Quotations and Excerpts 1

from the book

Corporation Nation

by Charles Derber

St. Martin's Griffin, 1998

p12
... With the 1990s came a second hint of a new Gilded Age [late 1800s]: the revelation that the United States had become the most unequal country in the developed world-with the gap between rich and poor growing disturbingly vast. By the mid-nineties, not only was the gap the largest in fifty years, but as the United Nations reported, "the United States is slipping into a category of countries-among them Brazil, Britain, and Guatemala-where the gap [between rich and poor] is the worst around the globe."

The Gilded Age was marked by the accumulation of great wealth in the midst of overwhelming poverty... A hundred years later, America [is] movoing again toward a great divide of vast wealth and mass poverty.

... In 1996, the richest 1 percent of the population enjoyed a median net worth of several million dollars and had accumulated 40 percent of the nation's wealth - the highest proportion since the 1920s. At the same time 40 million Americans - including one of every four children - had fallen into poverty, also the highest percentage in decades.

p14
The Gilded Age brought both hope and tragedy. It ushered in the American century, with the United States emerging as the new industrial power that would replace Britain as the guardian of a new world order. Americans-among them millions of immigrants who dreamed of a better future-were never more hopeful about their prospects for prosperity. The booming new industrial economy created by the robber barons-the popular name given to Gilded Age business leaders-allowed many citizens to realize their dreams, and the Gilded Age showed the remarkable potential of American business to harness the resources of the nation.

Yet millions of Gilded Age Americans worked in sweatshops, and the intensity of economic and social exploitation wrought by the robber barons became legendary. The growth of urban slums, the concentration of new monopoly power in the trusts, and the scandalous corruption of politics made many turn-of-the-century Americans feel their nation was losing its democratic promise.

Today's new Gilded Age order stems from an economy fueled by revolutionary advances in market scale and technology. It is dominated by dynamic corporations larger than any in history, and run by men possessed of power, business networks, and personal fortunes far exceeding those of the robber barons. It is defined by a democracy in which popular sovereignty is eroding. And it features a culture in which old-fashioned "virtues" like laissez-faire economies, social Darwinism, and accumulation of wealth are enjoying redoubled popularity. Despite some central differences, the new order and the old reveal parallels at almost every level.

p16
Like the robber barons, today's business elites have radically restructured the economy in ways that promise both dynamic technical progress and frightening social polarization. Despite the current rhetoric of social responsibility, they, like their descendants, are presiding over supercharged corporate systems that will be remembered for their irresponsibility.

p17
President Rutherford B. Hayes about the Gilded Age

"Shall the railroads govern the country or shall the people govern the railroads? ... This is a government of the people, by the people and for the people no longer. It is a government of corporations, by corporations and for corporations."

p18
Gilded Age elites shifted constitutional powers from the public to corporations and their leaders-a legal and political transformation that continues today in subtle yet alarming ways. The result was a tension between corporate and popular sovereignty that exploded violently in epic riots and strikes at the end of the last century - but is being played out today largely off the public radar screen.

p18
Corporations, at base, are legal devices for concentrating capital of the many in the hands of the few.

p20
The social disuniting of America is the most important parallel between the Gilded Age and today. We may have a much larger and more affluent middle class today, as well as some safety nets that did not exist a hundred years ago. America's class structure and standard of living have changed dramatically. But once again today we are in the grip of a perverse form of economic growth that polarizes America into increasingly separate worlds.

The richest 1 percent of Americans today own more than $4 trillion in assets, enough to pay down the national debt themselves. The bottom 80 percent own only 6 percent of the nation's financial wealth. To find a comparable wealth gap in American history we have to go back before the New Deal era, when new policies were implemented to alleviate poverty and inequality. A leading scholar at the turn of the last century concluded that the poorest "seveneighths of the families hold but one-eighth of the national wealth, while but one percent of the families hold more than the remaining ninety-nine percent." The 1890 census data suggested that the richest 1 percent of Americans owned 54 percent of national wealth, compared to about 42 percent today.

Wealth became the great corrupting symbol of the Gilded Age, with robber barons, such as the Vanderbilts, Rockefellers, and Fricks, aping the lifestyles of European aristocrats. Their estates were replicas of palaces like Versailles; at their parties one might see "monkeys seated between the guests, human gold fish swimming about in pools, or chorus girls hopping out of pies."

Richard Hofstadter writes that the Gilded Age's wealth and economic dynamism were achieved at "a terrible cost of human values.... The land and the people had both been plundered." In slums like Pittsburgh's Painter Mill, people cooked in dark cellar kitchens in houses without ventilation or drinking water. Neighborhoods in New York City had higher population density than that of Bombay, the most densely populated city in the world. More than 80 percent of the Gilded Age workforce was poor.

Today, while the nation's official poverty rate is only 15 percent, it is much higher than in any Western European country orJapan. The parallel with the Gilded Age is especially notable in the huge scale of child poverty, with a million children expected to become newly poor as a result of welfare reform. Dr. Deborah Frank of Boston City Hospital reports that it has become common in the city to see malnourished poor infants "whose mothers were diluting their formula with water because they couldn't afford more." The main cause of poverty, as in the Gilded Age, is not unemployment so much as very low wages; 70 percent of today's poor have jobs. The corporate social contract, while far more protective today, is moving back toward the Gilded Age model. The pattern includes not only low wages but the creation of a disposable workforce, harsh working conditions, and a relentless assault on unions.

p24
The robber barons virtually reinvented politics. Had they been only wealthy captains of industry, they would be today simply a fascinating historical curiosity. But because their economic achievements were based on a political reconstruction of the corporation that eroded the sovereignty of the public, they had a profound and enduring impact on American democracy.

Gilded Age politics can be defined simply: It used the language and machinery of formally democratic government to weaken real democracy. The Gilded Age suffered "a government of Wall Street, by Wall Street and for Wall Street," in the heated 1890 rhetoric of populist orator Mary Ellen Lease. While the robber barons preceded Ronald Reagan in denouncing big government as evil, they quietly expanded the intricate web of connections that linked the corporation and the government, and in the process broke down the barriers between economic and political power on which capitalist democracy presumably rested. Corporations became private governments with quasi-public powers, while government itself became a servant of private interests.

The corporate undermining of democracy was so blatant in the Gilded Age that it gave rise to the Progressive Era and its "clean politics" reforms. While hardly hostile to business, Progressivism and the New Deal restored a modicum of democracy, eliminated the most outrageous corruption, and created a Democratic party not entirely under the sway of business.

p25
We live in a period of moral fervor. The Christian Right, calling for restoration of discipline and faith, wields vast power in the Republican party. President Clinton increasingly uses his bully pulpit to call for V chips, school uniforms, and a general return to "family values.

A new rhetoric of personal responsibility is transforming American politics. The discourse of responsibility has become a central part of President Clinton's lexicon: We all must take responsibility for our own lives, he argues. The focus is on each individual's moral development. This new ethic is seen by many to offer the hope, in this most materialist of ages, of a great moral awakening.

The new politics of responsibility has both liberal and conservative poles. Among liberals, it is associated with personal growth, the revival of civil society, and a grassroots renewal of blighted neighborhoods and a return to community-level democracy. Among conservatives, it takes a more traditional focus on religious revival and a new entrepreneurship. The almost messianic quality of this vision among mainly conservative of ficials in Washington invests their efforts to cut off welfare with a sense of moral rectitude: The poor should take responsibility for themselves, the argument goes; America's great social programs, including Social Security, should be privatized. Now it will be each person responsible for herself or himself.

Such moralism is hardly new in American life. It has roots in American Puritanism, and is strongly linked to rugged individualism and the American Dream. The rags-to-riches success story is one of America's most enduring myths-it was already familiar by the time the Horatio Alger stories codified it during the Gilded Age-and it constitutes one of the common threads between the new politics of responsibility and the old politics of business. Particularly in its conservative manifestation, the new morality is linked to broader philosophies of individualism and social Darwinism dominant in the Gilded Age.

Gilded Age culture saturated Americans with the morality of business and individual responsibility, equating wealth with virtue. Robber-baron morality might seem an oxymoron; the greed and corruption of the nineteenth-century industrialists set a new low standard in American life. Yet the robber barons were among the nation's most moralistic leaders. They draped themselves in the lofty rhetoric of social Darwinism, which framed the workings of the free market as a blessing from God and subjected the unwashed poor to a religion-fueled moral indignation. John D.

Rockefeller, for example, readily used Darwinist language: "The growth of a large business is merely a survival of the fittest . . . it is merely the working-out of a law of nature and a law of God." Rockefeller could conclude that "God gave me my money."

Social Darwinism dominated the thinking of the Gilded Age. It made poverty, competition, and exploitation all part of the natural struggle for existence. Said one railroad baron, "Society as created was for the purpose of one man getting what the other fellow has." Social Darwinism and rugged individualism intertwined to create a theology that gave spiritual meaning to the terrible gulf between rich and poor. The robber barons' conversion of their own ill-begotten wealth into a symbol of God's favor, and reading of God's mysterious purposes into the misery of the poor, was the great spiritual accomplishment of a passionately commercial and otherwise notably nonspiritual age. It helped engender the public worship of wealth and acceptance of poverty that is among the cruelest of the robber-baron legacies.

p28
Today, as in the Gilded Age, we live in a world where a morality of personal responsibility rubs shoulders with a culture of greed and of flagrant social irresponsibility. Now as then, business has shed its collective responsibility for employees-just as government has for its citizens. Yet this threat to the common good is organized in the name of nurturing responsibility itself. The politics of personal responsibility offers a public moralism that does not disturb the culture of greed or existing relations of power. Making money is again a sign of personal responsibility while the failure to do so suggests a moral lapse.

The specter of moral breakdown that permeates our own times also lingered nearby during the Gilded Age, a sure product of the cynical rhetoric of personal responsibility and the erosion of public hope for social change.

p35
Today, as in the Gilded Age, countervailing power to business has been severely eroded. Without the emergence of more robust countervailing power ... competition on its own will not be enough to protect democratic pluralism, or, indeed, civil society itself.

p35
Our present era is defined by three central tendencies. The first is the rise of giant global corporate empires linking producers, retailers, distributors, and suppliers in integrated worldwide business networks. The second is the downsizing of the federal government and its increasing role as an advocate for, rather than adversary to, business. The third is the erosion of labor unions. Together, these trends mark a great decline of the forces of countervailing power that had developed through much of the twentieth century, and a return to a balance of forces reminiscent of the late 1800s.

p37
[Ronald] Reagan turned the full weight of [the labor bureaucracy] apparatus against the labor movement, appointing regulators to the National Labor Relations Board who sided routinely with corporations on jurisdictional and certification disputes and would make it difficult to contest even blatantly illegal corporate acts such as firing organizers. The Great Communicator also used his bully pulpit to persuade the public, already predisposed to think of unions as corrupt, to see unions as special-interest groups which corrode democracy-a view that many labor leaders contributed to by their own blatant abuse of union power or dues. In tandem with the corporate campaign that pictured unions as subverting competitiveness, Reagan helped turn most Americans into foes of unions, an especially notable achievement while massive downsizing and declining wages were the order of the day.

Combined with changes in market scale and technology, those antilabor campaigns sounded the death knell of labor as a vigorous countervailing force while also signaling the shift of government from countervailing power to corporate booster. Union membership fell precipitously-from its peak of 34 percent in 1954 to its current low of 15 percent of the nation's workforce. The influence of labor plummeted. While there are promising signs of revival in the late nineties, the labor movement has not been so weak since before its takeoff in the New Deal.

p55
Corporations have succeeded in diverting the frustration generated by downsizing and stagnant wages into a furious attack on governments rather than on themselves. Terrorist "patriot militias," who bomb public facilities, are symptomatic of the millions who blame government rather than business for their economic stress and in their anti-government zeal have no inkling of business as a kind of government itself.

p55
Corporate money pours into American political coffers while corporate welfare-in the form of public subsidies and tax breaks-has become central to the profitability of America's biggest firms. Public and private government remain formally distinct and continue to confront each other with hostility on occasion... But as in the Gilded Age, our public leaders have increasingly accepted their new role as advocates for our private corporate government.

p56
Americans have been schooled to deny the existence of overwhelming corporate power, or to see nothing wrong with it... America's leading companies cast a spell over many Americans, who are charmed by their technological wizardry, mesmerized by their advertising, and often understandably grateful for the products they serve up. Americans have been persuaded that the main threat to the nation is not the growth of American corporate power, but its potential collapse in the wake of relentless global competition.

p78
The worship of money - symbolized by the hypnotic focus of the nation on the stock market - becomes the new religion. Finance capital ... creates a surreal obsession with money and money markets. The value of patient production in early America yields to an ethos of pursuing money without any regard to making something useful. Personal identity shifts from the sense of self as life-long worker to that of short-term investor.

p79
The financial analysts employed on Wall Street personalize the immense power and partially countervailing force exercised by the investment banks. As the high priests of the economy, the analysts are increasingly in a position to dictate standards of corporate performance, and they provide the assessments which can mean life or death for big companies. A new, upstart elite on which leading executives have become frustratingly dependent, they act as a force of severe discipline on corporate behavior, and helped create the restructuring revolution of the 1 990s. Harvard Business School's Joel Kurtzman points out that under their mathematical formulae and quantitative market models lies a stark new ethos: "American corporations exist for their shareholders. Period." The analysts are helping transform banks into institutional investors enforcing the crystalline new logic of shareholder value. The interests of workers and communities are not part of their equation.

p91
... governments themselves continue to downsize, devoting an increasing percentage of their declining resources to subsidizing corporate growth and profitability. As public governments decline, the top 200 corporations - which make up our new private government - are increasingly becoming the government that matters.

p95
A social contract is the set of laws and social norms that establishes long-term responsibilities and protective moral covenants among employers, employees, and communities. While it seems the foundation of any society, a social contract is not to be taken for granted in market societies... the Gilded Age model is instructive. The robber barons purged social covenants by crushing nonmarket forces and enshrining the amoral ideology of the market as the ultimate morality.

In the Gilded Age, business leaders, politicians, and intellectuals preached the gospel of social Darwinism-a variant of market fundamentalism that has resurfaced today. Herbert Spencer, one of England's leading Darwinist thinkers a century ago, summed up the Gilded Age view of safety nets and social contracts: "The whole effort of nature is to get rid of such {the poor}, to clear the world of them, and make room for better . . . it is best that they die." William Graham Sumner, another of the period's most influential writers, saw the rich as nature's elect-and any effort to distribute wealth to help workers or the poor as contrary to the natural order: "The millionaires are a product of natural selection . . . if we do not like the survival of the fittest, we have only Ir one possible alternative, and that is the survival of the unfittest. The former is the law of civilization; the latter is the law of anti-civilization." He argued that poor workers were nature's losers and should be treated as such.

p101
... the termination of the New Deal social contract represented an economy-wide initiative by leading corporations-some exposed to new competitive pressures and some protected from it-who no longer found themselves compelled to make a deal with unions or communities.
Contractors constitute only one category of the virtual workers who make up America's new contingent labor force. The others include roughly three million temps; a million leased workers, who-like temps-are rented by the hour, day, week or month; and nearly 25 million part-time workers. Collectively, contingent ~ workers now make up between one-fourth and one-third of all American workers. "If there was a national fear index," says economist Richard Belous about these new charter members of the anxious class, "it would be directly related to the growth of contingent work."

p119

A basic faith in the separation of public and private arenas plays a central role in American thought. This faith enables us to believe ( that it is possible to have great concentrations of power and wealth in the "private" sphere while still practicing true democracy in the | public. It is a notion that masks the melding of government and | business that is one of the defining features of our times.

Corporation Nation

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