Sunday, 1 November 2015

Gain the Whole World, and Lose Your Soul

Do you remember David Lewis of the NDP capturing people’s imagination in a Canadian federal election by coining the phrase “corporate welfare bums”?  He was referring to envelopes of government funding for corporations.  His point was that the rich were getting benefits that were not available to the relatively poor.

Can you remember even further back to the 1930 when Ida Tarbell coined another phrase – the “robber barons”?  Decades after her father’s oil company was ruined by a Rockefeller’s Standard Oil – as he set about to monopolize that industry – she got her just deserts by publishing a brilliant series of articles in McClure’s magazine.  She was one of the “muckrakers” who pioneered investigative journalism.  They helped turn what is called “the Gilded Age” into “the Progressive Era”.  Among the changes that came to pass, as a consequence of their whistle blowing, were the 16th and 17th amendments to the American Constitution – ushering in an income tax and the election instead of appointment of US Senators, respectively.

Deep Background

Back before the American Civil War, the richest man in 1848 was John J Astor.  He was a merchant trader and was worth $20 million (now equivalent to $545 million).  By contrast, just sixty years later, John D Rockefeller became America’s first billionaire.  A century later, when Sam Walton the founder of Walmart dies, he was worth $8 billion.  Bill Gates occupies the position today with a fortune of $82 billion.

The point is that America’s economy has gone through transformations – from agrarian before the Civil War to industrial in “the Gilded Age”, to global trading in “the Progressive Era” to an information society in the here and now.  Each new phase has vaulted the economy to a new and unprecedented level.

Returning to “the Gilded Age”, the question of whether or not slavery would be used to underpin an agrarian economy was soon overtaken by the railroads, steel and oil.  That is, by railway barons like Leland Stanford and EH Harriman; steel magnate Andrew Carnegie; and oil king John D Rockefeller.  The economy did not just grow – it morphed.  200,000 miles of track built to drain grain out of the West became a network for trading to expand.  Products like Heinz ketchup or Kellogg’s corn flakes could now be manufactured and distributed country-wide.  Steel enabled new products to be built and mass manufactured - like the automobile.  Then distributed, leaning on the economies of scale involved.

An interesting example is the price of an automobile.  In its first year of production, Ford’s Model T sold for $850.  By 1916 the price was down to $360.  In 1924 you could buy a much improved model for only $290.  (This is not the same car being sold and re-sold!  It’s the list price for a new model.)

History is repeating itself


At one stage, Rockefeller controlled 80% of the world’s supply of oil.  Today, Google has 90% of the search market in Europe and 67% in the USA.

Henry Ford wanted to put a car in every garage.  Bill Gates wants to see a personal computer in every office and home.

Walmart wanted to place a superstore in every city.  Amazon and the iStore want you to buy on-line.

The railroad wanted a spur into every town.  Uber will pick up and deliver anything to your doorstep.

Economies of scale are at the base of all this.  As they are at the base of Google and Facebook.  Carnegie famously put it this way: “Cut the prices; scoop the market; run the mills full."

The price of computer hardware, adjusted for quality and inflation, was far cheaper in 2009 than in 1959.  An iPhone contains the same computing power as the full capacity of MIT in 1960.

Just as the gains of the Civil War in terms of social justice were overtaken by the transformation of the economy from agrarian to industrial, the gains of “the progressive era” that followed are now being overtaken by the switch from manufacturing and trading to information and technology.  Power is once again being concentrated, not dispersed.  Google and Apple between them provide 90% of smartphone operating systems.  Over half the population of North America and over a third of Europeans use Facebook.  By contrast, not one of the big five car companies controls more than a fifth of the American market.

Alfred Chandler, the American business historian, summed up the century following the Civil War as “ten years of competition and 90 years of oligopoly”.

What does this have to do with Lent?


A book called This Changes Everything (by Naomi Klein) was recently brought to my attention.  It sees through the hitherto superficial efforts to address climate change, and points to the deeper need for structural economic change.  It is your recommended reading for Lent!

The lifestyle of the barons – as compared to those who buy their products – tells a tale...  Carnegie bought a castle in Scotland and maintained a staff of 85.  Peter Thiel (PayPal’s founder) bought an oceanfront spread in Maui for $27 million.  Meanwhile – as I have lamented in another C4L Bulletin - the dream of “40 acres and a mule” for every freed slave did not come to pass after the Civil War ended.  The plowman overtook the reaper.

Then you have the deeper question: “do they put anything back?” in social terms.  Of course the “robber barons” eventually came to be known as philanthropists.  Perhaps this was a result of their own intentional efforts at re-branding?  To have themselves remembered as such, rather than as malefactors of great wealth or - to quote Teddy Roosevelt - “criminal rich”?  Carnegie funded libraries and Rockefeller financed the University of Chicago.

Likewise, we now have the Giving Pledge challenging the super-rich to give away half of their fortunes.  The Gates Foundation has joined the ranks of grantmakers.  Good entrepreneurs do make good philanthropists, when they get there.  And yet the divide between rich and poor is widening again.  Oxfam estimates that by 2016, over 50% of the wealth in the world will be owned by 1% of its people.  Monopoly and inequality are rising as social concerns, no matter how generous the tech barons can make themselves look.

Jesus asked the question: For what shall it profit a man, if he shall gain the whole world, and lose his own soul?  (Mark 8:36)  Please do what you can during Lent to speak and act in ways that will level the playing field.  “The Progressive Era” ended in the 1960s, when economic equality was at its peak.  It’s no coincidence that the Civil Rights movement and the Sexual Revolution occurred in that decade.  For when and where there is more equality, there will be more justice and peace.

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