Posts Tagged ‘18th Amendment’
“Humanity is actually much more cooperative and empathic than given credit for”*…
We looked earlier at the shrinking away of public companies in the U.S., both as a product of consolidation (of operations and of ownership) and of the (potentially dangerous) growth, in their stead, of private equity. University of Michigan professor Jerry Davis has a more optimistic take…
Public corporations have been dominant institutions in the American economy since the dawn of the 20th century. Whether due to their greater efficiency or power, listed corporations spread across nearly all industries. “Capitalism” in America was synonymous with “corporate capitalism,” and the number of exchange-listed companies grew with the size of the economy.
Yet since the late 1990s, the number of listed corporations has dropped by half in the US, underwritten by new technologies that lower the cost of assembling an enterprise. Meanwhile, neglected alternatives to the public corporation both old (e.g., mutuals, cooperatives) and new (e.g., open source, platform coops) have proven surprisingly durable. Given the manifest pathologies of shareholder capitalism, the combination of these two trends may suggest pathways out of our current dilemma…
[David explains how both consolidation among listed companies and the rise of private equity have contributed to this drop, but then raises a third, more general explanation…]
A more encompassing interpretation is that information and communication technologies (ICTs) have drastically changed the basic economic calculus of what an enterprise looks like and how it might be funded. In the US context, this has meant that companies prefer “buy” to “make,” as transaction cost enthusiasts might describe it. I coined the term Nikefication to describe the process of vertical dis-integration that reconfigured American industry during the 1990s and 2000s and the options it opens for alternative forms of enterprise, described in detail in previous books…
The vertical dis-integration of the American economy was driven by Wall Street and enabled by ICTs. Ironically, the result is that the capital requirements to create and scale a business can be much lower, reducing the rationale to go public in the first place. Indeed, IPO prospectuses routinely convey that the point of the IPO is not to raise capital, but to create a market for the company’s shares to enable VCs and employees to cash out – which is not the most persuasive pitch to potential buyers, and perhaps helps account for the disastrous post-IPO performance of most new listings.
The asset-lite model means fewer public companies, but it also suggests new possibilities for non-corporate forms that may be more human-scale and democratic. Nike’s profit-driven, asset- and employee-lite model is not the only option enabled by new technologies.
By “noncorporate” I mean forms of economic organization that are not owned by outside shareholders, although they may be legally organized as a corporation. These include mutuals (where consumers or members are also the owners); cooperatives (where workers, producers, or consumers are the owners); municipal enterprises (where citizens or governments own the enterprise); nonprofits; and open source projects. These forms are far more prevalent than one might expect, and in some cases they dominate their industry (e.g., property insurance, server software).
Noncorporate forms of enterprise have proven surprisingly resilient in the US. The Fortune 500 list for 2022 includes at least a dozen mutual insurance companies, including State Farm (#44), New York Life (#71), and Nationwide (#83). The single largest shareholder of over 350 of the 1000 largest American corporations is Vanguard—also a mutual. Land o’ Lakes (#213) is an agricultural cooperative owned by its producer-members, as are Ocean Spray and Blue Diamond. Ace Hardware is a retail cooperative in which local stores can be attuned to local needs and tastes yet gain the economies of scale of a large-scale brand. Jessica Gordon Nembhard’s brilliant book Collective Courage documents that cooperative forms thrived in African-American communities for generations – often overlooked by those who find data about the economy solely through online databases. And the US is home to nearly 5000 credit unions, which by law are not-for-profits, owned by their members.
Stanford Law professor Ron Gilson once quipped that if shareholders didn’t exist, they would have to be invented. That’s not quite true: plenty of American enterprises do quite well without shareholders. Indeed, civilization itself might be better without them. As I have written elsewhere, “nearly every major societal pathology in the West today – certainly in the USA – is caused or exacerbated by profit-oriented corporations,” including the opioid epidemic, the obesity crisis, the return of nicotine addiction among the young, democracy-undermining social media, and a climate catastrophe underwritten by the fossil fuel industry. Shareholder capitalism may be a suicide pact. Conversely, cooperatives are inherently democratic and accountable…
Institutional alternatives to public corporations are well-established in the US, and in some cases they lead their industry, such as mutuals in finance and insurance. But cooperatives have historically been thin on the ground here compared to Europe. According to the Democracy At Work Initiative, there were 612 worker cooperatives in 2021 –a 30% increase over 2019, but still a tiny number.
Perhaps the digital revolution has finally created the conditions for cooperatives to thrive. Research from the pre-digital era suggests that one of the factors limiting cooperatives is, for want of a better term, the transaction costs of democracy. A lot of workers’ time spent in meetings to engage in dialogue, debate, and polling is a price that corporate dictatorships don’t have to bear. But newer tools have dramatically reduced the transaction costs of democracy: the same smartphones that enable pervasive corporate surveillance also allow worker voice at scale on a continuous basis.
It is not just transaction costs that have declined: the required assets to start a business are also much cheaper now to own or rent. Capital equipment such as Computer Numerical Control tools, powered by software, gets better and cheaper much the same way other software-powered tools do. (Compare the price of a color laser printer in 1990 to one today.) This is also true of the software required to run an enterprise. It is possible to buy a knockoff version of the enterprise software underlying the Uber app for under $10,000 – and the Drivers Coop in New York is creating a version to “franchise” the locavore driver-owned coop alternative to Uber. The ICTs that dis-integrated the corporate economy have opened space for noncorporate alternatives that might be more democratic and human-scaled.
There are reasons for optimism here. Platform cooperatives merge the benefits of coops with accessible technology, and have been especially effective in industries in which the required new capital investment is low (home cleaning, home health aides, transit). Trebor Scholz’s new book Own This! provides details on the opportunities here. Municipally- or cooperative-owned fabrication facilities can enable enterprises with limited capital to launch and thrive. If the required investment to start a business is low, then the range of alternative institutions, including coops, is correspondingly larger.
The technologies exist to create low-cost alternatives to public corporations. Maybe we are not stuck with the legacy of 20th century corporate capitalism after all…
An optimistic (and aspirational) take on what might follow the economic reign of the public company: “Is This the End of Corporate Capitalism?” from @vanishingcorp via @iftf.
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As we ponder proprietorship, we might recall that, on this date in 1933 the hospitality industry got a boost as Congress ratified the 21st Amendment to the U.S. Constitution– repealing the 18th Amendment, which had prohibited the manufacture, transportation, and sale of alcohol. Prohibition had gone into effect in 1920 in an effort to reduce crime and improve public health, but it had backfired: despite massive public investment in enforcement, there was a sharp rise in organized crime (c.f.: bootleggers like Al Capone stepping in to supply black market booze) and the emergence of a “scofflaw” attitude on the part of a public that wanted its alcohol.
“You are where your brain is but not where a front-page headline is”*…
Headlines in newspapers, teasers for TV new stories “at 11”– from it’s birth, the press has promoted its wares with précis that pique a peruser’s interest. The advent of online journalism has only amplified that phenomenon… and to amusing effect.
Jeva Lange illustrates in “A field guide to identifying what website that headline came from.”
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As we click on the bait, we might recall that it was on this date in 1920 that the 18th Amendment took effect, and the U.S. became dry. Under 100 years earlier, American’s had been drinking an average of (the equivalent of) 1.7 bottles of hard liquor per week– three times the average these days. A sin tax, levied at the end of the Civil War, moderated consumption a bit– but not enough to satisfy the coalition of women and evangelicals behind the passage and ratification of “The Noble Experiment”– the national ban on the sale, manufacture, and transportation of alcohol that was better known as “Prohibition”– was ratified. Prohibitionists had been after a ban for decades before the 18th Amendment went through. But until the institution of an income tax (in 1913), the federal government depended for the majority of its income on alcohol taxes… so was indisposed to let Prohibition happen.
By the time it was repealed in 1933, organized crime had become a major feature of American city life, and the American public had adopted the invented-for-the-occasion word “scofflaw.”
The Defender Of The 18th Amendment. From Klansmen: Guardians of Liberty published by the Pillar of Fire Church
From the Plague-On-Both-Their-Houses Department: It’s come to this…
The Andy Warhol banana that graced the cover of the Velvet Underground’s 1967 debut album has become the subject of litigation between the band and the artist’s estate.
In a nutshell, the estate believes that it holds the copyright, and is licensing the image (for everything from iPad covers to Absolut ads). The band argues that there is no copyright (as the original ran without a notice), but that the image is protected as a trademark of the band– so the estate is infringing. (There’s a more detailed recounting of situation and its background at Final Boss Form.)
One is tempted to launch into a discussion of the case as a symptom of the diseased state of intellectual property law and practice in the U.S.; but your correspondent has already burned pixels doing that, e.g., here, here, and here. Suffice it here to quote the ever-insightful Pop Loser: “This whole story is an excellent metaphor for the world we currently live in and should probably make us all a little bit sad.”
As we re-up our affiliation with Creative Commons and write our Representatives to oppose SOPA, we might recall that it was on this date in 1919 that “The Noble Experiment”– the national ban on the sale, manufacture, and transportation of alcohol that was better known as “Prohibition”– was ratified (the 18th Amendment).
By the time it was repealed in 1933, organized crime had become a major feature of American city life, and the American public had adopted the invented-for-the-occasion word “scofflaw.”
Ku Klux Klan: “Defender of the 18th Amendment” (source)
Burying the lead…
source: Getty Images, via the Telegraph
Bulgarian government scientists are in communication with aliens, reports the (London) Telegraph.
Aliens from outer space are already among us on earth, say Bulgarian government scientists who claim they are already in contact with extraterrestrial life.
Work on deciphering a complex set of symbols sent to them is underway, scientists from the country’s Space Research Institute said.
They claim aliens are currently answering 30 questions posed to them.
Lachezar Filipov, deputy director of the Space Research Institute of the Bulgarian Academy of Sciences, confirmed the research.
The story continues here, concluding,
The publication of the BAS researchers report concerning communicating with aliens comes in the midst of a controversy over the role, feasibility, and reform of the Bulgarian Academy of Sciences.
Last week it lead to a heated debate between Bulgaria’s Finance Minister, Simeon Djankov, and President Georgi Parvanov.
Oh, to be a fly on the wall…
As consult the entry requirements for the Golden Fleece Awards, we might raise a glass to the end of one of the most costly failed experiments in enforced morality in U.S. history: Prohibition. On this date in 1933, Utah (!) became the 36th state to ratify the 21st Amendment, thus creating the three-fourths majority of states necessary to repeal the 18th Amendment (which had taken effect in 1920). (Lest some perverse sort of jingoism lead us to think of Prohibition as an exclusively American phenomenon, we might note its history in other nations as well.)
A different kind of keg party: NY police dispose of bootlegged beer during Prohibition
Your correspondent is headed so far west as to be Far East, thus these missives will resume their regular rhythm on his return across the Dateline.
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