COLOSSUS HOW THE CORPORATION CHANGED AMERICA JACK BEATTY BROADWAY BOOKS / NEW YORK CONTENTS Title Dedication PREFACE PART ONE: THE CORPORATE FOUNDATIONS OF AMERICA INTRODUCTION “OF A HUGE AND UNKNOWN GREATNESS” THE CALVINIST STRAIN THE ETHIC OF PROSPERITY by Stephen Innes THE CORPORATE ROOTS OF AMERICAN GOVERNMENT FROM CORPORATION TO COMMONWEALTH by Stephen Innes ECONOMIC METABOLISM THE NEW ENGLAND MERCHANTS IN THE SEVENTEENTH CENTURY by Bernard Bailyn TRAFFICKING IN SOULS THE SLAVE TRADE by James B Hedges THE CASE FOR AND AGAINST INCORPORATION THE PARTNERSHIP FORM OF ORGANIZATION: ITS POPULARITY IN EARLYNINETEENTH-CENTURY BOSTON by Naomi R Lamoreaux LEGACIES THE REVOLUTION AND THE CORPORATION by Jack Beatty PART TWO: A MAGICIAN’S ROD 1820–1860 THE (SLOW) CONQUEST OF AMERICAN SPACE TOWARD SCALE AND SCOPE by Jack Beatty WOMEN AND CHILDREN FIRST THE BOSTON MANUFACTURING COMPANY by Thomas Dublin A BUSINESS UTOPIA? CHARLES DICKENS ON THE MILL GIRLS OF LOWELL THE COURTS AND THE CORPORATION CHARLES RIVER BRIDGE V WARREN BRIDGE, 1837 THE MACHINE IN THE GARDEN THE AMERICAN SYSTEM OF MANUFACTURING by Jack Beatty AMERICA ON TRACK THE RAILROADS: THE FIRST MODERN BUSINESS ENTERPRISES, 1850s–1860s by Alfred D Chandler, Jr THE DEBT SLAVE LABOR AND THE SOUTHERN RAILROADS by Jack Beatty OMNIPOTENT WITHOUT VIOLENCE THE CIVIL WAR AND THE SEARS ROEBUCK CATALOG by Jack Beatty PART THREE: THE AGE OFINCORPORATION 1870–1930 “THE OUTSTANDING FACT OF MODERN LIFE” A RIOT OF INDIVIDUALISTIC MATERIALISM by Jack Beatty TARBELL’S REVENGE STORY OF A GREAT MONOPOLY by Henry Demarest Lloyd A SECOND OPINION THE PROSPERING FATHERS by Paul Johnson “ORGANIZE OR PERISH!” BLOODY HOMESTEAD, 1892 by Jack Beatty PR AT&T: THE VISION OF A LOVED MONOPOLY by Roland Marchand TAYLORISM THE CINDERELLA OF OCCUPATIONS: MANAGING THE WORK OF DEPARTMENT STORE SALESWOMEN, 1900–1940 by Susan Porter Benson “LIKE TRYING TO SCREW AN ELEPHANT” FORD VS GM by Richard S Tedlow THE TWENTIES THE BUSINESS OF AMERICA by Jack Beatty PART FOUR: BUST TO BOOM 1930–1973 THE AMERICAN HIGH OLIGOPOLY’S GOLDEN AGE by George David Smith and Davis Dyer THE CORPORATE SURROUND THE MODERN CORPORATION AND PRIVATE PROPERTY by A A Berle and Gardiner C Means THE MONSTER From THE GRAPES OF WRATH by John Steinbeck WASHINGTON INC THE MILITARY-INDUSTRIAL COMPLEX by Jack Beatty THE SCIENTIFIC-INDUSTRIAL COMPLEX MAKING “R” YIELD “D”: THE IBM LABS by Robert Buderi OFFICE POLITICS “THE OFFICE IN WHICH I WORK” by Joseph Heller COMPANY MEN THE OTHER-DIRECTED ROUND OF LIFE by David Riesman WHAT PRICE SUCCESS? From THE MAN IN THE GRAY FLANNEL SUIT by Sloan Wilson VISION AND THE BOTTOM LINE MORE THAN PROFITS by James C Collins and Jerry I Porras PART FIVE: UNBUNDLED 1973–1999 U-TURN THE CRISIS OF THE AMERICAN CORPORATION by George David Smith and Davis Dyer BLAME THE HARVARD BUSINESS SCHOOL MANAGING OUR WAY TO ECONOMIC DECLINE by Robert H Hayes and William J Abernathy MANAGEMENT’S WORST HOUR THE HOSTILE TAKEOVER AND ITS DISCONTENTS by Peter F Drucker BETRAYAL RECKONING AT SAFEWAY by Susan C Faludi POLLUTING THE CULTURE THE WAR ON TIME WARNER by Paul Alexander WOMEN IN A MAN’S WORLD GIVING AT THE OFFICE by Arlie Russell Hochschild MINORITY REPORT WHAT BLACKS THINK OF CORPORATE AMERICA by Shelly Branch SOCIAL RESPONSIBILITY THE CORPORATION AND SOCIETY by Marina v.N Whitman IS DEMOCRACY CATCHING UP TO CAPITALISM? A SEA OF TROUBLES by Jack Beatty NOTES ACKNOWLEDGMENTS PERMISSIONS ACKNOWLEDGMENTS Copyright To David Outerbridge for a lifetime of friendship PREFACE The economic interpretation of history merely represents an effort to explain the deep flowing currents moving underneath the surface of the past —Arthur M Schlesinger, New Viewpoints in American History (1922) Big business has been the lever of big change over time in American life, change in economy, society, politics, and the envelope of existence—in work, mores, language, consciousness, and in the pace and bite of time itself Such is the pattern revealed by this historical mosaic: an anthology of readings tracing the rise of the American corporation In school we absorbed a model of change in which politics and government—popular movements, political leaders, and the passage of laws— drive history; and, partly from a Cold War–era repugnance toward the Marxian politics and metaphysics of economic determinism, the dynamic role of business in the making of what the economist Robert Heilbroner calls America’s “business civilization” got shorn down in our textbooks to anecdotes about “robber barons” and “industrial statesmen,” annexing institutional history to biography However well or ill it may fit the past, the politics-drives-history model is discrepant with our own experience of recent decades, when few would argue for the primacy of politics and government as instrumentalities of change While government has barely rippled society since the civil rights and environmental legislation of the 1960s and early 1970s, the great corporation, through diffusing technology, has changed the way we work, communicate, play, and talk “A new corporate language has been invented,” Michael Lewis shrewdly notes, “to support people’s need to believe that their work is actually an endless quest for novelty ‘Outside the box,’ for instance ‘Outside the box’ is to our age what ‘plastics’ was to the 1960’s.” (Lewis adds, wryly: “The one thing that is certain is that anyone who uses the phrase is as deeply inside the box as a person can be.”) The ubiquity of “the bottom line” signals an expanding corporate beachhead from language to values Writing in the Atlantic Monthly, the billionaire/philosopher George Soros fears that we are advancing from a market economy toward a “market society,” where everything is for sale; and the corporation, through assiduous billions spent conditioning the American Dream, is taking us there Whether downsizing or reengineering, merging or unbundling, de-skilling or re-skilling, shifting jobs abroad or automating them at home, fanning wants with advertising or subsidizing election campaigns—in the 1998 election cycle business contributed $660 million to candidates to labor’s $66 million—today the corporation gathers up millions across the globe in a hurricane of creative destruction of which it is at once vortex and plaything, sweeping and swept along “Today’s leading revolutionary force,” Michael Novak, of the American Enterprise Institute, writes, “is not the state but the business corporation, turning the mechanical industrial age into the electronic age.” Politics is comparatively a sideshow, a diversion from the real precincts of power Discussing the AOL/Time Warner merger during the 2000 election campaign, James Ledbetter of the Industry Standard calculates that AOL’s 20 million subscribers plus the 35 million customers of Time Warner’s HBO “represent more people than will vote in presidential primaries.” Government, increasingly, is run strictly for the people, without their interest, knowledge, direction, or more than flickering curiosity “Who cares what Washington does,” Burt Solomon asks in the National Journal, “when the nation’s course is being driven from Silicon Valley and Wall Street? One can imagine, a century hence, schoolchildren laboring to remember the names of Ford and Carter and whether Clinton served before or after Bush (or both).” Americans, Ledbetter observes, participate in the economy as never before through the Internet and the stock market “Business stories,” he writes in Microsoft-owned Slate, “are the dramas of this age.” This book examines the past through the prism of a present when the great corporation looms colossus-like over economy, society, and culture Hyperbole? Consider the maker of consciousness, the media industry Eleven companies now own over half of the nation’s daily newspapers, down from forty-six as recently as 1983 Two corporations now account for more than half of all magazine revenue Five control more than half of book publishing In 1946 80 percent of daily newspapers were independently owned; now 80 percent are owned by corporate chains The four major television networks append from giants like General Electric and Disney “The same few firms,” the journalism critic Ben Bagdikian writes, “are slowly tightening their stranglehold on the news, views, literature, and entertainment that reach a majority of Americans.” Mark Crispin Miller, director of the Project on Media Ownership and a professor of Media Studies at New York University, says the antitrust laws don’t cover media mergers like the pending union of AOL and Time Warner “The danger of concentration lies not in the risk of prices getting higher, which is what antitrust measures,” Miller said in an interview with the New York Times “The real danger is much subtler You’re talking about the disappearance of alternative views You’re talking about an exponential increase in conflicts of interest.* You’re talking about fewer interests having greater market power These are consequences that are extremely troubling, that worry most Americans, but that don’t attract any kind of sustained political or judicial attention because they are not simply economically quantifiable.” Our laws lag economic reality as they did in the years after the Civil War, when even predacious monopolies like Standard Oil were not against the law because they were not anticipated by it How did concentration on today’s scale occur? What were the historical dynamics that led us to this age of the megacorporation? Multifariously, the readings supply pieces of the answer Some document while others evoke the transformative power of the economic forces—“omnipotent without violence,” Emerson characterized them—coiled up in the corporation Colossus has a second preoccupation: It seeks to give perspective to the debate over the corporation’s place in the good society *“In the Readers’ Guide to Periodical Literature for the years 1919–1921, in which were listed all the magazine articles appearing during those years, there were two columns of references to articles on Radicals and Radicalism and less than a quarter of a column on Radio In the Readers’ Guide for 1922–24, by contrast, the section on Radicals and Radicalism shrank to half a column and the section on Radio swelled to nineteen columns In that change there is an index to something more than periodical literature.” Frederick Lewis Allen, Only Yesterday (New York: Harper and Row, 1964), pp 65–66 *Industrial production nearly doubled between 1921 and 1929 However: “This impressive increase in productivity was achieved without any expansion in the labor force Manufacturing employed precisely the same number of men in 1929 as it had in 1919.” William E Leuchtenburg, The Perils of Prosperity (Chicago: University of Chicago Press, 1958), p 179 * “Thoughtful citizens were stunned by the violence, the bombast, the naked demagoguery of those sentences,” Raymond Moley, a Roosevelt adviser who broke with him after the campaign, wrote “I began to wonder whether he wasn’t beginning to feel that the proof of a measure’s soundness was the extent to which it offended the business community.” From David M Kennedy, Freedom From Fear: The American People in Depression and War, 1929–1945 (New York: Oxford University Press, 1999), p 282 *A recent advertisement taken out by Lockheed Martin, Boeing, and Pratt & Whitney shows deterrence logic surviving the Cold War Across the black-and-white fuselage of an “F-22 air dominance fighter” is this legend, written in red: “The first thing it will kill is an enemy’s appetite for war” (N.J Congress Daily, May 13, 1999) *The debate is paralleled in health care Dr Arnold Relman, a former editor of the New England Journal of Medicine, voicing the anger of physicians at the kind of bureaucratically administered for-profit “managed care” that limits what doctors can for their patients, decries the “corporatization of medicine.” He predicts a rebellion against it, an assertion of countervailing power led by disgruntled consumers and responsive politicians Arnold S Relman, M.D., “What Market Values Are Doing to Medicine,” Atlantic Monthly, March 1992 *In the run-up to the May 2000 House vote on normalizing trade with China, business groups spent $10 million on advertising and House members pledged to vote yes on China for an average of $46,000 apiece When House Republicans tried to stall the vote until just before August’s Democratic Convention, when they could use it to drive an ill-timed wedge between Vice President Gore, who favored the measure, and his union supporters, who execrated it, the business lobby “read the riot act,” Business Week noted, to Republican House Whip Tom DeLay “The Republicans had to stop playing games,” a former lobbyist for Boeing then working for America Online Inc told Business Week “We just told DeLay, ‘You can’t this.’ ” See “China Trade: Will Clinton Pull It Off ?” by Paul Magnusson, Business Week, May 29, 2000, p 75 *Corporate influence pervades the nation’s middle and high schools, according to a report from the General Accounting Office A quarter of these schools, it found, now carry Channel One, which broadcasts news and commercials in the classroom Textbook covers, this first government study of commercialism in the schools notes, feature the names and logos of Clairol, Ralph Lauren, Reebok, even Philip Morris Constance L Hays, “Commercialism in U.S Schools Is Examined in New Report,” New York Times, September 14, 2000, p.24 *The world has since turned upside down: “There are now many jobs to which it takes more nerve to wear a blue suit than a nose ring.” Michael Lewis, “The Artist in the Gray Flannel Pajamas,” New York Times Magazine, March 5, 2000, p 48 *“There has been violence in some of the movies that we put out,” Rupert Murdoch, the chairman of 20th-Century Fox told Ken Auletta in 1993 “But is violence justified I think so If it involves cruelty, sadism—obviously, you would never that The trouble is, of course, that you run a studio, and how free are you to make these rules? The creative people give you a script and are given a last cut on a movie The next thing, you have a thirty-million-dollar movie in the can which you may disapprove of.” From “What Won’t They Do?” by Ken Auletta, in The New Yorker, May 7, 1993, p 46 *“Even in today’s lean, fast-changing business environment, people like their jobs—overwhelmingly A solid 84% of American workers are satisfied with their jobs, according to a Wall Street Journal /NBC News poll conducted by the polling firms of Peter D Hart and Robert Teeter Only 4% describe themselves as completely dissatisfied A solid minority—36%—say they feel more appreciated, satisfied and comfortable at work.” “Work May Be a Rat Race, But It’s Not a Daily Grind,” by Ellen Graham, the Wall Street Journal, September 19, 1997, pp R1 and R4 †“To compete globally, most companies pursue some combination of three strategies,” Hochschild writes “The first is to invest in workers by cross-training them in order to expand their range of skills A second strategy is to invest less in workers —to lower wages, benefits, and job security—while trying to get the same amount of work out of them A third strategy, which is compatible with the first and helpful in handling the bad news attached to the second, is to create and manage a strong company culture.” The Time Bind (New York: Metropolitan Books, 1997), pp 16 and 17 *John D Rockefeller took a nap at noon, worked only three days a week, often left the office at three or four to go home to play with his children, and wanted to see his employees’ feet up on their desks “Has anyone given you the law of these offices?” he asked a new recruit “No? It is this Nobody does anything if he can get anybody else to it As soon as you can, get some one whom you can rely on, train him in the work, sit down, cock up your heels, and think out some way for Standard Oil to make some money.” From Ron Chernow, Titan: The Life and Times of John D Rockefeller, Sr (New York: Random House, 1998), pp 170–173 *Gays and lesbians are discriminated against within corporations as throughout society But some corporations are notably responsive to their gay and lesbian employees, or so one surmises from a recent incident involving Stephen Covey, the author of The Seven Habits of Highly Successful People After he was quoted making construably anti-gay remarks at a Hawaii fund-raiser for a group seeking to ban same-sex marriages, companies that had invited him to speak—for $65,000 a lecture—faced demands from their gay and lesbian employees to cancel Covey’s contracts To recoup, Covey had to send letters of apology to a half-dozen companies Covey’s spokesman, Lee Gomes wryly noted in the Wall Street Journal, “declined to speculate which, if any, of Mr Covey’s own rules for effectiveness might have been broken in the course of the Hawaii episode.” (“Expert of Effectiveness Manages to Extricate Foot From Mouth,” by Lee Gomes, in the Wall Street Journal, page B-1, March 2, 1998.) *The Economist called the conglomerate “the biggest collective error ever made by American business.” April 21, 1991 COLOSSUS Copyright © 2001 by Jack Beatty All rights reserved Printed in the United States of America No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher For information, address Broadway Books, a division of Random House, Inc., 1540 Broadway, New York, NY 10036 Broadway Books titles may be purchased for business or promotional use or for special sales For information, please write to: Special Markets Department, Random House, Inc., 1540 Broadway, New York, NY 10036 BROADWAY BOOKS and its logo, a letter B bisected on the diagonal, are trademarks of Broadway Books, a division of Random House, Inc Visit our Web site at www.broadwaybooks.com LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA Beatty, Jack Colossus: how the corporation changed America / by Jack Beatty.—1st ed p cm Big business—United States—History Corporations—United States—History Industrialization—United States—History Capitalism—United States—History Business and politics—United States—History United States—Economic conditions United States—Social conditions I Title HD2356.US B43 2000 338.7'4'0973—dc21 00-040361 Additional copyright information appears on Permissions and Acknowledgments page eISBN: 978-0-7679-0957-0 v3.0 ... ambition for the patient slog toward the gold watch Undoubtedly the profoundest change in the lives of the employees of the great corporation is the one from the job security of the fifties to the pervasive... exploitation The readings sketch in the corporate frame of America and the American frame of the corporation They discuss the economic culture of Puritan New England so propitious to the growth of American... prosperity, and the daughter devoured the mother —Cotton Mather Under their charters, the colonial trading corporations assumed the risks of America; in return, the Crown granted them monopolies