American Psycho: The Corporation. posted by Richard Seymour

Review of Joel Bakan, The Corporation: The Patholigical Pursuit of Money and Power, Constable, 2004.

Beginning with the merest whisper, this book builds into a storm of critique, analysis and witty apercus. It is breath-taking and ground-breaking. A mark of how well it has done its job is the fact that it can describe corporate rule as "the pathological pursuit of money and power" and have The Economist describe it as "a surprisingly rational and coherent attack on capitalism's most important institution". Bakan negotiates the history, theory and practise of corporations with considerable verve and he always wins.

And in what does his victory consist? He proves, with considerable economy and rigour, that the corporation is a psychopath. (You'll regret that raised eyebrow and cynical smirk.) What Brett Easton Ellis could only describe metaphorically in fiction, Bakan sets out with brutal clarity. To summarise briefly, the corporation is, in law, a person endowed with all the rights and protection of any human being. In 1886, the Supreme Court of the United States declared as much, insisting that the corporation had as much right as any human being to the protection of the Fourth Amendment. Constitutional rights designed to protect freed slaves became the safeguard of corporate power.

But the corporate personality sucks. It is grandiose, manipulative, asocial, irresponsible, lacks empathy and is unable to feel remorse. According to Dr Robert Hare, interviewed for this book, these are the hallmarks of a psychopath. Psychopaths are also given to using their immense resources of charm to hide dangerously self-obsessed personalities, which is exactly how companies relate to the public in advertising (Ronald McDonald, the Michelin Man, Tony Tiger etc). With their immense power, they understand that they need to be seen as humane creatures, sources of social value, embodiments of this or that virtue (family values, sexual charisma etc).

But Bakan does not begin with this cutting anthropomorphism. His first task is to establish how the corporation developed, and this he does by tracing its "inauspicious beginnings" in London's Exchange Alley. The initial attraction of the corporate form was that it combined large amounts of capital into one enterprise, enabling large-scale works such as mining and shipping. But there were several major scandals in the late 1600s as fraudsters sold shares in fictitious companies. These early corporations had raised suspicion because they separated management from ownership, prompting Adam Smith's concern (in 1776) that managers being entrusted with other people's money would encourage "negligence and profusion". When Smith wrote this, the corporation had been banned in England for fifty years following the collapse of the fraudulent South Sea Company which soared on a wave of confidence until investors realised that it was a con and bailed out. Its infamous decline led to the Bubble Act being passed by parliament in 1720, banning corporate bodies. That Act was repealed in 1825, allowing for a proliferation of corporations. Similar processes were at work in America after the revolution, and especially after the civil war. The new railway systems being constructed required vast combined efforts and capital, but the effect of this was to contribute to the development of "a national market in company securities" as the historian M C Reed observed. The middle class began to own shares for the first time - especially after new laws were introduced restricting the individual shareholder's liability for company debts.

The Select Committee on Partnerships reported in 1851 that the spread of share ownership would provide additional motive to "preserve order and respect for the laws of property", while in 1853 the Edingburgh Journal hoped that workers could be brought into the shareowning democracy, because:

Working men, once enabled to act together as owners of a joint capital, will soon find their whole view of the relations between capital and labour undergo a radical alteration.

However, although the limitation of liability enabled more people of limited means to access shares, it had its detractors. It was held by many to undermine one of the elementary principles of economic life - that every person is bound to pay debts contracted insofar as this is possible. The consequences, they said, would leave the owners of capital without responsibility for the actions of their company. Executives could easily escape the noose, since decisions rarely emanated from a single individual but rather tended to result from collective thinking.

The very scale of the corporation, which was its productive strength, came to be seen as a dehumanising factor. One Vice-President of AT&T complained that "bigness" tended to squeeze out "human understanding" and "human sympathy". And it was AT&T who in 1908 launched the first major advertising campaign of modern history, attempting to put a human face on their company by featuring employees and shareholders, promoting a "new democracy of public service ownership", ""controlled by all". By the end of WWI, a great fad had developed among corporations for what has become known as "corporate social responsibility" with companies like Goodyear Tire and General Electric feting a "New Capitalism". Paul Litchfield, president of Goodyear for some 32 years, pioneered this idea - and, indeed, he took it seriously, making inroads into promoting the health and education of his workforce, and giving them a greater say in the production process. He even developed a workers' Senate and House of Representatives, which had jurisdiction over wages and employment issues. This movement experienced a resurgence in the 1930s with the Great Depression, as corporations were increasingly held in popular contempt. Gerard Swope, President of General Electric, urged organised industry to take the lead in social responsibility rather than allowing "democratic society" to "act through its government".

This did not convince many, and Roosevelt's New Deal package of regulatory measures was popularly received, even if despised by most corporate leaders. Its legacy was to have a profound impact on the postwar scene, preserving social benefits for workers and affording unions protections they had not previously enjoyed. However, with the OPEC crisis of 1973, a new ideology began to take hold. Neoliberalism was the right's answer to runaway inflation, unemployment and stagnation. Privatising, deregulating and overturning many of the achievements made by working people previously, the axis of Reagan and Thatcher heralded a new era in which corporate callousness acquired the kind of glamour that put "Chainsaw" Al Dunlap on the front page of a magazine, brandishing a machine-gun to symbolise how ruthless he was. Such images would have evoked general disgust and hilarity in the 1990s, even as corporate power continued to expand through such institutions as the World Trade Organisation, and the Enron scandal with all of its associated casualties dealt a fatal blow to the corporate halo. So far, so familiar.

But it is precisely the questions around the latest bout of corporate scandal that this book seeks to deal with. Is it systemic, or is it just a few rotten apples? Well, not least among the many astonishing revelations in this book is the one that "Corporate social responsibility is illegal - unless it is insincere". You did not misread.

Corporate social responsibility is illegal because the sole responsibility of the executive, established through legal rulings, is to the shareholders. The duty of the executive, whatever his personal feelings, is to maximise shareholder value. This part of the book is opened with some feel-good rhetoric from "socially aware" companies like BP, who wish it to be known that they are "Beyond Petroleum", and tobacco giant ABT who donate millions of dollars to the creation of centres for the study of corporate social responsibility at universities. For all the world, one would think that millions of protesters across the world had been pushing at an open door, and corporations were all too ready to go out of their way to deal with the challenges of the environment, workers' rights and so on. Then, to the ground with a thud. The author meets a dapper, tart little intellectual known as Milton Friedman. Corporate social responsibility, Friedman assures him, is a nonsense - not just illegal, but immoral. It is self-indulgence on the part of some sappy executive to pay workers higher wages when he could be maximising shareholder value by finding cheaper labour elsewhere. Peter Drucker, the modern expert on corporations, has a similar take. If you have an executive who wants to take on social responsibility - "fire him. Fast." Noam Chomsky's arguments mirror those of his ideological nemeses, only reversing the value significations.

So, how did this legal state of affairs become clear? Henry Ford first discovered these limits when he attempted to reduce prices for customers. He did not believe that companies should make "such awful profits" - a "reasonable profit ... but not too much". However, when he tried to reduce prices by cutting shareholder returns - specifically returns to his ex-partners, the Dodge brothers - he was told by the court that a company should be run "primarily for the profit of the stockholders" not "for the primary purpose of benefiting others". Dodge vs Ford, and similar decisions in England and elsewhere, stand to this day as the legal expression of the corporation's "pathological pursuit of profit and power". Bakan speaks to former corporate lawyer Robert Hinkley who quit his job when he discovered what the law was all about. The law as it stands, he avers, actually inhibits corporate social responsibility.

And so it proves, in case after case. Bakan speaks to the head of BP, Sir John Browne, who created a stir in the energy industry by announcing that his company did accept that hydrocarbon fuels were potentially dangerous and that it would not only meet the Kyoto protocols but beat them. He advocates the "precautionary principle" in which corporations must acknowledge risks to people and planet and seek to minimise harm - even where the evidence is unclear. Unfortunately for the Gwich'in people of Yukon village, 20 miles north of the arctic circle, Browne doesn't allow his precautionary principle to apply to drilling in that region even though scientific evidence suggests that it would have a devastating impact on the village by driving away the caribou herds, forcing them into starvation and depriving the Gwich'in of their calorie intake. Indeed, as Bakan observes, it could not be otherwise - the benefits to shareholders of BP are too obvious. Meanwhile the actual costs of BP's environmental initiatives to date have been nugatory, while the effect of improving its relations with the public has been invaluable. Similarly, Pfizer have their own brand of corporate social responsibility - they provide drugs to Third World countries to help them treat the trachoma illness. Luckily enough, the drugs cost them next to zero, they can write all costs off as charitable donations when the taxman comes, and the benefits in terms of public trust and relations with prescription-happy doctors are priceless.

Anita Roddick. There is a name that evokes some well-justified suspicion, but in Bakan's book she comes through as a well-meaning but ultimately thwarted individual. She started the Body Shop as a means of merging her business practise with her social ideals, defending workers' rights, opposing nuclear proliferation and working to preserve the environment. Soon, however, she found that in order to survive as a business she would require money from public trading of shares. This, apparently, was the opening that admitted the poltergeist into the words. "You go into the stock market", she explains, "and the imperative is to grow - and by a small group of people's standards, financial investors who are gamblers". It came to a head with the protests agains the World Trade Organisation in Seattle, which Roddick attended. She wanted every Body Shop branch to publicise the facts about the WTO and to campaign against it. "I wanted every shop to challenge the WTO", she said. "And they won't do that." Roddick and her husband have a 24% stake in the company, while Anita herself has been downgraded to a consultant on a 2-year contract. The new executive chairman Adrian Bellamy explains that "We believe in social responsibility, but we are very hard-nosed about profit. We know that success is measured by the bottom line."

But, not only does the corporate structure frustrate attempts at doing good deeds, it allows for and nurtures bad ones. Meet Marc Barry. After a hard day's work, he likes nothing better than to go on a wine date with a nice lady. He thinks he's a decent guy - honest, sincere, intelligent. In his day job, however, he is a corporate crook. He gets paid by corporations to imbibe information about opponents by means fair and foul. Among his many schemes is the phoney recruitment centre he once set up - he would invite executives along and pretend to interview them while in reality debriefing them on behalf of his clients. Another great scoop of his was posing as a venture capitalist, on behalf of a multinational corporation, in order to steal an inventor's technology for transmitting video over a wireless phone. Moral ruin by day, sweatheart by night. How does he do it?

The philosopher Alisdair MacIntyre is brought in to explain how corporate executives and managers compartmentalise their lives. Their working lives, they can dissociate from their values. This is where Dr Robert Hare intervenes, with his extemporising on schizophrenia. Corporate bosses should be thankful, he says, for the ability to thus compartmentalise, for if they didn't have that they would be psychopaths just like the corporations they work for. And what of that immense charm that psychopaths are capable of - the kind that we have all seen salesmen exude? One company used to espouse social responsibility with a passion, such that each year it produced a Corporate Responsibility Annual Report, vowing to cut greenhouse gas emissions, support indigenous rights, look after workers and maintain rigorous safety standards. It's name is Enron, and the rest is history.

The corporation is an "externalising machine". It is in its genes, in its design to externalise costs - to consumers, workers, the environment, the government, whomever. Milton Friedman describes externalities as "the effect of a transaction ... on a third party who has not consented to or played any role in the carrying out of that transaction." He offers a mundane example, but acknowledges that the effects can be and are much greater. Patricia Anderson could tell him a thing or two. Her kids suffered burns on 60% of their bodies, and one had his hand amputated following a crash in which a car slammed into the back of hers, causing it to explode into flames. The fuel tank had been placed behind the axle by the manufacturers, GM, in the knowledge that this would involve significant dangers. A court case found that this had been done to maximise profits. GM analysts had predicted that fuel-fed fires would occur with their cars - but when designing their new model (around 1973) they asked an engineer from the company's Advance Design department to investigate the risks and costs of fuel-fed fires. The formula he produced is now infamous. He estimated that each year there would be five hundred fatalities as a result of fuel-fed fires, which would cost the company about $200,000 in legal settlements each. As there were 41 million GM motors on the highway, he simply multiplied 500 by 200,000, then divided it by 41 million. The cost to GM of sticking with its design was $2.40 per car. It would cost $8.59 per car to ensure that the car was safe. So, by going with the more dangerous design, the company saved $6.19 per car.

There are many more examples of this sort of callous indifference - from sweatshops (the incidence of which in the US is astonishing) to corporate crime. The well-respected General Electric has a corporate crime slate that would literally leave you saucer-eyed. Year after year there are successful complaints against the company for pollution, poor safety, illegal arms sales... The list is literally breathtaking. They are not alone, of course. Another example cited is BP, whose crimes against workers and the environment proved to be very cost-effective and thus are compulsively repeated.

Another theme of the book is the corporation's attempts to work around - even overthrow - democracy. It is true that in the 1930s, a group of corporate leaders concocted a serious plot to overthrow Roosevelt and install a military dictatorship based on some ideas circulating around Europe at the time. While Roosevelt was accused by Hoover of "preaching class-hatred", Mussolini and Hitler had driven down wages, slashed the public debt and broken the working class movement. Gerald Maguire, a WWI veteran, began his pitch for power when he met with former Marine General Smedley Butler and explained that he had been sent by a group of business leaders to raise an army, seize the Whitehouse and install himself as a fascist dictator. The two men had met before, when Maquire, claiming to be representing a veterans groups, implored Butler to deliver a speech against the decision to abandon the gold standard. On the second occasion, he brought several thousand-dollar bills with him. Butler politely declined. On the fateful coup meeting, Maguire claimed to represent Anaconda Copper, Goodyear Tire and Bethlehem Steel among others. He explained that he intended to found a soldiers’ organisation based on the French Croix de Feu, which Butler would head. Butler could then demand that Roosevelt appoint him in a new role as secretary for general affairs – a sort of shadow President – and from there he would assume real power on the pretext of Roosevelt’s failing health. If Roosevelt refused to acquiesce, the army would take power.

Three weeks later, the American Liberty League was founded to “combat radicalism” and “teach the necessity of respect for the rights of person and property”. Its treasurer, Grayson Murphy, was Maguire’s boss while one of his backers, Robert Clark, was a major contributor. Men from JP Morgan and DuPont became executives. Unfortunately for them, they had selected the wrong man, for Butler had now come to believe that “war is a racket”, fuelled mainly by corporate greed and that he had been, in his youth, a “racketeer for capitalism”. He told the government what was up, and the plot was dead.

Clearly, this is not typical, but it is revealing. Trotsky asserted that, just as an earthquake revealed the layers of earth and rock beneath the surface, so a social upheaval would uncover the layers of society and its myriad forms. And it is this submerged but constant struggle against democratic control that Bakan unpicks. It is the usual fare – lobbying, campaign contributions and so on to overturn unfriendly legislation. The successful lobbying for deregulation of the electricity supply in California has had baleful consequences that hardly merit repeating. Enron’s story is “the story of a corporation that used its political influence to remove government restrictions on its operations”, while the coal industry has been heavily funding Republican election campaigns resulting in concerted efforts by Bush to cut the budget of the Mine Safety and Health Administration (MHSA), which is already having difficulty carrying out its necessary tasks on its present budget. There are many other instances, of course, and Bakan provides a concise history of the growth in the lobbying industry, but what adds to its impact is the ingenious heuristic. Corporations are psychopaths; they can do no good that is not self-interested; they cause immense harm to people and planet; they break the law. And now, on top of that, they will work to curtail democracy where it doesn’t act in their interests.

Bakan’s work is packed with a wealth of analysis, and supporting detail. It is, to my knowledge, the first of its kind – an attempt to critically understand the central institution in modern capitalism, as well as a well-aimed ideological blast against it. Read this book, pass it on to friends and teach its message to your children:

“[T]he corporations that surround us are not our friends. Charming and plausible though they are, they can only ever see us as resources to be used. This is the real world, not science fiction, and it really is us or them.”

A film based on this book will shortly be released in the UK. In the meantime, visit the website.