Showing posts with label railroads. Show all posts
Showing posts with label railroads. Show all posts
Tuesday, April 12, 2011
Labor-Management Relations: Starving Workers as a Childish Tactic
0 comments Posted by Find Insurance Online at 11:40 AMBefore the industrialization in the nineteenth century, nothing "intrinsic or permanent separated those who hired from those who hired out" because "many laborers could hope to ear and saven enough to become their own employers." (1) That is to say, the employee/employer distinction was not overlaid with connotations of disparate distinctions, such as child/parent and subject/ruler. Relatedly, the two parties to the economic agreements bearing on labor in exchange for money had roughly equal bargaining power. As the United States industrialized, however, a distinct working class developed as industrial workers found their upward mobility cut off by rising start-up costs and other barriers to entry. Additionally, the advent of the monopolies (and oligopolies) swung the balance of power in contract negotiations strongly in favor of the corporations. With the added leverage came pretensions going far beyond what could be justified by the relation of labor and capital in a commercial contract. The case of the first transcontinental railroad, which was completed in 1869, demonstrates just how distended the pretentions on the corporate side had become.
As the Central Pacific Railroad was working eastward on the first transcontinental railroad in the late 1860s, Chinese immigrants were hired at $26 per month (including board). The rate for white Americans was $30. The railroad was getting a good deal for the Chinese, as some of them had had experience using explosive black power (which had been invented by Chinese). Where the railroad had to blow out bedrock along a cliff, Chinese workers were lowered in reed baskets to place explosive in the rock and ignite the fuses in time to get out of the way. It was highly skilled and dangerous work. Accordingly, the Chinese struck for $40 per month. The reaction from the railroad partners gives us a snapshot of the attitude of management toward labor in nineteenth-century America.
As the Central Pacific Railroad was working eastward on the first transcontinental railroad in the late 1860s, Chinese immigrants were hired at $26 per month (including board). The rate for white Americans was $30. The railroad was getting a good deal for the Chinese, as some of them had had experience using explosive black power (which had been invented by Chinese). Where the railroad had to blow out bedrock along a cliff, Chinese workers were lowered in reed baskets to place explosive in the rock and ignite the fuses in time to get out of the way. It was highly skilled and dangerous work. Accordingly, the Chinese struck for $40 per month. The reaction from the railroad partners gives us a snapshot of the attitude of management toward labor in nineteenth-century America.
According to Brands, “the Central partners determined not to give in. ‘If they are successful in this demand, then they control and their demands will be increased,’ Hopkins warned the others. Edwin Crocker put the danger differently. ‘The truth is, he said, ‘they are getting smart.’” (2) From this description, it can be seen that the partners viewed the Chinese demand for a higher wage as an “all or none” matter rather than as one for negotiation. Moreover, the partners’ perception was that the matter was fundamentally one of control rather than compensation. That the Chinese demand probably had merit is supported by Edwin Crocker’s admission that the Chinese were getting smart. The Chinese’ skill with explosives also lends support to this view. Had the Chinese workers been over-reaching, Crocker might have said that the Chinese were getting greedy. Therefore, we can conclude more generally that in labor-management disputes, managers probably tended to react in terms of power rather than economics. Moreover, the power presumed was beyond that which pertains to an economic negotiation and contract. In other words, the partners assumed more control than they had a right to claim. In actuality, they and the workers were two parties to an agreement, rather than say rulers and subjects. The presumption led to a rather extreme tactic.
According to Brands, “Charles Crocker ordered the provisioners to the Chinese camps to stop supplying them with food. ‘They really began to suffer,’ Edwin Crocker recalled.” Edwin Crocker reported that after a week, Charles told the laborers “that he would not be dictated to that he made the rules for them and not they for him.” The hungriest of the strikers agreed to return to work. (3)
Although it could be argued that the contract for board also involved labor, the railroad would presumably be obligated to transport the workers back to civilization. Such contractual technicalities aside, starving other human beings in order to manipulate them to get one’s way is indicative of a criminal mind; it is essentially attempted murder. The over-extended presumption of a right to power based on an economic contract between two parties is obvious here. That the partners perceived the over-arching axis as one of control rather than money is evident from Charles Crocker’s use of dictated to and rules. These words are out of place in an economic transaction. In short, Crocker was presuming himself to be a ruler rather than a party to a contract. In addition, his tone suggests that he might have held the view that his side of the contract somehow made him akin to a parent, thus fittingly oriented to scolding the children.
The projections of being a ruler and a parent are so unnatural, or out of place, in an economic relationship between two parties that the psychology of the perpetrators must be questioned and found wanting. Even the psychological wherewithal and legal legitimacy even to stand as party in a contract can be questioned, so it is telling that the partners got away with their attitude and conduct. Ironically, it was the partners rather than the Chinese who were acting like children, yet how many people in the society and government who heard of the strike perceived the partners as being seriously out of line? If this perception was lacking because of what the society at the time attributed to being a business practitioner with a title, the problem may be in the societal values as well as what was presumed to come from position itself.
That childish (and perhaps even sadistic) behavior could issue out of a corporate office awash with economic leverage, being checked neither by whatever power labor could muster nor at least by humane societal values, points to the ability of corporate capitalism to effectively project its version of social reality onto society. A miner's mintrel in the wake of the unsuccessful "Long Strike" against the Philadelphia & Reading Railroad in 1874 captured the new situation facing both the workers and the country from the emergence of the modern corporation:
"Well, we've been beaten, beaten all to smash
And now, sir, we've begun to feel the lash,
As wielded by a gigantic corporation,
Which runs the Commonwealth and ruins the nation." (4)
That childish (and perhaps even sadistic) behavior could issue out of a corporate office awash with economic leverage, being checked neither by whatever power labor could muster nor at least by humane societal values, points to the ability of corporate capitalism to effectively project its version of social reality onto society. A miner's mintrel in the wake of the unsuccessful "Long Strike" against the Philadelphia & Reading Railroad in 1874 captured the new situation facing both the workers and the country from the emergence of the modern corporation:
"Well, we've been beaten, beaten all to smash
And now, sir, we've begun to feel the lash,
As wielded by a gigantic corporation,
Which runs the Commonwealth and ruins the nation." (4)
Footnotes:
1. Henry W. Brands, American Colossus: The Triumph of Capitalism 1865-1900 (New York: Doubleday, 2010), 96.
2. Ibid., 55.
3. Ibid., 56.
4. Priscilla Long, Where the Sun Never Shines: A History of America's Bloody Coal Industry (New York: Paragon House, 1989), 109.
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Monday, April 11, 2011
The Nineteenth-Century Eclipse of Democratic Governance by Capitalism. Part II: Wartime Exploitation of Government by Lincoln and the Railroads
0 comments Posted by Find Insurance Online at 12:28 AMBy the time of Lincoln, the capitalists had amassed sufficient capital that they could literally write federal laws concerning them and exploit the government beyond their own statues for additional profits. In 1869, the first transcontinental railroad was completed. Brands notes that “the capitalists commanding the road recruited the institutions of government to share the risk and costs of construction.” (1) In other words, the capitalist investors (not the workers) get the rewards while the taxpayers take on the risk. Capitalism might thus be called convenience by another name. To be sure, a political ideology came into play that was highly conducive to this arrangement.
By the Civil War, “(a)mong the Republicans, support for a Pacific railroad fitted a general belief that government could benefit the American people by helping American business.” (2) This was an early version of what is good for GM is good for America. The fallacy in this assertion is that what is good to a part is necessarily good for the whole. For example, a part benefits from exclusion (e.g., not paying for externalities), which is not in the interest of the whole.
In any case, the fashioning of the first transcontinental railroad during the Civil War involved Lincoln, Stanford (the Governor of California and a partner of the Central Pacific Railroad),
and the two railroads in some shady dealing and related conflicts of interest. Generally speaking, the capitalist capture of democratic government can be expected to spin off various unethical twisters.
Funding by the U.S. Government for the railroad would entice California, which might have adopted a pro-Confederate independence otherwise, to remain in the union. (3) It was also not lost on Lincoln that the western republic had gold. Accordingly, the new party adopted into its platform the plank of government financial assistance in the undertaking. Brands reports that “Californians’ brave talk of self-sufficiency suddenly ceased when they heard the Republican offer.” (4) For the plank to be converted into legislation favorable to California, as well as to the railroads, the remnants of democracy had to be overcome in the Congress. This required “the concerted efforts of small armies of lobbyists.” (5) This experience gave capitalists a “way in” to the halls of the national government, which they could exploit in the future. In other words, the Republican policy involved a shift in government with respect to the influence of capitalists. American government would never be the same.
Specifically, Durant’s Union Pacific Railroad bribed members of Congress. Not to be outdone, Theodore Judah brought shares of the Central Pacific Railroad to Congress to disperse as he saw fit. (6) The result was the Pacific Railway Act of 1862, which was essentially written by the railroads even though they had vested interests in the project. (7) The federal government would offer the railroads loans financed by 30 year bonds held by the taxpayers and grants of land. If the project failed, the certificates would be worthless.
To be sure, private capital markets could not attract investors willing to risk large sums on such a long-term (and risky) payoff. (8) The interest of the U.S. Government in integrating the union such that new western states would not follow the example of the Confederacy made it worthwhile to make up for the shortfall in those markets. The problem is that the precedent risked giving capitalists access to the Treasury—a new source of food for the new feeding machines. It is not as though the cats would have one taste of the tuna only to never come back for more. Once on the scent of the government money, the capitalists would surely follow up in the halls of Congress. The case was the same in California.
Leland Stanford (the namesake of Stanford University) was elected governor of California without having to reduce his participation in the Central Pacific. His brother Philip distributed gold coins to voters. As if there were no conflict of interest between his office and his business interests, he got the California legislature to contribute $15 million to get the transcontinental railroad started on the California end. (9) In general, the capitalist capture of democratic government makes use of the public’s proclivity to ignore conflicts of interest. This continued to be the case for Governor Stanford.
In July 1864, the Pacific Railway Act of 1862 was amended so the U.S. Government would bear most of the risk (giving up first lein) and the railroads would get even more from the government. Even though the railroads had written the original act, only with the amended act did the capitalists find the railroad to be “a most attractive investment.” (10) It was no concern to them that in 1864 the U.S. Government was nearly bankrupt on account of the war. Nor did the sacrifices being made on the battlefields in the wilderness intimate to the capitalists that they too should sacrifice so the U.S. Government could add more resources to the war effort. The matter was one solely of risk and profit calculations—the railroads leveraging the government until the investment was sufficiently sweetened for enough potential investors to come on board. Duty, or ethics more generally, does not compute in business terms. Business ethicists would be wise to remember this.
In any case, the U.S. Government would pay the railroads $48,000 per mile in the mountains and $32,000 per mile on the flat land away in the desert. The self-written terms not be enough for the Central Pacific railroad, Governor Stanford used California’s geologists to claim flat land as mountainous. With a difficult election approaching, Lincoln overruled his own secretary of the Interior in favor of his railroad allies in California. (11) Lincoln himself had been a railroad lawyer. The preserver of the union was inadvertently making the task more difficult for the U.S. Government by bowing to the new capitalist might at the expense of his own government. In other words, he was willing to acquiesce in the defrauding of his own government even when it was fighting a rebellion. Such is the allure of capitalists at the expense of public governance in the name of democracy.
Lest this information on Lincoln be deemed as counter-productive by Lincoln fans, pointing out the president’s faults makes him “all the more beloved because they discourage us from turning him into a plaster saint. His greatness, without the flaws, would make him unapproachable and remote — a canonization made even more probable by his martyrdom.” (12) Made human, all too human in fact, Lincoln can stand for us as a marker on the trajectory of capitalism over democracy that occurred during the nineteenth century.
Speaking on the capitalist inroads in democratic government already by the end of the Civil War, Rep. Elihu Washburne, interestingly a Republican lawyer from Illinois and the chairman of the U.S. House Commerce Committee, said, “I have no faith in the noisy patriotism of shoddy contractors and none in the men who in these times of trial and tribulation through which the country is passing are scheming and plotting to fill their own pockets while the nation is verging toward bankruptcy. The sublime and unselfish patriotism of our people, . . . a people suffering, bleeding, dying for their country, is in magnificent contrast to the flaunting counterfeit everywhere to be seen.” (13) Worse still were those contractors who had paid gold coins to gain public office only to engage their government in the service of their capitalist ventures. Of the “flaunting counterfeits” who would avoid government office, the richest would become the robber barons of the Gilded Age. Government would be theirs for the taking, such that holding office would no longer be necessary.
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1. Henry W. Brands, American Colossus: The Triumph of Capitalism 1865-1900 (New York: Doubleday, 2010), p. 40.
2. Ibid., p. 42.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid., p. 44.
7. Ibid., 48.
8. Ibid., p. 45.
9. Ibid., p. 47.
10. Ibid., p. 49.
11. Ibid., p. 49.
12. Ross Baker, “Lincoln—Like All of Us—Had his Flaws,” USA Today, April 10, 2011 (on-line).
13. Congressional Globe, 38th Congress, 1st session. June 21, 1864, 3150-152. Quoted by Brands, American Collosus, p. 48.
Wednesday, April 6, 2011
On the Birth in 1869 of Corporate Social Responsibilty amid Excessive Corporate Power in Government
0 comments Posted by Find Insurance Online at 12:51 PMReferring to the speculation in gold that was engineered by Jay Gould and others in 1869 to enrich themselves and the Erie Railroad, Henry Adams (1838-1918), a grandson of John Quincy Adams and great grandson of John Adams, wrote at the time:
“For the first time since the creation of these enormous corporate bodies, one of them has shown its power for mischief, and has proved itself able to override and trample on law, custom, decency, and every restraint known to society, without scruple, and as yet without check. The belief is common in America that the day is at hand when corporations far greater than the Erie [Railroad] — swaying power such as has never in the world’s history been trusted in the hands of mere private citizens . . . — will ultimately succeed in directing government itself. Under the American form of society, there is now no authority capable of effective resistance.” (1)
Gould had wanted the price of gold to rise not only because he had bought some to sell at a higher price, but also because as a stockholder of the Erie, he would benefit from the railroad transporting more wheat from the Midwest to the east coast for export. A higher price in gold meant a lower dollar. Wheat being based in dollars, a lower dollar meant more exports. The strategy was essentially to devalue the dollar, which Gould assured President Grant would be in the national interest economically. As the price of gold rose to $165 in 1869, Grant, fearing a bubble, pulled the plug by having the Treasury sell $4million in gold. The collapse in the gold market triggered a drop in the stock-market. Even if it might have been in the short term interest of the speculators and railroads, the manufactured bubble was not in the national interest after all. Gould’s bribes of administration officials had been in vain.
Henry Adams saw the imprint of corporate power eviscerating both societal norms and democracy in the scandal. In other words, the new-found corporate power eventuated in the birth of the need for corporate social responsibility amid capitalism eclipsing democracy. In academic terms, corporate social responsibility and (corporate) business & government, although discrete fields, were both first publicly recognized in 1869.
Henry Adams saw the imprint of corporate power eviscerating both societal norms and democracy in the scandal. In other words, the new-found corporate power eventuated in the birth of the need for corporate social responsibility amid capitalism eclipsing democracy. In academic terms, corporate social responsibility and (corporate) business & government, although discrete fields, were both first publicly recognized in 1869.
The corporate power occasioning Adam’s recognition was a novelty at the time, according to Brands, because the large corporation had only come into being as the railroads incorporated in the 1850s. Looking back after the Civil War, Henry Adams observed, "The last ten years had given to the great mechanical energies — coal, iron, steam — a distinct superiority in power over the old industrial elements -- agriculture, handwork, and learning." (2) The power of steam in particular translated into large, publicly-held, corporations first in the railroad industry.
On account of their size and scope, and the associated equity capital requirements given the risk faced by lenders, the railroads were the first large American corporations to be publicly traded. The diffusion of ownership — a consequence of the large capital demands — led to a separation of ownership from control and to a new ownership interest: that of the short-term-oriented speculator. A short-seller, for example, seeks lower corporate earnings in the future, while a long-term investor hopes for higher dividends, and thus profits. Managers can exploit this difference in order to pursue their interests in the name of the corporation at the expense of societal norms and democratic governance.
On account of their size and scope, and the associated equity capital requirements given the risk faced by lenders, the railroads were the first large American corporations to be publicly traded. The diffusion of ownership — a consequence of the large capital demands — led to a separation of ownership from control and to a new ownership interest: that of the short-term-oriented speculator. A short-seller, for example, seeks lower corporate earnings in the future, while a long-term investor hopes for higher dividends, and thus profits. Managers can exploit this difference in order to pursue their interests in the name of the corporation at the expense of societal norms and democratic governance.
Undergirding the managerial basis in skill, the railroads were the first companies to develop the methods of corporate administration. For example, there were supervisors over supervisors—in other words, multilayered organizational charts. Furthermore, dovetailing with the need for safety and efficiency (given the competition), the railroads developed precise management of their operations, including the development of standards for measuring performance. In short, the railroads were the first to develop a cadre of managers specialized in administration in the particular industry. (3)
Regarding the private power based on technique (i.e., managerial power), Henry Adams announced in 1869 that there was no authority, whether in society or government, capable of resisting it. The normative call for corporate social responsibility and the political call for a resurgence of democracy amid the encroaching capitalism were born. In other words, with great power came a recognition of a need for great responsibility. The corporate social responsibility movement began as precisely this recognition even as the modern large corporation was in its second decade.
Punctum Saliens, the large corporate type of commercial organization itself is inherently powerful relative to societal norms and even potential governmental or regulatory restraints. That is to say, the invention of the large corporation may have been inherently problematic, essentially involving systemic risk to the republic itself on account of the private power of the managements. To paraphrase Nietzsche, power cannot be but powerful. To unleash an inherently powerful feeding machine and expect it not to eat the grass is naive, if not patently irresponsible. To expect the managements of extremely wealthy corporations to be willingly socially responsible when their economizing and power-aggrandizing nature is to run through such non-constraints is simply ideological, if not fanciful. Fundamentally, the problem with corporate management is its inherent proclivity to bristle at any external constraint. It is the underlying maximizing egoism that is innately antithetical to the limiting natures of government regulation and corporate social responsibility.
Punctum Saliens, the large corporate type of commercial organization itself is inherently powerful relative to societal norms and even potential governmental or regulatory restraints. That is to say, the invention of the large corporation may have been inherently problematic, essentially involving systemic risk to the republic itself on account of the private power of the managements. To paraphrase Nietzsche, power cannot be but powerful. To unleash an inherently powerful feeding machine and expect it not to eat the grass is naive, if not patently irresponsible. To expect the managements of extremely wealthy corporations to be willingly socially responsible when their economizing and power-aggrandizing nature is to run through such non-constraints is simply ideological, if not fanciful. Fundamentally, the problem with corporate management is its inherent proclivity to bristle at any external constraint. It is the underlying maximizing egoism that is innately antithetical to the limiting natures of government regulation and corporate social responsibility.
Footnotes:
1. Henry Adams, “The New York Gold Conspiracy,” in Charles F. Adams, Jr. and Henry Adams, Chapters of Erie (Ithaca: Cornell University Press, 1956), pp. 135-36.
2. Henry Adams, The Education of Henry Adams (1907; Boston: Houghton Mifflin, 1961), p. 238.
3. H. W. Brands, American Colossus: The Triumph of Capitalism 1865-1900 (New York: Doubleday, 2010), pp. 22-23.
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