The myth of coporations

From our overstocked archives

Sam Smith, 2011 - The right has successfully convinced people that multinational corporations operate in the same way as your friendly neighborhood druggist. In fact, it is hard to find examples where the former even slightly replicate the latter. Yet this myth is perpetuated not only by politicians but by the media.

In fact, large corporations repeatedly drive smaller firms out of business.

Large corporations don’t treat customers as fellow members of their communities but merely as a market to exploit.

Large corporations, unlike small businesses, are run on the lifeless model described by John McKnight: “The structure of institutions is a design established to create control of people. On the other hand, the structure of associations is the result of people acting through consent. . . You will know that you are in a community if you often hear laughter and singing. You will know you are in an institution, corporation, or bureaucracy if you hear the silence of long halls and reasoned meetings.”

Large corporations, unlike small businesses, do not constrain their ambitions in order to maintain respect and honor within a community.

Large corporations are not the major job creators; small businesses are. As the Small Business Administration noted in a 2010 report, “While small and large firms provide roughly equivalent shares of jobs, the major part of job generation and destruction takes place in the small firm sector, and small firms provide the greater share of net new jobs.”

Large corporations are, in fact, the nation’s major job exporters, not to mention all the money they launder overseas while avoiding domestic taxes. Yes Magazine recently put it this way: “Between 2000 and 2009, U.S. transnational corporations, which employ roughly 20 percent of all U.S. workers, slashed their U.S. employment by 2.9 million even as they increased their overseas workforce by 2.4 million. . .A series of Kauffman Foundation studies find that nearly all job growth in the United States comes from entrepreneurial startups, which by their nature are products of Main Street. It is equally significant that more than 90 percent of the entrepreneurs responsible for job growth come from middle-class or the top end of lower-class backgrounds. Less than 1 percent of America’s job-creating entrepreneurs come from extremely rich or extremely poor backgrounds.”

The carefully concealed truth is that Wall Street and corporate America hate free markets. That's why these welfare fathers keep tens of thousands of lobbyists in Washington -- to protect them from the random effects of the competition they so frequently extoll.

The least free of all markets is to be found at the Pentagon, where defense contractors have become so dependent on their single customer -- the military -- that more than a few simply wouldn't know how to survive in normal business competition.

Generally speaking, the smaller the business the more it resembles the great myths of capitalism. If you want to find out what free enterprise is really about talk to a street vendor and not a Fortune 500 executive.

Typically, members of the 1% are not there because they are smarter or more creative than those in small business. As C. Wright Mills noted:

“If we took the one hundred most powerful men in America, the one hundred wealthiest, and the one hundred most celebrated away from the institutional positions they now occupy, away from their resources of men and women and money, away from the media of mass communication . . . then they would be powerless and poor and uncelebrated. For power is not of a man. Wealth does not center in the person of the wealthy. Celebrity is not inherent in any personality. To be celebrated, to be wealthy, to have power, requires access to major institutions, for the institutional positions men occupy determine in large part their chances to have and to hold these valued experiences.”

Most free workers in this country were self-employed well into the 19th century. Further, until the last decades of the 19th century, Americans believed in a degree of fair distribution of wealth that would shock many today. James L. Huston wrote in the American Historical Review:

"Americans believed that if property were concentrated in the hands of a few in a republic, those few would use their wealth to control other citizens, seize political power, and warp the republic into an oligarchy. Thus to avoid descent into despotism or oligarchy, republics had to possess an equitable distribution of wealth."

Such a distribution, in theory at least, came from enjoying the "fruits of one's labor" but no more. Businesses that sprung up didn't flourish on competition because there generally wasn't any and, besides, cooperation worked better. You didn't need two banks or two drug stores in the average town. Prices and business ethics were not regulated by the marketplace but by a complicated cultural code and the fact that the banker went to church with his depositors.

Although the practice was centuries old, the term capitalism -- and thus the religion -- didn't even exist until the middle of the 19th century.

Americans were intensely commercial, but this spirit was propelled not by Reaganesque fantasies about competition but by the freedom that engaging in business provided from the hierarchical social and economic system of the monarchy. Business, including the exchange as well as the making of goods, was seen as a natural state allowing a community and individuals to get ahead and to prosper without the blessing of nobility.

In the beginning, if you wanted to form a corporation you needed a state charter and had to prove it was in the public interest, convenience and necessity. During the entire colonial period only about a half-dozen business corporations were chartered; between the end of the Revolution and 1795 this rose to about   150. Jefferson to the end opposed liberal grants of corporate charters and argued that states should be allowed to intervene in corporate matters or take back a charter if necessary. With the pressure for more commerce and indications that corporate grants were becoming a form of patronage, states began passing free incorporation laws and before long Massachusetts had thirty times as many corporations as there were in all of Europe.

Still it wasn't until after the Civil War that economic conditions turned sharply in favor of the large corporation.

These corporations, says Huston, "killed the republican theory of the distribution of wealth.”

Concludes Huston:

"The rise of big business generated the most important transformation of American life that North America has ever experienced."