Egypt's revolution of 2011 seemed like a success. Mubarak resigned, parliament was disbanded, the constitution was suspended, and free elections were scheduled. All of this was accomplished while the military exercised considerable constraint, thus avoiding widespread killing. The whole world seemed to breathe a deep sigh of relief.
But Egypt's revolution had a critical flaw: It only addressed three branches of government: executive, legislative, and military. The judicial branch was ignored, and now Egypt's revolution is paying a severe price.
Supreme Constitutional Court of Egypt
Over the past year much has surfaced about Egypt's armed forces. They are quite independent from the executive branch, and its top officers are among the nation's wealthiest individuals. The military operates massive civilian businesses, including roads and housing construction, consumer goods manufacturing and distribution, resorts, and vast tracts of real estate. Most of the military's financial statements, along with its officers' incomes, are tightly held secrets. Some experts say it controls as much as forty percent of Egypt's economy. Indeed, Mubarak began accumulating his vast wealth, estimated in the tens of billions, as an officer in the air force. Without a doubt, the military is a central force in Egypt.
The world is just now realizing, however, that Egypt's judicial branch, headed by its Supreme Constitutional Court (SCC), is a critical fourth branch. It has played an essential role in supporting Egypt's wealthy few all along the way. The SCC is an independent and autonomous branch of government. Its decisions are final and become the law of the land. The SCC has its own budget which is not reviewed by any other branch. Its seven judges serve until the age of 65, and cannot be impeached for any reason whatsoever.
Recent trouble signs emerged when the SCC's president (akin to the Chief Justice of the Supreme Court in the US) assumed the lead role in governing the parliamentary and presidential elections. Past members of the ruling elite were favored, and popular candidates were forced to vie for limited openings. Massive protests were waged, and the SCC relented somewhat. But most of their rulings stood, and many popular candidates were squeezed out or even disqualified outright.
Most citizens regarded the final presidential election between Morsi and Shafiq as highly unsatisfying. Shafiq was a top member of the air force, and Morsi represented conservative Islamists from the Muslim Brotherhood. Completely missing from the final election was Egypt's highly popular secular voice. Indeed, Egypt's revolution was primarily driven by secularism, not a bias toward Islamic rule, and certainly not by a desire to return power to the old regime! In the end, Egypt's final presidential election ballot was a distortion created in large part by the SCC.
Two days before the final election, the SCC realized their strategy would likely backfire, and the Muslim Brotherhood would win the election. To avoid complete disaster, the SCC shocked the world by dissolving the popularly elected Egyptian parliament––a parliament that was elected in a free election process managed by them! Further, they reallocated significant executive and legislative powers to the military, leaving the election all but irrelevant.
The underlying, untold story from Egypt is this: The judicial system will use its legal power to support the wealthy few at any cost.
The lesson for those citizens who want to reduce income disparity here in the US: don't underestimate the power and willingness of our Supreme Court to do the same thing!
FDR launched the New Deal back in 1933 in response to the widespread income disparity that ultimately created the Great Depression. His New Deal was working, which meant that income disparity was declining. In a desperate effort to protect the interests of the wealthy few, our Supreme Court declared the New Deal unconstitutional. In retaliation, FDR held a famous fireside chat and presented his "court-packing" plan. All of a sudden the Court's viability was at stake. The Court immediately relented, and approved the New Deal in what was called "the switch in time that saved nine."
Or, take the Court's recent Citizens United
decisions. See the pattern? These, and many similar Court rulings intentionally help the wealthy few extract a grossly disproportionate share of wealth from our economy at the expense of everyone else.
The most recent and significant protest in the US against economic inequality, the Occupy movement, was shut down by the courts. Even though mayors issued the actual orders to close the camps and obstruct constitutional rights to peaceful assembly, they correctly assumed the courts would support them.
Judges are political beings, just like anyone else. They are biased members of the political process. The notion that judges can remain objective and impartial has been proven wrong, again and again. Until we make the judicial branch, like every other branch, accountable to the people, the courts will continue to support the wealthy few and undermine any efforts to establish a truly healthy economy.
For a comprehensive set of recommendations on how to make the judicial branch accountable, read Deep Economics, Part 5
The short version goes like this:
Once upon a time there was a king. He wanted to get richer. He used charters to divide his lands into provinces run by lords.
The charters allowed the king to retain ownership of his lands, and require the lords make regular payments to the king and protect the king's land.
King's College Charter, 1446
They also granted lords broad administrative rights over their provinces and the inhabitants, allowed them to keep excess provincial profits after paying the king, and protected them with the king's court and army.
The charters worked quite well for the king and his lords; they became wealthier. Other kings followed suit, and they became richer, too. But suffering increased for serfs. Before charters, they only had to make kings rich. Now they were forced to make kings and lords rich.
Serfs complained. They sought help from the courts, but found no justice. The first order of business for “equity courts” was to protect kings’ charters. Common citizen’s concerns were secondary.
After centuries of oppression, people revolted and created democratic governments. Kings’ charters were nullified. In the US, authority over charters was given to each state.
Initially, the states took charters seriously. They specified what corporations were allowed to do, and required corporations to serve the general welfare.
But the states did not create new equity codes to enforce their people-centered charters. Instead, they deferred to British equity code, which was heavily biased in favor of the wealthy few. Consequently, state efforts to regulate corporations were consistently undermined by the courts.
Eventually the states gave up. They allowed corporations to create charters that emphasized shareholders and ignored the interests of common citizens.
After more than a century of growth in corporate power, the US was crippled by the Great Depression. A massive effort to reduce corporate power was launched by FDR. Scores of liberal laws were written. More importantly, they were enforced by FDR’s eight Supreme Court appointees. An era of widespread prosperity was launched, and it lasted for thirty years.
But FDR’s Court appointees were gradually replaced by conservatives. Eisenhower had two appointments, and Nixon added four more. The balance of power on the Court radically shifted in favor of corporations. Since Nixon, the Court has consistently ruled in favor of corporations, culminating in recent decisions such as Citizens United and WalMart.
History teaches us that the road to serfdom is ultimately paved in conservative legal code; code that places the interests of the wealthy few above the interests of the general welfare.
There have been scores of people’s revolutions. They have nullified corporate charters, passed sweeping laws governing corporations, and appointed liberal judges. But such measures were never enough.
The essential ingredient is a liberal equity code that consistently places the interests of the many over the interests of the few. Only then can we reverse centuries of legal precedent favoring the wealthy few, and hope to enjoy centuries of prosperity for we the people.
You think public elections are distorted by the Supreme Court's Citizens United decision? Well, corporate law is worse. It's so loosey-goosey that boards of directors can ignore "no" votes.
That's right. Corporate law allows plurality voting, which means top vote-getters win regardless of how many people vote against them. For example, just last month shareholders voted 2-to-1 against a Sirius XM director candidate, but plurality rules let him win anyway.
The chancellor and vice chancellors of Delaware's Court of Chancery
Making matters worse, corporate law does not give shareholders the right to nominate candidates, or call for votes on critical issues. But, it explicitly gives this right to boards of directors. So most of the time, shareholders only vote on candidates listed by the board, or on proposals presented by the board. Lacking legal pressure to do otherwise, board members usually nominate their buddies, and they almost always make proposals they strongly favor. Candidates who might shake things up on the board rarely see the light of day, and the same goes for proposals that might cut CEO pay, increase rank-and-file wages, or help restore the environment.How did it get this bad? It's called the "race to the bottom." Early in the 1900's Delaware started competing for corporate revenue by creating a very biased legal code, called Title 8. It grants generous liability protection to shareholders and
directors, and does not tax out-of-state sales. As frosting on the cake, it totally ignors the rights of employees, local communities, or the environment. Corporations flocked to Delaware, which is now corporate home to almost a million corporations and almost two-thirds of the Fortune 500. Isn't it ironic, that the second smallest state in the Union is number one in corporate law? (For details, see Deep Economics Part 2
, Beware of Delaware.)The real secret to Delaware's success has been favoring directors over shareholders. Why? Because directors make the decision about where to incorporate. If Delaware does not keep them happy, they just leave for a more director-friendly state.
Delaware relies on corporate revenue more than any other state, so director satisfaction is more important in Delaware than any other state. Since corporate law tilts in favor of executives, is it any wonder their pay is so high?
Since corporate law ignores employees, is it any surprise that executives send jobs overseas, or pay non-viable wages? Since corporate law ignores the environment, is it any surprise that corporations do so much environmental damage?The solution starts with federalizing corporate
law. Now conservatives would have you believe this is tantamount to declaring war on freedom and America itself. But in truth, the only risk is that executive pay might decline, and boards might become more accountable to the people. Sounds like a risk worth taking to me.
For an entertaining puppet show on Delaware's Court of Chancery, watch the video below: