With financial reform now newly passed, politicians who supported it go into overdrive to exaggerate its likely effects. Their cultivated enthusiasms culminate in the same promises made by every president and congressperson after similar reforms were enacted in the wake of earlier capitalist crises. “This reform,” they all insist, “will prevent crises in the future.” That promise has been broken every time as our current global capitalist crisis proves yet again.
Reforms and regulations fail for one basic reason. The corporations whose behaviors contributed to the crisis emerge from the processes of reforms and regulations or reregulations with their basic internal structures in tact. They remain organized such that the mass of workers come to work, Monday through Friday, produce whatever their employer then sells, and then go home. The corporation’s Board of Directors continues to make all the key decisions: what, where, and how production will occur, where and how the products will be sold, and how to dispose of the enterprise’s profits. In making those decisions, the Board (15-20 individuals) is responsible and accountable chiefly to the major shareholders who elect them (usually another 15-20 individuals). Each Board’s job is to make money for its corporation.
For the Boards, reforms and regulations are like taxes: obstacles to be minimized, evaded, weakened, and, where possible, eliminated. The goal is to grow the corporation’s profits, market share, etc. As the first receiver of the corporation’s net revenues (including profits), the Board of Directors possesses the funds needed to succeed. Over the last century, Board of Directors have dispersed these funds in ever larger contributions to political candidates, lobbying campaigns, and conservative think tanks publicly promoting low business taxes, deregulation, etc. In these ways, US corporations basically responded to the New Deal’s reforms and regulations in the decades after the 1930s by working around and then against them. In this process, Democrats and Republicans alike did those corporations’ bidding (e.g., Reagan cut business taxes, Clinton repealed Glass-Steagall, etc.).
If we now just enact and impose another set of reforms, regulations, and business taxes – and that is all Obama or either party do, think or talk about – we will shortly have a replay of history. These new reforms and regulations will be undone just like those of the New Deal. The only difference this time will be that corporations will get that job done faster since they have all the accumulated experience in how to do that.
Real reform and regulation from the top, via laws and government administration, can only work if it has a cooperating partner at the productive base of society operating the enterprises which produce the wealth. The existing corporate structure provides no such partner. On the contrary, it represents an enemy of reform and regulation. Corporate boards and major shareholders receive and control the fruits of production (profits). Those are the resources with which they have repeatedly undone reforms and regulations.
The solution therefore lies in a change in the organization of enterprises. Instead of the tiny minority of boards of directors and major shareholders, the decision-making of enterprises ought to be democratized. All those who work in each enterprise ought collectively to function as their own board of directors. Everyone comes to work Mondays through Thursday producing what the enterprise sells. On Friday everyone comes to work to hold meetings and there democratically to decide what, where, and how to produce and what to do with the profits. Such a democratically organized economy would then negotiate with its democratic political counterparts based on residential communities to produce and enforce reforms and regulations as needed and in cooperation as social partners.