This essay originally appeared in The Huffington Post.

My mother used to have a cat that wasn’t declawed. As such, most of the plushier furniture items around the house inevitably ended up shredded. She would take the cat to the veterinarian now and then for the claws to be clipped down, which was effective for a time before they grew back, after which point more evisceration would ensue. Cats do this not as some devious Garfieldian machination (the comic strip, not the president), but rather as a means for sharpening, or upkeep, driven by an irresistible evolutionary compulsion. Thus for the maintenance of their claws, they are beholden to an uncontrollable and sometimes destructive urge.

The same can be said for contemporary finance and for our legally codified concept of the limited liability, profit-driven corporation more generally. The current financial regulatory reforms being hashed out in Congress seek to clip Wall Street’s claws, but it is only a matter of time before those claws grow back in the form of increasingly complex financial innovations. Not all of these will be “bad” ideas. Some will efficiently and effectively connect resources to production. But if history shows anything, it’s that eventually a profit-maximizing instrument or nascent investment area will emerge that wrecks the system all over again.

Perhaps the most troubling reality in the 21st Century is that our economics now dictates our cultural values, rather than the reverse, where we the people would decide how resources, production, and mutual prosperity should be systematized to achieve the best society for all. Like the cat’s claws, the corporation’s profit motive is its only tool for survival. The casino culture of the financial system has spawned an expectation for unrealistic year-to-year growth in investors of all forms, demanding that managers increase profits exponentially and unsustainably, lest they be canned and replaced.

To account for that ever increasing demand — and constrained by laws that prohibit CEOs to take any action that isn’t in the direct fiduciary interest of shareholders — corporations are forced to externalize costs whenever possible, regardless of social or environmental detriment. This process takes many forms, such as shortcuts and cutting corners (British Petroleum), or outsourcing to more unsavory elements (sweat shops), to name just two.

The corporation is the predominant institution in Western society, and there is indeed a yin to its yang. Corporations provide vital jobs, ideas, products, and services. But these are all incidental and secondary to the profit drive. If a corporation does good for goodness’ sake then, by law, it runs the risk of being sued by its shareholders. As its greatest champion, Milton Friedman, told author Joel Bakan: “Its interests are the interests of its stockholders. Now, beyond that should it spend the stockholders’ money for purposes which it regards as socially responsible but which it cannot connect to its bottom line? The answer I would say is no.”

When Adam Smith introduced the paradigmatic notion of a self-guiding economy through open and free markets, he based it on select, necessary conditions. In order to most efficiently and effectively allocate resources, encourage innovation and production, and provide the widest, most balanced social benefits to all, the market must be comprised of small buyers and sellers that have equal access to information and that operate on a level playing field. And for investing in future production and wealth creation, capital must remain within the borders of the state, with balanced trade and an ample link between savings and future production, rather than speculation.

That vision now looks hopelessly prelapsarian. The oak tree that grew from Smith’s acorn has none of those necessary conditions. Instead there are multinational corporations operating between and above national borders with the perverse state-provided ability to stifle competition and with the added advantage of munificent subsidies, tax breaks, contracts and lax regulation — all of which directly stem from decades of carefully calculated public relations crusades and a collective corporate cannonball into the deep end of moneyed politics.

Rather than capital being invested productively for future creation and innovation, the collective wealth of society is instead slowly sucked out and squirreled away through financial speculation by a wealthy minority, who have the means to make money from money. Economic bubbles based on imaginary prosperity inflate and pop with increasing regularity, and the victims are always those with no horse in the race nor any ace up the sleeve. Those with immunity are the cherished wunderkinds who planted the bomb in the first place. In any other society they would be hard at work curing cancer, but in this one they are cultivated and harvested from the top educational institutions to cleverly shift paper around while the great empire that conceived them rots from the inside out.

The mechanism developed to realize Adam Smith’s free market vision — the corporation — has come quite a ways; from manufacturing and innovating America through the tumultuous early days of the industrial era in the 19th Century to the very top of the world order in the 20th. Our mirage of affluence has astounded rivals and admirers alike and set the standard for the rest of the globe.

But what was once a boon now feels more like a cancer. A 30,000-foot view shows a system that does not satisfy the ideals of a just society. Corporate brokered state policies and all manner of cynically creative cost-cutting techniques — amplified during the latter half of the 20th Century — have left the medium annual earnings for Americans stagnant since the 1970s. Likewise, the poverty rate in America has not budged for four decades. The United States citizenry, as well as its government, is abominably in debt from a decades long barrage of incessant and pervasive commercialization that makes a point of targeting children and afflicts its prey with an insatiable appetite for frivolous material extravagances.

Those extravagances are made in China, or so the cliché goes. Unlike the halcyon days of manufacturative and innovative corporations creating prosperity we now have an economy driven almost entirely by the service sector — around 80 percent. Of that 80 percent, 41 percent of corporate service sector profits just before the 2008 financial collapse went to the financial industry, which distorts, destroys, and rearranges wealth notably more than it creates it. This methodical rearrangement is hardly a two-way street: the richest 25th percentile of society holds over 80 percent of the wealth — and the very top 1 percent holds the combined total of the bottom 90 percent. The wealth inequality in America today is unprecedented, approaching that of a banana republic or petrostate.

It is in light of this reality that we must reappraise where we’ve been, where we are, and where we are going as a culture and as a people. The modern corporate economy’s innate predilection for rapid growth is based unsustainably on finite environmental and human resources. Economists boil down a society’s wealth and economic gains with single figures, such as the Gross Domestic Product (the measure of all transacted goods and services), but fail to emphasize that GDP can increase as much from destruction as from production. A state’s GDP can rise just as much from using more fossil fuels, porn and cigarettes as from new clean technologies, life-saving medical devices, and higher education. As David C. Korten pointed out over a decade ago, “It is thus quite possible by an economist’s measure for a country’s economy to be growing briskly even as it is suffering rapid erosion of its future productive potential and the well-being of its citizens.”

Regardless of how far it goes, financial reform in Congress won’t fix any of this, and the figures of wealth disparity, poverty, and middle-class decline are just the tip of the iceberg if the oligarchic trend continues unimpeded. Corporations will always be driven by profit; and if the benefit of externalizing expenses in the form of environmental or humanitarian conspurcations outweighs the cost of the punishment imposed by the state, then nothing will change.

We’re now at a fork in the road for our “advanced” society — we can either trim the cat’s claws, or we can try to conceive of a way to blunt them for good (or remove them altogether). Financial reform — less some kind of corporation reform — won’t alter Western capitalism’s Icarus trajectory.

Such further reaching reform would fundamentally alter the cost-benefit analysis in which any corporation is required to engage. Penalties for social and environmental depravity would be increased to the degree of becoming an existential deterrent — only then will corporations think twice before cutting corners. Ideal measures include but are not limited to policies that institutionalize the act of revoking an abusive corporation’s charter (right now this is just an empty threat); or that prosecute and incarcerate criminal executives with greater severity. We won’t see any of this anytime soon, but it doesn’t mean it’s not an option.

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