6     How the Rule of Law Backfired

It is legal because I wish it.

—King Louis XIV of France

The government, which was designed for the people, has got into the hands of the bosses and their employers, the special interests. An invisible empire has been set up above the forms of democracy.

—Woodrow Wilson

Many of the forces shaping the current relationship between public and private power were evident in the swirling eddies stirred up in the wake of 1848. In Sweden, the upheaval of the Continent was felt, but it was as if muted by distance, absorbed by crossing the Baltic. King Oscar I was moved by what he saw happening across Europe, and either out of genuine sympathy for the liberal movement or to head off potential unrest at home, he proposed a variety of reforms. One included the idea of a two-chamber Riksdag, although his not-quite-wholehearted commitment to real reform was revealed by his view that the upper house should be dominated by a large royally appointed contingent. The proposals stirred a buzz and were at least temporarily parried by opponents, as were more radical notions such as granting “universal” suffrage to the men of Sweden. But clearly political change was coming even to Europe’s northern frontiers.

One reform—noted earlier—that did make it through at the time, however, had a direct impact on Stora. It might be easy to overlook, given everything else that was happening in 1848, but that was the year Sweden passed limited liability laws for the first time. A year later these laws went into effect, allowing Swedish joint-stock companies to incorporate with royal approval. In fact, with the political changes afoot, the requirement for royal assent to deals quickly became a technicality that many courts were disinclined to demand before granting limited liability status and breathing legal life into new entities. The limited liability laws also made it possible for companies like Stora to raise the capital they needed for growth. By 1872, limited liability companies employed almost half Sweden’s workforce, and over 80 percent of it by World War I. The rethinking of the shape, structure, and basic concept of the role of companies in society in Sweden was again a harbinger of a trend that was sweeping Europe, the United States, and countries around the world.

At the same time, on the Continent, radicals who were inflamed but frustrated by the year of revolutions and the fragile, typically short-lived governments that came and went in their aftermath were thinking about the laws governing property and the sources of private power within society in rather different ways. There was a French philosopher who, while also a socialist, had a rather different view from Marx’s about how to address the injustices of the capitalist system. His name was Pierre-Joseph Proudhon. In 1840, he published a book titled What Is Property? Or, an Inquiry into the Principle of Right and Government. Within it was his most famous assertion: “Property is theft.”

By this he meant that capitalists or landowners who benefited from the efforts of the workers or peasants in his employ were actually stealing the fruits of their labors. He wrote, “The economic idea of capitalism, the politics of government or authority, and the theological idea of the Church are three identical ideas, linked in various ways. To attack one of them is equivalent to attacking all of them … what capital does to labor, and the State to liberty, the Church does to the spirit.” His conclusion was that the power of anyone over others in society was an infringement of their rights and should be eliminated. Following these beliefs to their logical conclusion, he became the world’s first self-professed anarchist. As it happened, these views also gave him an idea of socialism very different from that of Marx (who himself took issue with the “property is theft” formulation). Prudhon believed property should not be transferred to the state, but rather should reside within associations of workers. He also believed that workers should manage themselves. (As impractical as these ideas must have sounded in a world dependent on hierarchies like that of the nineteenth and twentieth centuries, one wonders how they might be received in the increasingly network-dominated world of the current century. For example, do the leaderless revolutions such as that in Egypt in early 2011 suggest that Proudhon’s ideal might now be slightly more within reach? In a different variation on the idea, it is also worth noting that labor participation in corporate boards, as is found in Germany, for example, has proved to be an effective structure—often credited with playing a significant role in that country’s economic success.)

In the interplay between views like Proudhon’s and those of Marx, the socialist movement gradually gained momentum in Europe. With 1848 demonstrating that old political and economic systems were in need of reform, the Continent and indeed the world were seeing an emerging, intensifying ferment over the political and economic rules and philosophies that should shape society.

In Sweden, new political parties were emerging that would ultimately demand a very different relationship between companies and governments. A young tailor named August Palme came to Sweden after being imprisoned in Germany for his active socialist views. By 1889—three years after the country finally adopted a bicameral legislature—Palme, something of a political entrepreneur, launched the country’s Social Democratic Party. His creation, soon cultivated under the leadership of a math and astronomy student named Hjalmar Branting, took a very practical Swedish turn away from Marxist radicalism and toward a view of “social reform as a way to socialism.” This more gradualist focus on finding a way to work within the government rather than through revolution was abetted by the parallel rise of labor unions, which emerged earlier in Sweden than elsewhere. The industrial workers of Sweden, like the miners centuries before, sought a stronger voice in society, and they allied with the Social Democratic Party to form a counterweight to the power of traditional aristocrats and moneyed elites. The result was the modern Swedish vision of society in which the old idea of balance among the estates is reflected in a compact between the state and workers that counterbalanced the concentrated power of the private sector.

But if Sweden was establishing itself as an incubator of what would later be known as Eurosocialism or the welfare state, and of what we shall later discuss as one of the primary alternative models of modern capitalism, throughout the nineteenth century the economic center of gravity of the world was indisputably shifting across the Atlantic Ocean, as Stora’s Ljungberg had appreciated. Eurocapitalism and American capitalism were evolving along related but different lines. The role America would come to play in redefining the corporation was every bit as important as the one it played in ushering in important advances in the modern idea of democracy. And, as we shall see, the evolution of American ideas regarding not just the nature of public and private power but the relationship between the two would emerge in an American capitalist model that at the end of the twentieth century and in the first years of the twenty-first century looked as if it might transcend all other approaches—from socialism to social democratic approaches to every variation between and beyond them.

However, in order to understand why it now appears that the American model might not ultimately triumph and why new life is being bred into the alternative approaches that evolved in Sweden and elsewhere in Europe and in Asia, the middle section of this book will explore the rise of corporate power and the decline of state power during the past century and a half. The rise of corporate power—often at the expense of the state—may be among the most important yet least understood major trends affecting the modern world—despite the efforts of writers mentioned earlier, like Barnet or Vernon, to bring it to the fore.

While it is impossible to cover every nuance of the changes affecting these complex institutional structures, we will attempt to provide a look at certain major changes that are illustrative of broader trends in the historical relationship between private and public power. To do so, we will look at four of the basic components of nation-states that had come to define them by the mid-nineteenth century: the ability to pass and enforce laws, the ability to define and be defined by borders, the ability to print money and manage national fiscal affairs, and the ability to legitimately project force. In each case, we will take several specific examples of how, over the past century or so and especially in the recent past, the power of states has been chipped away and the power of companies has grown, and how there has often been a direct and intentional connection between the two. In addition, we will consider how these changes have altered the relationship between these two power centers and thereby how the functions of societies have changed.

This discussion will then lead to the final section of the book, in which we will explore how these trends have directly contributed to the great challenges we face today and, consequently, to the way the international system seems likely to change in the years ahead.

From Individual Property Rights to Property with More Rights than Individuals

If the watershed associated with Westphalia and 1648 had to do with defining the rights and roles of states, and the liberal reforms associated with 1776 and 1848 had to do with asserting the rights of individuals, it might be argued that the most significant trend since then has had to do with asserting the relative rights and roles of private enterprises. The change in those rights has come by marrying the legal concept of the business corporation—an idea originally created to serve the needs of the state—to the individual rights that were originally asserted to define the origins and limits of state power. Whereas the battle between church and state was a battle between two sets of “lawgivers,” the subsequent tug-of-war between public and private power centers has turned on the revolutionary idea that more important than the laws states could make were the laws that limited and defined the origins of state powers—an approach to lawmaking that traces its roots to the Magna Carta and the U.S. Constitution.

It was the fact that America embraced the idea of constitutional law earlier than other countries that helped make the United States the birthplace of a new form of corporate power that would dwarf even the rather remarkable rise of early great enterprises, from Stora to the British East India Company. This fueled America’s remarkable ascent to its status as the world’s richest and most powerful nation and, at the same time, may have—at least temporarily—compromised both its political and economic systems.

As we have discussed, medieval Europeans inherited from Rome the idea that an entity or an institution could incorporate and be granted the status of a legal person. An entity could request corporate status from the king, and the king would, if he chose, grant this status, creating an artificial legal person of the corporation. Importantly, the monarch would also retain the right to withdraw the privileges he or she had bestowed. Corporations existed at the pleasure of the state and thus clearly to serve the purposes of the state.

Just before the South Sea bubble burst, businessmen used their influence to persuade Parliament to pass legislation that greatly set back the development of the corporation in England and may consequently have fatally compromised British competitiveness. As stock prices were rising sharply early in 1720, there was a boom in establishing corporations by the dozens. Many of these companies were not officially registered, but investors, seeking profits wherever they could find them, began buying stock in many of them, thus creating unwelcome competition for established and still capital-hungry entities like the South Sea Company.

Thanks to its friends in Parliament, the leadership of the South Sea Company was able to engineer the passage of the Bubble Act of 1720. This law mandated severe penalties—including infinite fines and perpetual imprisonment (which is about as severe as you can get short of legislating eternal damnation)—on any joint-stock company operating without a charter. The impact of the act, however, was not exactly what was expected by the South Sea Company leadership, since the company collapsed in scandal shortly afterward. The Whigs—whose views on businesses were exemplified by Trenchard and Gordon—became even more leery and made the existence of any corporation even more dependent on a Parliament that, postcrash, was reluctant to give its permission. In essence, in the eyes of legal scholars like Douglas Arner, a historian of early corporations, the Bubble Act “essentially cut off the growth of the private corporation in England until the nineteenth century.” The joint-stock corporation was on a short leash, and the development of the modern corporation would therefore have to take place somewhere else.

The Word “Corporation” Appears Nowhere in the U.S. Constitution

Prior to the American Revolution, only seven businesses had been chartered in the United States. When one more—a bank—was chartered during the period in which the Articles of Confederation were the law of the land, the bank’s officers made sure to get state charters too to ensure the legality of its existence. During the 1780s there was something of a surge in the formation of companies in the new country—ten were established during the first half of the decade and twenty-two more before 1790. While drafting the Constitution that was to replace the Articles of Confederation, James Madison proposed an amendment that would have given the U.S. Congress the power to “grant charters of incorporation where the interest of the U.S. might require & the legislative provisions of the individual States may be incompetent.” Only three states voted for the proposal, however, and eight voted against it; as a result, the U.S. Constitution contains no mention of corporations.

This omission led to one of the biggest controversies of the presidency of George Washington. For all the new country’s differences with the country that had until recently ruled it, the political divisions within the United States and the views of the leaders tracked with those in England. Washington’s secretary of the Treasury, Alexander Hamilton, and many others from northern, more industrially inclined states were considered Tories. Jefferson, like many others with agricultural roots, was more sympathetic to Whig views about business.

Hamilton was an advocate for a U.S. version of the Bank of England, which he saw as an essential engine of British growth. He felt a U.S. central bank would increase capital availability, enable the government to gain financing when necessary, and allow for the issuing of banknotes that could facilitate payment of taxes. In his view, such a bank would best serve the public interest if it were privately incorporated and thus immunized from being buffeted by public opinion. He wrote in his Report on a National Bank that “to attach full confidence to an institution of this nature, it appears to be an essential ingredient in its structure that it shall be under a private and not a public direction, under the guidance of individual interest, not of public policy, which would be supposed to be, and in certain emergencies, under a feeble or too sanguine administration, would really be, liable to being too much influenced by public necessity.” Despite no mention of corporations in the Constitution, Hamilton felt that the bank could be brought into existence under the provision that allowed the Congress to take such actions as are “necessary and proper.” Although the primary author of the Constitution and one of Hamilton’s coauthors of the Federalist Papers, James Madison, objected to the Treasury secretary’s arguments, Congress chartered the Bank of the United States early in 1791.

Seeking advice on whether he should sign the new legislation, President Washington turned to Jefferson. Unsurprisingly, Jefferson sided with Madison, his Virginia neighbor and close friend. He argued that Hamilton was playing fast and loose with the meaning of the word “necessary” in the “necessary and proper” clause of the Constitution, going on to write: “the constitution only allows the means which are ‘necessary’ not those which are merely ‘convenient’ for effecting the enumerated powers.” In his view, the bank was not undeniably essential, so the Congress had no right to will it into existence.

Washington sent Jefferson’s response to Hamilton, who responded vehemently. He asserted that the power to incorporate the bank was implied if and only if chartering such a corporation would help Congress achieve one of its specifically designated duties. “It is unequestionably incident to sovereign power to erect corporations,” he wrote, “and consequently to that of the United States, in relation to the objects intrusted to the management of the government.” He felt Jefferson’s restrictive view of the “necessary and proper” clause would severely hamstring the federal government. He also asserted that, although it was not mentioned, the power to grant corporate charters would be important for the new country going forward, given the relative benefits of limited-liability arrangements over those associated with simple private partnerships. Later Hamilton’s widow said, “[Hamilton] made your bank. I sat up all night with him to help him do it. Jefferson thought we ought not to have a bank and President Washington thought so. But my husband said, ‘We must have a Bank.’ I sat up all night, copied out his writing, and the next morning he carried it to President Washington and we had a bank.”

Despite Hamilton’s persuasion of America’s first president, the next four chief executives of the United States were less enthusiastic about corporations. John Adams was on the record as being particularly critical of banks. Jefferson’s views were well known and greatly influenced those of his two successors—Madison and James Monroe—both of whom hailed from within a few miles of Jefferson’s home at Monticello. It is an interesting and perhaps unexpected twist of fate that it was another Virginian from the same neighborhood—a relative of Jefferson’s who was a friend of Washington and a political ally of Madison and Adams and would ultimately be appointed by Adams, first as secretary of state and later as a Supreme Court justice—who would play a vitally important role in granting corporations the freedoms they would use to shrug off key state controls and then grow to a size that allowed them (as the New York Times columnist Thomas L. Friedman has put it) to “lift off ” and begin to “float above” nation-states altogether and thus have a very different kind of relationship with national laws.

That individual was John Marshall, whom Adams named Chief Justice of the U.S. Supreme Court in 1801. Over his nearly three and a half decades in office, the longest-serving Chief Justice in U.S. history handed down a series of decisions that gave shape to the modern corporation and marked a pronounced deviation away from English legal traditions regarding companies. After Marshall, America took the initiative, and Britain, Sweden, and other nations would follow the U.S. lead.

At first, the Marshall court’s decisions seemed to cleave closely to British common law. Indeed, in 1804, in its first major decision on corporate law, the Court decided the case of Head & Amory v. Providence Insurance Co., in which it ruled that corporations were creations not only of the charters that gave birth to them but also of the common law. Using this conclusion as a springboard, in 1809, in his opinion in the case of Bank of the United States v. Deveaux, Marshall used common law principles to create a universal definition of the corporation in American law, which had the effect of preventing state courts from developing separate understandings of what constituted a corporation (a first step toward the precedence of federal law that would later lead to decisions that would help create a national market and economy and thus corporations of continental scale).

A decade later, in one of the Marshall era’s most famous decisions, McCulloch v. Maryland, Marshall underscored some of Hamilton’s initial arguments by asserting that Congress could constitutionally charter corporations to achieve constitutionally permissible ends despite there being no specific incorporation power in the founding document. As important as this decision was, it primarily had the effect of increasing the influence of the Supreme Court and the federal government over corporate law. However, later in 1819, Marshall participated in a decision that would dramatically alter the balance of power between corporations and the governments that created them: The Trustees of Dartmouth College v. Woodward.

The origins of the case can be traced back to the founding of what became Dartmouth College in 1754. At that time, the Reverend Eleazor Wheelock founded a school in Connecticut to teach Christianity to Native Americans. After depleting the initial donations from colonists, Wheelock sent a friend, Nathaniel Whitaker, to England to raise additional monies. The trip resulted in the establishment of a fund under the direction of the Earl of Dartmouth, who gave the institution not only his money but his name. In 1769, the royal governor of New Hampshire granted the school a charter of incorporation on behalf of King George III. The charter granted the school land in New Hampshire, provided that it also be used to teach English students. Wheelock was made president of the school and given power to choose his own successor, and, most important, control of the school was granted to the trustees and “their successors forever.”

When Wheelock died a decade later, he designated in his will that his son John should take over the school. A twenty-five-year-old colonel in the Revolutionary Army, the son was reluctant to assume the daunting responsibilities of managing the school but gave in to the urging of the trustees. John’s tenure was marked by increasingly frequent battles with the board over a variety of issues, ranging from tax questions to where students were to sit when attending village church services. When a rival of Wheelock’s father, Nathaniel Niles, was appointed to the board in 1793, matters grew more tense as Niles outmaneuvered Wheelock and began to exert control over the board.

By 1815, the two sides were issuing contentious pamphlets, and the trustees ultimately decided to remove Wheelock and elect a replacement. In response, Wheelock went to the New Hampshire legislature and got them to pass a series of laws revoking Dartmouth’s corporate charter and putting the school under public control. The trustees ignored the law and continued operation of the school as before. This triggered passage of yet another act by the legislature, making it illegal to serve as a trustee or officer of the college without an appointment by the legislature.

Wheelock, elected president of the State of New Hampshire’s “new” Dartmouth, moved to oust the old board and any faculty who supported them from the campus. They responded by setting up shop nearby and requesting the college’s records and seal from William Woodward, a former college officer who was siding with Wheelock and the state. Naturally, Woodward refused to comply, and the trustees sued. The all-Republican New Hampshire Court of Appeals upheld the view of the Republican-dominated legislature on behalf of Wheelock and the “new” college. They held that the college was a public corporation from its inception; that the constitutional protections accorded were meant to protect private rights; and that even if the royal charter was a contract, it would be against proper principles of government to prevent the legislature from being able to amend the charter if it was in the public interest to do so.

The trustees appealed to the Supreme Court. On March 10, 1818, Congressman Daniel Webster—a Dartmouth alumnus and future senator, secretary of state, and presidential candidate, already coming into his own as one of America’s greatest orators—presented arguments on behalf of the college and the original trustees. He began by noting that the corporate charter declared that “the powers conferred on the trustees, are ‘privileges, advantages, liberties and immunities’ and that they shall be forever holden by them and their successors.” He linked these rights with the most fundamental historical rights granted to Englishmen and subsequently to Americans:

The privilege, then, of being a member of a corporation, under a lawful Grant, and of exercising the rights and powers of such members, is such a privilege, liberty or franchise, as has been the object of legal protection, and the subject of a legal interest from the time of the Magna Carta until the present moment.

He then made his pivotal argument. States, he asserted, were within their rights to decide what privileges they might wish to confer in a charter prior to issuing it. However, “once granted, the constitution holds them [the rights granted under the charter] to be sacred, till forfeited for just cause.”

Webster then made a connection as remarkable for its legal deftness as it was for its internal ironies. He declared that “the very object sought in obtaining such a charter, and in giving property to such a corporation, is to make and keep it private property, and to clothe it with all the security and inviolability of private property.”

In a single sentence he linked key ideas about the nature of states and property rights that had evolved throughout English and Western history and added a new twist. The Magna Carta had been drafted for the same reasons as the agreements between estates in Sweden and other similar documents from the days of the absolute power of monarchs: it promulgated the idea of individual rights as a way of circumscribing the powers of kings. While the Magna Carta was essentially a document designed to preserve the interests of other nobles, Locke and others built on the ideas within it to assert that the individual was the ultimate authority, that the only legitimate powers of the state were those that existed in service of the individual. In both instances, property rights were of primary importance. Wealth, to whatever degree it existed, was seen as the foundation of individual independence and influence. The question of the ability of the monarch or the state to make unchallenged or unlimited claims on personal property was central to determining who would have the upper hand within a society. Therefore, guaranteeing life and liberty without guaranteeing the right to property was essentially politically irrelevant, and Locke and his contemporaries knew it.

Now Webster had gone a step further. He used the idea of property rights to limit a state’s influence over a corporation once it had been brought into existence. This would open the door to the gradual accumulation of other rights and prerogatives by corporate “fictional persons” that had only recently been won by real people. As we shall soon see, the concept of property rights, which was originally developed to preserve an individual’s rights to property, would as a direct result of this decision be used to grant individual rights to entities that were themselves a form of property. It is a toxic stain on all involved that while these early advances were being made on the road to granting individual rights to “fictional persons,” which were in fact forms of property, real people were still being bought and sold as property with fewer protections than corporations.

Webster closed his case by arguing that the actions of the New Hampshire legislature in undoing the original charter violated constitutional provisions against taking away property without due process:

This Court then, does not admit the doctrine, that a legislature can repeal statutes creating private corporations. If it cannot repeal them altogether, of course it cannot repeal any part of them, or impair them, or essentially alter them, without the consent of the corporators … A grant of corporate powers and privileges is as much a contract as a grant of land.

He later added, “In charters creating artificial persons for purposes exclusively private, and not interfering with the common rights of citizens; it may be admitted that the legislature cannot interfere to amend without the consent of the grantees.”

According to witnesses, when Webster finished his arguments, he stood silently for a few moments before the Court and then addressed Marshall: “Sir, you may destroy this little institution; it is weak; it is in your hands! I know it is one of the lesser lights in the literary horizons of our country. You may put it out. But if you do so, you must carry through your work! You must extinguish, one after another, all those great lights of science which, for more than a century, have thrown their radiance over our land! It is, Sir, as I have said, a small College. And yet, there are those who love it.” Webster then was consumed by emotion, his voice cracking and his passion so great that apparently even Marshall was deeply moved.

When the Court announced its decision, the Chief Justice began by stating that “the American people have said, in the constitution of the United States, that ‘no State shall pass any bill of attainder, ex post facto law, or law impairing an obligation of contracts.” He asserted that “it can require no argument to prove” that a contract existed in this case. The private donations of funds with future authority vested in the trustees made Dartmouth a private corporation whose rights were protected by the Constitution despite the holding of the New Hampshire court. He then defined what a corporation is:

A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it … among the most important are immortality, and, if the expression may be allowed, individuality; properties, by which a perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs, and to hold property without the perplexing intricacies, the hazardous and endless necessity, of perpetual conveyances for the purposes of transmitting it from hand to hand … By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object like one immortal being. But this being does not share in the civil government of the country, unless that be the purpose for which it was created. Its immortality no more confers on it political power, or a political character, than immortality would confer such power or character on a natural person. It is no more a State instrument, than a natural person exercising the same powers would be.

While Marshall’s definition is famous, it contains a flaw. It fails to recognize the connection between economic and political power. It fails to note that an entity that is granted immortality has the ability to accumulate more means and thus influence than a mortal human being. Further, it fails to recognize that the decision of which it was a part would later be used to open the door to future Supreme Court decisions that would grant additional “individual” rights to these “artificial beings” that would allow them to use that economic power specifically for political purposes. Furthermore, the corporation in question was an institution of higher learning, not a profit-seeking enterprise. The decision and its subsequent interpretations seem to gloss too quickly over this fact, ignoring the critical role a corporation’s mission plays in determining its value to society and consequently how it should be treated under the law.

Marshall noted that although the British Parliament was “omnipotent” and thus had the ability to annul corporate rights, the New Hampshire legislature was limited by the U.S. Constitution. The decision was not only a victory for Webster and for the trustees of Dartmouth College, it was a watershed for the corporation in America and, at the same time, a turning point for the state. When King James II had decided in 1686 that New England’s states needed better central coordination to defend themselves, he easily persuaded the courts to cancel existing royal charters and to create the Dominion of New England. As we know, Parliament was also able to cancel the East India Company’s charter after the Indian Great Rebellion of 1857. But in the United States after Dartmouth, the state was prohibited from arbitrary interference with corporate charters and the door was opened to the modern corporation.

U.S. states were naturally unsettled by the Dartmouth decision and tried for a number of years to work around it by either limiting the duration of charters or obligating companies to have a public purpose. But gradually they began to change their laws in ways that ultimately gave even greater latitude to companies. In 1830, Massachusetts passed an act decreeing that corporations did not need a public purpose in order to achieve limited liability status. Seven years later Connecticut created what would be a popular model when it enabled firms in almost all areas of business to incorporate without a special legislative act. This signaled the beginning of a competition among the states to offer ever more business-friendly laws. New York was an early leader in this sweepstakes, then New Jersey; ultimately Delaware was viewed as so welcoming that today more than 50 percent of publicly traded corporations are incorporated in that state.

This competition for investment, of course, presaged a similar competition that would be created among nation-states for the investment of multinational corporations. While some might assert that states have the upper hand because they can issue and enforce laws, states’ power is not absolute if in so doing they damage themselves economically (which in turn damages their leaders politically).

Further, while Dartmouth offered corporations the protections of property and contract laws pertaining to their charters, subsequent Supreme Court cases have enabled companies to obtain additional rights that had previously been thought to be available only to actual flesh-and-blood people. In 1886, in the case of Santa Clara County v. Southern Pacific Railroad, the Court declared without argument that the Fourteenth Amendment of the U.S. Constitution, which guarantees equal protection of the laws (and was originally intended to provide protection for actual human beings denied such protection), applied to corporations. In 1890, it used this principle to start a series of rulings over the next fifty years that were used to strike down economic and often anticorporate regulations under the Fourteenth Amendment’s doctrine of substantive due process. Fifth Amendment due process and Fourth Amendment protections against unreasonable searches were added in 1893 and 1906 respectively. And then, in the 1970s, the pace picked up and some really remarkable bending of the law took place to empower the private sector in ways that would have been unimaginable to those who once saw property rights as a tool by which to empower individuals.

A Campaign to Capture the Legislature

Writing seventy years after the initial passage of the Fourteenth Amendment, the U.S. Supreme Court justice Hugo Black lamented the fact that of all the cases to which it was applied, “less than one-half of one percent invoked it in protection of the Negro race, and more than 50 percent asked that its benefits be extended to corporations.” Given that the amendment was passed after the Civil War to correct the grotesque ways the law had been used to deprive African Americans of their liberties and fundamental rights, Black’s shock was easy to understand. It is quite clear that corporations were never the amendment’s intended subject.

The language of the amendment speaks of protections for “all persons born or naturalized in the United States.” It asserts that no state can deprive such people of “life, liberty or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” While Justice Marshall had noted that historically the law had viewed corporations as “artificial” beings, in the tradition of English law there was a pronounced emphasis on this fact of artificiality. Corporations were creatures of the state, figments of the legal imagination of the public sector. It is quite clear that they were not seen as part of the society of individuals that the U.S. Bill of Rights or its British forebears were meant to protect. If anything, they were seen as quasipublic extensions of the state among the kind of potentially corrupting forces from which the framers of U.S. law sought to protect the people. Corruption, in fact, weighed heavily on their minds, given their recent experience with the British Parliament and their memories of the recent history of British society. It was discussed more during the Constitutional Convention than issues such as factions, violence, or instability.

From Dartmouth onward, the theory of corporations evolved; they ultimately came to be seen as “natural entities” with “a separate existence and independent rights.” Santa Clara was a major step “forward” in this process. The case was presided over by Chief Justice Morrison “Mott” Waite, a Yale-educated Ohio lawyer who was the seventh person to whom President Ulysses S. Grant had offered the job and who was derided by The Nation as being “in the front-rank of second-rank lawyers.” Nonetheless, he presided over nearly 3,500 cases during his fourteen-year tenure, many of which involved interpretation of the Thirteenth, Fourteenth, and Fifteenth Amendments and oversight of the adaptation of American law to the booming world of a post–Civil War America increasingly dominated by national enterprises such as the railroad industry. If there was a theme during his court, it was the systematic limitation of the power of the U.S. federal government.

Even before oral arguments in the case began, Chief Justice Waite informed the participants in the case that “the Court does not wish to hear argument on the question whether the provision within the Fourteenth Amendment to the Constitution which forbids a state to deny to any person within its jurisdiction the equal protection of the laws applies to these corporations. We are all of the opinion that it does.” The statement was included in the headnote to the case, and with that notation, the basis for the accumulation of ever more “rights” by corporations was established.

The initial applications of the law made by the Santa Clara headnote were primarily at the state level. This was consistent with a prevailing reluctance to overempower the federal government and a tendency to defer regulatory matters to the states. This preference was not only rooted in the original concept of the U.S. government in which sovereignty resided within the states, but was also due to a perception that taking a state-by-state approach to such matters impeded corruption. Justice Louis Brandeis would later write that he was skeptical of regulation at the federal level because he thought it might “lead to capture of the national legislature by the industry, but that the insurance industry could never capture every statehouse.” While his fears would later be borne out, it should also have been fairly clear that if “capturing every statehouse” was what it took, then that’s precisely what companies would attempt. Standard Oil’s systematic cultivation of state legislatures from Ohio to New Jersey, for example, was as important to its explosive growth as was any process by which it drilled for, processed, or shipped petroleum products.

A 1905 case ushered in a boom in the application of the Fourteenth Amendment to companies. The case was Lochner vs. New York, in which a bakery owner who was fined for overworking an employee claimed the law violated his freedom of contract. While courts had previously acknowledged that the right to contract was a part of due process as defined by the Fourteenth Amendment, they had asserted that the right was balanced by the “police powers” of states—their ability to regulate affairs within their borders. In the Lochner decision, the Supreme Court asserted that the police power of states was not without limits. The Court thereby essentially identified a “substantive economic doctrine” within the Fourteenth Amendment: that of “laissez-faire and freedom of contract.” Although the decision was overturned in 1937, in the intervening decades companies used it as precedent for efforts to protect themselves from regulations pertaining to labor, prices, and limitations on who can conduct business. It was this legal era of using the Santa Clara headnote as a bludgeon to beat back state (and sometimes federal) regulation that Justice Black was lamenting in 1938.

By 1938, the United States had undergone a major political shift in its views toward corporations, thanks to the rise of trusts during the “robber baron” era, the trust-busting efforts that followed, and later the fact that the Jazz Age excesses of the 1920s were followed by the deprivations and personal economic tragedies of the Depression years. As a consequence, the New Deal era that followed saw a willingness to reconsider federal-level regulations. Naturally, corporations challenged the new federal securities laws of the early twentieth century, as well as attempts at price regulation, with all the tools at their disposal, but it would be a couple of decades before corporations would again tailor the U.S. Bill of Rights to their advantage.

The next surge, which began in the 1960s and 1970s and has continued until the present, has corresponded with a burgeoning of what might be called the “regulatory state.” Government regulations of this era differed from those of earlier eras in the twentieth century because they had more expansive social goals (such as environmental protection, consumer protection, and employee health and safety), were conducted largely on the federal level, were arguably more intrusive and systematic, and covered virtually all sectors of the economy. Between 1964 and 1977, ten new agencies of the U.S. government were created with the goal of protecting consumers, employees, or the public. (Prior to 1964, the Food and Drug Administration was the only agency with this kind of broad mandate.) It was this expansion of the role of the federal government that led corporations to more aggressively seek other protections within the U.S. Bill of Rights; and their reaction to federal government expansion is as good an illustration as there is, not only of the ongoing struggle between public and private power, but also of how the expansion of the “regulatory state” has directly and paradoxically led to the superempowerment of corporations and the nationally corrupting state of affairs that so concerned Justice Brandeis. The powers the state ceded in granting enduring “rights” to corporations were, because they carved away historical state prerogatives, an order of magnitude greater than many of those asserted through expanded regulation—especially since superempowered corporations had so much influence over what such regulations might be passed and how they might be enforced.

Of the ten amendments that make up the Bill of Rights, corporations have successfully asserted the applicability of five to win protections for themselves. These include the First Amendment right to free speech, which we will discuss in a moment in more detail; the Fourth Amendment freedom from unreasonable searches and seizures; the Fifth Amendment prohibition against takings and double jeopardy (despite the fact that the amendment clearly refers to natural persons); and the Sixth and Seventh Amendment rights to jury trials in criminal and civil matters, respectively.

For example, in a 1977 case, the Court held that a provision of the Occupational Safety and Health Act was unconstitutional because it permitted an inspector to enter the premises of an Idaho electrical and plumbing company for the purposes of performing a safety inspection without a search warrant. Any sympathies one might muster for the poor defenseless Idaho company may be tempered somewhat in light of the fact that it was backed in the case by the U.S. Chamber of Commerce, the American Conservative Union, the National Federation of Independent Business, and two legal foundations representing corporate interests.

This sort of high-paid alliance on behalf of the interests of business illustrates yet another way in which the scales of justice are balanced somewhat differently when it comes to corporate citizens rather than mere individuals with much more limited means. If this results in an uneven application of the laws or more protections for those who can afford to assert them, then the law is once again being used as a tool to advance the interest of the few in ways that reasonable critics may see as antithetical to at least its asserted purpose within “just” societies.

Other cases show similar creativity in the use of constitutional protections to push back against federal power and advance corporate interests. For example, in a 1986 case, Dow Chemical was upheld when it objected to Environmental Protection Agency overflights of its facilities to monitor compliance with the Clean Air Act because, under the Fourth Amendment, Dow had a “reasonable, legitimate, and objective expectation of privacy.” Certainly, the assertion of such a right seems to be at odds with the original concept of the corporation as an entity created exclusively to advance public interests.

The Fifth Amendment protects against double jeopardy by stating that no person shall “be subject for the same offense to be twice put in jeopardy of life or limb.” Nonetheless, even though a 1906 ruling asserted that corporations do not enjoy constitutional protections against self-incrimination, a 1962 case and 1977 case both asserted that companies could not be retried in cases that had previously been settled by direct verdicts. As for the Fifth Amendment guarantee that “life, liberty or property” cannot be taken by the state “without due process of law,” in 1980 the Washington, D.C., Court of Appeals found that the Pentagon’s decision to prohibit a dairy company from selling to the military because an audit found it had been “irresponsible” and lacked “business integrity” was a violation of the dairy’s “liberty rights” in its reputation.

If Money Is Speech, Then Can Speech Really Be Considered Free?

As has already been illustrated, in the United States, as in other countries around the world, the law is not immutable. But not only does it evolve to keep up with political, economic, and technological progress, it does so also to keep pace with national moods and mores. Consequently, as views have ebbed and flowed regarding the relative roles of companies and states, so too have laws reflected those changes. Nowhere is this quite as clearly illustrated as in the story of how America’s most fundamental liberty, the First Amendment right to free speech, pertains to companies.

*   *   *

At the beginning of the twentieth century, as public outrage grew concerning the excesses of the Gilded Age and the perception that the corporate titans atop the great trusts like Rockefeller, Morgan, and Carnegie had far too much power, President Theodore Roosevelt channeled the zeitgeist in asking that Congress regulate corporate contributions to political campaigns. “All contributions by corporations to any political committee or for any political purpose,” he said in his 1905 annual message to Congress, “should be forbidden by law; directors should not be permitted to use stockholders’ money for such purposes; and, moreover, a prohibition of this kind would be, as far as it went, an effective method of stopping the evils aimed at in corrupt practices acts.”

Within two years, Congress responded by passing the Tillman Act, which banned all corporate contributions to any political candidate for federal office. Later, in reflecting on Congress’s reason for embracing Roosevelt’s suggestion, Justice John Paul Stevens cited “the enormous power corporations had come to wield in federal elections, with the accompanying threat of both actual corruption and a public perception of corruption” as well as “a respect for the interest of shareholders and members in preventing the use of their money to support candidates they opposed.”

These motivations continued to guide Congress throughout the remainder of the twentieth century as it steadfastly maintained its right to set clear limits on corporate involvement in politics. If companies could grow to great size, then, it was assumed, they could purchase outsized influence over the affairs of the nation, and that was an idea utterly inconsistent with the views of representative democracy that had emerged in the seventeenth and eighteenth centuries. Similarly, in 1943, Congress sought to level the playing field in response to massive union political donations by extending the ban to them. That ban was made permanent by the Taft-Hartley Act of 1947. Concerned that either companies or unions might find a way around the ban by narrowly defining “political donations” as directly giving money to candidates, the law also banned any “expenditure” by either group from their general treasury funds “in connection with” a federal election. It should be noted that these large private entities were still allowed to make donations from political action committees that were funded by “voluntary” donations from employees or union members. This was a bit of a wink-and-a-nod approach, as both companies and unions clearly have ways of seeking donations from their employees or members that are voluntary in name only. At the same time, throughout this period, not only did Congress feel unconstrained by the Constitution in regulating corporate speech in the form of political donations, it had no hesitation about regulating it in terms of advertising or in terms of what companies could say about stock offerings or certain types of financial information. There were no perceived protections for “commercial speech,” and indeed some of these constraints on such speech—for example, as those on “insider trading” or pertaining to “truth in advertising”—still exist today.

As the mood of the country began to shift with the boom era of the 1960s and the 1970s, the growth of regulatory government, and the backlash against it from big business, “rights” to corporate speech began to be more broadly defined. Some of the legal decisions that expanded those rights were driven by perceived consumer interest, as in the 1976 Virginia case in which a ban on advertising pharmaceutical prices was overturned. Four years later, at the dawn of what would later be known as the Reagan Revolution—a period in which attitudes toward reducing fetters on business translated into a fundamental ideological divide pitting “free markets” against “big government”—the Supreme Court provided a test for determining the constitutionality of the regulation of corporate speech. In another case concerning an advertising ban, in this instance pertaining to ads by electrical utilities, the Court argued that for government regulation of commercial speech to be lawful, the government must have a substantial interest in regulating the particular speech that is advanced by a regulation that is not more extensive than necessary. Given the breadth of interpretation that such a test is open to, it has produced some rather divergent and seemingly inconsistent outcomes: banning advertising by Puerto Rican casinos was okay, while blocking publication of liquor store prices in Rhode Island was not. While these decisions are confusing, one thing is certain: states can regulate commercial speech to make sure it contains truthful information. As far as political speech goes, states have no such power.

At around the same time as the new law in corporate speech was starting to emerge, a campaign finance case called Buckley v. Valeo produced a ruling that spending money to influence an election was protected speech regardless of whether the money was spent as a contribution to a candidate or as an expenditure on behalf of one. While this case was silent on the specific issue of corporate political free speech “rights,” two years later the Supreme Court found in First National Bank of Boston v. Bellotti that a Massachusetts law banning companies from making contributions from general treasury funds to advocate for or against a referendum was unconstitutional. This conclusion was reached in part, in the eyes of analysts, because with a referendum, unlike with elections for political representatives, there was no perceived threat of corruption, and also because it is in the interest of voters to hear both sides of a debate. The outcome was also influenced by the facts of the situation, in which the state had tried to pass a graduated income tax, saw strong corporate opposition to it, and thus tried to pass a ban on corporate contributions in order to clear the way for the tax.

The Court would later cherry-pick elements of Bellotti to support a further, even more dramatic expansion of the idea of corporate political “free speech.” It would ignore the fact that the case made a distinction for the unique circumstances associated with referenda. But it would build upon Bellotti to grant corporations broad rights to bring their money to bear in influencing outcomes in elections.

The Court would do so despite two subsequent decisions that once again limited corporate participation in elections. One, Austin v. Michigan Chamber of Commerce, saw the Court uphold a Michigan law preventing companies from using general treasury funds to support or oppose candidates. In the 1990 decision, the Court cited the potentially “corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.” It added that “the unique state-conferred corporate structure that facilitates the amassing of large treasuries warrants the limit on independent expenditures. Corporate wealth can unfairly influence elections when it is deployed in the form of independent expenditures, just as it can when it assumes the guise of political contributions.” A second decision, McConnell v. FEC, ruled that the McCain-Feingold Bipartisan Campaign Reform Act was legal even in terms of the section that blocked corporations or unions from using general treasury funds to pay for “sham issue” ads (ads that purport to limit themselves to issues but actually urge voting for or against a particular candidate) within sixty days of a primary or a general election. Again, a key factor in influencing the decision was the desire to avoid the distortions that big bank accounts could bring to elections. A later case allowed a not-for-profit organization to use its treasury to pay for a pamphlet listing candidates who might be considered for or against its position because the Court concluded that as an NGO the entity did not “pose a threat of corruption.” Thus, there was at least a rationale established—the Court wanted to protect against the distortions and potential corruption associated with companies writing big checks for candidates.

A Showstopper Moment

On January 27, 2010, President Barack Obama delivered his second State of the Union address. Before him sat members of both houses of Congress, his cabinet, members of the Joint Chiefs of Staff, and six members of the U.S. Supreme Court. In the midst of his remarks, Obama broke with tradition and directed a withering rebuke toward the representatives of the most senior members of America’s judiciary.

A week earlier, the Court had handed down a decision that was a game changer for both campaign finance law and the idea of corporate free speech. Obama, a former professor of constitutional law, argued that the case—Citizens United v. FEC—“reversed a century of law to open the floodgates for special interests—including foreign corporations—to spend without limit in our elections.” Echoing Roosevelt 105 years earlier, Obama said he didn’t think “American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.” Setting aside for a moment the question of whether there is something especially American about the interests of multinational corporations headquartered in the United States, Obama’s outrage made headlines and underscored the importance of the Citizens United decision. The fact that Justice Samuel Alito also broke with tradition and visibly reacted to the president’s remarks by mouthing the words “not true” only emphasized the emotional nature of the philosophical divide revealed by the decision. The Atlantic called the Alito reaction “the showstopper moment” of the State of the Union.

Citizens United turned on whether a movie distributor could run ads promoting the release of an ideologically motivated attack on Hillary Clinton called Hillary: The Movie during the period in the run-up to an election. Since Clinton was a political candidate at the time, the distributor was concerned that the ads would be banned, and so it preempted a challenge to its rights and sought court approval to proceed. The district court agreed with the Federal Election Commission’s assertion that the movie ads should not be permitted, so the case went to the high court.

The Court had several options before it. Of course, one was that it could have upheld the lower court’s decision. Alternatively, it could have chosen a number of rulings that would have based its decision on relatively narrow grounds. It could have ruled that the video-on-demand distribution of the movie did not count as an “electioneering communication” under the applicable law. It could have based its decision on the not-for-profit exemption cited above. Or it could have done as Citizens United had specifically asked and ruled that the law was unconstitutional only as it pertained to the unique case and its specific circumstances. Instead, the Court chose to use the occasion to reconsider the Austin and McConnell decisions. It asserted it had no other choice than to permit the ads “without chilling political speech.”

The reasoning of the majority in the case is based on a few core points. The first of these is that political speech is at the very heart of what the First Amendment is meant to protect. While this principle is largely consistent with prior court decisions, the next is not as clear. It asserts that money expended in a campaign equals speech and is therefore protected. While this is consistent with the Buckley decision, the majority went further and effectively abandoned the constraints within which it and other decisions had operated—those pertaining to distortion and corruption. It did so based on the view that more political speech is always better in the marketplace of ideas and that banning any of it diminishes the vitality of democratic discourse. This is directly contrary to previously held bans on distorting or corrupting speech, which imply that there are some forms of political speech that ought to be prohibited because they pose clear threats to the public interest. In its decision, the majority asserted that since wealthy individuals and unincorporated groups could spend massive amounts of money to distort the debate, corporations should not be treated differently solely because of their corporate form. The fact that this form gives them the ability to amass greater amounts of money than individuals theoretically can (because corporations are immortal, among other reasons), and thus gives corporations “more” speech than individuals, is not addressed. The fact that the corporate form was initially conceived as having constraints placed upon it because of its unique relationship to and dependency on the state was also not addressed.

The majority also literally took a page from a very common contemporary argument on behalf of the “rights” of businesses by asserting—as did the U.S. Chamber of Commerce in its brief to the Court on this case—that most of the almost six million corporations in the United States were “small corporations without large amounts of wealth.” The Chamber brief pointed out that 96 percent of the Chamber’s members had fewer than a hundred employees and that 75 percent of corporations whose income is taxed under federal law have less than $1 million in sales per year. This was sufficient for the Court to set aside the distortion arguments, even though its decision does not address the several thousand corporations with operations in the United States that have annual sales bigger than the GDP of most countries, the fact that those corporations were, not surprisingly, the biggest contributors to the Chamber, nor the fact that even small businesses have considerably more resources than do the vast majority of individuals.

The Court, which apparently had an appetite to take what could have been a case with limited impact and turn it into a sweeping statement, went further, suggesting that corporations’ option of participating in an election through a political action committee (PAC) was inadequate because “a PAC is a separate association from the corporation … so the PAC exemption … does not allow corporations to speak.” Further, they argue that even if PACs were construed as allowing corporations to speak, they were “expensive to administer and subject to extensive regulations.” Supporting this rather outlandish reasoning, they offered as evidence of the burdensome nature of PACs that “fewer than 2,000 of the millions of corporations in this country have PACs.”

Finally, the Court addressed the corruption concern. It argued that the government’s interest in avoiding corruption—the interest that was so dominant during the discussions of the Constitutional Congress and the issue that has dogged governments throughout recorded history—is not more important than corporations’ interests in participating in the political process via independent expenditures. Clearly, we have come a long way since the Bubble Act of 1720—and in the process have forgotten all the lessons learned immediately prior to that and throughout the three intervening centuries.

The court justified this last point by making a distinction between quid pro quo corruption and that which might result from giving large sums of money to candidates to support their election. For perhaps obvious reasons, the Court’s arguments on this point are limited to a perfunctory “the anti-corruption interest here is not sufficient to displace the speech here in question” while adding that the government had provided no evidence that states with no limits on independent corporate expenditures were victims of corruption. The expectation that representatives of a government that was elected as part of the most expensive political campaign process in history would be the best people to make a strong case against corruption is yet another sharp irony associated with this decision.

The majority’s argument went on to include a statement arguing that favoritism and influence are unavoidable in politics and that corruption does not automatically exist just because certain groups give a politician a lot of money and he or she ultimately votes in a way that is consistent with the interest of those groups. This argument went on to say:

When Congress finds that a problem exists, we must give that finding due deference; but Congress may not choose an unconstitutional remedy. If elected officials succumb to improper influences from independent expenditures; if they surrender their best judgment and if they put expediency before principle then surely there is cause for concern … the remedies enacted by law, however, must comply with the First Amendment; and it is our law and our tradition that more speech, not less, is the governing rule.

Setting aside concerns that corporate giving might violate the interests of shareholders whose views are contrary to those supported by the company, the majority made the argument that “the procedures of corporate democracy” would be sufficient to remedy such a situation. It is particularly discordant that this argument could be used in the midst of a financial crisis that revealed that management often did not act in the broad interests of shareholders and that many aspects of corporate governance were inadequate or suspect.

The four justices of the Court who dissented from most of the key elements of the decision scoffed at the assertion that Citizens United was not a reversal of more than a century of ever-tightening regulations on corporate money in politics. They also argued that the decision was overreaching (without making the politically piquant and accurate accusation of judicial activism that was clearly called for). After defending the prior decisions that had justified limits on corporate campaign spending when it was distortionary or an invitation to corruption, the dissent concluded:

The Court’s opinion is thus a rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self-government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt. It is a strange time to repudiate that common sense. While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.

The Rule of Law in the Global Era: Next Frontiers in a World Without Borders

There is no other democracy, or country that claims to have a democratic character, that has come to grant corporations such a privileged role in its polity as has America. Over two centuries, this country has gone from a debate about whether corporations should even be mentioned in the Constitution to a situation in which these artificial persons are granted the same protection as individual citizens. But of course in granting resource-rich, immortal entities such rights, one is able to fashion an extraordinary role for them.

Nowhere is that clearer than with the idea that money is speech. One of the evils that the Fourteenth Amendment was conceived to eliminate was poll taxes that required certain groups of voters—such as African Americans—to pay for the right to vote. But in the context of modern American politics, if candidates cannot run unless they raise millions—or, in the case of presidential candidates, hundreds of millions—then there is a new form of poll tax in which the people who select the candidates are the ones who have the ability to make the donations that will determine who will run and who will not. And the “people” in the best position to do that are the actors with the greatest economic means: “artificial people”—an apparent injustice that helped trigger much of the backlash and anti-business ferment seen, for example, in 2011’s Occupy Wall Street protests.

Thus there have come to be, in such a system, citizens and supercitizens with rights and characteristics that give both unique political advantages. And even as some argue that states have grown in power because of the rise of the “regulatory state” and the growing share of GDP that is represented by government expenditures, and even as the case is made that the state still maintains “coercive” powers—the ability to enforce the laws—the reality is that modern states are shaped by the influence of their most empowered citizens and that “persuasive power” often takes the upper hand because it is able one way or another to direct those with the “coercive” capabilities.

The American example is, of course, an extreme. Given the objectives of this book, which will ultimately focus on the different systems that have emerged for balancing public and private interests, it is important to understand the American example, because it has been, since the middle of the nineteenth century, the most influential in the world, thanks to America’s economic, political, and military successes. Other countries have also granted growing roles for corporations, which in some cases arise from even closer relations between the state and companies. But virtually all competitive global corporations today are influenced in their shape, structure, and social role by the developments that have shaped corporations in the United States. Finally, the international influence of the U.S. corporate model is also manifest in the fact that of the world’s top two thousand global corporations, by far the largest number are American, occupying 536 places on the 2011 list compiled by Forbes magazine.

Still, American capitalism is just one of the several options vying for preeminence in the world today (and others that are on the rise are more directly descended from the branch of capitalism that split off and developed in Europe, as in the case of Sweden, France, and Germany). Understanding how the emerging class of “supercitizens” has co-opted important powers of the state requires us to return our focus to the global stage.

The reality is that regardless of the system we see, corporations have grown in influence worldwide and in every instance have played a role in paring away key prerogatives of the state. As in the United States, they have used powers granted them within changing national laws to do so. But their ascent has not been bounded by such efforts. Indeed, their rise has transcended all boundaries, which in itself is both a symbolic and a sharply practical way in which modern corporations have been able to gain unprecedented power relative to the states that once gave life to them.