The Corporation and John D. Rockefeller’s Bewilderment

(extracted and adapted from National Lies by Charles Churchyard)

By the last decade of the Nineteenth Century, John D. Rockefeller had good reason to feel satisfaction. His Standard Oil Company was the largest corporation in the United States and the one others looked up to. It had brought stability and quality to an industry that used to be notorious for anarchic behavior and unreliable products. Individual entrepreneurs had formerly employed cutthroat tactics against one another, to the detriment of the consumer, who had paid for their wasteful rivalry with higher prices and worse.

To his evident surprise,
he found that he had
become “the most hated
man in the world.”

At a time before electric lights appeared in ordinary households, kerosene lamps were the usual means of illumination. Each year, defective concoctions of inflammable liquids had caused thousands of explosions, which resulted in hideous injuries and deaths. Standard Oil, with its superior efficiency and size, bought up the small producers or drove them out of business. Almost all the kerosene the public now purchased came from Standard Oil. It was safe, its quality was high, and its price was low. For this achievement, Rockefeller might have expected to be applauded as a benefactor to humanity and the nation. Instead, to his evident surprise, he found that he had become “the most hated man in the world.”

Henry Lloyd’s Wealth Against Commonwealth (1894) declared that Rockefeller and his associates belonged in the penitentiary. The book achieved such popularity that contemporaries compared it to Uncle Tom’s Cabin in importance and influence. But it was surpassed by Ida Tarbell’s History of the Standard Oil Company (1904), a two-volume opus presenting a simple morality story, in which Rockefeller’s greedy corporation, using unfair tactics, drove out of business honest, smaller competitors, of whom Tarbell’s father had been one. The impact of her indictment was so enormous that a later historian pronounced it to be one of only three books that could be said to have exerted an actual influence on American history. Lloyd and Tarbell were only the most memorable accusers; there were innumerable others. As Tarbell herself said, “The public...has always been willing to believe the worst of the Standard Oil Company.”

Rockefeller was surprised and perplexed by the opprobrium. His company had not robbed widows and orphans or blown up rivals’ plants. Its tactics were in fact no worse than those employed by other businessmen of the time, large and small, including the inefficient independent oil producers, whom Tarbell had idealized to a ridiculous degree and the Standard Oil Company had put out of operation to the public benefit. Supported by these facts, Rockefeller was sure that people would eventually come round to his way of thinking and recognize the good things his company had bestowed upon the nation. It did not happen. When, in later life, he turned to philanthropy, his money was stigmatized as “tainted,” and he was jeered at for attempting to relieve a guilty conscience and buy his way out of hell, to which his sins would justly assign him. Even today his reputation, like that of the other captains of industry (a.k.a. robber barons), is mixed at best

“No other institution in
American history—not
even slavery—has ever
been so consistently

This apparently bizarre and incongruous denigration of Rockefeller and his company is precisely the same public response that has pursued the American corporation in general through its entire history. Utilizing, as it does, the national genius for collective, cooperative action, the corporation has played a crucial and indispensable role in the creation of goods and services and consequently in the growth of national wealth and power. Anyone who today takes the trouble to search out the origins of the necessary, useful, and pleasurable items in everyday life will find that an overwhelming number of them were produced by corporations. They form an “envelope of existence,” which has been called the “corporate surround.” It first began to be obvious around the beginning of the Twentieth Century, and it has increased in the subsequent hundred years.

Yet, despite all the benefits the corporation has bestowed, it has not been duly appreciated. It has received reluctant respect and grudging acceptance at best; at worst, it has provoked resentment and even hatred. According to one scholar, journalist, and commentator, “No other institution in American history—not even slavery—has ever been so consistently unpopular...with the American public. It was controversial from the outset, and it has remained controversial to this day.”

Such an assertion may sound startlingly extreme, especially to Europeans, given their predilection for substantial, established institutions. But it is quite true. Americans are disposed to think badly of corporations. Whenever the flagrantly illicit behavior of a few executives becomes national news, pundits seize the occasion to condemn the entire corporate world, as happened with the accounting and bankruptcy scandals of 2002. So strong is the prejudice that it erupted even in the midst of a book entitled The Progress Paradox, which was written to demonstrate the soothing and levelheaded proposition that life is getting better. The author made an exception for the misdeeds of corporate leaders and lashed out at them with indiscriminate and extravagant condemnation. A popular documentary movie entitled The Corporation (2004), and the book on which it was based, maintained in all seriousness that, since the law views corporations as persons, their personality should be diagnosed as psychopathic, because they are habitually predatory and ruthless.

— ♦ —

During the early years of the Nineteenth Century, working life took the form of what contemporaries called “free labor” and scholars later called “small producers.” Most men were neither employers nor employees. They owned their own farms or shops, where they worked for themselves, often with the assistance of their families. Each shoemaker, for example, bought raw materials, fashioned them into shoes, and sold them directly to customers. When a person hired himself out for wages, he usually intended to remain in that situation only a limited time—long enough to complete an apprenticeship or accumulate a nest egg—and then strike out on his own.

“Corporations have
neither bodies to be
kicked nor souls to
be damned.”

This state of affairs began to change with the rise of large manufacturing organizations. By organizing teams of workers, with each man performing a specialized task, they were able to produce more goods at lower prices than independent artisans could produce by their separate efforts. Innovations in the means of transportation and communication (railroads, steamships, and telegraph lines) opened up wider markets, which could absorb the increase of goods. Factories appeared and grew in size, and the larger ones naturally opted for the legal advantages of incorporation.

Before the Civil War, factories tended to be small and corporations few, but from the very beginning the public in general and workingmen in particular perceived them as a threat and a serious danger. They reduced the value of the individual worker. Instead of having a highly trained and experienced man construct an entire product for sale, they hired less skilled laborers at lower wages and assigned each one a specific and simplified part of the process. A former craftsman complained that, by working in a shoe factory as one of sixty-four people on the production line, he was functioning as “one 64th of a shoemaker.”

The new arrangements also reduced the independence of the individual worker. As an employee, he had to adjust his behavior to that of other employees and, far worse, to the dictates of superiors. His relationship to those outside the business also changed. A man who owned his own shop could stand up to an obnoxious customer, and he would lose no more than the trade of a single person. An employee who dared to maintain his dignity in this way risked losing his job.

In addition, the employee who remained an employee could scarcely hope that the future held something better in store for him. When a man had his own business, no matter how humble, he could always imagine that by the exercise of his own effort and ingenuity he might succeed in improving his lot, perhaps striking it rich. But as long as a man remained in a factory or other corporate organization, he would remain a subordinate, with all the disadvantages of subordination, and little or no prospect of improvement. Only a limited number of higher positions fell vacant, and these were handed out at the wish and whim of corporate management.

Whenever defenders of the South argued that the lives of their slaves were, as a rule, better than those of Northern workers, opponents had one formidable and cogent reply: the condition of a free laborer, no matter how low and unappealing, was not permanent; he could improve it by his own exertions. But that was not the case if he were to remain an employee. Workers and middle-class observers alike perceived this fact, and they looked with disapprobation and fear upon these new corporate organizations, which were growing in size and number, for they appeared to be contrary to everything that the ideal of freedom in general and economic individualism in particular had promised.

The factory bell
was like “a slave
driver’s whip.”

In the 1830s, the phrase “wage slavery” (along with “factory slavery”) became popular. Comparisons were frequently made between this form of bondage and the bondage of Negroes, with the former being viewed as equally vile or at times worse than the latter. One operative in a New England mill complained that the factory bell was like “a slave driver’s whip.” A famous essay, “The Laboring Classes” (1840), condemned the entire system of working for wages as a means by which capital cheated labor: “A cunning device of the devil for the benefit of tender consciences, who would retain all the advantages of the slave system without the expense, trouble, and odium of being slave holders.”

Charges leveled against the corporation went far beyond anything it might do to its own employees. Since the hated banks were also corporations, Jacksonian and Anti-Masonic protest denounced all such organizations as dangerous tools of a wealthy minority, which was allegedly using them for the illicit advancement of its own interests and the subversion of democratic government by means of bribery and influence. Simplistic American idealism stigmatized the corporation—with its limited liability protection and other features inexplicable to the layman—as a complex and unnatural contrivance that exploited hardworking people and corrupted public officials. It was charged with subverting the natural and simple relationships that ought to prevail among men, where each individual dealt with other individuals and not with faceless organizations and their subtle, sinister machinations.

So monstrous a thing did the corporation seem, that people believed it could be guilty of any social offense or transgression. An individual businessman, however debased his personal character, might shrink from wrongdoing because he feared public opprobrium and other penalties it would provoke. But sheltered behind the anonymity of a corporation, unscrupulous men would stop at nothing. “Corporations have neither bodies to be kicked, nor souls to be damned,” declared a maxim often repeated. Such an organism was not so much immoral as amoral; it only wanted to increase its profits and power, and it would do anything to attain this end. A short story published in 1837 told of a corporation that persecuted a poor widow. In reply to the question of why it had done so, the author could only answer, “It was a corporation”—precisely the point made in a review of the film The Corporation over a century and a half later: “It’s in their nature.”

— ♦ —

Despite all the bad publicity and the calls for their reduction, corporations in antebellum America flourished and multiplied, because they were in fact an economically superior way of utilizing capital and labor. Some wealthy and sophisticated persons (like the Whigs) and their spokesmen (like Daniel Webster) deplored the loud and continual cry against “all banks and corporations,” for these organizations were instrumental in promoting the prosperity of the country. Those who were closer to the popular mentality (like the Democrats) were often ambiguous, even hypocritical, in their treatment of the new institution. Many a politician denounced corporations on the stump and the hustings while supporting them in his backroom deals and with his legislative vote. One staunch and prominent Jacksonian argued, not that they should be abolished, but that they should be made available to all, including the poor, who would benefit from being able to form corporations to advance their own interests.

“Corporation: an ingenious
device for obtaining
individual profit without
individual responsibility.”

In the years after the Civil War, corporations spread into all parts of the commercial world and all geographical regions of the country. They merged and grew ever larger, until by the end of the century they had become the dominant business institution of the nation. In some sectors of the economy, control was exercised by only a very few firms (“the big twos, threes, and fours”). Occasionally, it was only one, John D. Rockefeller’s Standard Oil Company being the most notorious example.

This development was the result, not so much of personal ambition and opportunity, as of business necessity and demand. Chaos and misery, as well as growth, had characterized economic life during the later decades of the Nineteenth Century. Companies fought with each other in a frantic competitive effort of producing, buying, and selling, which created unpredictable waves of boom and bust. Prices would shoot up, driving consumers into panic, then plunge downward, bankrupting businesses and throwing people out of work. In an effort to protect themselves in the midst of this disorder, firms consolidated and merged. Each drop in the economy drove them to create larger organizations, until at last the great corporations emerged. Their dominance brought stability and an end to the wild, injurious, and extravagant warfare of competition.

Looking back over their success, the corporate leaders could be proud of what they had done. They had created tremendous material prosperity and power for the American nation, and they had established the conditions for its increase in the coming century. But they received little thanks from the public, who perceived in the triumph of the corporation a decisive reduction in personal and occupational freedom.

At the beginning of the Nineteenth Century, most people who were engaged in remunerative labor worked for themselves, in farms and shops that they owned. By the end of the century, most of them were working for someone else, on land or in a business that they did not own. Workers who would have been self-employed craftsmen or tradesmen a generation or two earlier were now employees in factories and other industrial organizations. Independent entrepreneurs found that it was increasingly difficult to survive in a world dominated by large businesses. Local merchants who had once been the self-sufficient pillars and patrons of their communities now had to endure the humiliation of taking orders from the bureaucratic officers of remote corporations.

To many it seemed as if the most fundamental components and the most precious qualities of American life were in danger. All the accusations that had been directed at the corporation when it was in its infancy during the antebellum era were repeated with new urgency and intensity now that it had become a ruling power. If most Americans were to spend their lives working for such organizations, the results would be pernicious for both the men and the country. Individuals would have to renounce the hope of bettering their economic position and thereby realizing their full personal potential. Instead of being rewarded for ingenuity, initiative, and independence, as they presumably had been in the free market, the corporation would teach them the habits of obedience and docility, thereby transforming a free and active citizenry into a servile and passive one.

What people want
is “the kind of
opportunity that
formerly existed
in this country.”

Such a degradation was profoundly unnatural, the popular logic insisted, and thus it could only be accomplished by means that were no doubt immoral and probably illegal. Corporations must, therefore, have risen to their present dominance by underhanded business practices, if not by outright fraud and crime. The public easily believed and eagerly repeated stories of their robbing widows and orphans, blowing up the plants of smaller rivals, and bribing politicians with their ill-gotten wealth. One muckraking tract entitled “The Treason of the Senate” (1906) asserted that a majority of the United States Senate was in the pay of the corporations. That same year, Ambrose Bierce defined “corporation” in his Devil’s Dictionary as “an ingenious device for obtaining individual profit without individual responsibility.”

Opponents of the corporation (or “trust,” as it was called at the time) did not want to hear that it had a good side. They brushed aside the claim that it produced lower prices. Such a benefit was only temporary, they insisted, and even if true, it was a minor consideration. As a justice of the Supreme Court declared in his opinion on an antitrust case, lower costs for the consumer and the manufacturer were no compensation for “driving out of business the small dealers and worthy men whose lives have been spent therein” and thus bringing about “the ruin of such a class.”

The president of the United States agreed. In his 1896 annual address to Congress, Grover Cleveland referred curtly to the alleged and “incidental economic advantages” of the trusts, but spoke at ponderous length of the manifold social evils they inflicted, as they “crush out individual independence...hinder or prevent the free use of human faculties and the full development of human character...[and injure the] personal character, prospects, and usefulness” of citizens.

Cleveland was expressing himself rather moderately, given the mood of the times. Possessed by the feeling that their country was facing a fundamental and immediate threat, fanatics blamed corporations for nearly every bad thing that had happened in the past or might happen in the future and called for their extirpation. A puzzled journalist from England reported that the governor of Michigan for one viewed “the trust as a kind of Antichrist,” about to bring a reign of havoc and ruin upon the land.

The case in favor of the corporation was logical and realistic, but it lacked wide support and emotional intensity. The idea of accepting corporations and having the government police them might seem attractive to a few people—often influential and discerning people (like Herbert Croly, founder of the New Republic)—but not to the general public.

Thomas Riley Marshall, vice president of the United States under Woodrow Wilson, probably spoke for most ordinary citizens. If some politicians could be said to understand the “psychology of the mutt,” Marshall was politically gifted with the mind and mouth of the mutt, and being American it was an idealistic mutt. One of his pronouncements has persisted in the nation’s memory to the present day: “What this country needs is a good five-cent cigar.” On the subject of trusts, he scoffed at the notion that they “were a natural evolution, and that the only way to deal with them was to regulate them. The people are tired of being told such things,” he declared. “What they want is the kind of opportunity that formerly existed in this country.”

It might have seemed that a disastrous, unavoidable collision was approaching. If popular sentiment prevailed and brought about the dismantling or even just the diminishing of the corporation, it would have ruined or at least seriously damaged the nation’s economy. If a realistic recognition of the corporation prevailed, and people gave up their dreams of economic individualism, it would have injured and perhaps destroyed productive motivation and morale. On the horns of this dilemma was many a politician, who realized the crucial and ineluctable importance of the corporation yet somehow had to appease the public cry against it.

source of the above:

Charles Churchyard. National Lies: The Truth About American Values. Ch. 7.

Chapter seven goes on to explain how America managed to cope with the dilemma posed at the end of the above excerpt, and how the resulting relationship between the corporation and the public has persisted to the present day.