Corporate Power and the Unmaking of American Democracy

AP Photo/Toby Talbot

People hold signs during a gathering on the anniversary of the Citizens United decision in Montpelier, Vermont

We the Corporations: How American Businesses Won Their Civil Rights
By Adam Winkler
Liveright

Corporations and American Democracy
By Naomi R. Lamoreaux and William J. Novak, Eds.
Harvard University Press

This article appears in the Spring 2018 issue of The American Prospect magazine. Subscribe here

With the passage of a massive corporate tax cut, a billionaire’s cabinet in Washington, and rising corporate profits amidst worsening economic inequality and insecurity, the problem of corporate power is justifiably at the forefront of political debate. A pair of new books provide a rich historical context for understanding these tensions between corporate power, democracy, and inequality: legal scholar Adam Winkler’s We the Corporations, and a volume edited by historians Naomi Lamoreaux and William Novak called Corporations and American Democracy. Taken together, these volumes show how corporations have historically leveraged law and public policy to secure far greater rights and influence.

Winkler, a constitutional law scholar at UCLA Law School, offers a comprehensive account of how corporate legal rights emerged, from the colonial era to Citizens United and the contemporary battles over corporate speech and campaign spending. Winkler’s account makes clear that corporate powers have always been a legal construction. The question is not whether corporations should have “more” or “less” power; rather it is about what rights and powers corporations should have, for what purposes.

In the colonial era, corporate entities like the Massachusetts Bay Company were central to facilitating collective action, association, and economic activity. Winkler’s book then narrates key historical turning points where a combination of corporate actors, lawyers, and judges made crucial decisions establishing corporate rights, and transforming the nature of both the corporation and the American polity itself. The first key turning point came in the 1809 case of Bank of the United States v. Deveaux, in which Chief Justice John Marshall held that corporations were to be understood as associations of persons. In this view, corporate rights were limited, and ultimately derivative of the rights of their (human) members. It wasn’t until 1886 in the famous case of Santa Clara County v. Southern Pacific Railroad that the Supreme Court established the legal fiction of corporate personhood itself.

But as Winkler argues, these advances in corporate rights, perhaps paradoxically, served more than the narrow interests of corporate litigants. Corporations and the lawyers representing them, in Winkler’s account, have been at the vanguard of legal innovation and transformation, often forging property and liberty rights that have sometimes advanced as well as narrowed American democracy. Both the associative and personhood views of the corporation served as grounding for subsequent cases finding specific property rights and protections against government pressure, and later liberty rights including speech rights for corporations.

Crucially, these rights emerged from “liberal” and “conservative” courts alike, and often served a variety of social purposes. Corporate property interests were key to the emergence of early Fourth and Fifth Amendment criminal procedure protections against search and seizure and on due process grounds. Similarly, speech rights were key to protecting media companies from threats of censorship and attack by state actors—including demagogues like Huey Long. The NAACPleveraged corporate association arguments to protect its membership from state-sanctioned harassment and pressure as Southern governments sought to criminalize the civil rights movement activists.

Winkler’s account is thus partly a powerful theory of legal change and societal transformation. Through strategic litigation motivated by corporate self-interest, corporations—and their representatives in the legal profession—worked massive transformations in American law, public policy, and democracy itself. As Winkler argues, corporations have been adept at harnessing the top legal talent—from the days of Daniel Webster to the present—and pursuing risky, innovative legal claims. Corporations are thus, for Winkler, “constitutional leveragers” and “constitutional first movers.”

Winkler is admirably balanced in his account, adding nuance to the conventional right/left debates by avoiding simple pro- or anti-corporate power narratives. But even as these corporate rights often have afterlives that cut in a variety of directions, on net the story of corporate-driven legal innovation is not a neutral one. It is not a coincidence that corporate rights gained traction in our legal jurisprudence well before equal rights for African Americans or women—Winkler notes that the 1809 corporate rights cases predate by decades cases like Dred Scott v. Sandford (1857) and Bradwell v. Illinois (1873), which considered and ultimately ruled against legal rights for enslaved persons and women, respectively.

After the passage of the 14th Amendment, aimed at overturning Dred Scott and ensuring birthright citizenship, more than 300 of the roughly 600 cases brought under the amendment from 1868 to 1912 addressed the rights of corporations; only 28 were about the rights of African American persons. Furthermore, corporate rights were implicated in decisions that reaffirmed racial and economic inequalities—like Plessy v. Ferguson maintaining segregation—and Lochner-era cases striking down labor and economic regulations advanced by the emerging labor movement in the face of the inequities of industrialization. As Winkler suggests, the result was to transform the 14th Amendment into what one observer at the time called “the Magna Charta of accumulated and organized capital.”

Even more galling are the episodes recounted by Winkler in which corporate interests and their allies in the legal profession and the judiciary constructed these favorable regimes using legal sleights of hand. Winkler uncovers how the Santa Clara decision, cited by hundreds of cases as precedent for assuring corporate personhood and the legal rights that follow, in fact held no such thing. Rather, through the combined efforts of railroad magnate Leland Stanford, his legal team, and a favorably inclined Supreme Court Justice Stephen Field, the case was improperly summarized in a Court report—and then cited for this holding that Field (and Stanford) supported but had been unable to actually secure in the original case itself.

In the modern era, the turning point came in the 1970s, when Supreme Court Justice Lewis Powell, himself a former lobbyist with the U.S. Chamber of Commerce and architect of the chamber’s deliberate strategy of dismantling New Deal economic regulations through a litigation strategy aimed at the courts, was able to put his views into practice in a series of decisions that formed the foundations for modern corporate speech doctrine—and ultimately Citizens United. Indeed, Winkler’s book is in part an important reminder that the levers for corporate influence extend far beyond the familiar realm of campaign financing and lobbying; if anything, the most valuable vector for the construction of corporate power has been their skilled leveraging of law, litigation, and the judiciary itself. Corporate rights may have been central to forging many of our vital legal precedents, but we the people have still been junior partners at best in this trajectory, in a legal history that has largely been driven by and for those corporate interests.

 

IN CORPORATIONS AND American Democracy, historians Naomi Lamoreaux, William Novak, and their colleagues offer an equally sweeping and compelling account of these tensions between corporate power, law, inequality, and democracy. The volume includes a number of important contributions in the legal history of corporate rights and corporate personhood, including essays by Margaret Blair, Elizabeth Pollman, Ruth Bloch, Naomi Lamoreaux, and Winkler himself. These essays as a whole deepen some of the themes from Winkler’s book: that corporate rights have been products of legal contestation; that those rights have at times been secured through theories of corporations-as-association as well as theories of corporations-as-persons. Indeed, the modern view of corporate personhood with thick legal rights is, as these essays suggest, built on a dual misapprehension. On the one hand, there is a danger to having a monolithic view of corporate legal rights when the history of the corporation reveals a stunning multiplicity of corporate forms and purposes, each warranting wildly different kinds of protections and limits. On the other hand, the modern legal regime around corporate rights, including Citizens United, significantly underplays the very real concentrations of economic and political power that these corporations exercise, often without regard to the interests of all of their supposed (human) members.

As the editors argue, the tensions around corporate power also stem from the dual nature of corporations themselves: “On the one hand, the corporation has long been seen as a useful and alluring vehicle for harnessing and distributing the collective energies of individuals—an engine of economic growth.” Yet at the same time, corporations have also been “viewed with suspicion as a potentially dangerous threat … a site of coercion, monopoly, and the agglomeration of excessive social, economic, and political power.” Where Winkler’s book tells the story of modern legal rights being constructed in large part through corporate-driven litigation, the Corporations volume tells a similar story on a much broader canvas: These essays suggest that the very institutions of American democracy themselves are products of battles over corporate power—both the efforts to defend them, and the efforts to rein them in. 

Thus, essays like those by Eric Hilt, Jessica Hennessey, and John Wallis suggest that early legal battles establishing general incorporation laws were more than a power grab by corporate entities. Rather, this shift was crucial for reining in rampant corruption in the patronage-based granting of special charters by state officials. Corporate rights, in this domain, were vital to creating a foundation for economic dynamism and genuine political liberty. But this was not always the case. Essays like those by Daniel Crane, Ajay Mehrotra, Novak, and Steven Bank shift to the industrial era of the late 19th and early 20th century, and together paint a different picture. Here, as corporate power magnified in the era of trusts, monopolies, and the specter of industrialized production, the challenge was not how to protect corporations and people from a corrupt state, but rather how to use the state to protect people against arbitrary and exploitative corporations. Thus, efforts by reformers to impose legal limits on corporate power led to the emergence of modern democratic institutions, from the tax regime to the regulatory state—public-sector instrumentalities that did not exist previously. These institutions, so central to modern democratic governance, emerged out of the urgent struggle by reformers to create new institutions and laws that could provide a countervailing balance against corporate behemoths, from the trusts to the industrialized workplace.

The volume concludes by suggesting that this struggle over protecting the socially valuable activities of corporations while limiting the dangerous excesses of corporate power will continue, sometimes in new forms. Nelson Lichtenstein’s essay notes that the shift from large vertically integrated firms to more diffuse supply chains has been central to the erosion of the safety net and the increasingly precarious forms of modern work, undermining those turn-of-the-century protections for workers and consumers even as corporations are able to centralize greater power through strategic use of outsourcing, franchising, and platforms. Winkler’s own contribution to the volume returns to the Citizens United decision as an example of how a 19th-century vision of corporations-as-association has helped sanction dangerous new forms of 21st-century corporate power in the political arena.

 

INDEED, WHILE BOTH books are framed as historical accounts of the rise of corporate power, these volumes can also be read as telling a vital parallel narrative: not of “we the corporations” but of “we the people” developing new movements, laws, rights, and institutions to contain corporate power, and channel it productively. Winkler touches on the importance of figures like Louis Brandeis, Thurgood Marshall, Ruth Bader Ginsburg, and Ralph Nader, to name a few—all lawyers who saw a valuable role for corporations and leveraged corporate rights strategically to serve larger visions of equality and democracy. But they also worked to establish vital guardrails, ways of limiting corporate power to prevent overreach. Similarly, the essays in the Corporations volume paint a similar picture, as the rise of antitrust law, public utility regulation, labor rights, and general forms of state taxation and regulation in the late 19th century were crucial in reining in the excesses of the first Gilded Age, and setting up the potential for a more egalitarian economy in the decades to come. As we struggle with new forms of corporate power, radical transformations to the nature of work, and growing inequities in our politics, these volumes offer invaluable reminders: that corporations ultimately are instruments whose powers and limits can serve a variety of economic, social, and political purposes; that corporations have been adept at shaping law and institutions—and that the prospect for a more inclusive economy and polity have always depended on the ability of reformers to mobilize and assert their own vision of appropriately contained corporate power.

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