Can corporations co-exist with democracy?
Rebecca Fisher of Corporate Watch is editor of Managing Democracy, Managing Dissent: Capitalism, Democracy and the Organisation of Consent
I will argue that corporations cannot co-exist with genuine democracy. A genuine, participatory democracy, in which the general populace participate in a substantive way, would threaten the capitalist system which corporations are built to serve. However, the emergence and predominance of the corporation has facilitated the emergence of a form of democracy – liberal democracy – which, by careful processes of management is made safe for corporations to dominate society, and for the capitalist system to reap enormous human and environmental damage.
I hope to make it clear that this liberal democracy is in fact a defensive strategy to protect the capitalist system from the threat of more genuine, participatory democracy. Not only can corporations not exist with a genuine democracy, but they have actively ensured to create the mainstream consensus that they can and must. In this way the anti-democratic nature of capitalism is hidden, and general consent to an unfree and unequal society is engineered. That such a defensive mechanism is necessary, and that it is built on an untruth, a contradiction, is testament not necessarily to the strength of capitalism, but to a weakness. It is a weakness we can exploit by redefining democracy as incompatible with corporations and the capitalist system.
In this talk I will only touch upon the various means in which liberal democracy is limited and managed by and for corporations. Instead, I will concentrate on how the contradiction between genuine democracy and corporate power exists at a very fundamental level, stemming from the historical roots of both capitalism and liberal democracy.
First of all, I will define some key terms, for the purposes of this presentation.
By Corporations, I mean commercial companies. These are essentially engines of profit. They exist to accumulate capital by commodifying and marketing more and more goods and services. They are the motors of the capitalist system, enabling it to continually expand. Capitalism must keep expanding to sustain itself: surplus profit must be extracted and reinvested for the system to continue. This process requires the majority to provide their labour – waged and unwaged – to keep generating profits. It can therefore permit only a limited degree of popular political participation.
Instead, corporations are tasked with disciplining our labour, and turning it into profit. They are the perfect mechanisms to do this. Profit-making is prioritised in their very structure. They are legally bound to maximise their profits for their shareholders over all other concerns. And as separate legal entities, the individuals who make decisions within the corporation, are not held responsible in the courts, or by the state, for actions of the corporation. Profit-making is the raison d'etre of the corporation, and nothing else need get in the way. Corporations have also accrued enormous economic, social and political power, in order to protect their ability to continue to make profits, which becomes increasingly difficult and prone to resistance in our finite world.
Democracy is a very slippery term with various changing and even sometimes contradictory applications. For the purposes of this talk I will be using the term to denote two quite separate notions. Firstly, participatory, genuine democracy is something few of us have direct experience with on a large scale. It would ensure equal access to decision-making and so equal political, social and economic power for all. Such a system would therefore be fully responsive to the needs, wants and desires of the entire populace. There is not time here to go into details – and indeed I am not an expert – but suffice to say that this is clearly incompatible with the oppressive capitalist system in which the majority have very little power over the political, social and economic forces that mould everyday life.
The second definition of democracy is a liberal democracy – in which people elect so called 'representatives' every 4 or 5 years, who will supposedly make decisions on their behalf. Yet in practice, this system of representation is severely flawed. Today elections are empty symbolic rituals, and most politicians owe their position, and are thus more loyal, to outside, and often corporate, interests. The 'choice' that voters face is restricted to ultimately very similar political parties, since these are the only ones able to gain a foothold in the mainstream political system.
Further, the real wielders of power are often unelected, unaccountable and untransparent: the corporations themselves, and other intranational institutions such as the IMF and the World Bank. The fact is that liberal democracy does not deserve to be called a democracy, so far removed it is from any notion of rule by the people. However, it retains this description as a result of a long historical process, beginning in the 18th century, of transforming democracy from a concept dangerous and threatening to the powerful, to a means of the maintenance of their power. This process was facilitated by the growth of the corporation.
So logically democracy and capitalism should not be able to co-exist. And indeed, for a long time democracy was presumed to be incompatible with an unequal society. For instance, James Madison, one of the 'Founding Fathers' of the United Sates wrote that “democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security, or the rights of property”. Thus democracy, and its advocates struck fear into the hearts of the ruling classes – bringing to mind armies of the oppressed clamouring for a democracy that would bring liberty and equality. Yet today we are expected to believe that our political interests are represented in a liberal democracy, even when social inequality is constantly rising both within and between countries, and in which we are able to exert very little political power. How did this fundamental shift take place?
Well, this involves looking back into history, as feudalism declined and capitalist relations of market exchange began to dominate. The great innovation upon which this shift depended was the separation between the political and economic sphere, which corporations helped to entrench and legitimate. Under the feudal system political and economic power were indivisible – a situation which is evident in the derivation of the word state from 'estate'.
But the emergence of capitalism was precipitated by the growth of a new class of merchants, traders and industrialists who successfully won the freedom to trade, released from their ties to the feudal aristocracy. Now, the political elites were no longer necessarily also the primary wielders of economic power. Economic power became in theory private – wielded by industrialists and merchants separate from the political and public institutions of the state. This had wide-reaching consequences on the concept of individual political rights.
This shift was legitimated by the social contract, replacing the earlier 'divine social order'. This conferred, at least in theory, universal equality under the law rather than before God, as self-contained individuals with innate rights and liberties. This became known as liberalism. However, at least conceptually, it also released those upon whose labour the economic system still depended: the masses. They could now, within this doctrine, claim the same social, political and economic equality as the elites. In this climate, democracy became a very dangerous concept for those in power, and compelling for those who weren't.
This was a time of social rebellion: indeed the decline of feudalism was a product of the rising social conflict. That capitalism emerged from this process was far from certain, but was achieved via the suppression of social movements and rebellions advocating egalitarianism and cooperation. It was also dependent upon the brutal suppression and exploitation of labour and resource overseas, most violently exemplified by the Atlantic Slave trade.
The first response to these social rebellions was violent repression. This demonstrates the contradiction that still exists at the heart of the capitalist system: that all are supposedly free and equal yet the majority must be exploited to provide wealth for the few. The state occupies this place of contradiction: as both impartial judge protecting the supposedly innate and universal rights of the individual and the authority entrusted with protecting private property rights, and thus the unequal social order from challenges from the dispossessed majority. This became the site of democracy as it developed.
Yet economic power and political power are in reality impossible to separate. It is impossible to be politically free and equal in a class society built, even predicated, on socio-economic oppression. And indeed, it was considered highly problematic. It led many elites in the 18th and 19th centuries to vehemently oppose the extension of political rights out of fear that it would lead to increased socio-economic equality. It was here that the growth of the corporation assisted to resolve this dilemma, and to make democracy safer for capitalist inequality and oppression.
Corporations help to both entrench and legitimate the separation of the political and economic spheres. As legal entities separate from the persons running them, those persons could not be held responsible for 'the corporations' actions in the political sphere of the law and the state. Its social, political or moral responsibilities were instead replaced by its responsibilities to maximise profits for its shareholders. Thus the operations of the economy, managed by corporations, became largely unaccountable to the political administration. The fundamental basis of the capitalist system – the corporations who create profit – could therefore remain safer from political interference from the site of 'democracy'. The prerogatives of profit making could effectively reign supreme.
But they also helped to ensure that were any political interference to arrive from 'democracy' it would be unlikely to be entirely antithetical to their enterprise. One other great innovation of the corporation was their ability to pool wealth from unlimited numbers of people for a particular venture. Previously, wealthy elites had had to network amongst each other and negotiate to invest in projects. But with a corporation people could buy shares without necessarily knowing the persons responsible for the venture. The introduction of limited liability aided this process even further.
It ensured that investors were liable only to the value of their investment, vastly reducing the risks involved. In Britain this happened in 1855. Soon many middle class people were investing their relatively meagre savings in corporate activities. This accelerated their economic integration in the capitalist system. Such economic integration stabilises the capitalist system, since those who depend upon its operations are less likely to rebel against it. As one article in the Edinburgh Journal of 1853 stated, “The workman does not understand the position of the capitalist. The remedy is, to put him in the way of practical experience. Working men, once enabled to act together as the owners of a joint capital, will soon find their whole view of the relations between capital and labour undergo a radical alternation.”
The increase in the amount of capital available had dramatic impacts also on the ability of the capitalist system to expand. The increased levels of investment financed expensive ventures such as the canal and railway building programmes, upon which the development of industrial capitalism in Europe and North America depended. It was also crucial to financing colonial and imperial ventures, sourcing new markets and resources for capitalist expansion. The wealth accrued during these ventures further aided the process of economically integrating the burgeoning middle classes, and reducing the risks of social rebellion in the centre.
With increased economic integration, and the unaccountability of the economic sphere to the political sphere, liberal democracy could at last be countenanced as a way to legitimate the capitalist social order. Having decreased the chances of fundamental challenges arising from below, it became safer to extend political rights to more of the population. Though of course this only happened after fierce and often bloody struggles. Thus liberal democracy emerged as a defensive mechanism against the ever present spectre of organised mass resistance to corporate capitalism, and in direct opposition to clamours for a more free, equal and truly democratic system.
I hope that this cursory exploration into the historical roots of both capitalism and liberal democracy has shown that capitalism, and thus the power of corporations, and democracy are in fundamental contradiction. However, it is also necessarily to note that to be secure, this contradiction must be hidden, for general consent to democratic capitalism to be secured.
Particularly with full extension of the franchise, those in power required means to discipline people's choices, and to influence public opinion and political and economic understandings. The goal here is to organise public consent for 'democratic' capitalism in order to reduce the need to resort to repression. By consent I mean tacit or active acceptance of capitalism as an economic system, and of liberal democracy as its political counterpart.
This understanding owes a clear debt to the ideas of Antonio Gramsci concerning ideological hegemony. Gramsci defined hegemony as “consensus protected by the armour of coercion” and thus hegemonic social orders can be defined as those which deploy consensual methods of social control to mitigate the necessity of overt coercion. The coercive domination or large scale policing of thought, more redolent of totalitarian societies, are in hegemonic social orders, less necessary to achieve similar levels of compliance.
Consensual methods of social control operate by dominant groups defining the limits or parameters of 'legitimate' values, meanings, norms and behaviours. In doing so, they can define the limits of what political, social or economic changes are possible or even conceivable, while providing the semblance of plurality and open debate. In short, they can define the 'common-sense' internalised beliefs, in order to assert that any non-compliance or opposition to a certain value-order, is illegitimate, irrational or even pernicious.
This opposition can therefore be more deemed deserving of repression. What makes such hegemonic systems arguably more powerful than more crude totalitarian ones, is their flexibility. Those meanings, values and norms can shift with the times, recuperating and neutralising erstwhile radical ideas, and demonising others. In this way democracy has been defined as self-evidently compatible with corporations, and with the capitalist system more generally, despite its inherent incompatibility. The result is far more powerful and insidious than a simple ideology imposed by one particular class upon another. Indeed, it does not come about through direct and overt conscious planning. Instead, the implicit rules that define so-called 'common' sense silently permeate our understandings of ourselves and the world around us.
While it is not possible to see any conscious, conspiratorial planning, it is fair to say that corporations are at the heart of many of the processes which aggregate towards ideological hegemony. I am not expert enough to go into full details here of all the mechanisms of engineering consent to the capitalist system. Some are explored in more detail by contributors to the book.
They include such processes as propaganda, public relations industry, advertising and marketing, the promotion of consumerism, the co-option and channelling of social movements and NGOs, and the corporate dominance of the mainstream media. Yet hegemony is is always contested. And when ideas or behaviours contravene the parameters of legitimate dissent, repression is the last resort. This coercion violates the rhetoric of democracy – for if the system were democratic then populations would not need to be coerced into obedience.
Liberal democracy thus provides the sheen of legitimacy that corporate capitalism needs to operate. It gives the impression that political rights are afforded to populations, without granting them substantive political power over the capitalist system, which instead is largely controlled and managed by corporations. However, at times of crisis, the sheen of democracy is frequently insufficient to disguise the contradiction between democracy and capitalism, or to hide capitalism's reliance on coercion. At these times 'democratic' capitalism faces a crisis of legitimacy and capital accumulation.
This was clearly the case during the depression in the 1930s when social rebellion across the centres of world capitalism ensured that democracy was increasingly unstable. Some countries, such as Germany, Italy, and Japan rejected the liberal democratic model altogether and adopted fascism as a method of quelling social discontent. Countries such as the UK and the US adopted a friendlier form of 'democratic' capitalism: including government intervention in welfare provision and job creation programmes. This was mirrored in post-war Europe with the adoption of Keynesian, corporatist economic and political policies, designed to ameliorate the worst effects of capitalism and stave off social unrest. In Britain, these policies included a degree of accommodation of trade union power, controls on the free movement of capital and extended public expenditure, in particular the welfare state and the National Health Service. This instituted a fragile compromise between capital and labour.
Such redistributive policies were financed by the surplus capital accumulated via coercive means, including colonial and neo-colonial interventions and the importation and exploitation of cheap migrant labour in the centre. Such unequal relationships between the 'centre' and 'periphery' countries were to be managed by the Bretton Woods Institutions – the World Bank and the International Monetary Fund. They have come to deploy coercive economic disciplinary mechanisms, often involving debt, to police countries' macro-economic policies.
In doing so they have often contravened the political and economic decisions made by 'democratically' mandated governments. Such behaviour demonstrates the reliance of corporate capitalism on anti-democratic coercion, a result of its inherent incompatibility with genuine democracy. And this tension has continued ever since – as the coercion at the heart of the capitalist social order conflicts with its democratic rhetoric.
Democracy has frequently been used as a trope to legitimate foreign interference in supposedly sovereign countries during the 20th and 21st centuries. The US government was the first to use a rhetoric of democracy to make a case for war when Woodrow Wilson was persuading the US public to consent to fight in World War One. This was more easily ascribed to US imperial power, than European, since the US form of imperialism did not generally claim that its subject populations were unable to govern themselves. Instead, it claimed the role of benevolent tutor to as yet untrained pupils.
This morphed in the second half of the 20th century to an active role in manipulating, or even selecting or removing political elites in the target countries. Economic and military aid, coup d’états, assassinations and military invasions were all deployed, in order to provide unfettered access to the available resources and/or labour force for US corporations, and particularly against communist or left wing political movements. As US National Security Advisor Henry Kissinger said in 1970, “I don't see why we need to stand by and watch a country go communist because of the irresponsibility of its own people.”
Well known examples include the coup d'etat to remove the left-wing Iranian prime minister Mohammed Mossadegh, and replacing him with the Shah of Iran who then obediently granted oil contracts to American and British companies. Such interventions were sometimes requested by particular corporations. In Guatemala Jacobo Arbenz's elected government adopted land reforms which threatened the agricultural monopoly of US United Fruit Company – now Chiquita. At the request of the United Fruit Company the CIA removed the Arbenz government in a coup d’état.
At the time this was seen as critical to counter governments in the area who were more responsive to the needs of the populace than to corporate interests: as one State Department official explained “Guatemala has become an increasing threat to the stability of Honduras and El Salvador. Its agrarian reform is a powerful propaganda weapon; its broad social program, of aiding the workers and the peasants in a victorious struggle against the upper classes and large foreign enterprises, has a strong appeal to the populations of Central American neighbours, where similar conditions prevail.”
Nor was such political interference in supposedly 'democratic' operations limited to 'periphery' countries. Immediately following WW2 the CIA bankrolled both French and Italian centre-right and conservative parties to prevent communist successes in the post-war elections. They also worked to destroy the political left in Greece.
However, such unsubtle methods which blatantly contradicted the rhetoric of democracy, upon which the US staked its propaganda efforts as leader of the free world in the Cold War, ultimately backfired. The invasions of Korea and Vietnam and the exposure of the CIA's anti-democratic practices, coupled with a stagnating global economy and rising social and political instability contributed to the break down of the post-war settlement. This was a severe crisis of legitimacy of 'democratic' capitalism. An alternative solution was devised: neoliberalism.
This sought to increase corporate power and market freedoms in order to restore the class power of the wealthy elite. This turbo-charged variant of capitalism is even harder to reconcile with the rhetoric of democracy. Doing so has therefore involved a more intensive attempt to construct ideological hegemony – both in the centre and in the periphery, where the programmes have been misleadingly described as 'democracy promotion'.
The rationale behind 'democracy promotion' was to attempt to control and manipulate civil society within intervened countries, in order to manipulate public opinion and neuter resistance. In practice this meant instead of manipulating the political structures from above – via assassinations, coup d’états or invasions – 'democracy promotion' would try to affect a similar process of change 'from below'. This would involve cultivating and channelling the social movements, trade unions, political parties, NGOs, mass media etc.
In this way it was hoped that the general populations would consent to accommodate US and neoliberal interests and 'choose' the leaders who would pursue policies compatible with the transnational corporate economy. It constitutes the replication of consensual means of control that have been utilised in the US-European domestic political systems. Democracy promotion forms an important part of how democracy is made safer for global capitalism – aiming to secure broad acceptance for overwhelming corporate power and rampant capitalist expansion across the globe.
As I hope to have explained, democratic practices have had to be continually restricted and limited in order to insulate the processes of capital accumulation from political pressures from subjugated classes and groups. Corporations, and the capitalist order they serve, can thus never be compatible with genuine, participatory democracy. As we have seen this has resulted in an unstable and sometimes precarious hegemonic order, in which democracy is both a mask to legitimate capitalist coercion and a direct threat to those coercive forces. Thus the existing supposedly democratic systems have to become ever more anti-democratic, and ever more adept at hiding and disguising this, in line with capitalist expansion. Thus the claims for the existence of such a thing as 'democratic' capitalism', a crucial means of securing public consent, are increasingly jeopardised as neoliberal capitalism rampages on.
Thus we are today experiencing increasing corporate domination of many supposedly 'democratic' practices – from the revolving doors between companies and governments, to the large-scale bankrolling of election campaigns; from the insulation of monetary policy making from any form of even nominally democratic control, to the deployment of corporations to rebuild 'democracy' in Iraq. Most obviously exposing the myth of 'democratic capitalism' has been the readiness of the state to bail out the financial sector, entirely without public consultation, and the subsequent imposition of the costs of this on the public via brutal cuts and privatisations. In addition, increased levels of coercion have been required in order to maintain this system, further undermining the myth of the compatibility of democracy and capitalism.
I have attempted here to show how while genuine democracy and corporate capitalism are in fundamental opposition, a form of putative democracy, liberal democracy, has developed in order to hide this fact. Exploiting its positive connotations, the notion of democracy is used to legitimate the capitalist social order and corporate power. Far from co-existing with genuine democracy, corporations serve to help to protect capitalism from the threats posed by the equality of access to political power and decision-making that genuine democracy would provide.
Corporations also actively hide the incompatibility – via propaganda, control of the mainstream media, consumerism, and the manipulation of civil society. The result is a sense that it is almost a heresy to question the inviobility of democracy and capitalism. Today we are expected to believe that not only is capitalism – and thus corporate power – able to become fair and democratic (since persuading us that it already is is too much of a stretch) but that it is the only system capable of doing so. Thus in spite of the incontrovertible finiteness of the planet, which is already at risk of becoming uninhabitable, we are expected to believe that this system which demands perpetual growth and continued commodification, exploitation and resource extraction is both sustainable and democratic. This is the reality of ideological hegemony: the construction of patently illogical notions as common sense. And the de-legitimation of opinions which go against this grain.
The myth of democratic capitalism should today by rights be hanging by a thread. But there remains a great deal of work to do to reveal the truth contradicting the putative common-sense of democratic capitalism we are inundated with every day. Indeed the title of this discussion today is itself testament to the power of ideological hegemony and the overwhelming dominance of pro-corporate discourse over public life.
The question we should really be asking is not 'are corporations compatible with democracy', but why it is that we think they might be. We should be asking how to combat such ideological and hegemonic forces. How to reclaim democracy from its current liberal and slavishly pro-corporate form? And how to create a genuine democratic system in which our needs, wants and desires are heard and acted upon, and the sustainability of the planet is conserved.