Operation Corporate

Raffles Hotel, Singapore. Photo: WikiMedia

Empire, Incorporated: The Corporations that Built British Colonialism
Philip J. Stern
Belknap Press: 202
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Empire, Incorporated: The Corporations that Built British Colonialism is two books in one. Philip J. Stern’s latest work dealing with colonisation and corporations combines a deep analysis of the nature and structure of the modern corporation, and its role in extending its economic reach into political power in an era when Britannia ruled the waves (or waived the rules). Ultimately, what Stern offers is a reflection on the nature of power—how organisations created to share risks and raise capital for economic activities ended up becoming a dominant force.

As a non-state actor, the corporation vies with churches, temples, synagogues and mosques for the power it wields over people’s lives, shaping their behaviour and, indeed, governing how they live. It has even emerged victorious in specific conflicts with the state. Think of United Fruit Co in Central America; the Rajah of Sarawak and, of course, the British East India Company. Singapore admires Sir Stamford Raffles, who spent a relatively small part of his life on the island and ended up with buildings, a subway station and a hotel named after him. He wasn’t even a government servant.

Stern’s book abounds with examples from Africa to Southeast Asia, from the Americas to South Asia, as he brings together vivid stories of greed and need, entrepreneurship and warships, and, above all, self-interest and amorality.

The modern corporation is a special invention. By limiting the liability of its owners to the extent of the capital they have invested, placing their interests above those of other stakeholders—including creditors, consumers or communities in which it operates—separating ownership from management, and giving the artificial entity (the company) legal standing and perpetual succession, the human mind has crafted laws giving rights to the corporation which are unique in the annals of civilisation. More importantly, these are rights without responsibilities.

Cut to Milton Friedman, the high priest of libertarian thinking, who is erroneously described as having said that “a corporation is an artificial person and in this sense may have artificial responsibilities, but ‘business’ as a whole cannot be said to have responsibilities, even in this vague sense”. It is crucial to note that Friedman went on to add: “That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” Abiding by rules, norms and laws was a prerequisite.

The corporation is expected to pursue profit relentlessly. It undertakes measures to increase efficiency and lower costs which benefit the shareholders, and often that is at the cost of what society expects. The obsession with shareholders is surely outmoded; as Lynn Stout showed in The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public, the average shareholder today ‘holds’ shares in a company for a very short period of time, since the algorithms that govern program trading take over decision-making. The day trader has his interests at his heart, not that of the long-term viability of the corporation.

To that, add the illusion that the state has reasserted itself, because companies can be nationalised and assets can be seized. But reality is complicated; companies accede to state power, but they also cut deals with the state and often end up getting what they want. While the alarmism of shrill critics of the corporation continues, a look at the invitee list to the ski slopes of Davos at the World Economic Forum is revealing, and the conversations that take place there often have more lasting impact on society than the deliberations at the UN General Assembly in New York.

The fact remains that unrestrained companies have polluted the environment with impunity (think of smokestack industries that made London’s air unbreathable after the industrial revolution), employed children in hazardous industries (from Dickensian times), treated people as commodities (think of slavery) and colonised vast parts of the world. Has much changed? If it did, would we have debates about ‘modern forms of slavery’, or campaigns to abolish child labour?

Cassandras have been screaming for some time now. Literature critiquing colonialism has flourished. Academics and historians have been re-examining the role of Britain, in works from the Indian politician and writer Shashi Tharoor’s Inglorious Empire: What the British Did to India, which wittily showed how the British empire had nothing to feel glorious about; to the British writer William Dalrymple’s Anarchy: The Relentless Rise of the East India Company, an eloquent and extended mea culpa of what Britain did to its colonies; to the Indian academic Priyamvada Gopal’s Insurgent Empire: Anticolonial Resistance and British Dissent, which showed how the colonised were not mere passive subjects; and the Indo-British writer Sathnam Sanghera’s Empireland: How Imperialism Shaped Modern Britain, which examined how the coloniser was shaped by his actions. London does venerate Clive and Churchill today, but in front of parliament and elsewhere in the city, you see statues honouring Mandela and Gandhi.

Empire was built on commerce: Britain wanted tea from China and so it harvested opium in India, got the Chinese hooked on the controlled substance and acquired treaty ports. Writers have written critically of colonialism and how deeply it is interwoven with the corporation—think of the Canadian writer and filmmaker Joel Bakan’s The Corporation: The Pathological Pursuit of Profit and Power, which shows how the modern company would be characterised as a psychopath if it were a real person. Or Noreena Hertz’s The Silent Takeover: Global Capitalism and the Death of Democracy, an early warning about the growing backlash against corporations, the Canadian writer Naomi Klein’s No Logo, which became the manifesto of the anti-globalisation crowd, and more recently, Shosanna Zuboff’s The Age of Surveillance Capitalism, which shows that the promise of the internet freeing us was, once again, an illusion.

The genius of Empire, Incorporated lies in weaving a coherent narrative that is at once solid and lucid, explaining how corporations are structured and how they ended up ruling the world, creating empires. Stern begins his book with an intriguing premise—that the British Empire was not conceived by kings and statesmen, but emerged out of entrepreneurs and idealists, and the confluence of a military power and an economic behemoth created an enduring empire. It radically transformed the map of the world, introduced food and drinks to parts of the world that hadn’t known those delicacies, made people play sport they never knew they’d excel at (the Indian writer Ashis Nandy rightly called cricket an Indian game accidentally discovered by the British), and rushed somnolent societies into the nineteenth century by forcing through railways and telegraph, postal services and courts.

Stern begins the story in Tudor England and recounts early setbacks in the Elizabethan age, before taking us to the sixteenth century and the joint stock corporations of Scotland. He takes us to the pirates of Jamaica and the discoveries in ‘New England’, before bringing us to the South Sea Bubble and the age of hostile takeovers. He notes the impunity with which the East India Company treated rulers (however unrepresentative they actually were) as their prisoners and the supreme arrogance that personified, as well as the writing of Adam Smith’s The Wealth of Nations and how it shaped the thinking of generations. He examines the notion of ‘limited liability’, which protects the investor while leaving the creditor (and the worker) often penniless. He notes the irony of how the war over the Falklands in the South Atlantic between British and Argentine forces was codenamed “Operation Corporate” by the British, as if punctuating what it was all about.

The book’s sweep is vast. In seeing the corporation as the vehicle of the empire, Stern is provocative, considering that the modern corporation has embraced many principles of sustainability and corporate responsibility that might make the pioneering buccaneers wince. For example, more than two hundred American companies filed amicus curiae briefs to the Supreme Court supporting marriage equality. After the murder of George Floyd, many US companies embraced the Black Lives Matter movement, and after the conservative Supreme Court overturned the five-decades-old precedent of Roe v Wade and sent the contentious issue of abortion back to the states, several companies considered steps to protect the sexual and reproductive rights of their female employees.

However, history is littered with examples of ‘good’ companies doing ‘bad’ things. There are unintended consequences, and a product developed to do good may end up doing very bad things. A corporation, ultimately, is a creature of human imagination, and it can produce weapons of mass destruction efficiently or provide healthcare to all cheaply. How that is decided is up to the women and men who run them. And how those people act depends on the laws of the land, the values they inherit and the principles and norms that society upholds. Like Patagonia, they can turn their profits to save the planet. Or, like Union Carbide, they can have a disastrous leak which kills thousands and—thanks to complicated corporate ownership patterns—leaves victims of those abuses helpless in their search for justice. States can restrain them—sanctions are a powerful tool and governments can ban companies from operating in particular sectors, spheres or geographies. But untrammelled, they can reshape the universe to their liking.

The power, ultimately, has to rest with the people. And Stern’s scholarly, engaging and entertaining study shows how things can and do go wrong, and why we must remain watchful.