The following is an extract from the new preface of Silent Coup: How Corporations Overthrew Democracy, by Claire Provost and Matt Kennard
This history of the corporate takeover of our world goes back more than 500 years. None of what we describe in Silent Coup would have been possible without the invention of the modern corporation.
For the Americas, the key year is 1492 when Christopher Columbus famously set sail across the Atlantic Ocean, seeking an alternative route to the East Indies and the spice trade. The Spanish royal family sponsored his journey, though Columbus was born in Genoa, Italy, which is also credited by many academics as being the place where the concept of a joint-stock company first emerged, or took root.
The idea of such a company – which can raise money for its activities by selling stocks, in exchange for shares of future profits – then spread and was crucial in the phase of history that came next, and which saw Europe seek to colonise much of the world. It is still the corporate form of choice for contemporary giants like Apple and Google.
From the 16th century onwards, joint-stock companies were increasingly organised to undertake ventures such as long journeys that required large amounts of money up-front.
In 1555, Queen Mary Tudor granted the Muscovy Company a ‘charter’ with a monopoly over trade routes with Russia and the ability to finance its journeys by selling tradable shares. The Virginia Company (AKA the Society of Adventurers) also financed its colonisation of what is now Virginia in the US by selling shares in the early 1600s after receiving a ‘charter’ from King James I.
The form became popular in the Netherlands too, which is why Amsterdam is home to what is considered the oldest modern stock exchange – created in the early 17th century. But only a few, favoured companies such as the British East India Company (established: 1600) were granted limited liability – meaning that their investors only risked their initial investment and were not liable for other losses or actions by the business.
By 1700, it controlled 50% of British foreign trade. Along with becoming an enduring symbol of British imperialism, it inspired other companies and has been credited with spurring the development of London’s capital markets.
It wasn’t until the 19th century that legislation was passed in the UK and other countries to free the multiplying number of such joint-stock companies from state control.
In the UK, a specific charter had to be granted, or specific state permission otherwise received, to form such a company until the 1844 Joint Stock Companies Act was passed, enabling anyone to register such an entity.
This ‘marked perhaps the first time in English legislative history that parliament enabled a new business form, rather than proscribed it’, according to the Institute of Chartered Accountants in England and Wales (ICAEW). An updated version of the Joint Stock Companies Act, passed in 1862, is still considered the foundation of contemporary British companies law; it changed the game further by adding open access to limited liability too.
British business leaders had pushed for these changes. Prominent liberals like John Stuart Mill had also argued that limited liability would open up the world of business to the poor because it would lower their risks. Robert Lowe, in William Gladstone’s Liberal Party, is meanwhile described by ICAEW as the ‘Father of the Modern Company,’ having returned to England after years in Australia, which gave him ‘negative experiences with strong labour unions and exposure to a relaxed class system [which] made him an ardent opponent of social democracy and universal male suffrage.’
Lowe’s interest was the company and freeing it from state control. He thus pushed for legislation for the ‘development of power centres within society that were largely independent of the national state. Companies became small societies within the larger society, answering to shareholders… rather than the public.’
Though there were also prominent critics of limited liability’s expansion. In the late 19th century, Gilbert & Sullivan premiered their comic opera Utopia, Limited at the Savoy Theatre in London. It satirised government action to make profit-making less risky, as well as the UK’s role in the world and its sense of superiority.
In particular, it took aim at the 1862 Joint Stock Companies Act and how limited liability gives owner-shareholders routes to profit without even basic responsibility for corporations’ actions, which can promote speculation and corruption. While full of references to specific things happening at the time, its themes are still strikingly relevant today.
When Gilbert & Sullivan were working on the production, Princess Kaiulani of Hawaii (before it was annexed by the US) arrived in England to study. Her arrival was in the news and seemed to have partly inspired the story, which begins with the King of a fictional South Pacific island called Utopia sending his eldest daughter to an English boarding school.
She then returns with six British men who take up key roles on the island. One of them, Mr. Goldbury, explains the British law enabling limited liability companies and how it offers great rewards with little risk:
Bank, Railway, Loan, or Panama Canal.
You can’t embark on trading too tremendous
It’s strictly fair, and based on common sense
If you succeed, your profits are stupendous
And if you fail, pop goes your eighteenpence.
The King is taken by the idea and decides to go further and transform his entire country into a limited liability company – and an even ‘more perfect’ replica of Britain. Reading the script now, rather than a plot twist, it seems like a chilling prediction of dystopian but real ventures that we describe in Silent Coup, to create whole cities and territories run by corporations, with CEOs in lieu of elected representatives.
Along with legislation freeing corporations from state control, and from unlimited liability, courts and lawyers were also involved in developing, defining and enshrining ‘rights’ for these businesses.
In the late 18th century, for example, London-based Scottish lawyer Stewart Kyd published his pioneering Treatise on the Law of Corporations, defining a corporation as ‘a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form.’ Kyd’s definition added that the corporation is also ‘vested, by the policy of the law, with the capacity of acting, in several respects, as an individual’ including in the sense of ‘enjoying privileges’ and of ‘exercising a variety of political rights.’
On both sides of the Atlantic in the 19th century, judgments in court cases then recognised corporations as legal ‘persons’, with corresponding ‘rights’ and protections.
In the US an 1886 Supreme Court judgment, in a dispute on railroad taxation, wildly accepted that the Constitution’s Fourteenth Amendment (which had been introduced to protect the rights of freed slaves) should also apply to private corporations.
In the UK, another legal case resulted in the recognition that ‘the company is at law a different person altogether’ from its shareholders, with its own rights. In 1896, a House of Lords judgment in the case (Salomon v Salomon & Co), in the words of academics Dan Plesch and Stephanie Blankenburg, completed ‘the transformation of corporations from privileged monopolies, brought into existence by a grant or charter of the monarch or state, into a ‘person’ and a legal entity of its own’.
Other significant rulings followed from courts, not parliaments (and thus from legal professionals and not from elected officials). They include the 1916 Michigan Supreme Court case (that the Dodge Brothers brought against Henry Ford) in which judges asserted that the purpose of a corporation is ‘primarily for the profit of the stockholders.’
This has been interpreted to mean that the corporation is legally required to maximise its profits – any other interests and concerns be damned.
By the turn of the 20th century, ‘holding companies’ emerged and corporate mergers resulted in the creation of larger corporations; conglomerates began forming along with transnational networks of corporate entities. These are the foundations on which today’s multinational corporations were then built and expanded globally.
Silent Coup thus tells the latest part of a story that began long ago, and was intertwined with imperialist projects from the start. Over this long period corporations have become increasingly free from the states that created them.
Now, they appear to have completed (or be on the verge of completing) their power grab, including through supranational institutions and strategies that can insulate them from challenges – or can punish those who dare to defy or resist them.
You can purchase Silent Coup here.
Featured image supplied
