Milton Friedman, the inspiration and guiding light for much of the Globalization and free-market movements of the late 20th century, often asserted that the sole responsibility of a corporation was to make a profit for shareholders. In other words, corporations should not have social objectives such as improving the environment or improving employees’ lives except to the degree that any such actions would improve profits. In the free-market economics literature and theories, it is held that competition between corporations and the power of the consumer will “keep the corporation honest” or keep corporations from pursuing actions that are anti-social. In other words, fraud will be prevented by consumers (buyers) refusing to buy from firms with bad reputations. Competition will force corporations to keep prices and profits low. In the decade before the banking system collapse in 2008, the previous Chair of The Federal Reserve System, Alan Greenspan, frequently held that regulation of banks was unnecessary because the banks’ shareholders would discipline the managers. He eventually recanted this position in 2009.
Throughout the 20th century until 1981, most industrialized nations pursued policies of regulating both the actions and size of corporations. One aspect of these regulations was called anti-trust policy (also called competition policy). One of the most famous anti-trust actions was in 1911 dealt with Standard Oil (source of the Rockefeller fortune). Standard Oil had acquired an 88-90% market share in the production, refining, shipping, wholesaling, and retailing of petroleum and it’s products in the U.S. Standard Oil was ordered broken into 34 separate companies in order to re-create competition.
But in 1981, along with the Reagan-Thatcher Free-market revolution, anti-trust policies were largely abandoned in the U.S. At the same time, U.S. patent and copyright laws were greatly expanded and strengthened to the benefit of large corporations. The US then helped push similar policies to other countries through trade treaties. In industry after industry, competition has actually declined. Strong arguments can be made that neither competition nor consumers have been able to discipline or control the corporations.
Now the world’s economy is heavily dominated by very, very large multi-national corporations. For example, let’s consider one particular industry that is critical to all modern life: agriculture. Two of the largest food crops in the U.S. are corn and soy beans. One corporation, Monsanto, owns patents on genetic modifications to the seeds used for these crops. As a result, Monsanto controls 80-95% of all seed used to produce these two crops in the U.S. Through the help of US negotiators of trade treaties, other countries have been pressured to recognize Monsanto’s patents and likewise allow Monsanto to take-over their seed industries. Monsanto’s aggressive prosecution of farmers for not buying their seeds combined with Monsanto’s history of employing governments to force the use of their product has led to severe criticism and frequent protests. (see here). Yet, despite the protests against Monsanto and genetically modified agriculture, the critics have had little success.
So the issue is: Who controls the multi-national corporations? Are they bigger and more powerful than our national governments? Are these executives now in control of the critical decisions that constitute an economic system? Will this continue? If so, what will the future look like? If not, how will it change? And to what will it change? In this U.S., a recent Supreme Court decision has established that corporations have “free speech rights” and cannot be limited in their spending on political campaigns. How will this affect our economic system?