corporate foundations of law and the state

Corporate Foundations of Law and the StateAuthor(s): Howard ShermanSource: Journal of Economic Issues, Vol. 6, No. 1 (Mar., 1972), pp. 87-90Published by: Association for Evolutionary EconomicsStable URL: http://www.jstor.org/stable/4224123 .

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Corporate Foundations of Law and the State

Howard Sherman

Professor Arthur Miller's article, "Legal Foundations of the Corpo- rate State," is pioneering and excellent, and my remarks are meant to extend his work, not to criticize it. He is moving in the right direction on a vital issue, but does not go far enough. Part of the problem is his lawyer's bias. He talks about the legal foundations on which the corporate state is built, but that conventional approach reverses the reality: law is a reflection of the politico-economic relations of society. The economic power of corporate owners and managers is manifested through their political power, which is used to pass laws that reflect and support their economic power. Miller's article still seems to have ves- tiges of the old view that laws are passed and politico-economic in- stitutions and relationships then are erected on the basis of those laws.1

Most important, while he sees much of the evidence of corporate power in our society, Miller still accepts the conventional wisdom of political scientists that corporate power is merely one power among many. He speaks of "transactions between government and pluralistic social groups (in our case the corporations)." It may be argued, on the contrary, that no other power in our society approaches that of the large corporations, and that, consequently, they are the insiders holding state power; workers, farmers, poor, and Blacks are outsiders looking long- ingly at the candy palace of government. To be sure, Miller says that "a legal connection can thus be shown between corporation and the state, with the resulting synthesis a form of corporativism," but elsewhere he poses the two as separate: "the state will become more and more The author is Professor of Economics, University of California, Riverside. This paper was presented at the Annual Meeting of the Association for Evolutionary Economics, New Orleans, Louisiana, 27-28 December 1971.

87



88 Howard Sherman

important ... the dominant member of the duo ... but ... in the future as in the past, those with wealth will have the ultimate power." It perhaps would be more correct to say that there is little separation between corporate wealth and the state, and that the state (certainly under Nixon, but in all previous administrations as well in varying degrees) is the minion and errand boy as well as protector of the large corporations.

In Marx's terminology, there is not one ruling class in the economy and another in the government, but rather there is an economically based ruling class that rules through the state apparatus. In the blunt terminology of an American muckracker, Woodrow Wilson wrote: "Suppose you go to Washington and try to get at your Government. You will always find that while you are politely listened to, the men really consulted are the men who have the biggest stake -the big bank- ers, the big manufacturers, the big masters of commerce, the heads of railroad corporations and of steamship corporations.... The masters of the Government of the United States are the combined capitalists and manufacturers of the United States."2

There is not enough room in this brief comment to prove the truth of this hypothesis, but it may be useful to outline the politico-economic evidence that such a verification would have to consider. The "evidence" is thus limited to subassertions, neither detailed nor proven, since this would require a large book.3

In the first place, the degree of political participation tends to vary with class background. The average worker is exhausted after his job each day, and wishes only to relax, having neither time nor interest nor money to play politics. Workers vote in lower percentages than the middle and capitalist classes. Workers give less money to political parties, attend fewer political meetings, work less for candidates, and even talk less to others in favor of a party than do the owning classes. The reasons are partly less time and money and more exhaustion, but the low participation also reflects a manipulated ignorance of the facts.4

We are all molded by the system, participate in its competitive race, and take its ideology for granted from childhood. The ideology is rein- forced by the mass news media, which generally carry very little news; what little there is usually will be slanted toward big business opinion. This is neither a conspiracy nor unexpected, since the media controllers are themselves products of ideology, and most news media are big businesses, controlled by large corporations (such as Time-Life). More- over, they are very sensitive to the opinions of their largest advertisers, who are also big businesses. Big business uses advertising not merely to sell us useless trash, but also to sell us their ideology. An amazing



Corporate Foundations of Law and the State 89

percentage of advertising is now devoted to general advocacy of capitalism.5 Beyond this, there is the direct political advertising and lobbying by business and business-associated political parties. The effect of this ideology is so omnipresent that all of us reflect the attitudes of capitalism most of the time, regardless of our conscious political outlook.

Big business uses the private foundations to achieve more control over research and education. In addition, their control of government is utilized (as a feedback mechanism) to obtain more control. The military spending on research, for example, helps control scientists and education. There also is direct control of educational ideology through government at the state and local levels. Moreover, the ruling class makes use of the army, navy, and air force for overseas control, and to inculcate pro-capitalist ideology in the minds of young men. The police clearly are used to break up student and minority demonstrations and strikes. J. Edgar Hoover's FBI long has made the attack on the Left its major contribution to law and order; it is now joined in its task by our other "intelligence" agencies. Even the president's prestige is used-for what it is worth -to give speeches in favor of capitalism.

As a result of all this disproportionate political power, the small capitalist class controls most important political offices. Only 4 percent of U.S. presidents, vice-presidents, and senators have had fathers who were workers (that is, whose main income was from wage or salary income). Only 9 percent of the Congressmen in the House of Represen- tatives had fathers who were wage earners or salaried workers.6 The capitalist class or their hired retainers (executives and lawyers for big business) have had an overwhelming preponderance in the cabinet, exec- utive departments, regulatory agencies, top intelligence and military posts, and federal judgeships.7

The capitalist class uses its control of government not only to rein- force that control (as shown above), but also to help its money-making crusade. The "law and order" enforced by capitalist governments means primarily protection of private property, and protection of overseas investments (which now account for some 15 percent of all corporate profits). The latter function means that the American people have to pay out billions in taxes and thousands of lives every year. The taxes are used for vast military spending, which accounts for another 10 percent of all corporate profit. The military activity, which is the single most important activity of the U.S. government, helps protect and generate about 25 percent of all corporate profit, over 90 percent of which goes to the top 100 corporations.8 Overseas adventures and wars constitute a heavy cost to most Americans, but a major benefit to a small capitalist class.



90 Howard Sherman

Other evidence, if more is needed, of the capitalist use of the U.S. government is shown in the results of the supposedly liberal, progres- sive income tax, under which many millionaires manage to pay no taxes year after year. Similarly, the farm program, which liberals conceived in order to help the rural poor, has benefited very generously the large corporate farm owners. Another case in point is the liberal concept of wage-price controls, perverted so that wages are indeed frozen to very small increases, but most prices are still rising. As President Nixon expressed it, the purpose of the controls is to raise corporate profits, "which is good for all Americans."

Notes

1. Miller argues that most economists are ignorant of law and its role, so he may accuse me of an economist's bias. In defense, it may be noted that I was trained in law-Jur.D., University of Chicago Law School-before going into economics, so my formal training gives a presumption of equal competence or equal ignorance in both areas.

2. Woodrow Wilson, The New Freedom (New York: Doubleday, 1914), p. 83. 3. Some of this evidence is presented in a book just published by me, Radical

Political Economy (New York: Basic Books, 1972), chap. 9. 4. For much of the detailed data supporting statements in this and following

paragraphs, see the traditional text by Marian Irish and James Prothro, The Politics of American Democracy, 2d ed. (Englewood Cliffs, N. J.: Pren- tice-Hall, 1965), pp. 37- 38 ff.

5. Ibid., pp. 257-66. 6. Ibid., p. 39. 7. See G. William Domhoff, Who Rules America? (Englewood Cliffs, N.J.:

Prentice-Hall, 1967), pp. 10- 11 and passim. 8. For plentiful details and sources, see Howard Sherman, Profits in the

United States (Ithaca, N.Y.: Cornell University Press, 1968), pp. 136-38.



corporate foundations of law and the state

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