Corporatism, FDR, LBJ, and BHO

[Recursion]

I pulled this out from a thread as an OP because I didn't want to threadjack.

There is a lot of talk here about "corporatism", and how we need less of that and more of what FDR and LBJ did. When I look at their administrations, I see Presidents who were "corporatists" to a level that would make Clinton or Obama blush.

The amount of corporate consolidation and increase in power during the New Deal and World War II is astounding. Industries went from having dozens and dozens of small regional players to generally two or three national players. The New Deal made IBM from a bit player in calculators to at its time the world's largest company. The Great Society essentially created EDS. The Communications Act which established the FCC also locked in AT&T/Bell as the sole provider of telephone service for half a century. For that time, Bell Labs functioned as our national laboratory of science, paid for by required contributions to a for-profit company. Their inventions and discoveries include things like the laser, UNIX, the transistor, the fax, information theory, and cosmic background radiation. All done by a lab owned by a private, for-profit corporation empowered by FDR to run the nation's telecommunication systems.

Social Security and Medicare cemented the role of the corporation as the sole "legitimate" employer in the US: because they were funded through corporate payroll levies, anyone who wanted to participate in these programs had to be employed by a corporation, to the extent that enterprises that were never before treated as corporations like doctor's practices and farms had to incorporate to not be shut out of them. The FDIC requirements for banks and the dual-chartering system for credit unions guaranteed that the for-profit banking system would not only dominate the co-operative banking model, but that the system itself would be dominated by large national players rather than small regional players. The Food, Drug, and Cosmetic act did make food safer, but in a way that nearly immediately ended the small slaughterhouse and replaced it with large corporate meat-packing plants (to this day the FDA refuses to "waste time" inspecting slaughterhouses that are "too small", with the result that they have to shut down). When the Volstead act was repealed, what had before prohibition been a rich local variety of brewers was transformed by regulations from the newly-reconstituted ATF into the big three brewers of vaguely-beer-like Pilsners we still suffer with today (American beer has only in the past few years begun to recover from that), and the vintners fared even worse (Frank and Ed thank you for your support).

This is not post-facto revisionism: critics at the time complained that FDR was moving to a fascist planned-economy strong-corporate model (Huey P. Long, Father Coughlin, etc.; Churchill described FDR and Mussolini in the same terms, though they weren't criticisms). Google finds dozens of contemporary comparisons of FDR to Mussolini and almost no comparisons to Stalin. The National Recovery Act was contested (and found unconstitutional) as an example of excessive government collusion with corporations to plan the economy. Social Security was derided as a giveway from the bankers to the bankers. Even the TVA (and boy do I miss living in a TVA area) was a corporation owned by the Federal government, rather than a government agency (it was started by the Federal Government buying most of the then-bankrupt power suppliers in situ). In brief (too late!), we entered the Depression with a lot of moderately powerful corporations running the economy and we left it with the government having more or less chosen a much smaller number of much more powerful corporations and encouraging/mandating economic participation of everyone with those corporations. And it worked.

It is simply not the case that government regulation and coroporate power are at odds. Corporations that become powerful usually have done so because of the government. Monsanto would not exist without the USDA and FDA. Microsoft would not exist without the FCC and DoD. Every single field I can think of came out of the New Deal more strongly controlled by a smaller number of corporations compared to how they went in -- and SS and Medicare now required all Americans who wanted to retire and have health care to participate in the corporate economic model.

The very fact that "progressive" is being contrasted with "corporatist" seems blind to this aspect of the history of progressivism. Historical progressives wanted to ameliorate the corporate system and use it as a tool to produce more moral behavior (by their standards) among individuals.

Corporations have always been more powerful in this country than I would like. I don't think they're more powerful today than they were in, say, the 1950's, let alone the 1890's. For that matter, I think the biggest systemic weakness in our economy right now is that the corporate-dominated model that came out of the New Deal and WWII is no longer able to keep up with fully statized corporations/corporatized states a la China. That and the fact that the social contract that once existed was broken -- but it was broken because corporations were becoming too weak to maintain it, not because they got stronger. (Though that is too simplistic; changed SEC governance rules from the 1970's onward provided too much incentive for short-term thinking, and still do -- though those rules themselves were responses to an already-changing corporate culture that now had to fear foreign competition to an extent it had never had to before.)

Corporations do a lot of harm and a lot of good; they produce wealth and poverty (and, yes, less and less in between as time goes on). But FDR saw them as vitally important to the US economy, and pushed legislation that saved the corporations from themselves -- saved capitalism from itself, even -- and produced an economy that was more centrally controlled by a smaller number of larger corporations than before. And that was for all of its flaws a good thing, in the end.

[TwilightGardener]

1. Interesting and enlightening, thank you.

[Recursion]

2. Thanks. I think I'm whistling into a hurricane, though.

History is rarely as simple as people want to make it. Myself included.

[treestar]

3. Rec'd. Corporations aren't evil in and of themselves.

Nor are big companies. It is just silly to expect, in the modern world, an entire economy of small, local companies.

[Jennicut]

4. Where do people think the vast military-industrial complex came from? WWII started

us down the path to it. Part of it was necessary but it was never really scaled back to what it was before WWII.
Also, during the 1800's, corporations had hardly any rules governing them. There was no OSHA. I would say a lot of laws regarding big corps have been gutted but to say that there was never a time when big corps ruled America is simply false. A progressive era started in the late 1800's into the 1900's when many corporate abuses were exposed but everything goes in cycles.

[Recursion]

5. I agree on the cyclic nature of it

We're leaving a conservative era just like Nixon's presidency took us out of a liberal era (political scientists seem to call them "party systems"; we're leaving the sixth and entering the seventh now).

Also, during the 1800's, corporations had hardly any rules governing them. There was no OSHA.

What I'm getting at is that the sort of reform legislation that passed during the progressive era ended up consolidating and strengthening the big players in the fields that were regulated. So corporate governance goes hand in hand with corporate power. Even Amoco and Chevron came out of the Standard Oil breakup more powerful than Standard Oil was coming in; ditto the Baby Bells 70 years later.

[Jennicut]

16. True. The smaller corps that came out of the bigger corps eventually became

even bigger and more powerful. My father has worked for a phone company for 35 years. It went from Southern New England Telephone to Bell South and is now owned by AT&T.

[Recursion]

17. And in 10 years we'll probably have 3 or 4 big insurance companies left

With a few bit players doing niche business in the exchanges. Those three will negotiate quality of service and price deals with HHS, just like Bell did with the FCC, and in combination with the expanded FQHC system we will more or less have a situation where everybody has access to medical care, even if it's more expensive than it otherwise could be. Small businesses and low-wage businesses will stop providing health insurance altogether, and the fines they pay for that will fund the subsidies for their employees on the exchange. It's perverse, twisted, and silly if you were to look at it without an historical context, but then again so was the existence of Bell, and all in all that turned out pretty well. (Like Obama said, if we were starting from scratch we would build a national health system or at least a single-payer reimbursement system, but we aren't starting from scratch, we're starting from where we are and there's not a path from point A to point B that doesn't risk causing bigger problems than it solves.)

[phleshdef]

6. CEOs and politicians are human beings just like the rest of us.

The only difference is the bad ones have the ability to exercise their agenda a lot more than bad people with less money and power do. The middle class is full of the same assholes (just look at the tea baggers) but they just aren't equipped to do anything about it.

But I guess its because when bad people get some kind of power, they use it and the aftermath is something that ends up sticking in peoples' heads. And that has created this sort of prejudiced, especially on the left, towards anyone that has used the capitalist system to their advantage. Plenty of good people have done so and done some really good things with their power. But that doesn't tend to stick in peoples' heads as much I suppose.

There is nothing wrong with capitalism in and of itself though. America seems to work best as a melding of capitalism and socialism and neither is going away anytime soon. We just need to work on the balance between the 2 at this point in our history and that seems to be what Barack Obama has been doing if you actually look at the long view. He didn't kill the private health insurance industry. But he did cram a very large governmental foot in the regulatory door, one that can be strengthened over time. What critics now attack as being a weak giveaway for health insurance companies will likely one day be hailed as the start of the "EPA for health insurance". Wall Street Reform didn't nationalize the big banks. But the vast regulations that were imposed touch just about every single area of an overly complicated industry.

In both cases, I think we will see outcomes similar to the historical examples you provided. I predict that health insurance companies and banks likely will come out stronger institutions overall. But that will be because of the increased stability that comes with sensible regulations that are practiced over a long period of time and the increased sense of certainty that comes with that.

[Recursion]

7. The stability is key, though we'll lose a lot of smaller insurance companies

That was the big opposition during the Clintons' attempt at HCR: small insurers looked at it and saw that they were going to get eaten alive by the Anthems of the world.

I think the industry was willing to get behind it this time for two reasons: 1) there are fewer smaller insurers now than there were then, and 2) the ones who are left realize that they can't continue to operate with delivery costs soaring like they are, and they'd rather take their chances being niche players in the exchange.

Wall Street Reform didn't nationalize the big banks. But the vast regulations that were imposed touch just about every single area of an overly complicated industry.

And it created the consumer protection commission, which is going to be able to do a lot -- Warren is already working with the states attorneys general to coordinate the legal cleanup we're facing.

[Hello_Kitty]

8. I'm seeing a lot of defenses of corporatism here lately. Must be the new coordinated talking point.

[Recursion]

9. Yes, I get a memo faxed to me every morning

:eyes:

I'm "defending" it because I think the attacks are A) getting silly and B) based on a willful ignoring of history.

[Hello_Kitty]

10. I'm just making an observation. All of a sudden the 'usual suspects' are defending corporations.

Vigorously.

[Recursion]

11. Because the consistent and constant attack here against Obama is that he is "corporatist"

And that because the legislation we ended up with did not fundamentally undo the role of corporations in the economy, it is not only a failure but a regression. Do you disagree with my reading of history that the corporations that survived the Depression and the New Deal came out more powerful than they went in? Or that Social Security and Medicare fundamentally cemented the corporation as the engine of employment in the US economy?

[Hello_Kitty]

12. Strawman.

No one was asking Obama to dismantle corporations. We were asking him to put the interests of the working and unemployed who are suffering right now ahead of the moneyed elite.

[Recursion]

13. But why do you insist he hasn't done that?

What's a concrete example of something he could have done that would convince you he's doing that?

You claim I'm presenting a strawman: if so it's unintentional; I'm trying to honestly respond to what I understand the criticisms to be. As I read the responses to PPACA, people here are saying that because it ends up strengthening the position of health insurance companies, it cannot be an example of putting working people's interests first. (I have no idea if you've said that, but I have seen that said on this board in as many words.) I mentioned FDR's programs because these helped working people immensely and yet also strengthened the position of large corporations.

But, if it is a strawman I'll dismantle it: what's something he could have done that would have convinced you? If you really want him to come up with a bill you're happier with that would then fail Congress, well, that's what you want and that's what would convince you. But anyways, what I'm against is the idea that stabilizing and strengthening corporations must be a sell-out of the working man and woman; in FDR's case it wasn't.

[Hello_Kitty]

14. Taking the public option off the table. And the WH deals with Big Pharma.

Which I'm sure are justified by saying that they were compromises that had to be made to move the bill forward. But those are blatant cases of putting the moneyed elite ahead of the people. And we didn't even get a say in it.

[Recursion]

15. None of his concessions were to Republicans

The concessions Obama made (from what we can tell; I do fault him greatly for not opening up the negotiations more like he promised to) were to Democrats to keep his own caucus together, since he had written off getting GOP support once it became clear the Senators from Maine were just stalling Baucus.

Republicans wanted tort reform, medical savings accounts, and price transparency. None of those made it into the bill (well, there's a bit of price transparency, but not at the individual level); there wasn't a single concession to Republicans that I can think of.

The public option died for two reasons:
1. Nobody could find a way to pay for it, and the Blue Dogs were absolutely insisting that HCR had to be deficit-neutral at worst

2. Without a dedicated revenue source, it would be pretty much doomed into becoming another Medicaid, and the hospitals were dead-set against that because they're losing money hand over fist on Medicaid as it is.

(This, incidentally, is why I am also against a public option without a dedicated Federal revenue source: I think it would end up making things much worse. The insurance companies loved the idea because they could dump all of their sick customers onto it, and we'd end up with Medicaid 2 when the real Medicaid is already managing to bankrupt both states and providers, which is why the states and hospitals opposed it for the most part.)

And we didn't even get a say in it.

Like I mentioned above, the lack of transparency in the process is probably my biggest complaint against Obama to date. I can come up with all sorts of reasons, like how he didn't want to repeat the Clintons' mistake of dictating a fait accompli to Congress, etc., but I think this is something he could have pushed for and got, but he didn't want to offend senior Democrats. So, yeah, I'm with you there. But if you grant that a lot of people do sincerely hold worry #2 above with me, including a lot of members of Congress, I don't think it requires a great amount of charity not to view its disappearance as a betrayal.

Now, to your larger point as I read it, how do we get more public participation in the political process? I'm not sure; election reform needs to be part of it, term limits could be part of it too, and in general a lot more people need to run for office (to serve shorter terms) than do today.

[Odin2005]

18. FDR made it very clear that his goal was to save the Capitalist Class from it's own screw-ups.

This is something us Left-Libertarians have said for a long time. The New Deal was, in fact, the establishment of Corporatism, the Welfare State is simply a bribe to keep us from overthrowing the system.

Much of our safety and health regulation are, in fact, designed to destroy small business, the safety and health improvements are simply cover for the real purpose.

[Recursion]

24. I can't disagree

Much of our safety and health regulation are, in fact, designed to destroy small business, the safety and health improvements are simply cover for the real purpose.

Exactly; that's why I don't get this repeated contrast between progressivism and corporatism. Progressives at least historically wanted national standardization, which meant ending local small enterprises and replacing them with national ones.

[boppers]

19. +1.

There needs to be a better word employed, to express the difference between helpful positive corporate citizens, and mindless, soulless, entities that are not partnerships with workers for the benefit of both.

[craigmatic]

20. All that's well and good but when LBJ and FDR did it, they got more out of it.

[Recursion]

21. There was more to get

This is the postwar dregs

[craigmatic]

22. Nonsense, there was a universal health care system to get.

[Recursion]

26. The whole world is running out of resources

While the population is growing. There's just not as much to go around as there used to be.

[craigmatic]

27. All the more reason not to put a price on health care.

[Recursion]

28. Fair enough

But the price remains; someone has to pay for it.

[craigmatic]

29. Yeah but in other countries they make it available for everyone and everyone pays into the system.

People don't realize that our military spending and presence around the world enables Western Europe to have universal systems. We could cut our military spending and use the money to help our own people by opening up medicare to everyone.

[Bluenorthwest]

23. Social Security and Medicare are funded though payroll taxes

not as you say on 'corporate payroll'. And the implication that most corporate payroll itself is large multi national payroll is false.
Even the self employed pay into the system. Those who are employed by a non incorporated employer also pay into the system via payroll taxes.
So this theory of yours that only corps are legitimate empoyers because only they pay those taxes is hugely incorrect.

[Recursion]

25. Yes, self-employed people can pay into the system

By literally or effectively becoming corporations (no, you don't have to actually incorporate, but you have to run your books as if you yourself are a business). That's what I meant by it changed enterprises that were never considered businesses, like doctor's practices and farmers, into following the corporate model.

[AdHocSolver]

30. A lot of misinformation and misinterpretation in this post.

The corporate consolidation that happened during the New Deal was NOT because of the New Deal, but because of the Great Depression that started BEFORE the New Deal was implemented. Smaller businesses went bankrupt, and only the largest corporations survived.

Of course FDR and LBJ were "corporatists". FDR came from "old money" and LBJ was "new money". The difference was that FDR and LBJ weren't intent on waging class warfare on the middle and working classes.

What became IBM was founded in 1896, first incorporated in 1911, and merged with foreign subsidiaries under the name International Business Machines in 1924. Their German subsidiary did very well financially selling data processing equipment to the German military during WWII.

IBM became a leading player in computers thanks to winning a contract from NASA. The research done with NASA funds led to the IBM System 360 mainframe and its descendants. The special virtue of the 360 was that a company could buy a low cost basic computer and scale up with compatible hardware as their needs increased and still use the same software.

Microsoft would not exist if they hadn't received a sweetheart deal from IBM back in 1981. The FCC and the DoD had nothing to do with it.

WWII did play a major role in consolidating power in a few corporations as the government gave a lot of money to a small number of players to manufacture war materiel.

There was never any "social contract" between corporations and the public. The corporations were always trying to screw the public.

The change in the relationship between corporations and the public came about, not because of regulation or social programs, but because of the consolidation of once competing companies through the mergers and buyouts of those competing companies.

Many supposedly competing corporations are horizontally and vertically integrated through the investment companies that hold controlling interests in those corporations. The once vaunted competition of capitalism that was supposed to benefit the masses no longer exists.

When a handful of financial corporations can bring several countries to the brink of financial collapse, one better believe that they are more powerful today than ever before.