By Christopher Farrell
How the Corporation Changed America
Edited by Jack Beatty
Broadway Books -- 506pp -- $30
In 1892, a violent strike broke out at Pennsylvania's Homestead Works, Carnegie Steel Co.'s massive mill on the banks of the Monongahela River. Carnegie's indomitable president, Henry Clay Frick, was determined to break the plant's Amalgamated Association of Iron & Steel Workers, a tough union that represented some 800 skilled workers. During the strike, Alexander Berkman, an anarchist with no ties to the Amalgamated, entered Frick's office, shot him twice, and stabbed him three times before being subdued. Frick refused anesthesia and insisted on staying in his office as doctors probed his neck and back for bullets during the next two hours. The bullets removed, Frick went back to work and issued this statement: "This incident will not change the attitude of the Carnegie Steel Company toward the Amalgamated Association. I do not think I shall die, but whether I do or not, the Company will pursue the same policy and it will win." The strike collapsed, the union was broken, and the nascent labor movement suffered a serious setback.
Tales like this one animate Jack Beatty's anthology on the rise of Big Business and the modern corporation, Colossus: How the Corporation Changed America. Beatty, a senior editor at The Atlantic Monthly, has pulled together readings that illuminate the dramatic evolution of business since colonial days. His own nicely nuanced essays analytically link the book's major sections. And he has done a judicious job with his picks, in which literate academics dominate. These include such business historians as Alfred D. Chandler Jr. on the emergence of modern administrative business hierarchies to run the 19th century railroad, Roland Marchand on AT&T's relentless early 20th century public relations campaign to alter its image as a rapacious monopolist, and Richard Tedlow on the legendary battle for supremacy between Ford Motor Co. (F ) and General Motors Corp. (PTO ) in the 1920s. These articles are leavened with readings from novels such as John Steinbeck's The Grapes of Wrath and Joseph Heller's Something Happened. Throughout the text are fascinating sidebars on everything from Ralph Waldo Emerson's view that commerce is a force for peace to lyrics sung by United Auto Workers sitdown strikers in 1936.
Beatty's contention is that the corporation has evolved into the dominant institution in the U.S. Indeed, he argues that most scholars have vastly understated its role in shaping the economy and society. For instance, on July 30, 1619, the Virginia Company authorized a colonial legislature for Virginia. The company's procedures, with members democratically voting their equity shares, choosing officers, and approving policy, became the template for government in Virginia. The roots of representative government can be traced "to a surprising source--the corporation," Colossus reveals.
But what truly drives the book is Beatty's concern with the place of the corporation in the good society. Throughout U.S. history, companies have done a remarkable job of delivering what customers desire, and it's hard not to admire Corporate America's productive efficiency and willingness to innovate. But Americans have long mistrusted corporations, too, worrying that Big Business wields far too much power. Management lays off workers, disrupts communities, and ignores the pain of the inevitable losers--all in the name of profit and shareholder value. From this perspective, much of U.S. political, judicial, and labor history is best understood as a tale of institutions and interest groups struggling to contain rising corporate power.
For instance, toward the end of the 19th century, the power of private enterprises run by Rockefeller, Carnegie, and other titans dwarfed both the federal and state governments, as well as labor. Still, unions and the federal government managed to emerge as the main countervailing centers of power through a long struggle from the Civil War to World War II. Oligopolistic, cooperative capitalism gradually replaced unregulated private competition, as management, labor, and government negotiated an uneasy power-sharing truce.
But there is growing suspicion today that the corporation is once again too powerful. Beatty argues that the competitive market has supplanted cooperative capitalism. The shift started in the 1970s, thanks to fierce global competition and deregulation of some critical industries. Beatty is outraged at the human cost of restructurings and downsizings in recent years. And he worries that there is no counterweight to corporate power as America positions itself globally.
Colossus does lag a bit near the end. Some stories, such as the employee fallout from a leveraged buyout or changes in corporate R&D practices, will seem familiar to readers of the business press. Analyses of the New Economy and the boom in high-tech entrepreneurship are absent--and missed. All the same, the historical essays that make up Colossus form a far better business book than many management tracts. What we learn is that today's debates about globalization and corporate power are not without precedent. History, as Beatty marshals it, makes a strong case that managers must do more than deliver higher stock prices or contribute to rising living standards. In a democracy, corporate freedom depends on citizens' belief that business is exercising social responsibility as well as power.
Contributing Economics Editor Farrell writes from the heartland.