Are Corporations People? Is Romney?January 9, 2012
Watching Democracy Now on Friday Jan 6th I saw another sad exchange on the topic of “corporate personhood”, the strange legalistic side-track that seems to have galvanized so much of the passions of Occupiers. Two days earlier Mark Provost of Occupy NH confronted Mitt Romney regarding Romney’s now famous defense of the idea that corporations are people. Provost prefaces his question by pointing out the growing disparities between the rich and the poor in America, alluding to some connection between this and corporate personhood.
What fascinates me is Mitt Romney’s response, which recapitulates an old argument from Adam Smith, and Provost’s complete inability to articulate a response to this argument. Romney responds with a simple question, “Where do you think corporate profits go?” Provost responds by arguing that profits could be hoarded or they could go to the 1%.
Romney had apparently been waiting for this question for a long time. He responds with a well-scripted, tight argument: “Corporations are collections of people that are trying to have good jobs for themselves and promote the future.” Profits go to shareholders, “some of which may be the 1%” (notice that he is perfectly comfortable embracing the 1% lingo) but also to people with pensions. Profits also go into growing businesses which creates new jobs. All the money always goes to people. “The money goes to hire people or to shareholders, and so they’re made up of people. So somehow thinking that there’s something else out there that we can just grab money from and get taxes from that doesn’t involve people- well they’re still people!”
Adam Smith made this exact same argument a couple centuries earlier. The argument is that the prices of commodities, or the total value in society, all resolve themselves back to wages. If you trace the price of a commodity back to all of the costs that went into its production all of these eventually end up at wages paid to workers. Now, you may ask where profit comes from then, since profit is, by definition, money you made above your cost of production. Profit, says Smith, is going to be spent on future wages. The greater the profit, the more jobs we can create in the future. So, for Smith, profit and capitalism are good news for workers. All value eventually resolves itself to wages paid to workers.
I can’t help but point out here that Adam Smith didn’t need to live in an age of “corporate personhood” to make this argument. This is because the basic logic of capital remains the same regardless of the specific legalese within which capital may find itself enmeshed at various times in history.
But back to Mark Provost…. Provost doesn’t get a chance to respond to Romney until he appears on Democracy Now two days later. Provost says that he doesn’t understand how Romney’s argument really related to his question which was meant to be a question about the growing disparity of wealth in the country, which he somehow, vaguely, sees related to corporate personhood. On Democracy Now he merely manages to mumble something about corporations needing to pay more taxes but he fails to try to take on Romney’s argument that corporations are just collections of people and that all corporate profits eventually go to job creation. He just repeats that there is growing wealth disparity in this country.
Then the discussion on Democracy Now immediately turns to a discussion of tactics: Are mic-checks still a legitimate way of interrupting public speeches? What are Occupy’s plans for the NH primary? This discussion takes up the majority of the interview. This is to be expected for a movement that is focused primarily on protest tactics and not on theory.
Now, if we take Provost’s comments and try to formulate them into a coherent argument it seems that they would be this: Corporations aren’t people because not all of the profit made by them goes to the workers. He defends this position by pointing to empirical data about wealth disparity, not by providing a theoretical counter-argument to Romney. Where does this profit go? Apparently, for Provost, they go to the personal consumption of CEO’s and shareholders, and to “deferred investment”.
Now, if there was no deferred investment (say, we were in a boom phase of the economy and profits were being channeled into growing businesses) and this money was instead plowed into production, and if wages were higher and CEO salaries were lower (say, because of a resurgent labor movement), then it seems that Provost would be forced to agree with Romney that corporations are just collections of people. Provost hasn’t actually shown that capital contains “something outside” of people. By focusing on wealth distribution and deferred investment he makes it sound like the problem is just the distribution of wealth between people within the corporation.
But I think that the beef with corporate personhood goes deeper than this. I think that what people are really upset about is not the legalistic framework of corporations. It is that we are intuitively aware that there is a greater, dominant force in society, something that is beyond relations between people. There is an autonomous, cold, calculating, impersonal nature to capital that follows its own rules. We work to enrich it more than we work to enrich the CEO’s that serve it. When Romney claims that there is nothing to see here, when he makes his “pay no attention to the man behind the curtain” argument that there is nothing “outside” of people in the corporation, we have two choices: 1. We agree with him that capitalism resolves itself to workers producing value for themselves and thus give up a real anti-capitalist project; or 2. We can try to identify what exactly this “something outside” is.
I couldn’t help but beat my head against a copy of Vol. 2 of Kapital and moan disconsolately as I watched the broadcast of Democracy Now. Marx tackles this very argument of Smith’s in Vol. 2 of Kapital. He shows that there is a rather significant part of capitalist production that does not resolve itself to wages, that does not go to serve workers at all. It does not exist to enrich the capitalist. It is merely self-perpetuating accumulation of capital for its own sake. This is the real nightmare of capitalist production, a greater nightmare than wealth disparity or deferred investment. Marx’s argument is a long, complex argument which eventually exposes a very crucial insight about the nature of capitalist production, one that is quite relevant for contemporary debates over crisis theory. I attempt to summarize it here.
Building a model of the interrelated investments that make up a capitalist economy Marx divides production into two departments. Department 1 (D1) produces means of production. Department 2 (D2) produces consumer commodities.
Let’s take a look at D2 first. The capitalists of D2 spend their money on wages and non-labor inputs like machines and raw materials. Marx calls these non-labor inputs ‘constant capital’. From the perspective of D2 it looks like Romney and Smith are correct. The wages of D2 obviously go to workers and the money spent on constant capital seems like it should all go to the workers of D1. (Yes some of the money they pay to D1 also goes to the capitalists as profit. But if this profit is spent as revenue for the consumption goods of capitalists then it just goes to the workers of D2 who make these consumption goods. And if the money is used to plow back into production then it goes to hire more workers…. or so it seems thus far.)
But when we ask the same questions about D1 things look different. Obviously the money spent by D1 capitalists on wages goes to workers. But where does the money spent on constant capital go? It goes to other firms in D1. In other words, capitalists in D1 buy and sell constant capital from each other. This means that there is a portion of value in society that never actually ends up in the form of wages. It is constantly circulating within D1 in the form of constant capital (or money which has just been paid for constant capital and is about to be reinvested in constant capital.)
This is the “something out there” that Mitt Romney and Adam Smith don’t want you to know about. They are not hiding the 1% from you. They are hiding this. Why? Does this really destabilize Romney’s argument that what is good for corporations is good for people? Even if there is a small portion of value that never makes its way into wages isn’t it still true that growing corporations creates jobs and that most of this investment goes to into wages?
Marx’s argument continues as he examines what is necessary for capitalism to grow, to expand the total amount of production each period. Through a series of complicated illustrations he shows that what must grow first, before anything else can grow, is this chunk of value that is not wages. By expanding the means of production capital can then expand the total size of production. But in order for this to happen money must be diverted away from consumption (away from consumer goods) and into the production of means of production. As capital grows the portion of the total value in society dedicated to the production of means of production grows at the expense of the portion dedicated to consumption goods.
Thus Romney is not correct that what is good for corporations is always good for people. What is good for capital is what is good for capital and this will always involve people getting the short end of the stick. When capital grows it may lead to some more employment (in certain conditions) but there will be a greater growth of capital value that never makes its way into wages.
Another way to put it is that as capital grows in the expansionary phase of an economic cycle it will need more workers. But the expansion of capital happens faster than the expansion of wages and worker’s consumption. This is because this expansion happens at the expense of workers. Oftentimes capitalists enrich themselves by siphoning off a lot of this expansion in the form of bonuses and dividends. But these bonuses and dividends are not the driving force of capital. The driving force of capital is expansion for the sake of expansion. Machines for the sake of machines. Money for the sake of money. The real entity that dominates the corporation is not a person. It a constantly growing chunk of value that takes the form of money and anonymous objects that have no purpose but to grow forever in a nihilistic quest to expand for the sake of expansion. I discuss this from a slightly different perspective in my latest video Subject/Object.
I am indebted to Andrew Kliman for helping me to understand the significance of Marx’s argument in the latter half of Vol. 2 of Kapital. Interested readers should keep in mind that Kliman is currently working on a study guide to all 3 volumes of Kapital that should be ready in the next year of so. Also of interest is a section of Kliman’s brand new book “The Failure of Capitalist Production” which discusses these reproduction schemas (the models of a capitalist economy broken up into D1 and D2). Kliman tracks the growth of D1 empirically over that last century showing that as capital grew D1 grew at the expense of D2. Kliman also draws some important conclusions from this, conclusions that I don’t have room for here but will summarize/bastardize in short: if D1 can grow on its own, creating its own demand for its product, then there is something wrong with theories of crisis that claim that capitalism goes into crisis because of a lack of consumer demand due to low wages. If D1 can create its own demand, and if it is the growth of D1 which causes capital to grow, then lowering wages should actually be good for the economy not bad for it. This means that politics of wealth distribution that claim we can have healthy capitalism if wages are higher are logically flawed. Low wages are good for capital. Capital is good for capital but it is bad for people. Capital is not people.
My girlfriend chides me that I am too quick to criticize and too slow to offer constructive advice. In the spirit of rectifying this character flaw, I offer the following advice for Mark Provost and all others who may care to debate Mitt Romney in the future on this topic. When Romney tells you that corporations are just made up of people you can respond by saying one of the following:
1. “Actually there is a huge and growing portion of the value of corporations that never ends up in the pockets of workers or the pockets of capitalists! It is money that stays in the form of factories, machines, etc. and just grows for its own sake. It grows at the expense of the worker. We work for it not the other way around.”
2. “Put down the Book of Mormon and read volume 2 of Marx’s Kapital.”
3. “If I wrote Volume 2 of Kapital on a gold tablet and buried it in the hills of New York would you take the time to read it?”
4. “Fuck you, clown.”