"Every single investment bank on Wall Street, as we know it today, would have been illegal in the days of our founding."

The Founding Fathers and Occupy Wall Street

By Rick Ungar October 28, 2011 11:08 AM 

As many in the GOP continue their attacks on the Occupy Wall Street movement, it seems a worthwhile exercise to take a look at how our Founding Fathers —who Republicans constantly remind us are the guiding light whose vision is to be strictly adhered to—would view the effort of this movement to take back the nation from the corporate and moneyed interests. John Adams wrote that:

All the perplexities, confusion and distress in America arise not from defects in the Constitution or Confederation, not from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation.

Does this sound like a man who intended to give corporations—a legal fiction whose life exists only on paper—the right to free and unfettered speech to be expressed by way of political contributions or extraordinary control over the functioning of government?

The reality is that the Founding Fathers did not think very much of corporations or, for that matter, any of the organized moneyed interests that played so large a role in the decision to revolt against Mother England. To understand this, it is important to understand the nature of corporations during the days when the United States was founded.

The modern corporation dates back to the early 17th century when Queen Elizabeth I granted a charter to create the East India Trading Company. During that time, corporations were small, quasi-government institutions approved by the crown for a specific purpose. Not unlike today, the idea behind these organizations was to bring together investors interested in financing large projects, such as exploration.

Indeed, many American colonies were originally governed by corporations— such as the Massachusetts Bay Company.

We all know how well that went over.

Recognizing the threat corporations could pose to government, the English monarchs kept a close eye on these organizations and did not hesitate to revoke charters if they didn’t like the way things were going.

However, as the money piled up in these companies, they began to take on increased political power.

Which brings us back to The East India Company, the dominant corporation of that era.

Thom Hartman writes in his book, Unequal Protection,

Trade-dominance by the East India Company aroused the greatest passions of America’s Founders - every schoolboy knows how they dumped the Company’s tea into Boston harbour. At the time in Britain virtually all members of parliament were stockholders, a tenth had made their fortunes through the Company, and the Company funded parliamentary elections generously.

Any of this sound familiar?

While we know that the Founders had contempt for these corporate entities and the corruption they produced in Parliament, it appears to have never occurred to them to directly address corporations when they wrote the Constitution. It is not particularly difficult to understand why this would be the case. The Constitution speaks to control of government by the people…for the people…and of the people. Why should it occur to the Founders that a corporation might ever be perceived as one of “the people”?

And yet, today that is precisely what has become the case. A corporation now enjoys many of the same protections as a person under our law.

While the drafters of the Constitution may not have seen the need to make it clear that corporations were to be treated as tightly controlled entities rather than human beings, they certainly revealed their intention via their practices.

After the nation’s founding, corporations were, as they are today, the result of charters granted by the state. However, unlike today, they were limited in how long they were permitted to exist (typically 20 or 30 years), only permitted to deal in one commodity, not permitted to own shares in other corporations, and their property holdings were expressly limited to what they needed to accomplish their specific, corporate business goals.

Put another way, every single investment bank on Wall Street, as we know it today, would have been illegal in the days of our founding.

And here is the big one —in the early days of the nation, most states had rules on the books making any political contribution by a corporation a criminal offence.

Indeed, so restrictive was the corporate entity, many of early America’s greatest entities were set up to avoid the corporate restrictions. Andrew Carnegie formed his steel operation as a limited partnership and John D. Rockefeller set up Standard Oil as a trust.

Were this the case today, both Carnegie and Rockefeller would find themselves personally liable for every lawsuit leveled against their giant companies.

One wonders if British Petroleum would have been quite so careless in the Gulf of Mexico if the chairman and the shareholders were personally responsible for the giant financial losses their negligence caused.

Despite the controls placed on corporations in the early days of our nation, as corporations grew larger and their shareholders wealthier, they began to influence the rule making process that governed corporations.

Using the money they had accumulated, they began to chip away at corporate restrictions. Eventually, corporations were permitted to go on forever. Where shareholders had once been personally responsible for the actions of the corporation, contemporary corporations shield their owners from personal liability. And, as more money became involved, the politicians who regulated them grew were increasingly seduced by what the wealthy corporations could do for them.

Were they around today, our founders would not only be standing on the front lines of the Occupy Wall Street movement, they would likely be pursuing a far more strident strategy than playing some bongo drums in Zuccotti Park.