The Creation of Corporate America

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? 

What is it about the Wizard of Oz?

Last night I happened to catch "The Wizard of Oz" on TBS and given the Rockoff reading for this week I thought I would watch for a few minutes.  It had been quite a few years since I had seen the film and I haven't seen it that many times, yet I knew all the songs and many of the quotes.  This is because the Wizard of Oz is so permeated in our culture.  I'm not really sure that I understand why, but I thought that I would take a few minutes to point out some of its influences.

Check out the images in the album "What is it about the Wizard of Oz" for some visuals.

Re-makes and Re-imaginings:

• The Wiz
• Return to Oz
• The Muppet's Wizard of Oz
• Tin Man

Movies which quote The Wizard of Oz (to name a few):

• Honey, I Shrunk the Kids
• Hannibal
• Twister

Pop culture influenced by the Wizard of Oz:

• Pink Floyd "Dark Side of the Moon"
• Lost
• Star Wars

Know of any other pop culture references? Share them in the comments!

Pushed Aside by the Visible Hand

 

In his book “The Visible Hand: The Managerial Revolution in American Business,” Alfred D. Chandler, Jr. examines the process of how large, vertically-integrated, and scientifically-managed firms of the 20^th century came to dominate the modern economy.  Chandler argues that advances in the technologies of communication and transportation changed the process of production and distribution which, when combined with the application of scientific knowledge to industrial technology, created the modern business enterprise (Chandler, pp. 376). Chandler shows how the size and scope of a firm’s powers evolved over time.  Scientific Management made them no longer reliant on the invisible hand of the market.  They were now able to determine supply and cost themselves through the visible hand of management. 

In their article “Beyond Markets and Hierarchies: Toward a New Synthesis of American Business History,” the authors Lamoreaux, Raff, and Temin argue that Chandler’s thesis is flawed.  They state that because many of the businesses exemplified by Chandler as fully-integrated and stable have become obsolete and closed that his linear theory of business history is inaccurate. They try to show multiple options can be taken by businesses to succeed. These options are determined by a combination of available technology, per capita income, and personal opinions.  Chandler sees the time when he is writing as the peak of efficiency for this business model. However, they see the hierarchies set up within “The Visible Hand” as a product of the fact that the business model he explores worked best for the time, not because it is the natural end game of all businesses.  Rather than the vertically–integrated, multinational corporations of Chandler being a given, they hold that business models change over time based on conditions in society.

I appreciated the critiques of “Beyond Markets and Hierarchies” because it explains why we see specialized industries today.  They are a result of the digital revolution and high per capita incomes.  However I think that Chandler’s largest weakness was not in his assumption that the 1970’s was the zenith of business efficiency, but rather in who was left out of his analysis.  In all of his 500 pages of writing Chandler does not once reference the workers in these oligopolies. 

Chandler completely leaves out workers and worker’s unions.  At one point he does mention the increase in the work force due to high birth rates, low death rates, and an influx of immigration but goes no further. It is as if the people who work in these factories have no role to play in the managerial styles which were created to control them. Even with the advances in technology, expansion on this scale could not have happened without a large work force.  But the character and influence of this new work force is left out by Chandler.

Similarly, when discussing the expansion of American corporations abroad, Chandler states that industries chose to build factories abroad rather than expanding existing factories in the US “because of tariffs, high transportation costs, lower labor costs, and difficulties in coordinating trans-ocean flows” (pp. 369).  This expansion abroad is said to have taken place in the years before 1914.  There is no further explanation of the “lower labor costs” or situations in the US which would have prompted this corporate flight.  Presumably, transaction costs for international trade would have significantly decreased because of the improvements in technology and transportation.  But why industries chose this particular time to move abroad is not addressed in Chandler’s thesis.  He ignores the changes pushed for by the workers and their unions which would have impacted their industries within the US.  For Chandler changes spurred on by the worker don’t impact the creation of the modern business.  Nope, just those tricky trans-ocean flows.

This neglect of the workers is especially problematic because Chandler does not leave out the human element altogether.  It is not as if he is constructing an economic world devoid of the individual’s role in shaping big business.  Indeed, it is one of the main parts of his thesis that the creation of a professionalized career manager allowed business to flourish with the possibilities provided by technological advances.  But it is Chandler’s prejudices about who is important enough to include in the history of business which leaves out the common factory worker, and ultimately weakens his thesis.

 

Here is a recording of one of my favorite bands, Old Crow Medicine Show, performing their rendition of a classic union ballad, “Union Maid." It is a great song and their version is a lot of fun, especially since they are a group of 20-somethings and this was recorded in 2006.  I suggest you check it out.  

Did We Learn Anything from 1929?

Because the notion of an active monetary policy to combat the business cycle was so novel and the knowledge of how the economy worked so primitive, debates among the various factions within the Fed became highly confused and at time even incomprehensible.

-Liaquat Ahamed, pp. 365

 

This week marks the one year anniversary of the fall of Lehman Brothers, the starting point of our current economic recession. This is a fitting time to read Liaquat Ahamed’s book “Lords of Finance: The Bankers Who Broke the World.” Ahamed focuses on the events, but more importantly the individual financial leaders of the US, England, France, and Germany, that shaped the Crash of 1929 and the international Great Depression of the 1930s.  The similarities between the state of American finances which Ahamed describes and what we have been experiencing for the last few years was shocking to me.  I couldn’t help but wonder, did we learn anything from 1929?

There are many parallels between the two eras. The booms of the US stock market in both the 1920s and mid-2000s were based on speculative bubbles. The bubbles Ahamed describes were tangled up in the 1925 Florida land grab and the stock market boom associated with advances in industrialization, mainly the US automobile industry. The housing market and the tech boom led to today’s bubbles. In both situations, after the bubbles burst the American public found itself deeper in debt as price levels fell and the real value of loans owed increased. Indeed, President Obama’s speech to the financial leaders of Wall Street on Monday describing the “risk without regard for consequences” they took could have been taken from Ahamed’s analysis on the expansion of brokerage firms throughout the US.

Infighting and a lack of action characterized the Federal Reserve Bank of New York which Benjamin Strong headed during the 1920s. Though everyone seemed to have a different view of the scope of the problem, most acknowledged its existence. Still, little was done to prevent the economic catastrophes of the era.  The US Congress could not get around the central divide of who should be held responsible for the speculation and how it could be reined back in.  It seemed “a reenactment of an old morality play that had divided the republic since its founding – between those, like Hamilton, who believed that great wealth was the reward for taking risks and those, like Jefferson, who believed that prosperity should be the reward for hard work and thrift.” (Ahamed, pp. 317) The responsibility to take care of the economy fell squarely on the Fed.  But bureaucratic controls and less than qualified Board members led to a “paralysis of the Fed” and actions were taken too little too late. (pp. 368)

At least one lesson was learned from the mistakes of our economic forefathers.  The Fed acted much more quickly to the signs of economic depression, injecting billions of dollars of liquid assets into the banking system.  Only two days after Lehman Brothers declared bankruptcy, the Fed approved controversial loans to AIG in an attempt to curb the effects of the closures. Though the full consequences of the measures taken by the Fed and other government agencies are yet to be seen their quick actions are a direct reflection of the lessons learned by the “wait and see” policies of the mid-1920s.

While we may have learned our lesson on the governmental level, we have not learned our lesson on the psychological level. Ahamed describes how people choose to believe in stock prices and speculation which have no anchor in reality, this is the psychological aspect of the market place. This sort of thinking led to the bubbles of the 1920s and the 2000s. It is more difficult to learn the personal lessons which cause bubbles and ultimately recessions.  By exploring book’s like Ahamed’s which focus on the history of past booms and busts, we can be more aware of similar situations in the present. We are not the first to think that prices would always go up and the good times would stay good forever. Rather than thinking that we are finally the exception to the rule, we can be more conscious of the dangers of buying in to bubbles and make an effort to combat wild speculation. Moving forward we should try to combine the institutional lessons with the personal psychological lessons so that we can avoid these bubbles and crashes.

HBO Special for the History Buff in all of us.

Over the weekend I happened to catch a re-airing of an HBO special from 2006 entitled "Assume the Position with Mr Wuhl."  Comedian Robert Wuhl gives a history class for film students at NYU where he focuses on the facts and myths which come together to make American history.  His discussion on the Founding Fathers made me think of our in class discussion from last week and I thought that others would like it too.  There is also a sequel, "Assume the Position 201 with Mr Wuhl," which I haven't seen but if you like the intro class I will bet that 201 is for you. 

Here are links to the special, it is in 4 parts. Enjoy!

HBO_Special_1

HBO_Special_2

HBO_Special_3

HBP_Special_4

The Founding Fathers & Their Economic Interests

Charles A Beard’s 1913 thesis stated that the arguments between the different political groups over the formation of the Constitution reflected conflicts between economic groups and that these groups were shaped in different ways by the adoption of the Constitution. This pragmatic economic view of the motivations of the Founding Fathers was accepted until the 1950s.  He states that “merchants, money lenders, security holders, manufacturers, shippers, capitalists, and financiers” were likely supporters, while “farmers and debtors” were likely opponents.[1] He argues that the Founders were not patriots blindly acting on ideals, but rather that they were in pursuit of economic interests.

In the 1950’s this pragmatic theory fell out of favor and was usurped by idealistic theories. These theories focused on the ideological beliefs of the Founders over their real world motivations. One of the key historians credited with debunking Beard was Forrest McDonald.  McDonald looked at statistical data of voting records at the Constitutional Convention and found that public securities holders were not in fact more likely to support the Constitution as Beard asserted.  These men would have had a great deal to gain financially from the Constitution, yet they did not support its creation. McDonald holds that this proves the Founders were motivated by ideologies and not economics. The culture of the 1950’s when McDonald wrote also helped to spur the legitimacy of his claims.  The realism of mass media sought out infallible and one dimensional characters for mass consumption.[2] This reading of the history of the Constitution was much more favorable to the intellectual pallets of Americans than the pre World War One theories of the guiding powers of the economy presented by Beard.   

In the article “Economic Interests and the American Constitution: A Quantitative Rehabilitation of Charles A. Beard” Robert McGuire and Robert Ohsfeldt resurrect the theories of Beard. They reexamine the statistical data collected by McDonald and reach dramatically different conclusions. McGuire and Ohsfeldt hold that it was in fact economic interests which shaped the ways in which the Founding Father’s voted. They take the exploration of statistics to include both the Constitutional Convention and the subsequent state ratifying conventions and found that delegates do in fact vote along economic lines.  On the national level at the Constitutional Convention, among other groups, private securities holders were much more pro national, whereas slave owners were much more anti national.[3]  On the national level holding public securities, the economic trait which McDonald used to debunk Beard’s theory, had no affect on voting. This is because it represented too small a portion of the average Founder’s portfolio. However, on the state level all economic interests played a role in voting habits and in addition to repeating the characteristics of the voters on the national level, those who held any amount of public securities were pro Constitution, again hurting McDonald’s thesis.[4]

The Founding Fathers as romantic characters in our national popular culture were created while the idealistic historical views of McDonald were dominant. How will these newer pragmatic views of the Founders change this persona?

The Founding Fathers shape what it means to be an American. Other nations have centuries upon centuries of history from which to choose their heroes.  America’s limited history makes this more difficult, and I would argue that one of the main groups of heroes is the Founding Fathers.

When a figure moves from being well respected or loved to being idolized it is necessary for that person to become a character.  They are often reduced to one main characteristic which personifies who they are and how they are portrayed in popular culture. (See the “Founding Fathers in Pop Culture” photo album for examples of the Founders as heroes in Pop Culture)

McDonald and the historians of his generation established that the main characteristic of the Founding Fathers was their commitment to political ideals of equality and democracy. From the media boom of the 1950s through to today we have seen the Founders in this light. But as pragmatic ways of thought resurface calling attention to how the private interests of the Founders, one of two things will happen.  Either is will be incorporated into their personas as heroes, or the Founding Fathers will be knocked down a peg in the American psyche.

I think that we need at least a few idols that are purely American to shape our culture.  I hope that the economic interests of the Founding Fathers is not seen as a scandal or reason to discredit them as idols, but rather that their multidimensionality be folded into their teachings.  Perhaps it will not become the main focus of the lessons they teach us, but from the stand point of the rise of American Industry surely the fact that the Founders had economic interests can be seen as another way they helped make America great.  The fact that bankers and merchants were supporters of the Constitution which was ultimately passed certainly helped the legitimacy of industry in the US. They took the first steps towards American entrepreneurship. The varied interests of the Founding Fathers shows how they shaped what it means to be an American on more than just the idealistic level with which they are credited.

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[1] Charles A. Beard, An Economic Interpretation of the Constitution of the United States (New York, 1913, 1935) pp. 16-18

[2] Lev Manovich, The Language of New Media (Cambridge MA, 1995) pp. 208-209

[3] Robert McGuire & Robert Ohsfeldt, “Economic Interests and the American Constitution: A Quantitative Rehabilitation of Charles A Beard,” The Journal of Economic History Vol. 44 No. 2 (1984): 515

[4] Ibid. pp 516