A Socialist by Necessity: The Anonymous Societies

Witnessing the effects of business deregulation was a significant element of my decades-long leftward shift from Centrist Republican to Socialist.  The earliest deregulatory actions of the Reagan Administration and the later capture of the legislative and regulatory functions created the environment for what has become a wholesale pillaging by the corporate sector and the uber-wealthy.  It has been the route by which millions of jobs have been sacrificed to short-term profit goals and the American Middle Class has been strangled.  This progressive regulatory neutering has fertilized the bloom of kudzu-like moral hazard and allowed the return of a corporate culture that was shackled by our predecessors:  the Anonymous Societies.

What exactly is a corporation?  The phrase that sticks with me from a distant business law class – more notable by the presence of a fellow student’s bandana-clad labrador retriever that sat at a desk two rows over – is “fictitious legal entity”, a construct that forms the groundwork for giving a non-breathing, bloodless entity the same standing legal standing as a real person.  There were other descriptions and meanings but the full meaning of a corporation didn’t sink in until years later.  At its core, a corporation is simply a legal mechanism to pool capital to gain the requisite critical mass necessary to fund a new venture to gain wealth.  Jeff Bezos and Sergei Brin might have the financial capital necessary to fund a new venture but the great mass of humanity will have to figure out a way and the corporation is a decent mechanism if you don’t have $25 million in pocket.  You come up with a plan and seed money, sell the idea to a group of interested individuals and in return for a promise to share in the profits, they provide the necessary funding.

Corporations go back to the Middle Ages, when they existed for finite periods of time to raise money for specific purposes such as chartering a school or building a cathedral.  That changed at the beginning of the 17th century when the English king provided a charter to the East Indies Tea Company; that company then raised money for the express purpose of turning a profit for the new shareholders.  These early corporations, including the West Indies Tea Company and the Dutch East Indies Company, not only lived to make money but to assist their respective governments in the colonization of their respective regions.  These companies finally failed by the 1800s when their respective colonial regions either became independent or impossible to administer.  It was only in the early years of the 19th century Industrial Revolution that the modern variant of the corporation came into being, existing in perpetuity (hopefully) to turn a profit for the shareholders.

If you understand the comment that evil is twice around the block before good has even put on shoes, then you have a sense of the relationship between corporate behavior and government oversight.  Throughout history, regulation has largely been behind in responding to the various corporate misbehaviors.  Before any meaningful regulation began in the late 19th and early 20th centuries, men grown so wealthy as to be known as robber barons engaged in such activities as bribing Civil War telegraphers to obtain advance notice of battle results to sell or purchase gold in advance of the public.  They manipulated the price of company stocks like a Duncan Yo-yo.  They engaged in bare-knuckle price fixing to eliminate competition.  They became the earliest lobbyists by camping in the lobby of Civil War Washington’s Willard Hotel to buttonhole Union officials to procure contracts.  They fought – and sometimes killed – labor organizers in disputes about working conditions.  And in one of the more entertaining episodes now known as the Erie Railroad War, two robber barons swindled another by simply printing thousands of new stock certificates to sell to him as he attempted to buy up control of their railroad.  The point being that in the absence of meaningful regulatory oversight, gross illegalities – with significant collateral damage – occurred in the pursuit of profit.

The term Anonymous Society is foreboding, the image evoking shadowy figures moving in the background to satisfy their own ends.  It is also a term explicitly linked to the corporation.  I first learned the term in a college Spanish class when a professor corrected me in conversation, clarifying that the correct Spanish term for corporation was Sociedad Anonima and that any Spanish corporation would carry the identifier SA after its name.  But it was decades later that I learned the history behind the phrase Sociedad Anonima.  Unlike today, where ownership of shares is recorded and reportable, the practice in 19th century Europe was that share ownership was not recorded.  A European corporation of that period didn’t know who owned their shares; the shareholders were literally anonymous and company dividends could only be paid to those individuals who showed up with their certificate chits as proof of ownership.  Corporate directors did not know if the shares changed hands between owners and the early European corporations were literally anonymous societies of shareholders.  Because the practice fed illegalities, most often tax evasion, that anonymity was eliminated but the original terminology, SA, remained.

The collective decline of the American Middle Class, since the Reagan Administration, is rooted in the notion of shareholder capitalism.  It was during the first part that I was witness to one of those countless actions in the name of shareholder capitalism.  At that time in the early 1990s, I worked on the corporate staff of a multinational telecommunications company that provided long-distance services.  The firm had an immensely successful marketing program, Friends and Family, which offered lower phone service rates to anyone enrolled who was calling a friend or family who was likewise enrolled.  The program was marketed and sold via phone sales from multiple call centers located across the Midwestern United States.

The call centers were a mix of fixed and variable costs, equipment and labor respectively.  To keep costs down, corporate would place them in economically distressed areas; they would find a locality with cheap property, empty building and a population with higher unemployment.  The farm debt-ravaged Midwest met that criteria in spades.  The company would establish a site, lease and retrofit an unused warehouse or empty supermarket as a call center and then hire the locals to work there as phone bank operators to sell the Friends and Family program.  Understand this about the corporate mindset:  Labor is viewed as an accounting concept, a variable cost.  You cannot just tear up hundreds of miles of fiber-optic cable nor recoup the cost of switching equipment installed in temperature controlled rooms.  Those costs are fixed and woe to the executive who advocated for those decisions if they don’t pan out.  But people can be hired and terminated, in many states at will.

My position was in Risk Management, but my small department was located oddly in the Treasury Operations Group.  A part of the job was to make periodic trips to the division that managed the F&F program and that entailed flights to those call centers.  Senior executives could take the corporate jets to Hong Kong or London, but I caught an evening flight to Minneapolis and a subsequent crop-duster to Iowa or Missouri.  There were instances that I sat as an observer with the call center workers.  The system would auto-dial a number and it would be routed to the employee, who would commence the sales pitch upon being answered.  Upon the call’s ending, often unpleasantly, the employee would have a few seconds to mentally reset before the system repeated the process again.  During breaks, I did what I frequently do:  I chatted with the people.  They were not there for a career but solely to make ends meet in a difficult place at a difficult time.  They were college students, divorced parents and ex-farmers working for second income money and modest benefits, supporting immediate or extended family.  They were real people doing their best to handle real financial situations.

Fast forward to a late-Spring Friday afternoon in the downtown Washington, DC headquarters.  My cubicle was located on the third floor immediately outside the front conference room adjacent to the Treasurer’s office.  As I worked, I overheard him and others entering the conference room, joined shortly afterwards by the CFO and other senior executives and staff.  It was notable because the CFO and those executives typically stayed on an upper floor with a view towards the Washington Monument and the White House.  When everyone had later gone and the day was winding down, I stepped into the office of a cash management director and made a crack about the presence of the gods amongst us mortals.  She didn’t respond at first, unlike other times, but then commented that the senior management was concerned about the share price and that it had been stalled near a particular level.  The executives wanted to make a gesture to the market to demonstrate that they were “serious” about controlling costs and they would announce that they would be shuttering multiple call centers.  I didn’t think that the decision made great sense since this program was a certifiable marketing phenomenon with wide brand recognition and yes, the company was in the black.  Was it as profitable as it could have been?  Probably not.  But the decision was framed within the context of proving a point to the stock market and as executives with stock options, the decision makers in that room had a vested interest in seeing that price rise.

The decision to close centers, with the resultant loss of hundreds of  jobs, was announced the following week.  Like tufts of dried dandelions in stiff breeze, the jobs were simply gone.  Mortgages, health insurance, family circumstances, whatever…all were meaningless to those executives so long as the market understood that they were serious.

Although my own job was safe, the experience was educational.  When we found that my wife was pregnant about a year later, we talked at length and decided that it made more sense if one of us stayed home with the child.  This experience was not the principal reason behind my decision to resign and stay home but it certainly lurked in the background of my thinking.  This act, and the countless others throughout the economy, proved that corporate loyalty to the employee was dead and that I could be unemployed regardless of my competence or job performance.  We would take a significant short-term pay cut but my wife’s long-term employment would be far more stable.

Just a few years ago, almost twenty-five years after the closures, I wandered the local high school auditorium lobby during a play’s intermission.  I was perusing the plaques honoring notable alumni and stopped abruptly at one plaque, which honored the CFO of that corporation for his contribution to establishing a gift to the school.  I looked him up upon returning home and found that he had left the company a few years after me and was now a principal at an established investment firm.  He had managed to avoid the final implosion of the company after it was purchased by Worldcom, which itself ceased to exist because of a massive accounting scandal.  The Treasurer was himself established as the CFO of an oil company and the CEO, who wasn’t in the room but would certainly have signed off on the closure decision, was now an independent investor specializing in tech start-ups.  My thought now, as it was that night?  You got yours, you Bastards.  What about everyone else?

A corporation is a valuable tool but in the end, it is only that, a tool.  There are certainly decent corporate leaders who abide by the rule of law, but the cumulative acts of the others are sufficiently damaging that we can no longer allow the conflicts of interest arising through stock options.  We can no longer accept them at their words that the books weren’t cooked (Enron and Worldcom), their scientific research wasn’t flawed (Theranos), their actions weren’t damaging to the marketplace (Amazon).  I am sure at this point that you can identify any number of other corporations which can fit the bill here.

People, many being supporters of President Trump, fear the impact of a Democratic party victory upon shareholder capitalism.  They neither recall nor understand that much of the damage to their middle class is a result of shareholder capitalism, a Randian and morally bankrupt conceit that serves as window dressing to justify the legalized looting and pillaging by corporate elites for decades.  Without the re-imposition of government oversight and regulation, the pillaging will continue until the Anonymous Societies succeed as neo-feudal lords amongst hundreds of millions of American serfs.