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General News    H4'ed 9/11/14

Steve Fraser: The Return of the Titans

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The business autocrats of the Gilded Age could be rude and crude like Gould, Vanderbilt, and Fisk or adopt the veneer of civilization like Pullman. Some of these "geniuses" of big business belonged to what Americans used to call the "shoddy aristocracy." Fisk had, after all, started out as a confidence man in circuses and Gould accumulated his "start-up capital" by bilking a business partner. "Uncle" Daniel Drew, top dog on Wall Street around the time of the Civil War (and a pious one at that, who founded Drew Theological Seminary), had once been a cattle drover. Before bringing his cows to the New York market, he would feed them salt licks to make sure they were thirsty and then fill them with water so they would make it to the auction block weighing far more than their mere flesh and bones could account for. He bequeathed America the practice of "watered stock."

Not all the founding fathers of our original tycoonery, however, were social invisibles or refugees from the commercial badlands. They could also hail from the highest precincts of the social register. The Morgans were a distinguished banking and insurance clan going all the way back to colonial days. J.P. Morgan was therefore to the manor born. At the turn of the twentieth century, he functioned as the country's unofficial central banker, meaning he had the power to allocate much of the capital that American society depended on. Nonetheless, when asked about bearing such a heavy social responsibility, he bluntly responded, "I owe the public nothing."

This sort of unabashed indifference to the general welfare was typical and didn't end in the new century. During the Great Depression of the 1930s, the managements of some major publicly owned corporations felt compelled by a newly militant labor movement and the shift in the political atmosphere that accompanied President Franklin Roosevelt's New Deal to recognize and bargain with the unions formed by their employees. Not so long before, some of these corporations, in particular United States Steel, had left a trail of blood on the streets of the steel towns of Pennsylvania and Ohio when they crushed the Great Steel Strike of 1919. But times had changed.

Not so, however, for the adamantine patriarchs who still owned and ran the nation's "little steel" companies (which were hardly little). Men like Tom Girdler of Republic Steel resented any interference with their right to rule over what happened on their premises and hated the New Deal, as well as its allies in the labor movement, because they challenged that absolutism. So it was that, on Memorial Day 1937, 10 strikers were shot in the back and killed while picketing Girdler's Chicago factory.

The Great U-Turn

By and large, however, the middle decades of the twentieth century were dominated by modern concerns like U.S. Steel, General Motors, and General Electric, whose corporate CEOs were more sensitive to the pressures of their multiple constituencies. These included not only workers, but legions of shareholders, customers, suppliers, and local and regional public officials.

Publicly held corporations are, for the most part, owned not by a family, dynasty, or even a handful of business partners, but by a vast sea of shareholders. Those "owners" have little if anything to do with running "their" complex companies. This is left to a managerial cadre captained by lavishly rewarded chief executives. Their concerns are inherently political, but not necessarily ideological. They worry about their brand's reputation, have multiple dealings with a broad array of government agencies, look to curry favor with politicians from both parties, and are generally reasonably vigilant about being politically correct when it comes to matters of race, gender, and other socially sensitive issues. Behaving in this way is, after all, a marketing strategy that shows up where it matters most -- on the bottom line.

Over the last several decades, however, history has done a U-turn. Old-style private enterprises of enormous size have made a remarkable comeback. Partly, this is a consequence of the way the federal government has encouraged private enterprise through the tax code, land-use policy, and subsidized finance. It is also the outcome of a new system of decentralized, flexible capitalism in which large, complex corporations have downloaded functions once performed internally onto an array of outside, independent firms.

Family capitalism has experienced a renaissance. Even giant firms are now often controlled by their owners the way Andrew Carnegie once captained his steel works or Henry Ford his car company. Some of these new family firms were previously publicly traded corporations that went private. A buy-out craze initiated by private equity firms hungry for quick turn-around profits, like Mitt Romney's infamous Bain Capital, lent the process a major hand. This might be thought of as entrepreneurial capitalism for the short-term, a strictly finance-driven strategy.

But family-based firms in it for the long haul have also proliferated and flourished in this era of economic turbulence. These are no longer stodgy, technologically antiquated outfits, narrowly dedicated to churning out a single, time-tested product. They are often remarkably adept at responding to shifts in the market, often highly diversified in what they make and sell, and -- thanks to the expansion of capital markets -- they now enjoy a degree of financial independence not unlike that of their dynastic forebears of the nineteenth century, who relied on internally generated resources to keep free of the banks. They have been cropping up in newer growth sectors of the economy, including retail, entertainment, energy, finance, and high tech. Nor are they necessarily small-fry mom-and-pop operations. One-third of the Fortune 500 now fall into the category of family-controlled.

Feet firmly anchored in their business fiefdoms, family patriarchs loom over the twenty-first-century landscape, lending it a back-to-the-future air. They exercise enormous political influence. They talk loudly and carry big sticks. Their money elects officials, finances their own campaigns for public office, and is reconfiguring our political culture by fertilizing a rain forest of think tanks, journals, and political action committees. A nation which, a generation ago, largely abandoned its historic resistance to organized wealth and power has allowed this newest version of the "robber baron" to dominate the public arena to a degree that might have astonished even John Jacob Astor and Cornelius Vanderbilt.

The Political Imperative

That ancestral generation, living in an era when the state was weak and kept on short rations, didn't need to be as immersed in political affairs. Contacting a kept senator or federal judge when needed was enough. The modern regulatory and bureaucratic welfare state has extended its reach so far and wide that it needs to be steered, if not dismantled.

Some of our new tycoons try doing one or the other from off-stage through a bevy of front organizations and hand-selected candidates for public office. Others dive right into the electoral arena themselves. Linda McMahon, who with her husband created the World Wrestling Entertainment empire, is a two-time loser in senate races in Connecticut. Rick Scott, a pharmaceutical entrepreneur, did better, becoming Florida's governor. Such figures, and other triumphalist types like them, claim their rise to business supremacy as their chief credential, often their only credential, when running for office or simply telling those holding office what to do.

Our entrepreneurial maestros come in a remarkable range of sizes and shapes. On style points, "the Donald" looms largest. Like so many nineteenth century dynasts, his family origins are modest. A German grandfather arriving here in 1885 was a wine maker, a barber, and a saloonkeeper in California; father Fred became the Henry Ford of homebuilding, helped along by New Deal low-cost housing subsidies. His son went after splashier, flashier enterprises like casinos, luxury resorts, high-end hotels, and domiciles for the 1%. In all of this, the family name, splashed on towers of every sort and "the Donald's" image -- laminated hair-do and all -- became his company's chief assets.

Famous for nothing other than being very rich, Trump feels free to hold forth on every conceivable subject of public import from same-sex marriage to the geopolitics of the Middle East. Periodically, he tosses his hat into the electoral arena. But he comports himself like a clown. He even has a game named after himself: "Trump -- The Game," whose play currency bears Donald's face and whose lowest denomination is $10 million. No wonder no one takes his right-wing bluster too seriously. A modern day "Jubilee Jim Fisk," craving attention so much he's willing to make himself ridiculous, the Donald is his own reality TV show.

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Tom Engelhardt, who runs the Nation Institute's ("a regular antidote to the mainstream media"), is the co-founder of the American Empire Project and, most recently, the author of Mission Unaccomplished: Tomdispatch (more...)

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