Large Corporations Have Gutted Our Economy and Damaged Our Country

Republicans are always touting large corporations as the engine of our economy and argue that we have to have business-friendly policies in order to allow them to grow and create jobs.  And while Democrats might take a more nuanced stance publicly, their actions in Congress certainly show that they, while not in lock step with Republicans on this issue, are also certainly very friendly-disposed to large corporations.

One would be a fool not to agree that the business sector, including large corporations, is critical to the health of our economy.  However, it is one thing to say that we need to have policies that promote the growth of business and another to say that business interests trump all others, such as the public good.

But these statements about the importance of large corporations are just cover.  What it’s really all about is something very base at the core of American politics … the power and influence of money.  

It’s no secret that large corporations and industry groups have, through their largesse in donating money to political campaigns as well as their newer participation in PACS, bought unequaled clout in the halls of Congress.  While there are some clear exceptions, generally, regardless what type of legislation or regulation you look at, whether in the hands of Republicans or Democrats, at the end of the day, big business has either gotten their way or so weakened measures meant to control them and protect the public that the end result is in their favor.

Clearly the growth of big business has benefited those who sit at the top of corporate power and are players on Wall Street ... the new elite, the 1%.  But what about the rest of us?  Has the average American benefited from the growth of big business?  Has our country benefitted?  To answer that question, I will be looking at the impact on jobs, wages, small business, and transportation.

Jobs:  Big business is almost solely to blame  (I say “almost solely” because unions carry a good share of the blame as well), aided and abetted by government tax policies, for the loss of millions of jobs overseas since 1979.  For the transformation of the average American worker from solidly middle class with a good wage, to struggling to hang on at a low wage.  Looking just at manufacturing, employment collapsed from 19.5 million workers in June 1979 to 11.5 million in December 2009.

Corporations have always been greedy.  It’s their nature.  In the first part of the 20th century, workers were typically, not always, viewed almost as an enemy who challenged the corporation’s absolute power and wanted more of the corporate financial pie, rather than as valued workers who were responsible for the quality of the product.  The antagonism between the two forces was very evident.  The passage of Federal labor laws, while not changing this dynamic between management and labor,  helped level the playing field by giving workers real negotiating power.

But at some point, corporations had enough of labor negotiations.  Those in power wanted to retain more of the financial pie for themselves and shareholders.  This provided the motivation to find a way out.

And they found one readily available ... the South and it’s “Right to Work” laws.  Many manufacturing firms moved south to take advantage of these state laws which made it very difficult to unionize, and thus wages were significantly lower.  Job losses thus started occurring long before globalization.  

So, for example, I grew up in Reading, PA.  One of the largest employers was Berkshire Knitting, at the time the largest knitting mill in the world.   But within a few years, the vast mills were all empty.  After being sold to Vanity Fair, the jobs moved south and thousands of workers in Reading were out of work.  The same scenario played out in many cities throughout the northeast as light manufacturing relocated to the South.

But it was the advent of the global economy, “globalization,” that nailed the lid on the coffin of the American blue collar worker.  Again, solely because of corporate greed ... wanting to increase the bottom line regardless at whose expense ... (and often against the background of union intransigence) manufacturing as well as many other types of jobs moved en masse to lower cost locations, mainly Mexico and Asia.  The result was a literal hemorrhaging of jobs and the decimation of America’s middle class.

For example, U.S. Dept. of Commerce data show that “U.S. multinational corporations cut their work force in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”  In the two years following the 2008 Wall Street crisis, large American corporations cut U.S. payrolls by a net of 500,000 jobs.  At the same time, they hired 729,000 workers overseas. Corporations were hiring, just not in the U.S.

Corporate spokesmen and their political apologists say that this move off-shore was necessary in order to keep “American” business competitive.  Nonsense.  It was to keep corporate profits and thus CEO and shareholder pockets flush.  They always had the option to cut prices, but that would have meant lowering profits, which is anathema in corporate America.  Protecting American jobs was obviously nowhere on their list of goals.  (Unfortunately, unions were also often unrealistic and refused to countenance pay or benefit cuts in return for job security.)  

The poster child for this off-shore movement, General Electric’s then-CEO Jack Welsh, argued that public corporations owed their primary allegiance to stockholders, not employees.  Nor, although this was unspoken, to the country that spawned them.  Therefore, Welsh said, companies should seek to lower costs and maximize profits by moving operations wherever is cheapest.

And so they moved their operations and the jobs were lost.  These are no longer “American” companies in any sense other than headquarters. 

Yes, it’s true that many new jobs have been created in the United States, including since the recent recession.  But those jobs have overwhelmingly been lower-paying service industry jobs and often part-time jobs.  So people hired for these new jobs are working for less money and their standard of living is far below what it was previously.

Wages:  It’s no secret that American workers’ wages have stagnated over the past few decades.  The reason is also clear … the loss of middle class living-wage jobs overseas and the creation of low-paying jobs here.  And for those who still have their formerly good jobs, their pay has at best remained stagnant or they have had to take a significant cut in pay in order to keep the corporation from moving the jobs overseas.  

Again, all to protect the corporate bottom line.  And so we see that while CEOs today make astronomical sums, a 937% increase, inflation adjusted, in their total compensation package between 1978 and 2013, a typical workers’ income in inflation-adjusted dollars rose only 10% during that same period.  

If corporate profits have risen approximately 3% per year during this period (or 105% … yes, I was surprised, far less than the rise in CEO pay), why haven’t their workers benefited?  Because workers no longer have any clout.  With so many jobs lost overseas, companies, whether unionized or not, don’t have to worry that their employees will leave if they don’t get raises.   They know that workers have nowhere else to go.  And it is a rare corporation that will raise wages because it is fitting to do so.  Obviously, CEOs do have clout.

Small Business:  Politicians of both parties love to talk about the importance of small business to the American economy and cite government efforts to help small business.  Yet these same politicians curry the favor of the very forces … large corporations … that have brought doom to small (and often not so small) local businesses across the country.

We have become a nation that, certainly from a retailing perspective, lacks virtually any individual character from place to place.  Everywhere you go, you will find shopping malls with exactly the same stores.  You will find roads lined with exactly the same collection of fast-food outlets.  You will find a proliferation of Starbucks coffee shops.  And of course, you will find a Walmart, a Lowes or Home Depot, and a Staples or Office Depot.  As a consequence, local stores offering the same services have been put out of business whether because they couldn’t compete with volume pricing or corporate marketing or couldn’t offer the same selection.

These large corporations have thrived, not just because of the business acumen and ambition of their management … which of course is critically important … but because of government policies and actions, including the enabling if not encouraging of the suburbanization of America.

Let me again look at Reading, PA as an example.  In the 50s, downtown Reading was a thriving place with a vibrant local retail scene and cultural life.  But as highways were built that encouraged the creation of suburban development, a new type of business entered the mix … national and regional retail corporations … that found their home not downtown but in new suburban malls.  As this development increased, people living in the suburbs, which now overshadowed the city-dweller in both numbers and economic purchasing power, no longer needed to go downtown to shop, or eat, or go to the movies.  And so despite all sorts of measures by Reading officials, downtown Reading died and is nothing more than a memory, replaced now by an office culture.

Transportation:  Why is America a nation which, more than any other, is so dependent on the automobile?  Why do we have such a weak national or regional passenger railroad system?  Why, with a few large city exceptions, do we have such weak local public transportation networks?

The answer is unambiguous … for almost a century, the automobile industry was the most powerful industrial force in the country.  The saying, “What’s good for GM is good for the country,” was said in all seriousness.  And its influence was not surprisingly felt in Congress as well as in state and local government.

Prior to WWII,  although cars had become an essential element in American transportation, the railroad and mass transit were equally essential.  But after WWII, the federal government, under President Eisenhower, began a massive investment in creating the interstate highway system and expressways that bypass and go through major urban areas … all to make it easier for automobile and truck traffic to get from place to place.  

The official reasoning for this huge expenditure was improving our defense and response to nuclear attack.  But what really lay behind this decision was the power and influence of the automobile industry, together with a desire to increase economic growth through new highway and housing construction.

Just as the coming of the railroad brought about the creation of new towns and cities in its day, so too did the new highway systems (together with the new availability of low down-payment long-term mortgages) bring about the proliferation of suburban development, not just outside major cities but virtually all cities. Over the next few decades, what began as an experiment in changing the basic nature of American everyday life turned into the default mode, urged on by a confluence of powerful business interests and people’s desire to own a home and some property (what became “the American dream”) as well as the white flight from cities.

This government action amounted to a huge subsidy of the automobile industry which had no counterpart in the railroad industry and only a faint counterpart for local mass transit.  Since automobiles were deemed by government to be the transportation of choice, virtually no new mass transit or light rail systems were built in the United States for several decades after WWII. 

But the automobile industry wasn’t satisfied with the benefits flowing from this government action.  They also brought about the actual dismantling of existing light rail systems, most well-known is the Los Angeles system, and the obstruction of new mass transit lines.

The result of this influence (together with the other factors noted) was an increasingly car-dependent society, the deterioration of railroads, and the stagnation of mass transit systems.  Only in the last few decades, since the mid-70s, have new and expanded mass transit systems been built in various cities to accommodate an inescapable need.  

For example, in the San Francisco area, “after dismantling the existing electric streetcar and suburban train system in the 1950s in favor of highway travel using automobiles and buses, given the explosive growth of expressway construction,” the modern BART system began limited operation in 1972 and was expanded over the following decade.

Now, one could certainly argue that the American public revels in and treasures its ability to go where and when it wants to based on the automobile.  After decades of mass marketing campaigns, this has indeed become a major feature of our culture.  And so the average American would not say that they have been short-changed by this development; quite the contrary.

But looked at objectively, would the average American and the country as a whole have been better off with the post-WWII development of a more balanced transportation network … one that included a viable, modern national and regional railroad system, more comprehensive mass transit systems in major cities, and light rail systems in other cities, together with an improved network of roads.  The answer is certainly yes.   And it would have left us better prepared to adjust to an era where the use of fossil fuels must be reduced. 

By looking at these major areas … jobs, wages, small business, and transportation … we see that the power of big business has had a major negative impact on the average American worker as well as on various aspects of our society.  

Not to be forgotten is the broader economic impact of the decimation of the American middle class … the middle class was the backbone of our consumer-driven economy with consumer spending accounting for 70% of GDP (some argue 52%).  Only the emergence of the ubiquitous credit card has saved the economy, but at the cost of massive household debt … an average of $15,593, a total of $880 billion.   Not a good thing.  Many things that have happened because of the power of big business cannot be reversed; however, many can.

Large corporations have consistently shown themselves to be amoral.   As defined by the dictionary, that means that they have no moral standards, restraints, or principles; are unaware of or indifferent to questions of right or wrong.  They have only one guiding principle … improving their bottom line. 

For the good of our country, this cannot be allowed to continue free of restraint.  The public and government must break from this stranglehold of big business and fight for a more egalitarian society.   

In every society, there will always be those who are better off, even rich, and those who are not as well off.  But there is no excuse in a society as rich as ours for the egregious disparity in incomes, for the decimation of a strong middle class, for children to go to bed hungry, for people to be homeless, and for the pollution of the air we breathe and the water that sustains us, which pollution threatens not just our health but our very way of life and possibly the viability of planet Earth.

Our Political System Has Failed Us

The health of our democracy depends on three components, among others.  The first is an informed electorate which has the responsibility of electing those who will both represent  it and help lead the country.  The second is leaders who both represent their constituencies and act for the greater good of the country.  The third is an electorate and leaders that respect that all are working in the best interest of the country and accept the inevitable loss, whether of a legislative bill or an election, that is part of the democratic process.

On the first point, we have always been weak.  From the very beginning of our country, the electorate base was not well-informed about the issues, in the sense of being able to think rationally about the choices.  Not that they weren’t or aren’t capable of it.  But politicians (even the august Thomas Jefferson, through surrogates of course) have often played more to the electorate’s emotions than its mind and have often used inflammatory words, making reckless, deceitful charges, in order to rouse the populace in their favor and against others.

As to the second point, while American politics, especially elections, have always involved a good amount of mud-slinging, historically politicians on the national level once elected have generally speaking comported themselves appropriately and have, while representing their constituents, acted in what they saw as the national interest.  Except on the issue of racism (or in the pre-Civil War years, slavery), ideology was not a controlling factor in actions of Congress.  

And although there has always been a strong element of conflict between the powerful central government forces v the small/weak central government forces (the parties names have changed over the years), those arguments were, once the Constitution was in place, more on peripheral issues.  Even a staunch small central government advocate such as Jefferson, presided over a huge increase in the responsibility of the federal government.  Similarly George W. Bush presided over a huge increase in the federal deficit as a result of his policies.

But the art of compromise in Congress had been weakening and the nastiness of interchange increasing since the election of Bill Clinton in 1992.  Since the election of Barack Obama and the 2010 midterms, the functioning of Congress has basically come to a halt.  

The Republican Right has taken control of the party and the Republican Congressional agenda.  With their extreme ideological rigidity, the Republican majority in the House and the Republican minority in the Senate (which can stop any legislation or appointment through the filibuster, even when a majority of the Senate is in favor) have been able to halt any legislation that addresses the national interest from other than their narrow perspective. 

The most egregious example of this was in the recent debate on expanding background checks for gun purchases.  90% of Americans surveyed, and 85% of NRA members, supported expanded background checks.  A bi-partisan compromise measure was introduced lead by arch gun rights advocates, one Republican, one Democrat.  And still the measure was defeated through the filibuster process by Republicans joined by a few Democrats.  

That this measure, which would not have kept a single gun of any type out of the hands of anyone who was legally entitled to own one and thus, as the Republican co-sponsor said, was really not a gun control measure, was defeated despite overwhelming popular support and desperate need shows the total failure of our system.  It also shows clearly another aspect of the system’s failure ... the preponderant influence of corporate America.  The only powerful interests against the Senate measure were firearm manufacturers and their de facto voice, the NRA.

Corporations have for more than a century had a strong voice in Congress through their lobbyists and political donations.  And this has impacted both parties.  Both are in thrall to and support the power of the big corporations, although the Republicans more so than the Democrats because they have been the greater beneficiary of corporate dollars.  

The old saying, "What's good for General Motors is good for the country," was discredited years ago, and yet that still is often the marching tune for both Republicans and Democrats in Congress.  What happened to the concept that, while being supportive of a strong and healthy business sector, an important role of government, and therefore Congress, is to protect the general public from the excesses of corporate activity and power? 

This can especially be seen in the federal response to the recent financial crisis ... nothing has really changed; the same financial practices that led to the collapse are ongoing; regulation has not really improved; no one in the big investment firms has been brought to justice for their shady practices; it's business as usual on Wall Street.  It can also sadly be seen in the team that President Obama put together after his inauguration to advise him on such matters ... all seasoned Wall Street types who were prime actors in the period leading up to the collapse.  

But since the Supreme Court’s 2010 ruling that corporations can spend unlimited sums supporting someone’s candidacy through PACs, the power of corporations not just over the actions of Congressmen, but on who gets elected, has been increased manyfold.  Through huge purchases of advertising air time to support candidates favorable to them, they have been able or tried to influence the electorate and change the outcome of close elections.  If ever there was an argument for Federally-financed elections, this is it.

The third point, which has always been the most solid aspect of our democracy, is under threat.  The basic premise, that each side respects the other’s bone fides in working for the national interest, has been gravely weakened if not destroyed.  Neither side trusts the other nor will it give the other credit for acting in the national interest.  Instead, each side accuses the other of special interest politics and being a threat to the nation’s well-being.  

There have even been some who have voiced the possibility of violence if their position does not win the day.  And there has been a substantial rise in the number of right-wing militias around the country since the election of Barack Obama.  While there is no danger of the constitutional transfer of power being interrupted, there is certainly a danger that the peacefulness of that transfer or the peacefulness of legislative losses may become a thing of the past.

This situation cannot continue unabated without seriously damaging our democratic system.  Several actions are necessary.  At a minimum, all federal elections should be publicly financed.  That would have the benefit of putting all candidates on an equal footing ... winning an election should not depend on how much money you can raise ... and would greatly decrease the prevalence of advertising, which is almost never informative.  Second, all broadcasters, who use federally-licensed air waves, should be required to provide a certain amount of free advertising and speaking time to all candidates.  This should help increase the exchange of ideas rather than sound bites.  Third, no other organizations should be allowed to take out advertising to influence elections or pressure their employees to vote a certain way; contrary to the recent Supreme Court opinion, corporations are not people ... they don’t have a vote and likewise they shouldn’t have a voice.  Fourth, religious organizations who are granted tax-exempt non-profit status should be held to the regulations regarding that status, which prohibit supporting candidates for political office.  Finally, there should be a truth in campaigning measure passed which disciplines candidates who not just stretch the truth but lie and sets up a nonpartisan group to monitor all campaign statements and literature,

The factor of money must be removed from elections and politics.  And the electorate must be communicated with in a way that engages their mind on competing ideas rather than on competing emotions.