Sunday, July 26, 2009

The History of the Corporate-Commercialist State, Pt1: The Trusts

The mess our country has meandered into did not simply happen all at once. Nor are many elements of it new. Politically speaking, the rather disingenuous conflict that the right wing of American politics has been waging against the middle class and the educated 'elite' goes back to Thomas Jefferson (a wealthy aristocrat whose first memory was being carried by a slave on a pillow) appointing himself the champion of the 'common man' and squaring off against the pragmatic realism of Alexander Hamilton (the illegitimate son of an impoverished drunk) in the name of democratic utopia. Jefferson painted the self-made, largely self-educated Hamilton as an 'aristocrat' and himself as a 'yeoman' and thereby set the stage for conservatives to continue to bash liberals as 'elitists' in defense of the property rights of the privileged class ever since.

Of course, Hamilton was far from either a socialist attempting to destroy aristocratic privilege or a laissez faire capitalist attempting to insure that the new moneyed aristocracy replaced the old landed aristocracy. Nor did the lack of faith Hamilton felt in democracy (believing, with some legitimacy, that demagogues could transform majority rule into mob rule very easily) reflect a lack of belief in natural rights. For much of the first century of American history, then, the fundamental conflict in American politics was between an agrarian, democratic utopia (which never really existed except in the minds of the large scale commerical farmers who either did not really understand or did not really care about the realities of life for their family farmer neighbors) and a practical, realistic capitalist republic. This is an important distinction, because the primary commodity of the agrarian economy is land and land is static. The rich are always rich the poor are nearly always poor and society is very stable as long as the rich are able to keep the poor content. The social order is firmly established and rooted.

Capitalism, in its pure state, however, is fundamentally progressive. I mean this word not in the manner meant by today's American political liberals, who call themselves 'progressive' out of fear of getting 'liberal' all over their nice suits, but rather that the workings of a proper capitalist economy force change. Money is spread through society on a slightly wider scale and replaces lands as the fundamental commodity, entrepreneurs can become wealthy by making more money far faster than a family farmer can acquire more land and do the same. Thus, for the landed aristocracy of the 13 Colonies (who became the democratic utopians of the United States of America), capitalism posed a challenge to what was (in not only what we now think of as 'the South' but also in New York, New Jersey, and Pennsylvania) a vested social and political power believed to be a natural and deserved privilege.

For obvious reasons, then, the economy could not remain in a state of flux for long. In the years leading up to the civil war this became baldly obvious, as the economy in the South became ever more specialized and dependent on huge-scale commerical farming dependent on the inefficient-but-free labor provided by slavery to make a profit. The conflict over slavery, real moral debate that it was, was also a necessary front in the conflict between agrarianism and capitalism. The Civil War was the final confrontation between the agrarian democratic utopia of Jefferson and Madison and the practical, capitalist republic of Hamilton. Clearly, in the final contest, Hamilton won.

Precisely because capitalism is progressive, however, this victory laid the seeds for new socio-economic conflicts. At first these were fairly small scale. Class warfare is neither new nor unique to the United States, and the poor found it as easy (or easier, thanks to the prejudices inculcated by the utopian tradition in American political dogma) to resent successful entrepreneurs as it was to resent landed gentry. The poor coveted the property of the rich and the rich sought the state's protection against the superior numbers of the poor. Worse, the rich capitalists increasingly sought to protect themselves from capitalism itself. What is more dangerous to an established business interest than competition which may lower prices and cut into profits?

This was also a period of massive imbalance in American politics. The Republican Party, allied as it was to the capitalist economy and increased social mobility, had a virtual monoply on the presidency (broken only by the two non-consecutive terms of Grover Cleveland) from the election of U.S. Grant until the election of Woodrow Wilson. This was directly a result of the Civil War, in which the Republicans had been the leaders of the winning side. This all-but-unchallenged power, however, lead to the usual result of a lack of competition... corruption and internal factional disputes. The great political issue of the end of the 1870s and the first half of the next decade was not a dispute between Democrats and Republicans, but the conflict in the GOP itself between advocates of greater bureaucratization of government offices (as a defense against political corruption) and their opponents (who wished to keep government offices entirely political on the basis of the old 'spoils' system, as much for genuine political considerations as in defense of corruption) on the issue.

The bureaucratization of government offices was an attempt to professionalize and depoliticize the business of government. However, the main argument against it had a ring of truth. It has led to the rise of a governing class with some (but far from all) the elements of an aristocracy. Though the real aristrocratic presence in American society is still economic and political, primarily centered in the business world and the political parties, the bureaucrats and low-level appointees who make up a large percentage of the members of 'the Beltway' have a significant influence on the way policymaking is viewed in this country. I'll talk a little more about the government's role in the corporate-commericialist overthrow of capitalism in future articles, but it is during the era of civil service reform that the modern 'Beltway mentality' was born.

Bureaucratization of government was matched by the bureaucratization of business, which was growing as it had never grown before. The most successful entrepreneurs of the relatively young capitalist economy had achieved succes and wealth on a scale unprecedented in history since the fabled 'Riches of Inde' that had attracted adventurers from Marco Polo to Christopher Columbus or the Aztec and Incan treasures that made Spanish conquistadors drool. Indeed, the Carnegies, Vanderbilts, and Rockefellers of history were probably richer than Montezuma in terms of real wealth and property. Like most success stories, they immediately set about making it harder for anyone else to succeed and cut into their action. They bought up the competition, on as large a scale as possible, to build up monopoly or near-monopoly power in their line of business. Not satisfied with this, they then bought up the support systems for their business, so that they were not doing business with any outside entrepreneurs or companies. They did everything for themselves. This was the true beginning of what would later be called 'The Gilded Age', during which America's richest citizens were the richest men in the world and the bulk of America was poorer (relative to the wealthiest) than it had been at any point before.

This was the age of the trusts, massive corporate interests that did not just monopolize one industry but also controlled as much of every supporting industry related to their area of monopoly as possible. This control of the support system served, naturally, to stengthen their monopoly power. They always had more money and influence on hand than potential competitors. New entrepreneurs found it more and more difficult to enter the market. Capitalism had become its own worst enemy and it had only just begun.

More troubling still was the manner in which the 'captains of industry' set out to make themselves the new artistocracy in the mold of the landed gentry of the previous era. They began to meddle in nearly every aspect of government policy and American life, because they could. In many cases this was genuinely benign, it every case it was putatively benign... but utopian visions are never, ultimately, benign in practice. It was during the era of the trust that utopian visions of education (which still do massive amounts of damage in our schools, public and private), technology, industry, and the free market began to take shape in ways that have been influencing our thoughts and policies ever since. It is the era that birthed the notion that business was superior to government, morally and functionally, and the era that first proposed that human life could be 'managed.' Many of our theories of management today stem directly from the utopian aspirations of this era.

The utopian design of the great industrialists was both in conflict with, and aided by, a numerous subset of causes and reforms advocated by many social activists, writers, and politicians. This movement, 'progressivism', is the direct ancestor of both modern American political liberalism and the modern neoconservative and fundamentalist religious reform movements. The Progressive Era is defined by the presidencies of Theodore Roosevelt, who adopted a 'progressive' label and advocated many reform policies seen as liberal by today's lights... but who was essentially pragmatic rather than utopian... and William Howard Taft, whose adoption of a conservative persona belied his active opposition to the concentration of economic power in only a few hands. Taft was so active in fighting the trusts, in fact, that 'Teddy the Trust Buster' came to feel that his hand-picked successor was too aggressive in his reform efforts and ran against him for president.

The breaking up of the trusts under Roosevelt and Taft, and Democrat Woodrow Wilson, carried the ironic lesson that the most effective guarantee of a free market was the government regulation of the excesses of business while absolute laissez faire capitalism was the most genuine threat the free market faced. At first, we learned these lessons very well and very clearly. Over time, however, we have forgotten them. Neoclassical economists, and their heirs of the Austrian and Monetarist schools of economic thought, have sought to undermine them in search of a utopia in which a self-regulating market provides for all of man's needs. Very slowly, they have increased to make their voices heard in the halls of power. The 'free market' has been racing to the detriment of capitalism at a breakneck pace from the Reagan Era onward, and had been crawling slowly to the startling line since the Eisenhower Era. Reagan, Clinton, and Bush have successively presided over deregulatory endeavors which have put more and more public influence and responsibility into the hands of corporations rather than society.

Business is a necessary part of capitalism. Entrepreneurial endeavour requires management and so business must exist. Even the corporation itself, for all the damage corporate power has done, is not inherently evil. However, the economy exists to serve society. Society cannot and should not exist to serve business, and this is where the danger of the utopian vision of our modern corporate aristocracy lies. They believe that they know what is best for society, and that what is best for society is what is best for them. They justify this by their contribution to the economy, but frequently they serve to distort the economy in their own favor. Today's discussions of the 'free market' are not about more 'freedom' for business, which is already far too independent of social or government influence, but rather more power for business.

The old saw says that 'power corrupts and absolute power corrupts absolutely.'

The current neoconservative advocacy of the 'free market' does not mean the competitive capitalism of Classical economics, but absolute power (in the form of absolute freedom from outside authority) for the most powerful corporate entities.

Can you think of a corporation you trust that much?

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