The Birth of Corporatism

The Monetary Wars Part V

"Despair not, spare your enemies not, for God is with us." -Jan Pieterszoon Coen, Governor-General of the Dutch East India Company

To understand the birth of corporatism, we might reach back to the beginning of civilization or earlier. Such is inherent in the tasks of worthy books like James C. Scott's Against the Grain, whether or not they aim at this particular goal. But for most of human history, tribes, kingdoms, and empires were the dominant units of organized governance in a relatively straight-forward way. We might recognize the corpus or collegium of sixth century Rome as the first corporations, but this distinction becomes primarily rhetorical for our purposes. Our goal is to understand the inception of the kinds of corporations that so profoundly changed the balance of all human dynamics after the birth of capitalism.

Capitalism generated profound technology advancement and wealth throughout much of Europe from the late fifteenth century onward. Portugese and later Spanish merchants dominated ocean trade routes, as they were so motivated at the extreme end of the distribution of goods entering Europe through Mediterranean ports, with Italian or Ottoman merchants adding substantially to final costs. So powerful were the European oceanic trade empires that their currencies became almost universally accepted among merchants, sparking the modern reserve currency era.

Part of what distinguished European trading powers from the Chinese Treasure Fleet of the early fifteenth century was the clear profit motivation. Rather than building a massive-but-expensive "floating city" as was managed by the Chinese eunuch Zheng He with a powerful if vague diluted mission to represent Imperial China, the Europeans relied on a handful of boats focusing cargo space primarily on the valuable goods to be brought back largely from Asia. Diplomacy in the name of some far away crown was a secondary, but not primary concern.

Early trade expeditions that rounded Africa were funded by royals such as King Manuel I of Portugal, who chose Vasco da Gama to lead ships that eventually reached Calicut, in India. But such voyages were risky, with "boom or bust" returns. Eventually, traders learned to balance risk by diversifying both investors and voyages through corporate vehicles. In 1602, the Dutch East India Company was founded to those ends. This new form of corporation was granted a trade monopoly broadly in oceans and seas outside of the regional waters where affairs were directly managed by the Dutch crown.

What should be understood about the Dutch East India Company is that it operated largely as an independent organization from the government that birthed its charter. It is sometimes referred to as the world's first multinational corporation (MNC), though the British East India Company was chartered nearly two years prior in 1600. The Dutch East India Company's power grew quickly during the seventeenth century under strong and brutal leadership. Financial backing with lower single-voyage risk allowed the Dutch merchants to quickly surpass rival Portugese and Spanish trade empires, taking control of valuable trade with Asia.

More profit and higher stakes led to moral transformation of the massive Dutch MNC. While abolition of slavery spread through European kingdoms during the centuries leading up to this new corporate era, the large trade empires of Europe faced temptations to make use of slaves in the Americas and also along the trade routes to Africa and Asia. While Christian Europeans successfully pushed for abolition of slavery throughout nearly all of Europe centuries earlier, and often fought against colonial slavery with varying degrees of success, the Netherlands hung on to slave plantations in its colonies until 1863. That system of slavery lasted more than six decades after the final termination of the Dutch East India Company that established them. East India Companies from numerous European nations also established colonies, conducted slave trade, and held slaves in contravention of their local laws and customs.

Perhaps this is a good time to define corporatism as we intend its distinction from traditional market capitalism.

Corporatism is the system in which market trade and activity takes place outside of the framework of law that otherwise restricts societal governance.

It makes further sense to distinguish corporatism from what usually gets described as laissez-faire capitalism, or Adam Smith's "system of perfect liberty". Smith, most often referenced as the "Father of Modern Capitalism", is also often and rightly described as the first "anti-corporatist". While he argued that wealth grows when nations stay out of the economic affairs of its citizens, he lambasted the legal asymmetries of corporate governance. In An Inquiry Into the Causes and Nature of the Wealth of Nations, he protested the monopoly powers with an implication of what we might call "the tail wagging the dog",

The majority of a corporation can enact a bye-law with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever.

Before moving forward, let us clarify the distinction between capitalism and corporatism because it is so often lacking in sound conversation and analysis:

• Capitalism describes the application of technology in positive feedback loops to produce goods and services to be consumed or traded freely.

• Corporatism describes the application of force (including state force) in taking control of technology and production feedback loops.

What some people call "Western capitalism" or "crony capitalism" as pejoratives are part or all of what I'm more simply calling corporatism. Corporatism typically leverages a monopoly on violence for its parasitic ends. Sadly, the historical development of such terminology ("capitalist" was coined by Karl Marx as a pejorative) has lent itself to a world of confusion, not to mention forms of revolution that killed many millions before deteriorating into Animal Farms, which might as well be described as feral corporatist states.

The Dutch East India Company secured and maintained valuable trade routes and colonies until its dissolution on December 31, 1799, thanks in part to its ability to call on the Dutch naval forces to dispatch rivals and support local princes in a game of "picking winners" in far away lands such as Indonesia. During its nearly 200 year existence, this first MNC saw the first shareholder activism and even stock short-selling in Amsterdam. Not only were its moral practices distasteful to many Dutch citizens and shareholders alike, its leadership succumbed to temptations such as withholding funds from investors and cooking the books. The birth of the modern corporation quickly birthed new white collar crimes, or at least made them common. The profits that came in were too valuable for the kingdom or shareholders to want to let go of, or at least rein in, their new international mafia.

Throughout the 1700s, the British East India Company began to rival the Dutch East India Company, leading to four wars and a variety of related skirmishes between the incumbent Dutch and Rising British powers. The latter's exploits and wealth would eventually propel it to take on the role of the world's largest MNC. As with the Dutch East India Company, the British East India Company engaged in wealth extracting activities neither tolerated or legal within English borders. As with the Dutch, the British, through the MNC, reignited their participation in slavery, highly active in the trade and holding of slaves for more than a century.

As the Mughal empire that controlled most of the Indian subcontinent of South Asia faded in the early 1700s after two centuries of reign, the British East India Company seized control. Colonel Robert Clive led English (corporate) forces to victory over Mughal Nawab of Bengal in 1757 during the Battle of Plassey. Soon after Clive took control of Calcutta as well. French forces were also on the losing side as part of the Seven Years War that began the erosion of French colonial forces. As the British gained more complete control over India's valuable economic products, including opium to be sold in Chinese ports, the British pound sterling asserted monetary dominance over the French livre des tournois.

Source

The British enjoyed brutal corporate control over India for just over a century, aided by the use of violence to ensure monopolistic profits, and during that time took on powerful China in the First Opium Wars, the first of a series of defeats for China that demonstrated that European corporate power had surpassed what was likely the world's wealthiest nation for most of the previous 4,000 years. When the British East India Company dissolved back into the British Crown in 1874, it left a legacy of global terror in its wake. The increasing profits of European trade from the late 1400s onward tempted psychopathic men to climb the ladders of corporate power, then take advantage of relative asymmetries in technology to bring tens of millions of Asians and Africans under its control, at least partially, if not completely. While the birth of capitalism represented the widespread employment of economic feedback loops of technology to generate wealth and power, along with the erection of hierarchies of competency, the birth of corporatism represented the use of that power to take control of the economic feedback loops, along with the erection of hierarchies of psychopathy and sociopathy.