Important Transitions Undergone by Corporations from the Early 19th Century to the Late 20th Century - Essay Example

Corporation Transitions Corporations have undergone significant transitions between the early 19th century and the late 20th century. Most significantly, the development of the capitalist economy was heightened dramatically during the transformation from rural agriculture to giant, urban industries. The capitalist economy may have emerged as early as the 14th century following the conflict between agricultural producers and the land-owning upper classes, but its fastest and greatest developments were between the 19th and 20th century’s industrial revolution (Scott & Marshall, 2005). Some of the social transformations directly associated with these developments include immigration, urbanization and the establishment of a national market. Further, there were territorial expansions, technological innovations and mass production. Corporations were consolidated and centralized, which brought about the rise of trusts. As industrialization picked pace, the demand for unskilled labor also increased, leading to labor conflicts and, inevitably, legal transformations. This paper will analyze the legal transformations that occurred from the 1880s within and outside corporations while paying attention to historical developments of the capitalist economy and the social transformations accompanied by the developments. It will further highlight the criticism social groups and governments have of corporations and the power amassed by corporations between the early 19th century and the late 20th century. The social transformations that accompanied the development of the capitalist market took several forms. As the US shifted to an industrial economy from an agricultural one, it also shifted from a population that was largely homogenous, dominated by immigrants from Western Europe, to a more heterogeneous one (Zmolek, 2001). The predominantly rural society also shifted to urban centers as the nation transformed from an isolated one that was previously dependent economically on European capital to the world’s leading manufacturer. This was unlike the early economy which featured smaller and local markets located around large cities. As the railroads vastly expanded in the 19th century, the nation was meshed together into a single national market where goods were easily shipped across the entire nation. So significant was the expansion of the railroads to the development of the capitalist economy that towards the end of the 19th century, the railroad business was the single largest labor employer in the US. Essentially, it was the railroad industry that facilitated the standardization of the US culturally, socially and economically. The expansion is what availed land for commercial agriculture from the 1850s up to 1900 and the addition to the union of 12 new western states (Scott & Marshall, 2005). It also led to the American frontier being closed and the ending of Indian resistance, which was denoted by the Wounded Knee massacre in South Dakota. The 19th and 20th centuries witnessed the emergence and growth of colossal corporations, which were also known as Trusts and dominated most key industries and their activities. For example, industrialists like J.D. Rockefeller and Andrew Carnegie employed strategies like ambitious competition, horizontal integration and vertical integration to build vast economic empires in the oil and steel industries respectively, over which they held centralized control. The theory of Social Darwinism, ‘survival for the fittest’ was evidently applied by corporate owners to justify their fierce competition. They also made absolute use of the concept of private property to lock the government out of their personal economic affairs. Those who owned corporations in the form of income-producing businesses or land had power. In fact, most American presidents of the late 19th century era had close interests in the railroad industry, oil, natural resources, finance and agribusiness (Leahy, 2012). Since power was increasingly being held by fewer people, the trend began affecting multiple industries, giving rise to calls of legal reforms. The rise of the corporation brought about a concentration of economic power which was capable of competing with the modern state on equal terms. The corporation amassed enough power to shape modern forms of social organization. Private property and corporations were a manifestation of the association between social and political changes with giant corporations within rapidly industrializing societies. While national governments amassed power politically, multinational corporations were increasingly dominating the global economy over which the centralized governments were exercising reducing control. Corporations in different industries such as real estate, agriculture and finance worked separately on most issues regarding policies. However, they had a common interest in the power to control general issues such as external trade agreements, hostility to labor unions and taxes. The legal transformations from the 1880s were geared towards separating ownership and control of large public corporations (Leahy, 2012). Separating ownership from control was intended to justify the vision of managerial duties that were centered on the shareholders. In this sense, corporate managers were viewed as the shareholders’ agents and had to maximize profits for them even to the extent of exclusion of other corporate constituencies’ or the community’s interests. Modern corporations and the concept of private property were inspired largely by collectivist traditions that influenced the way law was developed in the US in the early 20th century (Hancock, 2000). However, an individualist approach later replaced this trend in the period after WWII. As long as the analyses of corporate law was informed by the collectivist approach, references to private property and modern corporations highlighted the need of corporate power to be constrained via external mechanisms like, for example, federal regulation. Market economists claimed that the market economy and democracy were linked intrinsically (Hancock, 2000). Generally, their belief was centered on the notion that market economy and democracy are typically two different features of freedom. When market economy is made a widespread culture, it encourages standards that are considered to support democracy such as equality before the law, respect for the law, compromise, negotiations and individualism. Social groups and some government agencies argued that democracy could be applied to corporations, which traditionally had a top-down power structure with the owners and their managers believed to have unmatched knowledge. As movements for workplace democracy asserted, the corporations lacked diffusion of powers to make decisions, empowering of low-level workers and consultation. Through the help of the government and policy makers, social groups demand democracy within corporations on a wide scope (Forbath, 2000). As industrialization was peaking, production plants such as the Ford Motor Corporation required less and less skilled labor. This led to the influx of immigrants who were hired as casual laborers and paid poorly. The reduced demand of skilled labor also meant that women and children were also able to find casual jobs in the production plants at a time when the society was highly gendered (Kendall, 2002). Taking on the model of many other democratic nations in which the working class had more power than that of the US, social groups lobbied for such powers to be achieved through political parties and labor unions. They further lobbied for better unemployment and old-age benefits, subsidized housing, improved public health services, equitable tax structures and more democratic income and wealth distribution. In conclusion, the industrial revolution fueled the development of the capitalist economy from the 19th century, with the expansion of the railroads providing the momentum by tying together an expansive market for goods. Within that period, technological innovations transformed the economy as office work and production processes became mechanized, leading to mass production. As gigantic corporations were being built, the owners amassed power and could control large parts of their respective industries in international markets on a scale that could match the government’s powers. Necessarily, power concentration demanded legal transformations that were put forward by social bodies, policy makers and the government. This saw the advocating of social welfare to be promoted by exercising the authority of collective institutions, creating a democracy in the market economy. Essentially, in the form of separating ownership from control, corporate power was constrained (Zmolek, 2001). Among the significant social changes that were witnessed was immigration, which saw the US moving from an economy predominantly featuring European immigrants to a more global population. References Forbath, W. (2000). Civil rights and economic citizenship: Notes on the past and future of the civil rights and labor movements. University of Pennsylvania Journal of Labor and Employment Law 2(1), 697-718. Hancock, A. (2000). Special study for corporate counsel on corporate lobbying activity. Ohio: Business Laws, Inc. Kendall, D. (2002). The power of good deeds: Privileged women and the social reproduction of class. Maryland: Rowman and Littlefield. Leahy, M. (2012). Covenant of liberty: The ideological origins of the Tea Party Movement. New York: HarperCollins. Scott, J., & Marshall, G. (2005). Capitalism. New York: Oxford University Press. Zmolek, M. (2001). Debate – Further thoughts on Agrarian capitalism: A reply to Albritton. Journal of Peasant Studies 29(1), 129-154. Read More