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Douglas Rushkoff’s Life Inc: A Biography of the Corporate Creature

02/15/2012

In 1973, consumer debt in the US (comprised mostly of credit card debt) totaled $193 billion dollars. By 1983, that number reached $445 billion, and attained $866 billion in 1993. Want to take a stab at how high that number rose by 2008?

$13.84 trillion.

Now, compare a couple numbers taken from a larger span of time. In 1894, the richest man in America–John D. Rockefeller–earned $1.25 million, which was approximately seven-thousand times the country’s average income. In 2006, James Simons, a typical hedge-fund manager, earned $1.7 billion. That’s thirty-eight thousand times the average income.

These figures were gleaned from Life Inc, Douglas Rushkoff’s analysis of corporatism; its history, starting with the Renaissance, and its continued influence on our daily affairs.

If you’re wondering how wealth came to be so unevenly distributed–why, for instance, “severely poor Americans”,  defined as a family of four earning less than $9,903 a year, form the fastest-growing group in the US economy–Rushkoff offers an answer. He argues that, from the beginning, corporatism’s purpose was to “suppress lateral interactions between people or small companies and instead redirect any and all value they created to a select group of investors.”

He traces corporatism’s origins back hundreds of years, to the rise of the merchant class in the towns and cities that were springing up all over Europe by the 13th century. These early entrepeneurs threatened the aristocracy, who depended on fixed tracts of land guarded by expensive armies. In contrast, the new class of merchants and manufacturers could expand their businesses pretty much indefinitely.

Except, the economy was fluid, and most merchant businesses at the time were family run. Sudden disaster–like a sunk ship or a burned-down workshop–could destroy wealth as quickly as it could be created. For their part, the aristocrats longed for a way to invest in the new economy, but they didn’t want to risk their families’ long-standing reputations. Both parties required a way to invest in a business “with total discretion, anonymity, limited liability, passive participation, and little or no expertise.”

“Limited partnership” firms were born–precursors to corporations. These permitted merchants to sustain their success over longer periods, while allowing investors to divest themselves of all responsibility for a business’ actions. They needed only contribute capital.

Then, the monarchy had a flash of brilliance. Royals sanctioned “a new kind of chartered body: a corporation…not a business or a government entity, but a combination of the two.” They granted certain companies legal charters to do business, giving them monopoly control over their respective sectors. In return, the chosen companies upheld the monarchy’s authority, effectively putting its decline on pause for hundreds of years.

But the emergence of corporations didn’t only affect merchants and royals. People who had formerly done business with each other were now required to do so through central authorities, “in a system enforced by law, controlled by currency, and perpetuated through the erosion of all other connections between people and their world.”

Consider the British East India Company, which was given monopoly power over the entire American coast. The corporation lobbied for laws that castrated any competition from the colonists, which was fairly easy, since the authorities the corporation was lobbying were also shareholders. The resulting legislation prevented the colonists from making anything from the resources they grew or mined, and also defined as smuggling the import of tea from anyone other than the East India Company.

In fact, the American Revolution was largely a revolt against the power granted to the East India Company by the British monarchy. And when the founders set out to shape a newly independent America, they were careful to put ample measures in place to keep corporations in check. For instance, corporations could only be chartered by states, not by the federal government, so that they could be regulated locally by those affected by their activities. As well, corporations had to demonstrate that they had a beneficial purpose other than making money, like building a bridge or opening a water way.

Thomas Jefferson considered “freedom from monopolies” a fundamental human right, and James Madison believed that citizens who produced what they consumed were “the most truly independent and happy”, “the best basis of public liberty”, and “the strongest bulwark of public safety.”

But corporations have a distinct advantage over human beings: they can live on indefinitely. The battle between those who argued for decentralization and those who advocated a strong federal government capable of granting corporate charters was waged throughout the 19th century. Finally, in 1886, a Supreme Court clerk incorrectly categorized the “defendant corporations” as “persons” in a decision’s headnotes, creating a precedent for corporations to claim the rights of personhood.

Image credit: neontommy.com

In the early 20th century, leading industrialists funded public schools, hiring education reformers such as Ellwood P. Cubberley, who worked to design a public school system that would produce, in Cubberley’s words, “mediocre intellects…and ensure docile citizens.” He modeled the schools after “factories, in which the raw product are to be shaped and fashioned…according to the specifications laid down.” (Cubberley’s words again.)

But it wasn’t enough to focus on education. The newfound public relations industry was gaining influence, and political candidates now required corporate funding in order to get into office.

Also, whereas people used to buy food and goods from their neighbours, with the rise of factories and trains they no longer knew where their purchases came from. Previously, human relationships were the guarantors of a good’s quality, and so the brand was developed as a substitute for these relationships. People no longer relied on the butcher or baker down the street–now they placed their trust in Uncle Ben and Aunt Jemima.

Meanwhile, corporations invested increasingly in advertising. An army of psychoanalysts were employed to craft the most enticing ads. By 1968, corporations in the US were spending $2.2 billion on advertising annually. In 1984, they spent $4.2 billion. And by 2001, they were spending $230 billion on advertising per year, $40 billion of which was directed at children. Today, the average person encounters over three thousand advertising messages every day.

Perhaps most insidious is the VNR, or video news report–a “complete, prepackaged story made by a company or a cause, which is beamed to news stations around the world for them to broadcast as if it were one of their own reports. VNRs have been used by the pharmaceutical industry to sell new drugs, by the oil companies to present themselves as environment-friendly, and even by the Bush White House in its effort to change public opinion on the postwar effort in Iraq.” In other words: commercials presented as news.

Rushkoff isn’t advocating that we abolish corporations altogether–he acknowledges we need them for certain things, like making smart phones and developing medical devices. But on the local scale, he argues that “people might actually be able to serve one another’s needs more efficiently, and in ways that encourage transaction, sustainability, and meaningful employment.”

At the end of the book, there’s a “Guide to Reclaiming the Value You Create”, which serves as a how-to for helping to invigorate your local economy. By creating value within our communities, for each other, maybe we can slow and even stop corporate exploitation of us, the economy, and the environment.

7 Comments leave one →
  1. John Erickson permalink
    02/15/2012 6:09 PM

    One of the things I particularly dislike is the latest trend in infomercials – ones that look like broadcast news reports, down to phony “news corporation” logos and tickers along the bottom. I can’t help but wonder how many souls far less cynical than I are taken in by them.
    One of my REAL hot buttons, though, is the cessation of corporate “parentage” of their employees. Yes, the old Bell System here in the States was a massive monopoly, but they took care of their employees for the entire time they were employed and well into retirement, with decent pensions, stock ownership plan, and outstanding medical coverage. Compare that with Citigroup, who fired me for taking too many sick days while claiming that they had “done everything to compromise with me” – which meant that they would allow me to make use of the already-extant “flex-time” start of 9 am, rather than letting me work from home as I had been before they took over.
    So if you ever hear of somebody blowing up Citi headquarters, well, you don’t know me, okay? ;) :D

    • 02/23/2012 12:36 PM

      Across the board, the trend certainly seems to be of corporations hiring workers on a much more temporary basis, and divesting themselves of workers before they accrue too many benefits.

      I think that makes it all the more urgent that we focus on community, and on creating value for ourselves. A lot of people seem to consider self-employment as a nigh-unattainable virtue, but it really isn’t that hard. It’s about identifying your needs, and figuring out what you have to offer in exchange for them. This seems like a preferable alternative to depending on corporate parentage, which, as illustrated by your examples, has a history of being extremely fickle.

  2. 02/17/2012 1:56 AM

    It is a sad state of the world indeed, when corporations rule the roost with a stated intent to put profit ahead of people and the planet. What happened to the small businesses of yester year, when everyone knew everyone one else and your neighbour was also your customer, and your friend also ran the other shop down the street. There we helped each other, there our social transactions had enough value to outweigh our consumer transactions, there humanity and the shopkeeper were indeed one of the same.

    How did we get so lost?

    • 02/23/2012 12:39 PM

      I’m not sure, but according to this book, the process of actually getting lost was a lot more engineered than one might think.

      And the process of reversing this seems to depend on finding our way back to those old practices, of being reliant on (and behold to) no one but your neighbours.

  3. Andrea permalink
    02/21/2012 3:08 PM

    Excellent post. Can you write a follow-up that summarizes what Rushkoff mentions in the Guide to Reclaiming the Value You Create? That could be tremendously useful for your followers to read about. I, for one, would much rather hear about how to fix the problem than how it came to be. Not that history doesn’t matter (how else will we know how to avoid making the same mistakes over again)… just that I want to stop feeling sad about what has come to pass and instead want to look forward to what can be. :)

    • 02/23/2012 12:41 PM

      Thank you, Andrea. That’s a great suggestion–I’ll definitely keep it in mind for a future post.

      You’re right, it’s important to focus on the positive. However, I also believe it’s useful to study problems closely, in order to come up with solutions that adequately address them.

      I’m making an effort to be a little more positive on the blog. My next post, which I hope to get up today, will be about the usefulness of recycling, and how we should dramatically expand its scope. I hope you like it!

    • 02/23/2012 8:02 PM

      Andrea – I agree with you. Sometimes the state of the world just wants to make me bury my head in the sand and pretend it is not happening… It is hard not to let the sadness of it all get you you from time to time.

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