The Creation of Corporate America

The Corruption of Information

This time last week Americans were busy planning menus, researching recipes, polishing the good silver, and picking up all of the canned cranberry sauce they could get their hands on. Chefs young and old were also focus on Thanksgiving’s center piece – the Turkey. Though the focus of Thanksgiving, many do not think about the business of getting their food on the table and where that Turkey came from.

The truth is that Thanksgiving is big business. And that that business is somewhat disturbing.

Big business has taken over the agricultural industry as factory farming has become the standard of the modern age. Raised in half the time to be double the size, animals are pumped full of growth hormones to the point that the modern chicken can neither walk nor fly. Because Americans prefer to eat white meat the fowl’s breast have been engineered to be unnaturally large. It is too breast heavy and is only able to walk a few steps before falling forward. This results in bed sores all over their bodies from having to lie in one place.

Not that their inability to walk matters much. Chickens and turkeys who are raised on industrial farms are so tightly packed together that each bird has a space the size of a standard piece of paper to live on. This is not enough room to even spread their wings. At the same time, a bird raised for slaughter will never see the light of day as the new coop styles have no windows.

The ability for the agricultural industries to have created such a level of disconnect between consumers and the food industry is due in large part to the control and corruption of information. Just as the railroad industry was able to control information a century earlier, the food industry has pursued the same tactics to increase their power.

There is a form of insider trading when it comes to the food industry. The governmental bodies which are meant to protect the interests of the American people are really just the stomping grounds of the former agricultural execs. Both the Bush and Clinton administrations saw the appointment of former and current board members for high powered agricultural businesses, such as Monsanto, to offices of the FDA and EPA – the organizations meant to regulate those very industries. For example, Margaret Miller, former chemical laboratory supervisor for Monsanto, was appointed Deputy Director of the FDA for the Clinton administration. The regulatory power of these governmental organizations is increasingly toothless.

At the same time as the food lobby cozies up to politicians, laws are being created which help business and not consumers. In 13 states it is against the law to publically call the sanitation and practices of the agricultural industry into question. With first amendment rights taken away through these ‘veggie libel’ laws in the most agriculturally dominate states – including Colorado, North Dakota, Texas, and Oklahoma – it is increasingly difficult to prosecute any wrong doing.  These veggie libel laws are perhaps best known for the court case in which the cattle industry sued Oprah Winfrey for her on air statement that she would not be eating beef any more after learning factory farm cows were being fed ground beef. In this way the food industry is controlling what the public is able to learn about the system by limiting the possibility for exposes and law suits.

This system of self regulation, connection to the political system, and the system being increasingly  dominated by a small group of corporations seems like something right out of the Gilded Age. A closed system with the public increasingly out of the loop combined with a tainted political process and lack of regulation is deplorable and something must be done for the inhumane and unhealthy products which we are buying off of our local grocers’ shelves. When left to their own devices we have seen that businesses will not act in the best interest of the consumer. Better business practices will not be obtained if they control the information.

Helping Businesses Avoid the Dreaded Recessions

This week’s readings highlight the fragility of America’s economic stability in the years from the Nation’s founding until the Great Crash of 1929.  Almost cyclically early Americans suffered through economic recessions once every five to ten years. The journal articles in particular reinforce this cycle –featuring four different economic panics in the course of forty years from 1854 to 1893. Though the severity of these depressions varied, their consistency showed a need for change.

Willingness to push for economic reform via regulation did not take hold until after the severe economic slump of the Great Depression. Galbraith’s The Great Crash: 1929 details the economic history of the great crash to show how and why the crash occurred the way it did. Because of its severity, the international ramifications, and the mood of political reform during the 1930’s the stock market crash of 1929 led to major regulatory changes for business and Wall Street. Including, “the Securities Act of 1933, and… the Securities Exchange Act of 1934” which each “sought to prohibit the more spectacular extravagances of 1928 and 1929.” (Galbraith, pp. 171)

Following the regulation put in place in the 1930’s there was not another severe economic depression for fifty years. It seemed as if America had finally beaten its boom and bust cycle. But then in the 1980’s the government began to pull away at the fabric of regulation. Politicians and business leaders had long forgotten the devastating nature of busts and decreased regulation in order to obtain the kinds of speculative lavishness of the 1920’s.  The result was the SNL Crisis, followed by recessions of the early 1990’s, the tech bubble, Enron, and finally the current economic recession.

Though regulation can be costly, time consuming, and can limit the rapid expansion of speculation they also help to prevent serious panics. Because of the safety net provided by regulation it would be in business’ long term interest to support regulation. The frequent economic slumps since the relaxation in regulation should prove to business leaders that regulation is actually in their long term interest.  Rather than resist reform, business leaders should call for regulation to fix the current broken system. “Long run salvation by men of business has never been highly regarded if it means disturbance of orderly life and convenience in the present. So inaction will be advocated in the present even though it means deep trouble in the future… It is what causes men who know that things are going quite wrong to say that things are fundamentally sound.” (Galbraith pp. 199)Business leaders must move against the status quo and unfounded fears that all regulation will hurt them. Though regulation may limit the speed and extreme nature of booms ultimately they are in businesses’ best interest because they also help to prevent and lessen busts.

Here is a great interview with Elizabeth Warren, chair of the Congressional Oversight Panel, which explains a lot about the recession, the bail out, and America's boom and bust cycle.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Elizabeth Warren Pt. 2
www.thedailyshow.com
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The Financier

Theodore Dreiser’s The Financier  is the story of Frank A. Cowperwood, a Philadelphia businessman who seems destined for greatness.  Even as a young man Cowperwood excels in business with his calculating logic and aversion to risk. As he grows into his career as a fancier even his aptly suited personal traits cannot save him from the lure of money and power. In an attempt to feed his ever growing need for consumption Cowperwood becomes involved with some shady politicians and begins embezzling mutual funds.  While playing the risky market he has dismissed as irrational his entire life, a panic causes Cowperwood’s misdealings to come to light.  Identified as the scapegoat, Cowperwood is sent to jail even though he does not believe he has done nothing wrong. Upon his release Cowperwood puts his instincts to the test reentering the world of finance, only to emerge a millionaire once more.

Dreiser’s novel touches on two main themes of our class: the question of whether great leaders of business are born or made, and the role of morality in business.

It is clear from Cowperwood’s first introduction that Dreiser believes in the idea that inherent character defines an individual’s lot in life. Even as a young man Copperwood possessed business qualities like efficiency, directness, critical analysis, and self assuredness. “Curiously, after only three or four minutes of conversation with the boy, he sensed this marked quality of efficiency. Something told him he would do well.” (pp. 25) Despite the fact that Cowperwood is born with the qualities to be great, his success is still determined by his choices. As his wealth grows, his taste for material possessions intensifies and he becomes unable to deny himself any luxuries. Cowperwood looses site of his own rationalization because of his mounting greed. “The sight of his new house going up made Cowperwood feel of more weight in the world, and the possession of his suddenly achieved connection with the city treasurer was as though a wide door had been thrown open to the Elysian fields of opportunity.” (pp. 98) His desire for the finer things in life causes him to turn his back on his long standing belief that markets are irrational and therefore unwise investments.  Dreiser is arguing that just because you are born to be great, that greatness is not guaranteed.

There is no morality in Dreiser’s Philadelphia. Nor is there lament at its absence. Cowperwood does not look at situations in a moral light of right and wrong, rather he enters into most affairs with a cost benefit analysis. He cares little about the politics of his time and is neutral on issues of slavery, infidelity, and embezzlement. “Cowperwood’s laissez-faire attitude” allowed him live with a “cold, direct, ‘I satisfy myself’” outlook on life. (pp. 268) It is for this reason that he cannot see his use of state funds for personal gain as wrong. Though he is caught and sent to jail, this is not a turning point in Cowperwood’s life. He leaves jail an unchanged man and immediately reenters the market, making back his millions. This is not a story of punishment and a search for moral consciousness, rather it is a statement on the cool, calculating, mechanical nature of the market and who is able to thrive in it. “A man, a real man, must never be an agent, a tool, or a gambler – acting for himself or for other – he must employ such. A real man – a financier – was never a tool. He used tools. He created. He led.” (pp. 42)

After you have exhausted what there is in business, politics, conviviality, and so on - have found that none of these finally satisfy, or permanently wear - what remains? Nature remains.

 
In the book Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in Big Business Roland Marchand tells the story of how expanding corporations sought legitimacy in the late 19^th and early 20^th centuries. As corporations grew in size and scope their power in relation to the family, town and church grew as well.  This led to fear of big business and created a “crisis of legitimacy” for American corporations. (pp.2) In their quest for social and moral legitimacy big businesses turned to public relations campaigns for both the public at large and their employees to shape what Marchand describes as the “corporate soul.” The PR campaigns launched by big businesses included corporate welfare programs, advertisements using imagery of the family and the idea of putting “profits second”, and an association with high culture.

This last approach of association with art and high culture caught my attention. I have been put off by a recent advertising approach which uses art in a way that I find inappropriate – Levi’s Jeans’ “Go_Forth” campaign.  

Using a recording of Walt Whitman himself reading his poems "Pioneers! O Pioneers!" and “America,” Levi’s shows flashing images of hipsters participating in a myriad of physical and often subtly sexual activities. The jeans themselves play only a secondary role in the ads. Levi’s is not talking up a new style or jean color. Rather, through art they are attempting to connect themselves with the young, educated, active, and liberal by trying to “spark in the viewer a yearning of the spirit that the product promises to satisfy.” (Brown, pp. 202).

These ads, which look more like an independent film movie trailer, are done well enough. The issue for me is not the quality or production value of the minute-and-a-half spots. The problem is it is inappropriate for Levi’s, or any other consumer corporation, to align themselves with art, poetry, or music which have cultural and social messages that have nothing to do with what is being sold. It is false to associate a product with cultural significance in this way. Walt Whitman’s poetry is not about Levi’s jeans or consumption

In an attempt to constantly position themselves as our friends, corporations overstep their cultural bounds and create falseness out of respected and cherished art. Their interpretations of art are insincere at best. Corporations do not have the right to associate themselves with high culture because mindless consumerism is the opposite of high culture.

The fact that corporations are seen as illegitimate participants in high culture and disingenuous contributors to our society shows that they are still a long way from gaining their corporate souls.

Re-Imagining Consumers

In her book Imaging Consumers: Design and Innovation from Wedgwood to
Corning, Regina Lee Blaszczyk describes the creation of market
research. Rather than coercing consumers, the manufactures in this
book wanted to design products that Americans truly wanted. In trying
to determine preferences from dishware to bathroom fixtures, companies
researched who their consumers were and imagined what may draw them
in. This led manufactures to see the buying power of women for the
first time.

In their roles as wives and mothers women did 80% of the household
shopping in the early 20th Century. (Blaszczyk, pp. 130) Companies
began catering to women and respecting their needs, altering their
products around tastes, necessity, and popular design. Blaszczyk’s
imagined consumers were women who had the power to make or break a
product.

Despite the power which was put in the hands of women through the
market, this shift was not a step in the right direction for women.
Women did a majority of the household buying during the time period
explored by Blaszczyk because they could not fill other roles beyond
the home. But this idea of woman as sole buyer has become so engrained
in the American consciousness that it has not changed for a century.
Even though women have moved outside the home they are shown as the
sole contributors to domestic buying. In modern ads women are the only
people in the grocery store, using Clorox wipes, dusting with the
Swiffer, packing children’s lunches, or cooking. After all, choosy
Moms choose JIF. What about choosy Dads?

This assumption puts an undue burden of responsibility on women and
forces them into being the errand runners. These ads reinforce
negative stereotypes about who the modern woman is and what her
priorities are. Surely modern market research shows that these sorts
of domestic tasks are shared. I think that modern corporations need to
imagine a new consumer.

Rebirth of a Salesman

Walter A Friedman’s Birth of a Salesman: The Transformation of Selling in America tells the story of the creation of a unique sales force within the US. Friedman lays out how a standardized salesman was established throughout the nineteenth and early twentieth century who used tactics of repetition, intensity, and association to create a market for specialty products. (pp. 175) Salesman not only provided supply where demand existed, they also created demand where none existed before. In this way American consumerism was born.

The door-to-door salesman described by Friedman is no longer a reality in America. In our modern economy they have been made obsolete by a booming population and increased access to consumer goods for even the most secluded of places. Additionally, cultural changes have occurred making it unlikely that any contemporary American would allow a strange man into their home.

Despite these setbacks, the strategies which have been perfected over the last hundred years were not allowed to go by the wayside, and though they no longer knock on our doors, this kind of salesmen still exists. The exact tactics and methods laid out in Birth of a Salesman are still alive and well in infomercials.

Though technically an advertisement, infomercials are more like mini sales pitches. All of the same tactics and pitfalls of their sales predecessors are there. Much like door-to-door salesman they petal specialty products which may be overlooked in major department stores through “direct selling.” (pp. 201) Infomercials have a standard format; opening with a scene of some everyday task, the seller attempts to create an association with the buyer’s life. In showing how their product can make this task easier or supply a better outcome they are creating demand. Intensity in voice and body language and repetition of product names are heavily used by infomercial peddlers. Demonstration, paying in installments, and premium giveaways of additional products were all invented by the door-to-door salesman.

But beyond selling strategies, the two are also linked by buyers’ skepticism towards them.  Canvassers who moved throughout the country were often seen as scammers during the rise of salesman. Similarly, the infomercial products are frequently thought of as hoaxes and the people who buy them as dupes. Traveling salesman tried to combat these negative stereotypes by associating themselves with a trusted brand name or through user’s positive reviews.  Brand name connection can be seen with Billy Mays who, before his recent death, earned credibility by personally testing the products and being selective about which products he agreed to pitch. Mays himself became a trusted brand name for infomercial sales. Taking the other approach, many recent infomercials have begun taking to the streets with their products to document “real” reactions. Though likely staged, this is a grab at legitimacy by attempting to recreate the buyer’s reviews used by traditional salesman.

In this way door-to-door salesmen are still alive and well. Though we stopped opening our doors to them, we still allow them into our homes through television. The same standardized sales tactics were able to survive.

Economic Power in Illegal Business

The tide is finally starting to turn in America’s war on drugs.  And who do we have to thank for it? These people:

Law enforcement agents who patrol the border between Mexico and California say that sales are down for drug traffickers.  Not because of decreased demand, but because small scale Mom and Pop pot growers in California are taking their customers. For decades the war on drugs has gotten us nowhere. Despite increased man hours and funds devoted to anti-narcotic efforts smugglers have still been able to bring drugs into the US. At the same time drug related violence continued to escalate on both sides of the border. 

But since California legalized medical marijuana in 1996, many average people have taken up the call to become growers. And why not? For an investment of $100 it is possible to turn a profit of $9,000. Beyond that the product created by domestic growers is more potent, higher quality, and more expensive than the traditional Mexican strains. The higher quality US strains have become the new market standard for quality.  This increase in competition has not only hurt sales, sending the cartels scrambling for money and customers, it has hurt the other main aspect of the drug trafficking business: violence. For the first time ever, money is a problem for drug dealers.  Without being able to guarantee profits there is less liquid capital to invest in weapons. For the moment violence is on a down swing.

The legalization of medical marijuana in California has been more successful at decreasing drug trafficking than any administration since Nixon, who first committed the US to the “War on Drugs” in 1969.

This shows you that even on the black market, traditional market forces matter. We should not look at issues like drug trafficking which have a huge economic component as purely social or legal problems. Perhaps the best combatant of corruption is competition.

Looks like Nancy Botwin has some competition heading her way.  

The Best Things In Life Are Free, But You Can Give Them To The Birds and Bees. I Want Money.

 The movies Wall Street (1985) and Boiler Room (2000) tell similar tales. In each a wet behind the ears stock broker seeks fast money while striving for the approval of his father.  Despite these plot similarities, the conflicts between the lead characters of each film and their fathers illustrate the changes in the perception of business and Wall Street from 1985 to 2000.

In the world of 1985 Bud Fox is lured into insider trading deals by the slick haired Gordon Gekko.  Despite his shady dealings, Gekko is a well known business man on Wall Street, even appearing on the cover of Fortune magazine. Yet Bud’s father is still not impressed.  He does not care about the size or prestige of the firm where his son works, he is more upset by the fact that Bud doesn’t work with his hands for a living. As an airline mechanic he can’t understand how his son is earning a living pushing paper.  Though he is disappointed with the insider trading Bud becomes a part of, he is unsupportive of his son’s line of work long before it becomes illegal.  For Wall Street the moral isn’t just that there is no any honor in fast money, it’s that there is no any honor in corporate work.

In 2000 Boiler Room has a different world view. Seth’s father is fine with the fact that his son isn’t working in a service job, in fact he likely would have considered that just as disappointing as his time at JT Marlin. For him it isn’t that Seth is working in the corporate world, it’s that he isn’t working for the right kind of firm within that world.  The question changes from “Why not labor work?” to “Why not JP Morgan?” So the moral lesson of Boiler Room is there is no honor in fast money that is obtained in the wrong kind of way. Corporate work and corporate greed, within certain parameters, is fine.

We will have to see how the lesson changes again in Oliver Stone’s upcoming sequel Wall Street 2: Money Never Sleeps which is currently shooting in New York City.

Fighting Tooth and Nail Polish: Revson, Rubinstein, and Arden

One of the key businessmen featured by Richard S. Tedlow in his book Giants of Enterprise: Seven Business Innovators and the Empires they Built is Charles Revson, the creator of Revlon.  Revson is chosen for his influence on the art of consumer marketing. Tedlow holds that Revson was the first person to market beauty products to women in a way which sold luxury and moved the product away from its less than savory connections to prostitution. By taking these unique approaches in advertising Revson forever shaped the world of advertising.

 To this I would have to disagree.

The beauty industry was already an established and respected market before Charles Revson entered the scene in 1932. Women had been purchasing creams and concealers since the 1910s. Even though makeup of this time remained much closer to the natural face it still shows that the beauty market was already well established and removed from ideas of “painted women.” Revson’s advertisements and alleged market innovations did not spur the legitimacy of beauty products.

The strategies of selling fantasy and luxury were not unique to Revson either. Helena Rubinstein and Elizabeth Arden both used these techniques in selling their products and salons.  In 1915 Arden introduced the idea of the makeover in her salons, selling the fantasy of being treated like a Queen in the lap of luxury. A 1920s Arden ad announces a new line of makeup called simply “Royal Makeup” which is a clear use of the kinds of advertising Revson is said to have invented. Rubinstein was also selling luxury with her product lines. Already an international figure when Revson came on the scene, Rubinstein’s packaging and advertisements connected her product to old world glamour. Her branding techniques played on fantasy – perhaps best exhibited through the style in which she launched her fragrance “Heaven Sent.”  Packaged in angel shaped bottles, Rubinstein had samples of the fragrance placed into baskets attached to pastel balloons which were lowered from the roof of her salon on Fifth Avenue in New York City.  This sort of creativity from his competitors certainly pushed Revson’s advertising strategies; strategies which Tedlow depicted as created in isolation from the rest of the market.

Had Tedlow stated that Revson expanded these luxury advertising techniques to include a broader audience I would have agreed.  But he overplays his hand in making Revson out to be the Founding Father of fantasy and luxury for cosmetic advertising.

Interested in learning more about Arden and Rubenstein? Check your local listings for PBS’ Special The Powder and the Glory which chronicles the life and times of two of America’s first female entrepreneurs.

Race in Corporate Advertising

Michael O’Malley’s article Specie and Species: Race and the Money Question in Nineteenth-Century America points out the connection between the languages of money and race.  He shows that the similarities in the two reflect how people seek to define themselves as intrinsically more valuable based on their ability to control entry to the market.

A recent Mad Men episode titled “The_Fog” dealt with similar themes about the issue of race in the economy.  In a 1963 board meeting the character Pete suggests that the execs from Admiral Television consider creating an integrated commercial because market data has shown an increase in sales amongst African American consumers.  One executive naively replies "Who's to say that Negroes aren't buying Admiral Televisions because they think white people want them?"  Pete is stunned.  Not because his character has been created as an advocate of equal rights, but because he loves money more than he hates black people.  He can’t imagine why a business man would let bigotry stand in the way of the bottom line.

But race matters in corporate advertising.  That was true in Mad Men’s 1960’s and in the much more recent past.  Growing up in the 1990’s it was a standard set up to have one black friend in all television commercials.  It was no longer politically correct to leave out African Americans, but corporations were still overtly saying that their ideal consumers were white people.  In this way African American consumers weren’t left out, but they also weren’t featured.  The commercials said “this product doesn’t neglect you, but it also isn’t for you.” 

I could remember several commercials like this off the top of my head: including a Sunny_D commercial and the Burger King Kids_Club ads.  When I looked up other commercials on YouTube I found an entire commercial break  snagged from a 1989 Super Mario Brothers Super Show episode that reinforced my memory of the “one black friend” phenomenon. Three of the five commercials feature kids. Two of these three commercials show only one African American child and a large group of white children.  The only commercial to feature more than one black person is the PSA warning kids against becoming drug dealers.  This commercial has an almost exclusively all black ensemble, with the exception of one white police officer. 

Are things different today? Companies are starting to change their approach when it comes to race in advertising.  There are two Target commercials on air presently which feature non-white families; one which shows an African American family and one which shows an Asian American family.  But what does this say about the modern corporation? Are we beyond thinking about race so that the commercial with the African American and Asian American families appeal to all?  I like to think so, but there is still the matter of interracial couples being left out of the advertising equation.  Perhaps this is a good question for O’Malley when he visits class on Thursday – how does race shape the present day economy?