Ten Miles Square


October 28, 2011 11:08 AM The Founding Fathers and Occupy Wall Street

By Rick Ungar

As many in the GOP continue their attacks on the Occupy Wall Street movement, it seems a worthwhile exercise to take a look at how our Founding Fathers —who Republicans constantly remind us are the guiding light whose vision is to be strictly adhered to—would view the effort of this movement to take back the nation from the corporate and moneyed interests. John Adams wrote that:

All the perplexities, confusion and distress in America arise not from defects in the Constitution or Confederation, not from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation.

Does this sound like a man who intended to give corporations—a legal fiction whose life exists only on paper—the right to free and unfettered speech to be expressed by way of political contributions or extraordinary control over the functioning of government?

The reality is that the Founding Fathers did not think very much of corporations or, for that matter, any of the organized moneyed interests that played so large a role in the decision to revolt against Mother England. To understand this, it is important to understand the nature of corporations during the days when the United States was founded.

The modern corporation dates back to the early 17th century when Queen Elizabeth I granted a charter to create the East India Trading Company. During that time, corporations were small, quasi-government institutions approved by the crown for a specific purpose. Not unlike today, the idea behind these organizations was to bring together investors interested in financing large projects, such as exploration. Indeed, many American colonies were originally governed by corporations— such as the Massachusetts Bay Company.
We all know how well that went over.

Recognizing the threat corporations could pose to government, the English monarchs kept a close eye on these organizations and did not hesitate to revoke charters if they didn’t like the way things were going. However, as the money piled up in these companies, they began to take on increased political power.

Which brings us back to The East India Company, the dominant corporation of that era.

Thom Hartman writes in his book, Unequal Protection,

Trade-dominance by the East India Company aroused the greatest passions of America’s Founders - every schoolboy knows how they dumped the Company’s tea into Boston harbour. At the time in Britain virtually all members of parliament were stockholders, a tenth had made their fortunes through the Company, and the Company funded parliamentary elections generously.

Any of this sound familiar?

While we know that the Founders had contempt for these corporate entities and the corruption they produced in Parliament, it appears to have never occurred to them to directly address corporations when they wrote the Constitution. It is not particularly difficult to understand why this would be the case. The Constitution speaks to control of government by the people…for the people…and of the people. Why should it occur to the Founders that a corporation might ever be perceived as one of “the people”?

And yet, today that is precisely what has become the case. A corporation now enjoys many of the same protections as a person under our law.
While the drafters of the Constitution may not have seen the need to make it clear that corporations were to be treated as tightly controlled entities rather than human beings, they certainly revealed their intention via their practices.

After the nation’s founding, corporations were, as they are today, the result of charters granted by the state. However, unlike today, they were limited in how long they were permitted to exist (typically 20 or 30 years), only permitted to deal in one commodity, not permitted to own shares in other corporations, and their property holdings were expressly limited to what they needed to accomplish their specific, corporate business goals.

Put another way, every single investment bank on Wall Street, as we know it today, would have been illegal in the days of our founding.

And here is the big one —in the early days of the nation, most states had rules on the books making any political contribution by a corporation a criminal offence.

Indeed, so restrictive was the corporate entity, many of early America’s greatest entities were set up to avoid the corporate restrictions. Andrew Carnegie formed his steel operation as a limited partnership and John D. Rockefeller set up Standard Oil as a trust.

Were this the case today, both Carnegie and Rockefeller would find themselves personally liable for every lawsuit leveled against their giant companies.
One wonders if British Petroleum would have been quite so careless in the Gulf of Mexico if the chairman and the shareholders were personally responsible for the giant financial losses their negligence caused.

Despite the controls placed on corporations in the early days of our nation, as corporations grew larger and their shareholders wealthier, they began to influence the rule making process that governed corporations. Using the money they had accumulated, they began to chip away at corporate restrictions. Eventually, corporations were permitted to go on forever. Where shareholders had once been personally responsible for the actions of the corporation, contemporary corporations shield their owners from personal liability. And, as more money became involved, the politicians who regulated them grew were increasingly seduced by what the wealthy corporations could do for them.

Were they around today, our founders would not only be standing on the front lines of the Occupy Wall Street movement, they would likely be pursuing a far more strident strategy than playing some bongo drums in Zuccotti Park.

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Rick Ungar is an attorney in Southern California and a frequent writer, speaker and consultant on health care policy and politics. He is a contributing writer at Forbes. Readers can reach him at rickungar [at] gmail [dot] com.


  • Jeff on October 27, 2011 2:58 PM:

    Although I'm sympathetic to your argument, Rick, you do your cause no favors by claiming that the first quotation was made by John Adams at the Constitutional Convention. Adams was not present at the Constitutional Convention; he was serving as U.S. ambassador to Britain. This statement was instead from a letter written to Thomas Jefferson (also serving overseas at the time), according to several online citations.

    If progressives are going to criticize conservatives for misunderstanding the Founders, progressives need to make sure that their own invocations of the Founders are scrupulously correct.

  • Rick Ungar on October 27, 2011 3:57 PM:

    I will double check this Jeff. If you are correct, I appreciate your picking up the error and I will, of course, modify at once.

  • Alec on October 27, 2011 10:11 PM:

    How about the obvious fact that today's Tea Party would call the original Tea Party anti-capitalist commies because they vandalized and attacked a corporation?

    Conservatives like simplicity and a clear demarcation between black and white. grey areas scare them. Even the idea that the founders were of one, monolithic thought is idiotic with even the barest of scrutiny. All of them said stuff that could back up either side of the argument.

    Also, a few of my favorite quotes that are cherry pciked for our side, but seem pretty darn clear:

    I hope we shall . . . crush in [its] birth the aristocracy of our monied corporations." Thomas Jefferson

    "When economic power... became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny." John Adams

    Alexander Hamilton:

    "As riches increase and accumulate in few hands . . . the tendency of things will be to depart from the republican standard." Alexander Hamilton

  • SYSPROG on October 30, 2011 8:07 PM:

    Um Jeff? Although your attention to detail is great the fact remains that Adams SAID it. If you read the complete set of letters you will see that Adams, Jefferson and indeed, Madison believed that we could 'corral' the rich in the Senate so that the 'talent' of the poor and middle class could rise to run the country. Jefferson thought it was a stretch that they would ever be corraled and in fact, argued against the rich playing a large part but bowed to the stronger arguments. There is NO WAY that they would have acceded to the current belief that we should have such a large disparity in wealth. You do your side no good on pretending otherwise.

  • Jeff on October 31, 2011 3:58 PM:

    Um SYSPROG? I *am* on "your side." Sorry if my pronoun choices confused you. I wrote as a progressive (and a historian) who fully agreed with the tenor of Rick's post but who was frustrated that his historical citation was incorrect. If progressives are going to slam conservatives for screwing up their history, they (we, you, I) can't make the same kinds of mistakes themselves.

  • GregFranplou on November 04, 2011 3:16 AM:

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  • Charles Lemos on November 06, 2011 3:52 AM:

    "Were they around today, our founders would not only be standing on the front lines of the Occupy Wall Street movement."

    Unlikely. These were, especially from the middle Atlantic colonies and the South, the wealthiest men in the colonies. Only in Congregationalist New England was there really any wider dispersal of wealth. Even so, John Hancock was the second wealthiest individual in Massachusetts. The Lees and Washington were the largest landowners in Virginia. John Dickinson of Pennsylvania was probably the wealthiest man in North America and he played an important role in the First and Second Continental Congresses but he opposed the Declaration of Independence and actually voted against it in 1776.

    It is true, however, that apart from Alex Hamilton, Aaron Burr and Gouverneur Morris (all New Yorkers), the Founding Fathers feared corporations because they did see that the accumulation of capital posed dangers to their concepts of equality and virtue. But given that these were men of property (only Thomas Paine and perhaps Patrick Henry were poor), they believed in property qualifications for voting. It is dangerous to view the Founders as infallible. They were men of their times and the late 18th century was a very different world.

    After the nation's founding, corporations were granted charters by the legislatures of the states. Unlike today, however, corporations were only permitted to exist for 20 or 30 years and then their charters required renewal. They could only deal in only one commodity, could not hold stock in other companies, and their property holdings were limited to what they needed to accomplish their business goals. And perhaps the most important facet of all this is that most states in the early days of the nation had laws on the books that made any political contribution by corporations a criminal offense. I don't think returning to that mono-business corporate structure is viable though we certainly need to rethink corporate personhood.

    I do think the problem of our age is that corporations over time have acquired rights of personhood and undue political influence. How this battle shakes out is likely to be the critical factor in our collective future. Really we are seeing the rise of transnational elites. Rupert Murdoch is a case in point. Australian by birth but his most important media holdings are in the UK and the US. Carlos Slim is another. Lebanese by ancestry and Mexican by birth, his fortune, the world's largest, is tied to telecommunications in over a dozen countries in Latin America. The largest airline group in Latin America is owned by a Bolivian Jew whose core business is in oil in Brazil and by the Kriete family of El Salvador. Or look the global beer industry now dominated by just 2 companies, one Belgian and the other South African. I could go on but you get the idea. This is a global issue now.

    As per the OWS, I am puzzled why liberals are tripping over themselves to embrace an illiberal movement that has anarchist overtones that seeks to dismantle liberal democratic capitalism and abolish the Federal Reserve. The Fed, it should be reminded, was a progressive achievement. I understand the inequities in the tax structure and the frustration of now 40 years of widening social inequality but it seems that many liberals are giving up on reforming the system from within. Naked Capitalism has given David Graeber the anarcho-primivist progenitor of the first OWS protest back in September, a platform. Crooks and Liars, Mother Jones and Firedoglake seem to be full blown Soviets linking to websites that are calling for global revolution. I am certainly not at that point as yet and I doubt I'll reach such a point of manning barricades. This is not Paris 1871 or Barcelona 1936.

    Personally I think the left is just so despondent that they are uncritically embracing OWS because at least in the US, the left has lost the argument or rather it has failed

  • JerryPhillsen on November 08, 2011 8:58 AM:

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  • Grace on November 08, 2011 11:44 AM:

    The Tea Party is really the Whiskey Rebellion.

  • John Kirsch on November 12, 2011 1:37 PM:

    Reminds me of Jackson's warning against "these corporations."

  • Marie Burns on November 13, 2011 1:01 PM:

    "... in the early days of the nation, most states had rules on the books making any political contribution by a corporation a criminal offence."

    Oh, how could that be? You mean the early Supremes didn't immediately strike down those state laws as unconstitutional? Maybe somebody should tell our favorite "originalists" Scalia, Thomas & Co. it would be a good idea to study the history of the Court. These Supremes -- who claim to interpret the Constitution "as the founders envisioned it" sure think it's fine to strike down campaign financing laws now, and there have been no intervening Constitutional Amendments to give them that power. (No, the Fourteenth Amendment does not make corporations "citizens.")

    Thanks for a truly illuminating column.

    The Constant Weader at www.RealityChex.com

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