The Place of Corporate Lawmaking in American Society

Loyola Consumer Law Review, Dec 1010

By Fenner Stewart Jr., Published on 01/01/10

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The Place of Corporate Lawmaking in American Society

hTe P lace of Corporate Lawmaking in American Society Fenner Stewart Jr. 0 1 0 Fenner Stewart Jr. Th e Place of Corporate Lawmaking in American Society , 23 Loy. Consumer L. Rev. 147 (2010). Available at: 1 Adj. Prof. , York University, Osgoode Hall Law School Part of the Consumer Protection Law Commons Recommended Citation - Article 3 Follow this and additional works at: http://lawecommons.luc.edu/lclr FennerStewart, Jr.* I. Introduction can be traced to Karl T hPeolacnoynic'sepTt heofGr"eeamtTberdadnesdfonremssa"tion.' The book is a history of the commoditization of English society from the eighteenth century forward, recounting how markets became unstitched from the fabric of society. As markets became more distinct from everyday life, society began to change in order to meet trending economic needs. One example of this transformation was the enclosure of English farmlands and the end of the ancient system of farming on land that was considered free for the use of all. This created a radical disruption in social function. Without farmland, thousands were forced to move to sites of industrial production, generating a radical shift in society from traditional agrarian life to one that was dominated by factory work. In other words, Polanyi's book explains how markets became disembedded from society and then how these disembedded markets altered social activities as they became re-embedded into market function.2 Polanyi never believed that society could become completely embedded within the market function, concluding that society's members would never tolerate a market function which completely overwhelmed their social needs. This resistance * B.A., University of Prince Edward Island; LL.B. & LL.M., University of British Columbia; Ph.D. Candidate & Adjunct Professor, York University Osgoode Hall Law School; Academic Director 2009-2010, CLPE Comparative Research in Law & Political Economy Network (www.comparativeresearch.net). I am grateful to Peer Zumbansen and Cynthia Williams for their comments on this paper, and also to Stephen Bainbridge and Mark Roe for their comments on an earlier version. 'KARL POLANYI, THE GREAT TRANSFORMATION (2d ed. 2001). 2 Mark Granovetter, Economic Action and Social Structure: The Problem of Embeddedness, 91 AM. J. Soc. 481, 482 (1985). to market pressures is what Polanyi called the "double movement." 3 Simon Deakin has elaborated on Polanyi's idea of the double movement, explaining how it also operates in reverse. In other words, market actors will resist projects for greater equality when these social demands compromise market functionality. The balance between favoring the needs of markets with the needs of society has fluctuated throughout the twentieth century.s According to Deakin, the pendulum is swinging toward the modern economy's increased need for markets as societal governance has become ever more closely tied to the expectations of investors.' Today, certainly, the pendulum appears to be swinging in a different yet still unknown direction.' In his seminal article of 1985, Mark Granovetter elaborated upon Polanyi's disembedded market theory and expanded it into a more complete (and complex) sociological theory of how embedded social behavior affects economic institutions. Granovetter argued that to adequately study economic institutions, like corporations, one must take into consideration how the behavior of such institutions is "constrained by ongoing social relations." 9 Granovetter's central contention was that when economic reasoning ignores an institution's social embeddedness, such reasoning is blinded to the actual social relationships within it and, accordingly, it is unlikely one will be able to understand how a particular institution functions (or fails to function).10 Granovetter's call to scrutinize the social relationships that affect an organization's function has been seen as a sociological plea explaining why institutions behave as they do. He criticized the assumptions of New Institutional Economics by highlighting how actual social networks inside and outside of the corporation operate in ways that handcuff economic thought. For a detailed commentary on the double movement, see Fred Block, Introduction to POLANYI, supranote 1, at xxiii-xxvii. 4 Simon Deakin, The. Rise of Finance: What Is It, What Is Driving It, What Might Stop It? A Comment on "Financeand Labor: Perspectives on Risk, Inequality and Democracy " by Sanford Jacoby, 30 COmP. LAB. L. & POL'Y 67, 67-69 (2008). s Block, supranote 3, at xxvii - xxvix. 6 See Deakin, supranote 4, at 67-68. See Lawrence Mitchell, Financialism:A Lecture Delivered at Creighton University School of Law, 43 CREIGHTON L. REv. 323 (2009). ' Granovetter, supra note 2. 9Id. at 482. 10Id. at 481-82. Specifically, Granovetter took issue with Oliver Williamson's theory of transaction costs, arguing that while there was a certain analytical value to Williamson's eventually highly influential market/hiera (...truncated)


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Fenner Stewart Jr.. The Place of Corporate Lawmaking in American Society, Loyola Consumer Law Review, 1010, pp. 147, Volume 23, Issue 2,