March 3, 2011

Corporations Are Feudal Manifestations (1 of 2)


Contrary to propaganda, there’s nothing modernistic about corporations. On the contrary, they’re a carryover phenomenon from feudalism. This feudal vestige persisted through the early heyday of capitalism, soon becoming the preferred mode of organization to prevent the full textbook logic of capitalism from developing. The result was that the economy never evolved beyond a feudal-capitalist hybrid. And once capitalism reached its terminal stage starting in the 1970s, where the combination of Peak Oil and the terminally declining profit rate threatened to attenuate forms of economic domination completely, the corporation became the basic unit of class war, and the anti-social, anti-political, anti-sovereign form around which full feudalism is intended to be restored.
The corporation originally arose out of medieval guilds and the monopoly charter. This charter was also called a “searching and sealing patent”. It had nothing to do with production. The charter-holder, generally some royal crony, didn’t produce or do anything but merely took a cut of some production process, nominally for “certifying the quality” of the product. We can compare today’s Food Control Bill, with its myriad FDA impositions, fees, and forced purchases of corporate electronic equipment for small and medium producers. On its face this isn’t to ensure better food quality (if it were, there would be rigorous enforcement of existing law against the big corporate producers, and a total ban on CAFOs), but to “certify” smaller producers and extract “searches and seals” from them. Or better yet, drive them out of business altogether.
The main goal of these medieval institutions and practices was always to restrain economic activity in the interest of the existing power structure. The goal was always monopoly and economic control by setting up rent extraction points. The first corporate innovation was pooled capital, first used for the Russia Company (chartered in 1553), although it wasn’t fully developed until some fifty years later, by the British East India Company. Limited liability followed soon after, at least as early as a 1662 Parliamentary grant to investors in the BEIC.
Although these corporate forms were sometimes organized by the rising bourgeoisie, they were also seen by the obsolete feudal structure as a way to protect its wealth and economic prerogatives, by channeling bourgeois activity through the controlled corporate form. 
In addition to the adaptation of the guild form and the monopoly charter, other medieval practices which now evolved with the times included piracy now becoming chartered privateering and the carryover of private taxation. Eventually the BEIC’s tax extractions from India exceeded its trade revenues. Corporate rent extractions, where not explicitly called “taxes”, are really the government de facto alienating its taxation power in favor of the corporation. Today we’re seeing the increasing recrudescence of de jure tax farming at the IRS. Meanwhile the health racket Stamp mandate is the new model for a government-mandated, IRS-enforced private tax extraction. Even the administration, in arguing for the mandate in court (public money and resources being used to argue on behalf of a private corporate prerogative), now explicitly calls the penalty for refusing to buy the Stamp a “tax”.
With all sorts of examples of artificial barriers to entry and restrictions on activity, as well as subsidies and other preferences for entrenched rackets, we see today the continuation of the original mercantile colonial system, wherein elites strictly controlled the allowed range of economic action for all colonials and other non-elites. This was a primary wellspring of the American Revolution. The chartering of monopolies and corporations was a major part of this control system. The 1773 plan for the BEIC to set up a vertical tea monopoly in the colonies, through chartered commissioners, was a classic example.
Today’s internal mercantilism seeks the same end. The difference is that the alien monarchical/corporate monopoly is nominally our own government and “our” corporations. But in fact the policy and aggression of a Walmart or a Wells Fargo is exactly the same as that of the British East India Company. The community is a colony to be exploited and drained of its wealth.
Remember the axiom, which applies in spite of every lie about “investment”, “ratables”, or any other trickle-down fraud: No big corporation would enter a region unless it expected to take out more wealth, usually far more, than it put in. Otherwise its shareholders wouldn’t let it enter in the first place.
The role of government, starting with chartering the corporation in the first place, is to aid this internal colonization, if necessary using constraint and force to enforce this corporate-colonial prerogative. Globalization started as the extranational, NGO form of this enforcement. With the advent of the EU and NAFTA, the stateless, alien bureaucracy has begun to rule within the West itself. The WTO extended this anti-sovereign process. This too is redolent of the old feudal nobility, prior to the rise of the nation-state, who squatted uselessly and destructively on the land as a purely alien presence, parasitic and predatory.
Another consistent feature, albeit in a frequently changing form, has been slavery. The basic status of the exploited medieval peasant was as a serf. The supposed evolution to capitalism saw both the change from serfdom to indentured servitude (for most Europeans), as well as the recrudescence of ancient direct slavery in the Western Hemisphere. The black slave and the white indentured servant gave way to the proletarian wage slave and the sharecropper. After a brief mid-20th century interlude of relative economic redistribution, we’re now rapidly returning to indentured servitude, debt slavery. The corporation is the main engine of this process. It dominates the real economy, subordinates the real economy to the finance sector, and forces us ever deeper into debt merely to continue to economically exist. 
The most consistent continuation of feudalism throughout the nominally “capitalist” era has been the necessary repetition, at ever-shorter intervals, of the process of primitive accumulation, AKA direct robbery in order to amass seed capital. The great European land enclosures are generally considered a defining feature of the transition from feudalism to capitalism. In fact, this enclosure process has needed to be repeated several times. 19th century imperialism was the first great round. Then post-WWII saw the next great assault as Western governments and corporations scrambled to establish capitalist dominance in the aftermath of the collapse of conventional colonialism. Starting in the 1970s, the final enclosure process began, all over the world including in the Western countries themselves. The land grabs are so far overt and large-scale only in the Global South, but there can be no doubt about the intended end stage in the West as well: 100% of the land, resources, and infrastructure are to be in the hands of a few private rentiers. The corporation is the main engine of this process, as its imposed debt slavery renders it more and more impossible for anyone not rich to hold onto any real assets.
These are some of the main ways that corporate rent extraction has always, throughout the nominally capitalist era, served to set up bottlenecks within the real economy, create forced markets, crush actual innovation, and prevent egalitarian market entry. In all these ways the corporation helped keep alive the spirit of rentier feudalism.
All this is why corporations were excluded from the Constitution, although as we’ve learned to our misfortune the exclusion wasn’t rigorous enough. We now need to amend this Constitution to render it exemplary of the true sovereign people’s constitution. This means abolishing these feudal atavisms.
What has ideologically justified not only the existence but the radical empowerment of the reactionary phenomenon, corporations? Here too, we find a feudal rationale.
Although the SCOTUS and corporate ideologues have worked their way through a menagerie of justifications for the corporation and corporate “rights”, the basic ideological premise is contained in the natural entity theory. This remains the implicit concept, although it’s seldom been explicated since the 1920s. This theory arose out of the late 19th century German organicist movement. Looking back to medieval times, liberal German scholars saw the key to all of its social and economic vitality and freedom in organized “collective personalities” – various clubs, guilds, lodges, the church flock, etc. They looked at how capitalism and the modern state have crushed the integrity and cohesion of such social and economic organs and concluded that the answer wasn’t to get rid of centralized power concentrations, but to create more, intermediate concentrations. (Madison had already formulated this scam in Federalist 51.) They wanted, not for us to assert our citizen and human rights against concentrated power as such, but rather for new corporate rights to be created for these intermediate structures as against the centralized state. The citizens would remain as disempowered as before.
The correct answer to this problem would be to break the centralized state and replace it with confederations of the lower-level community organs. But as always, Big Government liberalism was here in cahoots with corporatism from the start, in principle.
The practical result of this theory, once it reached the US, was to justify an expansive new view of corporate “rights” and prerogatives. The people were supposed to accept the existence of the corporation as god-given, natural, by definition good in principle and practice, and at any rate something we have no choice but to accept. It’s a circular, might-makes-right argument: The corporation is here and is playing a dominant, good-by-definition role, so it ought to have all Constitutional rights. And why should it be allowed to play such a role at all? Like the theory says, you’re forbidden to ask that question, but if you insist, it plays that role because it has the right to play it.
It’s the same rigged logic as in the federal courts which found the Stamp mandate constitutional (Congress can create a forced market, which is then dogmatically called a natural market, over which Congress naturally has full regulatory authority etc…), or of “libertarians” who want to normalize and legalize the crimes of primitive accumulation. Once the robber stops to formalize his plunder as “property”, it’s no longer the proceeds of crime, but now has a retroactive mystical validity going back to Adam and Eve. The propertarian now has the full “right” to idly hoard, bequeath to a worthless parasitic heir, etc.
Since the Constitution self-evidently rejects this “theory” (otherwise it would have enshrined these intermediate corporate bodies and described their powers and immunities), the SCOTUS never explicitly relied upon it much. (Indeed, it went through a series of rationales for corporate “rights”, discarding one and taking up the next, before basically giving up and just going ahead instrumentally, ad hoc, might-makes-right fashion. That’s all it could do in the end, since corporations obviously have no constitutional rights whatsoever, so how can anyone come up with a coherent theory of such rights?) But to this day it remains the implicit foundation of corporatist jurisprudence.
So corporations were one form in which elites tried to continue their feudal prerogatives into the 19th century. Ted Nace describes the circumstances of the first half of the 1800s.

What is not as well known is that, long after the ratification of the U.S.
Constitution and the adoption of the Bill of Rights, most aspects of employer-
employee relations continued to be regulated by a common law
legal structure that continued to enforce principles of privilege and hierarchy
derived from the feudal society of the late Middle Ages. As explained
by political scientist Karen Orren, “The original, mainly
landholding, masters had long since been overtaken by business owners
and managers; however, their privileges remained, passed on to their
successors largely intact.”

This system of workplace regulation, also known as the “law of
master and servant,” was similar to that applying to husband and wife,
parent and child, and guardian and ward. The power of employers over
their workers was considered a private relationship, where normal constitutional
rights did not necessarily apply. Thus, common law permitted
measures of enforcement that were unacceptable in other social
realms. For example, it was not until 1843 that American courts stopped
permitting employers to beat their employees.

Industrial relations in the United States were rooted in their English
antecedents. (p.142)

This is the atmosphere in which feudal practices were being carried over into the age of nominal capitalism and nominal democracy. The corporate form would play an important role in maintaining this employer-based tyranny and residuum of feudalism. The corporation was meant to serve as an anti-democratic fortress during the age of cheap, plentiful fossil fuel energy and industrial abundance, both of which ought to have been radically democratizing forces.
Nevertheless, at first it looked like this feudal vestige as well would wither away. Adam Smith despised corporations as a stagnant feudal holdover, as did influential physiocrats like Turgot. Through them the disparagement of corporations as an obsolete form came to America through Ben Franklin. The US Constitution shunned the corporation, and corporate charters were highly restrictive. Classical economists from Adam Smith to Karl Marx assumed corporations would play no significant role in the capitalist future. They were destined for the scrapheap.
So what happened? A reactionary corporatist coup took place in the US. This coup radically empowered corporations and, through them, the feudal rentier, now disguised as a productive capitalist. In Part 2 I’ll trace how that happened.


  1. Russ,

    I’m planning to read your post sometime later today, after work, but for now wanted to comment on the situation at Naked Capitalism. For one thing I was surprised by how many commenters were in favor of cutting social security in yesterday’s article. Readers of NC should be a more informed audience so this had me wondering if that many people buy into the right-wing propaganda on the need for austerity, or could some of them really be plants?

    Also, I was surprised by the regular commenter who seemed to be arguing that citizens do not have the right to question “our democratically elected officials”?? (I had to read this two or three times to make sure it wasn’t some kind of joke.) And then he went on to state that Pfc Bradley Manning should be shot for damage to *our* government?!?

    And that this same person could watch the “Collateral Damage” video and claim the soldiers in the helicopter were firing on civilians in self-defense? When it should be obvious to anyone that it was a clear case of murder.

    Unbelievable! Were the Nazis any more brainwashed than this?

    I appreciated your response that “the same officials would be hanged if subject to the rule of law at Nuremberg”, but now I’m left wondering: if this is what you get from a regular commenter of an econo-blog, then how many American citizens are just as brainwashed (or even more brainwashed) than this idiot?

    And from what you said, the situation at Baseline Scenario is no better? I had to stop visiting Baseline a few months ago, because I got too annoyed by Simon’s polite talk of “captured officials” instead of calling them what they are: “criminals” and “scum”. But last time I checked (5 or 6 months ago) most of the comments at Baseline seemed pretty enlightened compared to other blogs. Do you think this has changed?

    And I’m sorry to get off topic here, but it does look like the Egyptians, Tunisians and others are way ahead of us when it comes to seeing through government lies and propaganda.

    On the one hand, the good news is that the only thing keeping the American people in line is progaganda and manufactured consent. But, on the other hand, the bad news is that this propaganda is everywhere, and so far it seems to be doing a very efficient job of controlling the population.

    Comment by Frank Lavarre — March 4, 2011 @ 7:49 am

    • Hi Frank. I’m glad to hear someone’s reading these.

      I don’t know what’s up with commenters lately. The guy who wants to shoot Manning is really bizarre. I didn’t recall his saying anything so pro-bankster before.

      I don’t read or comment at Baseline as much as I used to, but I did post comments in the last two threads, in one of which I ended up in an argument with a statist yahoo. That’s the one I mentioned to Jim the Apoplectic.

      I thought the line about the elected officials ought to be a joke as well. Evidently not. It sure did sound like a regurgitated talking point, like I mentioned in my other comment.

      Were the Nazis any more brainwashed than this?

      I think today’s Americans are similarly brainwashed. They basically support the regime, aren’t enthusiastic about its more aggressive aspects, but meekly go along with anything.

      At least Hitler had actually restored jobs, prosperity, and international respect. (Even if the economic aspect was a bubble.) Meanwhile today’s US regime is presiding over the wholesale destruction of all of these. So it actually made a lot more sense for the average German man on the street to basically support Hitler than for a non-rich American today to support this regime.

      Comment by Russ — March 4, 2011 @ 10:17 am

      • I too have been surprised at the recent devolution of comments on Naked Capitalism. I was on holiday for 3 weeks and so the difference to me is readily apparent. First I was surprised to see so much deficit fear mongering in the comments, when the site had previously hosted reliable MMT rebutters. Those people seem to have fled. Second there has been an increase in pro-sham democracy voices and admirers of corporate parasites. Even if the commenter is immediately refuted, the ensuing argument distracts from worthwhile discussion. (Mission accomplished.)

        It may be that incoming links have shifted the readership. But I think it’s more likely we have 1-2 paid trolls at NC who serve to embolden those who agree with them. My guess is banks and the government have stepped up their MISO efforts (“military information support operations”… Wikipedia it for a laugh) in the wake of Wikileaks and global unrest.

        Further, it’s difficult to overestimate built-in human cognitive error. Bradley Manning faces another 22 charges, which reminds people that he is a despised outgroup member who challenged the powerful, high status government. Humans have a natural servile impulse rooted in the desire to conform in small groups. On the large scale, it leads to the worst kind of scary insanity. And terrible comments.

        Comment by reslez — March 4, 2011 @ 6:17 pm

      • I hadn’t really noticed a significant deterioration, but since you mention it this whole theme of “obeying elected officials” does seem like a new development, and I like I said in the comment it sounds like a talking point that came from the top down, since there’s no doubt that the wingnuts were told to keep saying that about Wisconsin. I guess they’re extending that idiocy to the general discourse.

        Ironic, isn’t it – they’re the ones who are supposed to be so anti-government, and yet they’re the ones now moronically parroting the most pro-government notion you could have.

        I wonder how hard it will be for us to drive in a wedge there. The counterargument seems obvious: I thought you were anti-government? Then why are you aping such pro-governmentism?

        I’m convinced that the basic anarchist idea can be a big winner, if it’s packaged correctly for the American audience. Anti-government, anti-corporate. (One doesn’t necessarily even need to specify, “anti-capitalist”, since by now capitalism is so bound up in corporatism. Smash the one while pushing anti-corporate solutions, and the other goes away as a side effect. Capitalism can no longer exist without the corporate form anyway, as I tried to argue in part 2 of this post. The idea’s still raw and will need development.)

        Comment by Russ — March 5, 2011 @ 5:38 am

  2. […] From Russ on the Volatility blog: […]

    Pingback by The neo-feudalism of corporations | The Bovine — March 6, 2011 @ 1:12 pm

  3. Hello!

    It does seem like feudalism is in fashion and almost everyone of my peers as a young man has either their eyed glossed over to be the one on top, has resigned themselves to a quiet existence trusting that politics will never have to be important to them and real wages will be sufficient for their needs, or really has just forfeited their mind and awareness to live in a dream-like stupor, lashing out angrily at humanity in general at times, having no particular understanding of why things are the way they are. It is quite sad really.

    And yet I’m trying to figure out some moves to make while I carry my debt load from university. Quietly wondering if it will inflate away before interest rates go up…

    At this point I think you have it right when it is about awareness. I am working on a project with my friend to start an alternative media organization as well as a think-tank that can serve as a platform for the retaking of our society from those who would seek to grab power.

    Perhaps its just the people I meet at this age but whether poor (and talented, wanting to be wealthy) or rich (unaware of and shielded from the effects of the recession), many of the talented people I meet seem pretty apathetic about moving forward with solutions to reorganize society for the better. The answer I normally get is “that sounds like a big plan… I’m just focusing on x,y,z [gym, class, work]. I keep holding the belief that humanity can raise itself up and participate fully in the world but I am saddened to see how many have agreed to be complacent – or even those who just seek thrills and scoff at rational discourse.

    Oh well. I’ll say it again, I appreciate your work (and all those engaging in positive discussion) as a sort of fuel to my fire.

    Comment by Transcent — March 8, 2011 @ 12:36 am

    • Thanks, transcent. Your project idea sounds great. You just have to keep plugging away and not let the naysayers and clods you describe get you down.

      Comment by Russ — March 8, 2011 @ 1:08 am

  4. […] was always a misunderstanding (for example on Marx’s part) and often a scam.   In this two-part post I argue:   1. Economic elites never wanted to abolish feudalism, but rather wanted […]

    Pingback by Capitalism as Disguised, Oil-Drenched Feudalism « Volatility — August 4, 2011 @ 4:59 am

  5. Anyone that has delved into history, especially constittuional, and American history can see how the oligarchy of banksters and big corporate monopolies have virtually taken over where the monarchies and fuedal system left off.

    For a while in our American Republic, we had a Constittion and a government with a mission to protect the inalienable rights, freedoms and property of the INDIVIDUAL. This liberty vaulted us into the most productive and hence prosperous country in the world. Even the poorest rivaled the ‘rich’ in amny countries.

    Today with a century of government ownership by the bankster/corporate cabals through special interest bribery of our elected, we find us back to a monolithic state resembling the monarchises of old and debt slavery of the masses to the few elites.

    Comment by Eugene Garner — October 1, 2011 @ 4:32 pm

  6. […] It turns out that “pure” capitalism was never going to exist, but rather at most a feudal-capitalist hybrid.   7. This is because history was in fact more materialistic than Marx’s historical […]

    Pingback by Is the Triumph of Food Sovereignty Inevitable? « Volatility — December 1, 2012 @ 3:22 am

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