Jeremy Corbyn’s economic ideas, as I have explained previously, owe a great deal to the intellectual battles fought between the British Left and Right during the 1970s and the 1980s. Corbyn, alas, is not the only leftist whose ideas are firmly stuck in the past.
On the other side of the Atlantic, the US Left is busy revisiting 100 year-old concerns from the Progressive Era. Listening to the leaders of the contemporary Democratic Party, you might think that the power and influence of the American corporation is the greatest threat to democracy. But where did that concern come from and should we really be worried?
The modern corporation is a product of the Industrial Revolution, which started in Great Britain in the 18th century, spread to the United States and then, somewhat later, to continental Europe. Prior to the Industrial Revolution, the main unit of production was the family, not a company. Of course, companies have existed for thousands of years and we can trace the first joint economic ventures (ie “proto-companies”) all the way back to ancient Greece and Rome. Until the modern era, however, most national output came from family farms in rural areas and artisan families in towns. Consequently, in the pre-industrial era, the only serious concentration of wealth and power was in the hands of the predatory nobility.
The Industrial Revolution changed all that. Old fuels (wood and peat) gave way to new fuels (coal and oil), old sources of power (wind and water) gave way to new sources of power (steam and electricity) and old machines (the spinning wheel and hand loom) gave way to new machines (the spinning jenny and power loom). The modern factory was born. Factories were located near towns, because towns were located near rivers and factories, like towns, needed access to large amounts of water.
A massive increase in agricultural productivity, which was facilitated by the use of guano and, later, chemical fertilisers, enabled workers to leave the countryside for the factories, leading to urbanisation. By providing goods to a swelling population of urban dwellers with disposable incomes, factories grew and fortunes were made.
By the end of the 19th century, the West could boast a coterie of self-made millionaires, who were neither kings nor nobility. That was a good thing, but it caught the ruling classes by surprise. The rulers’ concern about the growing economic and political influence of the rich capitalists (Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, J. P. Morgan, Henry Ford, etc) was exacerbated by the fact that no one knew just how large corporations could (and would) grow.
At that point, large corporate concerns were new and understanding of the life (and death) of a corporation was minimal. Many people simply assumed that corporations would continue to grow indefinitely. Similarly, many people assumed that wealth and power would accrue in the hands of a tiny group of millionaires or “monopolists”. Thomas Piketty, a French economist, would revisit some of these concepts 100 years later in his book Capital in the 21st Century.
Concern about the growing power of the capitalists and their corporations was one of the reasons for the rise of the progressive movement in the United States. In the late 19th century and start of the 20th century, progressivism was a bi-partisan phenomenon.
The Republican President, Teddy Roosevelt (1901 – 1909), for example, noted:
“Corporate expenditures for political purposes, and especially such expenditures by public-service corporations, have supplied one of the principal sources of corruption in our political affairs.”
According to Roosevelt:
“Those who oppose reform will do well to remember that ruin in its worst form is inevitable if our national life brings us nothing better than swollen fortunes for the few and the triumph in both politics and business of a sordid and selfish materialism.”
His Democratic successor, Woodrow Wilson (1913 – 1921), stated:
“I speak, for the moment, of the control over the government exercised by Big Business. Behind the whole subject, of course, is the truth that, in the new order, government and business must be associated closely. But that association is at present of a nature absolutely intolerable; the precedence is wrong, the association is upside down. Our government has been for the past few years under the control of heads of great allied corporations with special interests.”
So how did the United States fare in the last 100 years? Did big business succeed in monopolizing America’s wealth and democracy? Let’s look at evidence.
First and foremost, we are much more democratic than before. Women (52 per cent of the population) were enfranchised in 1920. Blacks (13 per cent of the population) were liberated from oppressive Jim Crow legislation by a series of civil rights laws. (I cannot help but note that upon assuming the presidency, Woodrow Wilson, a southern Democrat and one of the torchbearers of progressivism, kicked all blacks out of the US Civil Service.) The once common anti-Jewish, anti-Irish and anti-Italian sentiments and discriminatory practices are gone. Out of the nine US Supreme Court Justices, three are Jews and five are Catholics.
With regard to the monopolisation of wealth, America today boasts 10.8 million millionaires – a record. Surely that is a good thing. After all, the rich pay most of the taxes. In 1913, the top federal income tax bracket was 7 per cent. Today it is 39.6 per cent.
The income threshold for entering the top income tax bracket in 1913 was $11.6 million (in 2014 dollars). In 2014, it was $457,601. That year, the top one per cent of income earners paid 46 per cent of all income taxes collected in America. As such, the Organisation for Economic Cooperation and Development called the American tax system the “most progressive” in the industrialised world. Put differently, if the super-rich tried to protect their money from taxation by subverting American democracy, they have done a terrible job of it.
What about the little people? How well did the rest of us do in the age of corporations? Our life expectancy increased from 47 years in 1900 to 79 years today – a 68 per cent increase. Infant mortality declined from 100 per 1,000 live births to 5.6 – a 94 per cent decline. Adjusted for inflation, average income per capita in the United States rose from $4,964 in 2010 to $30,491 in 2010 – a 514 per cent increase (figures are in 1990 dollars). In 1900, a typical American worked 57.7 hours per week. In 2014, it was 46.7 hours – a 19 per cent decrease.
We are also better educated, fed, housed and clothed. But, who cares? Certainly not the progressive Democrats, whose ideas and rhetoric are stuck firmly in the past.
According to Vermont Senator Bernie Sanders:
“In my view, a corporation is not a person. In my view, a corporation does not have First Amendment rights to spend as much money as it wants, without disclosure, on a political campaign. In my view, corporations should not be able to go into their treasuries and spend millions and millions of dollars on a campaign in order to buy elections.”
Massachusetts Senator Elizabeth Warren noted,
“People feel the system is rigged against them. And here’s the painful part. They’re right. The system is rigged. Look around. Oil companies guzzle down billions in subsidies. Wall Street CEOs – the same ones who wrecked our economy and destroyed millions of jobs – still strut around Congress, no shame, demanding favors and acting like we should thank them.”
Hillary Clinton averred:
“This is all part, though, of how this [George W Bush] administration and corporate America today don’t see middle class and working Americans. They are invisible. They don’t understand that if you’re a family that can’t get health care, you are really hurting. But to the corporate elite and to the White House, you’re invisible. So we need to get both public sector and private sector leadership to start stepping up and being responsible and taking care of people.”
Finally, spare a thought for the corporation itself. Yes, it is true that corporations can grow wealthy and, occasionally, powerful. But, they are neither all powerful nor immortal. Bad business decisions, technological changes and evolving tastes have killed off many a household brand. Consider the following examples:
Pan Am
In 1927, Pan American World Airways was established to transport mail between Cuba and the United States. After World War II, Pan Am quickly expanded due to a surge in tourism and travel. It became so large that it was thought of as America’s unofficial airline. Unfortunately, in 1988 a terrorist attack on a Pan Am flight and a substantial rise in fuel price due to the Gulf War proved to be too much for the company to handle. It filed for bankruptcy in 1991.
Blockbuster
Blockbuster first opened its doors in 1985, in Dallas, Texas. By 1992, Blockbuster had more than 2,800 stores worldwide and showed rapid growth. However, Blockbuster was unable to keep up with market trends and compete with internet-based services, such as Netflix. The company declared bankruptcy in 2010.
Amoco
Amoco was formed after the Standard Oil Company acquired the American Oil Company in 1910. This new company rose to become the largest natural gas producer in North America and reinvented the way Americans obtained their gasoline. In 1998, British Petroleum and Amoco announced a merger. All of Amoco’s stations were ultimately rebranded as BP and Amoco ended as a brand.
Oldsmobile
In 1908, The Olds Motor Vehicle Co., which was founded in 1897 by Ransom Eli Olds, became part of General Motors. Throughout its history, the Olds Motor Vehicle Co. sold 35 million units. Unfortunately, in the 1990s, its sales started to decline. By 2000, GM declared that the company would eventually discontinue the brand. The last Oldsmobile was produced in 2004.
Woolworth’s
In 1879, Frank Woolworth revolutionised the way people shopped. His Great 5 Cents Store in Utica, New York, pioneered the one-stop shop business model. By selling everything that one could want in one place, Woolworth’s five-and-dime store dominated the market until 1986, when the store reported a loss of $37 million. By 1987, the company announced that it would close all of its existing locations.
Borders Book Store
Brothers Louis and Tom Borders founded Borders in Ann Arbor, Michigan, in 1971. By 1992, they sold the chain to Kmart, which took the company public. However, the book store was unable to compete with the advent of online competition – and the company filed for bankruptcy in 2011.
Yes, bashing corporations may be the favourite pastime of our elected officials, but it is the corporation that produces the food we eat, clothes we wear, houses that shelter us, jobs that employ us and drugs that cure us. The corporation pays taxes to alleviate the suffering of the needy and, perhaps less laudably, to sustain the careers of our parasitic political class that includes Corbyn, Sanders, Warren, and Bill and Hillary Clinton.
