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The rise of corporate power.

by By Anna Couey and Joshua Karliner Tuesday, Aug. 15, 2000 at 1:02 PM

CITIZENS BEGIN TO GATHER AT PERSHING SQUARE (5th and Olive) TO MARCH FOR PEOPLE BEFORE PROFITS. HERE IS CONTEXTUAL INTERVIEW BY CORPORATE WATCH WITH NOAM CHOMSKY ON MICROSOFT AND THE HISTORICAL ROLE OF CORPORATIONS IN THE UNITED STATES.

CW: How significant do you see the recent skirmishes between the Department of Justice and Microsoft? Do you see it as an important turn of events?

NC: There's some significance. We shouldn't exaggerate it. If there are three major corporations controlling what is essentially public property and a public creation, namely the Internet, telecommunications, and so on, that's not a whole lot better than one corporation controlling, but it's maybe a minor difference. The question is to what extent parasites like Microsoft should be parasites off the public system, or should be granted any rights at all.

CW: Give us a little bit of historical context. How does what's happening with Microsoft's growing power, and its role in society fit into the history of U.S. Corporate power, the evolution of corporations?

: There were corporations as far back as the 18th century, and beyond. In the United States, corporations were public bodies. Basically, they were associations. A bunch of people could get together and say we want to build a bridge over this river, and could get a state charter which allowed them to do that, precisely that and nothing more. The corporation had no rights of individual persons. The model for the corporation back at the time of the framing of the Constitution was a municipality. Through the 19th century, that began to change.

It's important to remember that the constitutional system was not designed in the first place to defend the rights of people. Rather, the rights of people had to be balanced, as Madison put it, against what he called "the rights of property." Well of course, property has no rights: my pen has no rights. Maybe I have a right to it, but the pen has no rights. So, this is just a code phrase for the rights of people with property. The constitutional system was founded on the principle that the rights of people with property have to be privileged; they have rights because they're people, but they also have special rights because they have property. As Madison put it in the constitutional debates, the goal of government must be "to protect the minority of the opulent against the majority." That's the way the system was set up.

In the United States, around the turn of the century, through radical judicial activism, the courts changed crucially the concept of the corporation. They simply redefined them so as to grant not only privileges to property owners, but also to what legal historians call "collectivist legal entities." Corporations, in other words, were granted early in this century the rights of persons, in fact, immortal persons, and persons of immense power. And they were freed from the need to restrict themselves to the grants of state charters.

That's a very big change. It's essentially establishing major private tyrannies, which are unaccountable, because they're protected by First Amendment rights, freedom from search and seizure, and so on, so you can't figure out what they're doing.

After the Second World War, it was well understood in the business world that they were going to have to have state coordination, subsidy, and a kind of socialization of costs and risks. The only question was how to do that. The method that was hit upon was the "Pentagon system" (including the DOE, AEC, NASA). These publicly-subsidized systems have been the core of the dynamic sectors of the American economy ever since (much the same is true of biotechnology, pharmaceuticals, etc., relying on different public sources). And that certainly leads right to Microsoft.

So how does Microsoft achieve its enormous profits? Well, Bill Gates is pretty frank about it. He says they do it by "embracing and extending" the ideas of others. They're based on computers, for example. Computers were created at public expense and public initiative. In the 1950s when they were being developed, it was about 100% public expense. The same is true of the Internet at its outset. The ideas, the initiatives, the software, the hardware -- these were created at public initiative and expense, and it's being handed over to guys like Bill Gates.

CW: What are the social and cultural impacts of allowing, not only a monopoly, but even if it's just a few large corporations, dominating something as basic as human speech, communication with each other?

NC: It's a form of tyranny. But, that's the whole point of corporatization -- to try to remove the public from making decisions over their own fate, to limit the public arena, to control opinion, to make sure that the fundamental decisions that determine how the world is going to be run -- which includes production, commerce, distribution, thought, social policy, foreign policy, everything -- are not in the hands of the public, but rather in the hands of highly concentrated private power. And there are various modalities for doing this. One is to have the communication system, the so-called information system, in the hands of a network of, fewer or more doesn't matter that much, private tyrannies.

Let's take the media in the United States. These are corporate media, overwhelmingly. Even the so-called public media are not very different. They are just huge corporations that sell audiences to advertisers in other businesses. And they're supposed to constitute the communications system. It's not complicated to figure out what's going to come out of this.

And there are new things happening all the time. Like right at this minute, there's a dramatic example, that's the Multilateral Agreement on Investment (MAI), which is supposed to be signed this month, but they're not going to make it. The negotiations have been going on in secret for about three years. It's essentially a huge corporate power play, trying to give "investors" -- that doesn't mean the guy working on the shop floor, it means the board of directors of GE, of Merrill Lynch, and so on -- extraordinary rights. It's being done in secret because the people involved, which is the whole business community incidentally, know that the public is going to hate it. So therefore the media are keeping it secret. And it's an astonishing feat for three years to keep quiet about what everyone knows to be a major set of decisions, which are going to lock countries into certain arrangements. It'll prevent public policy. Now you can argue that it's a good thing, a bad thing, you can argue what you like, but there's no doubt about how the public is going to react, and there's no doubt about the fact that the media, which have been well aware of this from the beginning have succeeded in virtually not mentioning it.

CW: How would a company like Microsoft benefit from the MAI?

NC: They could move capital freely. They could invest it where they like. There would be no restrictions on anything they do. A country, or a town, like say, Cambridge, Massachusetts, where I live, where I work, could not impose conditions on consumer protection, environmental control, investment and set-asides for minorities or women. You name it, it would be ruled out.

Now exactly how far this would go depends on the disposition to enforce it. These things are not determined by words. There's nothing in the Constitution, or the amendments to the Constitution, which allows private tyrannies to have the right to personhood. What the MAI would mean in practice depends not only or firstly on the words, but on what the power relations are, like whether people object to it so strenuously they won't allow it to happen, maybe by riots, or whatever.

A crucial element of this is what they call the ratchet effect; that is existing legislation is to be allowed, but it has to be removed over time. It has to be rolled back, and no new legislation can be introduced conflicting with the rights of Microsoft or any corporation to do anything they like in the international arena, or domestically. Over time that's supposed to have a ratchet effect, to turn the world over more and more to the major private tyrannies, like Microsoft, with their alliances and interactions.

CW: Economist Brian Arthur argues that with the rapidly changing nature of technology, no one will remain in a monopoly position for long, so that monopoly power in the technology industries is different than what we've historically seen, and is nothing to worry about.

NC: But there never was monopoly power; or there very rarely was monopoly power. Take highly concentrated power systems, like the energy industries. They're not strictly speaking monopolies. Shell and Exxon are competitors. This is a highly managed system of market administration, with enormous state power entering in the interests of a small collection of private tyrannies.

It's very rare to find a real monopoly. AT&T was a monopoly for a time, that's why it could create things like the transistor, for example. It was a monopoly, so therefore they could charge high rates. But that's certainly unusual.

CW: Do you think the whole monopoly issue is something to be concerned about?

NC: These are oligopolies; they are small groups of highly concentrated power systems which are integrated with one another. If one of them were to get total control of some system, other powers probably wouldn't allow it. In fact, that's what you're seeing.

CW: So, you don't think Bill Gates is a latter-day John D. Rockefeller?

NC: John D. Rockefeller wasn't a monopolist. Standard Oil didn't run the whole industry; they tried. But other power centers simply don't want to allow that amount of power to one of them.

CW: Then in fact, maybe there is a parallel there between Gates and Rockefeller, or not?

NC: Think of the feudal system. You had kings and princes and bishops and lords and so on. They for the most part did not want power to be totally concentrated, they didn't want total tyrants. They each had their fiefdoms they wanted to maintain in a system of highly concentrated power. They just wanted to make sure the population, the rabble so-called, wouldn't be part of it. It's for this reason the question of monopoly -- I don't want to say it's not important -- but it's by no means the core of the issue.

CW: How has that transfer from the public to the private sphere changed the Internet?

NC: As long as the Internet was under control of the Pentagon, it was free. People could use it freely [for] information sharing. That remained true when it stayed within the state sector of the National Science Foundation.

As late as about 1994, people like say, Bill Gates, had little interest in the Internet. He wouldn't even go to conferences about it, because he didn't see a way to make a profit from it. Now it's being handed over to private corporations, and they tell you pretty much what they want to do. They want to take large parts of the Internet and cut it out of the public domain altogether, turn it into intranets, which are fenced off with firewalls, and used simply for internal corporate operations.

They want to control access, and that's a large part of Microsoft's efforts: control access in such a way that people who access the Internet will be guided to things that *they* want, like home marketing service, or other diversion. If you really know exactly what you want to find, and have enough information and energy, you may be able to find it. But they want to make that as difficult as possible. And that's perfectly natural. If you were on the board of directors of Microsoft, sure, that's what you'd try to do.

Well, you know, these things don't *have* to happen. The internet can be kept under public control. Access could be promoted for all. More, providers could be subsidized so that what is available online won

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