Part II: Corporate Pathology and the Suicide Economy
By David C. Korten
The defining agenda of the Era of Empire has centered on unifying the planet’s territory and resources under centralized institutions with the power to impose order in the name of peace and prosperity. The dominant institutions, including states and corporations, feature coercive hierarchies able to maintain significant control over the behavior of hundreds of thousands, even millions of people. Such institutions have contributed many benefits to humanity, including many extraordinary advances in knowledge, technology, communications, and organization. Far from bringing universal peace and prosperity, however, the dark side of their legacy is a world of enormous inequality, violence, repression, and environmental destruction.
Those who sit atop the resulting pyramids of power all too often use their favored positions for personal gain at expense of those less favored. It was true for the kings and emperors who ruled by divine right. It is true for many of the political elites who hold power by electoral mandate. And it is true for many corporate CEOs, as the Enron scandal revealed so dramatically.
Over the past twenty years there has been an enormous shift in power from the institutions of the state to global corporations with economic resources far greater than those of most states and with a global reach that places them beyond accountability to any persons, place, or public institution. Through the processes of corporate globalization humanity is moving rapidly toward Empire’s ultimate goal of unifying the world’s people under a unified system of governance.
Proponents of corporate globalization hail this consolidation as the ultimate victory of democracy and the market. Unfortunately, they mistakenly equate the rule of money with democracy and central economic planning by global mega-corporations with the playing out of market forces.
Far from a victory of democracy and the market, humanity has fallen victim to a new variation on the age old theme of tyranny. The critical difference is that the present tyranny lacks a human face. It is more institutional than personal, an ominous victory of technology, culture, and institutions over people and more generally of money over life. It is a system of institutional power driven by financial markets and the profit imperatives of publicly traded corporations that has taken on a life of its own — functioning on autopilot beyond human control.
A money-centered culture interacts with the power of the institutions of money in a self-reinforcing vicious cycle to maintain human subservience to the system. Through their control of the modern mechanisms of cultural reproduction (mass media, advertising, and education) the institutions of money fabricate a materialistic, money-loving culture suited to their ends. Financial power becomes cultural power, which becomes institutional power, which becomes financial power, which becomes cultural power, which becomes….
Hired by Money to Grow Money
Visit a corporate headquarters and you see people, buildings, furnishings, and office equipment. By all appearances the people are running things. An organization chart will show clear lines of authority leading to a CEO who in turn reports to a board of directors. It is easy to think of a corporation as a community of people. It is, however, a misleading characterization precisely because in a publicly traded corporation the people are all employees of the institutions paid to serve the institution at its pleasure.
The publicly traded, limited liability corporation is more accurately described as a pool of money with special legal rights and protections dedicated to self-reproduction. The people, including the CEO and directors can be dismissed without recourse. Only the money, which the corporate officers are legally bound to serve, has rights. In theory it is the shareholders whom management serves, however, since most shares are held in trust by various institutional investors, the real shareholders are generally invisible even to the corporate officers. Management’s real focus is on the money, not the shareholders. In effect they are hired by money to nurture its growth and reproduction even at the expense of life.
Powerful though global corporations may be, the ultimate decision power in the suicide economy resides in the global financial markets. Each day these markets facilitate the exchange of vast sums of electronic money that exists only in computer memories. The money flows in response to purchase and sale orders from money traders betting on movements in the numbers that flash across their computer screens. It is the great cyberspace casino, the ultimate computer game. Because they tend to act in concert with a kind of herd mentality in response to fact, rumor, and shifting perceptions of what’s hot and what isn’t the players are sometimes referred to as the electronic herd. They live in a world of pure money that pays them for only one thing: using money to make money for money.
In a mere instant the actions of the money traders may make and break the fortunes of individuals, giant corporations, and powerful nations. Their computer screens, however, tell them nothing of the consequences either for nature or for the millions — even billions — of people whose lives their decisions affect. The traders and their world are equally invisible to those who bear the consequences of their decisions. The lives of those who live in the living world are integrally linked to the lives of those in the money world, but neither sees the connection. This mutual invisibility makes the institutional tyranny of money the most dangerous of all tyrannies, for those who make the decisions have no knowledge of the consequences of their actions and those who bear the consequences cannot identify and confront an unknown and invisible oppressor.
The more important consequences of this perverse system include an unconscionable and growing concentration of wealth and power that encourages wasteful extravagance on the part of the few while imposing deprivation and servitude on billions of people and an accelerating depletion of natural wealth it took our living planet billions of years to produce. Either of these trends will seal the human fate if allowed to continue.
The publicly traded, limited liability corporation that is the institutional centerpiece of the corporate global economy is by law and internal structure a single purpose organization in the business of serving the demand of financial markets for every increasing financial returns. Workers, customers, politicians, and the general public are only means to this end. What ever products and services the publicly traded corporation may provide are incidental to its primary business purpose of making money. In short it is an economic predator.
Human persons who behave in a similarly self-centered, anti-social, and ultimately self-destructive way are called sociopaths and they are commonly confined to prisons or mental institutions. Nature’s closest equivalent the publicly traded, limited liability is the cancer cell, which inflicted persons will endure extremely painful and debilitating medical treatments to eliminate from their bodies. In the suicide economy, cancer-like corporate sociopaths are regularly rewarded with rising share prices and multi-million dollar bonuses for their CEOs. Corporate officers suspected of sacrificing share price to other concerns — such as workers, community, or the environment — face a serious threat of dismissal.
The Enron scandal provided a rare public window into the depth of the corruption of the ruling institutions of the suicide economy. It is well known to insiders that the fraud and misrepresentation revealed in the Enron case, much of it perfectly legal under rules written by politicians on corporate payrolls, is far from the exception. According to Business Week (March 25, 2002), the Enron case exposed,
a mess that has been accumulating for years — an alarming erosion in the honesty and reliability of financial information about companies, data on which America’s markets depend. Companies have played numbers games with increasing abandon — exaggerating profits, understating debts, hiding costs — and indulgent auditors have O.K.’d it all, for fear of losing juicy consulting contracts with their clients. Overblown earnings inflated the bonuses of corporate insiders, many of whom reaped big profits cashing in stock options ahead of earnings restatements. Meanwhile investors were left clueless about what was really going on inside once-admired outfits such as Enron.
It is not a wise system.
Four characteristics of the publicly traded, limited liability corporation account for much of its sociopathic behavior:
· Unlimited Size. The largest global corporations command more economic power than most countries. Of the hundred largest economies in the world, fifty-one are economies internal to corporations. The dominant trend is toward continued rapid growth in the size and power of individual corporations through internal growth, mergers and acquisitions.
· Centralized Authority. A corporation is among the most authoritarian of human institutions. Its chief executive officer has the authority to hire and fire people, open and close facilities, buy and sell other companies, add or drop products, use corporate resources to shape public opinion and public policies in ways of his choosing, and move operations around the world — with virtually no recourse by the people and communities effected.
· Absentee Ownership. The publicly traded corporation institutionalizes an extreme form of absentee ownership. A major portion of the ownership interests in most corporations are aggregated in professionally managed investment funds. The real owners are unlikely to know even what corporations they “own,” let alone what devastation these corporation may be causing in the name of shareholder interest. They know only the financial returns produced by the managers of the portfolios in which they hold shares — which they may track on a daily or quarterly basis. Yet by law, custom and internal structure corporate management is accountable only to its “owners” and is required to place their interests ahead of all other interests in corporate decision making.
· Limited Liability. The corporation’s owners are exempt from any liability beyond the value of their shares for the consequences of actions taken by the corporation in their name, no matter how destructive or illegal. Directors and managers face almost no risk of personal fine or imprisonment for crimes committed by the corporations in their charge.
The institution of the publicly traded, limited liability corporation is a legalized invitation to organized irresponsibility on a breathtaking scale and it has no more acceptable place in a healthy community than a cancer has in a healthy body.
High Cost of Hierarchy
Apologists for corporate greed and violence to life maintain that this is simply nature’s way of perfecting genetic lines. Contrary to the claims of such social Darwinists, competition and hierarchies of domination in nature are sub-texts to the deeper the processes of cooperative self-organization by which trillions of individual, self-directing living organisms organize themselves into wholes with capacities far beyond the sum of their parts. Healthy, mature living systems are models of frugality and mutuality in which each organism and species takes only what it needs as the system conserves and continuously recycles energy and materials to maximize the life of the whole. Apparently, nature has learned that while competition and dominator hierarchies have their place, they are on the whole inefficient and wasteful of system resources — as the human institutions of Empire and the suicide economy so dramatically demonstrate.
Competition among global corporations leads them to expend hundreds of billions of dollars worth of society’s scarce resources on marketing and advertising in a battle for market share that contributes nothing to the well-being or quality of life of society. Competition among nations leads to the allocation of scarce resources to armaments, military troops, and wars that destroy whole societies and devastate the environment.
Maintaining the bureaucratic hierarchies of corporations and states requires an expensive organizational infrastructure of highly paid managers, accountants, lawyers, and auditors — and all the support staff and facilities they require — to no actual productive end. Meanwhile more than a billion of the world’s people live on less than a dollar a day and lack the most basic necessities of life.
Victory often goes to the corporation with the largest advertising budget or the state with the largest military. Corporations thus direct ever more resources to advertising to expand market share to expand advertising budgets to expand market share… Imperialistic states direct ever more resources to military budgets to extend dominion over ever more territory, resources, and people to expand military budgets…. Hierarchy grows, inequality increases, and rulers become ever further removed from the realities of daily life and the real world consequences of their decisions.
As power begets power and competition becomes more ruthless, the appetites of the wealthy become more extravagant and the excluded become more desperate. The growing gap erodes trust and institutional legitimacy, which in turn compels an ever greater diversion of resources to security measures — from car alarms and security guards to police and prisons. The planetary life support system becomes over stressed and critical subsystems collapse. Insulated from reality, power holding elites fail to realize the terrible truth that the institutions of their power have become instruments of humanity’s suicidal self-destruction — that their beloved global capitalist economy is a suicide economy.
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Healthy living systems create new opportunities for life to grow and flourish. The suicide economy grows money at life’s expense.
Given the speed at which the suicide economy is eroding the social and natural capital that is the foundation of human existence, humanity may have no more than a twenty to thirty year window of opportunity to replace the suicide economy of the Era of Empire with a planetary system of living economies adapted to the reality of a finite living planet.
Natural ecosystems offer useful insights for those who engage this challenge.