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Lawrence Lessig and the Lessons of Lowell

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An Automated Weave Room
(image by Manchester Historic Association)
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During a recent visit to Lowell, Massachusetts, I was struck by its microcosm of social and economic history. A National Historic Park, established here in 1978, preserves and presents a graphic account of the entire cycle of the conflict between capital and labor. Its message is as relevant today as it was in 1870. To understand its significance, we'll need to know a little about the views of Marx, Smith, and Lessig. We might fully appreciate Lowell's story only when taken in the context of these academics.

Adam Smith published Wealth of Nations in 1776, and its principles were reflected in the values of the new American republic. But some principles were revered more than others. Competition among workers, if freely permitted, would push prevailing wages downward to a fair rate. Competition among producers, if freely permitted, would push prevailing wages upward to a fair rate. The wage common to both forces was the point of equilibrium in a free market governed by supply and demand. So said the great economist. But Smith himself warned against collusion among suppliers.


Western Canal, Used for Navigation and Power
(image by Bernie Ongewe)
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The first textile operation in Lowell was Boott Mills, dating to 1834. Its owners attracted a workforce consisting primarily of young women following the promise of cash earnings, independence, company housing, and decent working conditions. Much of the growing town was new, and a diverse workforce of immigrant tradesmen constructed buildings, public areas, housing, and the canals needed for power and navigation around the falls of the Merrimack River. Life was pretty decent for the time, even for the women who enjoyed Smith's point of equilibrium in a free labor market governed by supply and demand.

The establishment of additional textile mills in Lowell marked the beginning of the end of this quasi-free market. Owners colluded to establish uniform wages under the control of the mills, thereby eliminating any competition among employers that might have developed.

Karl Marx first published Das Capital in 1867, and its principles were reflected nowhere in the world for half a century. But he observed mechanisms and conditions that cause class conflict, and these things were hard at work half a world away. Capital and labor can coexist peacefully only so long as power is divided equitably between the two - a condition Marx believed impossible to achieve in a permanent state. In Lowell, employers not only colluded, but began to generate capital surpluses that they invested in the automation of manufacturing processes.

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One Woman, Eight of These Machines
(image by U.S. Department of the Interior, National Park Service)
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Early on, for example, one woman could tend the operation of two automated looms powered by the turbines drawing energy from the canals. Investments in the development of loom technology brought about an increase in the number of looms one woman could operate - first four, then eight. This created a surplus of labor, so wages were cut and hours were extended. In effect, the proportion of revenues allocated to capital was increased at the expense of labor. Multiply this by the thousands of looms in Lowell, and you can see the conflict developing.

The women walked out in protest of their treatment. As they returned to their farms in despair, their jobs were given to children, then immigrants. Workers' lungs were impacted by the lint they inhaled, and their ears were assaulted with the deafening noise of the machines. Conditions in town declined with the fortunes of workers. The mill owners had achieved complete control of a decaying economic kingdom. In the middle of the twentieth century, they moved their mills - and their capital - en masse to southern states where even cheaper labor just begged to be exploited.

Marx would say that's just the way capitalism works, and Smith would blame collusion among suppliers. In Lowell, direct collusion killed the goose, and golden eggs had to be sought elsewhere. Today, direct collusion among corporations is illegal, but we have witnessed the development of a powerful and insidious middleman - our own republic of the United States.

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During the first century of the American republic, states applied careful and rational standards to business regulation, and state corporate charters were quite restrictive. Citizens controlled corporate operations through the chartering process. But a US Supreme Court ruling in 1886, Santa Clara County v. Southern Pacific Railroad, was construed to affirm the personhood of corporations and became precedent for even more damaging rulings that followed.

Today corporations claim civil rights under the Fourteenth Amendment and freedom of speech under Citizens United v. FEC. This has given them unprecedented power to exert their corrupting influence through legalized means, by financing political campaigns and establishing a government of the corporations, by the corporations, and for the corporations. And it's already happened.

So it's not necessary for corporations to collude directly with each other when they can use the federal government to achieve their goals. The direct subsidies and tax favors that our government grants corporations shed light on their control of the republic. Defense and civilian contracting through the GSA bloats the cost and size of government and enriches shareholders. And the corporate control of regulation in areas of labor, trade, the environment, and taxes ensures the continuity of the oligopoly that has developed right under our noses. When corporations can legally get the government to curtail the power of organized labor, collusion is unnecessary.

A look at the Republican platforms of recent years makes it clear that government is the friend of business corporations. This friendship is no coincidence - it is bought and paid for through control of campaign financing. This is the root of all evil, and the biggest threat to our democratic ideals.

Look again at Lowell - just one town with a history wracked by economic exploitation. The mill owners and "job creators" took their capital to the American South when they were finished with Lowell. From there, decades later, they took their capital and their operations to foreign countries. Wherever they trod, the opportunity they brought was replaced with suffering and devastation.

Today things are different from the way they were in 1834. For better or worse, economies have become increasingly globalized, and so have the multinational corporations that have driven the change. We live today in a global Lowell. But what happens when corporations inevitably run out of new places to find cheaper and cheaper labor? Will we then realize our error in letting big-money interests dominate our governments and our economies? If we do, will it be too late to prevent the kind of blood-in-the-streets rebellion predicted by Marx?

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Years ago I made a decision to commit to a life of business management. Kids do the dumbest things! After thirty five years as a small business consultant, CFO, and university educator specializing in quantitative business and economic (more...)
 

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