The Corporatization of America

 

John Ikerd

Professor Emeritus

University of Missouri

 

Presented at the “Summer Canvassers' Conference,” The Ohio State University, Columbus, OH, sponsored by the Hudson Bay Company, Golden Valley, MN, July 26-28, 2001.

 

We Americans are a fiercely independent people.  Right?   We truly value our freedoms – our freedom of speech, freedom of religion, freedom of privacy, and the freedom to use our personal property as we see fit.  We are fiercely independent about personal things.  We don't want the government or anyone else imposing restrictions upon our freedoms.  However, in matters that relate to our public life – our role in the economy, in politics, in society in general – we seem more than willing to depend on others.

 

We let someone else decide what's “in” and what's “out” – in clothes, cars, hairstyles, soft drinks, etc.  We are more than willing to follow the trendsetters.  We let someone else decide who gets to run for office and gets elected to office – at local, state, and national levels.  We don't have time to waste on politics – although we can find time to complain about the stupid decisions that politicians make and the taxes we have to pay to support them.  We let someone else decide what kind of society we are going to have – which types of behavior are socially acceptable and which are not, what's moral and ethical and what's not.  We leave that sort of thing to theologians, the philosophers – we just aren't interested in such esoteric matters.

 

While boldly claiming our independence, we depend on others to shape the economic, social, and ethical environment in which we live our lives.

 

A Dependent Society

We most certainly are not independent economically.  We have to buy nearly everything we need from someone else, and we have to work for someone else to get the money to buy those things.  In economic terms, we are “specialists” – we do one thing for a living and depend on other “specialists” to provide the things we can't provide for ourselves.  In addition, most of us work for some “corporate” business organization that makes all of the major workplace decisions for us.  For the most part, at work, we do what we are told to do.  We have no true economic independence.   We do what we have to do to keep our jobs and to survive.

 

We are not independent politically.  We don't educate ourselves on the issues; we don't participate in the process of getting people and issues on the ballots, so we don't even have a chance to vote for the things we want.   If we participate at all, we depend on political parties, political action committees, and other special interest groups, to define the issues and to articulate our political positions for us.  When we take the time to vote, we don't vote as “independents.”  We vote for one of the two major parties, or we vote for some “independent” third party, instead of voting as individuals.

 

When we do exert our independence, we tend to be exploitative.  We compete; we feel we must win.  We must beat someone else or profit from someone else; we must use someone else for our own benefit.  Without someone else to beat, we have no way to win, no way to succeed.  And, others have no way to win or succeed without beating us. In reality, we are hopelessly dependent on a system that demands that we be either victor or victim, and thus, encourages us to exploit each other. 

 

Through our lives of dependence, we have become only parts of people.  We have let big parts of ourselves become little parts of thousands of others, and most important, we have become little parts of non-human corporate organizations and systems over which we have no influence or control.  We cannot be independent because we are no longer whole people; we have lost control of our individual lives. The problem most certainly is not that we have too many relationships with other people.  The problem is that these relationships are “dependent” rather than “interdependent” in nature.

 

Steven Covey, in his book, Seven Habits of Highly Effective People, writes about dependence, independence, and interdependence.  Independence may be defined as the ability to survive and thrive on one's own resources – without significant relationships.  Interdependence is defined as “relationships of choice” rather than necessity – relationships between independent people who choose to form relationships that make both lives better.  Dependence is defined as “relationships of necessity” rather than choice – relationships among people who can't survive without each other.  A person in a dependent relationship needs to take more from the relationship than they can possibly give to it.  Dependent relationships are parasitical – they are inherently exploitative and can be mutually destructive. 

 

In America, too many of our relationships have become dependent and exploitative.  Through our dependence, we not only are exploiting each other, but we are also exploiting the natural environment.  We are sucking the life from each other and from the whole of creation.  We are destroying the very things upon which our own quality of life and the long run survival of humanity depend.  In spite of our boast of being fiercely independent, we have become totally dependent on a system of economics, politics, and ethics that quite simply is not sustainable.

 

The good news is that we can break free from these destructively dependent relationships.  However, independence is not the answer.  We must move beyond independence to build interdependent relationships of choice – relationships that are mutually supportive rather than mutually exploitative.  But first, we will have to become whole again.  We will have to replace the broken and missing parts of ourselves and of society, but it won't be nearly as difficult as building a new society from scratch.  We don't have to become “totally“ independent in order to choose interdependence, but we must stop exploiting each other. We can't become totally independent of our natural environment, but we must stop exploiting it.  We need to become sufficiently independent to break free from our unnecessary dependencies.  We must be sufficiently secure within ourselves to refuse to participate in relationships that force us to exploit or to be exploited.

 

From Capitalism to Corporatism

To break from the grasp of destructive dependence, we need to understand the nature of the force that holds us.  Our dependence is a reflection of the society in which we live.  Over the past several decades, America has evolved from a capitalist to a corporatist economy and from a democratic to a corporatist society – we have traded democratic capitalism for corporatism.  And in the process, we Americans have lost our independence.

 

Corporatism is defined by Webster as “the organization of a society into industrial and professional corporations serving as organs of political representation and exercising some control over persons and activities within their jurisdiction.”  Corporatism means that we participate in society as members of groups, which not only represent us but also exert control over us.  Corporatism means that we participate in the economy, not as individuals but as members of organizations – as workers, owners, or managers of corporations.  Corporatism means that we participate in the political process, not as individuals but as members of organizations – as members of labor unions, corporate business organizations, political action committees, or other special interest groups.  Corporatism means that we let someone else make our economic and political decisions for us.

 

Corporatism is a natural consequence of the process of industrialization. The processes of specialization, standardization, and centralization characterize the industrial paradigm.  Specialization, with each person or unit performing fewer functions, allows each function or step of a production process to be performed more efficiently – i.e. division of labor.  Standardization allows the various specialized functions to be controlled and integrated into an efficient overall production process – i.e. assembly line production.  Specialization and standardization allow, in turn, efficient centralization of management and consolidation of control – i.e. economies of scale.

 

Economies of scale allow fewer firms or business organizations to grow larger and thus to gain greater control over the total output of an industry.  As business firms become fewer and larger, they acquire increasing market power – the ability to reduce wages and buying prices and increase selling prices – leading to further economies of “size,” still greater market power, and chronically declining competitiveness of markets.  Labor unions and other special interests groups emerge to counteract the power of large industries to exploit their workers, civil society, and the natural environment.

 

An industrial organizational structure has evolved to facilitate specialization, standardization, and centralization of control.  Organizations are separated into specialized units – divisions, sections, departments, etc. – so as to facilitate gains from specialization. The function of each unit then must be specified and standardized so that all units work together effectively to achieve the overall purpose of the organization.

 

This same organizational structure has characterized private for-profit corporations, special interest groups, and government organizations – all specialize, standardize, and centralize to achieve efficiency.  Each organization, and each division, department, and workgroup within the organization, performs a specialized, standardized, function.  Control of the organization can then be centralized, allowing a few key decision makers to make decisions which exert control over the people within the organization while claiming to represent them to the outside world.  The corporation speaks for its stockholders and employees, the labor union speaks for its members, and Political Action Committees speak for their contributors.   People participate in society “through” these various types of corporate organizations – not directly, as independent individuals.

 

The Corporatization of Agriculture

During my professional career, I have lived through the industrialization and corporatization of agriculture.  The motives invariably were economic.  Farmers saw the opportunity to profit from adopting new agricultural technologies – new machines, fertilizers, pesticides, or business management strategies.  Each new technology promised lower costs, and thus, greater profits.  However, these new technologies inevitable allowed farmers to specialize, to standardize and mechanize, and to produce more than before – to farm more land, produce more per acre, to manage more workers, or use more capital.   So as more farmers individually adopted these new technologies, their collective production, which made up total market supply, began to increase.   As supplies increased, market prices fell.

 

The promise of profits disappeared, but not the need to adopt.  Profits went primarily to the “innovators” – those willing and able to take the risks of adopting unproven technologies.  The “early adopters” followed the innovators.  They realized some profits but less than the innovators as prices continued to fall.  The laggards eventually are forced to adopt, not to make profits, but in order to survive, as prices drop below their old, higher costs of production.  Those who attempted to adopt too late, or were unable to adopt, were forced out of business by falling prices as production continued to increase.

 

The failure of some was necessary so that others might acquire more land so that they could reap the full benefit of the economies of scale offered by the new industrial technologies.  As the farms became fewer, the surviving farms became larger. The same amount of land was still farmed as before, but now by larger, more industrialized farming operations.

 

Why should people in general be interested in what I have seen happen to farmers?  Because, this same thing has happened to nearly every other segment of the American economy.  This is the same process by which the crafts-people of the past were replaced by factories, by which “mom and pop” grocery stores were replaced by supermarkets, and by which the small dry goods and hardware stores were replaced by the giant discount stores.

 

This also is the process that ultimately brings an economy under corporate control – by which a country moves from capitalism to corporatism.  Incorporation allows still further specialization – allowing the ownership of an organization to be separated from its management and labor.  Public stock offerings allows people with large amounts of capital to own companies that they do not manage or work for, and allows others to work for and manage companies that they do not own.  The overriding motive for public investment and ownership is to realize profits and growth in value.  Thus, corporate ownership frequently removes all social and ethical constraints to a company's pursuit of ever-greater profits and growth.  Anything that is legal is considered allowable, and if profitable deemed desirable, regardless of its social or ethical implications.

 

The corporatization of agriculture did not become apparent until the 1990s, but it should have been anticipated from the earlier industrialization of other sectors of the economy.  As consolidation led to larger and larger business organizations, it became more and more difficult to amass sufficient quantities of capital to fully realize the potential economics of scale.  Thus, surviving businesses were forced to incorporate in order to accumulate sufficient capital to adopt the latest industrial technologies.

 

At first corporations tended to be family corporations – a means of making capital accumulated during one generation available to the next generation within the same family.  Eventually, however, corporations tend to go public to raise still more capital.  At this point in the consolidation process, existing publicly held corporations in other sectors of the economy become attracted to the newly emerging corporate sector.  Old corporations acquire or merge with the new corporations.  As these enterprises become still larger, it becomes quite difficult, if not impossible, for the remaining individually owned business to survive.  The sector then is in the final stages of corporatization.  And as the corporations grow larger, fewer firms will control an increasing share of total output, and markets become less competitive.  Beyond some point, the market will no longer be competitive – at least not in an economic sense necessary for competitive capitalism. 

 

The giant supermarket chains – Kroger, Safeway, Albertsons – have replaced the corner grocery store by this same process.  The giant department stores chains – Sears, J.C. Penny, Macys – have replaced the locally owned dry-goods and house-wares stores by this process.  The giant building supply chains – Lowes, Home Depot, and Builders Square – have replaced local hardware and lumberyards by this same process.  And now, still larger corporations, such as Walmart, are using this same process to replace the supermarket, department store, and building supply chains.

 

This is the process by which capitalism has been replaced by corporatism.  The process is defended using the theoretical principles of competitive capitalism – if it is a result of “free market” competition then it must be good for society.  However, there is no theoretical economic foundation to support the prevailing belief that a corporatist economy is capable of meeting the overall needs of society.   Corporatism is not capitalism.  Corporations are designed to amass capital – to generate profits and to grow.  Corporations facilitate industrialization, and thus, facilitate production of ever increasing quantities of cheap stuff.  Beyond this, there is no reason to believe that corporations will serve the needs of society.  There is no reason to believe that corporations are capable of doing anything other than this any more efficiently or effectively than can individuals.  In fact, there is reason to believe that corporations inevitably lead to the destruction of relationships and degradation of resources upon which human society ultimately must depend.

 

Why Corporatism Isn't Working

Capitalism is based on private ownership of property by “individuals.”  But, most “private property” in the U.S. today is owned by corporations, not by individuals.  Capitalism depends on social values and morals of the people to constrain their pursuit of individual self-interest.  Corporations have no morals. The only things a corporation values are profit and growth.  People have hopes and dreams for the future.  People have hearts and souls as well as minds.  Corporations have neither. In order for capitalism to work for the good of society, for the good of people, individual people must make the economic decisions, not corporations.

 

Capitalism is based on competition.  But, Adam Smith's invisible hand of competition has been mangled in the machinery of industrial corporatism, and is no longer capable of transforming self-interest into societal good.  We no longer have competitive markets, at least not in the economic sense needed to eliminate excessive profits and pass cost savings on to consumers.  It's no longer easy to get into or out of businesses, as is needed to accommodate ever-changing consumer tastes and preferences.  We don't have accurate information concerning the actual qualities of the things that we buy, but get disinformation by design, in the form of persuasive advertising.  Superficial differentiation of products abound, but there is no real variety and thus very limited consumer choice in the marketplace.  Consumer sovereignty is a thing of the past – as advertisers now “shape” consumer demand rather than respond to it.

 

None of the necessary conditions for competitive capitalism exists in today's economy.  The American economy is moving away from market coordination toward a corporate version of  “central planning.”  The problems of the centrally planned economies of Eastern Europe were not merely a lack of sophistication in management and planning. Central planning, by government or corporation, is a fundamentally “wrong-headed” way to try to coordinate an economy.

 

Capitalism is based on the principle of minimum government involvement in the economy, but the government and the economy have become inseparable.  The government's primary economic function under capitalism is to maintain competition.  Instead, the top priority of the government has become to promote economic growth.  Corporate interests permeate every aspect of government – from the making of laws to the delivery of basic public services.  It's virtually impossible to run successfully for any major office without corporate financial backing.  High level corporate and government officials swap positions regularly as they move freely through “revolving doors” between big industry and big government.  The corporations have gained so much influence in government that not only does government fail to ensure competition; government has become a tool for corporate exploitation of both people and resources.

 

Our economy is no longer capitalistic and our government is no longer democratic.  We are in the midst of a great social experiment – an experiment being carried out by non-human entities that we have created and let loose to plunder the earth.  A society cannot survive in the absence of effective societal restraints to moderate the pursuit of short-run, self-interests.   It will exploit and eventually destroy the very things that it must have to survive – productive human and natural resources.  In America, we have removed all social and moral restraints to our selfishness.  We have sacrificed our independence on an altar of “free markets.”  We, the people, are the only means left by which we can end this experiment before it is too late.  

 

Revolution

Our common sense tells us that it's time to re-declare our independence.  It's time for a new American Revolution.  Our common sense tells us that what society needs most is not more “cheap stuff.”  We already have more stuff than we need.  What we really need now is a greater ability to get along with other people – within families, among friends, within communities, within nations, and among people of all nations of the world.  What we need now is to learn to build positive, interdependent relationships.  We need to learn to build each other up rather than tear each other down.  We need to take care of the earth rather than destroy it.

 

We need to revolt against economic and political oppression because we need to help build a better world for the future of humanity.  A world with far fewer wars, that would be a better world.  A world with less crime – fewer prisons, fewer policemen, fewer judges, that would be a better world.  A world with less conflict – fewer confrontations, fewer lawyers and economists, fewer broken families and bankruptcies, that would be a better world.  All of these things are possible, but only if we break free of our destructive patterns of economic and political dependence, competition, and exploitation, and start building new patterns of truly, interdependent relationships.

 

Our common sense tells us that we need to learn to lead lives of purpose and meaning.  Purpose and meaning can only come from some higher level of understanding – some higher order of which we are but a part.  We cannot gain purpose and meaning from our relationships with other people or things – no matter how strong or positive they may be.  We are at the same level of organization as all of the tangible things we can see and feel; we are all part of the same whole.  The meaning of our lives is not derived from our relationships with each other, but instead from the relationship of us all with the larger whole of things.

 

We need to learn to rely on the spiritual dimension of our being for insight into the unique purpose and meaning of our lives.  Through this spiritual dimension, we are rewarded when we practice stewardship – when we take care of the other living things of the earth and take care of the earth itself.  Through spirituality, we are rewarded for treating those of future generations, as we would like to be treated by them, if we were of the future and they were of the present.   A world in which people respect and take care of other living things – accepting that plants and animals provide food for people as people give live and sustenance to them – that would be a better world.  A world in which people care for, nurture, and restore the environment, for the benefit of themselves as well as for those of the future – that would be a better world.

 

The new American Revolution must begin in the hearts and souls of the people.  We need to begin by declaring our independence from the various corporate organizations that control us while claiming to represent us.  Independence doesn't require that we quit our “corporate” jobs.  But, we must find the courage to refuse to do anything that exploits other people or exploits our natural environment, and we must work to wrest the corporate conscience from the grasp of the greedy.  We may well need to look for another job, if we can't regain our independence in the one we now have.  We should not allow a corporation to represent us that that does not respect our independence.

 

Independence doesn't require that we drop out of every advocacy organization to which we now pay dues.  But we must find the courage and the time to oppose those organizations when we do not agree with their positions on issues, and to take an active role in shaping their policies.  We cannot blindly accept the position of any special interest group as if it were our own.  We may well need to drop out of organizations that are not responsive to independent members who choose to speak for themselves. 

 

As we reclaim our personal independence, we can begin to build interdependent relationships with other like-minded people.  Relationships are important – a fundamental part of being human.  But, our relationships need to be empowering, not weakening or depleting.  As we change ourselves, we can begin to build relationships that will change our little piece of the world.

 

As we regain our personal independence, we can begin to form interdependent organizations to remove our dependence on corporate organizations of all types.  We can create our own jobs – by joining with family members and other like-minded people to pursue ventures that are economically viable, ecologically sound, and socially responsible.  We don't have to become self-sufficient.  But, we can develop enterprises that allow us to sell and buy from people with whom we have meaningful relationships – people that we care about and who care about us.  We can create relationship markets.  We don't have to be driven to get the highest price when we sell or the lowest price when buy.  We can insist that our trades be beneficial to both us and to those with whom we trade.

 

These types of opportunities already exist in agriculture – through farmers markets, community-supported agriculture groups (CSAs), community food circles, and other forms of direct marketing between farmers and their customers.  These are relationship markets, where the quality of the relationships – among people and between people and the land – are at least as important as the quality of the products.   A group of dedicated “agrarian revolutionaries” is recreating the global food system, “locally” – one farm and one community at a time by reconnecting people with each other and with the land.

 

I am sure that similar movements are underway elsewhere, and can be initiated in any area where they are not already developing.  All it takes is a few people who realize that change is necessary, and who can find the courage to help bring it about.  Similar changes can transform our non-profit organizations and special interest groups as well.  We no longer need large organizations to speak for us in the political arena.  We can form far smaller groups of like-minded people.  These smaller groups can form alliances with other groups on specific issues on which they agree without being tied together on issues where they do not.  In these days of e-mail and the Internet, such networks of political relationships can be flexible and dynamic – interdependent rather than dependent.

 

As we regain independence in the workplace and in politics, we can begin to reclaim our economy and reclaim our democracy.  We can wrest the political process from corporations of all types.  We can force corporations to serve the public interest – we have the constitutional right to demand it.  We can restore harmony and balance among the economic, social, and moral dimensions of our individual and collective social lives.  We can stop the exploitation of people and of nature in America and start building a sustainable society.

 

We Can Do It!

America today is not unlike America of the early 1900s.  John D. Rockefeller formed the first “US trust” in 1882.  He persuaded stockholders in some forty different corporations to exchange their stock for shares in The Standard Oil Company of Ohio.  This allowed Rockefeller to consolidate management and centralize decision making across a large segment of the entire petroleum industry under one board of directors, which he chaired.  Rockefeller exerted market power over the petroleum industry, manipulating supplies and influencing prices and profits, in ways that totally contradicted the conditions of competitive capitalism.  American industrialists ever since that time have attempted to follow his lead.

In 1893, American Sugar Refining Company and the United States Rubber Company had joined Standard Oil in the merger game.  A second flurry of mergers, beginning in the early 1900s, lead to the formation of such well-known companies as United States Steel, DuPont, American Can, and International Harvester.  Soon large corporations not only controlled the American economy but also reached deeply into the American political process as well.  Politicians and elections were routinely, often openly, “bought and sold” through bribes, lobbying, and corporate financing of campaigns.  In many respects, the economic and political situation was not unlike that of today.

 

But in the early 1900s, the people rebelled.  They demanded political and economic reform. Reform didn't come easy, but the people found the courage to challenge the political machines.  They sent a lot of new faces to Washington to represent them.  At the urging of the new President, Teddy Roosevelt, the new Congress passed a number of new laws designed to help strengthen and enforce the antitrust laws already on the books.

 

During Roosevelt's two administrations, the Justice Department brought more than 40 suits against the corporate trusts and won several important judgments.  One judgment resulted in the split up of the Standard Oil Company Trust.  The “Progressive Era” in American politics continued through the Woodrow Wilson administration.  Civil Service eventually replaced political patronage, crippling the powerful “political machines” and primary elections were instituted to select candidates for offices instead of corporate deals in smoke-filled rooms.

 

The Progressives were the initial advocates of such radical ideas as election of Senators by popular vote, prohibition of child labor, women's suffrage, Social Security, collective bargaining by labor, full constitutional rights for minorities, and federal curbs on monopolies.  Now, once again, the country is ready for some new radical ideas.

 

Today, the concentration of corporate industry is far greater, and consequently, markets are far less competitive than in the early 1900s.  Today's corporations are multinational – exceeding the span of control of any single nation, and often exceeding the size of most national economics.  Widespread corporate alliances and joint ventures add still further to the span of control of the corporate giants.  However, corporations are not more powerful than the people.  People have created corporations – both business and political – and people can control corporations.  We have the power, if we can find the courage.

 

The new progressive area must begin with us, the people.  As we change ourselves, we can begin to influence others.  As we influence others, we can begin to change the world around us – at least our little piece of it.  As each of us changes our little piece of the world, little by little the whole of the world begins to change.  This is the pattern of all great social and political movements of the past.

 

We shouldn't wait for some great charismatic leader to arise.  We need to lead this movement ourselves – the leadership must come from the people.  Certainly, we need to network with others and build strong relationships, both as individuals and as groups.  But we need to build interdependent relationships, not simply exchange one kind of dependency for another.  We need to create a new form of democratic capitalism, based not on the independence of the past or the dependence of the present, but instead on interdependence – relationships of choice rather than necessity.

 

Idealistic?  No.  Realistic!  That's the way the world changes for the better, little by little – one person at a time.  Change happens, but it's change in people that makes lasting change in society.  And, people change one at a time.  In the words of Margaret Mead, the renowned cultural anthropologist, “Never doubt that a small group of thoughtful, committed citizens can change the world.  Indeed, it's the only thing that ever has.”   We have the power to change the world, if we can find the courage to use it.