May 18, 2012

Robber Barons III

That’s an old photograph of what used to be the main Washington, DC public library up above. I patronized it in my teen years even though I lived in Arlington, VA. It had a recording of Siobahn McKenna, a noted Irish actress, in Shaw’s St. Joan. I took that set out so many times that I had the play memorized, and whenever I read it I could hear the lines as they were said in the recording. I also checked out Wagner, and Shaw. It was later superseded by a new building designed by Ludwig Mies van der Rohe, which is quite a nice building, but which doesn’t have the memories of the older one. This library was a gift from Andrew Carnegie, one of the Robber Barons vilified by Matthew Josephson.

Last Christmas I read a polemic against Josephson’s book. This Christmas I read Josephson’s book, which is also a polemic. The present book The Genesis of Industrial America, is not a polemic. It is a relatively sober, but interesting, history of the time period, and does not have an overt ideological axe to grind.

I’m going to mention some of his most salient points, and append brief comments.

The author begins by describing the period of industrialization:

“It transcended ideologies, defied political strictures, ignored moral dictums, overturned social orders, and unraveled the fabric of tradition. In the process American industrialization created the infrastructure for what became the richest and most influential material civilization in history.”

Klein (2007-09-01). The Genesis of Industrial America, 1870-1920 (p. 1). Cambridge University Press. Kindle Edition.

This is the process of bourgeois revolution that so outraged Marx in his Communist Manifesto. The process of capital formation is essentially revolutionary and destructive, while being at the same time creative. The usual person to invoke at this point is Joseph Schumpeter and his “creative destruction.” The jobs that are destroyed through capitalist production are replaced by different jobs, so that there is a continual churning that results as displaced workers seek to acquire new skills so that they can move into the newly created jobs. This process disturbed Marx, and he looked back to a time of static, or no innovation.

Josephson is fairly nasty towards those who did not serve in the Civil War, and the list is fairly extensive.

“A sampling of those who drew both capital and experience from the business of war includes Philip D. Armour, George F. Baker, Andrew Carnegie, A. J. Cassatt, Michael Cudahy, Charles Deere, William E. Dodge, Marshall Field, Jay Gould, Marcus Hanna, James J. Hill, August Juilliard, J. P. Morgan, Frederick Pabst, Charles A. Pillsbury, George M. Pullman, John D. Rockefeller, H. H. Rogers, Clement Studebaker, Gustavus Swift, John Wanamaker, Frederick Weyerhauser, William C. Whitney, Peter Widener, and Charles T. Yerkes. These and other entrepreneurs were all between the ages of seventeen and thirty in 1861 but disdained military service in favor of business opportunities.”

Klein (14).

I’m not going to pass moral judgement on these guys. The war was savage, and if you were wounded the treatment of your wound was just as likely to kill you as the wound itself. Medicine was little better than stone knives and bear skins.

“‘The organization of the American economy, since its beginning, has been centered around the contribution of the individual following his own interests and motives,” declared economist Jonathan R. T. Hughes. “There are no ‘forces of history.’ . . . Men make economic change.’”

Klein (20).

Proponents of altruism would have us believe that every man should be someone else’s slave. Klein’s quote here emphasizes, rightly I think, that progress has depended on the egocentric individual. Steve Jobs did not create the iPhone to please other people, he did it because he hated his phone, and wanted to make a better phone for himself.

In writing about land use and private property Klein makes this observation:

“Choices must be made as to its use, and from those decisions flow a pattern of both land use and social values. The question is whether land is to be regarded in narrow terms as simply property or in broader terms as a social resource. The former conceives of land in economic terms, the latter in social terms. With few exceptions, the American response has always followed the first approach. The continent was settled on the basis of private individual ownership. Every early attempt to organize settlements along other lines, mostly feudal in origin, failed miserably. The right of private property became no less revered than that of freedom of speech, worship, or assembly.”

Klein (39).

The social resource conception of land puts it at the service of someone else. That someone else is endlessly deferred, or becomes some person or body whose interests are not necessarily to maximize profit, but to achieve some other goal. That goal, with a sad inevitability, is to ensure the continuance in power of the person or group using the land.

“The leisurely, flowery flow of Victorian prose found itself challenged by the terse, snappy vignettes of the telegram, where more words meant higher costs. In broader terms, the telegraph became one more instrument speeding up the pace of American life, which in turn pressured language to become more succinct as well.”

Klein (77).

Telegraphic terseness foreshadowed Twitter terseness.

“Early in the telephone’s history a writer in Scientific American predicted confidently that the device would never catch on with people. After all, he observed sagely, ‘The dignity of talking consists of having a listener, and it seems absurd to be addressing a piece of iron.’”

Klein (78).

Contrary to Barry O. it wasn’t Rutherford B. Hayes who thought the phone was a passing fad, but a representative of the scientific community.

“In all his companies he introduced a program of welfare capitalism that included a forty-hour work week, medical benefits, a retirement plan, profit-sharing, company-sponsored night schools, and numerous other benefits.”

Klein (102).

“seeking ways to raise capital for large projects such as railroads, agitated to have corporate charters broadened from a limited privilege to a universal right. Instead of requiring a special act of the legislature, they wanted the right of incorporation made available to anyone who paid a reasonable fee and met some minimal requirements. Those who opposed this change argued that corporations were a tool of moneyed interests and a threat to democracy. ‘The very object . . . of the act of incorporation is to produce inequality, either in rights or in the division of property,’ declared lawyer Daniel Raymond as early as 1820. ‘They are always created for the benefit of the rich, and never for the poor.’”

Klein (108).

Anti-Wall Street sentiment is nothing new. Note, however, that the railroad made possible the transport of large amounts of food from one area of the country to another, and the movement of vast numbers of people who went in search of employment, leisure, or for any other purpose. The corporation makes possible medicine, medical supplies and equipment, food, leisure goods, and a vast number of other products of varying degrees of usefulness and desirability.

“Speculators reveled in the opportunities provided by the complexity of corporate structures for gleaning profits by manipulating securities and other transactional schemes. Their depredations, especially those of insider manipulators, led later generations of writers to tar businessmen of this era with the generic label ‘robber barons.’ For the entrepreneurs who built great enterprises the label was inaccurate and unfortunate. They might be ruthless and hard charging, but whatever their faults they left behind major contributions to American economic development. The exploiters and wreckers were the true robber barons and did much to taint the reputation and public image of corporations.”

Klein The Genesis of Industrial America, 1870-1920 (pp. 132-133).

I would modify that statement to say that it is the government that exhibits the worst traits of the robber barons. Your money is extracted from you by force, under the constant threat of imprisonment. (You doubt the truth of that statement? Ask Al Capone, or Wesley Snipes how they liked doing time for income tax crimes.) It makes a promise that it cannot possibly fulfill. (Full employment, pension security, bank insurance, etc.) It employs hordes of useless creatures (lawyers, accountants, bureaucrats of all stripes), and constitutes a drain on productivity and employment.

“In trying to grasp the nature of corporations, Americans resorted to their traditional habit of casting unfamiliar things in some familiar form. Rather than adjust their beliefs to accommodate this new entity, they tried at first to fit it into existing ideology. The Supreme Court took this approach in a series of cases beginning in 1873 by defining the corporation as an individual in the eyes of the law and therefore entitled to all the protection guaranteed individuals under the Fourteenth Amendment. In effect the Court wrote myth into law, yet to have done otherwise would have compelled the justices to redefine traditional concepts of property rights and the proper role of government in economic affairs.

Klein (133).

I’m not sure how Klein thinks corporations should be regarded here. Apparently the courts since 1873 have recognized corporations as being artificial persons. Whether they should be regarded as something else for the purposes of the law, and what that something else is I have absolutely no idea. However, based on the idea that the corporation is an artificial person, it has the same rights as a natural person. That would include the right to free speech. Since we do not live in an economy or a world based on barter that means that money, and its disbursal to purchase goods and services, including services to communicate and disseminate that speech. Hence the expenditure of money for the purpose of disseminating speech is equivalent to speech itself. Given that the corporation is an artificial person, that means that Citizens United was correctly decided.

“The result was a burst of growth that started the federal government down the road toward bureaucratic giantism and a more active role in areas of American life seldom touched by it in the past. Between 1880 and 1914 the federal government created its first regulatory commission, added three new cabinet departments, and formed several new boards and commissions along with countless special commissions to study particular problems. At the same time, existing agencies grew by taking on new responsibilities. The number of federal civilian employees increased from 100,200 in 1881 to 401,887 in 1914 while federal expenditures jumped from $268 million in 1880 to $726 million in 1914. Like the corporations themselves, the federal government began a gradual transformation from a small enterprise to a mammoth organization.”

Klein The Genesis of Industrial America, 1870-1920 (pp. 147-148).

This is the period that saw the growth of the metastatic bureaucracy.

“In the long run these cases proved straws in the wind. The railroads broken up by the Northern Securities case came back together in 1970, and the Union Pacific Railroad reacquired the Southern Pacific system in 1996. In the short run, as biographer Ron Chernow showed, the breakup of Standard Oil provided a supreme if unintentional irony. Rockefeller owned about 25 percent of Standard Oil’s shares when the Supreme Court decision spun off thirty-three subsidiary companies from the parent firm. As a result Rockefeller owned a quarter of every one of the new independent companies as well. His estimated net worth, which hovered around $300 million in 1911, mushroomed to nearly $1 billion as the assets of the new companies quintupled in value over the next decade. Rockefeller made more money without lifting a finger than he had at hard work for so many years, and Standard Oil of New Jersey still remained the nation’s second largest corporation and the world’s largest oil company.”

Klein The Genesis of Industrial America, 1870-1920 (pp. 149-150).

The anti-business thugs of the government failed to achieve their purpose. Rather than “spreading the wealth around,” as a recent occupant of the White House said, it simply brought greater wealth to the railroad men and the oil men.

“This pattern of land use reinforced the image of the city as a place of business where everything became a business. Most Americans were slow to grasp the social costs that resulted. The most obvious one was a pattern of rigid urban segregation. The rise of zoning laws after 1900 did much to preserve the patterns already created. Conceived as an instrument for preventing unscrupulous real estate operators from destroying the integrity of a neighborhood by acquiring a parcel and using it for whatever function brought the greatest profit, zoning also became a tool for keeping “undesirables” out. In the process, however, zoning confirmed existing patterns of segregation and uniformity for generations to come. At the same time, a change in zoning could be used as a wedge for transforming the nature of a neighborhood.”

Klein (158).

The zoning laws mentioned parallel the red-lining of areas for insurance, gerrymandering to ensure that the proper party remains in control of a district, or even the supposedly benign and beneficent Voting Rights Act, which requires selected Southern states to obtain approval from Washington when drawing up congressional districts, or making electoral changes. Can anyone doubt that the board in DC operates to maintain control in the hands of some favored party or group?

“In carrying out this program, the boss organized his troops into a disciplined army. Although no two machines were alike, nearly all of them followed a similar pattern of organization. The base of their political pyramid extended beyond the party to social clubs, athletic teams, fire companies, and various lodges, all of which served political as well as social roles. Through these groups and a network of loyal lieutenants – the district captains, “heelers,” runners, and block captains – the boss got out the vote for his slate of candidates in local elections. If reformers or rival politicos posed a threat, he might resort to other methods. The party faithful would vote early and often, taking the identity of someone long dead or departed. Ward bosses might recruit hordes of drifters as temporary residents until election time. Gangs of bully boys and friendly policemen chased off supporters of the opposition or detained them until the polls closed.”

Klein (166).

Multiple voting, dead body voting, voters with no provable residence. The machine politics of the past, the machine politics of Chicago’s past and present, and its probable future. The big question is whether machine politics will go nationwide.

“That year [1920] saw the election of a new Republican president, Warren G. Harding, who declared that ‘The business of America is the business of everybody in America. . . . This is essentially a business country. . . . We must get back to the methods of business.’ His successor, the taciturn Calvin Coolidge, put the same sentiment more succinctly when he said in 1925, ‘The chief business of the American people is business.’ Time has proved them more right than they ever imagined.”

Klein (194).

No comment needed on that one.

Next up Galileo Goes to Jail.

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