Corporation Nation

Chapter 3. Corporate Iniquity

C h a p t e r 3 Corporate Iniquity The powerful influence of good laws and their good administration on the wealth and prosperity of nations, is in theory universally acknowledged. . . . A wise and beneficent policy . . . may do more to advance the welfare of a nation than the greatest natural advantages. . . . Who would carry on business in a place in which wealth rendered the life of its possessor insecure? Who would reside by choice in a country where the laws gave no protection to life or property? —Anonymous, 18291 The U.S. Constitution does not mention business corporations because the delegates to the constitutional convention that met in Philadelphia in 1787 decided not to give the federal government the explicit power to charter corporations of any sort. Ironically, ratification of the Constitution touched off a chartering spree at the state level that has not abated to this day. The reason is not difficult to discern. The rise of the American corporation nation was not sui generis but rather rooted in what contemporaries called the genius of American institutions. Most countries were poor because most suffered under predatory governments. “There is no fact more evident,” one writer noted in 1818, “than that the bulk of mankind have been the hewers of wood and drawers of water, for the use and pleasure of knaves and tyrants, from the earliest ages to the present moment.”2 After ratification of the Constitution, however, Americans eagerly sought to create wealth because they were assured that they could keep the fruits of their hard work and acumen. As an anonymous author pointed out, the Constitution created a federal system that allowed Americans to flee to another state much more easily than 26 Chapter 3 oppressed Europeans could. Cognizant that “the smallest hope of profit” would “draw crowds of adventurers from Maine to Louisiana,” American state governments typically quickly adopted the best policies and practices of their neighbors lest they suffer a debilitating net outward migration.3 So the Constitution created a competent national government and also provided state governments with incentives to implement good policies.4 The American colonists had often evinced what was termed a “vigorous spirit of enterprise,” but adoption of the Constitution unleashed a torrent of additional entrepreneurial energies.5 In 1792, Philadelphia merchant and public policymaker Tench Coxe claimed that buildings and “public works . . . of every kind, and of species and values unknown among us till the present time, are undertaking every where” due to Treasury secretary Alexander Hamilton’s monetary and fiscal reforms but also “our voluntarily imposing upon ourselves the wholesome restraints of just government.” “Every good plan requiring capital, which is set on foot,” he correctly claimed, found capital “quickly from the confidence of our monied citizens or from foreigners.”6 Numerous other writers evinced similar sentiments, and not all were wealthy elites like Coxe. Justin Hitchcock, a hatter of modest means in Deerfield , Massachusetts, recalled the salubrious effect that “our National Government had upon all classes of people” in 1790. From widespread confidence in the new regime emanated “a new Spring to all kinds of business,” including a strong desire among farmers to “cultivate their lands under a sure prospect of a ready market and good price.”7 Time and experience mostly strengthened the nation’s institutional genius, so it is not surprising that in 1831, Swissborn banker Albert Gallatin believed that “a general spirit of enterprise” suffused the nation, a claim echoed by other foreign observers such as Michel Chevalier and Alexis de Tocqueville.8 Good government created the conditions under which corporations could thrive. “It cannot be material to inquire whether these institutions can flourish at all, under the influence of a tyrannical government,” argued a group of New York legislators in 1826, “but experience testifies to the truth of the position, that their principles will not submit to the control of arbitrary direction. . . . All history shows that they have flourished better and been the more safe and beneficial, in proportion as the government under which they have existed has approached the standard of rational liberty.”9 Americans who felt that their lives, liberty, and property were secure under the new regime set out to improve their economic lives. As 80 to 90 percent of Americans were farmers, much of the action at first occurred on Corporate Iniquity 27 farms (and related industries such as mills), but much activity in infrastructure , both physical...