By Gerald Davis and Israel Drori.
A landmark moment in the development of progressive politics in the U.S. was Theodore Roosevelt’s “New Nationalism” speech in Osawatomie Kansas in August 1910. Roosevelt described the social problems of the early twentieth century – soaring inequality, concentrated economic power, the corrupting influence of corporate money in politics, and the shadowy role of Wall Street – and called for a more robust Federal government to rein in the national-scale corporations that were beginning to dominate the economy.
The problems we face today are nearly identical to those diagnosed by Roosevelt. The root cause of our current situation, however, is not the rise of the large corporation but its collapse, and the proper response is not more centralization but a better match between the locus of governance and the shape of the new economy.
Wall Street-fueled mergers around the turn of the 20th century created corporate behemoths that dominated the American economy for the next century. Progressives like Roosevelt advocated building a more muscular Federal government that was a better match for the new corporate giants and pushing corporations to serve society’s interests. In subsequent years, corporate employers took on the provision of pensions and health insurance for workers and their families. They afforded stable employment and opportunities to move up. Some education and an entry-level corporate job provided a ready path to a middle-class life.
This era has now passed. The economies of scale that favored giant corporations in the twentieth century have given way to a networked information economy that encourages disaggregation. Think of this as the Nikefication of the American economy. Nike focuses on design and marketing while contracting out production to suppliers in East Asia. The Nike model has spread widely in sectors from clothing to consumer electronics to pet food to pharmaceuticals. The best-selling U.S. television brand last year was not Sony or Samsung but Vizio, located in Irvine, California. Vizio outsources production and distribution, much like Nike, and has introduced scores of new high-tech products – all with fewer than 200 employees.
The fear with companies like Vizio or similar firms is not that they are too powerful but that they are too weak, that is, that they are too ephemeral to carry out the policies that we expect of corporations. Why should a temporary company be expected to provide health insurance or pensions to workers who will outlive them by decades? And who can expect a 200-employee company to provide long-term careers or job ladders?
The old corporate system has also turned up short for investors and retirees: real returns for the first decade of the twenty-first century were worse than any decade in U.S. history, and the number of listed corporations today is less than half of what it was in 1997.
These are not problems that a central government can solve by prodding corporations to do more, as in past generations. It would take more than 3000 Facebooks to employ all of the jobless people in the U.S. today. With corporations no longer equipped to provide middle-class employment, benefits, and career mobility on a national scale, the current economy is like an inscrutable game of chutes and ladders, lifting a few kids from their dorm rooms to the economic stratosphere while millions of others drop unexpectedly into long-term unemployment.
The tools of governance suited to a U.S. Steel economy are not those suited to a Facebook economy. Just as national defense had to adjust to a world in which security threats are more likely to come from non-state actors than from other nation-states, our approach to economic security needs to adjust to a post-corporate economy. Contemporary technologies favor a kind of cosmopolitan localism. In a Web-based economy, there are opportunities for small- and medium-sized local businesses with global access. And it is likely to be local innovators, not big corporations, who will be in the vanguard.
The economic strains we face today cannot be addressed either by a quixotic return to states’ rights nor by more centralized governance but by strengthened local economies. There are hints of such models in post-industrial cities, like the Evergreen Cooperative system in Cleveland, but what is needed now is a more thorough assessment of the economic underpinnings of a new progressivism. Unlike the twentieth century version, which favored centralized solutions, progressivism 2.0 could mark the emergence of a more democratic and cosmopolitan localism.
(This post is based on an earlier article: https://globality.cc.stonybrook.edu/?p=288)
Please also check out the comment blog post by David Levy: Corporate Power in an Age of Global Value Chains