About the book: Populist Corrections
Although this necessarily is a work of fiction, addressing things that are not but could be, it is directly based on non-fictional realities we all experience in daily American life. The could-be is our economic wellbeing and the political democracy which we insist must accompany it. The reality in the United States today is that our economic wellbeing and democracy involve both fiction and non-fiction – ideals that should be but are not.
These non-fictional realities can be traced: what are the antecedents – of ten years ago, of eighty years ago – that have led down to today’s economic and political inequalities in the USA? And they can be projected: given the known trends that have led to where we are today, what is our probable economic and political future if we project those trends forward ten years, or forty years, or to the end of this century?
My tracing of where we came from, assessment of where we are this moment, and projection of where we are headed produces one overriding conclusion: the mechanisms that served for so long to give us the good life – fondly called the American Way of Life – have grown out of control and are now in process of destroying our good life. For many young Americans the good life passed before they were born – they’ve never known it. Increasing loss of the good life is “The Problem.” Most of this book is given over to “The Solution,” which is in fact a whole bundle of interrelated solutions. About these, my presentation is both deeply optimistic and deeply pessimistic. Both options are realistic.
I have been much assisted in detailing these antecedents and projections by my brilliant pal Elmore Bland, a keen observer of the passing scene and unstoppable pithy spokesman on what’s wrong with it. His nondescript name notwithstanding, Elmore is not really very bland. I hope you will come to appreciate him as I do. He has the socially responsible heart of a true populist, and unhesitatingly says bold things I would never dare. As good populists are supposed to, he deeply cares for people on no other basis than that they are fellow humans. And he is fiercely determined in his populist desire to correct the mindsets of people who willingly exploit and harm others – people such as, he will tell you, the greedy Wall Street geeks who caused the catastrophic financial meltdown of 2007-08, or the corporate manipulators whose money-driven actions are uncaring compromises on the road back toward slavery. They obviously need correcting.
Elmore reserves his special spleen for the inexcusably selfish who make trouble where there was no trouble. It was he, for example, who first conceived those highly successful correctional institutions known as Poverty School and Gambling School, where the recidivism rate is less than one percent. Elmore has trenchant ideas about such things.
Populist Corrections (the book, not the concept) has a simple three-part design. The front part consists of commentary alternating with sections from a legislative Act of Congress. 1) The alternating commentary is provided by Elmore’s penetrating views, augmented here and there by smatterings of my own modest writings. I have assiduously flagged Elmore’s great contributions by putting them in quotes so that the qualitative distinction of his perceptive thoughts will be recognized and thus stand above my own small efforts. 2) The alternating legislation, presented a few sections at a time, consists of…
The Capitalist Free Market Corrections Act (CaFMaC)
This remarkable legislation somehow made its way through a Congress that had for a generation proved itself capable only of obstructing all efforts to do something useful on behalf of All The People who kept electing its members to do precisely something useful on behalf of All The People. Not altogether coincidentally, CaFMaC’s ninety-five sections are in like quantity as the number of theses in Martin Luther’s modest little tome – and you will perhaps have heard of the effect his mild suggestions had on the course of western civilization. One modest difference sets the CaFMaC Act apart from Luther’s ninety-five theses: Luther neither expected nor intended that his complaints and corrective suggestions would loose a total revolution.
The second part arrives when Elmore’s comments (and my few) have exhausted most useful things worth saying and their alternating appearance gives way to CaFMaC exclusively. The whole last half of the Act thus is presented without interruption or comment – though let me just venture right here and now this small observation: when CaFMaC’s new laws are fully implemented the United States of America will be a nicer, more democratic, economically fairer place to live – a nation that does its very best to ensure equality for every last citizen, just like the Constitution says it will.
You will no doubt be pleased to know, right up front here, that Section 95, CaFMaC’s closing coup de grace, is a lengthy description of the purposes for which government exists. Elmore and I deemed this section necessary because Civics is no longer valued enough to teach it in high schools, in consequence of which so many potentially mature Americans no longer have any idea why their government exists. Many have even come to loathe, despise and hate their own government – if you can imagine that – apparently in complete ignorance that their government is themselves.
I should mention, too, that practical provision has been made for those normal people who don’t enjoy reading tedious legislative language as much as do abnormal people. Since CaFMaC’s ninety-five sections are indeed written in that awful obtuse language and style common to legislative bills, which always conceal more than they elucidate, I have followed Elmore’s suggestion to write a little summary and place it in front of each section to briefly tell ordinary English speakers such as yourself, in plain English, what the section’s convoluted wording actually says.
For those readers sufficiently peculiar to bother wading through the dense legislative language itself, I can only promise that interesting – even occasionally humorous – little treats will appear here and there, for it was Elmore himself who, just like that famous political writer Thomas Jefferson, maneuvered himself into writing the first draft of CaFMaC. And as Jefferson like all writers of governmental pieces well knew, he who writes first usually gets about eighty percent of that he wanted said.
CaFMaC therefore is optimistic – full of hope.
The third part leaves all that behind and moves into a future realm. No more CaFMaC, no more Elmore, no more pithy commentary on what’s right or wrong. No more hope. This third part logically projects today’s trends forward to what we – we citizens of America, of modern civilization, of the planet Earth – are probably going to encounter if today’s strong trends are permitted to continue unchanged. You will have to read this part for yourself. I haven’t the heart to preview it for you here.
I do however recommend that you do not skip ahead and read the last part first. No, you mustn’t do that – for if you did, you’d likely not bother reading the optimistic parts at all.
* * *
About the concept: populist-driven corrections
This book is about new solutions to some not-so-new serious problems.
It looks with fresh perspective at the worsening realities of our modern American economy – things such as below-subsistence pay; exporting our good-paying jobs overseas; a fast shrinking middle class; a new, growing and permanent socioeconomic underclass of uneducated poor young people; expanding poverty at all ages; the increasingly isolated super-rich top one percent who now own over half of all American wealth; growing reactionary anger against increasing income inequality; danger to American democracy; and the deliberate, intentional political dividing of ordinary good Americans from other ordinary good Americans, setting them against each other.
Over recent years these problems – except for that last one – have been so thoroughly described and constantly rehashed by so many that they have by now become familiar buzz to most Americans – even as the problems keep growing worse, even accelerating, without letup. And even as nobody does anything significant enough to change course from these worsening trends and problems, everybody keeps on talking about them.
To these problems, this book presents new and different kinds of solutions. As it happens, these particular solutions have been talked about by almost no one at all – not by any President or any member of Congress, not by liberals or conservatives, not by the Republican or Democratic parties nor by Bernie or Trump, assuredly not by the Chicago School of Economics, and most certainly not by Marx or Lenin those obsolete old hacks.
No, this writing involves a context altogether new. In order to participate you must agree here and now to suspend your mindset about the old normal you know so well and open your mind to new ways of thinking. Third Options I like to call them. If you cannot do this mind opening trick, as so many cannot, or are not willing to even try, as so many are not, then please close the book this moment and go do something else that better entertains you, for every word that follows is written only for the truly open of mind.
Here is your first test of sincerity: We are going to begin by juxtaposing and discussing, for just the first few pages, our modern American-but-internationalized global economy in terms applicable to slavery…
* * *
There now. Since you’re still here, let us consider together the comparable behavioral incentives of very large modern corporations and the owners of slaves.
Natural incentives of corporations
Imagine you are the head of a corporation. The main thing your board and stockholders expect of you is to increase profits. The stockholders don’t particularly care what you sell or how you go about increasing profits, they simply know they invested their money in your corporation with expectation that the investment will make them more money in the form of hefty dividends. The expectation is reasonable – they know it’s the reason your corporation exists, i.e., to produce profits, the more the better. All else is incidental.
You have two principal ways to increase profits: either 1) sell more of whatever it is that your corporation sells, or 2) reduce your costs. Most profit-increasing devices are variations of these two. To illustrate, let’s use an easy-to-understand small-store example. Then to corporatize the example, simply multiply all the following numbers by, say, 100.
Sell more. If your furniture store sells $500,000 worth of furniture in a year and spends $400,000 in costs to operate the store (wholesale purchases, employee wages, rent, advertising etc.), your net income – e.g., profit – is $100,000. This is expressed as a “profit margin” of 20% (net income divided by total income). Now suppose the next year you increase your sales to $700,000. To achieve this sales increase you spent more on advertising, more showroom rental space and extra sales staff at a total cost of $600,000. Your profit is still $100,000 ($700,000 minus $600,000) just like last year, but your profit margin has dropped from 20% down to 14.3% ($100,000 divided by $700,000). You’re not exactly losing money but your true profitability is way down. Even though you worked harder, you’re falling behind on the reason for which you exist. That reason is to make a profit. It most decidedly is not to “serve” customers, as one so often hears – that is merely incidental to the profit. Service could be ignored; a falling profit margin cannot.
You notice that other furniture stores, your competitors, have better profit margins than yours. How did they do it? You quickly find out they did it by cutting costs. It’s almost always easier to cut costs than to increase sales – and reducing costs by a percentage has more immediate impact on profit margin than increasing sales by the same percentage. Conversely, you have to think smarter to increase sales without also increasing costs, and most corporate heads don’t – or can’t – do that. Cutting costs is the easier road, and most of them take it. So let’s take a closer look at this easier alternative.
Cut costs. The options for cutting costs are endless, and they are on a continuum. At one end of this continuum you may trim costs a little, wherever you think it feasible – cut back a bit on advertising here, cut down a tad on employee overtime there. Moderation, as they say. But no law says we have to be moderate. Let’s choose to be immoderate – let’s carry this cost-cutting option to its logical extreme, as so many do. Somewhere near the continuum’s opposite end you can cut costs drastically, and so you do.
What you do is, you lay off two of your four salespersons, and tell the remaining two they’d just better handle it… or else… because you’ve got plenty of good experienced job applicants all out of work and wanting to sell furniture in your store. Congratulations: big cost cut, instant profit increase. Never mind that those two you let go had been with you for twenty-six years, were wholly loyal and were looking forward to retirement. Too bad. You did what you had to do to increase profits. That’s why you’re in business, right? If you didn’t, the new owner you sell the business to when you retire would, right? And besides, employee wages and fringe benefits are almost always the single biggest cost of doing business, so they’re right up there, real prominent, when the corporate heads go looking for places to cut costs, as they constantly do. Cutting costs is money in the bank.
Increase profits at any cost
Now, to get your mind into the corporate mega-perspective, multiply the numbers above by 100 – or 1,000. Maybe even 10,000 if your corporation is in that exalted status known as “too big to fail.” Pay attention to your first glimmerings of understanding on why corporations born and chartered in the United States, selling most of their products to Americans in the United States, have sent so many of our good high-paying jobs away from the United States to foreign nations where very low wages are the norm. Instead of paying you $35 an hour plus a set-aside for retirement benefits, which you diligently worked your way up to over twenty-six years, the corporation can now pay $2 an hour and no benefits at all to an industrious foreign worker who is oh-so happy to get the $2 and no complaints because it represents a lifestyle improvement in his or her poor country. Big cost cut, instant profit increase.
Your job has been “outsourced,” as they say. Sorry. After the corporate heads have done this maneuver so many times that all the good-paying jobs have been shipped overseas – and the CEOs and CFOs have been paid millions in congratulatory bonuses for their great and clever success at increasing profits by cutting costs – what jobs then are left in the USA to sustain American workers, or send their kids to college? Well, we no longer make our own furniture, our own shoes, our own clothes or upholstery fabrics, our own electronics, or even our own steel much less our own cars or pots and pans made with steel. And so we have to import all these life necessities from the foreign countries where they are now made, at great profit to the corporations. Nobody wins but the corporations.
Degrading the U.S. economy at its foundation
America has “naturally transitioned” into a “service” economy, they will tell you, where more and more of the jobs consist of changing sheets in motels or bussing tables and serving food (courteously, or else) in restaurants. In the service economy employees mostly don’t earn much money for their labors – certainly far less than when American workers used to make things. In the service economy a minimum wage is now the standard, and raises are low and slow in coming. Back when Americans made all the goods we Americans needed, and were paid good salaries with good raises and cost-of-living increases, those were the good old days. Those days are dead and gone – “transitioned” to a service economy. But the transition was by no means “natural.”
In this new service economy employees don’t “make things,” they “serve” other people. You might get lucky in the new service economy – but the odds increasingly are that you probably won’t, because there simply are no longer nearly as many good jobs as there used to be. And, unlike Roosevelt’s New Deal economy, this service economy does not promise an improving future. For an increasing percentage of American workers it comes with no hope – ever – of rising above the bare subsistence level of personal income. It guarantees only, logically enough, high employee turnover, so forget the job security of the good old days. You might do better if you can afford the cost and four years of time off to get a college degree – but then again you might not. Might always means might not. Many college graduates these days can’t find a job that pays a living wage, and are forced to settle for less, or much less, than promised by the old-fashioned American Dream.
Our consumption needs haven’t changed
Regardless of how well or poorly you now get paid, as a nation we still consume all those same durable goods that we used to manufacture for ourselves with our late good-paying jobs. Things every household has to have – practical stuff like light bulbs and televisions, table lamps and microwaves, hammers and drill bits, and good metal pots and pans – not to mention the shirt on your back. But these practical goods are now made mostly overseas, in foreign nations where wages are rock bottom even for manufacturing jobs.
Costs, as they say, have been cut – and American workers, once the most productive in the world, were the costs. But – Shazam! – corporate profits have been successfully increased. So pay a million-dollar bonus to the smart-cookie corporate CEO who engineered the increase by shipping the jobs overseas and putting Americans out of work. Pay a fairly decent quarterly dividend to every stockholder. But hold the line on wages and benefits paid to any remaining employees – tell them a pay cut may be necessary.
Stop, think. At 324 million citizens and growing fast, the United States is the third largest national market in the world. We all – every last household of us – still need to buy the pots and pans and practical stuff – just like always, those needs don’t change. But instead of manufacturing it for ourselves here in the USA – as we used to before the corporations increased their profits – we permit the corporations to send our good manufacturing jobs overseas, where foreign workers are paid a pittance to manufacture the stuff we still need, then the corporations ship the stuff back over to the USA, and then we buy it. By some standards this would be called crazy. As likely as not we will buy the stuff at Walmart, inanely attesting thereby our acquiescence to the internationalized corporate-foreign-manufacture system that is steadily impoverishing us. We are letting our own impoverishment happen. We don’t have to, but that’s what we’re doing.
We still have to have the stuff, the practical needs of daily living, we still have to buy it – we just don’t make it for ourselves anymore. Or more precisely, our corporations don’t manufacture it here at home anymore. They found new ways to increase their profits by cutting costs. This new foreign-job arrangement is highly successful at increasing profits for the corporations at the center of the arrangement, pulling the strings, abolishing jobs, laying off the Americans who used to fill the good jobs and make all the stuff we need.
Profit incentives for owners of slaves
To increase profit, cutting costs has long been known easier than increasing sales. In fact, increasing sales was strictly secondary until the advent of mass advertising after the mid-twentieth century. Cost cutting has been predominant through American history and, historically, the ultimate way to cut costs was to own slaves who need not be paid at all.
In particular: limiting the costs of employee labor was a primary device for maximizing profits through the colonial and national periods of the United States from about the year 1519 until the 1930s when the New Deal started requiring fair wages to be paid. Many Americans, especially in the South, avoided labor costs altogether until the Civil War abolished their custom of free (unpaid) labor. It really boosts profits if you can avoid paying out any wages and, instead, limit your labor costs to the minimal subsistence food, clothing and shelter sufficient to keep your slaves fit enough to work dawn to dusk. And you can always save a few more bucks by skimping on that. Here’s to Profits.
And so slavery was a godsend, you might say, for Americans really focused on achieving high profits. It worked even better than exchanging a $35-dollar an hour American job for a $2-an-hour job overseas. Slavery-based high profits built all those wondrous big white-columned plantation mansions which that damn yankee William Tecumpseh Sherman burned down in a fit of vengeful madness after the North won the Second American Revolution in 1865. Sherman made a lasting point, but he failed to overturn the situation as concerns paying slave wages. Share cropping quickly proved to be a good substitute. High profits and “low” wages had long been a necessity right down at the very core of the gracious and genteel Southern Way of Life, and so share cropping fit right in.
Maximizing profit was restored with vengeance within a decade after the Civil War, and prevailed through the rest of the nineteenth century notwithstanding the rise of labor unions intent on forcing less unfair pay out of factory owners. Sharecrop-wage arrangements in the American South – and below-subsistence wages throughout the rest of America – continued to prevail well into the twentieth century, notwithstanding the real growth of labor unions. These arrangements continued until the stock market crash of 1929 and the Great Depression precipitated by it forced things to start changing for the better – at least for northern factory workers, if not for southern share croppers.
After the Depression
Overall, wages for American workers improved only after the Roosevelt New Deal began placing severe regulatory restrictions on the natural behavior of corporations. And then for a while things stayed tolerably fair, as long as corporations remained under tight regulation. Economic destitution slowly gave way to adequacy. Things got better.
After the war
The New Deal really kicked in, enormously augmented by the GI Bill. The middle class grew bigger than ever before in American history. The poor shrank smaller than ever before. The rich grew richer more slowly than ever before. For a large majority of All The People, it was the best economic time ever experienced in the nation’s history. The next chapter will provide some details on this uniquely nice period. It stands alone. It lasted from 1946 to 1979.
After the New Deal years
But of course it didn’t last. Beginning in 1980 the economic ideologues of the Reagan Administration started dismantling the New Deal. The dismantling continues to this day, and it is a testimonial to the quality and depth of the New Deal innovations that it is taking the slave-owner mindsets so long to dismantle them. And make no mistake – the dismantlers exhibit the same old motivations that kept people enslaved, forced to give their free labor to ole massa. Ole massa’s mindset is alive and well in modern America.
The cost cutting continuum ranges from bald slavery on one end to a host of modern half-measures on the other, including these familiar examples of converting costs to profits:
- Requiring workers to constantly increase productivity but refusing to share the increased profits with the workers who produce them;
- Insisting that workers take pay cuts “so the corporation can remain competitive”;
- Limiting employees to less than forty hours a week to avoid paying the fringe benefits which are federally required at and above forty hours labor;
- Defining employees as “contractors” in order to avoid the cost of fringe benefits;
- Refusing to pay higher salaries even though the costs of living keep increasing;
- Paying employees minimum wage or less and advising them to get on welfare;
- Paying high dividends to stockholders and obscene mega-salaries to CEOs while holding employee wages to the lowest possible minimum they can get away with;
- and sending American jobs overseas, leaving the American workers unemployed.
In these examples the trend is clear. The road to slavery is only a matter of degree.
The slave owner mindset
Now here’s the thing – this factual history confronts us with a distressing truth. In the colonial territories that became the United States, slavery persisted from 1519 to 1865 – three hundred and forty six years – only because some humans were willing to enslave other humans. For three hundred and forty six years they did this. Willingly.
Persons with this mindset and the means to do so were perfectly willing to buy enslaved humans, to own them as slaves, to sell them, to sell their children and ignore their grief and essential humanness, to force them to work long hours every day for no pay, to discipline and mistreat them and occasionally to beat them until they died, and to regard them as animals – all at no consequence to the slave owner. Think about that.
Just as the slave owner’s heart was untouched by the slave’s misery and degradation, the modern CEO’s heart is untouched by the corporation’s lowest-wage employees who must work multiple jobs to afford the bare subsistence needs of life – or who become jobless when the job are sent overseas. The road to slavery is only a matter of degree. Moreover, slave owners were enabled to perpetrate these things because their peers were mostly slave owners too, and had the same untouched hearts and mindsets. Worst of all, the period 1519 to 1865 in our part of North America is not an anomaly in the human story.
Looking backward: Slavery has been acceptable to and considered normal by otherwise respectable humans since ancient times. It is hard to find a time in human history when slavery was not acceptable and indeed considered normal. Slavery is prominent from the earliest times described in the Old Testament. The Jewish slaves’ exodus from Egypt is central lore of Western civilization and the cultures of three Abrahamic world religions. The details are routinely taught to small children in Sunday School, with the result that they unthinkingly presume the existence of slavery in a context their parents seem to regard favorably. Slavery was routine in Greek and Roman cultures, full through the middle ages in Europe, and at all times in Oriental cultures. Most Americans are unaware that the sheer number of African people shipped as slaves to Brazil was seven times greater than the total number ever enslaved in the United States as colonies and nation. In most places and times, slavery has been considered normal. In many places it still is. It constitutes a presumptive subsistence-level context for paying a minimum wage. The road to slavery is only a matter of degree.
Looking around today: We find pimps perpetrating slavery over the prostitutes whose lives, movements and wellbeing they control, often with slave-owner brutality. These moderns willingly perpetrate enslavement without remorse –and collect their profits. Criminal jackals charge enormous fees to “escort” refugees and others wanting to illegally cross national borders, vulnerable to the undependable protection of human smugglers who may abandon or kill them at any moment. When jackals are caught and incarcerated, new jackals readily appear to continue the trade – and, without remorse, harvest its huge profits. There is not an Arab or Middle Eastern nation today in which slavery is not commonplace and accepted whether out of sight, barely out of sight or openly in sight. Terrorists in many countries routinely capture and enslave other humans, typically committing the men and boys to forced labor or forced combat and the women and young girls to sexual slavery. There are few nations that do not permit and engage in some degree of forced labor by convicted felons at no cost to the state which incarcerated them. The road to slavery is only a matter of degree.
The point of this grievous recitation is that slavery is not just a thing of the past, it is alive and well all over the world today. Moderns willingly enslaving other moderns. Did you think the American Civil war ended slavery? Did you actually think the human mindsets perfectly capable of enslaving other humans were all in the past?
Looking ahead: The slave-owner mindset has persisted from time immemorial, and some people whose names you know are still quite capable of renewing it. We should not be deceived that our society is without plenty of people perfectly capable of newly enslaving others and – as all across the Old South – willing to do so if opportunity should arise. Did you think we had become so civilized it was impossible? Incipient slave-owner mindsets are very much with us still, perfectly willing to turn other people into slaves, to buy, own and sell slaves, perfectly willing to force enslaved human beings to work for nothing, with no trace of human caring for the health or wellbeing of the enslaved – or to pay them the modern minimum wage. It’s just a matter of degree.
There have always been humans who were willing to enslave other humans.
There still are. A lot of them are in charge of large corporations.
Look around and see the obvious: the slave-minded potential thrives in modern America. In order to enhance their profits, people among us today – some perhaps your neighbors, or perhaps in the gated development up the road – are perfectly willing to employ other people at less than the minimum wage – knowing full well that the minimum wage is grievously inadequate for subsistence in modern America. Without remorse, they do not feel human caring for the low-paid employee’s health, stress, poverty or wellbeing. The slave-owner mentality easily rationalizes these wrongs: let them get on welfare, let them get food stamps, let them eat cake.
In corporations, cutting labor costs is thought acceptable – the smart thing to do.
From the displays of non-caring poverty-level employee wages that everywhere surround us – from the Walmarts to the fast food joints to the low-pay fine restaurants that tell their servers to “make it in tips” – it is only a matter of degree as to how far the non-caring mind is willing to go. There is no reason to assume slave-owner mentalities will not be with us tomorrow, and ever thereafter. It is only a matter of degree. It always has been.
In July 1888 a schoolteacher-turned-reporter named Helen Cusack donned a shabby frock and brown veil and went looking for a job. “In factories and sweat shops, she stitched coats and shoe linings, interviewed her fellow workers in hot, unventilated spaces and did the math. At the Excelsior Underwear Company, she was handed a stack of shirts to sew – 80 cents a dozen – and then was charged 50 cents to rent the sewing machine and 35 cents for thread. Nearby, another woman was being yelled at for leaving oil stains on chemises. She’d have to pay to launder them. ‘But worse than broken shoes, ragged clothes, filthy closets, poor light, high temperature, and vitiated atmosphere was the cruel treatment by the people in authority,’ she wrote under the byline Nell Nelson. Her series, ‘City Slave Girls,’ ran for weeks.”
Kim Todd in Smithsonian, November 2016
Food, clothing and shelter
The problem begins with the staples of human subsistence – i.e., food, clothing and shelter. Every human needs a basic supply of these simply to stay alive. Anyone doubting it may try going one week in January without food, warm clothing or a roof overhead.
The corporation which sells basic food, clothing or shelter is in an inherently controlling position, especially if its position is monopolistic as corporations selling life basics tend to be. Corporate heads know their customers must have food, clothing and shelter, and their employees must keep a job simply to afford their own food, clothing and shelter. Thus, looking in both directions at once, this situation presents manifold advantages for maximizing corporate profits – charge the customers high and pay the employees low. That’s why the corporation exists – to sell high and pay low, to maximize profit.
If you want to become very, very rich, go out and capture a large share of the market for those subsistence commodities that human beings must have in order to maintain life: food, clothing and shelter. How much would you pay for a glass of water if your canteen were empty in the middle of the Sahara? And what is the best device for capturing a large, perhaps monopolistic, share of any market?
Charter and operate a corporation. People figured that out a long time ago.
* * *
We must continue a while yet with our background on the problem and the causes of the problem. By no means are we yet ready to start talking about the solutions. All this talk about the corporate part of the problem is necessary simply because it is so un-talked about in daily discourse. The situation is rather like the air we breathe – it’s constantly all around us, vitally affecting our lives and taken for granted, but how often do you hear people talking about air? How often do you hear them talking about corporations as the root cause of all the things now going wrong in our formerly great American economy?
Corporate evolutionary history in brief
At base, the idea is nothing more than recognition that by teaming up and cooperating, people can implement desirable projects bigger than any one person could handle alone, whether it be herding bison over a cliff (free meat) or building a new bridge from which all will mutually benefit (easier travel). Stepped up one level of complexity, if the completed project can itself produce revenue, such as tolls charged to cross the bridge, it may result in new “free” income for all who contributed a share of the original cost. There have always been reasonable incentives to form corporations – and temptations to use them to exploit the masses of common people for personal enrichment.
Roman times. The term “corporation” derives from the Latin corpus meaning “body.” Early on the Romans applied it in this sense to cities and, later, to community organizations such as artisan associations, social clubs and religious societies where larger community interests were served. As the concept evolved, as all concepts do, private contractors came to associate themselves into ad hoc corporation equivalents called publicani, whereby to pool their resources in order to bid on public functions for the Roman state, such as collecting taxes, building aqueducts and constructing temples.
Of great interest here, from earliest times proto-corporations, whatever they were called, were subject to the public interest. They were created with intent to serve the greater public good, e.g., building hospitals, universities, roads and bridges. Their chartering documents typically spelled out their duties and public service obligations. They often were to be overseen by some public authority, and straying outside their charter for personal enrichment was punishable by law. Nonetheless, history records a repetitive cycle of corporations overreaching their intended bounds, inevitably causing such social turmoil that the state is forced to rein them back in and regulate their behavior.
The Roman publicani further evolved, as things always do, into more permanent associations with many investors – eventually becoming large, powerful and rich enough to employ hundreds of workers and spread across the Roman provinces. Some even attained limited liability under authority of the Roman state, which sheds new perspective on how long this handy device for avoiding full responsibility for one’s actions has been around. Many of the investors, being wealthy to start with, were of course well connected and wielded influence in Rome where collusion with government officials became indistinguishable from routine business. Thus the precursor model of modern for-profit corporations was launched.
Around the same time, incidentally, non-profit charitable corporations also came into being in attempts to serve (cope with) Rome’s large and growing indigent population. Let it be noted that the Roman state lasted a thousand years whereas our American states united are yet far from completing only our third century. Or coping with the very real human needs of our growing indigent population.
Middle ages. Under tenets of Roman law that survived as Church canon law, cities, universities, monasteries and guilds became incorporated – now under certification by religious authorities or various royalty and nobility. These too largely served public functions intended to benefit the public interest at large. Nothing resembling the Roman publicani would again emerge for a long, long time, but even Europe’s dark ages never fully extinguished the corporate idea. It lay mostly dormant until about 1600 when competitors arose to challenge the passing commercial dominance of Spain and Portugal.
Even in those Iberian kingdoms, the idea had to be re-learned. Thus: if a group of people, each having some extra money laid by, hatched the idea of sending a ship to the New World to wrest gold from the natives, they could pool – i.e., “invest” – their monies to fund the cost of a ship, crew, muskets and powder – a significant cost which no one of them could afford alone. They all knew that if the venture survived the risks of shipwreck and possibly violent resistance by the natives who owned the gold, then the investors were likely to become enriched far beyond the cost of their initial investment. Then if the voyage in fact succeeded, they would all be eager to do it again and become yet vastly more enriched without having to work for it or even inconvenienced from their daily rounds. But alas, if the ship sank or the natives won, their investments would be forfeit.
Such is the lot of corporate stockholders in all historical periods – in the end what they do is not altogether unlike the roulette wheel. A lot of people just love the adrenalin rush, just like in casinos. You’ll either win or you won’t. Fifty-fifty odds – right?
Early modern times
Thus despite the risks, investing in corporate shares with intent to gain profit without having to work for it became an incentive in and of itself. The incentive remained true even – sometimes especially – in cases where the corporation gained its profit not by producing useful objects to sell but merely by exploiting others out of their existing wealth. The Spanish and Portuguese had set the trend, developing the idea to a fine art with their gold-seeking exigencies in the New Worlds of North and South America.
Coincidentally, in the Year of Our Lord 1502 one Juan de Córdoba of Seville became the first known merchant to ship an African slave to the New World to work for free. No one remembers the slave’s name, only Córdoba’s.
Labor cost cutting in early modern times
Transporting African slaves to the Americas escalated when in 1510 Spain’s King Ferdinand authorized fifty to be shipped from Africa to Santo Domingo where they would provide free labor for the new Spanish-owned sugarcane plantations which had displaced the island’s native people, all now perished. This labor-cost-cutting idea took hold. Within a decade four thousand African slaves were “imported” westward to “New Spain” under authority of Charles V, the Most Holy and Sovereign Ruler of the Spanish Empire, the Holy Roman Empire and the Habsburg Netherlands. For a very long time thereafter, the slave trade grew every year, with holy endorsement or without.
Profit expansion in early modern times
Profit-minded Dutch businessmen, enthusiastically abetted by English privateers (robbers who moved about by sailing ship) with whom they shared mutually high focus on putting an end to Iberian dominance over foreign exploitations, greatly refined the corporate concept and its endless iterations in places like Manhattan Island and South Africa. Soon realizing the great profit and wealth to be had by stealing the natural resources of other peoples – especially when costs for the necessary labor could be rendered so very low – the French, Belgians, Italians, Germans and other enterprising Europeans sent troops to take control over most tribal/cultural areas throughout Africa, the Middle East and Asia. Thereby they launched the great heyday of worldwide imperialism and its long-memoried legacy of revengeful problems and strife not excluding the terrorism with us today.
The exploitive model favored by all of these (except the displaced Iberians whose sophistication never went beyond the brute-force conqueror model) was the corporation – or other organized endeavor that looked very much like a corporation – because it so effectively organized people to do work and produce profit. In those early corporate heydays profits underwent unprecedented growth as markets expanded explosively because prices were held down by low labor costs resulting from explosive growth of slavery. Times were good for corporate stockholders who could afford to buy shares.
The British model
In time the highly profit-minded British excelled beyond all others and exercised control over so very many foreign territories and their plenteous natural resources that the sun never set on the British Empire, as they used to say. Early on, the British jewel in this respect had been the American colonies to which England – uniquely among nations – sent its own citizens to colonize and work the land as residents. This arrangement quite unintentionally gave the British-American colonists something to lose, thus creating in them a new and independent mindset which was not overly long in coming to the fore.
Most profitably, the mother country required the colonists to ship their raw materials to England, where English workers paid slave wages processed them into manufactured finished goods such as pots and pans and axes, which were then shipped back to America where the colonists could buy at marked-up retail these little life necessities they were not permitted to manufacture for themselves. Sound familiar? Any American colonists caught making finished products for themselves were punished and their facilities destroyed. Though you don’t hear nearly so much about the “economic” causes of the American Revolution as about the “political” causes, the similarity to today’s arrangements whereby American workers are rendered unemployed when their jobs are shipped overseas to slave-wage countries will be apparent to the reader who has not fallen asleep. May we just observe in passing that economic arrangements of this one-sided nature tend to make revolutions fairly inevitable.
After the exasperated American colonists in high ill temper eventually separated themselves from their one-sided financial arrangements with merry old England, the British soon refocused their attentions on the large geographic area today known as India, Pakistan and Bengladesh – very rich in natural resources – and proclaimed it the jewel in the British crown. The vehicle for stealing this eastern jewel’s great wealth and shipping it home to England was a super-corporation arrangement, which modern mega-corporations can only envy, called…
The East India Company
Originally set up to challenge (replace) Portugal’s dominance of the Spice Islands trade, the East India Company (EIC) was chartered by Elizabeth I in 1600 and operated for 274 years. Evolving quickly in corporate ways, it soon looked much like modern business corporations with separate managers and wealthy merchant investors. The latter gradually took a backseat to heavy investment by the Queen and British aristocrats who looked out for its interests and their own. In turn, the EIC continued the old guild practice of annual payments to the government, perhaps a precursor of the idea that modern corporations really ought to pay some taxes. The East India Company eventually controlled half the world’s trade in basic commodities such as silk and cotton, tea, salt and opium.
The company employed its own private armies and in general acted as if it were an independent country subject to no higher authority. It had employed 3,000 regular troops in 1750, just seven years before the 1757 Battle of Plassey after which it took over India and ruled as sovereign. Just six years later (1763) the EIC had 26,000 troops, rising to 67,000 by 1778 – about the same England became militarily distracted in the American colonies. By 1803 this unregulated corporation’s private army numbered 260,000 troops.
The EIC ruled over and exploited India for 101 years. The company finally ceded control to the British Crown in 1858, less than a year after native troops rose against their British officers in the Sepoy rebellion – often called India’s First War of Independence. Not without justification, the modern mega-corporation Halliburton, so deeply involved in the Bush Administration’s allegedly preemptive invasion of Iraq, has been compared to the loose-cannon model that was the East India Company.
In many ways the EIC was a model of corporate efficiency: 100 years into its history, it had only 35 permanent employees in its head office. Nevertheless, that skeleton staff executed a corporate coup unparalleled in history: the military conquest, subjugation and plunder of vast tracts of southern Asia. It almost certainly remains the supreme act of corporate violence in world history. For all the power wielded today by the world’s largest corporations – whether ExxonMobil, Walmart or Google – they are tame beasts compared with the ravaging territorial appetites of the militarised East India Company. Yet if history shows anything, it is that in the intimate dance between the power of the state and that of the corporation, while the latter can be regulated, it will use all the resources in its power to resist.
William Dalrymple, The Guardian.com, March 4, 2015
The Boston Tea Party versus the EIC
It was the East India Company that was targeted when the Sons of Liberty implemented the Boston Tea Party. Aboard three newly arrived EIC ships – the Beaver, Dartmouth and Eleanor – were about 46 tons of the company’s tea, bagged in 340 chests and destined for retail sail at the EIC’s non-negotiable price. As it happened, that price was set so as to undersell the existing colonial market, thereby driving out local competitors and giving EIC a monopoly in the American colonies. These machinations being widely understood, the three ships’ arrival set off a series of angry town meetings for three weeks before the night of decisive action regarding the “pernicious tea.”
On the night of December 16, 1883 the Sons of Liberty – some badly disguised as native Americans – used an assortment of tomahawks and axes to smash open all 340 chests and chop into the baled tea to ensure it would not survive its imminent dump into Boston harbor’s saltwater. It was hard work and took a while. After completing the job the raiders swept the ships’ decks clean and returned to proper place anything it had been necessary to move. One accidentally broken padlock, the personal property of a ship’s captain, was promptly replaced the next day by the patriots. The EIC would report damages of £9,659 – about $1,700,000 in today’s currency – not counting the lock.
We then were ordered by our commander to open the hatches and take out all the chests of tea and throw them overboard, and we immediately proceeded to execute his orders, first cutting and splitting the chests with our tomahawks, so as thoroughly to expose them to the effects of the water. In about three hours from the time we went on board, we had thus broken and thrown overboard every tea chest to be found in the ship, while those in the other ships were disposing of the tea in the same way, at the same time.
George Hewes, a participating Son of Liberty
The modern models
As our modern times were about to emerge there already had emerged two broad types of corporations: 1) those that manufacture useful objects they can sell for a profit, and 2) those that produce nothing useful at all but just go directly for the profits by manipulating other peoples’ wealth. Examples of the latter include, but are not limited to, hedge funds and financialized “holding” umbrellas which merge giant banks, insurers and other holders of enormous funds with the inherent risks of investing and stock trading.
To this latter, the creative ingenuity into which self serving corporate managers and testosteronic bright boys can direct their intensely competitive energies approaches infinity, easily finding ways over, under, around and through mere governmental regulations set up with intent to protect the better interests of All The People. Anyone doubting this may try to comprehend the fine print on a bundled-mortgages derivative “instrument” sold at great profit and high commission prior to the Wall Street meltdown of 2007-08. Or even just explore how the term “derivative” was derived.
And so with this thumbnail summary of the peculiar human tool called the corporation we arrive at completely modern times when corporations have grown far bigger, and far more powerful, than ever before in all human history. Even the EIC would be impressed.
The corporation is properly called a tool because a “tool” is a human creation used as a means to an end. The tool is never an end in itself – it exists as an intermediary device, i.e., as a wrench turns a bolt, a car speedily transports you so you don’t have to walk, or a corporation enables a group of people to collaborate in making a profit by one means or another. The wrench, the car and the corporation are mere tools, a means to help us achieve some end. This being true, you will immediately see the error in the United States Supreme Court’s longstanding opinion that a corporation is the equivalent of a “person,” having the same rights as a living breathing person. A person is an end in himself/herself. A corporation is not; it is a mere tool. Therefore, the United States Supreme Court, our nation’s ultimate arbiter of right and wrong, is self evidently wrong – and with enormous ill consequences. What do we do about such a grievous wrong?
Well, CaFMaC has some ideas – but, challenging though it is, corporate personhood is but a side issue, a little fish. Our interest here is the big fish – i.e., The Whole System. I opened with the promise of new solutions to some not-so-new serious problems. So what are the problems, what are the solutions, and what is the corporate connection?
* * *
The contemporary context
Beginning in 1980 U.S. corporations entered into an absolute frenzy of consolidations and mergers, unfriendly forced mergers, hostile takeovers, leveraged buyouts and similar machinations all intended to make them grow larger and more powerful while reducing the competition they all faced and disliked. They preached the great virtue of competition while doing everything in their power to reduce it. It worked. That Reagan-era frenzy was the beginning of a trend that has today evolved into what is called a globalized economy.
In this worldwide economy there is irresistible pressure to ship American jobs out to low-wage nations to 1) cut costs and 2) increase profits. Merging continues, with the result that today there are many corporations so big they are multi-national in scope, completely internationalized in their operations, beholden to no single nation – and beyond meaningful control by any nation. Their behavior greatly enriches the insider bright boys who do the corporate manipulating. It works against betterment of All The People.
Out of control
The combined wealth of the thousands of corporations now grown to multi-national immensity, and the global wealth they control, exceeds that of any single nation. Many of these multi-national giants individually control more wealth than dozens of nations combined. They are, literally, out of control. Their ability to influence the policies of nations – specifically including powerhouses like the United States, China, Great Britain, France, Germany, and Russia – is immense and growing stronger. Even China, with its absolutist Communist Party control, struggles to stay in control – and is losing ground.
Runaway corporations are a new phenomenon in human history. Constant growth of their profits and the increasing power that goes with increasing wealth is not an option – it’s what they do, it’s what they must do, it’s why they exist. If they can rule the world, they will – whether they intend to or not. And they’re well on their way. Yet, around the world, most people are not even aware the threat exists. That’s partly because their attention is focused on obtaining the life necessities of food, clothing and shelter.
In the United States in particular, corporations increasingly use their wealth to influence elections and elect candidates sympathetic to corporate interests. Their primary goal, just like always, is to increase their profits. Along with profits now measured in twelve digits comes power. Wealth and power correlate, and increasing corporate control correlates inversely with decreasing wealth and power of We The People.
The complaint grown so popular among Americans about the inequality of “the top one percent” is for all practical purposes a red herring – it diverts attention from the real issue: the very existence of gigantic corporations as such. The top one percent of people are so exceedingly rich because they happen to be the few who control the great rich corporations, and this they do by using their great wealth to own controlling shares of the stocks of the great corporations.
These peoples’ great personal wealth, in combination with the consolidated extraordinary wealth of giant multi-national corporations, are a new force in American life. These corporations and their owners have the very real potential to so thoroughly take over control of the policies and leadership of the United States that the American republic – its democracy, its American dream and its shining light of liberty to all the world – will exist as such no longer. Anyone unable to recognize this real potential at this advanced stage of corporate evolution in American history is simply not in touch with the economic and political realities of our increasingly untenable position. Like Dr. Frankenstein, we are being overwhelmed by our own creation that has grown monstrous.
But all this terrible risk from inadequately stewarding the corporate tool we ourselves created would simply vanish if we were to put an end to the inherently autocratic corporations, and replace them with a different form of organizing that is inherently democratic, free, fair and just – and, by its very nature, cannot be any other way. How to go about doing so is the topic of this book.
The system is capitalism. Its vehicle is the corporation. Let us now turn to solutions.
* * *
PART ONE: CORRECTIONS TO CAPITALISM
Chapter 1: Economic history lesson: next crash projected
We cannot solve our problems with the same thinking we used when we created them.
– Albert Einstein
For the enlightenment of citizens in general and economists in particular, the more significant depressions, recessions, panics and awful economic downturns in U.S. history, each preceded by a period of irrationally exuberant speculation driven by greed with intent to attain disproportionate wealth without working for it, are hereby brought to public notice. The Wall Street crash and Great Depression of 1929-1940, and the subprime mortgage and derivatives collapse of 2007-08, ongoing, are examples.
The following list of the more significant among such calamities omits numerous other somewhat less significant economic downturns, named and unnamed, which occurred in between those listed, or in regions comprising less than the entire nation. The late-twentieth century savings and loan crisis is an example of these lesser but still serious events. Each and every one of these latter, even though “somewhat” less disruptive, was accompanied by widespread loss of personal savings, subsistence income, homes, farms and possessions, as well as, of course, the poorly documented human suffering which invariably attends such things. And that’s just the in-between ones not listed here.
The real suffering, a majority of it out of sight and undocumented in any way that would get peoples’ attention, resulted from the big ones – the panics, the bubble crashes, the things we now mostly call “recessions” or “downturns,” avoiding at all costs that unsettling word “depression.” It seems odd how quickly all that suffering gets forgotten, every time, how the indomitable human spirit turns positively then, once again, to the future, buckles down again, and millions try once more to work their way back up out of poverty and duress. Until the next time. While at the same time a relative few uncaring opportunist speculators set about gaming the system all over again, trying to get rich quick without working, keeping the boom and bust cycle forever in motion, exploiting the U.S. free market economy again, and again, and yet again, remarkably, without cease.
Here then – ignoring those lesser economic crises as well as comparable major ones that regularly occurred during the pre-U.S. colonial period – are listed the United States economy’s more significant depressions, recessions, panics and significant economic downturns through our history to date. Their frequency is of some interest.
– The Panic of 1796-97 (7 years after Constitutional formation of the United States).
– The Panic of 1819 (interval since last major downturn being 22 years).
– The Panic of 1837 (interval since last major downturn: 18 years) .
– The Panic of 1857 (interval 20 years).
The Age of Robber Barons
– “The Long Depression” of 1873 to 1896 which included:
The Panic of 1873 (interval 16 years).
The Panic of 1884 (interval 11 years).
The Panic of 1890 (interval 6 years).
The Panic of 1893 (interval 3 years).
– The Bankers Panic of 1907 (interval 14 years).
The Roaring Twenties
– The 1920s Florida Speculative Real Estate Bubble and Crash of 1926
(interval 19 years).
– The Roaring 20s Speculative Bull Market and Great Stock Market Crash of 1929.
(interval 3 years; followed by the 11-year Great Depression through 1940).
The Significant Interlude of 1946-79: 33 years of increasing widespread prosperity,
reduction of poverty, and major growth of the U.S. middle class.
Resumption of significant cyclic downturns:
1980: Imposition of simplistic “supply-side” “trickle-down” Reaganomics mindset.
– 1981-87: Speculative Merger Mania, Hostile Takeovers and Leveraged Buyouts.
– 1987: Black Monday Stock Market Crash , worst since 1929.
– 1990s-2000 The Dot.com Speculative Bubble and collapse (interval 13 years).
Latest (with accelerating extreme income inequality and reduction of the middle class):
-2007-08, ongoing: Subprime Mortgage/Derivatives Collapse & aftermath (int. 7 years).
Notice that, leaving aside the 1946-1979 interval of unprecedented economic prosperity, the least interval between economic crashes is three years; the longest is twenty-two. For these dozen intervals, the time between economic crashes, on average, thus is about 12.5 years. If one further omits the outlying “shortest three” and “longest twenty-two,” the average is about 13.7 years, an inconsequential difference from 12.5 years.
In other words: there was only one period in United States history when we the people enjoyed sustained prosperity and extended genuine respite from the ever-recurring recessions, depressions and economic crashes every twelve to fourteen years, on average. That one bright period was the years during which the financial sector was tightly regulated in reaction to the insanely selfish behavior and irrational speculation that had caused the Crash of 1929, the resultant decade of Great Depression, and the immense governmental regulation of economic (and most other) activities necessitated by the nation’s engagement in World War II as leader and only hope of the free world. That one bright period lasted just thirty-three years before things started back downhill.
Based on the historical record of average 12- to 14-year intervals between significant stock market crashes, and still not counting those lesser in-between dips and dives that waste so much human wealth, comfort and happiness, the next major economic downturn or collapse of the U.S. economy and resultant recession or depression can be reasonably predicted to begin around about the years 2019-2021. Unless it comes sooner.
Hedging this bet, let me note that the crash well may indeed come sooner, as a result of the extraordinary volume of speculation that resumed soon after the 2008 meltdown. In truth, the perpetrators never really stopped; despite governmental rumblings, they remain ineffectively regulated. They have bought up tons of the post-2008 repossessed houses for a song, bundled them as exorbitantly priced rental properties, and are at this moment selling the bundles as “monetized financial instruments,” most profitably, just as before. Still effectively unregulated, they have arranged to profit a second time on the same houses they caused to be foreclosed after their 2008 debacle. Did you really not know?
But then an historic discontinuity occurred…
Given the historical record of calumny and greed, the next crash most certainly would have happened – had not certain measures been adopted in the common national interest, as described in this writing. They were of two kinds, those measures: one was decidedly punitive, the other more positively corrective in nature. And their adoption surely would never have happened had we not finally persuaded Congress to change the terms of debate – that is to say, the context. Given the rock bottom public regard for our allegedly “representative” Congress, widely regarded as having degenerated into the worst public institution in U.S. history, believe you me that persuasion took some doing and had some most extraordinary twists and turns – but that’s another story to be told another time…
* © *
SHARE THE BLOG: If you’re enjoying this tale of POPULIST CORRECTIONS in modern America, please tell your friends to tune in. Invite others to view
The Fixy Populist …at… fixypopulist.com