PCDForum Article #20,   Release Date May 20, 1997

by David C. Korten

Proponents of market liberalism claim the free market is the essential foundation of political
democracy–a guarantor of the rights of people against the abuse of state power. They neglect,
however, the important ways in which the unfettered market tends to function as a profoundly
undemocratic institution.

Political democracy vests rights in the living person, one person, one vote. By contrast,
the market recognizes only money, not people–one dollar, one vote. It gives no voice to the
penniless, and when not balanced by constraining political forces can become an instrument of
oppression by which the wealthy monopolize society’s resources, leaving the less fortunate
without land, jobs, technology or other means of livelihood. Only when wealth is equally
distributed can the market be considered democratic in any meaningful sense.

Global markets are now dominated by global mega-corporations–among the most
undemocratic and unaccountable of human institutions. By its nature the corporation creates a
legal concentration of power while shielding those who wield that power from accountability for
the consequences of its use. Many mega-corporations command more economic power than do
the majority of states and dominate the political processes of nearly all states. Their growing
unaccountable power poses a serious threat to the basic economic and political rights of people

The time has come to re-examine some of our most basic assumptions about the nature of
democracy, human rights, and the institution of the corporation. The survival of our political
freedoms depends on recognizing that economic rights are an essential foundation of political
democracy. Consider for example two of the most fundamental of all human rights–the right to a
means of living–literally the right to live–and the right to participate in making the decisions
that affect our lives.

The Right of Access to a Means of Living. The earth’s life-sustaining resources are a common
heritage of all life. All people are born with an inalienable right to a sufficient share of these
resources to create a secure and fulfilling life for themselves and their families. They have a
corresponding responsibility to share and steward these resources to the benefit of all persons and
other living things.

Since the most basic requirements of living depend on the products of the earth, there is a
fundamental–though often neglected–connection between livelihood rights and property rights.
English Philosopher John Locke set forth a moral justification for property rights in The Second
Treatise of Government
published in 1689. Locke argued that where unused land is abundant, a
man has a right to appropriate for his private and exclusive use the land which he tills to produce
for his basic subsistence needs. It is through the application of his labor to make the land produce
that he acquires this private right. Locke stressed that given the condition of abundance, such
appropriation in no way deprived others of similar opportunity. Locke was also clear that the
rightful claim to a property right followed only from the application of one’s personal labor.
Furthermore, he said, this claim legitimately extended only to such property as required to meet
one’s own material needs–suggesting that a property right is virtually synonymous with a
livelihood right,

Locke, however, went beyond this relatively unassailable moral argument to seek
justification for actions of those who accumulate property rights far beyond their personal needs.
Presuming that property rights are most likely to be accumulated by clever and industrious
persons who seek to realize their full productive potential, Locke argued that the result of this
accumulation would be to maximize the wealth of society and thereby the well-being of all. It is
essentially the same argument that economists make to this day in defense of inequality based on
the assumption that the surpluses created through investments of the wealthy in a growing
economy will be widely distributed through society in the form of high-paying jobs and well-funded public services.

It is noteworthy that the moral defense of inequality imbedded in Locke’s thesis and the
work of most modern economists rests on two inadequately examined assumptions: 1) natural
wealth is abundant relative to need; and 2) the benefits of an overall increase in economic
activity are widely shared even when wealth is distributed unequally. Unfortunately, for several
billion people who find their livelihoods increasingly at risk, neither premise is valid in our
present world. To the contrary, the poor are being excluded from access to land, technology is
eliminating jobs faster than it is creating new ones, and public services are being systematically
dismantled–all to increase the riches of those whose wealth already exceeds any conceivable
need. In short, property rights are being used routinely to justify the exclusion of those without
property from access to a decent means of living.

As suggested by Locke’s argument, the rightful purpose of a property right is to protect a
person’s right of access to a means of livelihood or to secure for the individual a just reward for
entrepreneurial initiatives that create a better life for all. A property right loses its legitimacy
when its exercise by those who have more than they need denies others of their rightful means of
livelihood or otherwise diminishes their opportunities for a full and meaningful life. The
livelihood rights of the many come before the property rights of the few. Recognition in our laws
and public culture of this limitation of property rights is fundamental to the market’s socially
efficient function.

The Right to Participate in Decisions That Affect One’s Life and Community. Born with
reason, conscience, and the capacity for intelligent choice, all people have the inalienable
right–indeed the obligation–to use these gifts to participate actively in the decisions that affect
their lives and communities. The rights of speech and assembly derive from this basic right to
participate. The right to participate resides in the person and does not rightfully extend to any

In the economic realm the exercise of the right of participation extends far beyond
choosing among those products the market finds it profitable to offer us. It includes the right to
participate in setting standards and priorities for the economic affairs of our communities, the
uses to which our local resources will be put, and the conditions under which we will engage in
external trade and invite the participation of others in our domestic economies.

This right is under attack by the world’s mega-corporations that seek to establish their
own right to move across the face of the planet without restriction to extract resources, exploit
unorganized and unprotected labor, evade taxes and environmental regulations, and monopolize
indigenous knowledge and genetic materials without regard to the human and environmental
consequences. Their weapons of choice are international agreements on trade and investment that
take precedence over the rules and regulations established by people and their governments to
govern local commerce. Negotiated in secret and implemented without full public discussion and
democratic assent, these agreements are systematically eroding the democratic rights of people to
regulate their own local and national economies, and to set rules for commerce consistent with
their own values and judgements regarding their personal and community needs. The interests of
money and the fictitious legal persona of the corporation are thus placed ahead of the interests of
living persons and their communities–all in the name of market freedom.

It is useful to recall that Adam Smith, the patron saint of free marketeers, favored a
market comprised exclusively of small buyers and sellers. Smith considered the corporation to be
an instrument for monopolizing markets and saw no place for such institutions in a properly
functioning competitive market economy. By his reckoning the corporation is an anti-market

A corporation comes into being only through the public act of the government that issues
the corporate charter. The creation of a corporation is thus a public, not a private, act and its only
justification is to serve a public purpose. Whatever privileges or authority the corporation may
enjoy are derived from the authority of government, which is itself derived from the will of the
people. It therefore follows that the corporation is rightfully subject to the will of the people and
to whatever laws people freely chose to establish governing its function.

Nor does a corporation rightfully enjoy any privilege beyond the jurisdiction of the
government that issued its charter unless and until the people of another jurisdiction explicitly
chose to grant it such privilege. It is the proper function of the corporation to implement the laws
that people establish through their governments, not to participate in their creation. Indeed, it is
essential to the integrity of democratic governance that corporations be barred from political
participation of any kind on the theory that political rights reside only in real people.

The idea that corporations should enjoy the rights of flesh and blood persons–including
the right of free speech –grew out of a U.S. Supreme Court decision in 1886 that designated
corporations as legal persons entitled to all the rights and protections afforded by the Bill of
Rights of the U.S. Constitution. Significantly, the U.S. Constitution makes no reference to
corporations. It was a decision without legal or moral foundation made by a corrupted court

As citizens it is our right to revise existing legal codes to make clear that human rights
belong only to flesh and blood persons. Similarly, it is our right to replace trade and investment
agreements that abrogate the most basic political and economic rights of people with
international agreements that protect the rights to economic and political choice of all people
against infringement by democratically unaccountable institutions–either state or corporation.

Markets are important institutions and they have an essential place in any democratic
society–functioning within a framework of democratically determined rules and public
safeguards. There is nothing democratic, however, about an unregulated market that responds
exclusively to the needs of the wealthy and subordinates human rights and interests to corporate
rights and interests. In the end only an active and politically engaged citizenry can assure the
protection of our human rights from the arbitrary use of power by either states or corporations.
Institutional power and legitimacy flow from the will of people, and when any institution usurps
our natural rights, it is right of the people to restructure, replace, or eliminate, that institution.


David C. Korten is president of the PCDForum and author of When Corporations Rule the World published by
Kumarian Press and Berrett-Koehler Publishers.

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