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The East India Company and the 2012 Elections

One of the repeated accusations the GOP hurls at President Barack Obama is that he is a socialist and favors more government intrusion into our lives — of course what they mean is more government intrusion into business. In the context of American history, however, this accusation doesn't make much sense. In order to understand why, we need to go back to New Year's Eve of the year 1600.

Since 1580, Queen Elizabeth had been the largest shareholder in the Golden Hind, the ship of buccaneer and slave trader Sir Francis Drake. This investment had worked out quite well for her, but she wanted a more permanent way to protect her income stream from parliamentary oversight. So, on Dec. 31, 1600, she authorized 218 London merchants and noblemen to create a corporation, the East India Company.

Thus dawned the era of the modern corporation. For the next 200 years, corporate history was the history of the EIC. This corporation wielded more power than any business today could imagine. It is incorrect to state that Britain ruled the world with the assistance of the EIC. It is more correct to say that the EIC ruled the world. "At its height," says New Internationalist magazine, "it ruled over a fifth of the world's population with a private army of a quarter of a million."

This included the American colonies. The EIC exercised sufficient power in America that it can rightly be claimed that the American Revolution was not just a rebellion against the Crown; it was also a rebellion against a particular British corporation. For instance, although we are often taught that the Boston Tea Party was a protest against "taxation without representation," this is technically incorrect. The Bostonians who dumped over $1 million worth of tea (in today's currency) into Boston Harbor in 1773 were actually protesting against the unfair business practices of the East India Company, an importer and vender of tea.

Because of their unsavory encounter with European corporations, primarily the EIC, early Americans distrusted corporations and chartered very few of them. In 1816, Thomas Jefferson wrote, "I hope we shall … crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."

Ralph Estes observed that 150 years ago there were no large corporations in America, and those corporations that did exist were chartered for a very different reason than we see in corporate America today. In the early days of the Republic, "Corporations were chartered to serve society. They were created for a specific public purpose, to perform a task that individual citizens or the established but limited governments could not do better. Even then they were usually limited to 20 or fewer years of life."

In essence, corporations were an extension of government, created by the people to serve the needs of the people, not to enrich a small cadre of executives and aristocrats. This historical perspective makes today's conservative cries of "socialism" sound rather silly. One of the original functions of government, after all, was not just to create corporations, but to control them and to channel their activities into avenues that would serve public purposes.

Corporations still exist as a creation of government, by the grace of the people, but for many years now, the tail has been wagging the dog. Instead of having a government that charters corporations to serve public purposes, we have a government of the corporation, by the corporation and for the corporation. Corporations and the aristocratic class that owns and manages them are in control. We now have an upside-down economy, and although both major parties are owned by their corporate masters, it is the Republican Party in particular that has staked out its ground as the great defender of corporate autonomy — not a particularly American stance, at least if you take the long view of history.

Roger Terry is the author of "Economic Insanity: How Growth-Driven Capitalism Is Devouring the American Dream."