Book Review:

The Divine Right of Capital

A Re-examination of the Corporate Idea

Marjorie Kelly / Berret-Koehler 2001 /Reviewed by Arthur Edwards

Marjorie Kelly is a writer on corporate social responsibility and co-founder of `Business Ethics' magazine. Having believed for many years that `voluntary change by progressive business people would transform capitalism', she now proposes that only a systemic change in our institutional arrangements can really be effective.

The term `divine right' is normally used to refer to a king's self-presumed entitlement to absolute rule. Kelly suggests that corporate power can be viewed in the same light and she forcefully challenges the idea that only the interests of capital should determine how economic life is organised.

Over the past five years, there has been a plethora of books casting a critical eye over the corporate world, most of them have been worthy, but this one really has some bite. One thing that particularly singles out Marjorie Kelly from the crowd of corporate critics is that she is neither a socialist nor a revisionist. She wants a development of capitalism not a cancellation of it, which means embracing a vision of capitalism `not as a system for capital, but a system of capital.'

The book is in two halves. The first six chapters are devoted to illustrating parallel symptoms of the age of feudal aristocracy and the corporate age (economic aristocracy); and a further six to suggesting case by case how each symptom might be treated (economic democracy).

The idea of a feudal aristocracy no longer serving a valid function is taken as the central metaphor of the book, with multitudinous parallels drawn between the modern corporate investor and the out-moded feudal lord. It is around this notion that the structure of its argument is organised, giving the reader's imagination access to a key organising notion of our society, namely, that property rights reign supreme. Though misplaced in the corporate context, our persistent use of this notion engenders its continuing acceptance.

Kelly uses the term `economic sovereignty', demonstrating that this sovereignty (rather than being based on some sort of power sharing) belongs entirely to wealth. Moreover, she points out that this wealth concentration is intensifying year on year with corporate profits growing at 10% compared to US GDP growth of 3% (1991 to 1999). To illustrate the implication of this she asks: `If one group's slice of the pie is growing three times as fast as the pie itself... who is eating the pie?' Furthermore, corporate income tax revenues have fallen from 25% of the total in the 1960s to 9% today and corporate subsidies and sweeteners constitute a growing drain on the public purse. Corporations are giving less and taking more.

By `economic democracy', Kelly wants us to see shareholder primacy as only the middle chapter in the history of economic sovereignty not the ultimate chapter. So the second part of the book suggests approaches (some tried and tested, others merely conceived) whereby the six tenets of the first half might be challenged. In doing this she aims to cover many angles: making case studies of initiatives which have proved successful, suggesting points where a chink in the capitalist armour might be exploited, describing how the present law could be made use of (and how it should be changed), promoting education about corporate history, giving us a compass (not a map) of where we might be going, provoking our capacity to think differently about the situation we are in, and above all declaring that what is needed is `not a blueprint but the fire in the belly to get us moving.1

Kelly's book is a far-reaching review of capitalism's development to date by an author of note. From an associative economic point of view, however, much of it maintains the fallacy that only labour is a source of economic value, whereas creativity is as real a source, if not more so today. It is often the absence of understanding for the economic link between capital and creativity that allows capital to become antithetical to labour; causing might to reign where light should. Much of Kelly's analysis approaches this conception, but its overall tenor maintains the antagonism between capital and labour. This may hamper the change she is seeking, since those knowledgeable in finance may sense that Kelly's critique is socialist, the very scent of which may cause them to close their minds.

Further, the term `economic democracy' is connected with Major Douglas's `Social Credit'. Does Kelly mean to make this connection with all that it implies? Probably not, but it is a confusion best avoided. More significant is the implication that the economy should be run on a democratic basis or be subject to democratic rules, meaning the principle that decisions are reached by voting and voting rights are allocated on the basis of universal suffrage.

The contention that the principle of democracy is valid in the economic realm will seem questionable to anyone with a background in associative economics. On the other hand, although Kelly's uses the term `economic democracy' as if this is the goal, she does not spell out exactly how it should be understood. If the problem is the hold on power of those who `own' capital, the solution is not the democratisation of that power. Rather, as associative economics understands it, since capital represents the potential to make ideas a reality, it should be accessible to people with ideas and the genius to realise them but it should not be offered in a form that controls people or distorts their ideas. The way forward is not to democratise economic power, therefore, but to neutralise the power of capital ownership by bringing capital into healthy relationship to the creativity it represents.

In conclusion, this book deserves a second read, and once you have read it again you will probably want to mention it to your friends.

— first appeared in e2, Sep/Oct 2002

[1 Labour ... Capital ... Creativity ... Economic value: What is missing, fundamentally, as in so many discussions of ‘economic value’, is raw materials and waste sinks — Nature.  [BL]