Chris Hedges

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The Global Recordings network, a missionary group striving to bring “the name of Jesus” to “every tribe and tongue and nation,” gives close attention to the meaning of “liberty” in their teachings. A tape of a missionary lesson plays: "I want to make you understand this word 'liberty.' It is written in God's book: 'Where the Spirit of the Lord is, there is liberty.' Some say there is not enough liberty in this land, but if that is true, it is because there is not enough of the Spirit of the Lord. What do you think yourselves? Do people do as God commands them? Do they love each other? Do they help each other? Do they speak the truth? Do they flee from fornication and adultery? You know there are those who steal, who lie, who kill, and who worship things that are not God. These things are not of the Spirit of God, but of the spirit of Satan. Then how can there be true liberty?" 

The "infusion" of "the Spirit of the Lord" into society includes its infusion into society's legal system. Liberty is defined as the extent to which America obeys Christian law. When America is a Christian nation, liberty becomes, in this view, liberation from Satan. This slow, gradual and often imperceptible strangulation of thought -- the corruption of democratic concepts and ideas -- infects the society until the new, totalitarian vision is articulated by the old vocabulary. ..... 

While the radical Christian movement's leaders pay lip service to traditional justice, they call among their own for a legal system that promotes what they define as "Christian principles." The movement thus is able to preserve the appearance of law and respect for democracy even as its leaders condemn all opponents -- dismissed as "atheists," "nonbelievers" or "secular humanists" -- to moral and legal oblivion. Justice, under this process of logocide, is perverted to carry out injustice and becomes a mirage of law and order. The moral calculus no longer revolves around the concept of universal human rights; now its center is the well-being, protection and promotion of "Bible-believing Christians." Logocide slowly and stealthily removes whole segments of society from the moral map. As Joseph Goebbels wrote: "The best propaganda is that which, as it were, works invisibly, penetrates the whole of life without the public having any knowledge of the propagandistic initiative." 

Victor Klemperer, who was dismissed from his post as a professor of Romance languages at the University of Dresden in 1935 because of his Jewish ancestry, wrote what may have been the first literary critique of National Socialism. He noted that the Nazis also "changed the values, the frequency of words, (and) made them into common property, words that had previously been used by individuals or tiny troupes. They confiscated words for the party, saturated words and phrases and sentence forms with their poison. They made language serve their terrible system. They conquered words and made them into their strongest advertising tools (Werebemittel), at once the most public and the most secret." (Chris Hedges “American Fascists” 2006 p.16-7)
Chris Hedges “American Fascists” excerpt cited in DU

And she waits, like many believers, for a day when the forces that nearly destroyed her life are vanquished and rendered impotent.

Learned lives in the nation’s rust belt. The flight of manufacturing jobs has turned most of the old steel mill (Chris Hedges “American Fascists” 2006 p.42-3)

Before they seize power and establish a world according to their doctrines, totalitarian movements conjure up a lying world of consistency which is more adequate to the needs of the human mind than reality itself; in which, through sheer imagination, uprooted masses can feel at home and are spared the never-ending shocks which real life and real experiences deal to human beings and their expectations. The force possessed by totalitarian propaganda — before the movements have the power to drop iron curtains to prevent anyone’s disturbing, by the slightest reality, the gruesome quiet of an entirely imaginary world–lies in its ability to shut the masses off from the real world. (Chris Hedges “American Fascists” 2006 p.113)
“Totalitarianism: Part Three of The Origins of Totalitarianism” By Hannah Arendt
“Totalitarianism: Part Three of The Origins of Totalitarianism” By Hannah Arendt p.343-87 PDF scanned image no text

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“What would it look like?” I ask.

“It would be holdin’ the government in contempt,” he says. “It would be holdin’ the government to credibility and accountability. It would be holdin’ people accountable for their actions. That’s all I’m askin’ fer.
“They’re gonna destroy my state, and the government’s gonna give them the incentives to do it. My grandchildren and great-grandchildren won’t have any heritage here. They won’t have any mountain culture here, ’cause they’re wipin’ it out. I had the best time of my life not knowin’ I wasn’t rich or comfortable or wealthy. Who measures wealth? How do you do it? All the energy we have, all the people they destroyed, all the fatalities on these mine sites, and they keep makin’ reference to this as cheap energy.’
‘What keeps you going?’
‘I’m right. That’s all.’” (Chris Hedges “Days of Destruction, Days of Revolt” 2012 p.124-5)
Chris Hedges “Days of Destruction, Days of Revolt” also cited at “We got the numbers”

…. We thought about leavin', but my property has been devalued so much I can't get nothin' for it.
“The coal companies control everything, including what my kids learn in school,” Gunnoe says. “My son’s school textbook says that surface mining leaves the land in better condition once the mining is over. (Chris Hedges “Days of Destruction, Days of Revolt” 2012 p.148-9)

The food supply chain reaches from the squalid trailer parks and fields upward to the lavish suites of a handful of global corporations, such as Walmart, “Walmart makes farm workers poor,” read a recent statement from the Coalition of Immokalee Workers (CIW), an organization that advocates on behalf of farm workers. “But not just Walmart—all the major retail food brands that have grown at meteoric rates over the past thirty years have used the same volume purchasing strategy to drive their profits and growth at the expensive of the workers who make that growth possible.”

The United Food and Commercial Workers, in a report titled “Ending Wal-Mart’s Rural Stranglehold,” quoted John Tyson Foods, Inc., who, when confronted by an activist farmer on the low price paid for meat to the farm answered: “Walmart’s the problem. They dictate the price to us and we have no choice but to pay you less.”

The suppliers and growers, beset by the rising costs of pesticides, fertilizer, and chemicals, along with the diesel fuel that runs their farm equipment and pumping stations, have few other ways to save money. In 1992, according to U.S. Department of Agriculture statistics, the farm share of the U.S. consumer dollar spent on tomatoes was 40.8 percent. This means that forty cents of every dollar spent at the cash register on tomatoes went back to the farmer in 1992. By the end of the decade that number had fallen to 20.5 percent. …. The arid, sandy soil in southern Florida is devoid of plant nutrients. Growers saturate the soil with chemical fertilizers. More than one hundred herbicides and (Chris Hedges “Days of Destruction, Days of Revolt” 2012 p.182-3)
Chris Hedges “Days of Destruction, Days of Revolt” also cited at Zero Hedge
Chris Hedges “Days of Destruction, Days of Revolt” also cited at The Daily Beast
Chris Hedges “Days of Destruction, Days of Revolt” also cited on Tumblr

There are no excuses left. Either you join the revolt taking place on Wall Street and in the financial districts of other cities across the country or you stand on the wrong side of history. Either you obstruct, in the only form left to us, which is civil disobedience, the plundering by the criminal class on Wall Street and accelerated destruction of the ecosystem that sustains the human species, or become the passive enabler of a monstrous evil. Either you taste, feel and smell the intoxication of freedom and revolt or sink into the miasma of despair and apathy. Either you are a rebel or a slave. Chris Hedges “The Best Among Us” at Adbusters

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The political upheavals in the years before the war had put numerous populists and reformers in positions of power, including the election of Socialist mayors (Chris Hedges “Death of the Liberal Class” 2010 p.62-3)
Bullard proposed to Wilson that the government form a large “publicity bureau, which would constantly keep before the public the importance of supporting the men at the front. It would requisition the space on the front page of every newspaper; it would call for a draft of trained writers to feed Army stories to the public; it would create Corps of press agents..... In order to make a democracy fight wholeheartedly he resolved "it is necessary to make them understand the situation" (Chris Hedges “Death of the Liberal Class” 2010 p.68-71)
(Chris Hedges “Death of the Liberal Class” excerpts and related material at mass persuasion.blogspot

In 1908-1910, 58 percent of American cities had a press that was varied both in ownership and perspective,” Stuart Ewen wrote ….

Creel knew that his task of selling the war would require emasculating powerful social movements that not only had opposed the war but also had exposed the brutality and ruthlessness of major industrialists such as John D. Rockefeller. Labor unions, progressive journalists, pacifists, isolationists, the large number of immigrants who disliked the British, and some one million Socialists, led by Debs—who announced at Cooper Union in New York City on March 7, 1917, that he would rather be shot as a traitor than “go to war for Wall Street”15—would prove to be obstacles to Wilson’s war if left alone. The Industrial Workers of the World (IWW), or Wobblies, with some 100,000 members, and perhaps another 200,000 active supporters, denounced the war as capitalist exploitation, encouraged draft dodging, and called for strikes. (Chris Hedges “Death of the Liberal Class” 2010 p.74-5,78-9)
(Chris Hedges “Death of the Liberal Class” additional excerpts at Thomas Hartmann

Tenured academics are going the way of unionized steel workers. There are fewer and fewer tenure-track jobs—only about thirty-five percent of current ….

The final confrontation with the Times was sparked by events in Rockford Illinois at Rockford College, where I had been invited to give the 2003 commencement address. …..

The students, in the front, and the audience behind them sat in neat rows of folding chairs. There were black speakers mounted on poles to broadcast the talk.

“I want to speak to you today about war and empire,” I began.

The killing or at least the worst of it is over in Iraq. Although blood will continue to spill (Chris Hedges “Death of the Liberal Class” 2010 p.126-7)
(Chris Hedges “Death of the Liberal Class” 2010 p.128-9)
Text of the Rockford College graduation speech by Chris Hedges

“I’d written an article about Colgate-Palmolive having gone through a process to rebrand a type of toothpaste that they have bought in Asia that was named Darkie,” (Chris Hedges “Death of the Liberal Class” 2010 p.132-3)

South African justice Richard Goldstone was another high-profile apostate from the liberal class. On the international stage, he engendered a clash with the (Chris Hedges “Death of the Liberal Class” 2010 p.148-9)

It is only when radicals such as Stone exist that the commercial media wake from their slumber. Figures like Stone, in essence, shame the press into good journalism (Chris Hedges “Death of the Liberal Class” 2010 p.168-9)
Chris Hedges “Death of the Liberal Class” excerpts at Democratic Underground
The coup d'état we have undergone is beginning to fuel unrest and discontent. With its reformist and collaborative ethos, the liberal class lacks the capacity or the imagination to respond to this discontent. It has no ideas. Revolt, because of this, will come from the right, as it did in other eras of bankrupt liberalism in Nazi Germany, fascist Italy, and Tsarist Russia. That this revolt will be funded, organized, and manipulated by the corporate forces that caused the collapse is one of the tragic ironies of history. But the blame lies with the liberal class. Liberals, by standing for nothing, made possible the rise of inverted and perhaps soon classical totalitarianism.

As communities fragment under the weight of internal chaos and the increasingly dramatic changes caused by global warming and economic despair, they will face a difficult choice. They can retreat into a pure survivalist mode, a form of primitive tribalism, without linking themselves to the concentric circles of the wider community and the planet. This retreat will leave participants as morally and spiritually bankrupt as the corporate forces arrayed against us. It is imperative that, like the monasteries in the Middle Ages, communities nurture the intellectual and artistic traditions that make possible a civil society, humanism, and the common good. Access to parcels of agricultural land will be paramount. We will have to grasp, as the medieval monks did, that we cannot alter the larger culture around us, at least in the short term, but we may be able to retain the moral codes and culture for generations beyond ours. As those who retained their identity during slavery or the long night of twentieth-century fascism and communism discovered, resistance will be reduced to small, often imperceptible acts of defiance. Music, theatre, art, poetry, journalism, literature, dance, and the humanities, including the study of philosophy and history, will be the bulwarks that separate those who remain human from those who become savages.

We stand on the verge of one of the bleakest periods in human history, when the bright lights of civilizations will blink out and we will descend for decades, if not centuries, into barbarity. The elites, who successfully convinced us that we no longer possessed the capacity to understand the revealed truths presented before us or to fight back against the chaos caused by economic and environmental catastrophe, will use their resources to create privileged little islands where they will have access to security and goods denied to the rest of us. As long as the mass of bewildered and frightened people, fed images by the organs of mass propaganda that permit them to perpetually hallucinate, exist in this state of barbarism, they may periodically strike out with a blind fury against increased state repression, widespread poverty, and food shortages. But they will lack the ability and self-confidence to challenge in big and small ways the structures of control. The fantasy of widespread popular revolts and mass movements breaking the hegemony of the corporate state is just that — a fantasy.

Radical anarchists often grasp the extent of the rot in our cultural and political institutions. They know they must sever the tentacles of consumerism. But many also naively believe it can be countered with physical resistance and violence. There are debates within the anarchist movement about acceptable degrees of violent resistance. Some argue, for example, that we should limit ourselves to the destruction of property. But that is a dead end. Once you start using plastic explosives, innocent people get killed. The moment anarchic violence begins to disrupt the mechanisms of governance, the power elite will use these acts, however minor, as an excuse to employ disproportionate and ruthless force against real and suspected agitators, only fueling the fear and rage of the dispossessed.

There are times — and this moment in humane history may turn out to be one of them — when human beings are forced to respond to repression with violence. I was in Sarajevo during the war in Bosnia. We knew what the Serbian forces ringing the capital would do to us if they broke through the defenses and trench system around the besieged city. We had the examples of the Drina Valley or the city of Vukovar, where about a third of the Muslim inhabitants had been killed and the rest herded into refugee or displacement camps. The only choice, if one wanted to defend your family and community, was to pick up a weapon.
But violence has inherent problems. Those who proved most adept at defending Sarajevo came from the criminal class. When they were not shooting at Bosnian Serb forces, they were looting the apartments of ethnic Serbs in Sarajevo and often executing them, as well as terrorizing their fellow Muslims. When you ingest the poison of violence, even in a just cause, it corrupts, deforms, and perverts you.

Violence is also a drug. Those most addicted to violence are those who have access to weapons and a penchant for force. And killers rise to the surface of all armed movements, even those that could be defined as just, and contaminate them with the intoxicating and seductive power that comes with the capacity to kill and destroy. I have seen it in war after war. When you go down that road, you end up pitting your monsters against their monsters. And the sensitive, the humane, and the gentle, those with a propensity to nurture and protect life, are pushed aside and often murdered.

The romantic vision of war and violence is as prevalent among many on the radical left as it is in the mainstream culture. Those who resist with force cannot hope to defeat the corporate state. They will not sustain the cultural values that must be sustained if we are to have a future worth living. Armed resistance movements are always mutations of the violence that spawned them. I am not naive enough to think I could have avoided these armed movements had I been a landless Salvadoran or Guatemalan peasant, a Palestinian in Gaza, or a Muslim in Sarajevo. Threatened on all sides with violence and destruction, I probably would have taken up a gun. But violent response to repression, whether it achieves its goals or not, is counterproductive. It always results in the brutal sacrifice of innocents and the destruction of the culture and traditions that make us human. Violence must be avoided, although finally not at the expense of our own survival. Nonviolent acts of disobedience and the breaking of laws to disrupt the corporate assault on human life and the ecosystem will keep us whole. Once we use violence against violence, we enter a moral void.
Democracy, a system designed to challenge the status quo, has been corrupted to serve the status quo. The abject failure of activists and the liberal class to push corporate, industrialized states toward serious environmental reform, to thwart imperial adventurism, or to build a humane policy toward the world's poor stems from an inability to face these new configurations of power. (Chris Hedges “Death of the Liberal Class” 2010 p.196-8)
(Chris Hedges “Death of the Liberal Class” Chapter VI Rebelion
(Chris Hedges “Death of the Liberal Class” various excerpts

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The multiple failures that beset the country, from our mismanaged economy to our shredding of constitutional rights to our lack of universal health care to our imperial debacles in the Middle East, can be laid at the door of institutions that produce and sustain our educational elite. (Chris Hedges “The Empire of Illusion” 2009 p.89)

At the elite institution, those on the inside are told they are there because they are better than others. Most believe it. They see their money and their access to power as a natural extension of their talents and abilities, rather than the result of a (Chris Hedges “The Empire of Illusion” 2009 p.99)

John D. Rockefeller III, an alumnus, was our graduating speaker the year I finished prep school at Lincoln-Chaffee. The wealthy and powerful families in Boston, New York, or Los Angeles are molded by these institutions into a tribe. School, family, and entitlement effectively combine. The elites vacation together, ski at the same Swiss resorts, and know the names of the same restaurants in New York and Paris. They lunch at the same clubs and golf on the same greens. And by the time they finish an elite college, they have been conditioned to become part of the inner circle. They have obtained a confidence those on the outside often struggle to duplicate. And the elite, while they may not say so in public, disdain those who lack their polish and connections. Once they finish their schooling they have the means to barricade themselves in exclusive communities, places like Short Hills, New jersey, or Greenwich, Connecticut. They know few outside their elite circles. They may have contact with a mechanic in their garage or their doorman or a nanny or gardener or contractor, but these are stilted, insincere relationships between the powerful and the relatively powerless. The elite rarely confront genuine differences of opinion. They are not asked to examine the roles they play in society and the inequities of the structure that sustains them. They are cultured philistines. The sole basis for authority is wealth. And within these self-satisfied cocoons they think of themselves as caring, good people, which they often are, but only to other members of the elite or, at times, the few service workers who support their life style. The gross social injustices that condemn most African Americans to urban poverty and the working class to a subsistence level of existence, the imperial bullying that led to the wars in Iraq and Afghanistan, do not touch them. They engage in small, largely meaningless forays of charity, organized by their clubs or social groups, to give their lives a thin patina of goodness. They can live their entire lives in state of total self-delusion and perpetual childhood. "It is for people in such narrow milieux that the mass media can create a pseudo-world beyond, and a pseudo-world within themselves as well," wrote C. Wright Mills.
The people I loved most, my working-class family in Main, did not go to college. They were plumbers, post-office clerks, and mill workers. Most of the men were veterans. They lived frugal and hard lives. They were indulgent of my incessant reading and incompetence with tools, even my distaste for deer hunting, and they were a steady reminder that although I had been blessed with an opportunity that had been denied to them, I was not better or more intelligent. If you are poor, you have to work after high school or, in the case of my grandfather, before you finished high school. You serve in the military because it is one of the few jobs in which you can get health insurance and a decent salary. College is not an option. No one takes care of you. You have to do that for yourself. This is the most important difference between members of the working class and elites. If you are poor or a member of the working class, you are on your own.

The elite schools speak often of the diversity among their students. But they base diversity on race and ethnicity rather than on class. The admissions process, along with the staggering tuition costs, precludes most of the poor and the working class. The system is stacked against those who do not have parents with incomes and educations to play the game. When my son got his SAT scores back last year, we were surprised to find that his critical reading score was lower than his math score. He dislikes math. He is an avid and perceptive reader. And so we did what many educated, middle-class families do. We hired an expensive tutor from the Princeton Review-its deluxe SAT preparation package costs $7,000-who taught him the tricks and techniques of taking standardized testing. The undergraduate test-prep business takes in revenues of $726 million a year, up 25 percent from four years ago. The tutor told my son things like “stop thinking about whether the passage is true. You are wasting test time thinking about the ideas. Just spit back what they tell you.” His reading score went up 130 points, pushing his test scores into the highest percentile in the country. Had he somehow become smarter thanks to the tutoring? Was he suddenly a better reader because he could quickly regurgitate a passage rather than think about it or critique it? Had he become more intelligent? Is reading and answering multiple-choice questions while someone holds a stopwatch over you even an effective measure of intelligence? What about those families that do not have a few thousand dollars to hire a tutor? What chance do they have? Chris Hedges “The Empire of Illusion” variation cited at DU
Chris Hedges “The Empire of Illusion” variation cited by Stephanie
Chris Hedges “The Empire of Illusion” variation cited by the professor and the housewife
Chris Hedges “The Empire of Illusion” variation cited by Jim Marrs

Most of these students are so conditioned to success that they become afraid to take risks. They have been taught from a young age by zealous parents, schools, and institutional authorities what constitutes failure and success. They are socialized to obey. They obsess over grades and seek to please professors, even if what their professors teach is fatuous. The point is to get ahead, and getting ahead means deference to authority. Challenging authority is not a career advancer. (Chris Hedges “The Empire of Illusion” 2009 p.102-5)
Chris Hedges “The Empire of Illusion” 2009 variation at Alternet

Our health-care system is broken. There are 46 million Americans without coverage and tens of millions with inadequate policies that severely limit what kinds of procedures and treatments they can receive. Eighteen thousand people die, according to the Institute of Medicine, every year because they can't afford (Chris Hedges “The Empire of Illusion” 2009 p.156-7)

Corporations are ubiquitous parts of our lives, and those that own and run them want them to remain that way. We eat corporate food. We buy corporate clothes. We drive corporate cars. We buy our fuel from corporations. We borrow from, invest our retirement savings with, and take out our college loans with corporations and corporate banks. We are entertained, informed, and bombarded with advertisements by corporations. Many of us work for corporations. There are few aspects of life left that have not been taken over by corporations, from mail delivery to public utilities to our for-profit health-care system. These corporations have no loyalty to the country or workers. Our impoverishment feeds their profits. And profits, for corporations are all that count.

The corporation is designed to make money without regard to human life, the social good, or the impact of the corporation’s activities on the environment. Corporation bylaws impose a legal duty on corporate executives to make the largest profits possible for shareholders. In the 2003 documentary film The Corporation by Mark Achbar, Jennifer Abbott, and Joel Bakan, management guru Peter Drucker tells Bakan: “If you find an executive who wants to take on social responsibilities, fire him. Fast.” (Chris Hedges “The Empire of Illusion” 2009 p.162-4)
Chris Hedges “The Empire of Illusion” also cited at Truth dig
Chris Hedges “The Empire of Illusion” variation in speech not given at The Association of American Law Schools Annual Meeting January 2010

Whistle blowers who attempt to expose the abuses the government seeks to hide. This bill means we will never know the extent of the Bush white House’s violation of our civil liberties. Worst of all, since the bill gives the U.S. government a license to eavesdrop on our phone calls and E-mails, it effectively demolishes our right to privacy. These private communications can be stored and disseminated, not just to the U.S. government but to other governments as well. The bill will make it possible for those in power to identify and silence anyone who dares to make information public that defies official narritive or exposes fraud or abuse of power. But the telecommunications corporations, which spent some $15 million in lobbying fees, wanted the bill passed, so it was passed.

Being a courtier requires agility and eloquence. The most talented of them should at least be credited as persuasive actors. They entertain us. They make us feel good. They persuade us and pretend to be our friends. They are the smiley faces of a corporate state that has hijacked our government. When the corporations make their iron demands, these courtiers drop to their knees. They placate the telecommunications companies that want to be protected from lawsuits. They permit oil and gas companies to rake in obscene profits and keep in place the vast subsidies of corporate welfare doled out by the state. They allow our profit-driven health-care system to leave the uninsured and underinsured to suffer and die without proper care. We trust courtiers wearing face powder who deceive us in the name of journalism. We trust courtiers in our political parties who promise to fight for our interests even as they pass bill after bill to further corporate fraud and abuse. We confuse how we are made to feel about courtiers with real information, facts, and knowledge. This is the danger of a culture awash in lies and pseudo-events. The Democratic Party was able to refuse to impeach Bush and Cheney. It allows our government to spy on us without warrants or cause. It funnel billions of our taxpayer dollars to the firms that committed fraud. And it tells us that it cares about the protection of our civil rights and democracy. It is a form of collective abuse. And, as so often happens in the weird pathology of victim and victimizer, we keep coming back for more.
Our political and economic decline took place by way of a corporate drive for massive deregulation, the repeal of antitrust laws, and the country's radical transformation from a manufacturing economy to an economy of consumption. Franklin Delano Roosevelt recognized the danger this posed. He sent a message to Congress as long ago as April 29,1938, titled "Recommendations to the Congress to Curb Monopolies and the Concentration of Economic Power." In it he wrote:

The first truth is that the liberty of democracy is not safe if the people tolerate the growth of power to a point where it becomes stronger than the democratic state itself. That, in its essence, is fascism –ownership of government by an individual, by a group or by any other controlling private power. The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.”

The rise of the corporate state has grave political consequences, as we saw in Italy and Germany in the early part of the twentieth century. Antitrust laws not only regulate and control the marketplace. They also serve as bulwarks to protect democracy. And now that they are gone, now that we have a state run by and on behalf of corporations, we must expect inevitable and terrifying consequences.

As the pressure mounts, as this despair and impoverishment reach into larger and larger segments of the populace, the mechanisms of corporate and government control are being bolstered to prevent civil unrest and instability. The emergence of the corporate state always means the emergence of the security state.
(Chris Hedges “The Empire of Illusion” 2009 p.176-9)
Chris Hedges “The Empire of Illusion” Roosevelt quote cited at Roosevelt Institute
Chris Hedges “The Empire of Illusion” variation cited in 2008 truth dig article
(Chris Hedges “The Empire of Illusion” 2009 variation cited in 2008 truth dig article same?
Chris Hedges “The Empire of Illusion” variation cited at obodhiosophie.blogspot
Chris Hedges “The Empire of Illusion” variation in speech not given at The Association of American Law Schools Annual Meeting January 2010 see page 162-3

New Orleans Speech not given January 7, 2010

Corporate Governance, Fiduciary Duties and Social Responsibility

“[S]ocio-economics does not entail a commitment to any one paradigm or ideological position, but it is open to a range of thinking that treats economic behavior as involving the whole person and all facets of society within a community evolving natural context.”

In the 2003 film The Corporation by Mark Achbar, corporations are described as having may of the traits found in people clinically defined as psychopaths.

• Callous unconcern for the feelings for others
• Incapacity to maintain enduring relationships
• Reckless disregard for the safety of others
• Deceitfulness: repeated lying and conning of others for profit
• Incapacity to experience guilt
• Failure to conform to social norms with respect to lawful behavior.

The corporation is designed to make money without regard to human life, the social good, or the impact of the corporation’s activities on the environment. Corporation by laws impose a legal duty on corporate executives to make the largest profits possible for shareholders. Law and economics and cost benefit ratios provide the operational vocabulary.

This paper will suggest that a more spacious view of inveterate and unchanging legal concepts – such as the law of trusts – provide a framework for the construction of ethical corporations. We will suggest that ethical corporate behavior is characterized by three principal norms.

• Health – concern for the well being and biological survival of human participants
• Care of Infants – Concern with the long term - of sustainability
• Fairness – inter generational, inter national, and between the various components of the corporate constellation. Sharing of risks and benefits.

We will sketch the outlines of a possible path to ethical corporations in today’s United States.
#1 – One of the major challenges of our time is to assure to all the benefits of the wealth creating corporate system while at the same time protecting society from its adverse consequences.

#2 – The prevailing legal system in America describing the governance of corporations is largely a matter of state law. Its driving dynamic empowers and requires management to maximize shareholder values, as defined by the cost/benefit analyses so beloved by the law and economics community. This dynamic places incentive for corporations to “externalize liabilities” - to place as many of the costs of corporate functioning as possible on to others. In the film, The Corporation, I summarize: “The corporation is an externalizing machine, in the same way that a shark is a killing machine. There aren’t any questions of malevolence or of will. The enterprise has within, and the shark had within it, those characteristics that enable it to do that for which it is was designed.” The unhappy face of “federalism” seemingly condemns us to a “race to the bottom” in the effort to improve corporate standards – that has certainly been the fate of corporate governance attempted reforms over the last half century.

#3 – Management controls both the board of directors and the corporations’ lobbying and political contribution policies. This confers on management vast leverage in dealing with the state, its own creator and supervisor. The Supreme Court has removed all restraint on direct corporate involvement in politics. This has made “reform” of the prevailing corporate system most problematic. Indeed, years into the Crisis of 2009-2010 we are still experiencing endless equivocations and delays from the SEC, the Federal Reserve and other government agencies whose enforcement failures were such an important cause of the disasters. Reality is that we suffer from ownerless corporations – the single element in the corporate constellation adequately independent, motivated and skilled to require accountability from management has been muted. This phenomena has occurred partly as crime and partly as tragedy.

#4 – By sheer hazard, the preponderance of the outstanding voting stock of publicly traded companies in America is held by trustees - fiduciaries the extent of whose responsibilities and prerogatives are defined under existing federal laws – principally, The Employees’ Retirement Income Security Act of 1974 (ERISA) and The Investment Company Act of 1940 (Investment Company Act).

#5 - I asked Senator Jack Javitts, one of the “Fathers of ERISA” how they had managed to combine a rationalized retirement system with a legitimizing ownership base for portfolio companies. Never accused of modesty, Jack nonetheless was prompt to say: “Bob, we never thought of it.” Today, institutions own 76% of the total equity and yet J.W. Hurst’s forty year old description rings true. “As the number of institutional investors increased, some prophets said that these investors, moved by their stakes and informed by their expertise, would begin to play in earnest the supervisory roles of the legendary stockholder…Already under responsibility to those for whose benefit they held shares, professional fund managers did not seem anxious to incur further responsibilities to their fellow shareholder in the companies in which they invested. At bottom, the position seemed unstable…. Meanwhile the relative passivity of these big investors underlined the general failure of shareholding to supply the steady surveillance by which stockholders were supposed to legitimate the power wielded in business corporations.” (87-88)

Reality is that these big investors are not the flesh and blood individuals whom the theorists look to for legitimating private power. They are trustees, usually institutions, the scope of whose responsibility is set forth in enabling federal statutes which plainly were not at all focused on the implications on the governance of corporations. Most of these institutions are parts of financial conglomerates. Often, the relative financial importance of the fiduciary component in the conglomerate is less significant than other functions with the result that the inevitable conflicts of interest are resolved to the detriment of the beneficiaries of the employee benefit plans and mutual funds.

#6 - In the early 1970s, famous 2nd federal circuit court judge Henry J. Friendly ruled that institutional trusts were personal and could not be transferred. He was overruled in an amendment to the Securities Act in 1975. In 1985 UK Judge Robert Megarry ruled in Cowan v. Scargill that trustees must administer property exclusively for the benefit of participants. These two judicial recognitions of the association of ancient trust law and the newly emergent institutional investors are like road signs to a way long deserted. Money management became the most lucrative and important industry in the US and UK. Legal niceties defining trustee duties as expressed in ERISA – administer “for the exclusive purpose” and “for the sole benefit” of plan participants – were shunted aside into insignificance in the chase to maximize assets under management. The underlying notions of “fiduciary” which underlay the money management industry were unmistakably superseded by the appetite of the trustees to maximize the assets that they managed. Trustee has become an historical noun rather than a current mode of conduct.

#7 – The opportunity exists even today to recognize a federal law of trusts comprising the rights and obligations of fiduciaries under existing statutes – preeminently, those creating employee benefit plans, mutual funds and bank trusts. The President could convene the Chair of the SEC, the Secretary of Labor, the Chairman of the Federal Reserve and the Attorney General and announce simply: “It is in the public interest that the trustee owners of companies act like stewards for the welfare of their beneficial owners. This requires that all fiduciaries, the scope of whose responsibilities are defined by existing federal law, should require that the companies in their portfolios conduct their business so to optimize the long term value of the owners’ holdings. The Attorney General is here to evidence that this government intends to enforce the fiduciary responsibilities of the owners of America’s publicly traded companies.” It is within the current competency of those in office to manifest a new federal law of ownership that will have the effect of providing normative standards in the direction and management of companies that supersede the frail standards imposed by current state law and through vigorous and intelligent use of the power of ownership to create a new form of corporate governance.

#8 - Ownership rights and responsibilities are part of the “plan assets” which trustees are obligated to administer in the exclusive interest of beneficiaries. The US agencies responsible for enforcing beneficiaries’ rights have conspicuously been co-opted by the financial conglomerates they are supposed to regulate. The Investment Company Institute has notoriously dominated the SEC for decades and in recent times the Chamber of Commerce has elicited shameful fiduciary retreat from the Department of Labor. The emergence of fiduciaries as the “legendary shareholder” has been further inhibited by the reality that trustees are risk averse, trustees cannot be compensated for successfully taking risks and, in recent times, trustee organizations have largely been acquired by financial conglomerates with attending conflicts of interest. That said, a healthy wealth producing corporate system needs the involvement of informed owners.

#9 - Our chronicle of shareholder activism has brought us to the point where clearly the power exists in ownership to inform the process of managing the enterprise. What does not exist is a language of accountability. Managers are not bad people. They can manage what they can measure. It is up to the rest of us to reform the system of measurement from the manifest inadequacies of the present system of accounting. The primary obligation trustees, operating pursuant to the newly declared Federal Fiduciary Law, is to generate an holistic accounting system so that all corporations can have the confidence of functioning in a way compatible with society’s needs. Today’s managers could ethically manage tomorrow’s enterprises if we can internalize externalize costs and account appropriately for assets like intellectual property.

There has been encouraging progress in the field of environmental costs.

#10 - The United Nations Environment Program sponsored a report Fiduciary Responsibility – July 2009 – that directly confronts the obligation of trustees to consider what have traditionally been “external costs” ( at page 11). The law firm Freshfields expands the traditional scope of definition of fiduciary responsibility to include a spacious concept of operating rules. It concludes not only that this concept is within the competence of traditional trustees, it states clearly that it is their obligation - an obligation that is legally enforceable by beneficiaries.

1. Fiduciaries have a duty to consider more actively the adoption of responsible investment strategies
2. Fiduciaries must recognize that integrating ESG issues into investment and ownership processes is part of responsible investment, and is necessary to managing risk and evaluating opportunities for long-term investment.

3. Fiduciaries will increasingly come to understand the materiality of ESG issues and the systemic risk it poses, and the profound long-term costs of unsustainable development and its consequent impact on the long-term value of their investment portfolios.

4. Fiduciaries will increasingly apply pressure to their asset managers to develop robust investment strategies that integrate ESG issues into financial analysis, and to engage with companies in order to encourage more responsible and sustainable business practices.

The whole question of specifying the precise interests of shareholders is complicated by the diversity of the shareholder population, ranging from holders for a nano second pursuant to a computer algorithm to those permanent holders in index funds. A certain arbitrariness is necessary – many reasons, not the least of which is relative size, suggest that the typical beneficiary of a defined benefit plan with eighteen years before retirement and a desire not only to have the funds for a comfortable life, but also the desire to live in a clear, civil and conscious society. Designating such an individual beneficiary class will enable courts and enforcement agencies to put content into the new holistic accounting vocabulary.

#11 – J. D. Suss argues for the transformation of existing human systems: “From my perspective, a new, reinvigorated consciousness is the ideal fountainhead out of which truly citizen-centered global public policy, institutions, and institution-building can be born, nurtured, and maintained. From the stance of a world view that embraces a more relational/participatory consciousness the avaricious consumerist/ materialist, Cartesian frame-of-reference, e.g. the status quo values and agenda of a growing, global corpocracy would no longer be viable.”

#12 - By defining the scope of fiduciary responsibilities in increasingly holistic terms, which can be expressed in ethical terms - concern for health, a long term perspective, and fairness - the driving dynamic of corporations can be changed through the effective involvement of shareholders, acting in their legendary function as “stewards”.