Corporate power wielded through limited liability status

March 20th, 2001

I teach creative writing at a super maximum security prison in northern California. The men I teach are called by the corporate press ‘the worst of the worst’: they are robbers, thieves, murderers. But I now understand that these men are amateurs. If they really want to succeed at their chosen professions, they are going about it all wrong.

They need to get themselves special ‘limited-liability get-out-of-jail-free’ cards. Because the truth is that all of the men in the prison where I teach have killed far fewer people, destroyed far fewer lives, stolen far less money than the average CEO of the average limited-liability corporation.

No one’s laughing. Here are two jokes, neither of which are very funny:

Question: What do you get when you cross a long drug habit, a quick temper and a gun?

Answer: Two life terms for murder, earliest release date 2026.

Question: What do you get when you cross two nation states, a large limited-liability corporation, 40 tons of poison and at least 8,000 dead human beings?

Answer: Retirement with full pay and benefits.

If my students had robbed or killed in the service of economic production, with the protection of the legal fiction of a limited-liability corporation, they could now be joining Warren Anderson, ex-Union Carbide CEO, on the back nine instead of spending the rest of their lives in tiny cells.

So I think Nicholas Murray Butler, past president of New York’s Columbia University, might have been wrong when he said: ‘The limited-liability corporation is the greatest single invention of modern times.’ In many ways there’s nothing original about limited liability at all. Instead it wraps new language around a concept as old as civilisation – that of enriching rulers at the expense of the majority of humans and their human and non-human communities.

Rogue States

The US anthropologist Stanley Diamond noted: ‘Civilisation originates in conquest abroad and repression at home.’ He is not the only one to remark that the central goal and function of government has been, from the beginning, that of robbing from the poor to give to the rich.

Founding Father James Madison said as much when he insisted during the US constitutional convention in the 18th century that the main goal of the political system should be ‘to protect the minority of the opulent against the majority’.

Adam Smith, the godfather of modern economics, would have agreed. For he wrote: ‘Civil government… is instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.’ But I’d say that both of these people, as well as the philosopher John Locke, who stated that ‘government has no other end but the preservation of property’, were being modest. The real function of government goes further: it’s not just to protect, but, most especially, to acquire property – and ever more property – for the opulent.

From the beginning the goal has been (to use some two-dollar words) the privatisation of profits and the externalisation of costs. And from the beginning, the question has been: how best to do this?

Force is certainly one way. If you don’t believe me, ask the Africans – perhaps 100 million of whom died in the slave trade. Or the American Indians, decimated probably nine times over in the conquest of their continents. Or the indigenous the world over, who continue to be dispossessed and exterminated as rapidly as those who came before them. Or ask a modern slave: it shouldn’t be hard to find one, because there are more slaves (using a rigorous definition of slavery) in the world today than were shipped to the US on the Middle Passage.

But force is expensive, and an inefficient way to steal. It’s much better if you can convince victims to cooperate in their own victimisation. Thus, early in history those in power articulated the divine right of kings – trying to convince not only themselves but those from whom they stole, too, that their power originated not in force and social convention but came directly from God. If anyone opposed this power they faced eternal damnation as well as execution.

That may have worked in a religious era, but in our secularised world it would sound pretty stupid if those in power said Warren Anderson should not be executed (or in any way punished) for killing thousands of Indians because Union Carbide exists through divine mandate, and that timber company Weyerhaeuser can deforest the planet because God Says So.

Damages limitation

So the powerful had to come up with a different way to keep injured citizens from injuring them back. And somehow they’ve got us to buy into the extraordinarily odd notion that they can somehow limit their accountability for the damage they do by uttering the magic words ‘limited-liability corporation’.

What’s worse is that they’ve got us to buy into the notion that limited-liability corporations are a good idea. And what’s even worse than that is they’ve got us to buy into the notion that limited-liability corporations actually exist. For not only are limited-liability corporations not a good invention, they aren’t an invention at all. They are a conjuration: a fiction, a legal fiction – that is, a fiction made law by, you guessed it, those in power.

Corporations are ‘entities’ we pretend are real, and which have been granted (and institutionally grant themselves) person status on the basis that they are living bodies (‘incorporate’ comes from the Latin corporare meaning ‘to form into a body’, from corpus ‘body’).   Corporations are the ‘embodiment’, the reification, of a single idea – that of amassing wealth. To that end, according to my dusty old economics textbook, they have been ‘granted perpetual life and diversified ownership… [and] each part has limited liability for the debts and other liabilities of the firm’.

This limited liability means that owners are not liable for the actions of their corporations. Investors can only lose the amount of money invested, and are not held in any way accountable if the company commits genocide, ecocide, murder or any other crime.  Limited liability means more than profits, however, and it means more than poison clouds ‘in the colonies’. It is more than the mere institutionalisation of irresponsibility. It is an explicit acknowledgement that it’s impossible to amass great wealth without externalising costs. If costs were not being externalised there would be no need to limit liability.

Born to be bad

Limited-liability corporations first came into use during the 18th and 19th centuries. They were designed to deal with the myriad of limits exceeded by our culture’s social and economic system. The railroads and other early corporations were simply too big and too technological to be built or insured by the incorporators’ investments alone. When corporations failed or caused gross public damage, as they often did, the incorporators did not have the wealth to cover the damage. No one did. Thus, a limit was placed on the investors’ liability, on the amount of damage for which they could be held liable.

Limited liability has allowed several generations of corporation owners to economically, psychologically and legally ignore the limits of toxics, fisheries depletion, debt, and so on. To expect corporations to function any differently is to engage in make-believe. We may as well expect a clock to cook, a car to give birth or a gun to plant flowers. The specific and explicit function of for-profit corporations is to amass wealth. The function is not to guarantee that children are raised in environments free of toxic chemicals, nor to respect the autonomy or existence of indigenous peoples, nor to protect the vocational or personal integrity of workers, nor to design safe modes of transportation, nor to support life on this planet. Nor is the function to serve communities. It never has been and never will be.

To expect corporations to do anything other than amass wealth is to ignore our culture’s entire history, current practices, current power structure and its system of rewards. It is to ignore everything we know about behaviour modification: we reward those investing in or running corporations for what they do, and can therefore expect them to do it again. To expect those who hide behind corporate shields to do otherwise is delusional.

Limited-liability corporations are institutions created explicitly to separate humans from the effects of their actions – making them, by definition, inhuman and inhumane. To the degree that we desire to live in a human and humane world – and, really, to the degree that we wish to survive – limited-liability corporations need to be eliminated.

Icons of greed

It would be easy to blame corporations for most of the world’s ills, but not very helpful. To provide a clarifying example: although the world’s forests might receive a brief reprieve were Weyerhaeuser’s corporate charter revoked, we must remember that our culture was deforesting the world long before Weyerhaeuser – either the corporation or its founder Frederick Weyerhaeuser – was conceived.

Corporations don’t cause destruction. They are tools to facilitate, legalise and rationalise destruction. They make destruction respectable. Another word for ‘the externalisation of costs’, for ‘limited liability’, is ‘theft’. But corporations practise a special variation of theft, where even the victim is left feeling that a legitimate and just transaction has taken place: the victim may be frustrated, but is more likely to be jealous than outraged. 

As we have seen repeatedly in US elections, the victim will defend the thief’s property rights, and will also spend the rest of his or her life trying to earn back the stolen goods. In the 18th century the British statesman Edmund Burke laid out (presumably with a straight face) the mental and emotional states in which the poor must be maintained if they are to keep themselves at labour and not rebel against the rich. ‘They must respect that property of which they cannot partake,’ Burke pronounced. ‘They must labour to obtain what by labour can be obtained; and when they find, as they commonly do, the success disproportioned to the endeavour, they must be taught their consolation in the final proportions of eternal justice.’

But perhaps this is going too far. Perhaps by changing the language, by moving away from the academic – ‘the privatisation of profits and the externalisation of costs’ – to the vulgar – ‘theft’ – I run the risk of offending, I imperil my credibility. That is precisely the point, and precisely the strength of the corporation as a tool for privatising profits and externalising costs – for theft, for murder. The transaction is legitimate. The crime complete. It is acceptable. It is legal. And, of course, it is still theft. And it is still murder.

But labels aren’t so important. No matter what language we use, poison is still poison, death still death, and industrial civilisation is still causing the greatest mass extinction in the planet’s history. No matter how scary and stupid it may be to limit liability, the truth is that our situation is even more scary and stupid than this would imply. A corporation is a ‘creature of the law’, as US Supreme Court chief justice John Marshall observed in 1819. It is a creation of the state. When a government charters a corporation, it sets in motion, according to Marshall, ‘a perpetual succession of individuals [who] are capable of acting for the promotion of the particular object, like one immortal being’.

Since corporations are ‘immortal’, and since they are created solely to amass wealth, they become the institutionalisation of dissatisfaction: the economic manifestation of the Buddhist notion of ‘hungry ghosts’ – spirits that roam the earth, always eating, never sated.

US forest activist Jim Britell made this point in relation to timber industry executives, but his thinking could apply to the whole of corporate culture. ‘In the writings and speeches of clear-cutters and deforesters, you can see and hear an intense hunger to find forests to cut,’ Britell wrote. ‘At the same time, the last few years have broken all records in the amount of forests cut down. What we are seeing is a simultaneity of poverty and richness, a special kind of insatiable hunger where the more you possess the more deprived you feel. This is the emotion that dominates and pervades the realm of the hungry ghosts. The physical representation of this state is the image of a being with a gigantic belly, a very thin neck and a tiny mouth. No matter how much the hungry ghost eats, its stomach can never be filled.’

What this means is that corporations and those who run them cannot stop exploiting resources and amassing wealth until they have… I cannot finish this sentence, because the truth is that they can never stop. Like cancer they can only continue to expand until they kill their host.

Resist and survive

If we wish to survive, we must begin by dismantling corporations.

We must do this first psychologically – by recognising that corporations are tools for the transfer of wealth from the public to the rich, tools that are as absurd and self-serving as was the divine right of kings. Of course I mean self-serving only in its most superficial sense, because it is suicidal for the rich, as well as the poor, to destroy their land base – even if the rich are more insulated from the effects of their destructive behaviours (which I guess is one of the main points of the whole system).

Then we must dismantle corporations functionally and physically, by stopping corporate activities and taking apart the political, military, physical and infrastructural constructs that support them. This dismantling of corporations is and will continue to be extremely dangerous, bringing down upon those of us who participate in it the full power of the state – that is, the full power of the rich. Those who have not scrupled at killing to amass their wealth will not scruple at killing to maintain it, or to maintain the fiction that that wealth is legitimate. Or, as US radical Lucy Parsons so famously put it (long after the state had killed her husband because he spoke and acted in favour of the poor), ‘never be deceived that the rich will allow you to vote away their wealth’.

Dangerous as it is, I’m going to persevere. The only thing I can imagine more dangerous than dismantling limited-liability corporations – and, of course, the structures that allow them to destroy with relative impunity – is allowing them to continue.

Originally published in The Ecologist

Filed in Essays