A Brief History of the Corporation: 1600 to 2100

Paul Raven @ 22-06-2011

This is a rather excellent essay, and you should go and read it. With all the normal I-am-not-an-economist caveats, Venkatesh Rao’s reading of post-Enlightenment history in terms of the rise and fall of the concept of the corporation is powerful stuff, and – unlike a lot of economics material I’ve read recently – it actually manages to look beyond tomorrow afternoon, albeit with a certain amount of shrugging (I’d much rather have someone admit they’re not sure how something’s going to pan out than dress up a guess as a given). It clocks in at over 7k words (!) so you’ll wanna set aside some time to read the whole thing; I suspect that even those among you who’ll disagree with some of Rao’s mappings will still find plenty of stuff to think about.

But hey, this is Futurismic, and we’re all about the hand-picked excerpts, so here’s a teaser that makes it clear that not only are today’s rapacious and out of control corporations nothing new, but that they’re also pussycats compared to their historical forebears:

The [East India Company] was the original too-big-to-fail corporation. The EIC was the beneficiary of the original Big Bailout. Before there was TARP, there was the Tea Act of 1773 and the Pitt India Act of 1783. The former was a failed attempt to rein in the EIC, which cost Britain the American Colonies.  The latter created the British Raj as Britain doubled down in the east to recover from its losses in the west. An invisible thread connects the histories of India and America at this point. Lord Cornwallis, the loser at the Siege of Yorktown in 1781 during the revolutionary war, became the second Governor General of India in 1786.

But these events were set in motion over 30 years earlier, in the 1750s. There was no need for backroom subterfuge.  It was all out in the open because the corporation was such a new beast, nobody really understood the dangers it represented. The EIC maintained an army. Its merchant ships often carried vastly more firepower than the naval ships of lesser nations. Its officers were not only not prevented from making money on the side, private trade was actually a perk of employment (it was exactly this perk that allowed William Jardine to start a rival business that took over the China trade in the EIC’s old age).  And finally — the cherry on the sundae — there was nothing preventing its officers like Clive from simultaneously holding political appointments that legitimized conflicts of interest. If you thought it was bad enough that Dick Cheney used to work for Halliburton before he took office, imagine if he’d worked there while in office, with legitimate authority to use his government power to favor his corporate employer and make as much money on the side as he wanted, and call in the Army and Navy to enforce his will. That picture gives you an idea of the position Robert Clive found himself in, in 1757.

He made out like a bandit. A full 150 years before American corporate barons earned the appellation “robber.”

Rao’s thesis here is that the corporation – in terms of its power and influence – is actually entering its twilight years as we hit the limits of certain forms of economic growth; as such, I guess we have to view the recent banking crises as one last desperate – and rather savage – grasp for power and influence over a changing world. I certainly hope he’s right… though his concept of “Coasean growth” probably won’t be as appealing a replacement for the status quo for others as it is for me.


Aliens among us: Charlie Stross on the corporate invasion

Paul Raven @ 13-12-2010

More challenging ideas from Chateau Stross (or should that be Schloss Stross?) – he’s not the first to frame the corporation as a non-human entity with an alarming degree of power and control over human affairs, but – given the current economic and political climate – it’s a conversation worth revisiting.

We are now living in a global state that has been structured for the benefit of non-human entities with non-human goals. They have enormous media reach, which they use to distract attention from threats to their own survival. They also have an enormous ability to support litigation against public participation, except in the very limited circumstances where such action is forbidden. Individual atomized humans are thus either co-opted by these entities (you can live very nicely as a CEO or a politician, as long as you don’t bite the feeding hand) or steamrollered if they try to resist.

In short, we are living in the aftermath of an alien invasion.

The comment thread is fantastic reading too, but very long; set aside an hour or so to really dig into it properly.

Here’s a counterpoint from the NYT‘s Paul Krugman:

These days, we’re living in the world of the imperial, very self-interested individual; the man in the gray flannel suit has been replaced by the man in the very expensive Armani suit. Look at the protagonists in the global financial meltdown, and you won’t see faceless corporations subverting individual will; you’ll see avaricious individuals exploiting corporate forms to enrich themselves, often bringing the corporations down in the process. Lehman, AIG, Anglo-Irish, etc. were not cases of immortal hive-minds at work; they were cases of kleptocrats run wild.

And when it comes to the subversion of the political process — yes, there are faceless corporations in the mix, but the really dastardly players have names and large individual fortunes; Koch brothers, anyone?

I find myself somewhat on the fence here, principally because I’m painfully aware that I know enough about economics to know that I don’t know enough about economics. I’m not sure that the corporation as a concept is inherently bad, but I’m very sure that the current protectionist set-up is a root cause of many of our current problems, at both the global and local scales.

What do you think?


Google for President? Nations, corporations and the future of politics

Paul Raven @ 04-02-2010

(Thinking out loud here, folks, so do feel free to chip in and tell me why I’m completely wrong on any or all points raised… :))

The guys at TechDirt pointed toward a wryly tongue-in-cheek piece at Bloomberg that attempts to nominate Google, Inc as a presidential candidate. Obviously enough, it’s a response to the recent Supreme Court ruling that corporations should have the same “freedom of speech” as a person, something of a reductio ad absurdum… but it throws a light onto the increasing political clout of corporations in the States and elsewhere. A company running for political office is ridiculous (at least on the face of it), but a suite of corporate political rights and powers isn’t quite such an inconceivable idea.

After all, we’re already witnessing the decline in power of the nation-state as a political player, and there are numerous corporations whose yearly accounts eclipse the GDP of many countries. In some respects, it’s bizarre that corporate political power isn’t already enshrined in written legislation… if only because to legislate it would be a tacit admission that it exists, and that its boundaries need defining. As geography becomes anathema thanks to communications networks and climate change migration, the comparative security and reliability of the corporation as sovereign will start to make more sense to populations of rootless, landless and unrepresented people. I wouldn’t be surprised to see some corporations represented in the United Nations within my lifetime… assuming that the UN lasts long enough, that is.

Of course, the potential for corporations to abuse the trust placed in them by their citizen/employees will be immense… but will it be any more so than the potential for nation-states to do the same? Profit is just another ideology, after all… and much as the corporate mindset tends to set my teeth on edge, it’s an ideology with coherent logical underpinnings, which is more than I can say for most of my current political options here in the UK.

And don’t forget the point made by Jason Stoddard, namely that a profit-focussed corporation has no reason to enslave the population and make their lives miserable. Quite the opposite, in fact – corporations want happy people with expendable money in their pockets, and given that those two things are becoming very difficult for governments to provide in some parts of the world, the corporation as focus of political allegiance doesn’t seem as insane as it might at first glance. There’s precedent, too – East India Company, anyone? Hudson’s Bay Company?


Google threatens to pull out of China over hacking allegations

Paul Raven @ 13-01-2010

Well, this story’s everywhere this morning. After allegedly uncovering a “sophisticated and targeted” hacking attack, Google are now “reviewing the feasibility of their business operations in China”, which includes the controversial censorship systems they applied to Google.cn; here’s the official announcement, which is a beautiful example of legalese that says one thing, implies many others and leaves a lot of spaces uncharted. Chinese citizens are laying flowers outside Google’s Beijing office [via Jan Chipchase].

Beyond the glossy surface of the public announcements, however, we can’t be entirely sure what’s going on. The Wikileaks crew have tweeted a few revealing points:

gossip inside google China is gov hackers found infiltrating google source code repository; gmail attacks an old issue. #

Gossip from within google.cn is Shanghai office used as CN gov attack stage in US source code network. #

China has been quietly asking for the same access to google logfiles as US intelligence for 2-3 years now. #

Should be noted that Google keeps secret how many user’s records are disclosed to US intelligence, others. #

correction: the time of the Chinese requests/demands are not exactly known and are possibly in the last 12 months. #

Regardless of the exact causes and motivations behind Google’s threats to withdraw, it highlights the incredible bargaining power that a company of that size and influence has on the same stage as nation-states. It’s not entirely unimaginable to think that Google suspected something like this might have happened all along, and they were just waiting for the right moment to bring their leverage to bear – after all, China’s a big old market, and they’d probably far rather its citizens had full unfettered access to the web, if only so as to advertise to them more effectively. So why not agree to initial compromises, let the people get a taste for what they have to offer, and then threaten to take the toys home when the government makes an institutionally inevitable blunder?

It remains to be seen how seriously the Chinese government will take this threat – it’s not been a good few months for them as far as international publicity is concerned, and Google is a big economic player whose favour I suspect they’d rather not lose. But China’s people will be seriously miffed about it, and I that’s what makes me think that Google are far more cunning than they’re letting on. I’m not under the illusion that they’re interested in anything more than running a profitable business (though that whole “don’t be evil” thing is a pretty effective rule-of-thumb for achieving such), and bringing down totalitarian governments isn’t in their regular remit. But look at it this way: if you were running a business of that size and looking at a potential market that lucrative, and you saw a way to potentially open up the laws that currently restrict your business in that market by playing off the market’s citizens (and international public opinion) against the government, and you reckoned you could pull it off…

OK, so I’m hypothesising wildly here, but my point is that it’s by no means completely implausible. I’m reminded of Jason Stoddard’s points about the mythical bugbear of evil corporate hegemony:

A corporation doesn’t care if you’re living in a 300 square foot studio apartment or a 6000 square foot McMansion. They don’t want to wipe out the McMansion dwellers, or elevate the studio apartment owners. They only care about one thing: that you buy their stuff.

For everything they do, they’ll have justification. There’s no hidden business plan with a top-line mission statement of “Destroying Civilization As We Know It.”

But there will be hundreds or thousands of decisions, all based on maximizing profit. Substituting cheaper ingredients: maximize profit. Use low-income countries for labor: maximizing profit. Driving smaller competitors out of business: ensuring growth, which maximizes profit. Extending credit to anyone: maximizes profit.

If they can make a bigger profit selling you a “green” condo and a Prius rather than a McMansion and an Escalade, that’s exactly what they’ll do. If they think they’ll make an even larger profit renting you an apartment and leasing you a bike, that’s what they’ll do.

Google stand to make a lot of money if they can loosen the government leash in China, right? Right… so keep your eyes on the dollar signs. This story isn’t over yet, I suspect.


Writing the mega-corporation realistically

Paul Raven @ 22-04-2009

corporate headquartersJason Stoddard has gotten tired of stories and novels featuring shadowy and nefarious mega-corporations seeking to enslave the globe, and with good reason – it’s just not a realistic or logical thing for a corporation to do, and it’s becoming a modern iteration of the moustache-twirling Snidely Whiplash villain cliché. [image by victoriapeckham]

A corporation doesn’t care if you’re living in a 300 square foot studio apartment or a 6000 square foot McMansion. They don’t want to wipe out the McMansion dwellers, or elevate the studio apartment owners. They only care about one thing: that you buy their stuff.

For everything they do, they’ll have justification. There’s no hidden business plan with a top-line mission statement of “Destroying Civilization As We Know It.”

But there will be hundreds or thousands of decisions, all based on maximizing profit. Substituting cheaper ingredients: maximize profit. Use low-income countries for labor: maximizing profit. Driving smaller competitors out of business: ensuring growth, which maximizes profit. Extending credit to anyone: maximizes profit.

If they can make a bigger profit selling you a “green” condo and a Prius rather than a McMansion and an Escalade, that’s exactly what they’ll do. If they think they’ll make an even larger profit renting you an apartment and leasing you a bike, that’s what they’ll do.

While we’re on the subject of capitalist economics, ethics and prosperity, here’s Matt Ridley at Wired UK explaining why robber barons always end up on top – it’s because they find ways to make things cheaper for you, the consumer:

It’s still happening today. Wal-Mart, Aldi and Ryanair won their market shares by ruthlessly charging us viciously lower prices. And here lies a cause for optimism in the midst of this recession. Even though jobs are being lost, houses repossessed and firms bankrupted, the underlying deflation caused by innovation is still going on – indeed, on the web, it’s accelerating. All over the internet, people are dreaming up ways of making things available to you more cheaply, more conveniently, more copiously and more quickly. That is what will cause prosperity to return one day.

That’s a brave op-ed, given the current econo-political climate, but I suspect he’s at least half right. However, I was somewhat amused to note that Ridley’s masthead note says he was a non-executive chairman for Northern Rock for three years; make of that what you will. 😉


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