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Q: Could you tell us in detail how the corporation became so powerful?
How it became so powerful? Well, we know it very well. There were enormous market failures, market disasters in the late 19th century. There was a brief experiment, a very brief experiment, with something more or less like capitalism, not really but partially, really free markets, and it was such a total catastrophe that business called it off because it couldn't survive, and there were moves in the late 19th century to overcome these radical market failures and they led to various forms of concentration of capital: trusts, cartels, and others, and the one that emerged was the corporation in its modern form.
And the corporations were granted rights by the courts. I mean, I know the Anglo-American history fairly well - but I think it's pretty much the same elsewhere, so I'll keep to that one - in the Anglo-American system the courts, not the legislators, gave the corporate entities extraordinary rights. They gave them the rights of persons, meaning they have the right of freedom of speech, they can propagandize freely, advertise, they run elections and so on, and they have the protection from inspection by the state authorities which means that just as the police technically can't go into your apartment and read your papers, the public can't find out what's going on inside these totalitarian entities. They're mostly unaccountable to the public. Of course they are not real persons, they are immortal, they are collectivist legal entities. In fact they are very similar to other organizational forms we know and are one of the forms of totalitarianism that developed in the 20th century. The others were destroyed, these still exist, and later they were required by law to be what we would call pathological in the case of real human beings.
So they are required legally to maximize power and profit no matter what effect that has on anyone else. They are required to externalize costs, so if they can get the public or future generations to pay their costs, they are required to do that. It would be illegal for corporate executives to do anything else.
By now, in what are called trade agreements, which have nothing much to do with trade, corporations are granted rights that go way beyond the rights of persons. They are granted the right of what's called "national treatment." Persons don't have that right. Like if a Mexican comes to New York, he can't claim national treatment, but if General Motors goes to Mexico, it can claim national treatment. In fact corporations can even sue states, which you and I can't do.
So they're granted rights way beyond persons. They are immortal, they are extraordinarily powerful, they are pathological by legal requirement, and that's the contemporary form of totalitarianism. They are not truly competitive, they are linked to one another. So Siemens and IBM and Toshiba carry out joint projects. They rely heavily on state power; the dynamism of the modern economy comes mostly out of the state sector, not the private sector. Almost every aspect of what's called the "New Economy" is developed and designed at public cost and public risk: computers, electronics generally, telecommunications, the internet, lasers, whatever...
Take radio. Radio was designed by the US Navy. Mass production, modern mass production was developed in armories. If you go back to a century ago, the major problems of electrical and mechanical engineering had to do with how to place a huge gun on a moving platform, namely a ship, designing it to be able to hit a moving object, another ship, so naval gunnery. That was the most advanced problem in metallurgy, electrical and mechanical engineering, and so on. England and Germany put huge efforts into it, the United States less so. Out of associated innovations comes the automotive industry, and so on and so forth. In fact, it's very hard to find anything in the economy that doesn't rely critically on the state sector.
After the Second World War this took a qualitative leap upward, particularly in the United States, and while Alan Greenspan and others make speeches about "entrepreneurial initiative" and "consumer choice," and things you learn about in graduate school, and so on, this has almost no resemblance to the actual working economy. In fact a striking example of all this which we see very clearly at MIT, a main technological scientific university, is a recent shift in funding. When I got to MIT 50 years ago, it was Pentagon funded, almost one hundred percent. That stayed true until about 1970. Since then, however, Pentagon funding has been declining and funding from the National Institute of Health and the other so called health-related national institutes has gone up.
The reason is obvious to everybody except maybe some highly theoretical economists. The reason is that the cutting edge of the economy in the fifties and the sixties was electronics-based, so therefore it made sense for the public to pay for it under the pretext of defense. By now the cutting edge of the economy is becoming biology-based. Biotechnology, genetic engineering and so on, and pharmaceuticals, so it makes sense for the public to pay for that and to take the risks for it under the pretext of, you know, finding a cure for cancer or something. Actually what's happening is just developing the infrastructure and insights for the biological-based private industries of the future. They are happy to let the public pay the costs and take the risks, and then transfer the results to private corporations to make the profits. From the point of view of corporate elites it is a perfect system, this interaction between state and private power. There's plenty of other interactions as well. For example, the Pentagon isn't just for developing the economy, it's also for making sure that the world follows corporate friendly rules. So the linkages are quite complex.
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