DOC

ENFORCING MORALS FOR PUBLIC OFFICIALS Some notes for discussion (ca

By Joan Stewart,2014-07-11 11:52
12 views 0
ENFORCING MORALS FOR PUBLIC OFFICIALS Some notes for discussion (ca ...

? 2002, Russell Hardin

    TRANSITION TO CORPORATE DEMOCRACY?

    Russell Hardin

    New York and Stanford Universities

    In the study of the current East European transitions from Communist autocracy to

    liberal democracy, there are two distinct questions we should ask. First, what does it take to

    make the democratic transition? Second, what will the transition lead these nations into? The

    answer to the first query seems to be a lot less difficult than what political theorists of many

    persuasions have supposed. Some of the East Europeans did it or are doing it with remarkable

    quickness. The answer to the second query is much harder. In part it is the query whether

    these polities will turn out to be like the liberal democracies of the West. This is a more

    complex question than it might seem for the reason that the democracies of the West, as will

    be exemplified for present purposes by the United States, are themselves far from any liberal

    ideal that one might think they represent. They can increasingly be characterized as corporate

    democracies, in the sense spelled out below.

    The reasons for the western failure to be more nearly ideal are that the ideal is

    virtually impossible to achieve because it does not fit the actual motivations of real citizens or

    elected officials. Among the biggest incentive problems is the radical divergence between

    incentives in the economy and incentives in politics. The political state can create and destroy

    individual and corporate wealth. Hence, it is partly the combination of democracy and market

    economics that wrecks the liberal vision. If one spells out the epistemological and incentive

    problems of democracy, one cannot be optimistic about overcoming them (Hardin 2002b).

    I wish to lay out the liberal model, address its problems in real-world application,

    and then turn to an examination of the moves toward liberal democracy in the East. I will

    generally assume that the model for both liberal politics and market economics (also liberal in

     Hardin, Transition to Corporate Democracy?, p. 2

    historical usage) is principally concerned with the welfare of citizens. I will not go very deeply

    into analyzing the possible measures of welfare but will suppose only that certain simple

    measures, such as GDP per capita and a small number of civil liberties are adequate for a first

    pass.

    If we suppose that the ideal liberal government would be concerned with the

    welfare of its citizens, we immediately face the problem of how to motivate our governors to

    be essentially benevolent toward us. The Qing government of eighteenth-century China

    defined its role as “benevolent governance” (Rowe 2001, 447). Of course, its benevolence was

    in the cause of its view of how the society should be organized and what roles the people of

    various statuses should play in that society. It was surely also true that the agents of that

    government, such as the renowned bureaucrat Chen Hongmou, looked upon that government

    as in their interest. European kings similarly did not need arrogantly to claim L’état c’est moi

    to believe and act as though their own interest largely represented the interests of their peoples.

    The central problems of contemporary American liberal democracy are the scale of

    the electorate with its consequent problems of representation and of citizen’s knowledge of

    politics (Hardin 2002b). Some of the East European nations might be able to manage these

    problems because their scale is substantially smaller, although it seems unlikely that a polity of

    millions even if it is only a few millions can avoid these problems. These nations also

    may prove to have an advantage in the coherence of their parties, although this is not yet clear.

    So far, their parties are often a shambles (Carothers 1999). The American parties have lost

    their former definition as essentially left and right ? on fundamental economic policy and are

    now relatively ill defined. This fact complicates the problem of citizens” understanding,

    because party identification of candidates has less meaning than it had before the coalescence

     Hardin, Transition to Corporate Democracy?, p. 3

    of views in favor of mostly letting the market run on its own without much central

    management (Hardin 2000; forthcoming a). Many East European parties seem to agree on a

    similar economic policy.

    To set the stage, I will first discuss the problems of contemporary American democracy and then turn to a standard set of claims about how liberal democracy is organized

    as partially the product of a vibrant civil society. Some writings on civil society suggest that

    the East European political transitions would be potentially quite difficult, and yet some of

    those transitions seem, on the contrary, remarkably quick and likely successful. Indeed, the

    level of hostile, divisive politics in many of these nations is below that of the US during its first

    decade or two, when extra-constitutional action against political opponents was relatively

    common.

    A related issue is the Hobbesian problem of political transition. The central problem of such a transition in Hobbes’s view is its threat to social order. He insists that even

    agitating mildly for reform threatens to destroy government and bring back anarchy (Hobbes

    [1651] 1968, chap. 30, p. 380). Against traditional Hobbesian views in political philosophy,

    the transitions in East Europe have been surprisingly easy. In particular, of course, there has

    been virtually no problem of fundamental social order in many of these nations. There has been

    a general rise in criminality in some nations, perhaps especially in Russia with its quasi mafia

    1and its armed takeovers of newly privatized firms (Volkov 2002). But normal criminal law

    has not been particularly defective as contract law has been in many of the nations (see, e.g.,

    Radaev forthcoming). Moreover, grand social theorists who evidently fail to look at their

    own societies claim that social order depends on a broad consensus on values. Contrary to such claims, order in the eastern nations has been sustained from long before the transitions,

     Hardin, Transition to Corporate Democracy?, p. 4 through the transitions, and on into the present. It would be hard to argue that there has been

    a steady consensus on values throughout these periods.

    A short-term conclusion from much of the discussion that follows is that the current Eastern transitions belie many standard views in political theory, views that often are

    thought to rest on substantial experience in many diverse contexts. Some of these views

    should now be laid to rest for failing the tests posed by the Eastern examples. The two most

    important, related but not identical theses are that democratic society requires a value

    consensus (Durkheim ?; Parsons ?; and many communitarians, such as Etzioni ?) or that it

    requires the various elements of civil society (Tocqueville ?; Putnam ?; Arato and Cohen ?).

    Thousands of pages have been written on these theses, the bulk of which make claims of the

    virtual necessity for one or the other of these if democratic society is to cohere or to work

    well. For example, it is widely claimed that, without civil society, and especially its

    intermediary organizations, democracy is not viable.

    Corporate Democracy

    In the era of democratic representative government, it would probably be wrong to say that the elected officials and bureaucrats see government as theirs in quite the same way as

    the Qing rulers or as French monarchs saw theirs. But the elected officials have become a

    separate class, as argued from the early twentieth century, and many of their actions seem to

    serve their specific interests as office holders sometimes in conflict with the interests of their

    constituents or the citizenry (see Hardin forthcoming a and forthcoming b). In part, their

    interest is simply hanging onto office and power, but it is also to benefit themselves financially

    and with perquisites that would come otherwise only to the most powerful officers of large

     Hardin, Transition to Corporate Democracy?, p. 5 corporations or to the extremely wealthy. For example, Andras Sajo (1998) slyly remarks that

    “government sleaze is often completely legal but still unethical, for instance, taking a vacation to Madagascar and claiming the trip was intended to study how that country’s public

    administration operates.” One would like to see an accounting of the public costs of such

    benefits for being a corporate democrat. Those costs are as little public as certain parts of the

    extravagant emoluments of corporate CEOs. Many of these benefits would have come to

    earlier aristocratic governors through their family fortunes rather than from the public finances.

    Adolph Berle and Gardner Means (1932, 119-25 and passim; see also, Means 1959) note that the rise of the corporate form of organization of private firms broke the link between

    ownership and management, opening the possibility of conflict of interest between owners and

    professional managers. Writing in the heyday of beliefs in the superiority of communism or

    socialism over capitalism (Stein 1989), they supposed that the corporate form would develop

    into what would now be called a socially conscious institution. This wildly optimistic

    expectation is at odds with their hard-headed analysis of what had already developed in

    corporate governance. They quote Walter Rathenau’s 1918 view that the private “enterprise

    becomes transformed into an institution which resembles the state in character” (Berle and

    Means 1932, 352).

    Berle and Means propose three legal forms that property in the corporate form might take. The first is analogous to pure property rights, with managers acting wholly as

    agents of those who own the stock of the corporation and who retain the full rights of

    ownership of property. The second is analogous to what we have seen in many corporations

    historically, including many in recent years during the extraordinary stock bubble of the 1990s.

    This form creates “a new set of relationships, giving to the groups in control powers which are

     Hardin, Transition to Corporate Democracy?, p. 6 absolute and not limited by any implied obligation with respect to their use.” Through their

    absolute control of a corporation the managers “can operate it in their own interests, and can

    divert a portion of the [corporation’s income and assets] to their own uses,” and we face the

    potential for “corporate plundering” (354-5). We have seen recently just how massive the

    conflict between managers and owners in these two contending models of property can be,

    with managers of many high-flying firms in the US looting the firms while very nearly

    bankrupting certain owners, such as those whose retirement funds were virtually liquidated in

    the subsequent collapse of the firms.

    In a reversal of Rathenau’s view, democratic government has become a corporate form of organization in a sense analogous to the corporate form of enterprise management.

    Elected officials act as “professional” managers on behalf of the citizenry who “own” the

    nation. For the most part, these officials police themselves, if they are policed at all, with

    citizens having only an occasional say, primarily at times of elections. Sajo (1999, 118) notes

    that “the fundamental myth of parliamentary popular sovereignty today, namely, that the

    members of [parliament] represent the people or the nation cannot be sustained.” The officials

    are co-owners along with the citizens, but their rewards from management often far transcend

    anything they can gain as their share of the general good produced by government, just as the

    corporate managers of Tyco, WorldCom, and Enron gained far more from looting these firms

    than from the genuine increase in value of the stock they owned. Indeed, they manipulated the

    market valuation of that stock through accounting misrepresentations in order to enrich

    themselves, as Berle and Means (1932, 296-7) virtually predict. Such corporate managers

    were policed by corporate boards whose members they appointed, and many of these boards

    were also paid in stock options.

     Hardin, Transition to Corporate Democracy?, p. 7

    In principle elected officials are subject to greater control, but in practice they are apt to be policed only by their opponents in power unless their behavior becomes egregious.

    Even if I greatly disapprove of my party’s representatives, for example, any action I might

    successfully take to replace them in office is likely to benefit, instead of alternatives within my

    party, candidates from an opposing party, candidates of whom I would be likely to disapprove

    even more than I disapprove of my party’s incumbents. Democrats who voted for Ralph

    Nader, a guaranteed loser, are rightly charged with having helped put George Bush in the

    presidency. I am very nearly stuck with my party, so long as its office holders are not

    egregiously awful and self-serving to the detriment of me and my fellow citizens.

    If presidents Andrew Johnson, Richard Nixon, and Bill Clinton had had majorities of their own parties in control of Congress, they very likely would not have faced serious

    2impeachment proceedings. It was only the anomaly of so-called mixed government in the

    United States that put them at risk. During the attacks on Clinton, for example, the interests of

    most Democratic national legislators, as Democrats, were to defend him and the interests of

    Republicans, as Republicans, were to attack him. Of course, it could just happen to be true

    that almost all Democrats thought his offenses inadequate for removal from office while

    almost all Republicans thought those offenses adequate. In the case of Andrew Johnson, one

    of the Radical Republicans who opposed him would have taken the office of president if

    Johnson had been removed and would have elevated many others of his party to positions of

    national power. Separating personal interests from the positions all these people took would

    be very difficult, but it is hard to believe that their personal interests as office holders were not

    a major factor.

    What might set legislators apart is that they become competent at politics and even

     Hardin, Transition to Corporate Democracy?, p. 8

    legislation and governance through the specialization of their roles. Our representatives even tend, in Bernard Manin’s characterization, to become aristocratic in that they must have relatively high levels of competence and achievement to attain and hold their offices (Manin 1997, chap. 4). As the American constitutionalist Benjamin Rush, writing as Nestor, says, government cannot be done well by people who “spend three years in acquiring a profession which their country immediately afterwards forbids them to follow” (see Hardin 1999, 225).

    Moreover, actual elected officials clearly do not represent their constituents in the sense of being like them. There are, for example, almost no working class representatives in modern democratic governments, and lawyers are grossly over-represented in US legislative bodies. The representation of groups must often be through so-called active representation by people who themselves do not directly share the interests of the groups they represent. For example, Senator Ted Kennedy often represents the interests of union members and the poor, although he has no experience of either group in his own life.

    An obvious but painful implication of this account is that representatives are

    enabled to take advantage of citizens. This is true not merely in the manner of Silvio Berlusconi, who has used his official power to enact laws that specifically benefit him financially. For example, he has proposed legislation to allow him to change the venue of his trial for corruption, so that the trial would go before a court more likely to be friendly to him (Bruni 2002). To do this, of course, he has to get general legislation passed, although no one is likely to suppose he cares at all about the general legislation. It is true more fundamentally that legislators take advantage of citizens in the sense that, without such overt actions as Berlusconi’s, the elective personnel of government can be parasitic on the larger society, making most of them wealthier than they could have been in any other activity available to

     Hardin, Transition to Corporate Democracy?, p. 9 them, giving themselves prerogatives far beyond their ordinary emoluments, and securing

    themselves and often even their relatives in power. They commonly support legislation in large

    part in return for support from the specific beneficiaries of the legislation rather than

    supporting legislation because it would be generally good for the economy. Through such

    devices, which help to keep them personally in office, they become an aristocratic class apart

    from the society they both govern and represent, in a sense well beyond Manin’s.

    Even the slightest Madisonian or Humean view of human nature yields this implication. Roberto Michels ([1911] 1949) claims that the internal democratic government of

    political parties especially European socialist parties produces an aristocracy with great

    power over the rank and file members. This claim is true more generally of democratic

    government, although the latter may typically be subjected to greater scrutiny that might

    impede some of the worst excesses of oligarchic power. In Michels’s famous slogan, “Who

    says organization says oligarchy.” Perversely, who says representative democracy evidently

    also says oligarchy.

    In the Manin and Michels theses of an aristocracy of leadership, in some sense it is not the individual elected officials but the class of them that is problematic. As John C.

    Calhoun says, “The advantages of possessing the control of the powers of the government,

    and thereby of its honors and emoluments, are, of themselves, exclusive of all other

    considerations, ample to divide ... a community into two great hostile parties” (Calhoun [1853]

    1992, 16). As a class the political aristocracy are parasitic on the society that they ostensibly

    serve and that has the power of election over them. Although some representatives may be

    very well grounded in their constituencies, for many representatives their reference group is

    far more likely to be their fellow “aristocrats” than their electorates so long as they attend to

     Hardin, Transition to Corporate Democracy?, p. 10 certain issues of great salience to their constituencies. The supposedly powerful citizenry with

    its power of election over officials does not have the power to refuse to elect all of them; it

    can only turn out the occasional overtly bad apple. In the United States, it seldom has the

    temerity to overcome incumbents’ advantage. Edmund Burke thought citizens should be

    deferential to their aristocratic leaders. Few people would argue for such social deference

    today, although there is pervasive deference to the power of elected officials and to their

    celebrity, which is a peculiarly ugly aspect of modern democracies, perhaps uglier and more

    pervasive in the United States than in other advanced democracies.

    Calhoun spent the last two decades of his life defending slavery and the prerogative of the southern states to maintain slavery. The minority that his writings generally defend was

    the minority of southern states and their representatives in the national government against the

    majority of anti-slavery states and their representatives. Some of his central arguments,

    however, are more generally compelling in the abstract and when applied to many other issues.

    He argued the case that officials use their offices to serve their private interests nearly a

    century before Berle and Means made the analogous case for the governance of the modern

    corporation. Although the corporate form of organization had precedents in the seventeenth

    century, the first important manufacturing firm organized that way with a significant

    number of stock holders, all of them minority stock holders was the first of the large New

    England textile mills, organized in Waltham, Massachusetts, in 1813 (Berle and Means 1932,

    10-11). This company followed the virtual invention of modern representative government in

    the US constitution of 1787 by a quarter century so that, in a sense, the corporate form of

    control with large numbers of owners was pioneered by the US government, which remains

    the world’s largest corporate entity while thousands of substantial private corporations have

Report this document

For any questions or suggestions please email
cust-service@docsford.com