Part 1: The Real Fight in America
There is a great deal of talk these days about the U.S. sliding into a modern-day civil war. The discourse, so far, has largely focused on the polarization of American society along political, racial, and geographical lines. While these rifts are significant, they also obscure the one struggle that unites us all. The real fight in America is not between Democrats and Republicans or between the Trumpers and the never-Trumpers. Nor is it between the two coasts and the heartland or between the North and the South. The urban-rural divide is also not the primary obstacle standing in America’s way.
The most consequential battle in the U.S. today is the war that large corporations have been quietly waging upon the country’s population. These behemoths have used their ever-increasing political and financial clout to chip away at the fabric of American society. During the 1990s, a dangerous new ethos took hold in America — CEOs are only accountable to their shareholders. This mindset absolved the titans of industry of any responsibility towards their employees, consumers, or the country itself. Profit became the be-all and end-all of a corporation’s existence and its share price the only metric of success.
The sharp rise in corporate power during the past quarter-century has come at the expense of the institutions that made America truly great — the presidency and the congress, an independent media, the supreme court, the federal reserve, and the universities, to name a few.
Politics in America has become a race for money. The 2020 election cycle saw a mind-boggling 14 billion dollars worth of campaign spending, only a fifth of which came from small donors. The majority of the funds came from the wealthy and from big business — two entities that are frequently indistinguishable from each other. Large contributors oftentimes don’t even pick sides (on the basis of issues, heaven forbid) and donate money to both sides in the contest. Heads they win, tails they also win.
The rich and the corporations don’t make political contributions out of the goodness of their hearts. They expect a return on their investment and, far more often than not, they get it. In addition to continually passing laws that benefit big business (deregulation anyone?), the U.S. government has looked the other way as a wave of mergers dropped the number of publicly listed companies in America by half — from 8090 in 1996 to around 4000 today. As a result, almost every major industry in the U.S. — from airlines to media to finance — is dominated by a handful of large corporations. The resulting lack of competition has reduced choice for consumers and taken away the workers’ ability to negotiate.
A rise in corporate power has contributed to the inflation-adjusted median household income remaining stagnant in the U.S. for a quarter century (1989 - 2014), even as the real GDP doubled and the stock market surged by nearly 600%. Virtually all of the economic gains of this twenty-five year period went to capital at the expense of labor. Unions could have helped rectify this imbalance but they are a dying force. Currently, only about ten-percent of American workers belong to a union, down from a peak of thirty-five percent in the 1950s.
Mainstream media, also corporate owned, tries its hardest to keep America divided. Much like how the cable providers have carved the country into mafia-type territories (how many options do you have for cable TV in your town?), so have large media companies. It would be impossible for anyone to argue that MSNBC and FOX are taking any steps to poach viewers from each other. The battle lines have been drawn and the population has been focus-grouped to the point that viewers of MSNBC inhabit a different universe from those tuned into FOX. A relentless search for profits has led to outrage being permanently dialed to eleven at all of these channels, albeit at different targets. The head of CNN, Jeff Zucker, famously said, “Chaos is good for CNN,” while the head of CBS, Les Moonves, was quoted as saying (about the money being spent in the 2016 presidential election), “It may not be good for America, but it’s damn good for CBS.” It stands to reason, therefore, that these corporations have chosen profits over the good of the country. In fact, I doubt if the greater good ever enters the equation in America’s boardrooms.
The Federal Reserve, another pillar of American greatness, has also thrown its lot in with the stock market, which is just another term for corporations. The S&P 500 has somehow become a proxy for the health of the US economy and any sharp drop in stock prices is met with swift action by the Fed. For well over a decade now, the Fed has been involved in quantitative easing (QE) of some sort or another. Simply put, QE is a mechanism by which the Fed buys trillions of securities (usually bonds) in a bid to prop up the stock market and, by extension, the American economy. Or so the thinking goes. In reality, stock prices embody the fear and greed of market participants and are not a reliable indicator of economic strength or weakness. The highest inflation numbers in forty years have finally forced the Fed to raise interest rates recently. However, with consumer prices rising at an annual rate of 8.5%, it feels like the Fed is attempting to close the barn door long after the horse has bolted. The federal funds rate in May 2022 is still below 1%.
The Fed’s maintaining interest rates below the rate of inflation is a direct consequence of its corporate capture. All else equal, the lower the interest rates the higher the stock market. Stanley Fischer, the vice-chairman of the Federal Reserve from 2014-2017, confirmed as much in an August 2016 interview. While admitting that negative interest rates (where the bank charges you interest!) are “difficult to deal with” for those that save money, he added that they “go along with quite decent equity prices.”
It doesn’t help the American public that departing Fed chairpersons can look forward to a substantial payday upon retirement. Ben Bernanke pocketed a cool $250,000 a night for a series of dinners after leaving the Fed chairmanship in 2014. Likewise, Janet Yellen collected over seven million dollars from big business (in “speaking” fees) during the two years she spent between her low-paying jobs as Fed chairperson and the U.S. Treasury secretary. Just one corporation, Citigroup, paid her almost a million dollars in 2019 and 2020. The question, therefore, arises; who exactly is the chairperson serving while in office? The taxpayer that pays them $203,500 a year or corporations that pay them more in just one evening?
The universities of America have also become a part of the problem. The cost of higher education has risen almost eight-fold over the past four decades, leading to an explosion in student debt. This is especially cruel in light of the fact that, during the same period, it has become increasingly difficult to get a blue-collar job in America. A college degree that was once a luxury has now become a necessity.
Under normal circumstances, no one would accuse Harvard, arguably the most prestigious of U.S. universities, of being a corporation. However, with an actively managed $53 billion endowment, it is easy to think of Harvard as a small university attached to a large hedge fund. For four decades, Harvard undergraduate freshman enrollment has been stuck around 1600 even as America’s population rose by almost fifty percent and the university’s endowment grew ten-fold to reach a jaw-dropping $33 million for every entering freshman.
The sharp increase in endowments at top universities across the nation is a direct result of increased inequality in America. Once you’ve acquired all the material possessions that your heart desires, you might as well shoot for immortality — by buying the naming rights to a museum wing or a university building. Those who consider these donations to be an act of charity only need to look at the Lincoln Center in New York. The venerable institution bought back the naming rights to Avery Fisher Hall by paying $15 million to the Fisher family while selling the same rights to David Geffen for $100 million. These were both financial transactions plain and simple, not charity.
If I had to pick one phenomenon that has allowed corporations to run amok over the past two decades, it would have to be the fact that they are almost never held accountable for their misdeeds. Corporate sins, no matter how flagrant or repetitive, are almost always wiped away with money.
Part 2: A Fine Mess and Part 3: The Way Forward, will be coming soon!