Is It Possible to Regulate Corporations in America?

By Mike Koetting June 7, 2022

I am fascinated how in the current political landscape the culture wars have obscured almost everything else, including economic issues, which in most times are one of the major functions of a national government.

The Most Fundamental Issue

The New Deal is justly known for its structural innovations—Social Security, the Tennessee Valley Authority, the WPA, the FDIC, the SEC, recognition of unions, and so forth. But more important than any of these specifics was the underlying assertion of a governing ideology that raw economic power could not be left to itself, but must be tempered by, sometimes subordinated to, fairness, justice and equity.

Ronald Reagan worshipped at a different alter. He fully embraced the neo-liberal belief, popularized by Milton Friedman, that government should just get out of the way of individual enterprise. In this view of the world, “efficiency” was the sole criterion. Parallel, the neo-liberals argued that the only duty of a corporation was to make profit for shareholders.

Along similar lines, the ideas of Robert Bork about anti-trust become accepted orthodoxy: the primary consideration was whether the resulting consolidation resulted in lower consumer prices. The idea of limiting corporate reach as a matter of principle got dropped by the wayside.

In short, the New Deal idea that an essential function of government was to protect people from the sharp edges of the economic system was abandoned. We opened the door to a world of untrammeled corporate greed.

What We Have Reaped?

Even before the current round of price gouging, corporate profits were at a 100 year high. While a socialist might say any corporate profit is problematic, we have deliberately chosen, for broadly accepted reasons, to have a capitalist system. Such a system wouldn’t make sense if we saw all profits as a sign of perfidy. But it is fair to ask why are they so much relatively higher than at other times in our past? And has that led to a commensurate improvement in the country as a whole?

Of course the latter question is rhetorical. But that doesn’t make it an inappropriate line of inquiry. What if corporations are more the problem than the solution.

I know most folks are aware of why corporations unchecked are a problem for our society. But a quick recap of how these record profits have been achieved helps focus on why we should be concerned.

Busting Job Security. For the most part, corporations don’t have to indulge in old-fashioned union-busting. On the one hand, they got government to erect barriers to unionization. On the other hand, they restructured the work force and offshored and outsourced formerly union jobs. Union representation has shrunk and wages have become more unequal. And it isn’t just wages—sick leaves have withered, pensions disappeared, health insurance is more expensive if it is available, and job security eroded. The working lives of the non-college educated have become radically less secure and much poorer relatively.  In the last forty years, the premium to capital over labor has grown dramatically and the wage gaps just keep getting worse. In 2021, CEO pay rose by more than 17% while worker salaries increased by only 4.4%.

Corporate Concentration. Anti-trust enforcement declined substantially over the past forty years. During that period, 75% of firms are in sectors that have experienced market concentration and firms in sectors with the highest contraction have enjoyed greater profits and other economic returns This wave of concentration continues. In the first half of 2021, there were $1.8 trillion in mergers.

Political Influence. In 2021, about $3.6 billion was spent lobbying the Federal government, more than 90% of it by corporate entities. The Citizens United ruling gave corporations the power to make virtually unlimited contributions to political campaigns. As an article in The Atlantic notes, corporate lobbying has evolved from protecting them from what they felt was undue meddling to actively using Federal (and state) government to strengthen their hand in multiple ways.

Owning the Regulatory Process.  Corporate influence does not end when a law passes. Corporations have come to own the regulatory process. Corporate representatives are involved in rule-making from the moment a rule is conceived all the way through the process, and can even stall the implementation of a rule for long periods of time with litigation. They use their political clout to block the appointment of people whom they believe would be unfriendly to their interests.

Off-shoring. Corporations have moved many jobs overseas, allowing corporations to take advantage of lower labor costs in other countries and leaving a mess behind in the areas that were deserted. This has been facilitated by free trade deals that were heavily supported by corporate America.

Financialization. In the last forty years, many American corporations have stopped making money from actually making things. They make their money through manipulating the money flows. As even the National Review wonders, what exactly is the social value from this. Others have gone further to list the damages.

Privatization. Over the last forty years, a substantial number of government functions have been turned over to private contractors claiming that will improve efficiency. The results are decidedly mixed—both in terms of quality of services and in the degree of actual savings to the taxpayers. Among other things, all this privatization raises serious questions as to what is meant by “efficiency” and what is worth giving up to achieve it.

Appropriation. Corporations have seized for themselves many of the benefits of the environment—air, water, and land. They have dissembled about the impacts of these appropriations and used their political influence to block broader claims to the resources of the earth.

Okay, It’s Not All Bad

Part of the sworn duty of this blog is to remind readers that there are few black-and-white issues. This applies to what we’ve gotten from corporations in the last forty years. I enjoy many of the fruits of the technological and organizational innovations undertaken by corporations. (To take one example, the efficiency of Amazon is like nothing the world has ever seen before.)

It is also the case that creation of a world-wide supply chain has lowered costs to consumers for a great many items. And it has the largely beneficial side-effect of increasing standards of living in other parts of the world.

Some of the advantages promised by the Reagan revolution in how we thought about corporations have in fact been realized. It is also the case that many of the neo-liberal criticisms of government influence on the economy remain correct. So the question isn’t are corporations “good” or “bad”. The question is do we like the way the trade-offs of the last forty years have played out?

Perhaps there is an ideal world where the downsides of various approaches can be perfectly balanced out. That is the goal. But in the meantime, it is necessary for the citizenry to give its government instructions about priorities. If we are upset about widening inequality, the wreck of de-industrialized communities, the state of the environment, and the swamp of government—we need to make those a priority. Even if that means we have to give up some things and live with some annoying problems because addressing those issues won’t be frictionless.

Strangeness of Where We Are

All of which leads me back to my original point: This critical set of choices has been completely lost in the fog of the culture wars.

The majority of Americans are concerned about the influence we’ve given to corporations. So much of the rhetoric of Trump and the populist wing of the Republicans is about the problems that corporations have visited on the country. But, in some kind of Jedi-mind trick, Republicans have convinced their followers this is the fault of the Democrats, in their role representing “the elite”. While there have been incidents of Democratic complicity, the over attribution is unabashedly absurd.

From the Republican perspective, however, it is a great trick. For one, it gives people something to say they are angry about that doesn’t sound racist and authoritarian. It also diminishes the possibility of what would be a totally sensible coalition. People who would like to see more controls placed on corporate behavior are a large part of both parties, perhaps the majority. In theory, this could be a particularly good place for a bridge-over since it focuses on a common villain without directly attacking the shibboleths of the culture wars.

It remains to be seen whether Democrats can erode GOP support from working class whites with a firmer focus on loosening corporate hegemony. We may get a better sense from the Ohio Senate race, which pits sometimes populist and sometimes venture capitalist J.D.Vance against Tim Ryan. Ryan, an economically focused Democrat–like the other Ohio senator, Sherrod Brown–is running on a strong economic platform, and Ryan’s convictions, unlike Vance’s, have remained consistent over the years. Ryan’s campaign will zero in on the issues of curbing corporate influence so we will get a real test of whether this approach cuts through the fog of culture wars. In the past, Democrats have done better when they stressed economic issues. We’ll see if this retains the old magic.