Expecting More

By

Richard W. Crockett

If we think of ourselves as a consumer society, the source of economic prosperity for the United States is a consumer with money in his pocket. A proposition which even the most simple-minded should be able to understand is that a nation can not allow economic greed of business interest to abandon workers without the means to buy the products in the marketplace and maintain any significant level of prosperity. Henry Ford understood this, and he wanted his employees to earn enough to buy his product, the Model-T Ford. At present the United States is in an economic crunch, perhaps a recession, and even worse, perhaps headed for a depression. Whatever the name given to it and however deep the economic ditch becomes, I submit that the trend is “secular” as opposed to “cyclical,” that is, that it is not a temporary phenomenon caused by immediate economic conditions. The trend is longer term. It derives from the reduction and depletion of the financial means of ordinary people, driven by decline in wages, which is permitted by a decline in labor union power, and compounded by increases in the price of fuel. There is little discretionary income for former members of the middle class. We now have a working poor, perhaps a little more genteel than an earlier poor, but nevertheless poor. It is not possible in a consumer society to shortchange the consumer and keep the whole thing going.

Even though labor unions are no longer what they used to be, a perceived widespread threat to profitability, the jobs do not seem to be returning from China and other places. Further, anti-trust laws do not protect small business or labor and have failed to protect the consumer from monopoly power. This lack of oversight results not only in monopoly pricing of goods, for example the cost of gasoline and utilities, but also in monopoly exclusion of alternative products, such as electrically powered vehicles rather than exclusive availability of gasoline powered vehicles. This last claim refers to the combined efforts of Exxon and General Motors and others in the auto industry to beat back regulations requiring zero emissions on some vehicles sold in California, which resulted in the manufacture and distribution of electric cars between 1996 and 2004.

The problem seems to arise from a mistaken model for free enterprise. There has been a paradigm shift sometime between the New Deal era and today. I believe it to be the drift away from limited but sensible regulatory activity by the government, which seeks to preserve competition, a necessary element to allow for the development of new enterprise. Further, the destruction of the labor movement has eliminated political competition between capital and labor interests and thereby resulted in the loss of countervailing power, which might offset a run-away corporate capitalism. The result is, if you want a product, you must buy it from a large chain store such as Wal*Mart, Target, Menards or Lowes and the likelihood is that the product is manufactured overseas or outside our borders. Small entrepreneurs have little chance of succeeding against these entities especially when cultural habits have become ingrained in our psyche after twenty five to fifty years of this practice of purchasing almost exclusively from such businesses. For labor, this means jobs at reduced pay or hours, with more and more people having to hold two part-time jobs at reduced wages and benefits in order to make ends meet. Disbursed families may find themselves reassembling and living beneath one roof in a manner reminiscent of one hundred years ago. This image is portrayed in movies made in the 1930’s during the period of the Great Depression, but it will be with less romance or nostalgia than is offered in the movie version. Under this income scenario, how many twenty-five thousand dollar vehicles or two hundred thousand dollar mortgages can a family afford?

While the problem we face may not be exclusively the fault of the corporation, it is part of it. John Marshall, Chief Justice of the U.S. Supreme Court in the earliest days of our republic, defined the corporation as a “legal entity existing in contemplation of the law.” From this beginning evolved the construction of “the corporate person,” entitled to all of the privileges of a natural person, and some immunity that a natural person does not enjoy. The corporation cannot be sent to prison for slimy commercial behavior or from stealing from you. It is a means of accumulating capital, collectively; indeed, it is a kind of private collectivism within our midst. Politically, large businesses, throw their weight around the halls of the state legislatures and congress and both state and federal executive branches of government. They even lobby at the judicial branch of government, for example, when they finance lawsuits to shape the legal landscape they operate in. At both the state and national levels of government, the “corporate person” wields political power disproportionate to any other person. Accordingly, the work product of government serves their interests and not yours. Now while it may be, for example, that we don’t want General Motors to fail, it does not follow that “what is good for General Motors is good for the United States,” as former Secretary of Defense, Charles E. Wilson once claimed.

The new free enterprise paradigm must include the “corporate person” being subject to the law. The “corporate person” cannot be the lawgiver, because when it is it can exempt itself from law that is created to protect smaller business and consumers from its power. It has become clear in recent years that all power—even political power—does not reside in the seat of government. Much of it resides in the corporate boardrooms and its power is not merely economic but is also governmental. It is time to change all of this. To paraphrase and edit the Wall Street Journal's Washington editor Gerald Seib, "A political [party] that expects failure [on the part of the government] doesn't try very hard to produce anything else."

7/10/08