New Book Details Notorious Gangs: U.S. Corporations

Tuesday May 25, 2004

For a nation created in part as a rebellion against corporate power, the United States has embraced the corporation to a degree unprecedented in history, enshrouding it with the protections Jefferson enshrined to shelter the individual from the undue intrusion of government. 

The Boston Tea Party, that iconic moment when befeathered colonials dressed as native tribal folk to toss tea into the harbor, was in fact a revolt of merchants against the crown-backed power of the East India Company, the most powerful of British corporate creations. 

Andrew Jackson later led the political revolt against the first national bank chartered in the country. 

How then did a nation once so hostile to the corporate form come to surrender so much of its sovereignty to this most powerful of entities? 

That’s the question that led Ted Nace, founder and former owner of Berkeley’s Peach Pit Press, to write Gangs of America, the Rise of Corporate Power and the Disabling of Democracy. 

Nace’s research reveals a powerful Northern California connection to the transformation of the corporation from a tightly shackled and narrowly focused entity into the all-encompassing Frankenstein we behold today. 

The story of the modern corporation is inextricably linked to the rise of the railroads, and in particular to a San Francisco judge and the “Big Four”—Leland Stanford, Collis Huntington, Mark Hopkins and Charles Crocker, founders of the Central Pacific and Southern Pacific. 

It was Stanford who personally recommended California Supreme Court Chief Justice Stephen J. Field to Abraham Lincoln for the top slot on the newly created federal Ninth Circuit Court of Appeal based in San Francisco. Lincoln, himself a former railroad lawyer, took Stanford’s advice and gave Fields the slot—which at that time also automatically made Fields an associate justice on the U.S. Supreme Court. 

If Fields had been the railroads’ friend on the state courts, he became their virtual pimp from then on, constantly pushing his colleagues to grant them right after right. 

Fueled by the cash generated by massive land grants and the often-exorbitant shipping charges, the railroads became the dominant force in American politics, extracting endless promises from candidates in exchange for their support and paying out huge sums in bribes. 

In an 1877 dissent, Fields first signaled his intent to effect a legal revolution, declaring that the corporation, as a legal “person,” should be granted the same civil rights that the 14th Amendment bestowed on the newly freed slaves. 

In 1883, a key case reached the Ninth Circuit, where Fields still held the top slot. Santa Clara County was assessing Southern Pacific’s land at full value, while the railroad insisted that they be taxed at the value minus the cost of outstanding bonds. 

As a key element in their defense, the railroad claimed that the 14th Amendment’s equal protection provisions required they be treated as flesh-and-blood landowners, whose land was then taxed at the actual worth minus outstanding mortgages. 

Field agreed, though his rationale was that it was the railroad’s shareholders’ rights which were at stake, not those of the corporate “person.” 

The county appealed to the Supreme Court, which upheld the Ninth Circuit decision. 

Then came the curious incident of the reporter’s note. 

In those days, Supreme Court reporters—officials who transcribed the oral arguments and decisions into print—earned more than the justices. J.C. Bancroft Davis was the reporter who compiled one of the two final official versions of the verdict. Bancroft was not only a former railroad lawyer, he’d also been a railroad president. 

Which may go a long way toward explaining the curious headnote Davis inserted in the Santa Clara decision: “The defendant Corporations are persons within the intent of the clause in section I of the Fourteenth Amendment to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.” 

Though the phrase wasn’t included in the court’s written decision, subsequent courts at all levels followed the doctrine Davis laid out, and over the years granted corporations all the protections spelled out in the Bill of Rights. 

Since corporations are theoretically immortal entities of vastly greater wealth, reach and power than mere mortal fleshy persons, their embrace of the rights Fields spearheaded have made many as powerful as most nations on earth. 

Nace spells out how their reach has been expanded by the World Bank, International Monetary Fund, the General Agreement on Tariffs and Trade and agreements such as NAFTA, to the point where multinational corporations can use secret tribunals to challenge and overturn national laws, imposing backbreaking fines on nations that dare challenge the new corporate imperium. 

Gangs of America offers a chilling look at the Frankenstein of the Post-Industrial Age—a legal fiction that now holds democracies in thrall and governs the smallest details of our lives. 

Nace has created a crucial addition to the emerging global debate on corporate power, providing vitally needed insights into the question. 


Gangs of America, The Rise of Corporate Power and the Disabling of Democracy, by Ted Nace, Berrett-Koehler Publishers, Inc., San Francisco, 281 pages, $24.95.