Amazon Protests outside potential headquarters HQ2 building in LIC New York. Photo: SCOOTERCASTER -

The hidden agenda behind corporate-led reforms

  • June 14, 2019

Capitalism & Crisis

Do not fall for the corporate class’s offer to self-regulate. It is only interested in silencing criticism and expanding its own power and influence.

American corporations have long played a distinctive role in public debates about reform policies to address inequality. Contrary to popular belief, progress reform in American history, especially during the tumultuous and transformative late nineteenth and early twentieth centuries, has often occurred at the behest of the corporate class, and not necessarily in opposition to their own interests.

In fact, America’s corporate capitalist behemoths have long used reform rhetoric and moderate reform proposals to increase their control over markets, ideas, and people, all while quelling whatever public criticism they faced. In our contemporary context, Amazon’s “voluntary” minimum wage increase and Exxon Mobil’s support for a carbon emissions tax to combat climate change are cases in point.

These case studies serve as convincing examples of a concept known as “welfare capitalism,” which, historically, America’s corporate elites have employed to counter popular discontent, while advancing their own interests and re-legitimizing the core tenets of capitalist ideology.

Amazon’s strategic wage hike

In November 2018, Amazon voluntarily raised its minimum wage to $15 an hour for its 350,000 US employees, including current employees and seasonal hires. This wage increase came in the wake of prolonged public criticism about labor practices and starvation wages at the company’s warehouses across the country.

Senator Bernie Sanders and the Fight for $15 movement have been particularly critical of the Seattle-based retail giant’s labor and compensation policies. Sanders’s town hall meetings with former and current Amazon employees in 2018 elevated public concerns about employees’ low wages, marginal benefits and overwork at the country’s second-largest private-sector employer.

For workers, it is still unclear how Amazon’s wage hike will affect them in the longer term, especially since the company announced that it would also scrap some bonus and incentive initiatives for hourly employees.

For Amazon, the immediate benefits are clear: the company’s political capital and public image have benefited considerably. On the heels of Amazon’s announcement about raising its wages, Sanders and other minimum wage activists applauded the company’s decision and gave “credit where credit is due.”

The corporate-owned mainstream media observed that “[t]he goodwill gained with politicians and workers could outweigh any hit to profitability,” while simultaneously giving Amazon “a possible advantage in hiring tens of thousands of workers […] in a low-unemployment environment.”

Independent media coverage was more honest, and much less favorable toward Amazon. The Young Turks investigative reporter Ken Klippenstein commented that “Amazon isn’t doing this because they’re nice,” but rather because “public pressure forced them to.”

While both lines of argument offer valid observations about the labor market and public opinion as drivers behind Amazon’s minimum wage increase, they also obscure the distinct and deliberate agency of large corporate entities to protect their power, when challenged, under the guise of self-regulation.

In an attempt to reclaim and dictate terms of the minimum wage narrative, Amazon CEO Jeff Bezos boasted: “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead.” Despite Bezos’s concession on this matter, it should be obvious that, more than any other contributing factor, Amazon realized that by voluntarily increasing its wages, it could pre-empt state or federal minimum wage legislation, while repairing its public image and remaining competitive in the current labor market.

Moreover, the wage hike most certainly played a part in Amazon’s calculations to establish a second headquarter in New York, which has since fallen through due to considerable resistance from residents and activists. In any case, though, Amazon’s action on the minimum wage issue has prompted other corporate giants to follow suit, with McDonald’s, Disney, and Walmart all exploring similar “reforms.”

ExxonMobil’s self-serving climate policy

Similar ideas about corporate-led reform policies are reflected in oil giant ExxonMobil’s support for regulations on carbon emission.

In October 2018, ExxonMobil pledged $1 million to support a campaign for a carbon tax. But the donation by the largest US-based producer of oil and gas is no altruistic contribution to combating climate change. It is yet another self-serving corporate reform.

Exxon’s financial support toward climate policy goes toward a proposal championed by Americans for Carbon Dividends, a free-market organization that grew out of the policy think tank Climate Leadership Council (CLC). NPR commentators summarized the CLC’s carbon tax proposal as raising “the price of fossil fuels to reduce their use and cut the amount of climate-changing carbon released into the atmosphere.” Under this plan the primary focus is to generate short-term revenue, while reducing carbon emissions is considered a mere positive side effect.

While any proposal to cut carbon emission might make environmental activists rejoice at first, there is more to the story. The CLC was co-founded in early 2017 by conservative policy entrepreneur Ted Halstead, and James A. Baker III, a former White House chief of staff and treasury secretary under Ronald Reagan, and secretary of state under George W. Bush. The CLC describes itself as a bipartisan, pro-market organization to “promote a carbon dividends framework as the most cost-effective, equitable and politically-viable climate solution.” Other founding members of the organization include former Federal Reserve chairs Ben Bernanke and Janet Yellen, former Treasury Secretary Hank Paulsen, with financial and infrastructural support coming from US corporate behemoths like Unilever, GM, Proctor & Gamble, and oil giants ExxonMobil, BP, Shell and Total.

Given the “who’s who” slate of political bigwigs and corporate sponsors, it should come as no surprise that the CLC’s proposal intricately embeds and subsumes the pressing issue of combating climate change into a neoliberal market-based scheme that raises the price of fossil fuel in the short run, while simultaneously scaling back EPA regulations against environmental pollution and climate change in the first place.

The CLC is a prime example of American welfare capitalism. The group is touting its support for climate policy while distracting the American people from its own corporate goals and aspirations.

CLC founder Ted Halstead articulated his organization’s agenda most clearly in a TED talk in May 2017: “[T]he road to climate progress in the United Stated runs through the Republican party and the business community.” Halstead argued that the CLC’s carbon dividends plan would result in “less regulation and far less pollution at the same time, while helping working class Americans get ahead.”

Based on the proposition to repeal environmental regulation and to increase prices on carbon-based fuel, it is hardly surprising that ExxonMobil publicly supports the CLC’s carbon tax plan. Behind a thinly veiled and disingenuous veneer of concern about climate change lies an even greater and more genuine concern about the company’s profits and market share.

Moreover, as CLC spokesperson Greg Bertelsen admitted, ExxonMobil and other large corporation are happy to embrace and support regulatory policies like a carbon tax because they all want “regulatory certainty” in order to “know what the rules of the game will be.” In the tradition of Bismarckian controlled progress from above, large corporations want to ensure that reform happens only under their own purview and the parameters that they set.

This type of corporate-inspired climate change policy still forms the basis for establishment politicians in their quest for public support, with Joe Biden’s and Michael Bloomberg’s respective plans to combat climate change each representing yet another public show of capitalist benevolence to reform at a time when the stakes could hardly be any higher, and when anything less than a full, genuine commitment to combating climate change is unacceptable.

Welfare Capitalism and Corporate-led Reform

Amazon’s minimum wage hike and ExxonMobil’s support for a carbon tax are the most recent examples in a long line of cases in point about welfare capitalism and self-regulatory reform coming from the highest echelons of corporate America’s boardrooms.

Since the height of American industrial capitalism in the late 19th century, American corporations have actively sought and called for incremental reforms and regulatory policies to preserve and protect their own interests.

At the dawn of the twentieth century, labor and business appeared to be on a collision course. Business leaders believed that, in order to maintain their commercial successes and their political power, they had to respond to the growing social and economic inequality that resulted from virtually unregulated industrial capitalism. Consequently, many large corporations implemented programs known as welfare capitalism, which is the idea that improvements to working conditions — excluding those that are a necessity, a law, or burdens to profitability — are prudent and desirable to maintain a company’s existing status, wealth, and power.

In 1976, historian Stuart Brandes argued in American Welfare Capitalism, 1880-1940 that modern welfare capitalism in the late 19th and early 20th century was a response to the mass production and industrial growth of the era, as well as to directly related phenomena such as urbanization, immigration, labor unrest and wealth inequality. Increasing calls for public ownership of industries and antitrust policies, coupled with bourgeois fears of social revolution, labor agitation and unionism hastened these corporate-led reform proposals.

As Brandes shows, corporations built entire company towns for their employees, outfitted with schools, stores, restaurants, libraries, farms, morgues and cemeteries, recreational facilities, gardens and even medical care and legal advice.

All of these measures were intended to quell any sort of discontent, and by 1926, around 80 percent of the 1,500 largest companies in the US had at least one form of welfare program.

Whenever voluntary reform was not attainable, big business was willing to influence and harness government regulation to achieve its goals. To eliminate competition, railroad corporations largely supported and welcomed federal regulations under the Interstate Commerce Commission in 1887 or the Hepburn Act of 1906.

Steel tycoon Andrew Carnegie, who vertically integrated the steel industry to control all elements of production, argued vehemently against taxes on corporations and the wealthy, instead making a case for voluntary philanthropy as the best way to stave off socialism or anarchism. Mining tycoons such as John D. Rockefeller also agreed to raise wages and improve working conditions to prevent revolts and to create a more favorable public image, especially after the Ludlow Massacre in 1914.

Large banks and financial institutions such as JPMorgan Chase & Co. welcomed federal regulation and actively worked toward the creation of the Federal Reserve to impart greater stability into the American money market, and to provide more secure investment opportunities. Henry Ford figured out that by raising his workers’ wages, he could incentivize productivity, while at the same time creating a new class of consumers who then stood ready to purchase the products they produced.

All of these cases exemplify how private capital interests often proposed and pursued their own reform efforts in order to pre-empt more sweeping state and federal legislation that could damage their interests. Over time, America’s corporations have self-regulated to various degrees to quell labor unrest and placate public criticism, all while advancing their own agendas and expanding their economic benefit.

Whose Welfare?

The historical record indicates that big businesses have implemented reform policies only when they were pushed to do so, or when they stood to gain directly from these reforms. Like the welfare capitalists around the turn of the last century, Amazon and ExxonMobil today are pursuing ostensibly benevolent reforms and business practices with their own interests in mind.

Policies like raising the minimum wage or advocating for a carbon tax elicit more favorable public perception of these corporate giants, all while helping them preserve their power and influence, keep their edge in the market, and ensure financial vitality.

The crux of welfare capitalism is that it produces welfare for the capitalist class. Amazon made over $230 billion in revenue and over $90 billion in gross profit in 2018, while paying virtually zero in federal taxes. It can easily afford to pay their workers more in wages, and the added financial burden of this voluntary minimum wage increase is negligible compared to the potential impact of federal and state regulation. Moreover, Amazon’s plans to implement its own delivery and logistics network, including the use of independent delivery contractors, its chain of Whole Foods stores as pick-up and return locations, and its drones project, will save the company money in the long term, most likely at the expense of the US Postal Service and other delivery companies.

Likewise, Exxon gets the regulatory clarity it desires out of a carbon tax; it can then budget and adjust its operations accordingly. Yet, increasing the cost of fuel for consumers at the pump in the form of a tax or fee gives Exxon the opportunity to raise its prices, and thus to continue to rake in substantial profit at the expense of consumers, while not actually addressing fossil fuel consumption as an underlying contributor to climate change.

Rather than diminishing corporate profits or creating additional obstacles, the reform policies that these corporate leviathans propose actually expand their power and enlarge their economic well-being, while the public gets, at best, marginal benefits and, at worst, a continuation of corporate control over their lives and the perpetuation of the very structures that produce inequalities in the first place..

When such corporate-led reform proposals are applauded at face value, corporate benevolence and welfare capitalism are legitimized. When the public embraces corporate-led reform as genuine, the agency that ordinary people hold over their own lives is abdicated to American capitalist institutions.

Let’s not deprive ourselves of our own capacity to effect far-reaching social and economic change on our own terms and in the best interest of all working people!

Matthew M. Heidtmann

Matthew M. Heidtmann is a Ph.D. Candidate in History at Stony Brook University and an adjunct professor in History at Suffolk County Community College. His research revolves around American progressivism and conservatism during the late nineteenth and early twentieth century.

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