Community & Corporation

Community and Corporation Ian Hughes 2005. A major contribution to the discussion of community was made in the 1887 by Ferdinand Tonnies, who used the German words Gemeinschaft (community) and Gesellschaft (society) with special meanings which have entered the language of social science. Tonnies assumed that all social relationships are created by human will, that is, we basically make relationships because we choose to. We make our relationships in interaction; they are not simply imposed on us by external forces. So relationships are formed then maintained through the intentions and choices of the people in those relationships. A relationship can be formed because those involved have a definite, specific end or purpose in mind and they decide to work together to achieve it, so a partnership or group is set up or this specific purpose only and the members are indifferent about the rest of each other’s lives. In this situation, Tonnies wrote that ‘rational will’ prevailed or, as we might put it in today’s language, instrumental rationality governs the relationship. On the other hand, people may come together in friendship just because they like each other. Not because they want to get some specific outcome from the relationship, but because the relationship is valued as an end in itself. In this case, Tonnies wrote that ‘natural will’ prevailed, or, as we might say, subjective feelings govern the relationship. These relationships and groups are based on friendship, on neighbourliness and on kinship relationships. In traditional villages, for example, we find local communities based in all three, friendship, locality and kinship. Because he was German, Tonnies used a German word Gemeinschaft to refer to these close and holistic social relationships, which were typical of pre-industrial village communities, and which are highly valued by their members. For Tonnies, Gemeinschaft exists by the subjective will of the members: "the very existence of Gemeinschaft rests in the consciousness of belonging together and the affirmation of the condition of mutual dependence" (Tonnies 1925: 69). Gemeinschaft is usually translated as 'community', and this concept, first published in 1887 is at the core of all sociological and scientific thinking about community since. In contrast to Gemeinschaft or community relationships, Gesellschaft refers to the more instrumental, purposeful types of relationship that are typical of industrial society. This objective society or association (Gesellschaft), where "reference is only to the objective fact of a unity based on common traits and activities and other external phenomena" (Tonnies 1925: 67) stands in contrast to community defined by shared feeling. According to Tonnies, entities based on objective common interest such as "ethnic community, community of speech, community of work" (Tonnies 1925: 67) are Gesellschaft (society), not Gemeinschaft (community), because they lack the element of shared feeling which is essential to Gemeinschaft. Gemeinschaft type relationships may be found in modern industrial society, but they do not typify the dominant type of relationship of that society. For Tonnies, Gemeinschaft exists by the subjective will of the members: "the very existence of Gemeinschaft rests in the consciousness of belonging together and the affirmation of the

condition of mutual dependence" (Tonnies 1925: 69). Although Tonnies did not see it, recent research (Putnam 2000) has shown that trust is the most important dimension of that subjective community bond. Contrasted to this community defined by shared feeling, is Tonnies's concept of the objective society or association (Gesellschaft), where "reference is only to the objective fact of a unity based on common traits and activities and other external phenomena" (Tonnies 1925: 67). This distinction between Gemeinschaft (community) and Gesellschaft (instrumental) is important for any student trying to come to grips with the complex confusion of ideas around community studies. Although it is not always referred to directly, this distinction underlies almost all sociological debate in this field. Tonnies himself drew on previous ideas of evolutionary development constructed in the Nineteenth century. Theories of evolution led to several varieties of "social Darwinism", in which social systems were seen as analogous to biological systems. Early theories led to a concept of a broad social evolution, progressing from small close-knit rural communities to large urban societies characterised by specialisation, role differentiation and alienation. A progress of evolutionary development was proposed from community to society; from face to face relationships in undifferentiated and unspecialised communities, to mass communications and impersonal relationships in large scale and highly differentiated societies. People living in these impersonal social structures try in various ways to recreate the feeling of the caring community of the past, by organising artificial, and more recently, virtual communities. But there are problems with the idea of evolution from community to society, from Gemeinschaft to Gesellschaft. As Tonnies emphasised, Gemeinschaft to Gesellschaft are not kinds of social organisation, but kinds of relationship. Both are found in every society. Close, personalised, face to face relationships do exist in modern cities, and impersonal exploitive relationships are found in small-scale traditional societies. Community is not obsolete in our post-modern international society, although new forms of community are constructed alongside older forms that continue to exist. Secondly, there is no evidence that impersonal and exploitative relationships did not exist in the past. Some ancient civilisations preceding Western culture were based on slavery, a very instrumental form of relationship between people. Exploitation is not new Also there is a long history of the exclusion of 'others' from 'us'. The definition of who is 'us' and who are the 'others' vary from time to time and from culture to culture, but the fact of non-inclusion is not new. Though early evolutionist concepts were simplistic, Gemeinschaft and Gesellschaft as ideal types of relationship are important concepts, and implicit evolutionary theories continue to have relevance in contemporary social theory, and there seems to be no doubt that in contemporary Western societies, Gesellschaft instrumental relationships are squeezing the few remaining signs of genuine community feeling out of our cities.

Economic Determinism Some sociologists have seen economic forces as central in shaping a geographical space into a particular rural or urban pattern. Castells (1976a, 1976b) studied the concrete ways in which the material elements of geographic space is shaped and articulated into the social structure as a whole. The question is about how geographic space becomes social space. For Castells the answer to this question lay in the surrounding economic and political structures. He asked: In what way does a particular social structure contribute to the creation of the area concerned? To answer this it is not enough to describe particular events; one must first have a theory of the creation of space (Castells 1976a: 50). This is a political economy perspective that tackled head-on the problem of understanding the marked differences between different places in the same society. The economic base is the single most important factor in explaining why Redfern is not like Wahroonga, or why Byron Bay is different to Wollongong. The interaction between broad and wide reaching social forces and local resources generates a niche in a wider society that is occupied by a local community with particular characteristics. A local community cannot function independently of the wider political and economic system of which it is a part, but the precise configuration of the local community also depends on the local resources in the locality. These might be the mineral deposits of Mt Isa, the sheltered harbour of Wollongong, the administrative offices located in Canberra by political decision, or the labour resources in western Sydney. Broadly speaking, the economic base of a community generally falls into one or more of the following categories ♦ ♦ ♦ ♦

Resource based towns located near mineral deposits; Industrial centres, based around manufacturing; Trading centres and ports; Centres of government and administration;

♦ Recently, a new economic base in consumerism, such as tourism centres. Most towns or cities will have some mixture of these, and localities within towns include residential areas and cultural services supporting the larger town of which they are a part. Towns and communities do not have an immutable economic base. Economic and other features change through history. The structural niche of the community is an important aspect of understanding its position in the wider economy. It provides the background against which day to day decision are made in the community, however, it does not tell us much about how local people interpret their experience of events, or how they construct their daily activities.

Community and Corporation So, we have mentioned two key ideas. One is that the social spaces, in which we live, s well as the psychical spaces, may be determined by economic forces more than anything else; and secondly, the two kinds of relationship, Gemeinschaft or community based on subjective feelings; and Gesellschaft, based in instrumental rationally. I am going to try to bring these ideas up to date, starting with Gesellschaft. But back into history, let’s see where Gesellschaft started. There have been instrumental relationships as far back in history as we can tell. Wealthy Roman households included slaves, who were bought and sold, to do specific jobs without pay. But Roman slaves lives in a society dominated by Gemeinschaft or community relationships. The Roman community was based on the household, consisting of the family, servants and slaves of the household head. The slaves were part of a household, that is, part of a community based on kinship. Similarly in ancient China, slaves and concubines became members of the family of their owner. Although they had low status, they were considered as part of an extended family. It is still the situation in many parts of the world that communities based on friendship, kinship and locality are the dominant social formation. When I worked in remote Aboriginal communities in Arnhem Land I was employed in a contractual relationship to perform stated duties. But over time I was given kinship relationships with members of the local communities. Over time, these became much more important than my contractual relationship. So, Tonnies called these community relationships based on friendship, kinship and locality ‘natural relationships.’ He believed this kind of relationship has been dominant throughout human evolution. So, what happened? Even a couple of hundred years ago, the dominant form of business firm was partnership. In a partnership two or more natural persons pool their money, knowledge, skill and maybe other resources, to run a larger business than each could as an individual. Partnerships are relatively small groups of people bonded together by personal loyalties and trust. In late sixteenth Century Europe a new form of business organisation was invented in Europe. It probably started in slightly different forms in several European centres about the same time, but the core feature was that whereas in partnerships the people who owned a business also ran it, the corporation separated ownership from management. One group of people, directors and managers, ran the firm while another group, shareholders, owned it. Early corporations were open to scams and abuses, like the South Sea Bubble. In 1710 the South Sea Company was formed in England to carry on trade between England and the Spanish colonies of South America, including slaves. The directors promised ‘fabulous profits’ with huge returns in gold and silver in exchange for common British exports such as cheese, sealing wax and pickles (Carswell 1060). Investors flocked to buy stock, but then the truth came out that the Directors knew nothing about South America, and that the Spanish Government were not going to give away their lucrative monopoly on trade with the colonies that they owned. Shareholders realised their shares were worthless, panicked and sold. Fortunes were lost, lives ruined. The directors of the South Sea Company were tried before parliament, and fined or jailed for ‘notorious fraud and

breach of trust’. In 1720 Parliament passed the South Sea Bubble Act which made it a criminal offence to create a company ‘presuming to be a corporate body’ and to issue ‘transferable stocks without legal authority.’ Of course, corporations did not stay banned. In the USA the number of Corporations increased a hundred fold from 33 to 328 in the decade between 1781 and 1790. In 1825 the South Sea Bubble Act was repealed in England, and the number of Corporations grew dramatically. The genius of the corporation is that it is a social formation with a single dimension. It has the power to combine the capital, the economic power, of large numbers of people, while making no other demands or promises to then. There was one disadvantage. The shareholders, who were the owners of a company, were personally liable without limit for the company’s debts. So if a company went broke, shareholders faced financial ruin as their homes, savings and other financial assets could be seized by creditors. In 1856, and around the same period in States of the USA, limited liability was introduced into law. Now, if a person invested $100 in a company, all they could lose was that $100, not their other assets. This meant that middle class families with moderate savings could now limit their risk, and so participate in the stock market. A huge new source of capital became available to corporations. But Governments still placed severe limits placed on corporations, because they were seen as potentially dangerous. Some American States started to complete with each other to attract large companies into their territory, and around the turn of the Twentieth Century three major restrictions were gradually removed. • Rules requiring corporations to incorporate only for narrowly defined purposes, to exist only for limited durations, and to operate only in specified locations were repealed • Controls on mergers and acquisitions were loosened, and • Rules that one corporation could not own stock or shares in another were abolished. These relaxations spread through the world. By the First World War, the US, Britain and other economies were transformed from networks of small individually owned enterprises competing among themselves, to being dominated by relatively few huge corporations, each owned by many shareholders. Note that the era of corporate capitalism is only about 100 years old. By the end of the Nineteenth Century, through a ‘bizarre legal alchemy’ (Bakan 2004: 16) courts had transformed the corporation into a legal ‘person’ with its own identity separate from the flesh-and-blood people who were its owners and managers. Just like a real person, the corporation can conduct business in its own name, buy and sell assets, employ workers, pay taxes, go to court to be sued and to sue. In law, the corporate person had taken the place of the real people who owned corporations. Thought of as if they are natural entities, corporations have been created as free individuals, entitled to the same protections in law as flesh-and-blood people.

So, is there any difference between a natural person and a corporation as a legal person? There are two important and related differences. 1. The basic or fundamental duty of a corporation is to return a profitable dividend to its shareholders. All the activities of a corporation are subject to that single guiding principal. The corporation has no ethical responsibility apart from returning a dividend to shareholders. 2. The corporation cannot be tried in criminal court. This is because the corporation has no moral or social responsibility to citizens, only contractual obligations that can be pursued through civil courts. Company law compels executives to prioritise the interests of their corporations and shareholders above all other interests, and forbids them from placing any other values such as social or environmental responsibility above the financial interests of shareholders. This does not mean that corporations are not philanthropic or environmentally sensitive. There are very many examples. Just this month Westpac topped the lists of business in both Australia and Britain as the company with the greatest level of social responsibility and awareness (SMH April 4, 2005). But that social responsibility is calculated to be in the interests of shareholders, and does not indicate a social conscience for its own sake. Many companies now talk about the triple bottom line – economic profits, social responsibility and environmental sustainability. This is quite real for many corporations, but it is only if the corporation is financially viable, and returning a profit to shareholders that resources can be available for social responsibility and environmental sustainability activities. In other words, there is a triple bottom line, but profit is the bottom line bottom line. Globalisation is driven by large corporations. The richest 20% in the world spend 86% of the world’s wealth. This would not be possible without corporations. The reach of corporate culture and values is deep and pervasive. For example, a recent internal email about School websites, included these words: 3.2 Schools: Within each of the Schools (hereafter referred to as Business Unit), the following needs to be identified:

Referring to Schools as business units is an example of the deep penetration of corporate culture and values into our society. So, to make out way back to the central topic of this lecture, the global culture shift, change in lifestyles, re-organisation of wealth, global warming and all would not be possible without the legal construction of corporations. And the legal person that is corporation is, at its heart, a relationship between people that is uni-dimensional. A corporation is a number of people who join together for one single purpose, to make money through investment. At the heart of the corporation is this one-dimensional objectively defined relationship, which stands in contrast to the community relationship of share feeling and trust.

When Tonnies first wrote Gemeinschaft und Gesellschaft in 1887 the corporation was not widely known, and was not a significant force in business. If he wrote his book now, I am sure that the English translation would be Community and Corporation. These are two opposing forms of human relationship, and it seems clear to me that the Corporation is dangerously out of control.

References Bakan, J. (2004). The Corporation: the pathological pursuit of profit and power. London: Constable. Carswell, J. (1960). The South Sea Bubble. London: Cresset. Castells, M. (1976). Is there an urban sociology? In C. Pickvance (Ed.), Urban Sociology. London: Methuen. Castells, M. (1976). Theory and ideology in urban sociology. In C. Pickvance (Ed.), Urban Sociology. London: Methuen. Putnam, R. (2000) Bowling Alone: The Collapse and Revival of American Community, Simon and Schuster. Tonnies, F. (1955). Community and Association (Gemeinschaft und Gesellschaft) (C. P. Loomis, Trans.). London: Routledge & Kegan Paul.