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Previously in Politics & Prose:

Joe Sixpack's Revenge (May 17, 2000)
If the authors of two new books are right, it's time for Republicans to give class warfare a chance. Christopher Caldwell explains.

Governing Globalism (May 3, 2000)
Jack Beatty on the protests in Washington, Runaway World, and globalization's good and bad sides.

The Uses of Sprawl (April 6, 2000)
Christopher Caldwell on Suburban Nation, New Urbanism, and how Democrats can reap the benefits of the sprawl they helped to create.

Be Afraid (April 6, 2000)
If the digital revolution produces the dystopian nightmare envisioned in the April issue of Wired, humanity's only hope may be the end of capitalism as we know it. Try selling that in an election year, Jack Beatty writes.

Tagging After Teddy (March 22, 2000)
Christopher Caldwell on why Teddy Roosevelt -- "an egomaniacal weirdo" -- is an unlikely hero to both Republicans and Democrats.

Bush vs. Gore (March 8, 2000)
Scenes from the first presidential debate of the 2000 election campaign. By Jack Beatty.

More Politics & Prose in Atlantic Unbound.

Discuss this article in the Politics & Society conference of Post & Riposte.

Who Owns Capitalism?

Has democracy at last caught up with the corporation?

by Jack Beatty

June 15, 2000

Humanity is becoming ever more profoundly dependent on the corporation, not only for the means of production (that has been true since the Industrial Revolution), but also for the technology of communication, the ganglia of social connection. A letter through the post connects one to government. A message conveyed by e-mail connects one to a corporation. The gain in convenience comes at a price in autonomy, perhaps not payable for decades and then only imperceptibly. In America's commercial civilization, Madison wrote in The Federalist Papers, the power of government might prove a lesser threat to liberty than the excesses of freedom. The "cookies" planted by Internet companies to spy on our purchases as we click from site to site are just that kind of excess. If this subversion of individual liberty by economic freedom tokens the future, then the American political imagination, so long fixated on government's threat to private life, must change with the times. Madison's system of checks and balances protects us from government, but in the "privatized" society of power without accountability toward which we seem to be heading, what will protect us from the corporation?

Government intervention to restore a balance of power between the corporation and society is rarely the model for today, when nation-states whose authority stops at their borders have neither the power nor even the jurisdiction to check globalizing corporations. Moreover, should its journey from Rotarian lubricity to real-world trend continue unimpeded, "privatization" will weaken governments' hold on the levers of countervailing power within their borders and jurisdictions (a point well made by Benjamin Barber, a Rutgers political theorist, in an as yet unpublished paper). Will it take Henry Adams's nightmare -- some form of world government -- to create transnational countervailing power? History is a poor guide to the unprecedented.

* * *

The difficulty of establishing international standards for the corporation in the absence of international authority was the crux of the debate over granting normal trading status to China, recently concluded in the House and about to begin in the Senate. The debate has raised a fundamental question: Why, through the China deal and the WTO do we export only part of our economic system? The right to collective bargaining is part of our system. Prohibitions on child and slave labor are part of our system. Regulations of the hours and conditions of work -- these are not exogenous filigree, but part of our system. American capitalism has evolved to include them. Yet we export the kind of "wild capitalism" we have not seen in this country for a hundred years, leaving CEOs free to project their laissez-faire fantasies onto the blank page of the global economy.

You're to blame for this. Your pension fund drives corporate behavior. Corporations seek to break the carapace of domestic regulation and so earn greater returns for you by opening plants in the union-free, low-wage, hard-governed developing world.

The promise of the twenty-first century is to move from ownership -- already nearly 50 percent of us own stock -- to control. More and more the system is truly becoming "ours." The democratization of investment is fast bringing us to the point where we can begin to take responsibility for capitalism, which for the past two hundred years has been happening to humankind like fate. Countervailing power, that is to say, may arise not through political intervention from outside the economic system, as it did in the New Deal, for example, but from within the economic system itself, through the democratization of ownership.

The managerial revolution of the mid twentieth century effectively separated ownership of the corporation from its control. But the hostile takeover movement of the 1980s, when the owners began to rise up against underperforming managers, signaled the end of that separation and the beginning of something new -- the replacement of managerial with pension-fund capitalism. A contradiction haunts pension-fund capitalism: in its restless drive for higher returns it undermines the jobs of the men and women who hold the pensions. The twenty-first century will test whether that contradiction will stand.

* * *

The end of the separation of ownership from control of the corporation has had a political echo. A President of the United States notorious for setting policy by the polls put forward a plan in his 1999 State of the Union Address that would have instantly made government the biggest single investor on Wall Street. Clinton suggested investing surplus money from the federal budget in the stock market, and using the proceeds to save Social Security. Conservatives attacked as Bolshevism the idea of using a fraction of Social Security money for public investment in the private sector, and the Clinton Administration has said little about it since. But the cat was out of the bag. Government investment, as conservatives rightly fear, would almost inevitably introduce government influence or -- why not admit it? -- even government participation in control. Decisions fraught with public consequences about where to locate plants, about the effects of production on the environment, about wages, benefits, hours, health insurance, product quality and safety, pensions, and prices -- hitherto private decisions like these would now be made with public participation. Democracy would at last have caught up with capitalism.
This was not utopianism. This was very nearly practical politics. Fearing Republican caricature -- "Imagine the folks who run the Post Office running Wall Street" -- the Gore campaign has said nothing about Clinton's plan. But the issue will come up again should the corporate grip on our investor-driven politics -- its results measured in jobs lost to free trade and downsizing, in health and pension benefits cut back, and in wages lagging increases in productivity -- grow intolerable. Pension funds, whether private or public, are a latent force for world-historic change.

What do you think? Discuss this article in the
Politics & Society conference of Post & Riposte.

More on politics and society in Atlantic Unbound and The Atlantic Monthly.

Jack Beatty is a senior editor at The Atlantic Monthly and the author of The World According to Peter Drucker (1997) and The Rascal King: The Life and Times of James Michael Curley (1992).

All material copyright © 2000 by The Atlantic Monthly Group. All rights reserved.
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