosity, lack of empathy, asocial tendencies, refusal to accept responsibility for their actions, inability to feel remorse, and superficial relations with others (The Corporation, p. 57).

Rights are reflexive, shared understandings among people. If you violate the rights of others deliberately, your own rights are stripped and you are incarcerated.

Corporations do not respect rights, and they do not share understandings with people; they merely weigh costs and benefits and take the most profitable route.

Most people believe that human society is more than just a collection of interests. Clearly, humans often avoid harming others not because it's in their interest, but because not harming others is considered wrong in and of itself, regardless of costs or benefits.

Corporations can make no such ethical decisions. Indeed, corporate charters mandate a legal requirement to put shareholder interests above all others.

UPS is using NAFTA to shut down a competitor because it can, and because not having a competitor is better for the bottom line than having a competitor. Whether it will serve the public good is irrelevant.

Future Needs

The biggest long-term problems facing our society - energy scarcity, pollution, climate change - will challenge us in ways we can't even imagine.

The only way to survive the coming challenges is to unlock human creativity and ingenuity in the service of the public interest.

Some of that may occur through corporations that have been tamed and transformed into agents of the public weal, like crown corporations today. Some will occur through public research institutions, like our universities and colleges. Some will happen through non-governmental organizations and activist groups, and some will occur through independent research, imagination, and serendipity.

Some may even occur through for-profit corporations, but only insofar as those solutions will also enrich the corporations themselves. However, like the example of the drug industry, which spends billions of dollars researching sexual dysfunction, hair loss, and mood enhancement while millions of people die of preventable illnesses, we shouldn't expect too much.

However, the political will to put our solutions in place must come through governments.

And that means we citizens need to get busy.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan wrote a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. His articles have also been published in The Walrus, HuffPost and Behind the Numbers. He maintains a personal website, has been known to share passing thoughts on Twitter and Facebook, and posts the occasional cat photo on Instagram.


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