Empires Apart (53 page)

Nowhere was the transition from micro to midi clearer than in the case of one of the most powerful but least known of the robber barons. Minor Cooper Keith's corporation was to wield political power more directly, and for longer, than almost any other. Like so many of his contemporaries Keith made his first fortune building railways; what was unusual is where he built them – south of the border in Central America. He and his brothers set out from New York to make their fortune in Costa Rica. Minor was the only one to survive the appalling conditions in which 4,000 men died building a railway from the capital San José to the Caribbean. The Costa Rican government defaulted on the loans made by British banks to build the railway, and Cooper managed to gain control not only of the railroad itself but 80,000 acres of adjacent land on which to establish banana plantations. He quickly realised that the real money was to be made by controlling the whole supply chain. After establishing the first steamship service carrying fruit from Central America to the United States, he bought out plantations in Panama and Colombia. In 1899 he merged his interests with the Boston Fruit Company, which dominated the fruit plantations of the West Indies, to form the United Fruit Company – the world's largest banana company, with plantations in Colombia, Costa Rica, Cuba, the Dominican Republic, Jamaica, Nicaragua and Panama. Soon the company controlled 75 per cent of banana sales in the United States and effectively controlled the governments of most of the ‘banana republics' of Central America. Following the traditions of European royalty, he entered into the local aristocracy by marrying the daughter of the Costa Rican president.

In 1901 Cooper moved into the nation that was to become UFC's base and the archetypal banana republic: Guatemala. As in Costa Rica, Keith built a railway line from the capital to the coast and was given
land alongside at ultra-low prices by the Guatemalan dictator, who also granted United Fruit the exclusive right to transport mail between Guatemala and the US and the contract to build telegraph lines alongside the railway. UFC gained control of virtually all means of transport and communications and charged a tariff on everything moving into and out of the country through its ports, including Guatemala's famous coffee.

Cooper Keith died in 1929 but his corporation carried on, becoming a symbol of American corporate imperialism at its crudest.

For the first time ever the pattern of human life ceased to be determined by human beings. Until then history had been a long succession of religious prophets and marauding warlords, of great thinkers and heroic martyrs, of generals and politicians. History had been made by kings and presidents, revolutionaries and despots. Underneath existed great substrata to be mined by myriads of specialists – economic historians, social historians, anthropologists, environmental historians, and so on – but when most people think about history they think about Julius Caesar or Napoleon, Abraham Lincoln or Catherine the Great. And they are right to do so: those are the figures who shaped the way people lived and died and whose legacies endured for centuries afterwards. Ask who in the first half of the nineteenth century had the greatest impact on life in the modern world and there could be interesting debates about the claims of, say, the warlord Napoleon Bonaparte or the inventor of the steam train George Stephenson. Ask the same question about the second half-century and the names of many of the contenders would be hidden behind the veils of corporations. American history books might still concentrate on Congress and the White House, but the reality is that most politicians have had far less impact on the way people live today than a host of forgotten figures whose names are recognised by virtually nobody, figures like morphine addict John Stith Pemberton.

Pemberton was just one of numerous small entrepreneurs who made a living after the civil war producing wine-based stimulants and headache remedies. In today's jargon the market leader was a man named Angelo Mariani, but Pemberton produced an adequate ‘me-too' product
that enjoyed limited success until, in 1886, Pemberton's home state of Georgia introduced prohibition, and he was forced to modify his formula. Pemberton's accountant suggested a new name for the new concoction based on the main ingredients: coca leaves and kola nuts. Pemberton's French Wine Coca became Coca-Cola. Almost certainly more people today can distinguish Coca-Cola from Pepsi-Cola than can distinguish Theodore Roosevelt from Franklin Roosevelt. Not only is Coca-Cola known to millions of people around the world who have never heard of either Roosevelt, but the impact of the Coca-Cola Corporation as a vector of American pervasiveness has been far stronger and longer lasting than that achieved by any single American president. Coca-Cola could not be further from the first corporate imperialists in Hawaii and the banana republics of Central America. It supports cultural and sporting events wherever it operates, has a rigorously enforced code of corporate ethics and is welcomed around the world. Nevertheless its ubiquitous brown mixture has displaced indigenous beverages, its operations across the globe have helped inculcate American corporate values and millions of dollars of profit have passed back to Atlanta, Georgia. Coca Cola might be said to represent the acceptable face of American imperialism, the face that to many demonstrates that ‘corporate imperialism' is a myth.

The Coca-Cola Corporation of today would not have been possible if the lawyers employed by the robber barons had not invented the legal construct we know as the corporation; nor would it have been possible if the robber barons had remained predators perceived by the rest of society to be feasting on the wealth created by others: sooner or later populist politicians would have found a way of bringing them under public control. But wealth buys respectability. By the beginning of the twentieth century the robber barons were being transformed into captains of industry – perceived as serving the public rather than robbing it. Once more the railroads were in the forefront of this transformation. In 1906 Congress gave the Interstate Commerce Commission sweeping powers to inspect the railway corporations' accounts and fix prices. The measures were introduced to assuage popular anger over high fares and
the preferential tariffs given to the most powerful corporate customers. It might be thought that the railroad magnates would have reacted in fury to proposals that today would be regarded as old-fashioned socialism, but by the time the measures came in the railway industry itself had changed. In 1883 railroad oligarch William Vanderbilt had famously declared that ‘the public be damned!' Twenty years later the public pronouncements of the captains of the railway industry were very different. Now they too favoured reform, at least in public; in the corridors of Washington they were fighting to build in as many loopholes as possible. The new corporate captains had no desire to be forced into giving massive rebates to quasi-monopolists like Standard Oil nor to engage in cut-throat competition with each other; having established their place in society they much preferred the comforting support of the state to the unbridled brutality of the free market. The main beneficiaries of railroad regulation were the railroads – a debt they were to repay twelve years later when the government called upon them to help keep the world's greatest railway, the Trans-Siberian, out of the hands of Russian revolutionaries.

The First World War was a critical time in the evolution of corporatism, as the power of big business reached into the centre of government. The state took on enormous powers, with the War Industries Board introducing central planning on a massive, if hardly Bolshevik, scale. Woodrow Wilson's administration showed how corporatism had moved on from the crude corruption of the robber barons to something more recognisably modern. His most trusted advisor, and head of the War Industries Board, was not the creator of some great industrial monopoly but a Wall Street speculator, Bernard Baruch, who was to go on advising presidents for half a century. Baruch's board rammed through measures that dramatically increased US production, although its decision to regulate wholesale but not retail prices was a speculator's delight.

In almost every society the rich, like Baruch, find it easier to grasp the levers of power than the poor, but what was new in America is that increasingly it was not rich individuals that wielded power but corporations. At the beginning of the twentieth century, for example, the Southern
Pacific railroad, in the words of Hugh Brogan, ‘ruled California as its private fief'. And because for corporations, unlike individuals, life can seem infinite, political power can persist for generations: Montana was run as a virtual colony of the Anaconda Copper Company for nearly a century.

Having established themselves in America after the civil war, it was a small step for the corporations to move on to the international stage and assume the role of the earlier filibusters. The individuals who went out to expand the empire now did so with the power of corporations behind them. Whereas Texas had been colonised by bands of settlers seeking a new life for themselves and their slaves, Hawaii was colonised by a small band of corporations seeking profits for their shareholders back home, much as India had been colonised by the East India Company. Minor Keith's operations in Central America provided an extreme example of the new model. In 1910 a group of armed filibusters sailed from New Orleans to Honduras and installed a new president. What differentiated this group from its predecessors was that it was organised by the United Fruit Company, which acted when the incumbent president refused to provide the corporation with tax breaks; the newly installed president gave the company a waiver from paying any taxes for twenty-five years.

More representative was the natural and perfectly legitimate expansion of corporations in search of new markets and cheaper resources, following the example of the gun-maker Samuel Colt. The oil corporations took the lead; by 1885, 70 per cent of Standard Oil's business was outside the US, and it even had its own intelligence service, but the company usually credited as the world's first multinational corporation was far more humble in its aspirations. In 1867, a decade after Colt's failed experiment in London, the sewing machine manufacturer Isaac Singer opened a factory in Scotland, just sixteen years after starting his operations in New York. The Singer Corporation established the model for swallowing up competitors and aggressively expanding overseas; in 1905 it absorbed its leading US rival and opened a second overseas plant in Russia. By the Second World War it had plants in France and Italy and had been joined by a host of well-known American firms. The car industry was one of
the first to be dominated by US corporations, like Ford, which opened its first foreign factory in England in 1911, and General Motors, whose cars started rolling off its Danish assembly line in 1924. It is estimated that in 1916, 55 per cent of the world's cars were Model T Fords. After the First World War the historic pattern of foreigners investing more in America than Americans invested abroad was reversed as US corporations expanded into overseas markets.

By achieving a commanding position in foreign markets, American firms established the basis for a new type of imperialism, but an imperialism rooted firmly in the imperialism of earlier centuries. Spanish Louisiana in the quarter century after the American Revolution provides striking parallels to modern corporate imperialism: American settlers moved in and took over much of the commerce of the colony producing and exporting such staples as tobacco, wheat, corn, whiskey and beef. Once in command of the economy the colony would almost inevitably become part of the formal American empire. The same happened time after time until, after the annexation of Hawaii, corporatism entered into the nation's ideological mix.

As corporations like Ford and GM became an established part of global commerce, the ideology of corporatism continued to evolve. The next philosophical development came in the form of a long series of stealthy steps that with hindsight appear as the most gigantic leap of all: the assertion that corporations not only have rights but have the same rights as human beings. Corporations, having been set up precisely to avoid the responsibilities attached to real people, and therefore being given only very limited rights to match their limited liabilities, have in America today assumed the whole panoply of rights guaranteed in the American constitution.

Again the seeds for this development first sprouted in the era of booming railroads. When they were created the railway companies were frequently given massive state support, including grants of public land or the right to compulsorily purchase private land. The quid pro quo was often that the rail corporations had to pay a special tax on that land. In a
series of cases before the notoriously biased California courts in the 1870s the companies successfully argued that their ‘rights' were being infringed by having to pay a higher rate of tax on their land than human beings. From this small beginning, known as the Santa Clara case, American business over the next century grew a whole array of quasi-human rights, many of which, to Europeans, appear quite bizarre.

To take just one example: on the afternoon of 25 March 1911 fire broke out in a shirt factory on Greene Street, New York; 275 young female workers, most of them recent immigrants, some just thirteen years old, were trapped inside. Passers-by were horrified to see girls leaping to their deaths from ninth-floor windows on to the street below; 146 charred and smashed bodies were eventually taken away. The fire precautions had been virtually non-existent, but in the subsequent trial the factory owners were found to have done nothing illegal. The enormous public outrage that followed led to the first serious attempts to impose safety regulations on American business. The policing of such regulations became increasingly effective over the decades, until sixty-seven years later the doctrine of corporatism halted the trend. In 1978 the Supreme Court held that raids on factories by health and safety inspectors contravened the US Constitution, and in particular the Fourth Amendment, which protected citizens from having their homes searched without a judicial warrant. The Supreme Court held that the health and safety of human beings had to take second place to the constitutional ‘rights' of abstract corporate entities.