Domination by the Corporation

from the book

Sharing the Pie

by Steve Brouwer

Henry Holt and Co, New York


At the beginning of the twentieth century the public was well aware of where power resided-in the corporate boardrooms-and often protested about the anti-democratic tendencies of big business. The major presidential figures of the era, Woodrow Wilson and Theodore Roosevelt, felt obliged to acknowledge the negative influence of "the monopolies," "the trusts," and people who owned them, "the Robber Barons." Now we find ourselves at the end of the same century and economic power is even more concentrated, but seldom questioned. Common people are not likely to think they have any control over the distribution of wealth in society, and the president of the United States is not prepared to criticize the giant manufacturing, financial, sales, and service corporations for taking control of our destiny. Such an admission would cost him his job.

Big business dominates American society far more than the government could ever hope to. Its positive achievements include raising productivity to the highest rate in the world {that is to say, the average worker produces more value, as measured by the quantity and quality of goods and services, than anywhere else) and created, for the first time anywhere, the possibility of a comfortable, "middle-class" existence for a majority of their working-class employees. In the 1950s and 1960s the five hundred largest corporations (sometimes called the Fortune 500 employed approximately 20 percent of the U.S. workforce. Many of these workers were unionized and could look forward to lifetime employment. They bought their own houses, sent their kids to college, and started building up retirement "nest eggs" in company pension funds.

Over the past two decades the situation has changed dramatically. The biggest corporations still control a huge proportion of the economy, but they offer fewer opportunities- only 10 percent of working Americans now labor for the Fortune 500. Many large corporations-particularly those in the high-paying manufacturing sector-"outsource" their production; that is, more components and services are provided by smaller contracting companies, foreign-based and domestic, which pay much lower wages. Big companies that seek to get rid of unions practice ruthless "downsizing" by cutting their labor forces to the bone. This in turn puts more pressure on the remaining employees to work faster and longer.

A harsh new world of work has emerged: average workers are accustomed to declining wages, while the top managers who instituted the new "lean and mean" production standards expect extraordinary growth in their compensation. Business Week reported that the pay of the top executives at Fortune 500 companies averaged $3.75 million per year in 1995, up 30 percent from the previous year and 92 percent higher than in 1990. The profits of Fortune 500 companies had risen 75 percent since 1990, providing stockholders with an unprecedented 14.6 percent return on equity in 1995.

Layoffs of workers by the Fortune 500 were also up sharply, by 39 percent in 1995. The pay of those workers who remained rose only 2 percent for 1995 and a mere 16 percent from 1989 to 1995. Just to prove this was no fluke, CEOs' total compensation at the Fortune 500 jumped 54 percent in 1996 and profits were up 23.3 percent, surpassing the record of the previous year. Once again millions of employees had nothing to show for their efforts: wages went up 3 percent, lagging just behind inflation.

How Productive Is the Corporate World?

Soaring profit rates and the Wall Street boom have convinced the media that American corporations are doing a terrific job. In some respects this is true. When we look at the biggest companies in historical perspective, they consistently come out as winners. The largest industrial corporations have steadily increased their share of economic activity and the banking corporations have consolidated control even more tightly.

When the Fortune 500 companies hit the jackpot with record profits in 1995 and 1996, their share of all corporate profits jumped from 43 percent to 48 percent, almost half the profits generated by the hundreds of thousands of U.S. corporations. At the top of the top, business is even more concentrated. Of all the revenue generated by the Fortune 500 in 1996, fully 19 percent was produced by just ten corporations, including General Motors, AT&T, Exxon, Ford, and GE.

Yet, for all this apparent success, it is evident that some things are seriously amiss. CEO pay at the Fortune 500 went up 925 percent from 1980 to 1996, while non-supervisory workers, who make up four fifths of the American workforce, saw their salaries decline by 13 percent over the same period. CEOs earned 42 times as much as the average factory worker in 1980; they earned 217 times as much in 1996. These changes were accompanied by a strong endorsement of "supply-side economics" within the business and political worlds. Supply-side advocates claimed that the transfer of resources to the rich and powerful was going to unleash a vigorous wave of investment and generate an economic boom. ...

The failure of supply-side economics was spectacular. ... nothing trickled down to poor and working people. More important, their suffering and sacrifice was all for naught, because the U.S. economy suffered its worst record of sustained growth since the Great Depression.

What happened? The rules of employment and making money have been turned upside down by new forms of corporate dominance. Despite their growing range of economic activity, the corporations are no longer creating and sustaining the kinds of jobs that allow workers and their families to achieve "the American dream." ...

Sharing the Pie