What necessitated the development of the corporation?
It is a fact that corporations influence most activities of people in the society. Corporations determine matters that are so personal to individuals. These include what people eat or wear. People are usually oblivious of the effects that corporations have on their lives. Bakan’s book, ‘The Corporation,’ attempts to provide a pathological explanation of how corporations came to wield so much power over the society.
The 16th century marked the beginning of the rise of corporations. According to Bakan, corporations grew due to continous accumulation of capital. This necessitated the development of a structure that would facilitate accumulation and continuous expansion of capital. This led to the development of corporations, which could combine capital and economic power of unlimited numbers of people.
In addition, the rise of the corporation was due to the increasing concentration of the means of production and labor. The rise of corporations turned private property into capital. Ownership of the corporations was in the form of shares. Share ownership meant that no shares or group of shares had the right to manage the corporations. This paved the way for the development of the corporation as a separate legal entity.
What necessitated the change in the form of ownership of corporations?
For corporations to run effectively, they had to pull the resources of a large number of people. This would provide them with resources for continuous expansion. However, during the early stages of development of the corporation, investors were reluctant to invest in corporations. This is because investors were liable to lose private property due to liabilities of the corporations.
This necessitated a change in legislation to enable corporations to access more funds. Legislation made corporations ‘limited liability’ entities. This enabled corporations to access a huge pool of capital. This is because this legislation reduced the risks that investors faced due to the liabilities of the corporations. Access to a large pool of capital facilitated the continuous expansion of corporations.
Formation of the limited liability entity paved the way for active participation of investors in the stock market. Access to a large pool of capital increased the power of corporations. Therefore, it was vital to have a clear legal definition of corporations. Change in legislation led to the current definition of the corporation as an entity in its own right.
Therefore, corporations could conduct business like a real person, own assets and even go to court to defend their rights or activities. Change in the two legislations led to the development of the modern corporation.
What factors led to the development of the immense power that modern corporations wield?
Previously, governments controlled corporations. However, according to Bakan, corporations now control governments. Expansion of corporate power internationally in the 1980s and 1990s led to the development of powerful global institutions. The power of these institutions superseded the power of the state. The World Trade Organization (WTO) is one of these organizations.
According to Bakan, the WTO became a powerful, secretive, and corporate-influenced organization that ensured that corporations’ activities do not harm people or the environment. The power of the WTO overrides the power of the state. Therefore, WTO is the only body that is capable of regulating the power of corporations. Since WTO is corporate influenced, it is pertinent to claim that corporations now govern the society.