This post originally appeared as part of a series on “CSRwire Talkback.”
Part I of a series based on the book Corporate Dreams: Big Business in American Democracy from the Great Depression to the Great Recession (Rutgers University Press, 2011).
The American Dream was a corporate dream. At its 1950s zenith, the American Dream included suburban bungalows, stay-at-home moms, and a middle-class life for the common man. But the squeaky cleanness stopped at the workplace door. Grimy hands were the reality behind the reverie. Manufacturing jobs and heavy industry were the heart of America’s mid-twentieth-century prosperity.
Balancing Corporations With Democracy
Not of their own free will did business corporations create the American Dream. It took the might of government and the power of labor unions to force the bounty sharing that created a middle class life for ordinary citizens. Any revival of the American Dream will depend on getting the balance right between corporations and a democratic society.
Moderate anti-corporatism is the right approach for living with corporate power, accepting of its usefulness and wary of its danger. Moderate anti-corporatism no more seeks to destroy the business corporation than moderate antigovernment ideologues seek to abolish government.
Thomas Jefferson was moderately antigovernment. He wanted not to destroy government but to guard against its potential tyranny. Similarly, moderate anti-corporatists seek not to destroy our wealth creating corporate economy but only to insure that it helps rather than hurts the people.
We should recognize and preserve the tension between corporations and democracy. Democratic societies need the services of undemocratic corporations.
The trick is to ensure that corporations are the servants, not the masters.
Historic Checks To Corporations
One reason that many people miss the complexity of the American Dream is that it was an accident of history. In the early American republic, most citizens saw corporations as a threat to liberty and did not expect the United States to become a corporate society.
Early American anti-corporatism was partly due to experience with the East India Company whose tea the colonists dumped into Boston harbor in 1773. Nevertheless, the weak state governments issued corporate charters in order to win the support of wealthy investors for public purposes such as the building of canals, roads, and bridges.
The 1830s arrival of the nation’s first big businesses, the railroads, marked the transition of the corporation from public purpose to private profit. The legal innovation of “free incorporation” – i.e., making it easy to incorporate – was meant to democratize the for-profit corporation. But in the era of capital intensive production, most Americans were destined not to own a corporation but to work for one.
The Progressive Era: Reining in the Trusts
The railroads created a national market to be exploited by giant corporations in oil and minerals, food and beverages, electricity and machinery, steel and automobiles. Many of these corporations colluded to fix prices and otherwise interfere with the free market. So Congress passed the Sherman Anti-Trust Act (1890) outlawing “restraint of trade.”
The Sherman Act perversely caused the merger movement of the 1890s, which formed dozens of monopolistic or oligopolistic corporations in an attempt to achieve “legal unity” and avoid charges of colluding to restrain trade.
President Theodore Roosevelt responded with “trust busting” aimed not at destroying big business but making sure it created national strength. The sophistication of his approach was not understood by ordinary Americans, who still often thought in terms of simplistic market concepts.
A quarter century later, as the country entered its greatest economic decline, most Americans had little understanding of the corporate economy in which they had unexpectedly come to live. They would create the American Dream out of good luck and out of President Franklin Roosevelt’s unsystematic, ad hoc response to the Great Depression.
James E. Hoopes
Professor of History
Posted in Entrepreneurship of All Kinds