Corporations have been growing in power since they first emerged as vehicles of private profit-making in the early nineteenth century. Public acceptance of corporate power, however, waxed and waned with economic cycles until very recently. During the Great Depression and its aftermath, working Americans demanded that the government limit the power of corporations to dominate their lives. During the boom years after World War II, workers accepted the offer of job security, good wages and generous benefits in exchange for acquiescence.
Roosevelt's New Deal represents the last time that the state has sought to mediate the domination of corporations. Since then, both political parties have adopted pro-corporate platforms. Because the price of political success has sky-rocketed, both Democrats and Republicans have turned to corporate donors with increasing frequency. As a result, both Democrat and Republican administrations have advocated the corporate agenda: free movement of capital, limited influence of unions, and increased privitization of public life.
Sociologist Charles Derber suggests that the "corporate mystique" has never been stronger. "[T]he corporate mystique," Derber explains, "is, at heart, an ideology which for decades has effectively disguised the rising power of corporations in our lives. Corporate ascendency is emerging as the universal order of the post-communist world. Its most obvious feature is the reign of vast and much-admired global corporations, from General Electric to Microsoft to Disney. Yet the essence of corporate ascendency is the quiet shift of sovereignty that is shaking the roots of our democracy." [REF]
It might be hard to imagine a time when most Americans opposed the legitimacy of corporations. At the beginning of the nineteenth century, corporations were exceedingly rare. All private enterprise was conducted by individuals. Even when entrepreneurs got together for joint ventures, the law regarded them as separate individuals. Joint stock companies and partnerships allowed for the pooling of capital, but even in these forms, each individual investor was fully liable for any and all debts incurred by the venture. Corporations existed only for activities in the public interest, such as universities and municipalities. Indeed, incorporation required a special act of the state (or federal) legislature, and could be revoked if law-makers felt the corporation was not living up to its public purpose.
As commercial capitalism was developing in the first few decades of the nineteenth century, a legal revolution was taking place in America, outside of contentious partisan politics, and unnoticed by working people. Lawyers and judges heard the pleas of capitalists for greater protection and privilege. Through judicial initiative, our legal system moved away from its English common law roots, which balanced the rights of property with a sense of social justice, toward the basic tenet of the market: that unrestricted self-interest is the best guarantor of the common good.
"Lawyers were the shock troops of capitalism," notes historian Charles Sellers. They responded to the pressures generated by entrepreneurs eager to exploit the resources of the new republic. Where most Americans thought of property as a means to subsistence, capitalists and their judicial allies saw property as a vehicle of commercial development and private profit-making. Sellers notes that capitalists needed "law that gave new and dynamic forms of property, particularly transportation and manufacturing facilities, priority over old and static forms of property, particularly agricultural land. They needed law that favored holders of capital, in their roles as sellers, lenders and employers, over buyers, borrowers, and employees." [REF] This is exactly what they got.
The legal revolution cleared the way for the development of industrial capitalism in America. By the end of the nineteenth century, the age of the Robber Barons had arrived. Men such as John D. Rockefeller, Cornelius Vanderbilt and Andrew Carnegie built enormous fortunes and vast economic empires in banking, transportation, oil and steel. They amassed such wealth and enjoyed such lavish lifestyles as to be compared to Europe's great aristocrats. They could not have done so without the complicity of the state.
The great transportation fortunes required the power of eminent domain. (In New York, the legislature granted this power to private corporations for canal building and railroads.) Banks needed monopoly privileges and protection for speculative investments. Industry needed total domination of the labor force. (In 1894, for example, federal troops were used to put down a strike among Pullman car porters.) The Gilded Age was defined by this great concentration of wealth and social turmoil.
Derber believes that our situation compares to the Gilded Age. He notes that in 1890, the richest one percent of Americans owned more than half of all wealth. Today, the top one percent owns about 42%. Derber notes "[a]rguing that unions were a threa to global competitiveness, corporate leaders engaged in the most systematic anti-labor campaign since the Gilded Age. ... The Reagan, Bush, and Clinton administrations have all embraced a corporate agenda." Now, neither unions nor the state is able to balance the power of the corporation.[REF]
The economic power of modern corporations results in enormous influence over public policy. Beginning in the early nineteenth century, and growing explosively by the beginning of the twentieth, public funds have been used to ensure private profitability. Through direct and indirect investments and transfers, governments--local, state and federal--put tax dollars into the hands of corporations. The ubiquitous call for down-sizing of the federal government is directed at expenditures for individual benefits and entitlements, even though the amount spent on corporate aid is larger, and growing more rapidly.
Government began assisting private profit-seeking in the nineteenth century with expensive internal improvements, such as canals, turnpikes, railroads. These investments continue today. The federal government has built eight times as many miles of roads mainly for the use of logging companies than for the interstate highway system. Public lands are sold at below market prices to mining companies. Hundreds of millions of dollars are spent advertising American products abroad. Hundreds of millions more are spent on research, and the discoveries are often given over, without royalties or stipulations, to corporations for private profit. Add to this the cost of tax credits and subsidies and the cost of military operations to secure and preserve foreign markets, the amount of funding flowing from the state to private entities is staggering. [REF]
It is part of the corporate mystique, Derber notes, that such large investments of public funds are made without most Americans demanding any public accounting. Indeed, this transfer of wealth has become a routine part of the business of government such that most people don't even realize that it is taking place. When attention is focused on the use of public money for private profit, Americans are more likely to believe it is in our best interest to do so than to expect any collective control over the end results of this kind of investment. "The scandal here," Derber observes, "is not so much the intertwining of public and private arenas as the widespread denial of such interdependence and its implications. America is long overdue to discard the notion of the purely private corporation and start insisting that the public get its fair return on its corporate investment--as well as a system of public accountability proportional to the contribution it has made." [REF]
The largest corporations control vast amounts of material resources--indeed, more wealth than many countries possess. More and more, they also control other, smaller corporations. Institutional investors now own more than half of all U.S. stocks. A relatively small number of institutions--mostly banks, insurance companies and investment firms--occupy the top stock voting positions in America's largest corporations.
The largest U.S. banks have a fiduciary interest in corporations in all sectors of the economy, from consumer goods to the media, from traditional heavy industry to financial services. (The large banks, it turns out, own other banks too.) The people who control these banks not only command the resources of the banks themselves, but through stock ownership, they influence the activities of many other corporations.
Control of a corporation rests with the board of directors and the executive officers. Although the executive officers hold positions in only one company, they and the other board members are often on several boards simultaneously. This is referred to as interlocking directorates. Through interlocking, the control of U.S. corporations is further reduced.
In order to explore the issue of corporate power in contemporary society, we will take a closer look at some modern corporations.
In small groups, you will collect information from web sites about a particular corporation and, together, write a short report explaining what you've found. As you collect data, keep in mind Derber's discussion of the corporate mystique. Look for information that will permit you to describe how much power the corporation has, how it uses that power, and how the corporation is regarded in the larger society. You must use at least one of the sites listed below, and at least two others. You may also use readings from the text and the online chapters.
After the group reports have been posted, each group will write a response essay to another group's essay. The response will argue either in favor of or against the original essay. At least one additional fact, taken from a web site not cited by the original essay, must be presented in the response.
Provide a citation to the site in parentheses after the sentence in which you use information taken from that site. If, for example, you quote from this chapter, you should say (www.shortell.org/courses/cs3/corporatepower.html). If you use a print source, such as the textbook, provide a citation such as (Antonio Gramsci, Hegemony, Power: A Critical Reader, 10.)
Each member of the group may earn up to 5 points for the essay and up to 5 points for the response, for up to 10 total. The group essay must be between 800 and 1200 words and properly formatted, including citations. The group response will be between 600 and 800 words and properly formatted.
You will submit your first essay with the Group Essay Submission form. You will send your response essay with Response Essay Submission form. (It is important that you use the correct forms; if you submit with an incorrect form, your essay might not be accepted and you will lose points.)
Some sites about corporate power:
A. Common Cause (especially the "Soft Money Laundromat")
B. Corporate Accountability Project
C. Public Citizen
D. BBC News: Corporate Scandals
E. MS-NBC: Corporate Scandals
F. Washington Post: Corporate Ethics
G. Forbes: Corporate Scandal Sheet
H. Prof. Nouriel Roubini's Global Macroeconomic and Financial Policy Site
Consult Prof. Toulouse's guide to evaluating web sites for advice about using online information.