- Challenging Corporate Domination:The Public Ownership Approach
In the wake of the most crippling economic downturn since the Great Depression, it is becoming increasingly evident that the United States is facing a myriad of serious problems that can no longer be solved by a stalemated political system.1 These challenges will inevitably require the conceptualization of a vision for comprehensive systemic change, and a major component of this is the question of what to do about the large private corporations that presently, to varying degrees, imperil our economy, threaten our democracy, and impede progress on environmental issues.
The ability of large corporations—especially in the financial arena—to endanger the entire economic system is no longer in any doubt. According to the U.S. Treasury Department and Congressional Budget Office (CBO), the financial crisis and Great Recession has cost the nation at least $2.6 trillion in lost gross domestic product (GDP), $19.2 trillion in lost household net worth, and 8.8 million jobs.2 The $19.2 trillion number is worth contemplating for a moment. As there are around 115 million households in the United States, the total loss of wealth from the Great Recession is approximately $167,000 per household.3
Policy actions taken during the Great Recession by both the Bush and the Obama administrations—as well as similar actions taken throughout our history and by nations abroad—demonstrate that the sheer size of some of these corporations vis-à-vis the economy requires a government backstop. This reality ensures that profits are often private, but all the risks public. [End Page 26]
Our deep dependence on privately owned corporations that are "too big to fail" is widely acknowledged. Yet the implications are far more profound than we typically consider. Beyond its impact on balance sheets and employment, the Great Recession also confirmed a fundamental shift in our political economy. Fully gone is the New Deal state—which, at least in theory, played a moderating role between labor and capital. Instead, we now find ourselves confronted by the corporate state, in which the state's primary duty becomes to buttress corporate profitability.
In short, our nation has witnessed a radical privatization of economic decision-making authority. A democratic response adequate to meeting this challenge is required. In particular, such a response requires a tactic that has been considered anathema in U.S. politics for the past several decades. Specifically, in at least in some cases, restoring the public democratic authority necessary to meet our nation's economic and ecological challenges will require the willingness to take at least some key corporations directly into long-term public ownership.
Prime candidates for public ownership are the "too big to fail" financial corporations that presently dominate our economy and political system. These did not appear overnight. Between 1984 and 2003, more than 7,000 banks disappeared as the result of mergers and the asset share of the largest banks grew from 42 to 73 percent.4 As the size of financial corporations have increased, so too have the frequency and severity of crises. In Manias, Panics, and Crashes: A History of Financial Crises, the late MIT professor of economics Charles Kindleberger and University of Chicago professor of international economics and finance Robert Aliber found that the "years since the early 1970s are unprecedented in terms of the volatility in the prices of commodities, currencies, real estate, and stocks" and despite "the lack of perfect comparability across periods, the conclusion is unmistakable that financial failure has been more extensive and pervasive in the last thirty years."5
Moreover, the growing power of these corporations has repeatedly stymied any political attempts to reduce systemic risk. In fact, today these financial giants are larger than before the Great Recession. In 2006, the top six banks had assets amounting to around 55 percent of GDP.6 As of June 2012, this had increased to approximately 60.1 percent.7 In 2011, the financial services company, Standard & Poor's, warned that risks in the financial sector were now greater than before the crash in 2008. "[T]he potential initial cost to taxpayers of the next crisis cleanup" could, they forecasted, [End...