Monday, March 9, 2009

The Mess of 2009, Part 2

As I discussed in the first part of this article, the role of publicly-held corporations, particularly in the United States, has not been a subject of mainstream discussion in our current period of economic malaise. Numerous opinions have been opined on why we’re currently in this mess – consumers who foolishly bought homes they couldn’t afford, too tight credit, credit default swaps, and a long list of other symptoms. One factor that is infrequently discussed is the manner in which the very form of publicly-held corporations leads to certain logical – and tragic – conclusions.

The trajectory of the middle class in the United States parallels the growth and influence of publicly-held and traded corporations. Privately held-corporations, the influence of unions, the GI Bill of Rights, and other forces allowed for the evolution of a robust middle class in this country. But as publicly-held corporations grew, and bought up a myriad of smaller companies in the 80s and 90s, the manner in which they influenced this middle class was dramatic. As I outlined in Part 1, corporations went after the pension, convincing workers that “owning” their retirement was better than being on a fixed pension. By investing their retirement money themselves, so the talk went, we employees could have even more to retire on than if the company actually provided a fixed and permanent retirement income.

This didn’t work out real well, did it?

There are a series of other things that these publicly-held corporations also did. As a result of the infamous 1886 U.S. Supreme Court decision, Santa Clara County v. Southern Pacific Railroad Company, (or perhaps more accurately, as a tangent of this case…) corporations were declared “persons” with the same rights as real human persons under the Constitution. This decision gave corporations rights they previously didn’t have. Importantly, they gained the right of free speech. Advertising by corporations became “protected” speech and could not be regulated.

In the late 1800’s this wasn’t as important as it would soon become. With the evolution of the advertising industry in the early 1900’s, corporations, slowly but surely, developed a set of skills that are terribly relevant now.


As the influence of corporations grew in the early part of the last century, unionists fought for a reduction of the workday and workweek, along with numerous other workers’ rights. There was a key view, however, that they espoused that we hear little of from unionist today. Unionists had an objective in reduced work hours: leisure time. Note this comment:

“Workers have declared that their lives are not to be bartered at any price, that no wage, no matter how high can induce them to sell their birthright. (The worker) is not the slave of fifty years ago …he (sic) reads…goes to the theater…(and) has established his own libraries, his own educational institutions,…And he wants time, time, time for all these things…”

Juliet Schor, The Overworked American, 1991, p. 120-1

This vital connection between abbreviated work hours and leisure is fundamental and highly significant. Unionists realized that if workers viewed themselves as consumers, they would be as much slaves to their jobs as if they worked 10-12 hour days:

“Trade unionists and social reformers understood the long-term consequences of consumerism for most Americans: it would keep them imprisoned in capitalism’s ‘squirrel cage.” The consumption of luxuries necessitated long hours.”

Schor, p. 120

We hear very little from unions regarding this powerful argument these days. The mantra of limitless growth is considered normal these days. Consumerism is a building block of this. Consider why this is.

A private company may exhibit a hyper-materialistic bent as publicly-held companies do. But often, as noted in Part 1, family-owned businesses were familial. It was normal for the owner or owners of a privately-held company to know all the employees, treating them as family – sometimes better than family. A private owner could, if he or she wanted, decide, as an example, to distribute profits at year end to the employees who had such an integral part in producing the profit.

Publicly-held companies, in stark contrast, must, by law, have another master to serve: the stock price. By law, publicly-held companies must grow if at all possible. Not only must they grow, (i.e., the stock price must go up), it must grow exponentially. If 10% profit was good last year, 12% is the new goal, and a 10% profit this year becomes “under budget.”

Now, some companies, publicly or privately-held, produce real necessities of life – food, water, (not the bottled stuff), clothing, shelter. If, however, we all stopped buying these items when we had enough to live and no more, corporate profits would slow. That runs against the stated purpose of a publicly-held corporation to grow profits indefinitely. While a private corporation may tolerate lower, sustained profits, this model is unacceptable for a publicly-held, publicly traded corporation. Their goal must be more and more profits.

Early on in the 20th century, corporations realized that if they could use advertising to blur the distinction between what you and I need and what we want, we might be seduced into buying more of their stuff. The evolution of increasingly sophisticated advertising techniques served this end perfectly. Where being a consumer was once viewed as pejorative, publicly-held corporations in particular, slaves themselves to the unending pursuit of ever-increased profits, made a concerted effort to reshape American consciousness. We can see at this point almost a hundred years later that this effort succeeded magnificently.

Allow me to give an example about just one device – the microwave oven. I have nothing against these devices. But consider for a moment, those of you who can remember when these things didn’t exist, the evolution of a perceived need. At this point in time microwave ovens are close to ubiquitous. Every home now built has a space for one, just like it has a space for a refrigerator, a stove, etc. They are a given, a necessity, something we all just have.

Once upon a time, there were no microwave ovens. I remember that time. And while I find them useful for defrosting things quickly, or boiling water in less than two minutes, or popping popcorn, I have a confession to make. In the year before the first American heard of a microwave oven, I, for one, was not sitting around lusting for a device to pop popcorn quickly. I had no burning desire for such a device. Most, if not all people, weren’t seeking these things out.

In short, there was no massive market demand for these things. No one was sitting around saying, “Gee, if I only had a box in my kitchen that could defrost stuff quickly….” The market did not demand microwave ovens. They were simply outside of American consciousness because they didn’t exist.

And yet now we view these things as necessities, our homes built with a special space just for them, along with the electrical outlet close enough to work with those short cords.

How did this take place? How was something we might (or might not) want become something we now view as necessary? The answer is simple. We were hustled. The makers of these devices used advertising to seduce us, convince us, over and over again, that we needed a microwave oven. They succeeded in getting us to begin to think of them as a given, as something that we must have and cannot do without.

This subtle but dramatic change, this bait-and-switch, was critical for publicly-held corporations. Their success in convincing us that we needed what they sold changed a limited market into a limitless one. Corporations had the mechanism, the science, in place, to analyze exactly what makes the psyche of the potential buyer go from cold to hot for a product. Corporations, with their handmaids in the advertising world, spent vast amounts of money trying and succeeding in conjuring up desire for their products in our hearts. They found out how to create that “buzz,” that feeling that we just had to have that thing. From there it was just a matter of time before we ran out to buy that microwave oven. Or two. Or three.

I worked for almost a decade for one of the leaders in direct sales in the home. They had a sales force of almost 3000 people across the U.S. at one point. They had a sales device they used in presenting their product in the home called a Read Off. The salesperson would read off this notebook, which was designed to stand up by itself on the table so that the salesperson could flip pages, show samples, and work other magic. The salesperson would read the words from this notebook, word for word. Almost every page contained a question, and the answer to each question was designed to be “yes.” By the time the potential customer got to the end, to the pitch, they were accustomed to saying “yes” and would hopefully do so when asked if they wanted to buy this product.

This sales device is now primitive compared to the vast arsenal of sales and marketing tools to modern corporations. We see corporations form images that seem almost irresistible. Many of us, as an example, can remember the way that the image of basketball giant Michael Jordan was used by a host of corporations to create buzz for their product. Jordan’s image became associated with one product after another, and corporations used his image to seduce children and young people that by buying products he endorsed they could “be like Mike.” That’s one important reason why Jordan had to be a role model. Perhaps that entire line of reasoning – celebrities should be role models – has more to do with their usefulness as advertising props than with the actual need in our culture for role models. And there is a perverse relationship between advertising and the need for role models that I will advance in the next article on this subject.

We see this effort repeated, over and over again. We see musicians, who once called themselves ‘the crown of creation” in the 60’s, hustling any and everything. There is a great story about Jim Morrison threatening to take a sledgehammer to an auto live at a concert because the automaker wanted to use “Light My Fire” in a commercial. Now, paradoxically, we hear the Rolling Stones’ “I’m Free” used as background music for a credit card commercial.

We see celebrities selling any and everything. The entertainment industry creates the intense desire for us, particularly children, to be like the celebrity, and to feel this desire intensely. Once this desire is created, advertisers can make the next move and convince those same people that they can be like the celebrity if they buy that thing. That move – changing a desire into a necessity – is exactly what corporations want us to believe. And this serves their essential nature – the need for infinite growth in service to limitless profits – perfectly.

There is one more important shift that I want to discuss in the next part of this series.

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