How did big corporations become the prevailing form of enterprise in the United States? The standard answer is that bigger is better. Concentrated industry, we are told, allows managerial efficiency, huge economies of scale, and the ability to undertake bold research and development and apply it to better products and increasingly efficient process technology. But the reality is that the big corporate world primarily evolved from mergers and conglomerations, not excellence in the market.
General Motors is, perhaps, the best example. By 1955, General Motors controlled over half of the automotive market in the United States. Was this the result of superior technology and managerial ability? No: It was the result of the conglomeration of Chevrolet, Pontiac, Buick, Oldsmobile, and Cadillac—all formerly independent corporations. Unsatisfied with this hegemony, General Motors “back integrated” some of its most vital suppliers. General Motors also excluded other automaker’s vehicles from the dealerships where its automobiles were sold, eliminating competition. The result was the demise of Packard, then Hudson, then Studebaker. One by one, the grand old names of the automotive industry closed their doors.
That same year, 1955, General Motors was hauled before the U.S. Senate to explain how it had become the largest corporation in both the United States and the world and how its investors were able to enjoy twice the average manufacturing return on investment. The Senate wanted to know: “Wouldn’t America be better off if General Motors reduced the price of a Chevrolet substantially to make it more affordable for the workingman?” G.M.’s executives responded that, if they reduced the price of a Chevy as much as they could, they would run their competitors out of business. This clearly indicated that G.M. had amassed enough power over the automotive market that it would have been appropriate for the federal government to order the breakup of General Motors into three corporations, require it to dispose of its acquired part suppliers, and force it to allow normal retailing of its products alongside those of its competitors. Had this occurred, there is little doubt in my mind that more than 90 percent of the cars we drive today would be American-made.
Half a century ago, the American people were told that they could not do without the economies of scale at General Motors. How was it, then, that Toyota and Honda—companies a fraction of the size of General Motors at the time—were able to cross the Pacific and secure a sizeable market share by selling better cars at lower prices? Remember “planned obsolescence,” three-year styling cycles, and five years to rusted-out hulks? Superior disk brakes that were not adopted by G.M. until decades after they were commonplace in Europe? Or Detroit’s refusal to make quality compacts until foreign cars had secured 20 percent of U.S. market share? At those Senate hearings in 1955, Charlie Wilson, the chairman of General Motors, summed up G.M.’s philosophy: “What’s good for General Motors is good for the rest of America.”
International Business Machine, Inc., provides another good example of the way in which restraint of trade has enabled the dominance of major corporations. IBM was considered to be light-years ahead of its competitors. Were it not for the emergence of Apple’s personal computer, IBM mainframes would still dominate the computer industry.
Neither IBM’s superior technology nor patents formed the basis of its monopoly. Big Blue prevented competitors from emerging by frustrating the attempts of developers to create software that was compatible with their systems.
Microsoft was given the keys to the kingdom when it was hired by IBM to produce an operating system that would allow IBM to catch up to Apple in the innovative PC market. IBM adopted open architecture, the opposite of their former “mainframe” policy. Now, IBM personal computers would be designed to be compatible with products offered by their competitors. As networked PC’s replaced mainframe systems, Microsoft turned the tables on IBM, and Microsoft’s continued control over connectivity has been the basis of its current monopoly over PC software.
Bill Gates is, without a doubt, the consummate monopolist. Ask any company that bought Microsoft Windows 98 in 1999, only to be told that it will not be serviced next year. They have to buy Windows XP, not because of its innovative features, but because planned obsolescence is Microsoft’s right and privilege as a monopolist. Windows 98 will not run the company’s new printers. Those who play ball with Microsoft are granted connectivity, while those who compete are out of luck.
“Think tanks” put out articles on Microsoft that do not refer to antitrust law and do not detail what Microsoft has been doing. They just offer sympathy for “poor little old Microsoft, which is being picked on by the government.” This sounds suspiciously like “opinions for sale.” Now, after being found guilty of monopolistic practices in federal court, Microsoft is going to be let off with a slap on the wrist. Is justice for sale through corporate “soft money” political contributions?
The Man in the Gray Flannel Suit called into question the emerging corporate lifestyle and its effect on families, which greatly influenced the perspective of a generation of entrepreneurs. But the most radical alteration was the transformation of the power elite. The corporate executive and the chamber of commerce replaced the old guard in the community; the new class sat in judgment of the politics of the city, its environs, and its state, and rubberstamped such cultural revolutions as the socializing of American schools. One consequence was the demise of locality, as power was centralized into regional financial centers.
In most cases, the corporate representatives neither intended nor understood their roles and effects. They were basically being used as shills by the people who were engineering the changing of our society. The plight of real people did not cross their minds. Passing through town on three-year jaunts from one corporate assignment to another, they unwittingly played the role of Pontius Pilate, washing their hands as the localized centers of American society were dismembered by the new corporate state.
Wal-Marts and K-marts dried up local retailers; independent banks became branches of money-center banks; and franchises replaced independent businesses. Good citizenship was replaced by the welfare state. Sending American jobs and dollars abroad, redistributing income, and converting education to social conditioning all contributed to government’s beggaring and marginalizing of the family and the voluntary community.
Today, we worship at the altar of technological progress, which we attribute to Fortune 500 corporations, when in fact most innovation comes from small corporations, as does all of net new employment. During the past decade, we have been sold the lie that we have entered a new era of productivity. While the U.S. economy has had a high rate of productivity in such high-tech fields as computers and telecommunications, the old economy’s rate of growth of productivity has not deviated from the long-term norm. The rate of growth of productivity in the 1960’s was 50 percent higher than what it was in the 90’s.
Part of this productivity myth could be called “Gross National Garbage” statistics. You drive Mom out of the home, so the family eats out, because Mom is not cooking anymore; the tax collector accounts for more Gross National Product, and the government collects more taxes. The car Mom drives to work, the extra clothes she needs, and the daycare center that rears her children—all are tallied on the cash register and the Gross National Product goes up even more. Has anyone ever subtracted the loss of real life and community and seen what the net looks like?
A process of continual economic concentration is taking place through Wall Street, both at home and abroad. And we can look forward to enjoying less choice under cartels than we would if we had competition. The shaky foundations of the new international economic order are increasingly exposed. The United States is currently running a $400-billion trade deficit, the largest run by any country in history. But we are told by libertarians, “Do not worry, foreigners are reinvesting their gains here in the United States.” Didn’t we learn that the smart guy in the Manhattan Island deal was Peter Minuit, who took a few trunkloads of trinkets and traded it for Manhattan Island? Now, we are supposed to believe that the trinkets were the good deal and that trading factories and farms and real estate for foreign-made consumer goods bought on credit is good for Americans.
How do we recover our nerve and engage the battle for America? First of all, we must turn off the federal spigot. We need to stop soft-money donations by corporations and unions. Only individuals should be allowed to give to political parties or candidates. We need to end corporate welfare. The federal government dispenses $100 billion of handouts to corporations annually.
We need to restore competition. We need a real antitrust policy. The presumption of this country’s economy is that free enterprise and competition are the order of business. When an industry gets to the point where one company dominates the playing field, it is time to restore a competitive structure to that industry.
Bigger is not better. The way of the New Corporate State is the road to fascism. Traditional America was made up of free and locally rooted people, religiously moral and law-abiding families primarily engaged in local enterprise. What’s good for General Motors is not what made America the envy of the rest of the world.
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