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Corporate Dreams

Corporate Dreams: Big Business in American Democracy from the Great Depression to the Great Recession

James Hoopes
Copyright Date: 2011
Published by: Rutgers University Press
Pages: 248
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  • Book Info
    Corporate Dreams
    Book Description:

    Public trust in corporations plummeted in the wake of the 2008 financial crisis, when "Lehman Brothers" and "General Motors" became dirty words for many Americans. InCorporate Dreams, James Hoopes argues that Americans still place too much faith in corporations and, especially, in the idea of "values-based leadership" favored by most CEOs. The danger of corporations, he suggests, lies not just in their economic power, but also in how their confused and undemocratic values are infecting Americans' visions of good governance.

    Corporate Dreamsproposes that Americans need to radically rethink their relationships with big business and the government. Rather than buying into the corporate notion of "values-based leadership," we should view corporate leaders with the same healthy suspicion that our democratic political tradition teaches us to view our political leaders. Unfortunately, the trend is moving the other way. Corporate notions of leadership are invading our democratic political culture when it should be the reverse.

    To diagnose the cause and find a cure for our toxic attachment to corporate models of leadership, Hoopes goes back to the root of the problem, offering a comprehensive history of corporate culture in America, from the Great Depression to today's Great Recession. Combining a historian's careful eye with an insider's perspective on the business world, this provocative volume tracks changes in government economic policy, changes in public attitudes toward big business, and changes in how corporate executives view themselves.

    Whether examining the rise of Leadership Development programs or recounting JFK's Pyrrhic victory over U.S. Steel, Hoopes tells a compelling story of how America lost its way, ceding authority to the policies and values of corporate culture. But he also shows us how it's not too late to return to our democratic ideals-and that it's not too late to restore the American dream.

    eISBN: 978-0-8135-5204-0
    Subjects: Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-xii)
  4. Introduction
    (pp. 1-6)

    Lunching alone in a business restaurant in Shanghai, I received a conversational gambit from the waiter. I was different, she said, from her usual clientele of “corporate types,” a phrase she had probably learned from the corporate types themselves. They had, according to her, “cold hearts.” “They’re busy,” I answered, “and far from home. Many have warm hearts.” “No,” she said with unusual assertiveness for the waiter types I had met in China. “People with warm hearts work in restaurants and bars.”

    Like the Shanghai waiter, we all define the moral world by antitheses such as warm hearts and cold...

  5. Part I The Corporate American Dream at Its Height and in Its Origins

    • Chapter 1 The Corporate American Dream
      (pp. 9-14)

      Corporate capital and factory grit gave rise to the American Dream. At its 1950s zenith, the dream included suburban bungalows, stay-at-home moms, and a middle-class life for the common man. But the squeaky cleanness stopped at the workplace door. Grimy hands were the reality behind the reverie. Manufacturing jobs and heavy industry were the heart of America’s mid-twentieth-century prosperity. Giant corporations invested huge sums in plant and equipment, supporting mass production, economies of scale, and low unit costs.

      Despite the business corporation’s central role in the American Dream, the intellectual and social history of the corporation gets little attention. Now...

    • Chapter 2 Corporate and National Character
      (pp. 15-21)

      To live in a dream is to endanger one’s character. The American Dream of freedom and prosperity must be understood as a goal, not a given. To assume that a dream is inherently real is to encourage indolence and, eventually, a rude awakening. Character—whether individual, corporate, or national—is a matter of integrity, not just in the sense of acting honestly but in the sense of integrating our various passions and ideals in a fairly harmonious personality. An integrated personality gives strength of character. We cannot act consistently if our passions diverge too far from our proclaimed ideals. A...

    • Chapter 3 From Public Purpose to Private Profit
      (pp. 22-26)

      A poorly understood but vitally important factor in the course of American economic development was the transformation of corporations from instruments of social purpose to organizations for individual profit. In early America corporations were created mainly to accomplish public objectives such as the building of roads and canals. Even early American banking corporations often had an at least partly public purpose. The currency—the medium of exchange—that they created was in short supply and was a desperately needed public good.

      Today, of course, the primary goal of most corporations is not to enrich the public. Shareholders are supposed to...

    • Chapter 4 Corporations as Enemies of the Free Market
      (pp. 27-32)

      Until the coming of the textile and railroad industries, large-scale capitalism was a mercantile phenomenon. Great merchants, investing in ships and precious cargo in order to engage in long-distance trade, were the business world’s great capitalists. But in the late eighteenth and early nineteenth centuries mercantile capitalism was surpassed by a new kind of capitalism, industrial capitalism, which was to make some of Adam Smith’s ideas outmoded almost before they were published.

      Railroads provided the best example of why Smith’s laissez-faire ideas would not always be the right prescription for economic efficiency in an economy of large industrial corporations. Over...

  6. Part II Corporate Failure and Government Fix

    • Chapter 5 Corporate Crashes
      (pp. 35-39)

      Proponents of business are fond of calling government ineffective. But in many ways the business corporation has proven far less effective than government. The corporate economy that took shape in the United States in the late nineteenth and early twentieth centuries sometimes failed the most basic test of a good society. During the Great Depression of the 1930s and in some earlier financial crises as well, corporate America failed to supply industrious citizens with the work they needed to live a decent life.

      The corporate economy was central to mid-twentieth-century American prosperity, yet it was also central to the 1930s...

    • Chapter 6 Managers versus Markets
      (pp. 40-44)

      Beneath the practical and moral failures of the corporate economy in the Great Depression lay a failure of intellect. Many Americans did not see that the corporate economy had shown that the laissez-faire ideology was not the whole truth. They did not see that the success of the large business corporation proved that, in some circumstances, a free market is inefficient.

      If the market were always the most efficient system, there should have been no corporations employing large numbers of people. All Americans should have been self-employed, selling their autonomously produced goods and services. But the United States had developed...

    • Chapter 7 Corporations Blow Their Chance to End the Depression
      (pp. 45-50)

      The First New Deal was famously influenced by what newspapers at the time called the “Brains Trust,” a group of Columbia University professors who served as close advisers to President Roosevelt. Less widely appreciated is the fact that corporate executives were often as influential as the professors in shaping the economic policy of the First New Deal. Many people today understand that Roosevelt failed to revive the economy with the First New Deal. But few understand that he failed because he followed the advice of businessmen to give corporations more power, not less.

      There were exceptions to the failure of...

    • Chapter 8 Roosevelt’s Confused Anticorporatism
      (pp. 51-58)

      So began the Second New Deal, which would fight the Depression not by enhancing corporate power but by reducing it. Unfortunately, there was no widely shared understanding within the administration or among the American people as to the reasons for the shift in policy. Many knew then and know now that the Second New Deal weakened business corporations. Too few knew then or now that business corporations had it coming.

      Foremost among those who failed to understand what was happening was the president himself. During the campaign of 1932, Roosevelt had given a speech at the Commonwealth Club in San...

  7. Part III The Corporation Strikes Back

    • Chapter 9 The Right to Manage
      (pp. 61-66)

      Corporate leaders recovered their moxie in the late 1930s. Since the early days of the Roosevelt administration, many of them had lived in unrealistic fear that the survival of the business system was in doubt. The depth of the Depression had rendered more than a few of them passive, even cowed. But as the economic crisis waned, they found the will to fight for what they considered the essence of the business system, their “right to manage.”

      In the election of 1938, for the first time in a decade, Republicans gained rather than lost seats in both houses of Congress....

    • Chapter 10 Corporations Recover Their Moral Authority
      (pp. 67-71)

      For all of Alfred Sloan’s tough-minded contributions to the postwar American Dream, he nevertheless shared in some of the corporate world’s most popular fantasies about freedom. In one of his wartime speeches he described the $500 million investment that GM was about to make in postwar production as “the contribution we are prepared to make to help preserve the free competitive enterprise system as the keystone of the American economy.”¹ It was scarcely Sloan’s fault that $500 million was the price of admission to the “free competitive enterprise system.” But he might at least have recognized that ordinary citizens could...

    • Chapter 11 Killing the Unions Softly
      (pp. 72-75)

      Corporate executives now set about converting their newly recovered moral authority into political power. Here, too, they were successful. The anti-union legislation they persuaded Congress to enact would, in the long run, help to diminish the American Dream. Corporations used their postwar moral victory over the unions to shape Americans’ understanding of freedom. To many, freedom came to mean weak government, weak unions, and minimal interference with the supposedly free market. The issue of corporate power as a threat to freedom slipped off the radar.

      The Democrats’ identification with the unions, which had once been a political asset, would increasingly...

    • Chapter 12 Creating Reagan and His Voters
      (pp. 76-84)

      Graduating students turned out in large numbers to hear Lemuel Boulware speak at Harvard Business School (HBS) in June 1949, just a few days before commencement. The HBS class of 1949 would be renowned for its patriotism and its success. Many had fought in the war, had gone to school on the GI bill, and were destined for rich rewards in the corporate world. They listened attentively as Boulware outlined a conservative manifesto that, over the next thirty years, would spread into society at large and undo much of the New Deal.

      “Boulwarism” had recently become famous in the business...

  8. Part IV What Manner of Man(ager)?

    • Chapter 13 Masking the Arrogance of Power
      (pp. 87-92)

      Tycoons and financiers had long starred in the drama of capitalism. But corporate managers took center stage during the 1930s and held the spotlight for sixty years. Were managers the heroes or the villains of the piece? Management has always had an image problem in democratic America. Before the Civil War, overseers on slave plantations had been the largest cohort of salaried managers in the country. Later, as free whites went to work for corporations and fell under managerial control, they called a hard boss a “slave driver.”

      In the late nineteenth century and early in the twentieth, a movement...

    • Chapter 14 Responsibility versus Profit at General Motors
      (pp. 93-99)

      In the 1930s, self-proclaimed moral leadership was not unique to American corporate managers with the bad luck to fall under the influence of Mayo and Barnard or their acolytes. Adolf Hitler in Germany and Benito Mussolini in Italy—der Fuhrer and il Duce—governed on the “leadership principle.” In Russia, Stalin made a cult of his personality. It was easy to conclude that America would soon have a similar dictator. After all, Roosevelt claimed intangible qualities of leadership as justification for expanding his powers. Some conservatives saw the New Deal as an American version of European syndicalism.

      Such was the...

    • Chapter 15 Critics of Managerial Character
      (pp. 100-105)

      By the American Dream era of the 1950s, not just James Burnham and Peter Drucker but the country at large had awoken to the fact that the United States was a managerial society. Ambitious young people aimed at management jobs. Corporations, with the vast managerial hierarchies of the day, offered inviting career ladders and lots of social status. Thanks to Mayo and his ilk, managers could claim a raison d’être in their leadership ability. Was it possible, however, that managers were not leaders but lemmings, not capitalists but courtiers? Was it possible that managers were mere practitioners of palace intrigue,...

    • Chapter 16 JFK’s Pyrrhic Victory over U.S. Steel
      (pp. 106-112)

      “My father always told me that all businessmen were sons-of-bitches,” said President John F. Kennedy on April 10, 1962.¹ Kennedy’s angry reflection on corporate character was provoked by Roger M. Blough, head of U.S. Steel. Blough had just left the White House after informing the president that his company would be raising the price of steel by six dollars per ton.

      Since taking office a year earlier, Kennedy had made a priority of preventing inflation. He tried to take a balanced approach to unions and corporations, asking both sides to cooperate in holding down wages and prices. U.S. Steel’s price...

  9. Part V The Corporation in the Wilderness Again

    • Chapter 17 McNamara and the Staffers
      (pp. 115-121)

      Long before the modern business corporation existed, armies distinguished between “line” and “staff” positions. Authority over military operations flowed down the line from generals to colonels to sergeants to corporals. But a staff officer, say a quartermaster whose job was to procure blankets and boots, guns and ammunition, had no authority in military operations, no matter how high his rank. The quartermaster could require a line officer to submit a requisition form for new weapons. But the quartermaster had no authority over how the line officer used the weapons to fight the enemy.

      When business corporations became large organizations in...

    • Chapter 18 The False Confidence of the Anticorporatists
      (pp. 122-129)

      “Ben—I just want to say one word to you—just one word . . . Plastics.” It became one of the most famous movie lines of all time. The well-off Braddock family is giving a college graduation party for their son, Ben, star of the track team and valedictorian of his class. A family friend has taken Ben aside and gravely advises that there is “a great future in plastics. Think about it. Will you think about it?” Young audiences whooped at this scene from the 1967 filmThe Graduate. The pompous phony dispensing one-word profundities was familiar to...

    • Chapter 19 Corporate America Loses World Supremacy
      (pp. 130-136)

      If many American intellectuals in the late 1960s believed it beneath their dignity to study corporations, their European counterparts believed that American firms were too dangerous to ignore. “Fifteen years from now it is quite possible that the world’s third greatest industrial power, just after the United States and Russia, will not be Europe butAmerican industry in Europe.”¹ So warned Jean-Jacques Servan-Schreiber in his 1967 jeremiad,Le défi americain(The American Challenge), which outsold any book, fiction or nonfiction, published in France since World War II. Servan-Schreiber, a famous French intellectual and founder of the news magazineL’Express, adopted...

    • Chapter 20 Laying the Groundwork for the Corporation’s Cultural Comeback
      (pp. 137-142)

      On July 15, 1979, President Jimmy Carter went on national television and told the American people they were suffering from a “crisis of confidence . . . that strikes at the very heart and soul and spirit of our national will.” He was basically saying that the American Dream was waning. Americans were losing their “faith that the days of our children would be better than our own.”¹ The 1970s was called the “me decade” at the time, mainly to indicate a shift in people’s focus from 1960s social protest and social reform to taking care of their individual prospects....

  10. Part VI Leadership

    • Chapter 21 Managing by Values
      (pp. 145-151)

      The corporate cult of moral leadership dates back to the 1930s. Its origins, as outlined in chapter 13, lay in the Harvard Business School and the Hawthorne experiment. Elton Mayo and, especially, Chester Barnard had seen leadership as moral in the sense of “moral courage.” Barnard had said that leaders’ power is meager when measured against their responsibilities. As Barnard saw it, lack of adequate power is the paradoxical condition of moral leadership. By accepting responsibility without the authority to fulfill that responsibility, leaders demonstrate existential courage that inspires followers to get the job done. “Out of the void,” said...

    • Chapter 22 Creating the Concept of Corporate Culture
      (pp. 152-155)

      Cognate to the idea of managing by values was the idea of managing by culture. The wordscultureandvalueare both often used to imply normative goals and ends. Butcultureis a broader term, suggesting shared values that help unite a society. Corporate operations, whether with employees, customers, or suppliers, are nothing if not social. So it was easy for the corporate world to become captivated by a mistaken notion of culture at the same time that its leaders were subscribing to a mistaken notion of values. The same business leaders who want to “change the values” are...

    • Chapter 23 Inventing the Leadership Development Industry
      (pp. 156-162)

      The 1970s, often called the “me” decade, were also the “becoming” decade. Tom, Dick, and Harry were not automatically themselves. They had to become their true selves. Nineteen seventies management gurus helped executives to become leaders by becoming themselves. This focus on what was called “identity formation” was largely inspired by Erik Erikson, an eminent psychoanalyst. HisYoung Man Luther(1958) had won acclaim for its argument that the founder of Protestantism had needed to pass through a youthful identity crisis—remaking himself by rebelling against his father—before he could reform Christianity by rebelling against the pope. Erikson followed...

    • Chapter 24 Reagan Aids Corporations by Bashing Government
      (pp. 163-170)

      “The nine most terrifying words in the English language are ‘I’m from the government, and I’m here to help.’” So said Ronald Reagan, a self-assured leader who believed that in his 1980 election to the presidency he had won a mandate to undo the New Deal. The government pressure on business that had forced it to help create the corporate American Dream was about to be lifted.

      Reagan helped corporations not by boosting them but by bashing government. The question of the degree to which corporations were instruments of managerial power rather than market freedom, the question that had occupied...

  11. Part VII Entrepreneurship

    • Chapter 25 Supply-Siders versus the Big Corporation
      (pp. 173-179)

      A market economy has two sides, a supply side and a demand side. Economists long believed that any imbalance between supply and demand would correct itself. Any rise in supply, for example, would be met by a rise in demand, an idea called Say’s Law, after the early-nineteenth-century French economist Jean-Baptiste Say. According to Say, producers protect themselves against a decline in the value of their products by quickly exchanging them for cash. Then they protect themselves against inflation by getting rid of their cash. That is, they buy someone else’s products, which increases demand. Supply, therefore, can never outstrip...

    • Chapter 26 Reengineering the Corporation
      (pp. 180-188)

      Whereas President George H. W. Bush (1989–1993) had been a computer troglodyte, President Bill Clinton (1993–2001) relentlessly talked up “the new economy.” Clinton frequently used the 1990s terminformation superhighwayfor the Internet. The “Infobahn,” it was widely believed, would revolutionize the corporate world. And it did, though not quite in the way expected. Late-twentieth-century business cognoscenti believed that the revolution in information technology would (and in this they were right) create many small entrepreneurial companies. Some of those same illuminati erred, however, by supposing that information technology would of necessity put large corporations at a competitive disadvantage....

    • Chapter 27 George W. Bush, Enron, and the Great Recession
      (pp. 189-197)

      In the presidential election of 2000, Democratic candidate Al Gore won the popular vote. But Republican George W. Bush triumphed in the electoral college, thanks in part to a badly designed ballot that confused some voters in a key Florida county. It was a fluke, but Americans had elected their first president with a master’s degree in business administration. Bush had received his MBA from the Harvard Business School in 1975. Educated in 1970s corporate culture, he became a national exemplar of the moral conceit implicit in the notion of values-based leadership. Not because he had a weak character but...

    • Chapter 28 Can the Corporate American Dream Be Saved?
      (pp. 198-208)

      As part II has shown, the business corporation’s failure during the Great Depression to deliver a decent life to a large number of Americans brought the government response that created the corporate American Dream of half a century ago. The Great Recession that began with the financial crisis of 2007–2008 has raised again the issue of how a democratic society can make a corporate economy work for all of its citizens. The kind of actions that created the corporate American Dream—for example, laying the foundation for a strong labor movement with the Wagner Act—would not work now...

  12. Notes
    (pp. 209-218)
  13. Index
    (pp. 219-234)
  14. Back Matter
    (pp. 235-236)