The Divine Right of Capital – a small review.

RAGPICKER: They don’t do any work. Whenever they meet, they whisper and they pass each other thousand-frank notes. You see them standing on the corner by the Stock Exchange. You see at auctions- in the back. They never raise a finger-they just stand there. In the theatre lobbies, by the box office-they never go inside. They don’t do anything, but wherever you see them, things are not the same.

One of the biggest problems I have noticed through out history is how we as a group – a society – have tried to change the current situation, government, economic and financial model the we live under only to have pretty much the same thing or a variation of the same thing going by a different name. Oh it may start out looking different, like a new house with a slightly different outside motif. But we soon realize it really is not too much different than what we started out with.  This is because we have the same view or picture of what we expect that we have had all along. Few people come up with really new and radical ideas and when they do we sometimes try them out. But we soon try to fit our old ideas into them.  Such as R. Buckminster Fuller. His geodesic dome – a more space efficient and structurally sound  living arrangement. Which we try to put rectangular objects into and find that this does not work well or the shape is not what convention says it should be and we abandon the idea. When in fact our view of what convention should be is wrong and not the new idea.

I have heard and read much about how our society, government and economy needs to change but nearly all of these writings and talks and what not imply that what we need is the replacement of the current system with one that looks different on the outside but is pretty much the same on the inside.

In her book The Divine Right of Capital, Marjorie Kelly suggests that the inside needs to be changed as well. That the view we take of the world, our economy and our relationship with it needs to change. I fact for anything to change for the better these things must change first.

Marjorie Kelly is a modern revolutionary who wants to democratize economics. She argues that our current economic system is an aristocracy run by corporations that pay shareholders as much as possible and employees as little as possible—while ignoring the public good. CEOs aren’t all bad guys, Kelly says, they’re just operating in a system that forces them to put profits above everything else. That’s what she aims to change with her groundbreaking book, The Divine Right of Capital, which offers ideas on how to move toward a more humane, democratic corporate design.

Her book The Divine Right of Capital is not so much about changing government or forcing some mass economic change but rather how to democratize all aspects of society. Most especially our economy. The first part of the book looks at how our current economic / business model is not much different than the Aristocracy of old even comparing some aspects of it to medieval lords and serfs. An analogy this blogger thinks works quite well. Even going on to compare an antique book, Whitaker’s Peerage, Baronetage, Knightage and Companionage – a way for British nobility to know whose who and where they are. To the Forbs 500 list.

In the first part of the book, the author explains in fairly simple terms but with a good deal of detail how this is so with each chapter beginning with a short description of various truths of corporations.
Such as:

°In the worldview of corporate financial statements, the aim is to pay stockholders as much as possible and employees as little as possible.
°Like a feudal estate, a corporation is considered a piece of property-not a human community-so it can be owned and sold by the propertied class.
°Corporations function with an aristocratic governance structure, where members of the propertied class alone may vote.
°Corporate capitalism embraces a predemocratic concept of liberty reserved for property holders, which thrives by restricting the liberty of employees and the community.
°Corporations assert that they are private and the free market will self-regulate, much as feudal barons asserted a sovereignty of the Crown.

The author also tries to make it clear that stockholders are not investors and have not been so for quite some time. Since the beginning of the industrial age.

It’s a curiously overlooked fact today that, though we speak of stock market activities as investing, there is only the smallest bit of direct investment in companies going on. What is at work is speculation, the trading of shares from one speculator to another. Another word for it is gambling. But since these words have a less noble cast to them, we prefer the word investment, for it keeps us from confronting the stark reality.

She then goes on to explain how this is true by presenting how much of the money spent on stock actually gets to the company verses how much the company pays out to the stock holders. Showing not only numerically but also graphically how stock holders have in fact become a financial drain on most corporations. The author also go to show how stock holders are no better than the dukes and earls of old, expecting continued wealth and income even though they add nothing to the company, the community or society as a whole. That as the Ragpicker in The Madwoman of Chaillot says, “…little by little, the pimps have taken over the world. They don’t do anything, the don’t make anything-they just stand there and take their cut.”

The book also goes on to explain in each chapter of the the first part why this has to change.  That the current world view that detached ownership and feudal estate with its implied privileges has to be changed and in some cases eliminated.  That the employees of a company are not property – like the serfs and slaves of old – and there for have equal rights in the company to everyone else.  That wealth does not mean privilege or exemption from the laws that govern everyone else. That in order to ensure democracy, that it must be guaranteed even down to the smallest enterprise. 

In the second half of the book, the author – Marjorie Kelly – goes on to give an account of how this can and/or should be done. One thing she tries to make clear is that attain wealth is not a bad thing in and of itself and should be respected. Where the problem lies is how we and they view the possession of wealth as some license to be treated differently than anyone else. And in my view this is one of the major reasons that most attempts at political and economic change fail. That even though those on the left who espouse social justice and democracy still view wealth as some magical way to nirvana.  Where they can live a life of the nobility. This view must be discarded entirely.

    The power of wealth is the central issue, that is not to say the wealthy are the enemy, for the revolution-evolution-we seek will be without enemies.
    The wealthy, for the most part, are not more evil or greedy than anyone else. Most are not “demanding greater wealth”, for they don’t have a clue what’s being done with their money. They’ve for the most part left it in the hands of investing advisers. If the wealthy are not the enemy, neither are their advisers, for they are simply fulfilling their duty to serve their clients. Even CEOs aren’t the enemy, because they have no real power: their marching orders are to get shareholder wealth or get out. All these actors are to some extent complicit in the system and do have an ethical duty to resist. As the Nuremberg trails established, following orders does not ultimately excuse injurious behavior. But the aim of activists should not be to demonize anyone, but to open peoples eyes. [Italics added]
    We fool ourselves if we think we can find an enemy somewhere. Our anger at the system leaves us like the farmer in The Grapes of Wrath, who when his farm was repossessed,  couldn’t find anyone to shoot. There isn’t anyone to shoot.

And this is what we are confronted with right now. Aiming at the government will do not good for they are but a servant to the modern feudal system, like everyone else. Aiming at one corporation or sector will do no good as the owners are spread far and wide will only replace or reconfigure it.

It’s the system itself that needs to be change and the way we view it as well.  The next chapters give examples of how we can begin to change the system. As well  examples of how this is already being done. With employee ownership of companies etc. Particular areas that need changing or elimination. Such as financing of politics and the elimination of the corporate person-hood. Thoughts on how this best can be accomplished.  

Most of all what I get out of this book is a good map of what needs to be the direction that needs to take place.  To me it’s no good to know what you don’t want if what you do want is just a different color.  And as far as I am concerned Marjorie Kelly gives a very good idea of where that should be.  The final elimination of the feudal system we have had in place for years and years.  A situation where wealth does not call the shots and is not something that is exalted. 

Even for those of us who see a coming collapse of the present system,  having it replaced by smaller feudal states would be far worse. So for this eventuality it is even more imperative to engage in a move toward a democratically empowered economic community. Here is a link to the pdf of the introduction to the book


 

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9 thoughts on “The Divine Right of Capital – a small review.

  1. °In the worldview of corporate financial statements, the aim is to pay stockholders as much as possible and employees as little as possible.

    Yup! Of course the management gets first dibs!

      1. cmaukonen

        Remember the bail-out was for the stockholders first and for most.

        Which is why I was form the very first absolutely against it. Having the stockholder become paupers would have been one of the best outcomes.

        1. EmmaZahn

          I see the bail-out more as ransom for the general working capital of the entire country (maybe world) that was basically hostage because it was so entangled with all those synthetic securities devised to enrich banksters at everyone else’s expense.

      2. EmmaZahn

        I am going to side with dikkday on this one.

        Management has the catbird seat in public corporations as do hedge funders aka investment advisors a la Madoff with wealthy investors. They should be the focal point of change because they are the ones who profit most from great accumulations of wealth for that is how they accumulate their own. Without them we would see more rags to riches to rags. With them we see more perpetuities: foundations, trusts and other ‘family offices’ to maintain control of wealth long after the ones who earned it have died.

        1. cmaukonen

          Ah but management is there because the board of directors, those with the most stock, wants them there.

          When this is no longer the case, they are history.

          But as Commander Spock would say. “A difference that makes no difference is no difference.”

  2. You need only examine the growth of executive paychecks over time to get a handle on this. Even in times of difficulty or of corporate missteps, executives generally aren’t penalized. Shareholders don’t have any such guarantees.

    Executives may suffer some income reductions but there is still a limit to their exposure when things go bad. Nor is it all that common to see a CEO get the axe. And when it does happen he or she walks away with a ridiculous severance which bears no relationship to performance.

    Depending upon a person’s position in an organization there is a vast difference what happens when someone makes a mistake. How this works takes us well into the realm of the insane.

    1. cmaukonen

      Why do I get the feeling I’m arguing about who gets the best compensation here. Al Capone, his top henchmen or the the COPSs that get payed off.

      Be that as it may (and it may) the whole corporate system is corrupt from top to bottom. At least organized crime is…well…organized.

  3. cmaukonen

    My bad. I forgot a couple of things and I think the author did too. For one most of the activity on wall street, where the fortunes are made and lost, is not in the stock itself but in the futures market. And second of all, I would say around 90% of the stock that is traded is just that. Traded back and forth and few people actually hold on to it for any length of time.

    Also nearly all the companies now are owned by other companies and if one looked real hard you would probably find that those companies are owned by other companies as well.

    In other words, at any given time it would be very difficult to know who owns what or who. Especially now with most of the trading done on computers at the speed of light.

    It’s like one big casino where most of the gamblers are not playing the tables but are betting on each other.

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