Corporate power must be curbed to preserve free enterprise and stave off socialism, stated Milton Friedman and Jane Jacobs, two of the great public intellectuals of the 20th century.
The Big Tech titans have become especially powerful politically through their control of social media. This enables them, without meaningful accountability to shareholders, to direct their corporations’ resources to censor speech and assume other functions that Friedman called “governmental” in nature, becoming “simultaneously legislator, executive, and jurist.” Jacobs, in her 1992 book “Systems of Survival,” likewise warned that corporations assuming governmental functions can become “monstrous hybrids” that entrench monopolies, destroy competition, and promote corruption.
The problem of unaccountable corporate power, however, isn’t limited to Big Tech executives. Today, many if not most leaders of major corporations act as the “unwitting puppets” that Friedman warned about, backing social causes like Black Lives Matter or a $15-per-hour minimum wage, thus unwittingly contributing to the ascendancy of socialists such as Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.). Friedman found such business conduct so destructive as “to reveal a suicidal impulse.”
Corporate power wasn’t always unaccountable, although some, such as Thomas Jefferson, foresaw its potential for harm and wanted to “crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”
Alexander Hamilton, in making the case for corporations, sought to allay fears that they would one day acquire monstrous powers by saying they were but vehicles with limited powers.
“An incorporation seems to have been regarded as some great, independent, substantive thing—as a political end of peculiar magnitude and moment; whereas it is truly to be considered as a quality, capacity, or means to an end,” he assured.
John Marshall, considered the greatest chief justice in U.S. history, likewise saw corporations as strictly limited: “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law ... this being does not share in the civil government of the country, unless that be for the purpose for which it was created.”
Corporations are nowhere mentioned in the U.S. Constitution. Nevertheless, over the past two centuries, courts increasingly allowed these “artificial beings” to share in the civil government by giving them constitutional rights under a doctrine known as “corporate personhood.” Until a 1978 decision, corporations had free speech rights only when necessary to protect their business interests. Then, the Supreme Court decided that corporate persons had the same First Amendment free-speech rights as natural persons, letting corporations enter the world of politics on purely ideological grounds unrelated to the desires of their shareholders or the profitability of their business.
Until a 2010 decision, corporations were limited in making political contributions. Then, the Supreme Court opened the funding floodgates, leading to the billions of dollars that now lard the coffers of politicians of all stripes, and to political agendas more often set by corporations rather than the grassroots.
Corporations were invented and given legislated privileges, said Marshall, chiefly to overcome the inefficiencies of partnerships and sole proprietorships, whose short lives and high transaction costs strip society of value. By being able to “manage its own affairs and to hold property without the perplexing intricacies, the hazardous and endless necessity of perpetual conveyances for the purpose of transmitting it from hand to hand,” Marshall said, the corporation provides a public benefit. Its legislated privileges weren’t intended to undermine the citizenry’s ability to be self-governing, or to make citizens subservient to corporate power.
Yet, that is exactly the result if corporations—artificial persons conjured up by laws that provide tax benefits and limited liability—can augment their privileged ability to generate wealth with the constitutional protections of natural persons. As The New York Times put it prior to the 2010 Supreme Court decision that unleashed corporate donors, “Their influence would be overwhelming with the full array of rights that people have.”
That overwhelming influence, moreover, would be all to the bad because, as Friedman put it, business executives “are incredibly short-sighted and muddle-headed in matters that are outside their businesses but affect the possible survival of business in general. … The short-sightedness is also exemplified in speeches by businessmen on social responsibility. This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces.”
To avoid this perverse curbing and preserve free enterprise, the political power of corporations must instead be checked by returning corporations to their limited roots, barring them from social and political activities that, by rights, should be none of their business.
