In Jewish folklore, a golem is a mythic creature made from mud. Although the power to create a golem is thought to be reserved to the especially holy, the golem is bereft of speech and can never be more than the shadow of a human. In modern literature, golems often acquire terrible powers, and in the 1921 Czech play “R.U.R.”, robots take on this role and eventually conquer their human masters.
Corporations have become the golems of our time. They are the creations of man, endowed with limited powers for the purpose of serving humans in our attempt to improve the world. But those limited powers have been enough, combined with their singular focus on profit, to enable them to assert a power greater than our own.
In the early days of corporations, they were chartered by the Crown, and later by individual states of the United States. The chartering authority had the power to specify what they could or could not do, how they would be governed, and how long they would last. As they became more plentiful, the states passed general corporation laws enabling anyone to form a corporation under conditions set by the law. The essential characteristics of a corporation under any of these laws are perpetual life, limited liability on the part of the stockholders, and the power to sue and be sued in court as an entity. The power to sue and be sued in court was said to derive from the corporation’s status as a “persona ficta” — not a real person, but considered to be one before the law.
After the Civil War, the Constitution was amended to ban slavery and to establish the rights of persons in the United States to due process and equal protection of the laws. Less than 20 years later, in 1886, the Supreme Court held that the word “persons” included corporations. The court’s decision contained no rationale for that holding — here is the entire passage:
One of the points made and discussed at length in the brief of counsel for defendants in error was that “corporations are persons within the meaning of the Fourteenth Amendment to the Constitution of the United States.” Before argument, MR. CHIEF JUSTICE WAITE said:
“The Court does not wish to hear argument on the question whether the provision in 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 opinion that it does. “
That was it. Corporations were now “people.” Mind you, ten years earlier the Court had struck down civil rights legislation as unconstitutional and rejected an equal protection argument that would have allowed women to vote. Ten years later the Court would uphold “separate but equal”. The corporations didn’t need civil rights legislation — they had the Supreme Court.
Fast forward to the present. Corporations are people, but people with perpetual life and limited financial liability for their actions. These attributes permit them to accumulate piles of money larger than any individual could ever earn. This power is needed to engage in the commercial activity for which corporations were created — building huge factories, railroads, bridges and entire villages of office buildings.
Not content with money, power and eternal life, the corporations now sought to acquire the facility of speech. They cannot, of course, speak by themselves, but by using money to hire people as their agents to speak and write for them and in their name. Qui facit per alium facit per se. And in due course the Supreme Court let it be so.
With money, power, eternal life, and speech, it might be pardoned the corporations that they began to think of themselves as just like real people, only better. And if ordinary mortals can vote, why not their betters? A stumbling block was that the election laws all restrict the vote to actual human beings. The corporations might have argued that these ancient laws were just as quaint as the Geneva Convention. But they took a different route. After all, if you have the right to vote, you can only exercise it once each election, in the municipality where you reside. But corporations reside everywhere. Surely they needed something more appropriate.
And so it came to pass that they hit upon the idea of using money to flood the public forum with speech, enough to line the campaign chests of Senators and put their message on every television set in the land. And that is where we find the Citizens United case. Although it is only supposed to decide the narrow legal question before it, the Court majority was so anxious to decide the constitutional issue that it ignored the positions actually argued by the parties and held that corporations have the unlimited right to spend money in election campaigns, regardless of whether the corporation’s business was affected by the election, and regardless of whether it even does business in the state where the election is being held.
It will be observed that this right is equivalent to the power to accumulate unlimited amounts of money over an unlimited period of time and spend it in unlimited amounts to affect an election. That right is greater than the right of the candidates themselves to raise and spend money in federal elections. And in all this din, the speech of the individual is not even loud enough to be heard.
Now the golem has immortality, speech and an amplifier, too. It appears to lack nothing besides worshipers, and with the advent of corporate evangelists that can’t be far behind. Where can this end but in a world where we must bow down to our new masters?
Three Financial Myths That Need to Be Changed, Now
Sunday, December 14th, 2008No, it wasn’t 9/11 that changed everything: it was Lehman Brothers. With that firm’s failure, the plug was pulled from the warm bath that we imagined ourselves to be living in. Now we’re seeing industries fail faster than Congress can stuff money into them, and our major creditor, China, is warning us about piling up too much debt and threatening to take away our car keys.
We are saving too little and piling up too much debt. And the rationales voiced by the politicians for their bailout plans are starting to wear thin. We need to free ourselves of myths that have sustained too much national economic policy.
1. Consumer spending will lift us out of trouble. Actually, consumer spending is getting us into worse trouble. It may turn out that Detroit’s problems began before the First World War when Henry Ford raised his employees’ wages generously, correctly calculating that this would not only buy loyalty but also turn them into consumers able to buy their own company’s products. The trouble is that when you encourage consumer spending, you are diminishing the real value of wage increases. If we mindlessly pump money into the consumer sector, it may generate business but soon will lead to demands for more wage increases from the same employers who are about to go under now.
2. Consumer and mortgage debt is good. The subprime loan phenomenon is only a small part of the mortgage balloon that has expanded beyond recognition since 1935. Federal policy shifted the standard mortgage from 15 or 20 years to 30 years, reducing the monthly payment and enabling house prices to rise. Federal support of homeownership grew dramatically as a way to boost housing construction for returning veterans of World War II. Mortgage industry demands led Congress to authorize variable rate mortgages and other exotic products in the 1980s, leading directly to no-money-down financing and “no-documentation” loans in the 1990s. But when all these policy decisions cause home prices to rise, the amount of house you can afford stays the same — it’s just that the price has gone up, the mortgage payment has gone up, and you have been made able to afford it by deducting the interest and spreading out the payments.
Even apart from the current crisis, these props for the homeownership policy no longer make sense. No one stays in a home for 30 years anymore, so there is absolutely no pretense that a 30-year mortgage will ever be repaid on schedule. And allowing a tax deduction for interest makes owned housing more affordable, but does nothing for those who have chosen to rent their housing — either because they cannot afford to buy, or because their jobs require them to move frequently. What these loan products do is to force consumers to invest a large part of their net worth in a single highly leveraged investment, a home which may rise in value (especially in a bubble) but which may also decline in value, disastrously.
Nor is credit card debt a good way to make consumers more secure. Thanks to Congress, state usury laws have been wiped out as constraints on the amount of interest credit card issuers can charge. Much of the debt that winds up on credit cards carries a rate of interest that would be considered loansharking if the banks were not licensed — and recent changes to the bankruptcy laws make it much harder to wipe out credit card debt in bankruptcy. (Astoundingly, even those giveaways have apparently not rendered credit card issuers immune to the financial crisis.) Any bailout “solution” that increases the debt load on ordinary consumers should be regarded as suspect.
3. All spending is equal. We measure our economic health by gross domestic product, consumer spending, and other macro measures that fail to distinguish between buying a new refrigerator or buying a video game system. There is nothing in our economic policy that encourages people (or businesses, for that matter) to spend money on necessities rather than on discretionary items. We saw this recently when failing banks continued to fund lavish conferences at exclusive retreats for their executives. It’s all deductible as a business expense, so why not?
It’s hard to construct a federal policy that encourages saving. The only real way to do so is to end the federal policies that discourage it, and force lenders through better state and federal regulation to do their job of granting credit only to those who can repay it.
1. Lower Credit, Increase Saving. One first step in countering the pernicious effects of these myths would be immediately to repeal the two most significant federal laws that protect the credit card industry — federal preemption of state usury laws and federal bankruptcy laws that treat credit card debt differently from other types of debt. This would result in a vast reduction of consumer credit, and in the short run would reduce consumer purchasing. In the long run it would increase consumer saving as a means of accumulating the money needed to buy things that are truly necessary.
2. Make Mortgages Solid; Make Renting An Option. Allow a tax deduction for rent paid to a landlord. Reestablish standards that require a 20% down payment for most mortgages. Make the “slicing and dicing” of mortgages illegal and force a licensed bank or mortgage lender to keep its money on the line for the entire amount of the loan. End federal preemption of state laws that regulate the more exotic types of mortgages. These four measures would reduce the volume of mortgage money available and channel it into loans that really can be paid back, stablizing home prices at a more realistic level while putting the rental option on an equal footing with homeownership.
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