The Slow Growth of Corporate Governance

I. What makes a government?

What is a government but a set of legal structures providing services to an area in exchange for monopolistic power over what is allowed in that area?  Those services include stability—generally in the form of contract and law enforcement—and public goods—most commonly as monetary policy. These services may be broader: some governments seek to provide human rights or freedom from want while others guarantee an ability to practice a religion at the expense of others. At the root of this, the government is allowed to exist so long as it keeps the wheels of society turning and its citizens from dying in droves.   No matter how it is cut, almost every useful definition of a government can fit into this broad descriptor.

So what happens when the provider of these services changes? A perpetual concern in national security circles is how to deal with terrorists and gangs that provide better governance than those they are fighting (Brookings has a nice article on the topic). But for most of the world, terrorists are not taking over their governments, multinational companies are. Corporations exert control over many governments through regulatory capture and various forms of (often legal) corruption. But there is something fundamentally different between a set of corporations capturing their regulatory body ( the FDA) and corporations fulfilling tasks the government has neglected, especially when those tasks differ significantly from the corporation’s charter.

II. A different form of privatization 

Lyft recently announced it will provide free rides to polling stations on Election Day. Foreign aid is increasingly coming from philanthropic (and sometimes corporate) entities—which doesn’t even touch on the way in which these organizations are fulfilling the role of the state in the countries they “aid”  (for the record, a lot of this latter push is coming from the effective altruism movement with which I consider myself at least loosely allied). Dominos is filling in potholes on public roads. Facebook and Google are increasingly debating their roles as providers of US national cybersecurity (for the record, this didn’t start in 2016). And this is treating healthcare and the internet as things that belong in the private sector (a position held by many Americans).  

Private police, private fire departments, private military contractors, private prisons, and the general privatization of society have been the trend in the capitalist world since the latter half of the 20th Century. It strikes me that there is something different about corporations volunteering to provide what should be public goods, however. Privatization is the government hiring private groups to fulfill its tasks. There is an element of democratic control still involved, and sometimes a veneer of government presence in the providing of the service. Corporations taking it upon themselves to fulfill these needs is rooted in private sector organizations seeing a profit in cutting out the middleman of the government and becoming part of the fabric of society.  This points to a fundamental failing on the part of the local government, while increasing the legitimacy of corporations (and “the private sector market”) as a source of governance. Right now I am focused on this latter point.

If a few potholes are filled by a Pizza Company or people use an online taxi service to vote because the government abdicated its duty to facilitate transportation to polling station the world will not fall apart. Actually, the world will be made better, at least in the moment. This is when the idea of path dependency is most valuable: the foundations for a seismic shift are being laid beneath our feet with objectively beneficial short term decisions.

The question is where this stops. How broad does the corporate governance get? Will entire networks of highways be created and owned by different companies (there are certainly Republicans interested in this plan, and it has precedent in the form of the Railroad Barrons of the Gilded Age)? Will Amazon build their own public transit system for their HQ 3 (Google is going in this direction, for their employees)?  Will Lyft, once it has its fleet of self driving car, start building charging stations and running utilities in their busiest cities?  Will all of these scenarios begin to happen at once, in the same places? 

The next step from a series of corporations providing governing services is capital following its nature and consolidating until one corporation is providing the central services of a city. In this increasingly disturbing world the corporation may find it more efficient to have its own law enforcement units protecting their property rights and ability to do business—without distractions like a shooting in the poor neighborhoods.  If fiat currencies are simultaneously replaced by crypto-currencies, transferable wherever the privately controlled internet can reach, the place for The State as we know it begins to shrink and the governing body becomes The Regional Corporation.

This is similar to the world in (the amazing comic) Lazarus and a slippery slope logical fallacy. We are nowhere near corporations actively governing cities (company towns somewhat excepted) in the developed world and we are far from locked in on a path to that eventuality. We are however increasingly accepting of corporations as components of how both the world works and public goods are maintained.  Not only does the normalization of corporations volunteering public goods point our imaginations towards an extreme version of capitalism, but it shifts the Overton Window towards corporate governance and away from greater democracy.

III. Conclusion

Just as philanthropy is often used by libertarians as a justification for not needing a state, so too can corporate sponsored public goods. These arguments have consequences in the form of deregulation, privatization, and further concentration of amoral capital. Yet philanthropy and public goods help people, no matter the provider. It is hard for me to say “No, you are not allowed to fill in potholes” and I will give to private charities I think help others efficiently because that’s part of caring for other humans. The solution cannot be rejecting the presence and influence of the private sector entirely, but the solution needs to involve opposition to the mindset these actions build.  

Critics like I must therefore be clear. The problem is not a corporations providing government services, the problem is the void the corporations are stepping into, and what that is doing to our collective imaginations. When a pizza company fixes a city’s roads it should shame the government into becoming better. When private companies are necessary to vote it should galvanize people to demand electoral reforms like mail in ballots or more (and closer) polling places and for Election Day to be a holiday so voting is easy. SpaceX can be part of the future of space flight, but if more than the wealthiest of humanity are to benefit from space exploration private and public space exploration should compete, and cooperate, for the betterment of all. But the worst thing we can do is passively accept corporations as necessary and as capable of replacing governments because if we let them they may—and by then it will be long too late.

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