The Tragedy of the Corporate

Privatization of the commons usually means corporatization of them. When a government sells resources, such as oil rights or

The Parallel Economy of the Commons ocean plots, individuals rarely have the means to buy them. To free-market believers, this is a distinction without a difference. Corporations are really just economic persons, they say, only bigger. But that is like saying that a federal bureaucracy is no different than a town meeting democracy, because both are "government."

As Adam Smith observed often, humans are social beings. They have a capacity for empathy and a desire to be esteemed by their peers. "Nature, when she formed man for society," Smith wrote in his Theory ofMoral Sentiments, "endowed him with an original desire to please, and an original aversion to offend his brethren." This desire actually goes deeper, Smith said, because we aspire truly to be "what ought to be approved of." Right or wrong, that is an assumption on which his theory of a benign and generative market was based. The modern corporation does not fit this model.23

The corporation is a creature of lawyers rather than of nature. It embodies the pure financial calculus of the ciphers that inhabit the economics texts. The bottom line really is the bottom line. This is not because corporations are run by bad people. On the contrary, the financial calculus is built into charters through which corporations acquire legal life—fixed in the operating system, as it were.

This institutional machinery was designed for an era in which resources seemed limitless and the consumption of them the only urgent mandate. It was set loose on this landscape and did what it was supposed to do—dig mines, drill wells, build factories, lay tracks, generally eat like an adolescent and consume everything in sight. Today, however, it has become like an appetite without a shut-off switch, the adolescent who never grew up. It has no built-in capacity to say "enough."

The main internal constraints are financial, in the form of quarterly earnings statements, the demands of shareholders and creditors, and the like. These push generally toward liquidating nature, not husbanding it. Speaking of a rival who controls his own company and so can think "long term," Richard Parsons, the CEO of Time Warner, observed, "If almost anybody else did it, they'd get killed" by shareholders and Wall Street analysts.24

The problem is not common ownership per se but rather open access—that is, commons in which there are no social structures or formal rules to govern access and use.

The paradigmatic case is that of Pacific Lumber, a California company that in the 1980s owned most of the major old-growth redwood forest still in private hands. Pacific Lumber was unusual. The chief executive was a lifelong timberman by the name of A. S. Murphy, who believed in harvesting no more than the forests could replace. "Their approach," said David Harris, author of The Last Stand, "was basically to treat the forest as capital and try and live off the interest."25 This virtue did not go unpunished. Pacific's self-discipline meant its forests were ripe for less conscientious plucking. Its clean balance sheet—Murphy believed in pay-as-you-go—left plenty of room for a raider to load up the company with debt. This is exactly what happened. During the leveraged buy-out boom of the 1980s, a corporate chief by the name of Charles Hurwitz teamed up with Michael Milken and Ivan Boesky, two of the more infamous financiers of the era, to take over Pacific Lumber. They mortgaged the company to the hilt to finance the purchase.26 Then Hurwitz began to liquidate the forests that Murphy had conserved, in order to pay off the debt. Finance trumped hus

The Parallel Economy of the Commons bandry, as it most often does. External restraints are vulnerable at best, given the political influence of those whom they are supposed to restrain.27

But there is a more fundamental problem—namely, the way the modern corporation lies outside the constitutional structure that the nation's founders erected to keep institutional power in check. The corporations of today did not exist when the United States was founded. Adam Smith actually dismissed them as inherently too cumbersome and bureaucratic, their managers too given to "negligence and profusion." Individual entrepreneurs, nimble and resourceful, would outwit them every time.28

Smith was talking about the joint stock companies of his day, which were government-sanctioned monopolies such as the East India Company. He did not know that free incorporation laws soon would release the corporation from its legal strictures and obligations. He could not have known that these lawyer-created entities then would acquire the constitutional protections intended for human beings, through a Supreme Court procedure that was irregular at best.

The result is an institution that has outgrown both its legal and conceptual containers, including the ones of Smith's own theory. Although this is especially the case in the United States, it is true to some degree in most nations in which corporations operate. Even a diligent U.S. Congress can go only so far in terms of regulation. Nor have organized labor and consumer interests been an effective counterweight. Labor unions represent only some 12 percent of the workforce in the United States and often side with employers on resource issues, as when autoworkers oppose fuel efficiency standards for cars.29

The companies that own the resources— oil, coal, gas, and so forth—and those premised on their use have an insatiable hunger that drives—indeed, requires—the invasion of the commons. The appetite requires more, and the commons is where that more lies. This institutional engine is programmed to take whatever in nature and society did not have a protective shell around it. There are efforts to reform the corporation from within, by rewriting the charters under which they operate. Whether that succeeds or not, there still will be a need to establish a new kind of outer boundary, so that corporations cannot claim everything.

0 0

Post a comment