Monday, February 14, 2011

Testimony on Ohio House Bill 1

Ohio Senate Finance Committee - February 15, 2011

My name is Greg Coleridge. I’m the director of the Northeast Ohio American Friends Service Committee and author of the book Citizens over Corporations: A Brief History of Democracy in Ohio and Challenges to Freedom in the Future.

In 1837, the Ohio Legislature passed the Ohio Loan Law. This is one of the earliest examples of corporations gaining never-intended political power in our state.

The Ohio Loan Law provided funds to railroads, canals, and turnpike companies for construction and maintenance – loans to railroads and canals and funds for the purchase of stock in canal and turnpike companies.

The law greatly benefited Ohio’s development and permitted the state to have a different yet significant role in that development. Corporate influence on legislators, however, resulted in a few years in tremendous favoritism to certain industries (i.e. railroads over canals) and certain corporations (i.e. one railroad over another). This combination resulted in a $20 million state debt, increased taxes, and popular belief that government had been plundered (thus the nickname the “Plunder Law”) by corporate interests.

Stung by the rise in debt and loss of political power over corporations that the state legislature once possessed, the Plunder Law was repealed in 1842. That same year, the legislature also passed a general incorporation law that established among other provisions, that direct managers and stockholders of corporations were not immune from personal liability for the
corporation’s wrongdoing so long as the aggrieved party sued the corporation first.

These two acts together made corporate officials much more subordinate to the We the People – which was the intention of our state’s founders.

The public didn’t feel statutes went far enough to control corporations. A ballot proposal to hold a constitutional convention was approved statewide by 73% in 1850. As the Cleveland Plain Dealer put it, the convention provided an opportunity to pluck “the root of all political sin” from Ohio’s soil. In the words of one commentator, “the major motivating force [for the convention] was an anti-corporation sentiment.”

H.D. Clark, delegate to the Convention, stated the problem in these terms:
“The experiment has been tried in that body and almost every effort to engraft private responsibility on corporations has failed. The State is now strewed with the rotten, putrid carcasses of defunct corporations, and the effluvia is a stench in the nostrils of an outraged, swindled, community. The people of the county I represent have been scourged too much by corporations, to be willing to trust the Legislature.”

The sentiment at the convention was to “constitutionalize” laws controlling corporations – to transform statutes into constitutional provisions beyond the reach of corporations and their rented, leased, bought, and retained legislators.

The resulting 1851 revised Ohio Constitution, passed by voters, contained many strong provisions reasserting democratic control over corporations – affirming that they are, in fact, creations of the state.

Among them were Article XIII consists of seven sections placing general limits on the exercise of corporate power and Article VIII, specifically Section 4, which states (with amendment updates to the present): “The credit of the state shall not, in any manner, be given or loaned to, or in aid of, any individual association or corporation whatever; nor shall the state ever hereafter become a joint owner, or stockholder, in any company or association in this state, or elsewhere, formed for any purpose whatever.”

The language of this Amendment is very clear – no state money given or loaned to any corporation.

Wouldn’t that include the proposed Jobs Ohio corporation as defined in HB1?

Isn’t it unconstitutional for this proposed public corporation to take equity positions in private corporations?

Doesn’t that make the effort to privatize (or more descriptively, corporatize) part of the Ohio Department of Development a violation of the state constitution?

Didn’t We the People, those Ohioans who came before us who had experienced the financial disaster of the Plunder Law, abolish state investments and loans to corporations for a good reason?

And didn’t the citizens of Ohio, committed to self-governance, those who proposed and passed the 1851 Constitution, include Article VIII, Section 4 to prevent what is now being proposed legislatively in HB 1?

Our forebears who proposed and passed the 1851 Constitution were both wise and scathed from their experience to prevent turning over political power and public tax dollars to corporations.

HB1 is asking you to approve what you constitutionally do not have the authority to grant. Only the public, We the People, can amend the state constitution to give corporations more power and privileges.

None of us want a new Plunder Law. None of us want to see public tax dollars mixed up with private corporations. Hopefully, none of us as well want to violate a democratic provision of our state’s constitution.

HB1 may very well be a violation.


  1. Corporations are indeed children of the state and as such are just as bureaucratic and inefficient as their parent. Corporations are creations of the free market. Only government, by wielding its monopoly on the use of force, can absolve owners of the corporation of their responsibility for their actions in the market. Instead, government has deemed corporations to ne "artificial " persons, with constitutional rights, who are somehow responsible. As the late Murray N. Rothbard warned - "Government [and it's child the corporation] is the problem, not the solution ".

  2. Correction: corporations are NOT creations of the free market; they are creations of the state.