Money in politics. That is corporate capture. It’s the overt and covert influence of companies to affect the development of government policy in their favor though the power of money. Campaign finance, big-money donors, and favors to get later political favors.
But corporate capture is much more pervasive than just politics. Corporate thinking has co-opted much of our popular thinking about money and finance and, by extension, enterprise and the economy. Through a set of false equivalencies, corporate capture decides how we live in society in nature:
- Enterprise IS the corporation.
- Investment IS buying and selling shares.
- Growth IS good.
As exaggerations, they are right to a point. But only to a point.
Consider, for example, the dictum of economist Milton Friedman, who famously said in 1970 that the only social responsibility of corporation is to grow shareholder value.
In fact, with the exception noted in the sidebar, society does not impose any social responsibilities on any of the many forms of legal ownership of enterprise.
But finance does.
Corporate finance, in particular, demands a social contract with businesses (public traded corporations) that choose to finance through securitization for speculation on share price. The gravamen of that contract, as we say in the law, is that the corporation must grow its share price. Rising share prices are what attracts new buyers into the markets. New buyers are what allow current sellers to sell. A market that delivers a buyer who wants to buy to every seller who wants to sell is a correctly functioning – and therefore also profitably – market. Instant liquidity on demand – a certain sale, albeit at an uncertain price. That is the essential value proposition of the market price speculation financing system. That is the essence of speculative finance.
Corporate finance – the Wall Street system – requires business to single-mindedly pursue growth in profits, even at the expense of social good. Because? Growth in profits is what supports growth in share prices, and growth in share prices is what supports market liquidity, and market liquidity is what makes corporate finance profitable.
This is the myth of growth as the pathway to prosperity for society more generally. We accept it as our social norm. We let it influence society through corporate capture. It’s what puts business and government in conflict with the cost of managing global pandemics, like climate.
There is a new form of finance, fiduciary finance as proposed by Bank of Nature, that actually requires social responsibility in the conduct of commerce to meet its fiduciary duties of intergenerational loyalty. This is the form of finance that can capitalize action on climate and other challenges in our changing times that require action at the scale of climate.