October 26, 2005

Abolish the Corporation! Er, Maybe.

Steven Greenhouse's New York Times article today on how Wal-Mart is trying to pare down its health-care costs makes for depressing reading alongside Time's new cover story on those ever-shrinking corporate pension funds. The short story: Companies don't want to be on the hook for medical or retirement costs. Wal-Mart's first order of business is to keep its profits rising, which means insuring its employees as little as public opinion will allow. (Ensuring high turnover helps.) Meanwhile, managers across America have been raiding and overstating their company's pension holdings, while forking over millions to takeover artists and CEOs. Congress has let them get away with it by promising, dubiously, to take care of the retirees if things go badly. The abstract term for this is "moral hazard"; the more concrete term, I believe, is: "retirees recycling cans to avoid eating garbage." But fear not: as long as shareholders are happy, capitalism is working. We know because they tell us so.

How did we get into this mess? I mean, the quick 'n' dirty answer is that in the postwar era, short-sighted union leaders bargained with employers for corporate benefits rather than stumping en masse for universal health care and super-Social Security. But why, in this day and age, are companies still forced to worry about health care and retirement funds? They shouldn't have to do it; the system only encourages Wal-Mart-esque behavior, and makes it hard for businesses to compete globally. Luckily, good liberals have an exit strategy: the government should handle health care and retirement, so that corporations can get back to what they do best: focusing on profit-making. GM would no longer have to operate as a "social insurance system that sells cars to finance itself," and the business of America could be business once again. Only the state can free the market from these heavy chains, say liberals. On most days, I'd agree with this. But is all this really the best way to go, or only yet another short-sighted solution to a longstanding problem? Let's digress for a bit.

There is, of course, no such thing as a truly "free" market, only types of markets designed by the state, and it's hard to figure out what the ideal design really is. The framers of the Constitution never predicted that the corporation as we know it would ever exist—at the time of the American Revolution, there were only franchises charted by legislatures for public purposes. The Jacksonians, aiming to curb corruption, later revised the corporate charter and opened it up to all comers, but never intended to exempt corporations from the common law or social responsibility. It wasn't until the late 1800s that New Jersey changed all that, rewriting its charter laws to allow corporations to do whatever they damn well pleased. Soon all the major corporations were flocking to New Jersey, and states were forced to compete with each other for lax charters (thanks especially to several Supreme Court decisions protecting charters and declaring corporations "persons" entitled to full constitutional protection—including out-of-state recognition). Toss in decades of lavish federal subsidies and voila, we've got corporate America. Hence the modern "free market" that conservatives have fought so hard to protect against "state intrusion."

True legal originalists would overturn Santa Clara County vs. Southern Pacific Railroad Company—which gave corporations 14th amendment protection—as an unconscionable act of judicial activism, though don't expect anything along these lines today (nor, necessarily, should there be). But that's just to say that ultimately nothing stops citizens from revising corporate charter law, if needed. Charters aren't sacred. That leaves the question of whether to do so. The situation we have today, in which firms like Wal-Mart and GM are obliged to cater to shareholders (in theory at least), but somehow got lumped with these other profit-draining social responsibilities, like paying for prescription drugs—is untenable. It's no surprise, then, that, as Time details, companies are raiding and shedding their pensions and getting the government to bail them out of their obligations to retirees whenever possible. It's what they're "supposed" to do.

Again, one response is to say, "Enough, enough" and just make the government assume primary responsibility for all these profit-draining obligations. Set up basic universal healthcare and mandatory savings accounts, and let corporations offer extra benefits only insofar as they need to compete for workers. Taxpayers will foot the rest. That way, unions can stop haggling with employers over premiums and deductibles and focus instead on wages and workplace conditions. It's a far more rational and stable system than what we have now, true. But why we think it will be any more sustainable, over the long haul, than the postwar bargain struck fifty years ago is a good question. Isn't it likely that, even if we had a single-payer health care system and "mandatory savings accounts", companies would still offer extra benefits to workers, only to blow the whole thing up down the road when they decide it's no longer profitable to support increasingly long-living retirees?

Alternatively—and you see this proposal at WTO protests or in Multinational Monitor from time to time—we could start rewriting corporate charters, drastically, and require companies to worry about this stuff. Always seems iffy, but you know. Perhaps in the end we could even hack away at a good deal of government regulation; there'd be no need if companies were beholden to civil authority, as was the case in the 19th century, and required to meet their social responsibilities in whatever manner they find most efficient. What would that mean for health care? I don't know. State-run health insurance might still probably be the best way to go. Fine. Perhaps charter revision would prove far more useful in other areas, like in environmental conduct. (I'm not sold on the current "corporate responsibility" trend underway.) But corporations were originally designed by the people and for the people; why not have them act that way? "Ah," one will say, "but that sort of thing would never work in The Globalized Economy™; companies couldn't compete!" Or: "Fool! We tried this already; it was called 'Fascist Italy.'" Yeah, yeah. Still, the idea that companies should just do their thing while government can swoop in later and pick up the mess looks less and less appealing by the day.
-- Brad Plumer 8:52 PM || ||