Property Rights v. Endangered Species : The American Dream and the Common Good by Charles Timothy Shates - HTML preview

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A graduate project submitted in partial fulfillment of the requirements for the degree of Master of Public Administration




Charles Timothy Shates


California State University, Northridge June, 2005


For Sue, my wife, Julia and Tessa, my daughters, and for future generations




Dedication ii


List of Illustrations iv


Abstract v


Introduction 1


Chapter One


Wild Life: The Endangered Species Act 5


Chapter Two


Ground to Stand On: Property Rights 14


Chapter Three


Powers That Be: The Corporation 27


Chapter Four


Trees and Water: The Pacific Lumber Case 46


Chapter Five


Rivers and Highways: The Newhall Ranch Case 53


Conclusion 75


References 87




Table 1. Projected Forest Seral Type by [Selected] Decades. 48


Figure 1. Newhall Ranch sign on Highway 126. 55


Figure 2. The eventual fate of the orange trees. 56


Figure 3. A cross-section of the Santa Clara River Valley. 57


Figure 4. Industrial park development in the town of Castaic. 58


Table 2. Newhall Ranch project permits and approvals required. 59


Figure 5. On one side of the river, housing in Santa Clarita. 60


Figure 6. On the other side of the river from the housing. 61


Figure 7. Traffic makes its way over a bridge. 63


Figure 8. Shopping center along one side of the river. 64


Figure 9. Southern California’s last wild river. 71


Figure 10. The Santa Clara River. 72


Figure 11. In the same general vicinity, the Santa Clara River. 72


Figure 12. The relatively lightly traveled Highway 126. 73


Figure 13. Zoning began with the best of intentions. 75










Charles Timothy Shates


Master of Public Administration


This study examines how notions about dominion, self-interest, private property,


and economic growth and how the development of environmental protections, property


rights, and corporations have influenced the shaping of the country. Two illustrative


cases are examined: Pacific Lumber, a large timber-owning concern in Northern


California redwood country, and Newhall Ranch, a large planned community in suburban


Northern Los Angeles County. The study concludes that a sudden, radical paradigm shift


is unlikely, but that accelerated incremental change may result from a convergence of the


ideas of stewardship, traditional liberal democratic problem-solving processes or direct


regulation, and green consumerism—representing fundamental shifts in the definitions of


self-interest and the common good, or public interest.




The Skeptical Environmentalist, Bjorn Lomborg’s popular book, began with the


assertion “things are getting better” and then the book questioned

the Litany of our ever deteriorating environment...the view of the environment that is shaped by the images and messages that confront us each day on television, in the newspapers, in political statements and in conversations at work and at the kitchen table (2001, p. 1).

Lomborg’s point, ultimately, was not that problems don’t exist. Rather, his point


was that, while things were not necessarily good, they were better than they used to be.


To prove his position, he cited such factors as improved sanitation, improved nutrition,


and longer life spans. Indeed, modern science has brought a flood of achievements in its


wake. It is just this success that has added credence to the mythology of progress which


is one of the hallmarks of modernism.


It should be noted that findings of fact made by the modern-day United States


Congress are supposed to be based upon the best scientific evidence available at the time.


In public administration, “Any final rule [issued by an administrative agency] must be


based on substantial evidence on the record before the agency at the time of the decision”


(Cooper, 2000, p. 152) [emphasis added]. In the Rules of the House of Representatives,


clauses 2(l)(3)(A) of rule XI, and 2(b)(1) of rule X, require that oversight findings and


recommendations be reflected in all Committee reports (U.S. House, 1998). The


Congress ultimately may make compromises or even disregard findings in the interest of


political expediency; unlike administrative agencies, the Congress is directly accountable


to the electorate. Notwithstanding environmental skeptics, such as Lomborg, who decline to


acknowledge the darker side of material progress, Section 2(a) of the Endangered Species


Act of 1973 begins with a brief enumeration of the following findings of Congress:

(1) various species of fish, wildlife, and plants in the United States have been rendered extinct as a consequence of economic growth and development untempered by adequate concern and conservation; (2) other species of fish, wildlife, and plants have been so depleted in numbers that they are in danger of or threatened with extinction; (3) these species of fish, wildlife, and plants are of esthetic, ecological, educational, historical, recreational, and scientific value to the Nation and its people…

The quality of life issues that the human race confronts at the beginning of the 21st


century are caused, in part, by unbridled freedom in the use and development of private


property, and in part by market failures. Such problems as traffic congestion, poor air


quality, and loss of habitat are often the direct result of man’s economic activities. Many


problems are caused by the way we build; many by the way we extract and use natural




Efforts to alleviate environmental problems through policy have met with only


mixed success. This is for two reasons. First, symbolic actions give a sense of having


addressed the problem, when they are really only what Smith (1998) called “a suture, an


attempt to hide the wound that contemporary environmentalists are making to the smooth


fabric of productivist discourse” (p. 7). According to Cahn (1995, p. 24), policymakers


create and sell policy outputs to political consumers, addressing the problem symbolically


but failing to address the substantive issues. Second, some of the most successful pieces


of legislation have also been the most contentious. This is to be expected, given that, as


Cahn wrote, “Environmental policy is predicated on regulating the use and development


of private property,” (Ibid., p. 8) while at the same time private property underpins the liberal democratic tradition. To the extent that legislation such as the Endangered


Species Act has been successful in giving environmentalists a tool with which to fight


development interests, there has been also a significant amount of grassroots mobilization


in opposition to environmental regulation and generally in favor of liberal property rights.


This recent mobilization against environmental regulations has been very


successful because it taps into an emotional response to a very powerful American Dream


archetype. Individuals may have different versions of the dream, which has evolved over


the course of American history. (The dream of “a house in the suburbs,” for example, is


a far cry from the dream of “freedom to worship as one pleases.”) In a recent


development on this theme, Rifken’s book, The European Dream (2004), was based on


his observation that the American Dream was in decline and would eventually be


eclipsed by the new European Dream, which stresses personal development and


cooperation within community over competitive accumulation of wealth.


This paper explores the conflict between public policy and individual freedom in


the context of land use and development. Property rights rank among the most important


individual freedoms, but what happens when the exercise of those rights by property


owners interested in developing their land, for example, infringes on a neighbor’s quiet


enjoyment? Before the administrative state came into being, there existed a long history


of common law, the remnant of which is today known as nuisance law, which governed


such infringements.


There exists a strong tension between two fundamentally opposing environmental


philosophies that have shaped the development of the United States. These philosophies


can be summed up as falling under one of two categories of belief about humanity’s place in and relationship to nature. The first category can be called dominion, that which has


guided the expansive aspect of American history. It informs extraction and development


of natural resources, what Smith (1998, p. 5) called “the discourse of productivism.” The


second category can be called stewardship, and it informs the conservation of natural


resources. Freyfogle (2003, pp. 37-38) distinguished these two differing types of energy,


as represented by the terms ‘boomers’ and ‘stickers.’ The latter were noted for their


desire for ‘quiet enjoyment.’


The birth of the modern corporate form of business, not surprisingly on the


dominion side of the equation, has enabled more rapid growth and development of


resources because of its ability to generate greater amounts of capital. Growth and


development is good—to a point. Cells must grow and divide if an organism is to live,


but when cells grow too much, or divide too fast, the result may be harmful to the


organism as a whole. There is a name for this condition and—when malignant—it is

called cancer. CHAPTER ONE

Public policy can be defined as a public response to a perceived public problem.


In the late 1960s and early 1970s, Congress passed, and the Republican president,


Richard Nixon, signed into law, a number of Acts, among them the National


Environmental Policy Act, the Clean Air Act, and the Clean Water Act, designed to


protect the environment and reverse perceived environmental degradation. The


Endangered Species Act of 1973 (ESA) is a public attempt to address the narrow problem


of species extinction—the loss of biodiversity. Is this a legitimate problem? Species


become extinct as a normal result of the evolutionary process, but scientific evidence has


indicated that man’s activities have accelerated the rates of extinction far beyond the


background levels that existed previously, suggesting that the environmental impact of


these activities is significant. Detractors literally tend to miss the forest for the trees,


asking would we rather save an owl or our economic livelihoods. But the bigger picture


is far more insidious—for if all these other species are dying maybe man’s environment


is becoming unsuitable for man as well. It is particularly distressing to some scientists


that the world’s amphibians are rapidly disappearing. These creatures are considered


“indicator species,” like the miner’s canary that indicates when it is no longer safe in the


mine. The reason that animals such as frogs are so susceptible to environmental


degradation is in the nature of their biology. Frogs have numerous capillaries near the


surface of their skin and obtain a large portion of their oxygen directly from the air and


water to which they are exposed. The fact that they have been disappearing has scientists


alarmed. The U.S. Geological Survey has instituted a “frog watch,” asking volunteer citizens to report on their observations around the country (Where have all the frogs


gone?, 2002).


From a Darwinian perspective, perhaps man is, by virtue of his large brain,


destined to outlive many “weaker” species in his built environment. Assuming this is the


case, man must still make the utilitarian determination as to which species are essential to


cultivate for providing his basic needs: air, water, food, medicine, clothing, and shelter.


Until man has attained complete understanding of the biochemistry that underlies all life,


any loss in biodiversity should be looked upon as an opportunity cost. For example,


recently researchers in San Diego have discovered a new species of oceanic bacteria that


naturally produces a previously unknown compound that shows promise of being


effective in treating cancer (Wilson, 2003). The popular movie Medicine Man


(McTiernan, 1992), dramatizes this theme, suggesting perhaps it is better not to burn the


forest in the name of progress before such beneficial creatures can be discovered.


The ESA has been one of environmentalists’ most powerful weapons against


careless enterprise, but has been under attack recently by those who feel government


regulations infringe upon their property rights. In recent court cases, private property


owners have brought suits questioning the government’s ability to interfere with


development on private property. In Rancho Viejo, LLC v. Gale A. Norton, Secretary of
the Interior, et al
. (2003), the plaintiff sought to develop a housing project in northern


San Diego County and a survey, conducted to comply with the ESA, found that the


development would likely disturb the habitat of a group of endangered arroyo toads in the


area. Rather than accepting an alternative plan proposed by the Fish and Wildlife


Service, the plaintiff filed suit claiming the “the application of the ESA is unconstitutional because the federal government does not have the authority under the


Commerce Clause to regulate private lands in order to protect the arroyo toads on those


lands, because the toads live entirely within California.” The United States District Court


for the District of Columbia entered summary judgement on behalf of the defendants and


plaintiff appealed. Although plaintiff lost on appeal, the dissenting opinion suggests that


perhaps a gradual shift has been taking place, and that the pendulum is now beginning to


swing the other way—in favor of the industrial paradigm.


The following case, dealing with state property, demonstrates the weight of the


Endangered Species Act as a federal issue. “In Palila v. Hawaii Dep’t of Land and
Natural Resources
(1979), the district court carried…[the] suggestion of a federal


ownership interest in wildlife a step further. In Palila, the court upheld the Endangered


Species Act, as applied to nonmigratory species found on state lands, on the basis of the


treaty power and commerce clause. It nonetheless suggested that the ‘importance of


preserving such a national resource [as endangered species] may be of such magnitude as


to rise to the level of a federal property interest’” (Bean & Rowland, 1997, p. 22).


California has usually mirrored the federal environmental laws, sometimes


anticipating them. In the 10th Edition of The Guide to the California Environmental
Quality Act
(Remy, Thomas, Moose, & Manley, 1999), the authors review several


important court cases relevant to the issue of the California Endangered Species Act


(CESA). The authors discuss how CESA relates to the California Environmental Quality


Act (CEQA), and also how the latter relates to the National Environmental Policy Act


(NEPA ). CEQA was passed in 1970 (Public Resources Code Sec. 21000, et seq.) to require


public agency decision makers—such as, for example, a county board of supervisors


about to approve a development project—to consider the environmental consequences of


their actions. Although CEQA is compared to the National Environmental Policy Act


(NEPA) that was passed a year earlier, and upon which CEQA is modeled, the authors


point out that “Unlike NEPA, CEQA has not been characterized as merely a ‘procedural’


statute. Rather, CEQA contains a ‘substantive mandate’ that public agencies refrain from


approving projects with significant environmental effects if ‘there are feasible


alternatives or mitigation measures’ that can substantially lessen or avoid those effects”


(Remy, et al., pp. 2-3). Also, because the environmental review process involves the


public, it has become a means of enabling democratic participation. “Thus, the California


Supreme Court has stated that the CEQA process ‘protects not only the environment but


also informed self-government’” (Ibid., p. 3).


The procedural devices, as the authors call them, of the CEQA environmental


review can be viewed as various steps in the process. The most familiar of these


procedures is the preparation of an Environmental Impact Report, or EIR. The following


‘steps’ are not sequential; the negative declaration bypasses the EIR process, for example.


Simply enumerated, they are as follows: (1) the initial study, (2) the negative declaration,


(3) notice of preparation of an EIR, (4) draft EIR, (5) public review of (a) negative


declaration or (b) draft EIR, (6) written responses to comments on draft EIRs, (7)


certification of a final EIR, (8) mitigation reporting or monitoring program, and (9)


statement of overriding considerations. The principles governing the interpretation of CEQA are illustrated by important


California Supreme Court cases. CEQA was interpreted the first time in 1972 in the


landmark case Friends of Mammoth v. Board of Supervisors. In its decision the Court set


forth the principle that CEQA should be broadly construed “within the reasonable scope


of its language” to protect the environment. In later cases, “the court hinted that other


considerations may take their place alongside ‘the fullest possible protection for the


environment’… While the court neither distinguished Friends of Mammoth nor explicitly


rejected it, the court’s willingness to consider economic factors arguably departed from


the interpretive principle announced in the 1972 decision” (Remy, et al., p. 7).


The CEQA Guidelines are found in the California Code of Regulations under


Title 14, Sec. 15000 et seq. The Guidelines were first issued by the California Resources


Agency in 1973, under the authority granted by Public Resources Code Sec. 21083.


Section 15000 characterizes the Guidelines as “regulations.” Section 15005, however,


says that the Guidelines contain “mandatory, advisory, and permissive elements.”


Although characterized as regulations, the court has declined to make a definitive


determination on the Guidelines, but “has emphasized, however, that, ‘[a]t a minimum,’


courts should ‘afford them great weight…except when a provision is clearly unauthorized


or erroneous’” (Ibid., p. 9).


The general legislative policies that motivated enactment are identified in Public


Resources Code Sections 21000-21003. They will not be enumerated, but following are


two examples: “…7. to require all agencies that regulate activities to give major


consideration to preventing environmental damage while providing a decent home and


satisfying living environment for every Californian; …14. to require governmental agencies at all levels to consider qualitative factors as well as economic and technical


factors and long-term benefits and costs, in addition to short-term benefits and costs and


to consider alternatives to proposed actions affecting the environment” (Ibid., pp. 12-13).


Compared to NEPA, “The Legislative history of [CEQA] also supports the view


that environmental values are to be assigned greater weight than the needs of economic


growth….The act thus requires decision-makers to assign greater priorities to


environmental than to economic needs….The federal statute requires only that agencies


‘consider’ the potential significant adverse environmental impacts of their ‘major’


actions, as described in ‘environmental impact statements’ (EISs)” (Ibid., p. 31). Unlike


CEQA, however, NEPA does not create for federal agencies a “mandatory duty to act,”


even if alternatives or mitigation measures are feasible. One NEPA procedural


requirement that is more stringent than its parallel requirement under CEQA is that “a


final EIS must be circulated for public review for at least 30 days prior to project


approval.” In addition, “the alternatives analysis found in an EIS is typically much more


detailed than what would be typically found in an EIR….Under CEQA, in contrast,


alternatives need only be discussed in ‘meaningful detail’” (Ibid., p. 33). “Because


CEQA was modeled after NEPA, the California courts have often looked to federal cases


interpreting the latter statute as ‘strongly persuasive’ authority as to the meaning of the


former….Because the California statute is more protective of the environment, however,


it seems fair to say that NEPA cases generally set the environmental floor, but not


necessarily the ceiling, for interpreting CEQA” (Ibid., pp. 34-35).


The issue of endangered species is invoked within the discussion of CEQA


Guidelines Section 15065, which lists conclusions that would cause making “mandatory findings of significance.” Among these conclusions is “the potential to…reduce the


number or restrict the range of an endangered, rare or threatened species…” (Ibid., p.


176). Whenever any of the named conclusions may occur, an EIR must be prepared,


rather than a negative declaration. Furthermore, if an EIR shows that they will occur, an


agency cannot approve a project without first issuing certain findings “as required by


Public Resources Code section 21081 and CEQA Guidelines section 15091. If after


making such findings, the project in question will still cause significant impacts that are


not at least ‘avoided or substantially lessened,’ the agency then must issue a ‘statement of


overriding considerations’ before approving the project….Section 15065, in other words,


is necessary not only to ensure that EIRs are prepared under proper circumstances, but


also to ensure that agencies do not avoid the requirements to make necessary findings, to


modify projects where feasible to lessen or avoid significant impacts, and to adopt


statements of overriding considerations” (Ibid., pp. 176-177).


The case of Mira Monte Homeowners Association v. County of Ventura (1985)


first gave effect to section 15065. The issue before the appellate court was whether the


Ventura County Board of Supervisors abused its discretion under CEQA by certifying an


EIR and granting approval of a tentative tract map without first preparing a subsequent or


supplemental EIR when new conditions were discovered regarding encroachment of a


project on a sensitive wetland area and vernal pool. The court states that “Guidelines


section 15162 directs that an additional EIR be prepared where…[substantial] changes


occur with respect to the circumstances…, such as… due to the involvement of new


significant environmental impacts not covered in a previous EIR…The CEQA Guidelines


require a mandatory finding of significance where, inter alia, the project ‘…has the potential to …threaten to eliminate a plant or animal community, [or] reduce the number


or restrict the range of a rare or endangered plant…The Guidelines further provide that a


project will normally have a significant effect on the environment if it will substantially


affect a rare or endangered species of plant or its habitat or substantially diminish habitat


for fish, wildlife or plants.” The court found that the “discovery that ‘E’ Street would


pave over part of the wetlands was a change in circumstances…and the implementing


guidelines dictate that the proper procedure upon discovery of the encroachment should


have been further environmental evaluation by way of a subsequent or supplemental


report prior to any project approval. By failing to act in this manner, the County did not


consider the full range and effectiveness of alternatives and mitigation measures.” As


Remy described it, “the court rejected the respondent agency’s argument that substantial


evidence supported its experts’ view that the impact in question was


insignificant…Instead, the court reasoned that the impact was significant ‘[b]y
,’ treating the issue as involving a pure legal question as to which no deference


to agency experts was proper” (Remy, et al., p. 177).


Remy also deals with the issue of endangered species in the discussion of the


substantive requirements of EIRs, specifically “Impacts on endangered and threatened


species” (Ibid., p. 406). Focused on the California Endangered Species Act (CESA),


which is found at Fish and Game Code section 2050 et seq., Section 2080 provides “that


‘[n]o person shall…take’ or attempt to take ‘any species, or any part or product thereof,’


that the Fish and Game Commission has determined to be ‘endangered’ or ‘threatened’”


(Ibid.). From an intergovernmental perspective, Section 6 of the federal Endangered


Species Act (ESA) provides for “cooperation with the States,” which may include


consultation with the States, management agreements, cooperative agreements, allocation


of funds, and provides that the Secretary review State programs. The ESA explicitly


states (Sec. 6(f)) that “Any State law or regulation respecting the taking of an endangered


species or threatened species may be more restrictive than the exemptions or permits


provided for in this Act or in any regulation which implements this Act but not less


restrictive than the prohibitions so defined.” The federal law therefore sets a floor on


States’ environmental quality, but not a ceiling. The Act also requires consultation with


the Secretary on any federal project that may have an impact on an endangered or


threatened species.


This section has demonstrated that environmental laws and regulations at both the


state and federal levels can play a significant role in determining what an owner can or


cannot do to develop his or her property. In one conception of man’s proper place and


role in nature, development—or economic growth—is absolutely vital to his continued

existence. CHAPTER TWO

Our place – the ground we stand on – is both physical and spiritual, concrete and imagined, real and symbolic. The place we define for ourselves, and the place that is defined for us, is a constant point of reference for seeing the world, and for transforming the world and our "place" in it (Inter Pares, 2003).

The idea of property has its roots in western civilization. When settlers arrived in


the New World they found a Native American culture that did not believe in private


ownership of land (Zinn, 2003). When the Owens Valley in California was settled,


whites pushed Native Americans out and fenced the land where water rights along the


Owens River would eventually become an important issue to the growing city of Los


Angeles (Halperin, 1993). The Native Americans who inhabited the country had


coexisted with nature for thousands of years, but the settlement of the West demanded


that water be captured for use. Bean & Rowland (1997) characterized the property status


of wildlife in the following passage:

In the history of Western thought, there is an almost unbroken tradition, starting at least as early as the Roman Empire, in which wild animals (or animals ferae naturae, as they were called) were regarded as occupying a nearly unique status. The law considered wild animals in their natural state to be like the air and the oceans, in that they were the property of no one. Yet unlike the air and the oceans, wild animals could become the property of anyone who captured or killed them (pp. 7-8).

In early New England, wildlife was owned by the people collectively, and state


law “implicitly and sometimes explicitly” allowed the public to hunt on unenclosed land


and to fish and forage (Freyfogle, p. 23). As the timber industry grew, and timber


operations began to cause environmental degradation (that is, fishermen and resort


owners were beginning to suffer economic losses) the state of Maine, considering


regulating the timber industry, asked the Maine Supreme Court for an advisory opinion.


The Court held that the legislature did have the “authority to curtail private rights whenever, in its judgment, the public’s interest was served” (Ibid., p. 25). This case


demonstrated “a central element of ownership…the obligation of landowners to refrain


from activities that cause harm to public interests” (Ibid., p. 27).


Philosophers have written extensively on the meaning of property, asking what it


is and where it comes from. According to Rifkin (2004) it was the French philosopher


Jean Bodin who believed “…common ownership is unnatural and a violation of divine


law. Why would God include the commandment ‘Thou shall not steal’ if he didn’t mean


to embrace the concept of private property?...” (p. 139).


As Freyfogle (2003, pp. 16-17) pointed out, “Landownership includes more than


just the right to put land to use; it also includes the indispensable right to complain when


other landowners materially interfere with one’s quiet enjoyment. Inevitably, these rights


are relative: one owner’s right to use land is tempered by his neighbor’s right to remain


undisturbed. Nuisance law incorporates this ownership element by providing vital


protection for land uses, ordinary as well as sensitive, yet it does so by restricting the


ability of all landowners to conduct activities that cause harm. Nuisance law enhances


and protects property rights at the same time as it limits them” [emphasis added].


Freyfogle wrote about the two “rival versions of what private dominion is all


about” (Ibid., p. 37). The first is “an ownership image that has held high a landowner’s


right to live peaceably at home without significant disruption…to be protected in one’s


quiet enjoyment of the land” (Ibid.). The second version is what Freyfogle says might be


termed the industrial or developmental perspective, emphasizing “opportunity, a release


of physical energy, and an owner’s liberty to act with little restraint. Dominion in this view is about exploiting the land for personal gain” (Ibid., p. 38) and was clearly


associated with the idea of manifest destiny.


Early research, according to Freyfogle, had developed a limited view of private


property, providing comfortable reassurance in the dominant myth of material progress:

Everyone shared at first, theory had it, and only later, as populations rose and economies gained sophistication, did true private property emerge. It was a comforting conclusion, for it placed at the apex of property’s evolution a world view based on the individualism and progressive thought of nineteenth-century Europe (p. 44).

Continued research in the 20th century created “a much more nuanced


understanding of the institution and how it evolved,” as Freyfogle wrote,

Private rights in tribal groups were crafted and allocated to group members in ways that reflected the members’ needs, economies, and values. Rights to land typically took the form of specific use rights— rights to use a given tract for one or more specified purposes…Typically, more than one person or family had enforceable rights to use a given piece of land for differing purposes. Moreover, many use rights—to hunt, gather berries and nuts, and the like—were retained by the group as a whole, with all members (but not outsiders) able to exercise them (Ibid.).

Freyfogle emphasized that during the period when the United States Constitution


was written and adopted, concepts about property were strongly shaped not only by


Lockean liberalism, but by English common law as well (Ibid., p. 45). The English


common law in turn was shaped by the prevailing hierarchical culture of the manor


system. The spatial makeup of a “typical English village of the thirteenth century” was


described as follows:

…populated by 400 to 600 inhabitants, the landscape was divided into three categories of space: public spaces, where anyone could go, including outsiders; communal places, where inhabitants of the village but not outsiders held distinct use rights; and private places, normally homes and private gardens, where owners expected an element of privacy (Ibid., p. 48).
Although the manor system was eventually replaced by mercantilism,

“Landownership…[remained] a status, and to enter into the status was to enjoy the rights


and be subject to the responsibilities that pertained to it. With few exceptions, the


community had a voice in the ways people used their lands” (Ibid., pp. 49-50) [emphasis


added]. In the colonies, there was “a vigorous tradition of regulating land uses in the


public interest. …Owners of attractive sites for water mills could have their lands seized


if they failed to use them in the public interest” (Ibid., p. 60) [emphasis added]. Timber


regulation was commonplace, and as early as 1630, “the Pilgrims…had begun restricting


the right of timber owners to export their products without the approval of governor and


council…” and “…In New Hampshire and elsewhere, large trees suitable for ship masts


were claimed as public property, even when located on private land” (Ibid., pp. 60-61).


Perhaps alluding to late 20th Century wise-use and property-rights movements, Freyfogle



As many of these colonial and early federal-era laws illustrate, land-use regulations went well beyond the avoidance of harm to impose affirmative duties on private owners to help achieve social aims. Later generations would resist the imposition of such duties, portraying them as unprecedented, but the generation that led America’s formation seems to have had little trouble with them. Indeed, historian John Hart concludes that the legal record they left behind ‘reveals no sign of the later-imagined right of landowners to be let alone as long as they do not harm others.’ That idea would gain currency only toward the end of the nineteenth century, after lawmakers had fundamentally reworked laws to support America’s insatiable desires to develop the continent, expand markets, widen choices, and multiply the nation’s wealth” (Ibid., p. 62).

It was the Sanderson case, according to Freyfogle, that was pivotal in deciding


which version of ‘dominion’ would hold sway. In that case the Pennsylvania Supreme

Court ruled against an ordinary homeowner in favor of The Pennsylvania Coal Company. With Sanderson, the pendulum had completed its swing, at least in the coalfields of Pennsylvania. From an agrarian property system that protected quiet enjoyment and enforced sic utere tuo firmly, ownership law had swung completely to the industrial property side, freely permitting intensive land uses with only modest concern about resulting harms…Property law was no longer about the right to remain undisturbed in one’s lawful use; it was now chiefly about the right to use land for maximum gain. The mentality of the migrants and boomers had triumphed (Ibid., p. 73).

Fast forward to the 21st Century… In a recent article about coal mining, Williams


(2005) described the latest technique used by the mining industry—longwall mining.


This is a form of underground mining where a seam of coal is removed except for a long


transverse wall of the seam. Once the seam has been completely mined, the wall is


removed—allowing for the recovery of the last bit of coal in the seam—which causes


surface subsistence. One of the problems created by this method has been the


disappearance of streams and ponds: the permanent alteration of existing watersheds.


Another problem is the loss in property when subsistence occurs under private


residences. Describing what happened to the former occupants, Williams wrote, “Most


of the former residents were living in new double-wides and other modest dwellings


provided by the companies. For most it had been a step up” (2005, p. 46). It had been a


“step up” because the richest coal deposit—“the world’s richest mineral deposit—the


Pittsburg Coal Seam, …runs like layer-cake filling for 2,000 miles, 300 to 800 feet under


Pennsylvania, West Virginia, Virginia, Ohio, Indiana, Illinois, and Kentucky” (Ibid., p.


44). He wrote, “Longwalling happens anywhere there is coal, but the grossest


environmental damage is in the impoverished regions…” (Ibid.).


The liberty celebrated by Americans—to be able to pursue the American


Dream—was strongly influenced by the institution of private property. In the formative years of the country, property was considered indispensable to freedom from tyranny and


to providing access to the democratic process. As Americans pushed westward, however,


freedom became much more individualized. As Freyfogle (2003) noted, “…for the


drafters of the Declaration of Independence, it was collective liberty that was the primary


issue of the day: It was the power of the colonists as a people to govern themselves


without interference, not the rights of individuals as such to resist constraint” (p. 59).


Individual freedom, and the pursuit of happiness, by the middle to the end of the 19th


Century, began to take on what Rifkin (2004) referred to as “…the Horatio Alger


stories—that it’s possible for every American to go from ‘rags to riches’—is what the


American Dream is all about” (p. 26).


Throughout the latter half of the nineteenth century, the courts were busy undoing


the common law protections for quiet enjoyment. Quoting an 1873 New York Supreme


Court decision, Freyfogle wrote,

The general rules that I may have the exclusive and undisturbed use and possession of my real estate, and that I must so use my real estate as not to injure my neighbor, are much modified by the exigencies of the social state. We must have factories, machinery, dams, canals and railroads. They are demanded by the manifold wants of mankind, and lay at the basis of all our civilization (2003, p. 74).

It is interesting to note that early industrialists were in favor of government


interference and regulation “for the common good” when it benefited their plans for


growth and development, often depriving less powerful constituencies of their quiet


enjoyment in the process. The irony is that nowadays those who prefer more intensive


uses of the land commonly complain about environmental protections as being


tantamount to interference by the federal government in state and local matters. In yet


another twist, as Freyfogle pointed out, “Probusiness critics of government began to argue that it was the common law alone that defined a landowner’s rights—the common


law that was now so slanted in favor of industry. Statutes and regulations were part of a


different body of law entirely, a body of public law that was seen to threaten private


rights” (Ibid., p. 82) [emphasis added].


The idea of property is much broader than land, though much of the controversy


surrounds land use. The Lockean influence on the founders clearly contributed to the


country’s early development. In the Lockean scheme of things, land that is not put into


cultivation or put to some other use is “wasted.” In the early history of the country, land


was often given away or sold very cheaply to encourage settlement and development.


The Mining Law of 1872, for instance, allowed private development on public lands and


led to a privatization of policy (Klyza, 2001, p. 113). The idea of ownership according to


Locke is that one owns one’s self and the products of one’s labor. By placing land into


cultivation, a farmer adds increased value and is entitled to the fruits of his labor. From


the earliest period, the role of government was seen to be the fostering of the economic


development of the country by private citizens and the protection of property thereby


acquired by those citizens.


The Lockean notion of private property as an incentive to development worked


well in the country’s early history, but there were also abuses. These abuses and the


growth of the country into a more fully settled stage, required more government


intervention in the form of an administrative state. Particularly, the Interstate Commerce


Commission and various pieces of legislation such as the Sherman Antitrust Act came


about in an effort to curb excesses of the “robber barons” at the end of the 19th century. Yet, even today the wealth of these families is notable, and many of their names, such as


Morgan, Rockefeller, and Kennedy, continue to be well known.


Many writers have described the balance between private property rights and the


public interest. Richard Pipes (Property and Freedom, 2000) has attempted to


demonstrate the primacy of the right to property as a necessary prerequisite to other


freedoms. Other libertarian writers have described the gradual erosion of constitutional


protections as the country has grown. Particularly, the advent of the “administrative


state” has led to greater direct government involvement in land use policy (for example


zoning laws) and indirectly through other regulations that may impact land use.


Ellen Frankel Paul gave a prime example of the libertarian point of view. She


claimed that “the rise of the environmental movement in the 1970s has had an enormous


impact upon the rights of ordinary property owners, and not just the conduct of business


enterprises” (1987, 6).

That august political philosopher of the seventeenth century, John Locke, insisted that governments are constructed by men for one reason only, and that is to protect their property rights. He believed that the right to acquire, possess, and enjoy property is the fundamental liberty upon which all other inherent rights of life and liberty depend. The American founding fathers were deeply imbued with these Lockean notions. They, too, cherished property and the opportunity for personal development it represented. They embraced the idea that government exists to protect people's inalienable rights and should be tolerated only so long as it acts as a rights protector (Ibid., p. 3).

According to Locke, property belonged to an individual not because a king


granted it to him, but because he "mixed his labor" with it and thereby transformed it into


something separate and distinct from the common, unowned land in the state of nature


(Ibid., p. 8). Ellen Paul suggested that environmentalists’ rejection of these Lockean


notions represents a slide back toward a feudal notion of the state as the ultimate authority over the use and disposition of land (Ibid., p. 9). Yet, as Freyfogle


demonstrated, land use was well-regulated in the colonies at the local level, not by a far


flung evil empire nor by a distant bureaucracy. Ellen Paul claimed,

Most proponents of an expanded state role in determining land use do not see themselves as embracing a return to feudalism. Rather, they focus upon the supposed waste and environmental degradation foisted upon society by rapacious developers who are concerned only with profits and care nothing for the welfare of future generations. To replace these individual market decisions, they advocate some form of state or national land-use policy that will collectivize decision making while leaving the ownership of property in private hands (Ibid., pp. 9-10).

She asked, “Is the quality of our environment a private, local, or state concern, or


is it a federal problem?” She answered that there has been a steady shift of the balance of


power in the direction of federal government and lists a number of new laws that have


“spawned an elaborate apparatus of controls over the use of land, water, and air” (Ibid.,


pp. 10-11). Included among them are the Clean Air Acts of 1963 and 1970, the National


Environmental Policy Act of 1969, the Water Quality Act of 1965, the Water Pollution


Control Act Amendments of 1972, the Solid Waste Disposal Act of 1968, and the Federal


Coastal Zone Management Act of 1972. What she fails to do, however, is to place these


laws within historical context. In other words, she fails to explain that one of the reasons


national legislation became an imperative is because these problems were not being


addressed at the local level.


Not content to criticize only the federal government, she went on to say, “But the


environmentalist activism of the past few years has not been limited to shifting the locus


of control over land use to the federal government. Of equal or even greater impact has


been the veritable flood of state land-use programs. These seek to supersede local zoning


authorities and regulate land that falls into the nebulous category of land involving ‘statewide concern’” (p. 12). In addition, she pointed out that “local control over the use of


land has been a decisive force in shaping our land-use patterns since the early twentieth


century. If we have unsightly strips of garish neon lighting, if we have cities congested


by high-rise office buildings, if we have suburban sprawl and neighborhoods in which it


is impossible to do your shopping without hopping into your car—all phenomena


castigated by environmentalists—then zoning can take its fair share of the blame” (Ibid.,


p. 13) [emphasis added]. If libertarians such as Ellen Paul had their way, with so little


government what need would we have for democracy?


Ellen Paul was particularly critical of what she calls the environmentalist


movement. She said, “To comprehend fully the influences on judges and legislators, one


must examine the environmentalists’ arguments. Environmentalists have been very


successful in dramatizing their cause, and their influence upon legal writers dealing with


the police power and its proper limits is in no small part responsible for the wave of


environmental legislation and for the generally sympathetic review of it by the courts”


(Ibid., pp. 13-14). She characterized environmentalism as a battle for control of land.


“…suppositions shared by most environmental activists: that man’s artifacts and


civilization threaten the environment; that our limited ‘spaceship earth’s’ finite resources


are being eroded; that pollution threatens life on earth and must be eradicated at great


cost; and that the root cause of all these impending disasters lies in the ‘unrestricted


forces of the market’” (Ibid., p. 14). She continued, “Fundamental to the views of those


on the more extreme fringe of the environmentalist movement is a rejection of many


fundamental Western values. Both Christianity and the Greek tradition emanating from


Aristotle placed the human race at the focus of moral concern and atop the hierarchy of earthly beings.” But, she says, environmentalists believe that “Western man, no longer


the focus of moral concern, ought to learn from the Zen Buddhists, Asian mystics, and


ancient pagans who knew how to live in harmony with nature and nature’s laws” (Ibid.,


p. 17).


“The most radical wing of the environmentalist philosophers takes its inspiration


from Aldo Leopold and his ‘land ethic,’ which he enunciated in 1949 in his A Sand
County Almanac
. These thinkers wish to extend value or rights to nonconscious entities,


thus extending the purview of moral consideration beyond humans and animals to include


plants, rocks, streams, oceans, and the atmosphere. Although it would be wrong to


suppose that all environmentalists fall into this category, the radicals do in a sense set the


agenda. By establishing the far reaches of the environmentalists’ stance, they make less


extreme positions appear moderate” (Ibid., p. 19). Describing Leopold’s “land ethic” she


wrote, “His system emphasizes our obligations to nature rather than our privilege to rule


over it as mere property. His conception of an interdependent ‘biotic community’ was


definitely not human-centered. Consequently he disparaged the efforts of others who


pursued the conservation of nature motivated by an ethic based principally upon human


or economic concerns” (Ibid.).


Way at the other end of the spectrum, she described

…a dwindling band of moderate ecologists…, probably the least favored by activists but the most influential with the general public. This position might be called the ‘right wing’ of the ecological movement. These thinkers, relatively few in number, reject the Weltanschauung of their more radical colleagues and seek to preserve endangered species or threatened biosystems from an avowedly anthropocentric standpoint. … Government, according to them, has a legitimate role to play as arbiter, to determine exactly which natural objects and species ought to be preserved for their future utility to humankind. Although more reasonable than other environmental philosophies, this position still grants to government decision-making power in an area where personal values decree the result rather than hard, scientific evidence. How are officials to determine the value of a wetlands, for example, when no market competition informs their decision, and they must rely upon their personal understanding of the ‘public interest’? (Ibid., pp. 25-26).

Here she raised a good question. How do we value such assets? Yet, even though


there is no market for them, intuitively we know they have some value—and the less


there is of them, that is the more scarce they are, the more valuable they must become.


In her view, eminent domain had also become a serious issue “as courts have


emasculated one of the principal constraints upon the exercise of eminent domain: the


‘public use’ proviso, which used to mean that property could not be taken merely to


transfer it to another private owner. … But with the Supreme Court’s sanction for the


taking of a nondilapidated building that happened to lie within a blighted area destined


for urban renewal (in Berman v. Parker in 1954), courts throughout the country have


been encouraged to find a public use in a variety of imaginative takings by the states.


These takings have only a tenuous connection to public necessity or public purpose, and


they often simply transfer property from one private owner to another” (Ibid., pp. 28-29).


As Cahn noted, “…eminent domain, which many describe as a government initiative to


secure the public good, is more accurately defined as governmental action on behalf of


self-interested policy elites” (1995, p. 10).


Ellen Paul made some good arguments and asked some difficult questions, but


failed to adequately address the historical basis of governmental actions. The origin of


zoning laws is a case in point. As expressed in Suburban Nation:

While government programs for housing and highway promoted sprawl, the planning profession, worshipping at the altar of zoning, worked to make it law. Why the country’s planners were so uniformly convinced of the efficacy of zoning—the segregation of the different aspects of daily life—is a story that dates back to the previous century and the first victory of the planning profession. At that time, Europe’s industrialized cities were shrouded in the smoke of Blake’s ‘dark, satanic mills.’ City planners wisely advocated the separation of such factories from residential areas, with dramatic results. …Life expectancies rose significantly, and the planners, fairly enough, were hailed as heroes.

The successes of turn-of-the-century planning, represented in America by the City Beautiful movement, became the foundation of a new profession, and ever since, planners have repeatedly attempted to relive that moment of glory by separating everything from everything else. This segregation, once applied only to incompatible uses, is now applied to every use. …Perhaps the greatest irony is that even industry need not be isolated anymore. Many modern production facilities are perfectly safe neighbors, thanks to evolved manufacturing processes and improved pollution control.” (Duany, Plater-Zyberk & Speck, 2000, pp. 9-11)

A dynamic, “ontogenetic” view of property—as opposed to a static view—reveals


a blind faith in the power of technological progress, or what Smith (1998, p. 5) calls


productivism, driven primarily by corporate capital. The hegemony (Cahn, 1995, p. 18;


Smith, 1998, p. 16) of this system is such that a packaged and marketed vision of the

American Dream has come to be accepted as normal (Silverthorn, 2004). CHAPTER THREE

The capitalist process, by substituting a mere parcel of shares for the wall of and the machines in a factory, takes the life out of the idea of property. It loosens the grip that once was so strong—the grip in the sense of the legal right and the actual ability to do as one pleases with one’s own; the grip also in the sense that the holder of the title loses the will to fight, economically, physically, politically, for “his” factory and his control over it, to die if necessary on its steps. And this evaporation of what we may term the material substance of property—its visible and touchable reality—affects not only the attitude of the holders but also that of the workmen and the public in general. Dematerialized, defunctionalized and absentee ownership does not impress and call forth moral allegiance as the vital form of property did. Eventually, there will be nobody left who really cares to stand for it—nobody within and nobody without the precincts of the big concerns (Schumpeter 1942, p. 142, in Monks & Minnow, 1991, p. 67).

There can be little doubt that the corporation, as a form of organization, plays a


significant role in the modern world. As Bakan (2004, p. 1) wrote, “A key premise is that


the corporation is an institution—a unique structure and set of imperatives that direct the


actions of people within it.” But precisely what is a corporation, and how did this entity


become such a powerful player in all our lives?


Bowman (1996, p. 2) defined the “large business corporation” as an organization


possessing all of the following attributes: (1) it is “a legal entity (a fictitious and


immortal person possessing rights and obligations),” (2) it is “an enterprise chartered by


government and subject to the rule of law,” (3) it is “a joint-stock company that earns


dividends for its stockholders,” and (4) it is “an economic, political, and social institution


through which power is exercised internally (within the enterprise) and externally (in


society at large).”


The corporate form of organization surpassed the sole proprietorship and


partnership forms of organization as a tool of economic expansion because it permitted


the accumulation of large amounts of capital by pooling investor’s resources (unlike a


proprietorship) and it provided limited liability (unlike a partnership). This form of organization provided the fuel for the U.S. expansion in the 19th century, being the


catalyst for the industrial revolution. “A child of nation-building,” according to Beatty


(2001, p. 10), “the professionally managed corporation began in the effort to reach the


ever-receding line of settlement by railroad, America’s first big business.”


Hall (2002, pp. 23-24) provided three explanations for the emergence of the


multinational corporation as a powerful influence. The first explanation is imperialism,


which he defined as an expansion of corporate markets and reduction of costs by


“exerting economic power over a weaker nation.” Second, he made the somewhat


circular argument that “local economic independence is impossible for many nations,


particularly those with weak political and economic systems. The multinational firm


becomes the dominant economic and political form of organization, superseding the


traditional nation-state in weaker parts of the world.” One could argue that such a


condition of dependence is brought on by the imperialistic actions of corporations in the


first place, however, and that the second explanation is really an extension of the first.


His third explanation was that the multinational corporation is the inevitable result of


“corporate choices made to implement product-market strategy: As corporations begin to


produce a complex range of products, these are to be sold in different markets through


multiple channels of distribution.”


A recurrent theme in Hall was that “organizations in general seek to expand their


influence over the environment” (Ibid., p. 24). For example, with regard to


technological, legal, and other environmental conditions, he stated, “Organizations do not


respond to technological change through simple absorption. Instead, the organization’s


political process operates through the advocacy of change or stability” (Ibid., p. 205). Since innovation goes against the status quo, one could argue that organizations advocate


for stability more often than they advocate for change. He wrote, “The pharmaceutical


industry has had great success in protecting itself from competition by securing the


passage of state and federal legislation. It also was successful in getting organized


medicine, through the American Medical Association, to permit the industry to advertise


drugs by their brand names rather than by their generic names” (Ibid., p. 257). Similarly,


“Organizations are not benign recipients of laws and regulations. Organizations in all


sectors attempt to select the appropriate legal strategy aimed at the appropriate level of


government. Organizations are important actors in the development of laws and


regulations through their lobbying efforts” (Ibid., p. 206).


In Hall’s discussion of the resource-dependence model, he said, “Another


important aspect of the model is that organizations attempt to deal actively with the


environment. Organizations will attempt to manipulate the environment to their own


advantage…it also contains the idea that the administrators of organizations ‘manage


their environments as well as their organizations’…This is the institutional level of


operations, in which the organization is linked to the social structure by its top


executives” (Ibid., p. 265). Furthermore, “Interlocking directorates provide opportunities


for collusion, co-optation, monitoring, legitimacy, career advancement, and social


cohesion…Interlocks are a means by which organizations can attempt to manage


uncertainty in their environments” (Ibid., p. 231). One could argue that since change is a


major cause of uncertainty, most organizations attempt to manage uncertainty in their


environments by maintaining the status quo and thereby stifling innovation. Large partnerships and joint ventures permit the pooling of resources, and newer


forms of these organizations, such as limited partnerships, provide a certain degree of


limited liability to investors. If the concept of limited partnerships had been around in the


early 19th century, perhaps they would have become the dominant form of business


organization instead. But it was the corporation that existed at that period in our history.


The corporation existed in Europe before America was colonized. In fact, the


great trading companies of the European empires had a significant influence on how early


settlers viewed chartered companies. As Wasserman (1983) put it in his book America
Born and Reborn
, “As a whole the colonists were most thoroughly incensed by Britain’s


exploitation of their commerce and industry” (p. 42). The American Revolution was, in


Wasserman’s view, a populist revolt against, not only the Monarchy, but also the


excesses of trading companies such as the East India Company. “The spirit of American


democracy had unleashed the world’s first anti-imperial revolution, only to give birth to a


nation that saw itself as chosen by God to rule the world” (Ibid., pp. 47-48). The Articles


of Confederation formed a loosely knit federation of states that allowed for greater local


control and a more direct form of democratic government, but the Founding Fathers


realized that their own property interests were at risk. According to Wasserman,

Alexander Hamilton…laid the foundations for the rise of American corporate capitalism. ‘All communities divide themselves into the few and the many,’ he wrote. ‘The first are the rich and the well born, the other the mass of the people.’ The mass ‘are turbulent and changing; they seldom judge right.’ Therefore the rich must have a ‘distinct, permanent share in the government’ to check the ‘unsteadiness’ and ‘imprudence of democracy.’ [As a result] Adams codified a constitutional system built around property qualifications for office-holding and voting, a strong executive, two legislative houses with at least one dominated by the rich, and strict limitations on the abilities of the masses to rule…the Federalist ideal was perhaps best reflected in the state constitution of Maryland. Among other things it installed an electoral college which doubly removed the election of representatives from the public (Ibid., pp. 50-51).

As the Constitutional Convention got underway, “suspicion spread through the


countryside that the convention was dominated by men who intended to profit directly


from the formation of a new government. Supporters and critics alike understood that the


Constitution was a document of post-Revolutionary reaction designed to cement the


power of what James Madison called ‘a landed interest, a manufacturing interest, a


mercantile interest, a monied interest, with many lesser interests.’ John Jay put it more


succinctly. ‘Those who own the government,’ he said, ‘ought to run it’” (Ibid., p. 52).


The government formed by the Founding Fathers was based on the economic


theory of classical liberalism, which was, in the words of Bowman, “an affirmation and


defense of the freedom and rights of the individual whether they be political, religious, or



…It is the last of these for which liberalism offered the strongest defense, and understandably so, since it sought to justify an economic system that was premised on contractual relations between individuals.

…A product of both the Enlightenment and the Reformation, classical liberalism also contains a conception of history as material progress—a partly economic, partly religious view that identifies industry and acquisitiveness with the social good and heavenly rewards. Furthermore, American liberalism contains a version of material progress that is peculiarly its own—namely, the doctrine of the open frontier, economic expansion, unlimited opportunity, and upward mobility—in short, the American promise.

Adam Smith’s economic theory, which was outspokenly critical of the inefficiencies of corporate enterprise within the marketplace of individuals, eventually became a source of the corporation’s greatest ideological strength. To accomplish this result, the long-held view of the business corporation as a tool of monopoly power would have to be jettisoned for a modern, anthropomorphic conception of the corporation suited to the individualistic premises of liberalism. The unique contribution of American constitutional law to this ideological trick of mirrors, what I shall term ‘the doctrine of corporate individualism,’ took hold in American jurisprudence in the early decades of the nineteenth century. Not only did it confer on the corporate entity the legal rights and capacities of the contracting individual during the dawn of American industrialization, but it also personified this legal fiction, thereby transforming a collectivity into an individual (1996, pp. 6-9) [emphases added].

So, from the beginning there was a structure in place that would allow, even


encourage, corporate predominance to come to the forefront. Eventually, classical


liberalism would give way to corporate liberalism. But until the industrial revolution and


the invention of the steam locomotive, corporate power would remain a local


phenomenon. Chandler, in his essay “The Railroads: The First Modern Business


Enterprises, 1850s-1860s,” described how this technological innovation brought about


the large corporate industrial and financial organizations with which we are familiar in


today’s global environment:

The swift victory of the railway over the waterway resulted from organizational as well as technological innovation. …the operational requirements of the railroads demanded the creation of the first administrative hierarchies in American business. The men who managed these enterprises became the first group of modern business administrators in the United States. Ownership and management soon separated. The capital required to build a railroad was far more than that required to purchase a plantation, a textile mill, or even a fleet of ships.

With the coming of the railroad boom of the late 1840s, the capital required for railroad construction could no longer be raised… Funds for the simultaneous construction of so many large railroads had to come from the older commercial centers of the east.

As soon as the American capital market became centralized and institutionalized in New York City, all the present-day instruments of finance were perfected; so too were nearly all the techniques of modern securities marketing and speculation. By the outbreak of the Civil War, the New York financial district, by responding to the needs of railroad financing, had become one of the largest and most sophisticated capital markets in the world. The only significant innovation after the Civil War were the coming of the telegraphic stock ticket to record sales and the development of the cooperative syndicate of several investment bankers to market large blocks of securities. For more than a generation this market was used almost wholly by the railroads and allied enterprises, such as the telegraph, express, and sleeping car companies. As soon as American manufacturers had comparable needs for funds, they too began to rely on the New York markets. However, except for the makers of electrical equipment, few manufacturers felt such a need until the 1890s. When they did begin to seek outside funds, the institutions to provide such capital were fully developed (1977, pp. 99-108).

Throughout the course of the history of corporations, there were periodic


challenges to and consolidations of, corporate power. The courts, being the most


conservative branch of government, have tended to favor the propertied interests. But


populist uprisings, labor unions, and social movements have brought significant


challenges to corporate power. These movements have led to the enactment of antitrust


legislation and other regulatory reforms. As Beatty (2001) wrote,

The post-Civil War economy lacked centers of countervailing power to balance the distending power of the great corporation: Any social history of the corporation in these years must start with that perception. ‘Private economic power is held in check by the countervailing power of those who are subject to it,’ Professor Galbraith wrote in American Capitalism in 1952, when the worst evils of oligopoly were prevented by vigilant governments, with an arsenal of antitrust and regulatory weapons; strong unions, brandishing the threat of strikes; and nationwide retail chains, which could use their purchasing power to keep prices in line. None of these conditions obtained in the age of incorporation. Government could not exert countervailing power over the corporation because, at all levels, it was in the purse of corporations. Trade unions could not exert countervailing power because they were small and weak, and even peaceful strikes were put down by state militia or federal troops called out by politicians acting for corporations acting for shareholders. (And these were not Mr. and Mrs. Front Porch, with their retirement money invested in 401(k) accounts, but the richest 1 percent of Americans holding more wealth than the other 99 percent). And competition could not exert countervailing power as, in industry after industry, it yielded to combination. The Framers would have seen at once the root of what was coming to be known as ‘the corporation problem’— how to make the great corporation answerable to society. For them, checks and balances was not just constitutional machinery, but a theory of human nature. If men were angels, Madison said, there would be no need of government (pp. 129-130).
The Civil War era was an ugly episode of American history, and one during

which corporate power grew tremendously. The most fascinating result during this


period of consolidation of corporate power was the judicial activism which gave the


corporate “person,” a legal fiction, all of the rights of a natural person. As Wasserman



In 1862, with the slaveowners out of Congress, a Homestead Act was passed and signed. The foundations were also laid for the highest industrial tariff in U.S. history, and for an Immigration Act which opened the floodgates to cheap foreign labor. Most important of all, industrial interests began voting themselves gargantuan grants of money and land for expanding the western railway system. With huge profits pouring in from supplying the army with food and materiel, the nascent industrial class solidified its hold on the government.

Just as the Confederacy had exempted large slaveholders from fighting, the Union had allowed its rich to pay $300 each to stay out of the draft. Among those who did so were John D. Rockefeller, J. Pierpont Morgan, Andrew Carnegie, James Mellon, Cornelius Vanderbilt, Philip Armour, and Jay Gould. Fattened by war contracts, tariffs, and enormous grants of money and land, this cadre of nascent Robber Barons put a grip on the machinery of government that remains very much intact today.

Combining scientific theory and medieval Calvinism, the new Social Darwinist elite declared itself the chosen of both natural selection and a profit-minded deity. ‘The growth of a large business is merely the working-out of a law of nature and a law of God,’ said the original Rockefeller…In the true Puritan tradition, those who had not experienced such divine or natural favor had obviously been condemned as unfit. When it came to the poor, Cotton Mather’s old idea to ‘let them starve’ was back in fashion…In a market economy, workers could be used and discarded with no real concern for where or how they lived.

If natural selection was at work in the corporate world, the Supreme Court was its ultimate arbiter. As part of the ‘Black Bill of Rights,’ Congress had passed the Fourteenth Amendment forbidding the states to ‘deprive any person of life, liberty, or property without due process of law.’ The Klu Klux Klan and other forces of southern reaction paid the law little heed. But in 1886 the Supreme Court ruled definitively that corporations have human rights, and that 230 state laws regulating big business violated due process…For all intents and purposes, the corporations were now above meaningful public regulation. In 1887 Congress passed the Interstate Commerce Act, only to see the commission it mandated turn into a committee of executives who shuttled back and forth between the government and the companies they were supposed to regulate. In 1890 Congress tried again with the Sherman Antitrust Act. In the next seven years the Act was used twelve times to break labor unions (1983, pp. 84-95) [emphasis added].

The labor unions were one of the first countervailing powers to emerge out of the


industrial revolution, followed by Populist and Socialist movements which paved the way


for the reforms of the Progressive Era, and later the New Deal. “In the aftermath of the


legal and political accommodations of the Progressive Era and the New Deal period,


antimonopoly sentiment has been largely contained and legitimized through the public


regulation of enterprise” (Bowman, 1996, p. 5).


In the latter half of the 20th century, new regulatory legislation came into


existence as a result of the Civil Rights movement and the environmental movement. In


response, corporate power has been further consolidated through mergers and a new


“partnership with government.” As Wasserman pointed out, the Reagan administration’s

Robber Baron ethic led to the dismantling of the federal antitrust apparatus. One target was FDR’s Holding Company Act, which prohibited the interlocking of utility empires. The number of Federal Trade Commission prosecutions for unfair, deceptive, or anticompetitive business practices dropped from sixty-eight cases in 1980 to fifteen by 1982. ‘I think,’ said George Bush, ‘we’ve started to see this philosophical shift, the end or the beginning of the end of this adversary relationship between government and business. Government shouldn’t be an adversary. It ought to be a partner.’ That government-business ‘partnership,’ meant a green light for a new wave of mega-mergers. Billions of petro-dollars now fueled a ‘merger mania.’ By the end of the decade the largest 200 industrial concerns controlled 64 percent of the nation’s manufacturing assets, up from 46 percent in 1950. Oil company profits accounted for what Business Week called a ‘mind numbing’ 40 percent of all industrial profits, money now fueling the final centralization of the industrial system” (1983, p. 265).

In addition to this marked centralization of power, the evolution of the


multinational corporation has in many ways put corporate power even beyond the reach of national governments. What about the impact of corporate power on democracy and




Democracy is defined as government by the people; a form of government in


which the supreme power is vested in the people and exercised directly by them or by


their elected agents under a free electoral system. Democracy is a part of culture, which


is defined as the sum total of ways of living built up by a group of human beings and


transmitted from one generation to another.


Korten described how multinational corporate power has evolved outside of the


democratic process. He wrote, “It is helpful to understand how the corporate


globalization agenda has been crafted and carried forward largely outside the public


discourse. It is not a matter of a small elite group meeting in secret to craft a master plan


for taking over the world. It works much more like any networking or shared culture


building process out of which alliances among individuals and groups emerge and


evolve. There is no conspiracy, though in practical terms, the consequences are much as


if there were” (2001, p. 135).


The most troubling impact on democracy, as described by Korten below, has been


the corporate influence over public opinion through the media which has undermined the


democratic election process.

Before the 1970s, business interests were represented by oldfashioned corporate lobbying organizations with straightforward names: Beer Institute, National Coal Association, Chamber of Commerce, or American Petroleum Institute. As aggressive public-interest groups succeeded in mobilizing broad-based citizen pressures on Congress, business decided that another approach was needed. Corporations began to create their own ‘citizen’ organizations with names and images that were carefully constructed to mask their corporate and sponsorship and [sic] their true purpose. The National Wetlands Coalition, which features a logo of a duck flying blissfully over a swamp, was sponsored by oil and gas companies and real estate developers to fight for the easing of restrictions on the conversion of wetlands into drilling sites and shopping malls. Corporate-sponsored Consumer Alert fights government regulations of product safety. Keep America Beautiful attempts to give its sponsors, the bottling industry, a green image by funding anti-litter campaigns, while those same sponsors actively fight mandatory recycling legislation…The views of these and similar industry-sponsored groups…are regularly reported in the press as the views of citizen advocates. The sole reason for their existence is to convince the public that the corporate interest is the public interest and that labor, health, and the environment are ‘special’ interests.

With the growing role of television in American life and the decline of the U.S. labor movement, costly television-based media campaigns have become increasingly central in deciding election outcomes. As a consequence, the grassroots organization that was once the foundation of the Democratic Party structure has disintegrated, causing it to lose its populist moorings and leaving those who once constituted its political base feeling unrepresented (Ibid., pp. 144-148).

Originally commercial speech was protected because it was deemed to have social


value by providing consumers with information, but the approach to corporate advertising


has changed dramatically from one of providing information about a product to one of


associating a product with a particular lifestyle. And the courts have supported this


asymmetry. “Since Virginia State Board of Pharmacy v. Virginia Citizens Consumer
, federal courts have shifted from consumer-based assessments—that commercial


and corporate speech is protected if it enhances consumer decision-making—to the view


that laws and regulations limiting advertising restrict free speech” (Soley, 2002, p. 256).


Coleman (1982, pp. 102-104), writing about the asymmetry of relations between


corporate actors and natural persons said, “One consequence is that the corporate actor


nearly always controls most of the conditions surrounding the relation. The corporate


actor controls much of the information relevant to the interaction—typically by


advertising, propaganda, market research, public opinion research, credit ratings of


customers, and dossiers of other sorts. Information expressly designed to serve the interests of the person is far less in evidence…Persons have become,” he wrote, “in a


sense that was never before true, incidental to a large fraction of the productive activity in


society. This is most evident when the person who occupies a position in a corporate


actor is replaced not by another person but by a machine. Then the general irrelevance of


persons is clear. But the invention which made this possible was not a technological


invention which replaced [people with machines]; it was a social invention which created


a structure that was independent of particular persons and consisted only of positions.


Once this was done, it became merely a matter ingenuity to devise machines that could


carry out the activities which those positions required.” Coleman emphasized that it is


the social structure that is the culprit. “The irrelevance of persons in the structure is not


a question of machines, it is a question of the form of the structure. In management


training programs in many firms, there is a game that is used as part of the training


program: the in-basket game…The aim of the in-basket exercise is to make the transition


from one manager to the next unnoticeable—to make the manager as a person irrelevant


to the functioning of the plant. This is good for the smooth functioning of the


organization; but it takes away something of central importance to each of us: the sense


of being needed.”


Beatty, writing about Emerson’s views on ‘Trade,’ said, “Emerson’s optimism


about the beneficent effects of trade was wisdom in advance of its time, or so it looks


today. He identified a new kind of power—‘soft power,’ one political scientist calls it,


the propaganda of the good life, that is palpable in the world today. In the century now


beginning the hard power of the nation-state is yielding to soft power, which rivals


totalitarianism in its capacity to make change, but without coercion. Soft power, the amalgam of economic and cultural influence spread through the new media of


communications…” (2001, p. 123).


Klein, in her popular book No Logo, described the “cultural imperialism” of


modern-day global enterprises. She blamed much of what was wrong with globalization


on a tendency of moving away from product-centered values and toward image-centered



The astronomical growth in the wealth and cultural influence of multinational corporations over the last fifteen years can arguably be traced back to a single, seemingly innocuous idea developed by management theorists in the mid-1980s: that successful corporations must primarily produce brands, as opposed to products (2001, p. 3).

And for the longest time, the making of things remained, at least in principle, the heart of all industrialized economies. But by the eighties, pushed along by that decade’s recession, some of the most powerful manufacturers in the world began to falter. A consensus emerged that corporations were bloated, oversized; they owned too much, employed too many people, and were weighed down with too many things. The very process of producing—running one’s own factories, being responsible for tens of thousands of full-time, permanent employees—began to look less like the route to success and more like a clunky liability.

At around this same time a new kind of corporation began to rival the traditional all-American manufacturers for market share; these were the Nikes and Microsofts, and later, the Tommy Hilfigers and Intels. These pioneers made the bold claim that producing goods was only an incidental part of their operations, and that thanks to recent victories in trade liberalization and labor-law reform, they were able to have their products made for them by contractors, many of them overseas. What these companies produced primarily were not things, they said, but images of their brands. Their real work lay not in manufacturing but in marketing. This formula, needless to say, has proved enormously profitable, and its success has companies competing in a race toward weightlessness: whoever owns the least, has the fewest employees on the payroll and produces the most powerful images, as opposed to products, wins the race (Ibid., p. 4).

The branded multinationals may talk diversity, but the visible result of their actions is an army of teen clones marching—in ‘uniform,’ as the marketers say—into the global mall. Despite the embrace of polyethnic imagery, market-driven globalization doesn’t want diversity; quite the opposite. Its enemies are national habits, local brands and distinctive regional tastes. Fewer interests control ever more of the landscape.

Dazzled by the array of consumer choices, we may at first fail to notice the tremendous consolidation taking place in boardrooms of the entertainment, media and retail industries. Advertising floods us with the kaleidoscopic soothing images of the United Streets of Diversity and Microsoft’s wide-open ‘Where do you want to go today?’ enticements. But in the pages of the business section, the world goes monochromatic and doors slam shut from all sides: every other story—whether the announcements of a new buyout, and untimely bankruptcy, a colossal merger—points directly to a loss of meaningful choices (Ibid., p. 129).

Ahmad, in an article titled “Who’s Wearing the Trousers?” (2001), answered


Klein’s claim that consumers were being manipulated by big corporations and their


brands, and wrote

Historically, building a brand was rather simple. A logo was a straightforward guarantee of quality and consistency, or it was a signal that a product was something new. For that, consumers were, quite rationally, prepared to pay a premium.