July 12, 2016
Nothing New Under the Sun

I am rereading, by no means for the first time, Thurman Arnold’s great book, The Folklore of Capitalism. Published in 1937, it has aged well. Sad to say. These excerpts are from chapter eight, “The Personification of Corporation.”
The Supreme Court of the United States, because it could express better than any other institution the myth of the corporate personality, was able to hamper federal powers to an extent which foreigners, not realizing the emotional power of the myth, could not understand. This court invented most of the ceremonies which kept the myth alive and preached about them in the most dramatic setting. It dressed huge corporations in the clothes of simple farmers and merchants and thus made attempts to regulate them appear as attacks on liberty and the home. So long as men instinctively thought of these great organizations as individuals, the emotional analogies of home and freedom and all the other trappings of “rugged individualism” became their most potent protection…

This entire volume could be filled with the queer effects of the personification of industrial enterprises in mixing ceremony with the production and distribution of goods. Control of great organizations drifted out of the hands of those who knew the techniques of the business and into the hands of bankers. Stock manipulation became more important in control than efficiency of production. Organizations competed with each other in building magnificent structures for pure show in order to gain dignity and prestige in the company of their peers…

Nothing in the Middle Ages compares for sheer fantasy with the holding company, or with modern security manipulation by which control of large organizations may be obtained without investment risk. Equally fantastic was the notion that a corporation had the rights of a citizen of the state which incorporated it. This permitted the use of the sacred doctrine of states rights to hamper regulation of industrial empires which had no connection with any particular state…


Unemployed were relentlessly persecuted on moral grounds, in spite of the fact that there were plenty of material goods to feed and clothe them. It was thought sound economics to reduce them to the lowest level of subsistence and make the taking of that pittance as humiliating as possible. Every move the government made was accompanied by hostile oratory and blind irritation.

This was not done by ill will. It was simply the result of thinking in terms of a fiscal fairyland in which industrial organizations were individuals and government was supposed to protect their property.

Since corporate property had come to mean the right of an organization to distribute goods, the government could not engage in such distribution without damaging the whole structure. Government itself could not be efficient because it did not operate for profit, which was an essential element of efficiency. If a man did not work for profit, he became bureaucratic, unless he happened to be a minister of the gospel, a professor, or perhaps a scientist. Hence, government clerks could not fail to be bureaucratic. This extended down to the lowest governmental units. Municipal light plants were bad in principle.

Even charity could not be administered by the government because the government would not know where to stop. Needy and unemployed people would get the idea that the world owed them a living. This was supposed to ruin their characters. Thus in the great drought which occurred in the Southwest at the end of President Hoover's administration, money could be raised for the farmers only by the Red Cross. Government money could only go for crop loans, which was not thought to be such a dangerous use of the funds and would not have such a bad effect on the character of the farmers.

In any event, the fact that government organizations could not be put to practical use was tied up to character, the home, religion, law, and the science of economics. Any counter-proposal was some form of socialism, which led to both bankruptcy and bureaucracy.

On one occasion only could the government step into the temporal world of corporate organization and that was in time of war. Then all questions of where the money was coming from disappeared. Only then were the great corporate personalities supposed to subordinate their rights to a greater cause.


Posted by Jerome Doolittle at July 12, 2016 06:03 PM
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