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Gangs of America: The Rise of Corporate Power and the Disabling of Democracy

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As an attorney and former college agitator (long, long ago), I read with profound interest Ted Nace's "Gangs of America", which along the line of Howard Zinn's "People's History of the United States" challenges us to imagine an economic and legal universe other than the one we live in. Most Americans, and especially attorneys who are the high priests to the corporations, take it for granted (kind of like the inhabitants of the "Matrix") that multi-billion dollar corporations should enjoy and have always enjoyed preferential tax treatment, tort immunity, and government handouts by the gazoo.

What is valuable about such authors as Nace and Zinn is that they break free from the trap of blaming our current social and economic inequalities on a select group of evil men in the White House or Congress. While alternative historical analysis became an endangered species when Berlin Wall fell, the need for other voices did not go away. It is not enough to simply bash the current Administration a la Michael Moore, Jim Hightower and Al Franken, although such rants have their place. Nace tells us instead that it is vital to understand that such governments are organic to the same economic and legal system which allows Wall-Marts, Enrons and Worldcoms to flourish. If a non-entity such as Bush were not around to elect, there would be plenty others to take his place to service the machinery. If we do not get the government we deserve, at least we get the best goverment corporate money can buy. This power is enabled by a steadly-built array of laws to establish the modern limited liability corporation and its holding companies as a superior economic and legal entity ahead of the individual, despite the fact that the Constitution nowhere provides such status.

"Gangs of America" stakes out the historical origins of the status of the modern corporation as a preferential legal entity enjoying rights and freedoms superior to that of the individual. This is all true. While I was familiar with the late 19th century cases which gave recognition to the corporation as a "person", Nace adds additional color to the facts of these decisions, which I certainly did not hear in law school. Rather, in corporations class, liberals devoted their time to debating the nuances of "shareholder democracy", a concept which, applied to giant megaliths such as Pepsico, has all the relevance of Stalin's Inner Circle...

It takes considerable courage to tackle such a subject on a macro level without clinging to the conventional icons of either capitalist or Marxian theory, or conventional legal analysis. Rather, what is being attempted is close to a pure historical analysis which follows the paths of money and influence in a very practical way. This is, ultimately, a very important book.

This interesting book traces the history and development of corporations from the time of Queen Elizabeth I to the present day. Much of the book focuses on little-known episodes in the corporate chronicle - the cruel Jamestown settlement in Virginia, for example, or the British East India Company's depredations in India. About midway through, the book shifts from such tales to a close examination of Supreme Court justices who tilted the playing field in favor of corporate power. Breezily written and accessible, this book puts a lengthy and complicated history easily within reach of ordinary readers. Its bias is clear - the subtitle leaves no doubt that author Ted Nace is a foe of corporate power - and the closer to the present the story comes, the more accusatory the author's conclusions may seem. Nonetheless, We find this is a worthwhile read for those who seek background information on the dark side of the American corporate success story.

If the hijacking of the 2000 presidential election by Stupid White Men incensed you, then take heed of the Smart White Men who have dealt a thousand blows to democracy over the past century. Ted Nace's "Gangs of America" is an intense history of corporate America's deliberate and relentless effort to empower itself aided by congressmen and judges entrenched in a sea of vested interests.

In a Matrix-like prequel, Nace carefully chronologizes the efforts of corporations to gain freedoms and protections as "persons" at the very expense of the people the U.S. Constitution was designed to protect. Even the self-serving ACLU cannot see the "real slippery slope is the ever-increasing tendency to treat corporations as though they were human beings."

Nace's witty and engaging tale compels the reader to follow the roller-coaster ride of corporate dominance which begins by going down the murky path by which the courts came to treat corporations as "persons." As the author of "Be Careful Who You SLAPP" I especially enjoyed Nace's treatment of corporate Strategic Lawsuits Against Public Participation (SLAPPs).

Nace points the reader to the success of this concerted corporate effort to dominate as measured by the public image of the CEO who is once seen as the dutiful bureaucrat and is now transformed into the swashbuckling dot-com "hero" in the likes of Bill Gates. But as the corporate juggernaut rolls forward we find this local boy does good is soon testifying at his company's anti-trust hearing, one of the most egregious examples of corporate abuse of power of the 20th century.

Are we doomed to an Orwellian future where a large unaccountable "modern" entity enjoys more rights and freedom than the citizens who work its factories and offices? Can the same legal system that allowed corporations to add "field to field, and power to power" now check its unfettered growth? Can we as citizens tap into our human propensity for creativity and utilize the restraints that will morph the corporations into welcomed tools of society? Or is our future to be trapped in "The Matrix" where corporations and machines now control our reality?

Nace's answer is practical and inspiring. Just as corporations have bit by bit turned the tables on us, we citizens can take back our liberties by chipping away at the same old block - the legal institutions that have empowered them. One beginning is for each State to simply enact charter revocation by which modern day corporations can be tamed with the threat of dissolution as they once were.

Nace's "Gangs of America" is an insightful view of the basis for the sense of invincible arrogance that fueled Enron, WorldCom and others yet to appear on the public radar. Thanks to Nace, we know the trajectory of corporate America. It's not too late to redirect the flight plan.

I bought this book at the airport with the intention of reading a "good" but perhaps not "great" account of the rise of Corporate America. I was in for a nice surprise as quite the opposite happened, the book was great.

Ted Nace does a brilliant job of giving a clear and concise picture of how corporations managed to gain such a strong and uncompromising foothold to become corporate America as we recognize it today. We are given an in-depth look at the landmark Santa Clara supreme court decision, individual amendments that were passed to grant corporations "rights" -that at times weren't even accorded to individuals and the breakdown in the democratic process the led to such outcomes.

These central ideas are nicely integrated in a well-written book that is straight-forward and to the point without being dull. It's definitley a book that can be kept and referenced years down the road. A keeper without a doubt.

Nace's confrontations with the destructive actions of PCA (my shorthand for "Powerful Corporate America") when he was the staff director for the Dakota Resource Council, assisting rural communities to cope with the adverse effects of strip mining and power plants, and then his experiences later on in creating and running a publishing business, eventually selling it to a larger corporation, caused him to ponder the question of how corporations became so powerful, to research the answer, and to share it with us in this book.

The author tells how early corporations in America were tightly controlled by state charters. Gradually, however, state legislators, eager to attract new business, began liberalizing their strict charters. Corporations were slowly given yet more power from 1886 forward by the U.S. Supreme Court in a series of illogical decisions influenced by business friends and interests, which would have turned our Nation's founders over in their graves.

Three of the constitutional and quasi-constitutional rights granted to PCA and addressed by Nace are personhood, limited liability, and immortality. Let's look at each briefly.

The highest court has been mindlessly treating an otherwise legal piece of paper, the corporate entity, as a real person. An opinion in 1819 by Chief Justice John Marshall that any sensible person knows that a corporation is an artificial entity,
and subsequent dissenting opinions, equally acerbic and pointed, have all failed to dissuade the court from anthropomorphizing the corporation. Corporations have exploited the artificial personhood right and its other judicial derivatives to the considerable detriment of the rest of us and our environment. One example is how corporations, by relying on the substantive due process clause of the 14th Amendment, can stiff their workers toiling under dangerous conditions and thwart government regulators intent on catching the offenders in the act.

Shareholders are liable for twice the value of their investment should the corporation be sued for any harmful wrongdoing. Say what? Yes, it's true, but only in the 19th century. Gradually, the states lifted that obligation and handed public corporations and their shareholders a big gift, limited liability. Consequently, shareholders are spared liability for whatever misdeeds and crimes are committed by the corporation. No matter how much harm it causes, a corporation is liable for damages only up to an amount that can't exceed its assets. And, because of the next right overviewed, if the assets are exceeded, the corporation can always escape by filing for bankruptcy and then morph into the same business under a different name, probably with the same scoundrels in charge.

When people die, their bodies die. That's not the way it works with "Mr." or (rarely) "Ms." public corporation. This "person" can be raised from the dead like Lazarus, courtesy of states dropping the requirement that a chartered corporation had to reapply periodically to extend its limited lifespan, thereby making it much harder to hold a firm accountable for its wrongdoing. Moreover, as Nace notes, corporations in perpetuity can "benefit indefinitely" from their wrongdoing, as in the case of IBM when it gave technical assistance to the Nazi's regime in "implementing its genocidal policies."

Occasionally, PCA's abuse of its power does create a public backlash, as happened in the late 1960s and early 1970s. Nace gives an absorbing account of how a "pep talk" (actually it was a memorandum) by Lewis Powell to the U.S. Chamber of Commerce triggered the formation of the elitist Business Roundtable, which mobilized an unbelievable blitzkrieg of a counter attack against the public backlash. In the meantime, Powell moved up to the Supreme Court, giving PCA yet another inside track. This
account alone of PCA's resurgence, including its grip on both state and federal judiciary, is worth the price of the book.

Nace later goes on to tell how PCA's hegemony is extending globally through more recent international agreements that heavily favor business interests over the welfare of the host countries.

So, how is democracy to be rescued from domination by PCAs? Nace makes several suggestions. One, for example, is to mount efforts to revoke a scoflaw corporation's state charter. He describes a case that while it wasn't successful its lessons learned could lead eventually to a successful revocation some day in some state court.

Historical accounts can be snail paced and dull. Not Nace's His orderly and thorough documentation is never slow or dull because he's a skillful story teller, keeping you engrossed in a chapter and then baiting you with the next chapter's intriguing title: "Why the Colonists Feared Corporations," "The Court Reporter," "Judicial Yoga," "The Revolt of the Bosses," and "Fighting Back," to name a few.

My only criticism of the book is the author's misdiagnosing "the roots of the scandals of 2002," which also causes him to overlook an important remedy. He attributes the scandals to "overwhelming corporate influence in democratic government," an attribution that is, of course, in keeping with the general thesis of the book. You would think, therefore, that he would tie Enron and the 40-some other scoundrel corporations directly to their exploitation of one or more of their corporate rights. He doesn't. And he can't, at least directly.

The reason is that corporate rights, although indeed a significant problem, aren't really a root cause of corporate wrongdoing. They're more like a safety net or insurance policy for corporations' wrongdoings. If I had to pick the one primary root cause of them-and I've studied this matter extensively-it would be corruptible executives cutting ethical corners to increase profits every quarter while reaping undeserving, unconscionably huge personal rewards.

Despite my criticism, I like the book. It's well crafted, insightful, and very informative. Nace thoughtfully tabulates the many historical events to help readers keep track of them. There's also an appendix with very readable and short synopses of nearly 40 U.S. Supreme Court cases.

In conclusion, I would recommend this book to anyone who wants to know more about the rise of corporate power, its abuse in America, and what concerned citizens might try to do about it.

For many, maybe most, modern life just is. There is little understanding or even interest in the forces that shape, or more perniciously control, lives. That ignorance in no way disestablishes corporations as the most powerful, self-serving entities of the modern era. However, this book is not particularly concerned with all of the ramifications of their immense power to influence and control society.

The book primarily examines the profound change in the legal standing of corporations that occurred in the last half of the nineteenth century and into the first decades of the twentieth. Though not heavily argued, the author contends that Americans in the colonial period were very leery of corporations. After the founding, corporations came into existence only via state charters that specifically detailed and limited a corporation's activities with the real possibility of charter revocation acting as an effective incentive for compliance. But business interests began to battle those limitations, especially on the legal front.

The Santa Clara County case decided by the Supreme Court in 1886 was the case on which the subsequent legal empowerment of corporations was based. Though not specifically stated in the opinion, it is commonly held that after that decision, corporations would be viewed as "persons," the subject of the fourteenth Amendment, whereby all persons are entitled to due process and the equal protection of laws. Even the great John Marshall in 1819 had asserted that corporations are an "artificial being ... existing only in the contemplation of law." Now the artificial nature of corporations was being disregarded, clearing the way for consideration as the equal of any citizen with all of the same rights. The fact that corporate resources overwhelm those of any one person appears to not have been considered.

In the laissez-faire, Social Darwinist atmosphere of the early twentieth century individuals were left to compete with their corporate "equals." Time and again legislation that sought to ameliorate dreadful workplace conditions was struck down as interfering with liberty of contract, ignoring the one-sidedness of employer-employee exchange.

The same thinking is seen in decisions regarding participation in the political process. The author shows how the courts have subtly distorted the meaning of the First Amendment as protecting corporate "speech." In actuality, the amendment protects speakers - real people, not entities. The real speech of corporate stakeholders, such as customers, has routinely been suppressed. For example, a quarterly consumer's section in an energy utility's newsletter was disallowed, despite the utility's monopoly of the region.

The author shows that legal decisions regarding corporate personhood have since Santa Clara been very inconsistent and even contradictory. One would have thought that the author would have weighed in on the "strict construction" arguments that have been the rage over the last few decades. The reading of corporations as persons by the courts is a definite distortion of original intent. Moreover, the original intent of constructing a nation of self-governing citizens has been seriously eroded by allowing monolithic entities to dominate arenas where citizens participate, like elections.

The author notes that several movements at the turn of the nineteenth century attempted to counter corporate power, namely the Populists, the Knights of Labor, the IWW, and the socialists. Virtually all of them ran into the power of the state and reactionary forces that contained and eliminated the movements. Some of this material is rather sketchy.

In recent years corporations have gained tremendous advantages by being able to relocate internationally facilitated by any number of trade agreements. Through the WTO and other bodies, corporations are able to force nations to rescind legislation that they see as impacting their profitability. The modern anti-corporate movement often takes the form of anti-globalization, perhaps best seen in the Seattle demonstrations against the WTO. In addition, the author hopes for cooperatives or economic democracy as alternatives to corporate power. Such efforts have had little impact.

Any number of authors have addressed the dominance of corporations, such as Bakan, Greider, Hartmann, Korten, Schweickart, etc. This book is less comprehensive than those by the authors mentioned. It is a reasonable and readable overview of the legal shenanigans and rationalizations that have occurred concerning the rightful place of corporations in our society over the last 125 years. In an era where conservative movements have gained ascendancy, it is doubtful that any of this literature has a wide audience.

I was thrilled to finally read a thorough analysis of just how corporations arrived at the powerful position they occupy today. I knew of corporate personhood, but heard only superficial explanations. Nace logically and comprehensively filled in the who, what, when, and why gaps, providing a powerful tool for those who want to understand our society, consider alternatives or challenge the concept and consequences of corporate personhood.

I thought it was written succinctly with just the right amount of detail. It reads fast if you want to know about this topic. I stopped only to ponder the details and to get my work done.

This book is not where you start in the process of understanding corporatism or the economy. It is a book for those who have already introduced themselves to globalization and Democracy issues and realize that corporate personhood has covertly become a serious and fundamental component in our perceptions. I know of no other book that will put you on more solid footing when analyzing and confronting the issue of corporate personhood.

Thanks Mr. Nace. You have made a contribution to the democratic process. I hope we all can learn from what you have offered and reclaim Democracy from corporations.

I found this to be a fascinating book, well researched and documented. Mr. Nace traces the history of the American Corporations from the earliest years of our union. It would be easy to draw the conclusion that Mr. Nace is anti-business, but that is not how I read his position. Instead, what he is suggesting is that we have created a monster with our catering to the "personhood" of corporations at the expense of focused small businesses.

The premise is that corporations have now gained more rights than human persons have in our society. Along with longevity - corporations need not die - corporations have gained other "rights" not available to people. According to Mr. Nace, corporations enjoy a long list of such rights: limited liability for shareholders, perpetual existence, virtual location, indefinite entity or "shape shifting," minimum standard of treatment, national treatment and compensation for regulatory takings (such as NAFTA rulings, etc.). In addition, we have allowed corporations to enjoy rights equal to those of people, such as: Equal protection, due process, freedom from unreasonable search, jury trial in a criminal case, compensation for government takings, freedom from double jeopardy, jury trial in a civil case, commercial speech, political speech, Negative speech (the right to abstain from association with the speech of others).

Armed with these rights and deep pockets, many corporations are formidable opponents in competing with people for resources, political access, and redress of real or perceived injustices. Nace argues that without restriction of companies through the Corporate Charter (articles of incorporation), we have turned a monster loose on society which we are now almost powerless to contain. Corporations have lives of their own and little to fear from governments - they simply do business elsewhere should they find the environment undesirable. The consequences of this evolved capitalist model are that we have a concentration of power and a polarization of wealth. The most insidious result of this creation is that democracy is no longer in the hands of the people; it is in the hands of large corporations and big government which is now a big business. They have no incentive to relinquish their power.

Mr. Nace does not recommend radical solutions to this situation. Instead he advocates the "more hopeful scenario in which the pendulum swings toward a softer variant of corporate capitalism. Under this course, the corporation as we know it does not radically change, but society gets better at pushing back against its influence and excesses. Environmental regulation becomes stricter. Wealth taxes blunt the worst extremes of wealth and poverty. Antitrust regulations break up the largest corporate empires. Restrictions on corporate political activity revitalize democratic institutions."

Regardless of your position on business in general or big business in particular, this book will provide food for thought and you will gain knowledge of how we have come to be in this place.

Once I got the feeling that perhaps Corporations were in fact big scary soulless entities, I figured I should get a book. This was the one I got, and it was splendid, just what I wanted. Lots of information, interpretation, and conclusion, but not a lot of obvious anti-business preaching. Of course, nobody writes a book like this if they want to hug CEOs all day, but the tone that Nace adopts is one of cautious investigation. If I felt I was being preached at, I would have put it down. I prefer to get some information and then draw my own conclusions. I disagreed with a few of his reasonings, but that's pretty good for me. Anyway, I plan on reading more on the subject, but this is a great start.

I was expecting this to be a fairly dry read, given the subject, but I was so pleasantly surprised. As the New York Times said review put it, Gangs of America is a "entertaining examination of the rise of corporate power in America" (note the "entertaining"). The book starts on a very personal note about how businessman Nace came to write a book examining the roots of the system he founded, built, and finally sold his own publishing firm. Then jump back 700 to 200 years to look at the british corporate charters and their antecedents (most notably the East India Company). The story then moves to America with the corporate side of Jamestown, and later with the anti-corporate component of the American revolution (in which the Boston Tea Party is seen as sort of a revolt by local merchants against the nationwide chain trying to set up shop in town), and finally how the founding fathers sought to keep corporate power in check. Next the story moves to the characters of the nineteenth century who one by one undid the restraints on corporations (including chapters titled The Genius, The Judge, The Court Reporter, and The Lavender-Vested Turkey Gobbler). The story continues in the twentieth century with the new deal reforms and then jumps to the seventies where some fairly recent decisions have expanded coporate rights. Then it is on to the corporate scandals of 2002 and how trade agreements are the latest tactic for adding corporate rights and defeating democracy. Finally, there is a summary of the movements springing up to redress the radical changes that have given us corporations with more rights than people, and then a look back on just what is so worrisome about about where we find ourselves (the chapter titled "Intelligent, Amoral, Evolving"). The book is filled with useful tables and appendices summarizing court decisions and other relevant events, and the quotations throughout the book are thought-provoking. All and all a good read.