Worshipful roots of organized crime - pedophile oath-taking ceremonies at the front? - secured the "Silence of the Lambs" all the way to 9/11

Source: gangsofamerica.com

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

Corporations are the dominant force in modern life, surpassing even church and state. The largest are richer than entire nations, and courts have given these entities more rights than people. To many Americans, corporate power seems out of control. According to a Business Week/Harris poll released in September 2000, 82 percent of those surveyed agreed that “business has too much power over too many aspects of our lives.” And the recent revelations of corporate scandal and political influence have only added to such concerns.

Where did this powerful institution come from? How did it get so much power? In Gangs of America: The Rise of Corporate Power and the Disabling of Democracy, author Ted Nace probes the roots of corporate power, finding answers in surprising places.

A key revelation of the book is the wariness of the Founding Fathers toward corporations. That wariness was shaped by rampant abuses on the part of British corporations such as the Virginia Company, whose ill-treatment killed thousands of women and children on forced-labor tobacco plantations, and the East India Company, whose attempt to monopolize American commodities led to the merchant-led rebellion known as the Boston Tea Party.

From Street Fights to Empire

The British roots of the American corporation
(1267-1773)

The year was 1267, and blood flowed in the muddy streets of London. A dispute between two guildsthe Goldsmiths and the Tailorshad escalated until it turned into armed conflict. The issues that led to the fighting are not recorded, but history does tell us that over 500 men were involved, including members of the Clothworkers’ Guild and the Cordwainers’ Guild, and that many were injured or killed.

Such rumbles broke out from time to time among the scores of craft guilds that had arisen during the thirteenth and fourteenth centuries. In 1340 it was the Skinners fighting the Fishmongers in the Cheapside district of the city. In 1378, the Goldsmiths attacked the Grocers. Though bloody, those conflicts were both mere skirmishes compared to the all-out war of the 1390s in which a grand alliance consisting of the Drapers, the Mercers, the Tailors, the Goldsmiths, the Saddlers, the Haaberdashers, and the Cordwainers went to war against the Fishmongers and the Victuallers. The issues were a complex blend of the lofty and the mundane, including fish prices and the religious teachings of John Wyclif.

What, if anything, do these quaint-sounding medieval guilds and their conflicts over obscure and long-forgotten issues have to do with today’s goliaths, with General Electric, Microsoft, Merck, WalMart, and so on? The Skinners, Fishmongers, and Haaberdashers of the late Middle Ages did not yet display the particular features that would allow us to call them corporations. They were not unified businesses, but rather umbrella groups for the members of particular crafts. But already, some seeds of the corporation can be seen.

One such seed was a tendency toward exclusion and hierarchy as organizing principles. Even by the fourteenth century, the craft guild had moved a considerable distance from its communal roots in a Saxon tribal institution known as the firth gild, an association that included both men and women and served a variety of protective, religious, and mutual-aid functions. Medieval craft guilds had originally been “commonalities” in which all members were equal, but over time a stratification occurred, with the elite members of each guild assuming uniforms known as liveries. In time, non-liveried members were shut out entirely, and eligibility for membership was determined not by competency at a craft but by ability to pay a fee of capital. Among the London guilds, a strict ranking developed. Twelve became known as the “great livery guilds,” with the Mercers occupying the top slot, followed in order of prestige by the Grocers, the Drapers, the Fishmongers, the Goldsmiths, the Skinners, the Merchant Tailors, the Haberdashers, the Salters, the Ironmongers, the Vintonners, and the Clothworkers. Scores of other guilds were known as the “lesser livery guilds.” Membership in one of the great livery guilds required a membership fee of £1000; to belong to one of the lesser livery guilds, the fee was £500.

Guilds didn’t just fightthey also feasted. At one feast in 1516, the Drapers entertained the Mayor and the Sheriffs with “brawn and mustard, capon boiled, swan roasted, pike, venison baked and roast; jellies, pastry, quails, sturgeon, salmon, wafers and hippocras... six sheep, a calf, forty gallons of curds … swan’s puddings, a neck of mutton in pike broth, two shoulders of mutton roast, four conies, eight chickens, six pigeons, and cold meat plenty.”

Indeed, centuries after guilds such as the Skinners, Salters, and Long-bow Stringmakers had outlived their economic functionality, many of them lived on as vehicles for networking and socializing. (Lately, the guilds have been rediscovered by London’s young professionals, who have been forming new ones at a record pace, with names such as the Worshipful Company of Information Technologists and the Worshipful Company of Management Consultants, and the Worshipful Company of World Traders. A glance at the online social calendar for the Worshipful Company of Environmental Cleaners showed that its members were busily engaged in preparations for the annual Inter-Livery Clay Pigeon Shoot, the Inter-Livery Bridge Competition, the Installation of Masters, and the Lord Mayor’s Show, in addition to the regular practice sessions of the guild’s own Golfing Society.)

The nature of life in medieval times was such that the social, the religious, the economic, and the political spheres were fully mixed. Each guild had its own patron saint and altar. For example, the Fraternity of Pepperers, which begat the Company of Grocers in 1373, which in turn begat the Turkey Company in 1581 and the East India Company in 1600, maintained an altar in the Church of Saint Antonin and paid a priest to pray for the souls of past members. Since London had no police force, guilds also played a role in maintaining public order. As early as the thirteenth century, the guilds controlled the city government of London. They elected the Mayor, who was known as the “master of all the companies.” But despite their power, the guilds could not always rest secure, because their relationship with the British monarchy was complex and at times tense.

The main source of that tension was the revenue needs of the throne. By the 1500s, Parliament had gained control over taxation, and the English monarchs were scrambling to develop independent sources of revenue that did not rely on Parliamentary approval. One obvious source, especially in time of war, was the wealth of the livery guilds. For example, during the war between England and Spain, it was the Grocers’ Company, among others, that financed the ships that defeated the Spanish Armada.

During peace times, sales of land were a primary avenue of royal revenue, but as that source was exhausted by 1685. Another revenue source, employed both by Elizabeth I and James I, was to call in all the guilds’ charters for renewal, not because the charters needed renewal, but merely to create an opportunity for collecting fees. Similarly, royal revenue was generated by sales of monopolies, a term that had a somewhat different meaning than it does today. Rather than giving the owner exclusive control over producing a product, a monopolyalso called a “searching and sealing patent”signified authority over verifying the quality of a certain product. Given the advantages inherent in controlling such a function, it is no wonder that gifts or sales of monopolies to non-guild members provoked bitter guild opposition. In 1580, when Queen Elizabeth attempted to grant a monopoly on the gauging of beer to one of her court favorites, the Brewers’ Guild mounted a fierce campaign to dissuade her. Similarly, when one Edward Darcy obtained a right to approve and stamp all skins, his monopoly sparked a rebellion by the Leathersellers.

Despite the objections of the guilds, sales of monopolies became a major source of royal revenues in the sixteenth and seventeenth centuries. In 1623, Parliament passed the Statute of Monopolies, intended to halt the practice, but Charles I exploited loopholes in the act and managed to raise £100,000 per year from selling monopolies. In time, the practice ceased to be an effective source of revenue, since there were limits to how far even a king could go is selling off smaller and smaller slices of economic activity.

Meanwhile, as the livery guilds continued to joust with the monarchy over who would ultimately control the innumerable revenue streams produced by the English economy, growing international trade had begun to transform some of the guilds into the first actual business corporations. In 1505, the Mercers’ Guild spawned the “Guild or Fraternity of St. Thomas a Becket,” also known as the Merchant Adventurers, organized to conduct trade with in Holland and Germany. The Merchant Adventurers represented a transitional form, still a guild but beginning to show a few of the characteristics of the trading corporations that would subsequently define the first true corporations. As in a traditional guild, the Merchant Adventurers functioned as an umbrella for a group of independent traders rather than as an organized entity. So each trader handled his own capital independently. On the other hand, some common operations were beginning to emerge. Certain shared infrastructure, such as wharfs, conveys, and overseas embassies, was used jointly by all the members of the Merchant Adventurers, and this shared infrastructure needed to be developed jointly and financed out of pooled capital. This was the starting point for one of the key features that distinguished corporations from guilds: the pooling of capital.

The 1500s and 1600s saw the formation of a number of trading companies (see Table 2.1). For nearby regions such as Spain, the Baltic Sea, and France, the organizational model established by the Merchant Adventurers worked well. Thus, in the Spanish, the Eastland, and the French Companies, each company member maintaining his own separate capital. But, as new geographic discoveries and innovations in ship-building and navigation made it possible for voyages to range beyond the coastal areas of Europe to more distant regions, such as Russia, Turkey, West Africa, and China, it became more practical for the merchants to pool their resources.

The typical voyage was unsuccessful, but now and then a ship would return with cargo that generated fabulous returns. Trade was not the only way these expeditions generated rich returns outright piracy as often part of the equation. In 1587, one of Sir Francis Drake’s expeditions stumbled on a Portuguese galleon, and promptly seized it. The cargo turned out to be worth £100,000, and investor enthusiasm for investing in further expeditions soared. As in a venture capital fund that finances high-risk opportunities with potentially high returns, the steepness of the “risk-reward curve” made it logical for the financial backers of such voyages to pool their capital across multiple rolls of the dice. To further increase their chances of success, the investor groups sought grants of exclusive access to particular regions, bringing the notion of exclusivity to its apexthe gene of violent organization grafted onto the chromosome of peaceful trade. Inside the boundaries of their designated regions, they deployed private armies and police, waging war against rivals and imprisoning miscreants.

Thus was born the “joint-stock company,” the form used by large corporations today. This method of pooling capital was briefly attempted by the Russia Company, which was chartered in 1553; and was also used for the first two decades of its existence by the Turkey Company. But it was most fully developed by the British East India Company. Initially, the company raised capital one voyage at a time; next, it tried raising capital for limited periods of eight to fifteen years. In 1613, the company issued its first permanent stock, and by 1650 that method of raising capital became the norm, with profits periodically divided among shareholders.

With pooled capital, the corporation for the first time become a single unified entity rather than merely a federation of independent merchants. This internal consolidation made the joint-stock corporation ideally suited for the emergence of a key defining principle of the corporation form, the idea that a corporation represents a separate legal identity from its owners. Essentially, a corporation is a deal between the state and a group of people in which the state says: You can create a separate entity and do business under that name, and the law will deal with the entity rather than with you as individuals. What made the separation even more significant is that shares in joint-stock companies could be sold to third-party investors.

The separation of the legal identity of the corporation from that of its owners has a profound impact in many ways, opening up the possibility of such corporate characteristics as corporate immortality (which doesn’t mean, of course, that a corporation is immune from extinction, but merely that it is not constrained by the finite lifespans of its mortal owners) and limited liability (the ability of owners to escape responsibility for corporate errors, misdeeds, and debts). Of course, neither immortality nor limited liability were inevitable features of joint-stock companies. Indeed, as we’ll see in Chapter 6, both of those features were deliberately withheld from corporations in the United States in the decades prior to the Civil War.

Although scholars disagree about how the legal doctrine of limited liability first emerged in England, one of the first verifiable early sightings was an act of Parliament in 1662 that applied to gentlemen who owned shares in the East India Company or two smaller corporations.

Besides pioneering the use of joint-stock capital and limited liability, the East India Company is historically significant because it was quite simply the most powerful corporation that has ever existed. Imagine a private company so unaccountable it conducts its own criminal trials and runs its own jails, so dominant it possesses an army larger than any other organized force in the world, and so predatory that for more than two centuries it squeezes the economy of the richest country in the world until observers report that some regions have been “bled white.” The King is dependent on periodic “loans” from the company. A third of Parliament owns stock in it, and a tax on its tea constitutes ten percent of the government’s revenues. A 250,000-man army (twice the size of Britain’s) fights the company’s wars, and the four out of five soldiers in that army who are “sepoys,” i.e. Indians, are kept in line by punishments such as “blowing away”strapping an offending soldier across the mouth of a cannon and firing the weapon.

At the time of the American Revolution, the British East India Company was nearly two centuries old, having received its charter on December 31, 1600 via a signature by Queen Elizabeth. “The Company of Merchants of London trading into the East Indies,” as it was formally known or simply “The Company”received the largest grant of any of the trading companies: everything east of the Cape of Good Hope. Despite the queen’s largess, the company’s early years were difficult. A rival group of Dutch investors had gotten a head start and had access to ten times more capital than the English. In 1623, the Dutch captured ten employees of the British East India Company in Indonesia, tortured them on the rack, and executed them. Reluctantly—since Indonesia (known in those days as “East India”) was considered a more lucrative source for trade goods than India—the English retreated to the safer shores of India, whose coastline was large enough to absorb the trading settlements of multiple European powers.

India in the seventeenth and eighteenth centuries was a patchwork of small kingdoms engaged in constantly shifting alliances. Officially, the Mogul Empire extended across vast regions, but its actual authority was tenuous. Within this web of politics and intrigue, the Company sought alliances with various Indian princes and conducted military campaigns to outflank its European rivals. At the same time, the company’s own employees sometimes became the enemy. Consider the case of Samuel White, who came to India in 1676 at an annual salary of £20. White developed a colorful side business: using Company ships to transport elephants for the King of Siam. Eventually, he added to that the additional job of fortifying a port that the king intended to make available for the French, who happened not only to be allied with Siam but also were perpetual rivals of the British.

Using the small fleet of ships which he had armed for the King of Siam (directly against the interests of the East India Company), White proceeded to betray both of his employers by declaring his own private war on the kingdoms of Burma and Hyderabad. He seized ships belonging to those states and sold their cargoes as his own private property. In a two-year period, White’s extra-curricular activities earned him over £30,000, a vast fortune for the times.

White was hardly the first employee of the East India Company to engage in the forbidden activity of “free trading.” He just happened to be one of the more audacious and successful. Though the local administrators of the Company in India tended to tolerate such activity, so long as it did not interfere too greatly with the Company’s own revenue streams, the attitude of the central management was considerably harsher, as vividly described by historian Ramkrishna Mukherjee:

Sir Josiah Child, as Chairman of the Court of Directors, wrote to the Governor of Bombay, to spare no severity to crush their countrymen who invaded the ground of the Company’s pretensions in India. The Governor replied, by professing his readiness to omit nothing which lay within the sphere of his power, to satisfy the wishes of the Company; but the laws of England, unhappily, would not let him proceed so far as might otherwise be desirable. Sir Josiah wrote back with anger: “That he expected his orders were to be his rules, and not the laws of England, which were a heap of nonsense, compiled by a few ignorant country gentlemen, who hardly knew how to make laws for the good of their own private families, much less for the regulating of companies, and foreign commerce.”