The Triumph of Imbalances

A SOCIETY OUT OF BALANCE, with power concentrated in a privileged elite, can be ripe for revolution. The American colonies by 1776 were ripe for revolution, as was Russia in the early twentieth century. So are many countries today, including some called democratic.

The trouble with revolution is that it usually replaces one form of imbalance with another. As some people among the disenfranchised gain power through force, they tend to carry their society toward some new extreme. Lenin promised the Russian people a “dictatorship of the proletariat.” Instead, their revolution brought them a dictatorship of the Communist Party, exercised through the public sector. This new regime may have attended to certain collective needs, but at the expense of individual liberties. The United States went the other way, although it took two hundred years before tipping into imbalance.

America´s Long March Toward Imbalances: 1789-1989

The seeds of this imbalance were sown in the American Revolution. America did not invent democracy so much as give impetus to a particularly individualistic form of it. The people revolted against the authoritarian rule of the British monarchy and thus wrote “checks and balances” into their constitution. While these checked the power of government, by ensuring a certain balance across its executive, legislative, and judicial institutions, no such constitutional constraints checked the power of individuals and nonstate institutions.

As a consequence, the country thrived and became the world’s model for development—social and political as well as economic. For individuals seeking opportunity as well as escape from tyranny, America became the place to go. Even for those who stayed home, it was the place to emulate.

But that model worked only so long as the country maintained some semblance of balance. The power of individuals and their private institutions had to be constrained. That responsibility fell to government, in the form of laws and regulations, as well as to communities that upheld the prevalent social norms.

With the weakening of both government and local communities in recent years, this balance has been lost. Yet the American model remains the favored one in much of the world. Accordingly, we had better understand what has been going on in the United States if we are to find our way to restored balance.

The Rise of the Corporation

The nonstate institutions of the United States are mainly of two types: private businesses—for-profit—and community and other associations—not-for-profit. In his landmark study of Democracy in America in the 1830s, Alexis de Tocqueville recognized the latter as not only quintessentially American but also key to the country’s democracy (1840/2003: 115). He favored the word associations, but they were also referred to back then as “corporations,” as were certain businesses. As the private sector gained increasing influence, however, the word corporation came to be associated more exclusively with businesses.

The U.S. Constitution made no mention of corporations, let alone granted them liberties. The liberties it affirmed were for individual persons, in the spirit of Thomas Jefferson’s immortal words in the Declaration of Independence that “[w]e hold these truths to be self-evident, that all men are created equal.” At the time, “men” meant all white and propertied males. These gender, color, and financial restrictions were eventually eliminated, but not before an 1886 ruling by the Supreme Court reinforced property rights with a vengeance: corporations were recognized as “persons” with “equal protection of the laws.” Granting them this equal protection has made all the difference. From the liberties for individuals enshrined in the American Constitution sprang entitlements for private corporations.

Thomas Jefferson and Abraham Lincoln were highly suspicious of these corporations. Jefferson hoped that “we shall crush . . . in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial by strength.” And Lincoln worried that “corporations have been enthroned” by the Civil War, so that wealth could be “aggregated in a few hands and the republic . . . destroyed. . . . God grant that my suspicions may prove groundless.” God did not grant any such thing. Instead, twenty-two years later the Supreme Court granted corporations that personhood mentioned earlier.

This development happened amid the rise of the great business trusts—massive monopolies in oil, steel, and other industries, created by people who came to be called “robber barons.” These trusts were eventually beaten back by the anti-trust legislation of 1890 and 1914, and imbalance was further held in check by President Franklin Roosevelt’s New Deal enacted during the Great Depression of the 1930s as well as the welfare programs established after World War II. But underway at the same time was a “Cold War,” during which American defense spending grew to equal that of the rest of the world combined. And so a third Republican president weighed in on the influence of corporations: Dwight David Eisenhower pointed to a “military-industrial complex” as having “the potential for the disastrous rise of misplaced power.”

Supporting Dogma from Economics

Supporting this march toward imbalance has been an economic perspective that grew into a prevailing dogma (Hayek 1944; Friedman 1962). In its boldest form, this dogma centers on an “economic man” for whom greed is good, property is sacred, markets are sufficient, and governments are suspect. As one view of human society, this makes some sense; as the view of human society, it is nonsense.

But such nonsense did not stop the march toward imbalance; indeed, it expedited it, by providing formal justification for the corporate entitlements. Economics may be changing now—at the margins, at least—but the damage had been done: as greed became a cult, property rights were allowed to run rampant and many markets went out of control. In 1989, two hundred years after the U.S. Constitution had gone into effect, the stage was set for the country’s free fall into imbalance.

The End of Thinking of 1989:_______?

Communism, and the political left in general, had served as a modest constraint on capitalism, by harping on its weaknesses. But as the communist regimes of Eastern Europe began to collapse in 1989, this constraint also collapsed. After all, if governments under communism proved bad, then surely all governments themselves had to be constrained. “Capitalism has triumphed!” declared Western pundits in 1989. They were wrong—dead wrong.

The Berlin Wall was still standing when an article in the American magazine National Interest, under the title “The End of History?” (Fukuyama 1989—without the question mark in his 1992 book), declared capitalism to be not only the best system then, or even the best system ever, but the best system forever.

What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government. (p. 1).

Karl Marx’s communism was declared dead, so long live Adam Smith’s free markets, at least as depicted in one passage of his 1776 book about an “invisible hand” that drives butchers, brewers, and bakers—free men in the marketplace—to serve society by serving themselves. “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Mankind (for all of this was about that “economic man”) had reached perfection, thanks to relentless greed. The floodgates to private power were now wide open.

Never mind that by 1989 Americans were receiving much of their meat, beer, and bread from giant corporations with paramount positions in their marketplaces. Never mind, too, that these corporations were able to exert significant influence over the lives of the many people who butchered, brewed, and baked for them, as well as over these people’s governments. Adam Smith’s world may have long since passed, but not the quaint belief in this one passage of his. It was not history that had ended but thinking, as all we economic men and women were spared the burden of contemplating our future.

Even by the standards of neoconservative America, Fukuyama’s arrogance was monumental. But he was not alone. The moderate economist Paul Krugman, winner of one of those Bank of Sweden Prizes in Economic Sciences (erroneously called Nobel), concurred under the subheading of a Fortune magazine article in 2000 that read, “Economic man is free at last”: “both the American economy and the free-market system it epitomizes seem everywhere triumphant. . . . [A]ny future claims about a system that trumps the free market are going to face severe skepticism.” Krugman added, all too prophetically:

[P]olicy makers and the public are now willing . . . to stick with markets even when they misbehave. . . . [B]asically companies will be allowed to make money as best they can in the belief that the invisible hand will direct them to more or less the right place.

What both Krugman and Fukuyama failed to address is a simple question posed later by John Kay, an economist who kept thinking, “Did Marxism fail because it was the wrong grand design, or because all grand designs for economic systems are misconceived?” (2003: 192). Put differently, might we social people be grander than economic theory?

This book challenges the dogma that sees all of us driven to compete, collect, and consume our way to neurotic oblivion. That some of us choose to do so is indisputable. That many of us doing so poses a threat to our collective survival has likewise become indisputable. In place of this dogma, this book offers an integrating framework, built on our social, political, and economic predispositions, to consider how to restore balance in society.

Over the Edge: From 1989

In 1989, the United States of America was two hundred years old. The following words were themselves written two hundred years ago:

The average age of the world’s greatest civilizations has been 200 years. Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.

The United States had experienced many of these stages by 1989, while retaining characteristics of each. Is a return to bondage happening now?

What triumphed in 1989, relatively speaking, was balance. The communist regimes of Eastern Europe were severely out of balance, with so much power concentrated in their public sectors. In contrast, the successful countries called Western exhibited a balance of power across the three main sectors of society—public, private, and plural—more or less.

More was the case in countries such as Germany and Canada, less in the United States. Yet compared with what came after 1989, the United States still mitigated the forces of markets and individualism with extensive public welfare services, substantial regulations of business, and significant taxation of wealthy individuals and corporations. In fact, “America emerged from World War II with government, market, and civil society [the plural sector] working together in a healthier, more dynamic, and more creative balance than at any time since pre–Civil War years” (Korten 1995: 88).

But a failure to understand this need for balance drove the country over the tipping point, to imbalance. For if capitalism had indeed triumphed, then the economists had it right and the corporations were the heroes. They had saved the world from the communist menace. But if it was balance that had triumphed, then private sector excesses needed to be stopped, right then and there. The opposite happened: these excesses accelerated.

It is not that businesses have been waging some kind of orchestrated conspiracy. True, they have sometimes acted in concert to enhance their influence, as when their associations have lobbied for lower taxes. But of far greater effect has been the steady pull of so many private forces, each pursuing its own interests—for the creation of tax loopholes, extension of government subsidies, loosened enforcement of regulations, and so on—pitted against public agencies that have become less and less able, and inclined, to resist them.

Add up the consequences of so many deliberate but disparate actions—all the lobbying and litigating, maneuvering and manipulating—and the country has ended up with the equivalent of a coup d’état. Adam Smith’s invisible hand in the American marketplace has become a visible claw in the American Congress. De Tocqueville identified the genius of American society as “self-interest rightly understood.” Now the country finds itself overwhelmed by self-interest fatefully misunderstood.

Consider the extent to which power has shifted in America since 1989—for example, the significant skewing of wealth to the richest 1 percent of the population and Supreme Court rulings that have opened the floodgates to political donations. “Only a generation ago, excluding corporations from the political arena was not only thinkable and debatable but was also the law in some [American] states” (Nace 2003: 233). Back in “the mid-1980s, President Ronald Reagan overhauled the tax system after learning that General Electric . . . was among dozens of corporations that had been using accounting gamesmanship to avoid paying taxes. ‘I didn’t realize that things had gotten that far out of line,’” he said (Kocieniewski 2011a). From 2008 to 2012, twenty-six major American corporations including General Electric and Boeing, paid no federal income taxes at all (Drawbaugh and Temple-West 2014).

On the global front, with regard to the environment, the Montreal Protocol of 1987 dealt with the problem of the ozone layer, as a “result of unprecedented international cooperation” (Bruce 2012). Now we have been having conference after conference on global warming whose results would be laughable were the issue in question not so important. (The appendix describes various aspects of our current state of imbalance.) .

From Market Economy to Corportate Society

It has been said that the final stage of slavery is when you no longer realize that you are a slave. The East Europeans under communism never reached that stage. They understood full well how enslaved they were by their system of governance. But how many of us in so many countries now realize the extent to which we have become the slaves of our own economic structures? Do we recognize the extent to which our so-called market economies have become corporate societies, wherein business as usual has become hardly anything but business? When an economy of free enterprise becomes a society of free enterprises, it’s the citizens themselves who are no longer free.

As the Berlin Wall fell, it took with it much of the left side of the political spectrum of countries all over the world. Because the governments of Eastern Europe were discredited, people were persuaded to see all governments as discredited. This view has been especially prevalent where the population has long harbored suspicions about government. Suspicions are one thing; a collective misunderstanding of the role of government in a balanced society is quite another. Voters who thoughtlessly dismiss that role usually get the governments they deserve. (Articles of mine that elaborate on points in the text, such as this one, are listed in a section at the end of the references.)

It is telling that socialism has become a dirty word in America, leaving the impression that there is something wrong with things social, while capitalism has come to represent all things right. In fact, now we are seeing all kinds of proposals for adjectival capitalism—sustainable capitalism, caring capitalism, breakthrough capitalism, democratic capitalism, regenerative capitalism, inclusive capitalism. The implication is that, if only we can get capitalism right, all will be well again.

How did the word capitalism, coined to describe the creation and funding of private enterprises, themselves intended to supply us with commercial goods and services, come to represent the be-all and end-all of human existence? Is capitalism any way to run public services or judge their effectiveness, any way to understand the needs of education and health care, any way to organize our social lives and express our values as human beings? Capitalism was intended to serve us. Why are so many of us now serving it? Or as Pope Francis said recently, “Money must serve, not rule.”

In the United States in particular, the private sector now dominates society to such an extent that no established form of political activity is likely to dislodge it. The restoration of balance will thus require some form of renewal unprecedented in American history.

Not Only in America

After I gave a talk on these ideas a couple of years ago, a Swede asked me why I placed so much emphasis on the United States. Surely countries like Sweden were more balanced.

Maybe so, I replied, but for how long? The United States may be leading the march to imbalance, but it is hardly marching alone. A great many countries are being thrown out of balance by the spreading influence of the economic dogma in cahoots with a globalization movement that is suppressing so many things local. In a surprising number of countries, the rich are getting exponentially richer while income levels for the rest are stagnating and social problems are festering. My own country, Canada, long known for its balance and benevolence, has become another cheerleader for this one-sided view of development. There is a creeping meanness in my country that I find alarming, led by, but not restricted to, our current government. If Canada has succumbed, can Sweden be far behind? (See the accompanying box.)

Public Rights or Private Profits?

A number of recent bilateral trade pacts have included special courts of arbitration that enable private companies to sue sovereign states whose laws or regulations—even in matters relating to health, culture, and environment— they see as having reduced “the value of [their] profits or expected future profits” (Nace 2003: 257). Some corporations have used these courts not to sue states so much as to threaten them with such suits, which has had a “chilling effect on legislation” (Monbiot 2013).

In December 2013, the New York Times ran an article as well as an editorial discussing how “big tobacco” had been using such litigation to “intimidate” and “bully” poor countries around the world into rescinding regulations intended to control the use of tobacco. The health minister of Namibia reported receiving “‘bundles and bundles of letters’ from the industry about its attempts to curb smoking rates among young women” (Tavernise 2013). In reference to the North American Free Trade Agreement, one Canadian official likewise reported seeing “the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years.” One pharmaceutical company even “demand[ed] that Canada’s patent laws be changed” (Monbiot 2013).

In his article about these courts of arbitration, referred to in the title as “a Full-frontal Assault on Democracy,” George Monbiot wrote:

The rules are enforced by panels which have none of the safeguards we expect in our own courts. The hearings are held in secret. The judges are corporate lawyers, many of whom work for companies of the kind whose cases they hear. Citizens and communities affected by their decisions have no legal standing. There is no right of appeal.

One NGO labeled this “a privatized justice system for global corporations,” while a judge on these courts was quoted as saying that “it never ceases to amaze me that sovereign states have agreed to [such] arbitration at all.”

As I write this, the European Union is negotiating a trade pact with the United States. As a consequence, the lopsided lobbying so prevalent in the United States has come to Brussels with full force, a good deal of it from U.S. law firms (Lipton and Hakim 2013). If they succeed in installing such a court of arbitration, these “negotiations could . . . become de facto global standards” (Hakim and Lipton 2013), given that the European Union and the United States account for almost half the world’s trade.

If, however, the Europeans stand their ground, this could become a turning point that puts an end to such courts and encourages national courts to dismiss them as outrageous violations of their citizens’ rights.

A Rant Against Imbalance, Not Business

If the text so far (and the appendix later) sounds like a rant, then let me assure you that it is—for good reason. We have had enough of all this.

But please do not take this as a rant against business. I cherish businesses that compete responsibly to bring me worthwhile products and services. I eat at wonderful restaurants, work with dedicated publishers, buy some strikingly creative products. I have deep respect for the companies that respect me. Thankfully there remain many of these, big and small.

But I have equally deep disdain for the companies that try to exploit me with shoddy products, indifferent services, bamboozled pricing, and phony advertising. These companies are on the increase, thanks to the relentless drive for growth expected of them by frenetic stock markets. Likewise, I have deep disdain for those companies that seek to exploit us: by using political advertising to sway opinions on public issues, taking government handouts in the name of free enterprise, spending vast sums on lobbying to enhance their privileged positions. In 1952 in the United States, 32 percent of all taxes were paid by corporations; by 2010, that figure was down to 9 percent. There’s a tea party going on, all right, for big business, under the slogan “No taxation with representation.”

In his Devil’s Dictionary, first published in 1906, Ambrose Bierce defined the corporation as “an ingenious device for obtaining individual profit without individual responsibility.” Ingenious it may be, but can we continue to tolerate this? We turn next to a comparison of the world we have with a world that could be.

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