This is the first of a five-part series.
I. THE DEMISE OF DEMOCRACY IN AMERICA
II. REFLECTING ON AND IN AMERICA
III. GLOBALIZATION IN THE NAME OF “LIBERAL DEMOCRACY”
IV. REGAINING BALANCE
V. YOU CHOOSE: GLOBAL DEVASTATION OR GROUNDED REFORMATION
Summary of the Series A healthy society balances the collective responsibilities of governments in the public sector with the commercial interests of businesses in the private sector and the communal concerns of citizens in the plural sector. Two centuries ago, Thomas Jefferson warned of the problem that now pervades and corrupts America: imbalance in favor of private sector interests—of which Donald Trump is a dramatized version. Fixing capitalism will no more fix this problem than would fixing communism have fixed the broken regimes of Eastern Europe. Please understand that the real deplorables are those of us who have allowed rampant self-interest (under the guise of Liberal Democracy) to drive so many “deplorables” to vote for deplorable leadership. Shall we ride this tide to global devastation, or engage ourselves in grounded reformation? This will require that business be restored to its proper place, namely the marketplace, so that government can get on with serving in the public place, while the sector better called plural (rather than “civil society”) can reclaim its fundamental place of sustaining democracy, as Alexis de Tocqueville described, also two centuries ago.
In a letter of 1816, Thomas Jefferson expressed the “hope [that] we…shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of their country.”
This, the founding fathers did not do. Instead, they exacerbated the problem by addressing another, which had provoked their revolution, namely the excessive power of government. To constrain it, they introduced checks and balances across its legislative, executive, and judicial branches. But the introduction of no similar checks and balances on those monied corporations has proved to be the flaw in America’s venerated model of democracy.
The Battle for Control of America The battle between the private interests of wealth and public efforts to contain it continued throughout American history, for example with the rise of the monopolistic trusts late in the nineteenth century, countered eventually by the anti-trust legislation. But union-busting continued into the twentieth century, until Franklin Delano Roosevelt’s New Deal of the 1930s restored some semblance of balance for the people most disadvantaged by the Depression.
This balance sustained itself for several decades after World War Two, when tax rates were substantial and welfare programs generous while the economy grew robustly. In 1980, the election of Ronald Reagan, to fix America with market solutions, poured oil on the fire that had been smoldering since Jefferson’s time. Union-busting and its consequences returned with a vengeance, sanctioned by a misunderstanding since 1989 of what brought down the Berlin Wall—that capitalism had triumphed. American democracy has been burning ever since.
Three Sectors in Check for Balance A healthy society balances the collective responsibilities of governments in the public sector with the commercial interests of businesses in the private sector and the communal concerns of citizens in the plural sector—so labelled, instead of “civil society”, to be seen as taking its place alongside the sectors called public and private.
The plural sector is huge, comprising associations that are neither publicly owned by government nor privately owned by investors. Some, often called cooperatives, are owned by their members. The United States has more cooperative memberships than people. Others are owned by no-one, such as NGOs, foundations, religious orders, trusts, and clubs, as well as certain universities and hospitals. Many of these operate in “the commons”, meaning that their services are widely accessible, as are those of Wikipedia. Its size notwithstanding, the plural sector itself is obscure, despite Alexis de Tocqueville’s identification in the 1830s of its “associations” as key to the new Democracy in America.
In a healthy society, the three sectors hold each other in check while cooperating for constructive change. In this regard, the United States today is not a healthy society, with a dominant private sector that has significantly coopted the power of the public sector and marginalized the influence of the plural sector.
The Coup of the Corporate “Person” How did this 200-year-old battle for control of America end this way? Thank its Supreme Court. In 1886, its justices acknowledged—although never discussed—the status of corporations, monied and otherwise, as “persons” in the eyes of the law. This status, once established and never challenged, led to other Court decisions that further empowered these artificial persons, finally to the one that has taken balance over the edge. In 2010, “Citizens United” opened the floodgates to private power, by extending the rights of persons, artificial and real, to fund political campaigns to their hearts’ content. In effect, the Supreme Court legalized bribery in the United States. Today, the monied corporations of America no longer need to bid defiance to the laws of their country; they can twist those laws to their own advantage.
Arguably, however, the turning point came a bit earlier, in 1989, with a misunderstanding of what brought down the Berlin Wall. Pundits in the West enamored of the prevailing dogma of economics—that greed is good, markets are sufficient, and governments are suspect—proffered a ready explanation for the fall of that wall: that capitalism had triumphed. They were dead wrong. Balance had triumphed. While the successful countries of the West were in relative balance, the communist regimes of Eastern Europe were severely out of balance, on the side of their public sectors. These regimes collapsed largely under their own dead weight.
The failure to understand this has been upsetting balance in many of the democratic countries ever since, especially the United States, where the regulations on “free enterprise” have been steadily removed. Capitalism has indeed been triumphing since 1989, with the consequence that America, leading many other countries, is now dangerously skewed to the private sector. How ironic that the very problem that brought down communism in Eastern Europe—a fundamental imbalance across the three sectors of society—is now bringing down democracy in America, and beyond.
Shareholder Value Most large corporations today march to the tune of Shareholder Value, which has nothing to do with moral values. In keeping with the prevailing dogma of economics, this is about the stock markets’ relentless drive for MORE: more production for more consumption with more waste and more warming. This serves the investors, with all else, when convenient, be damned: workers, communities, the environment, and democracy itself. Grabbing MORE trumps getting better.
Robust businesses grow by offering better products, services, and prices. They are explorers. But what happens when the explorers run out of old markets and new ideas, while, having gone “public”, the wolves of Wall Street are baying at the door? Look around: many become exploiters. They trash their brands, con their customers, cut unseen costs (maintenance, research), bust the unions and then squeeze the workers by putting them on contract at lower pay with fewer protections. Anything to up the price of the stock, quickly. Some buy competitors, in the name of competition, or lobby governments to reduce taxes, in the name of free enterprise. This is not aberrant behavior: the unprincipled pursuit of Shareholder Value has rendered it mainstream—corporate business as usual—albeit with responsible exceptions.
Many of the “owners” of today’s corporations are day traders, while the “human resources” that have devoted decades to these corporations can be discarded like any other resource. In cahoots with these day traders, include me, and perhaps you too, because stock markets are masters at turning ordinary investors into mercenaries. We lift our heads out of the sand only long enough to check our gains, while we too let the consequences be damned. In the United States, these consequences now include alarming disparities of income, distressing levels of incarceration, and most surprising in the U.S. of all places, a conspicuous decline in social mobility.
Into this swamp waded Donald Trump, ostensibly to drain it. Instead, he has been wallowing in it, providing the country with more of the same business as usual, not least his own.
Ubiquitous Corruption, legal and criminal The degrading of enterprise is serious enough. Worse is the outright corruption, and the worst of this is the legal corruption, because it is difficult to challenge and thus ubiquitous. Think back to the subprime mortgages and now to other schemes emanating from some of the blue-chip banks; have a look at the tricks being used by the sugar-drink makers to block efforts to reduce obesity; and don’t forget all that bribing in Congress. (The real criminals of today are the lawmakers who refuse or reverse efforts to curb global warming.) And read this comment in the New York Times (23 September 2017) about the city of London’s challenge to Uber: “There is a feeling in the air that regulators should stand up to businesses that simply ignore any regulations they don’t like.” No kidding! The flaunting of regulations by pit bull corporations has apparently become normal. Call this the age of abomination.
Not that there is any shortage of criminal corruption, for example Volkswagen’s cheating on diesel emission tests and the officials of General Motors who delayed repairing an ignition switch that was killing drivers. But don’t look for white-collar criminals among the throngs in prison, thanks to a third kind of corruption, namely politicians in cahoots with corporations. This allows pharmaceutical companies to exploit government-granted monopolies (called patents) so that people die for want of medicines that could be affordable as well as considerably profitable. What kind of a society tolerates this? The gun lobby gets away with its own form of murder, while on a larger scale, a “military-industrial complex” sustains levels of American defense spending greater than the next half dozen countries combined. This includes a nuclear arsenal that leaves one finger on the proverbial button, presumably to “get them before they get us”, even if that could get everybody. What kind of madness is driving America? Look beyond those “deplorables”.
Next Post Part II: Reflecting on and in America
© Henry Mintzberg 2019. No rights reserved: this blog may be reproduced in whole or in part, without alterations, for non-commercial purposes, so long as the original © and posting are acknowledged. See Rebalancing Society… radical renewal beyond left, right, and center for the forerunner to this series (Order at Berrett-Koehler, Amazon.com, Amazon.co.uk or Download as PDF)