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Corporations in the U.S., part 4
NewsNotes, July-August 2009

Ed: The following article is slightly edited from its original form.

The corporate regulatory system in the U.S. was created over many decades. While ostensibly created to rein in corporations’ power, in many ways regulatory agencies instead have been used to limit competition and public influence. The other articles in this series are here.

In 1887, the establishment of the first regulatory agency, the Interstate Commerce Commission (ICC), set the mold for future bodies. Originally proposed by frustrated citizens unable to stop the railroads’ unwanted actions, the ICC’s formation eventually was overtaken by the leaders of the railroads themselves. Documents from the time show that executives saw the ICC as an effective way to shield the railroads from the growing Populist movement which called for tough state laws and government ownership of railroads and utilities. Then-Attorney General Richard Olney explained to executives that the ICC was to be “a sort of barrier between the railroad corporations and the people.” Through their influence, railroad leaders were able to design the ICC to pay the costs of coordinating the industry in terms of standards, inspections and enforcement while guaranteeing a profit for large corporations. Profits were guaranteed by setting price limits -- not maximum limits, but minimum prices so that smaller railroads could not undercut the corporations. The Railroad Gazette opined its hope that the ICC would “go ahead and catch every law-breaking rate cutter in the country.” John D. Rockefeller hoped it would stop what he called the “ruinous competition” of the smaller railroads.

Seeing the benefits brought to the railroads by the ICC, corporate leaders in a host of other industries often led the push for, or at least were deeply involved in, the formation of regulatory agencies for meat packing, insurance, banking, communications, etc. (Gabriel Kolko has written on this history using original documents from the time.)

After the Great Depression, President Franklin Roosevelt created 42 major regulatory agencies and programs for such specific sectors as broadcasting, oil and agriculture production, airlines, etc. As William Greider notes in Who Will Tell the People?, “The explosion of modern regulation, more than anything else, is what brought the money to Washington and transformed the capital from a sleepy small town to a glamorous power center.”

In the 1960s another flourish of regulation began with 53 programs enacted; from 1970-80, 130 more regulatory laws were passed. The new agencies, such as the Environmental Protection Agency or the Occupational Safety and Health Administration, differed from previous ones in that they were not limited to specific sectors like oil or airlines, but could police corporations in any sector. In response, corporations created multi-sector coalitions staffed with hundreds of lawyers and lobbyists providing expert advice for the new laws and regulations.

In 1986, Monsanto lobbied for regulations on genetically engineered (GE) crops even though no such products had been produced yet and successfully managed to get rules passed that allow manufacturers, not the government, to determine the dangers of GE crops, and permit testing only when corporations want. The rules also stipulate that consumers would not be notified which foods are genetically changed so as to not “mislead” the public by implying that there was reason for concern.

Greider writes, “Instead of containing the political influence of concentrated economic power and liberating government from its clutches, the steady diffusion of authority has simply multiplied the opportunities for power to work its will. The original progressive purpose of the New Deal has been stood on its head and now the weak and unorganized segments of society are the principal victims.”

In her aptly titled piece “Sheep in wolf’s clothing,” Jane Anne Morris writes: “1) Regulatory agencies have too much discretionary authority, which is almost invariably abused. 2) They combine legislative, executive, and judicial power in one place. 3) Their personnel and outlook reflect the views of the corporations they are supposed to be regulating. 4) Since individuals and small businesses can’t afford the time and expense to fully participate, large corporations dominate. 5) Procedural considerations are so intricate and demanding that matters of fairness, justice and overall policy questions, not to mention common sense, are ruled irrelevant if they come up at all.”

Today the regulatory system in the U.S. is, at best, dysfunctional requiring very significant reforms. But even with good regulatory reform, we will have to make deeper changes in order to truly rein in corporate power.

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