 One of the more surprising moments in the astonishingly popular documentary The Corporation is an historical one, where it is explained that joint stock companies are all the creations of—and can as easily be extinguished by—our government.
Joint stock companies, which are those owned by more than one person, were originally created to fulfill specific, time limited functions, usually in order to create something beyond the resources of any one single person. A large bridge or a railway track, for example, required the resources of many investors in order to be completed.
The original idea was that these special companies would be dissolved once their purpose was served. But so powerful did they prove themselves as wealth generators that investors in them soon abandoned any pretence of willfully winding them down. This was an “A-ha!” moment for the packed Cambie movie theatre.
So voracious for capital have these kinds of companies become that, by today, virtually the entire private half of the economy is comprised of only joint stock companies. What's more, an increasing portion of the public half of the economy—state-operated enterprises and services—are coming under the control of joint stock companies as well, as privatization-favouring political parties earn election to provincial and national governments.
Joint stock companies, like all other forms of companies, practice their own peculiar form of capitalism. But capitalism is only one of several forms of economic activity that comprise the markets. And of course, in turn, market exchanges make up only a portion of what happens in a whole national economy.
There are, for example, non-market exchanges in an economy, like when one wishes to mail a letter and must employ the services of the state-protected monopoly Canada Post. There are also other forms of market activity that are not capitalism, for example when non-profit enterprises compete for government social services contracts. And, finally, there are other forms of capitalism that behave very differently from that form exhibited by joint stock companies. For example, a proprietorship is more likely to be small and to find the owner and the manager being the same person, while a joint stock company is likely to be big and to employ managers who might never meet or know the owners. In this case, the bureaucracy headed up by the manager may well have different interests than those of the owners of the stock in the company, and will behave in devious ways at cross purposes to the owners (who, realizing this, invented boards of directors to oversee the work of the managers; a system not without its own problems, as the debacles at Enron and WorldCom recently proved).
So prevalent in the economy have joint stock companies become, however, that the popular impression is that they represent the only possible form of capitalism there is, that capitalism is the only form of market exchange imaginable, that market exchanges are the only form of economic activity found in the private sector, and that the private sector represents the entire economy.
But not only do the citizens directly control fully half of the economy through their various levels of democratically-elected governments (that do things like provide military protection, build and operate schools, and maintain sewer pipes, and so on), but they also indirectly control the other half of the economy, the private sector, all of whose participants exist only by state-granted license, and who all utterly depend on public utilities like money, laws, and knowledge, to perform whatever profit-generating activity they engage in.
As was evidenced in the Canadian federal election at the end of June, we the people show no hesitation in demanding that managers of all public sector activity closely obey our commands and do what we want them to do. But do we think to exercise our very same right to demand that managers of all private sector activity also closely obey our commands to do what we want them to do?
No we don't. In order to foster a free and therefore thriving and innovative private sector, virtually all prominent political parties in all Western nations have adhered closely to the principle that government authority should only do what is expressly permitted, and private companies should be allowed to do anything which is not expressly forbidden.
It's a principle that has worked enormously well for hundreds of years by allowing private investors to accumulate fantastically large hoards of capital, while at the same time allowing public authorities to exact sufficient tax from the private economy to fund strong health and education systems, vast networks of roads and railways, and even a modicum of a social safety net for the unlucky.
But there is now growing evidence that the old system has grown terminally ill. One kind of activity by one kind of player has come to so dominate the whole economy that it threatens to deflect the economy itself away from primarily serving the interests of the people to whom it belongs, and toward serving exclusively the interests of those who have come to dominate it: the big investors in joint stock companies.
There is further evidence that in being unnaturally deflected toward serving the interests of one of its participants alone, the economy itself might not long remain in a self-sustaining mode. Not only have large investors unwisely commandeered the Western worlds' economies to serve their interests alone, but in doing so, they have inadvertently poisoned those economies, and like a parasite grown too big and now out of control, they threaten to kill the host on which they depend.
In the past, when confronting times of crisis, Western societies have invented whole new ways of operating an economy. We have certainly arrived at a crisis in all our economies around the world today. We are either on the cusp of passing through to a whole new kind of economy, or coming to some kind of unprecedented collapse. The present generation will make that call—and time is short.
**** |
