Encomiums to the wonders
of market forces fill speeches and media reports. One National
Public Radio reporter even went so far as to describe a form
of government called market democracy, apparently a blend of
the Bill of Rights and the Wall Street Journal editorial page.
In fact, most free workers
in this country were self-employed well into the 19th century.
They were thus economic as well as political citizens.
Further, until the last decades of the 19th century, Americans
believed in a degree of fair distribution of wealth that would
shock many today. James L. Huston writes in the American Historical
Americans believed that
if property were concentrated in the hands of a few in a republic,
those few would use their wealth to control other citizens, seize
political power, and warp the republic into an oligarchy. Thus
to avoid descent into despotism or oligarchy, republics had to
possess an equitable distribution of wealth.
Such a distribution, in
theory at least, came from enjoying the "fruits of one's
labor" but no more. Businesses that sprung up didn't flourish
on competition because there generally wasn't any and, besides,
cooperation worked better. You didn't need two banks or two drug
stores in the average town. Prices and business ethics were not
regulated by the marketplace but by a complicated cultural code
and the fact that the banker went to church with his depositors.
Although the practice was centuries old, the term capitalism
-- and thus the religion -- didn't even exist until the middle
of the 19th century.
Americans were intensely
commercial, but this spirit was propelled not by Reaganesque
fantasies about competition but by the freedom that engaging
in business provided from the hierarchical social and economic
system of the monarchy. Business, including the exchange as well
as the making of goods, was seen as a natural state allowing
a community and individuals to get ahead and to prosper without
the blessing of nobility.
In the beginning, if you
wanted to form a corporation you needed a state charter and had
to prove it was in the public interest, convenience and necessity.
During the entire colonial period only about a half-dozen business
corporations were chartered; between the end of the Revolution
and 1795 this rose to about a 150. Jefferson to the end opposed
liberal grants of corporate charters and argued that states should
be allowed to intervene in corporate matters or take back a charter
With the pressure for
more commerce and indications that corporate grants were becoming
a form of patronage, states began passing free incorporation
laws and before long Massachusetts had thirty times as many corporations
as there were in all of Europe.
How states once
The purposes for which every such corporation shall be established
shall be distinctly and definitely specified in the articles
of association, and it shall not be lawful for said corporation
to appropriate its funds to any other purpose. -- State of Wisconsin,
The charter or acts of association of every corporation hereafter
created may be amendable or repealed at the will of the general
assembly. -- State of Rhode Island, 1857
[Legislators shall] alter, revoke or annul any charter of
a corporate hereafter conferred . . . whenever in their opinion
it may be injurious to citizens of the community. -- State of
Pennsylvania, constitutional amendment, 1857.
Still it wasn't until
after the Civil War that economic conditions turned sharply in
favor of the large corporation. These corporations, says Huston:
. . . killed the republican
theory of the distribution of wealth and probably ended whatever
was left of the political theory of republicanism as well. .
. .[The] corporation brought about a new form of dependency.
Instead of industry, frugality, and initiatives producing fruits,
underlings in the corporate hierarchy had to be aware of style,
manners, office politics, and choice of patrons -- very reminiscent
of the Old Whig corruption in England at the time of the revolution
-- what is today called "corporate culture."
The rise of Big Business
generated the most important transformation of American life
that North America has ever experienced.
By the end of the last
century the Supreme Court had declared corporations to be persons
under the 14th Amendment, entitled to the same protections as
human beings. As Morton Mintz pointed out in the National Law
Journal, this 1888 case ignored the fact that "the only
'person' Congress had in mind when it adopted the 14th Amendment
in 1866 was the newly freed slave." Justice Black observed
in the 1930s that in the first fifty years following the adoption
of the 14th Amendment, "less than one-half of 1 percent
[of Supreme Court cases] invoked it in protection of the Negro
race, and more than 50 percent asked that its benefits be extended
to corporations." During this period the courts moved to
limit democratic power in other ways as well. For example, the
Supreme Court restricted the common law right of juries to nullify
a wrongful law; other courts erected barriers against third parties
such as banning fusion slates.
It was during this same
time that the myth of competitive virtue sprouted, helping to
justify one of the great rapacious periods of American business.
It was a time when J.P. Morgan would come to own half the railroad
mileage in the country -- the same J. P. Morgan who got his start
during the Civil War by buying defective rifles for $3.50 each
from an army arsenal and then selling them to a general in the
field for $22 apiece. The founding principles of what we now
proudly call the "American free market system" flowered
in an era of enormous bribes, massive legislative corruption,
and the creation of great anti-competitive cartels. It was a
time when the government, in a precursor to industrial policy,
gave two railroad companies 21 million acres of free land.
And it was also the time
that American workers, who had once used commerce to free themselves
from the economic and social straitjacket of the monarchy, found
themselves servants of a new rigid hierarchy, that of the modern