How Do They Rule? The Constitution, Corporations and the Courts

By: Paul Kivel
Adapted and updated from You Call This a Democracy (2004)

Members of the power elite are able to make many decisions themselves through their direct control over land and corporations, foundations, trusts, and other institutions. But their influence over the government is often indirect. Although many members of the highest levels of government are from the power elite, many are not.

 

The ruling class of the United States has developed three primary ways to retain power as well as many ways to retain wealth

The Constitution

The Constitution was set up by members of the colonial ruling class to protect both their wealth (primarily property and slaves) and their control over our government. When the founding fathers wrote “All men are created equal” they were specifically excluding women, [1] as well as all men who were not white, from political participation. By protecting and enhancing the rights of white slave holders, these men established a foundation for their wealth and power in white supremacy and male domination.

The ruling class and the class of skilled artisans and shopkeepers combined made up only about 10 percent of the total population at the time of the American Revolution. [2] As James Madison pointed out to the Constitutional Convention, “the greatest conflict of all in the country was between those who had property and those who had none.” [3] He was clear on the role of government in this conflict, writing that it “ought to be so constituted as to protect the minority of the opulent against the majority.” [4] The wealthy and those who were successful craftsmen shared an interest in the protection of property rights. Therefore, they wrote a constitution that would safeguard their ability to own and develop property, including the ownership of slaves. Besides claiming the exclusive rights to vote and to participate in elected office, those with property further consolidated (and protected) their power by setting up an electoral system that provided for the selection of the president and senators not by direct vote, but by a more easily controllable indirect electoral voting system. They also built into the Constitution other checks on democratic participation such as staggered elections, executive veto, Senate confirmation of judicial appointments and treaties, and an exceedingly difficult process for amending the Constitution. [5]

Because of fears of more working class uprisings such as had just occurred in Massachusetts during Shays Rebellion in 1786-87, the framers of the Constitution created a central government that would hold the union together, establish a strong fiscal and regulatory infrastructure, promote free trade, and protect the interests of the ruling class.

The ruling class at that time wanted the federal government to play a strong role that would facilitate business and ruling class interests but would not interfere in areas over which they wanted to have more regional or local control.

The Constitution protected the property rights (and white supremacy) of the ruling class and lesser property owners in quite specific ways, such as by officially recognizing slavery and establishing the right of return for runaway indentured workers and slaves (Article 4, Sec. 2. [3]). The commerce clause (Article 1, Sec. 8[3]) was included to end protective tariffs that individual states had established to protect local businesses.

The contracts clause (Article 1 Sec. 10[1]) became, perhaps, the most significant protection of the property rights of the ruling class. This clause states that the government cannot interfere in any way in private contracts (private law). This has been the basis of hundreds of court decisions limiting the government’s role in regulating business and protecting the rights of citizens because public law has been ruled by the courts to be preempted by private law. [6] The courts have also used the First Amendment to protect property rights by restricting any government effort to limit the free speech rights of corporations.

Corporations

The second tool developed by the ruling class to guard its power was the corporation. The ruling class in Europe had long regulated its affairs and pooled its assets for colonial enterprises by creating trading partnerships, companies, and other forms of chartered business groups. The powerful East India Company is a prime example of the importance of these organizations.

In the United States, by the early nineteenth century, there was already large-scale consolidation of banking, insurance, and textile companies, and many business leaders developed links with, or were directors of, several companies. In the early nineteenth century, corporations were companies which were set up with charters from state governments for specific purposes. They provided a particular service to the community, and their charter was for a specific time period, usually between 10 and 30 years. The charter could be revoked if the company did not do what it was chartered for, such as building and providing a toll road between two destinations. These chartered businesses or corporations were tightly monitored, and their charters could be, and routinely were revoked by state legislators.

State control over corporations began to erode early on as corporations used their financial and political clout to roll back restrictions on them. In the first of a long series of important pro-corporate, antidemocratic decisions, the Supreme Court held in the Dartmouth decision of 1819 that corporations are protected under the contracts clause of the Constitution.

The ruling class gained even more protection, and opportunity to use the corporate structure from the 1886 Supreme Court Santa Clara decision. The railroads had brought cases to court year after year, spending large sums of money, to establish the right to have a corporation considered to be a “natural” person.

Finally, in 1886, the Supreme Court rendered a decision that was interpreted to mean that a corporation should be considered a natural person, with all the due process rights guaranteed to a person under the Fourteenth Amendment, which had been passed to protect the rights of freed slaves. The decision itself did not grant the status of a person to a corporation. This language was included in the headnotes by a court reporter and became accepted as part of the legal precedent through subsequent rulings. [7]

This decision was used as a precedent to give corporations the right to free speech and the right to due process. Subsequently, courts considered corporations to be on an equal playing field with individuals and communities, even though they had previously been regulated by local governments, and even though they had vastly more resources to defend their interests than either individuals or local governments had. In fact, most individuals at the time, including Native Americans, Blacks, Latinx, Asian Americans, and white women had few, if any rights, and virtually no legal standing in the courts at all.

White women had petitioned the court for the right to vote in 1875, also citing the Fourteenth Amendment, but their appeal was denied. They only gained the right to vote in 1920 under the Nineteenth Amendment. Property rights for corporations and their owners were deemed by the courts to be more important than voting rights for women. These rights were also more important than the rights of freed slaves, for whom the Fourteenth Amendment had been passed. In fact, of the 307 Fourteenth Amendment cases brought before the Supreme Court between 1886 and 1910, only 19 dealt with African Americans: 288 were suits brought by corporations seeking the rights of natural persons. [8] The ruling class used corporations to protect and expand its interests and to keep the interests of poor and working class people, women, and men and women of color, subordinate.

By the late nineteenth century, banking, transportation, steel, and other industrial corporations had become huge and complex enterprises in severe competition with each other. Members of the ruling class wanted ways to regulate competition among themselves because they had found that unregulated trade was lowering prices and, consequently, lowering profits. They were also faced with increased pressure from several sectors of the population such as middle-class reformers, populist farmers, and socialists, who were criticizing oligopolistic practices in which business leaders got together to fix prices, divide up markets, and share profits. [9]

There was a wave of government regulatory agencies established in the early twentieth century. Although some corporations fought vigorously against regulation, the largest corporations realized that some form of regulation would divert attention from more drastic efforts to control or dismantle large corporations, would help stabilize markets and regulate competition, would make it harder for smaller competitors to stay in the market, and would be fairly easy to manipulate through political influence. Many corporations fought vigorously against attempts at regulating them. But despite the increased regulation, most of the larger corporations were able to use their financial and political influence to continue growing and to increase their domination of state and federal government.

The modern form of corporations arose for a variety of reasons and it had multiple advantages for ruling class power and control. They could use corporations to protect themselves and their families from the financial losses and legal liabilities that this scale of enterprise entailed. As various forms of taxation were introduced, the ruling class used corporations to protect their profits from being taxed, and to pass down wealth to future generations without diluting it.

The corporate structure has allowed members of the ruling class to specialize in running large financial enterprises, enlist the specialized professional help they need, and ensure that they and their families are not liable for the unsafe working conditions, dangerous products, environmental pollution, and even the financial losses of the businesses that produce their wealth. These and many other advantages have continued to be added to and refined over the nearly 120 years since the landmark Santa Clara decision.

For several decades, corporations were national in scope. The largest of them developed markets within the U.S. and consolidated, colluded, and merged with other national corporations while also buying up, taking over, or destroying smaller companies. They had national manufacturing, marketing, and sales strategies.

The growth, mergers, and acquisitions of national corporations through the 1960s and 70s created multinational corporations which had a global reach and competed against (and cooperated with) the multinational corporations of Europe, Canada, and Japan. Many of these corporations were tied to multinational corporations in other countries through joint ventures and had extensive networks of subsidiaries throughout the world. They were based, however, in the U.S.

Beginning in the 1980s, with the rise of global financial markets and institutions, multinational corporations became transnational corporations. Economic and political power became even more concentrated in these incredibly huge enterprises. Leveraged buyouts, hostile takeovers, mergers and acquisitions across, as well as within, national boundaries resulted in the rise of corporations which were not only larger than most national economies, but were no longer based in or constricted as much by national governments. Although still nominally based in a country, the allegiance of the transnational corporation is committed more to maintenance of the international financial system and its own profitable role in it, than to a national government. As one senior executive told the New York Times in 1991: “The United States does not have an automatic call on our resources. There is no mindset that puts this country first.” [10]

Large transnational corporations have now become very powerful. Fifty-two of the 100 largest economic entities in the world are corporations, not countries. The five hundred largest in 1998 had total revenues of $11.5 trillion and employed 40 million people. Their average revenues were $122 billion. [11] Of the Global 500, 191 were U.S. companies. Each of the largest are run by a small group of men who control vast resources, are large financial institutions in their own right [12] even if predominately engaged in nonfinancial production and have substantial security operations. The nature of the development of these corporations has given the corporate elite a central role in the more extensive power elite both in the U.S. and in the other developed countries.

The Courts

The Dartmouth, Santa Clara, and hundreds of other legal decisions in favor of the ruling class brings us to the third tool they have used to protect their interests—the courts. Although the Constitution set up a system of checks and balances between the branches of government (based on the model of the Iroquois Confederacy), [13] in fact, all three branches were controlled by the ruling class. The checks were on working class power, and the balance was in the variety of governmental tools that the ruling class could use to remain hidden, but in control. The court system was set up to carry on the British legal system which had been established to maintain the rights of the white, male, landed aristocracy. It was given the responsibility of adjudicating in situations where ruling class interests conflicted, or in cases where the government overstepped its boundaries and interfered with ruling class interests by advocating policies that were more advantageous to the general populace. The ruling class bias of the courts was represented very simply by the first chief justice of the United States, John Jay, when he said in 1787, “The people who own the country ought to govern it.”

There was always great overlap between lawyers and judges on the one hand, and politicians on the other. In fact, most of our presidents have been lawyers, and many middle and upper-middle-class lawyers have used the practice of corporate law to advance into the ruling class. Presidents, many of whom were from the ruling class, have almost always appointed judges who share their class background, or who they have observed through years of law practice will support the interests of their class. These lawyers graduate primarily from a small number of elite, ruling class law schools, go through a grueling process of reshaping their values to adjust to their future roles, and end up becoming either members of the ruling class themselves (if they weren’t born into it), or professional servants of their ruling class peers.

Many people practice law and most are not part of this corporate law system. Only those who are, and who share ruling class values are likely to advance through judgeships into positions of authority within the legal profession. These are the ones who gain positions from which they can influence law school curricula, legal precedent, the American Bar Association, and governmental policy and legislation.

One area in which the ruling class bias of the courts is most evident is in labor-business cases. The courts have consistently aided business interests by prohibiting strikes, boycotts, and picketing, and by issuing injunctions against possible future worker activism and organizing. The courts have been used to sharply curtail the power of unions. They have also colluded in trying and convicting many labor leaders in periods of labor-business conflict. The courts have given the widest possible interpretation to open-shop laws, they have granted free speech rights to employers in union certification elections, they have failed to protect workers’ rights to free association and free speech (while protecting the same rights for corporations), and they have ruled that the permanent replacement of strikers is legal. Rarely have they actually protected the legal rights of workers. [14]

The current court system, and the corporate lawyers within it, operate to protect members of the ruling class and their personal and corporate property rights at the expense of ordinary citizens. Although there have been some decisions which penalize corporations for unusually egregious practices, for the most part the legal system makes it extremely difficult for ordinary citizens to win redress from the harm done to them by corporate actions. The courts, especially the federal court system, are heavily populated with members of the owning classes, and primarily render decisions which protect property rights, not civil and human rights.

To sum up my discussion of these tools, the ruling class created the rules (the Constitution) by which we live, the financial structures that operate to their benefit within those rules (corporations), and then guaranteed that, in any case of conflict, their people would decide the matter (the courts).

 

  1. Abigail Adams and several other women argued for the use of more inclusive phrasing such as persons, people, humans, or men and women, but the writers of the Constitution explicitly used men to refer to men only. Hartmann, Unequal Protection, 122.
    2. Kellman, Building Unions, 12.
    3. Nearly three out of four people were or had been indentured servants (short term property) and another 20 percent were slaves (long-term property). Ibid., 10. Quote ibid.,13.
    4. Mitchell and Schoeffel, eds. Understanding Power, 315.
    5. Parenti, Democracy for the Few, 61.
    6. Kellman, Building Unions, 14-16.
    7. Hartmann, Unequal Protection, 8.
    8. Ibid., 105.
    9. Domhoff, Who Rules America Now?, 41.
    10. Reich, Robert, The Work of Nations, 141.
    11. The Top 10 were GM, DaimlerChrysler, Ford, Wal-Mart Stores, Mitsui, Itochu,Mitsubishi, EXXON/Mobil, GE, and Toyota. Dowd, Capitalism and Its Economics, 173.
    12. Including engaging in large amounts of speculation in currencies, commodities and even stocks and bonds.
    13. For details see Weatherford, Indian Givers, 135-45.
    14. Kellman, Building Unions, 27-34.

 

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