Descendent of the royal charter monopoly companies of the 17th and 18th centuries and emergent in its present legal form on the dawn of the Industrial Revolution in the 19th century, the modern multinational corporation pulses with this ancestral DNA which guides the thoughts, words and actions of its CEO and Board of Directors. This monopoly gene always steers in the same direction, towards increased size, increased power and increased domination. The multinational corporation is a prisoner of genetic coding; it knows no better, sees no other path, and gorges itself on any obstacles that it encounters. Soon after acquiring its modern day form, the corporation was pressuring governments for favors. Early American presidents, more attuned to the basic concept of the republic being ruled by a majority of its citizens, resented this pressure and warned the American people.

Due to the Civil War and government war contracts, Abraham Lincoln became an early corporate target and, in 1864, he warned working people “to beware of surrendering a political power which they already possess, and which if surrendered, will surely be used to close the door of advancement against such as they.” In the following decade, Rutherford Hayes warned the American people of the looming potential of a government “of the corporation, by the corporation and for the corporation.” In 1907 Theodore Roosevelt criticized “the reactionaries of the business world “ who raged for absolutely no public oversight nor supervision. Dwight Eisenhower at the close of his second term warned of the ever growing might of “the military-industrial complex.”

Early in the 20th century, an unholy alliance between academia and corporate greed was incubated in the business schools of the eastern United States: the MBA; the simple act of “managing by the numbers” was bestowed the status of a formal post graduate degree. Gradually in the higher executive ranks of American business, production people were replaced by financial people with MBA’s. The price of the stock became the focal point, more important than the employees, more important than the community, more important than the product itself. By the early 1960’s, simply to enhance the price of the stock, the MBA zealots were shuttering factories in the northern USA and relocating them to the lower wage southern states. The sharing of prosperity between the middle class and the executive branch of the corporation was ending. Win - lose was on the horizon. Good for Wall St. was fast becoming bad for Main St.

By the late 1960’s the quality of American manufactured goods was suffering and being replaced by higher quality goods from Germany and Japan: radios, televisions, cameras, motorcycles, etc. Then in the early 1970’s, ignoring the decline in the quality of American manufactures relative to foreign competition and focusing only on the quarterly report, the bottom line, and the higher relative cost of American labor, the MBA-CEO’s lobbied the government for more favorable legislation, a position of bargaining advantage in labor negotiation.In 1973, at the height of the Cold War, motivated as much by the fear of communism as by the urging of the multinationals, Congress ratified the General Agreement on Tariffs and Trade(GATT). This mystifying move drastically reduced tariffs and opened the USA to a flood of imports from lower wage nations, and working wages in constant dollars for non supervisory personnel began a 30 year decline after a 35 year rise, the shrinking of the American middle class had begun. Moreover, not all of the imported goods were shoddy. The savvy American consumer quickly realized that the Germans and Japanese not only produced excellent cameras and motorcycles but also excellent automobiles. Detroit has been losing market share ever since: 1973-2003.

Following the instructions of its ancestral DNA, over the course of the 20th century, the American automobile industry cannibalized its competition and reduced its number by 1973 to just 4 corporations, a number compliant to the royal charter monopoly company genetic coding. But, by the last quarter of the 20th century, the American consumer was one smart shopper and loved a good selection of merchandise; a selection of four was insufficient, quality was insufficient. The auto makers in Germany and Japan seized the opportunity. Imported automobiles roared into the USA and today the brand selection number in the American auto market is currently about 12, a number much indicative of real competition in any industry, a competitive equilibrium point: below 12 collusion increases, above 12 some competition evaporates. The history of the American automobile industry teaches this lesson : when an industry consolidates below the competitive equilibrium point of 12, the American middle class suffers; it suffers in terms of job loss, loss of consumer choice, loss of quality in the product, loss in standard of living as wages fall. This same historical analysis can also be applied to the American consumer electronics industry, only with a worse outcome for the middle class : the few manufacturers remaining in 1973 either closed all their American factories or bailed out of the business entirely. Inferior quality and increased competition was a one - two punch knockout.

Now apply this same analysis on a global level. The RCMC (Royal charter monopoly company) DNA is a powerful directive. If left unchecked, the global automobile industry will cannibalize and consolidate itself down to 4 or 5 manufacturers and all the consumers of the world will be the lesser : less selection, less quality, less innovation, collusive pricing. Unlike the USA in 1973, on the global level there will be no rescue from afar, unless that rescue comes from Mars or Jupiter. Every passing day the term global economy refers more to the vast size of the multinational corporations than to the number of players participating or to the great distances involved. Even in 2003 the size of the multinationals is staggering : 51 of the 100 largest world economies are already multinational corporations. And the MBA-CEO’s are well aware of this fact.

A growing arrogance is reflected in CEO statements and comments of recent years. The General Electric CEO wished he could put all the firm’s factories on barges so he could move them every month to the country offering the cheapest bid on labor. The Boeing CEO wanted to lose the company’s American image. The Dow Chemical CEO yearned to move the company’s headquarters to an island owned by no nation. A professor at an eastern university business school remarked that the modern CEO would be embarrassed to admit he sacrificed profits to protect employees or a community. An aggregate CEO effort over the past half century has increased corporate profits by shifting some of the corporate tax share unto the shoulders of the middle class. In 1950 the portion of federal taxes paid by corporations was 26.5%, but by the year 2000 the corporate tax share had fallen to a mere 10.2%. This decline of 16.3% was slyly shifted to the citizens of the middle class in the form of Social Security and Medicare paycheck deductions which increased from 6.9% of federal taxes in 1950 to 31.1% in 2000. In 2003 the sly CEO’s are plotting another shift : healthcare - make the employees pay a greater share, improve the bottom line and enhance the price of the stock. Wall St. vs. Main St. Win - Lose.

Bobbing, weaving, shifting and dodging, the MBA-CEO sees this as executing good business acumen while the average American sees this as executing the middle class. Why the endless corporate mergers and consolidations and the ensuing closure of factories, employee downsizing, excessive CEO compensation, insider trading, offshore incorporations on tiny islands to evade federal taxes and offshore relocation of manufacturing to extremely low wage nations ? How is any of this good for the middle class? Why does the 20th century corporation behave this way? Perhaps a flawed business model?

Due to its ancestral ties to the royal charter monopoly company, the 20th century corporation has three fatal flaws. These three flaws are usually not fatal to the corporation itself but rather to the middle class and their pursuit of a working version of democracy. The three fatal flaws are:

1) The monopoly gene : the inbred instinct to dominate an industry via financial advantage, acquisition, merger and collusion.

2) Absentee ownership : the immediate consequence of the monopoly gene. the farther away the better. the harbinger of “we do not care.”

3) Obsession with the price of the stock : a strange realignment of a business’s priorities. dogma to the disciples of the MBA cult.

Victimized by the three fatal flaws, the American middle class feels powerless in 2003, no match up for bulging corporate coffers that determine both candidates in a two party election system. The corporations can not lose; the middle class can not win. Win - lose in wages; win - lose in votes. Why vote? Voter turnout decreases. Democracy is diminished. America needs an alternative to the 20th century corporation; whose MBA business model is detrimental to democracy; whose mind set of return to shareholder plays city against city, state against state and country against country; whose vast wealth and power purchases politicians on the local, national and international levels. The business model of the 20th century corporation needs to updated for the 21st century. This tweaking of the business model must eliminate the three fatal flaws.

The American middle class is one smart shopper and would welcome the opportunity to purchase products from a form of corporation more willing to share prosperity and less bent on domination - financial, cultural, and political. A strong middle class is essential to a true, functional democracy. Begin to level the playing field. Build it and they will come.

Peter Maroney observes the American economy from Salem, Oregon. He can be contacted at Scuppers123@aol.com.

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