The Vanishing American Corporation: Navigating the Hazards of a New Economy

by Gerald F. Davis Narrated by Jeff Hoyt

Overview

It may be hard to believe in an era of Walmart, Citizens United, and the Koch brothers, but corporations are on the decline. The number of American companies listed on the stock market dropped by half between 1996 and 2012. In recent years we've seen some of the most storied corporations go bankrupt (General Motors, Chrysler, Eastman Kodak) or disappear entirely (Bethlehem Steel, Lehman Brothers, Borders).

Gerald Davis argues this is a root cause of the income inequality and social instability we face today. Corporations were once an integral part of building the middle class. He points out that in their heyday they offered millions of people lifetime employment, a stable career path, health insurance, and retirement pensions. They were like small private welfare states.

The businesses that are replacing them will not fill the same role. For one thing, they employ far fewer people-the combined global workforces of Facebook, Yelp, Zynga, LinkedIn, Zillow, Tableau, Zulily, and Box are smaller than the number of people who lost their jobs when Circuit City was liquidated in 2009. And in the “sharing economy,” companies have no obligation to most of the people who work for them-at the end of 2014 Uber had over 160,000 “driver-partners” in the United States but recognized only about 2,000 people as actual employees.

Davis tracks the rise of the large American corporation and the economic, social, and technological developments that have led to its decline. The future could see either increasing economic polarization, as careers turn into jobs and jobs turn into tasks, or a more democratic economy built from the grass roots. It's up to us.

Editorial Reviews

From the Publisher

Jerry Davis offers a gut-wrenching, mind-blowing picture of the Uberized society we are more or less blindly constructing. It raises radical questions for how we should collectively organize and individually navigate this brave new world, forces us to look afresh at how market and government should be allowed to interact, and puts our existing economic and political philosophies to the test.” 
—Philip Pettit, L. S. Rockefeller University Professor of Politics and Human Values, Princeton University, and Distinguished University Professor of Philosophy, Australian National University

“This is a brilliant book that describes the evolution of America’s economic ecosystem and the implications of the ‘task-based’ economy for employees and society more generally.”
—Jeffrey Pfeffer, Thomas D. Dee II Professor of Organizational Behavior, Graduate School of Business, Stanford University

“Davis challenges the future of the corporation and of traditional jobs in a world of digital disruption and decentralization. The implications are significant, but so are the opportunities. Davis offers us a way to understand the significance of the change and to lead through it. Great insights and inspiration.”
—Jim Hagemann Snabe, former Co-CEO, board member, and Chairman, SAP

“Fast-paced, brilliantly written, and deeply informed. The best overview yet of the rise and fall of the giant corporation, the new technologies, and the opportunities and dangers—personal as well as political—we now confront.”
—Gar Alperovitz, author of What Then Must We Do? and Co-Chair, The Next System Project

“This book is a comprehensive commentary on the history of public corporations in America.  It provides an excellent insight on the rising fortunes of these corporations and dwells on their imminent fall. Elegantly paced, it gives glimpses of the social and economic impact of corporations on nations and makes for very good reading.”
—S.D. Shibulal, cofounder and former CEO, Infosys

“Job One for the modern business academic is to provide actionable advice to help businesses create meaningful jobs and contribute to broad economic prosperity. Jerry Davis shows himself again to be a tower of strength in this quest with his brilliant new book. It is a must-read for anyone who cares about the future of democratic capitalism.”
—Roger Martin, Institute Director, Martin Prosperity Institute, and former Dean, Rotman School of Management, University of Toronto

Product Details

BN ID:	2940169601428
Publisher:	Berrett-Koehler Publishers
Publication date:	05/02/2016
Edition description:	Unabridged

Read an Excerpt

Preface

wHY WOULD ANYONE want to write a gloomy book about the economy? And who would want to read it?

As a business professor who sees a lot of examples, I can attest that the world does not need another dull and jargon-filled book about business. But my motivation for writing this book was more personal. I wanted to give some advice to kids heading off into the world, including my own. Yet I was stumped.

When I headed to college, the options were clear. If you studied something practical, like engineering or business, you could get a corporate job when you finished school. If you studied something frivolous like philosophy, as I did, you could go to law school. And if you ran out of money and dropped out, there was always the chance of getting a union job on the assembly line.

That was in the early 1980s. In the years since then, we have all learned about the death of the corporate career. The company would not take care of you; you had to navigate from job to job and company to company, sometimes shifting laterally, but over the long run moving ahead. Today, even the “job” is endangered. Kids graduating from college might find themselves juggling an unpaid internship with a part-time job as a dog sitter and an intermittent gig driving for Uber.

If you ever played the children’s game Chutes and Ladders, you have a pretty good idea of the economic landscape facing millennials today. A handful land at the right place at the right time and manage to move up—maybe even selling their app to Facebook and retiring before age 30. But the vast majority face a precarious labor market where one wrong step might send them down the chute to part-time purgatory, struggling to put together enough shifts to make their x preface student loan payments. The factories haven’t been hiring for years, and law school only leads to a higher class of unemployment. Even the computer literate working for brand-name corporations find that their jobs can be done more cheaply offshore (sometimes after they train their own replacements).

At the same time, the American corporation has been undergoing dramatic and puzzling changes. The shift from careers to jobs to tasks corresponds to a change in the shape of the corporate economy. Corporate careers only make sense when you have corporations that last a long time. But the “gales of creative destruction” beloved by business writers seem to be a lot heavier on the destruction than on the creation. The most venerable names in the corporate economy were going bankrupt (General Motors, Chrysler, Eastman Kodak), morphing into new industries (Westinghouse, Woolworth), splitting into component parts (Alcoa, Hewlett-Packard, Time Warner), or disappearing entirely (Bethlehem Steel, Lehman Brothers, Borders, Circuit City, and many others). The number of American companies listed on the stock market dropped by more than half between 1997 and 2012. Moreover, new entrants like Zynga and Zillow and Zulily start small and never grow big. By relying on contractors rather than hiring permanent employees in bulk, the newest corporations seem destined to remain tiny.

The new businesses in the “sharing economy” have dispensed with employment almost entirely. At the end of 2014 Uber had over 160,000 “driver-partners” in the United States but only about 2,000 actual employees. Similar figures hold for Airbnb and other “sharing” firms. They are not manufacturers or service providers but platforms, out to disrupt traditional industries such as taxis, hotels, and even medicine. In school I was often threatened with suspension for being disruptive. Now being disruptive is an essential virtue for any new business plan.

These things are connected.

New technologies enable new ways of doing business and new forms of organization. New ways of doing business change the Preface xi economic landscape and the prospects that individuals and families face. In the 20th century, the American economy was dominated by major corporations. In the 21st, that will no longer be true. The old maps no longer work for our emerging economy, and the old remedies no longer fix current problems. The steam engine allowed factories to operate anywhere that could obtain coal, and drove the first industrial revolution. It gave us the steamship, the locomotive, and more globalized markets, as well as the “dark Satanic mills,” as William Blake described them, and the urban bedlam of Dickens. The mass production methods that shrank the cost of the Model T spread to all realms of industrial society over the 20th century, from how children were educated to how war was conducted. They gave us the modern corporation, the modern labor movement, and the American way of life. The Web and the smartphone allow pervasive markets and spontaneous collaborations at minimal cost. They make institutions like the modern corporation increasingly unsustainable. What comes next is up to us.

When the corporate economy arose in the early 20th century, astute observers like Theodore Roosevelt recognized that it created both opportunities for prosperity and hazards for democracy. Roosevelt and other Progressives recognized the need for well-informed public policy to harness the new corporations for public benefit.

Today we face a set of challenges similar to those at the turn of the last century: rising inequality, lower mobility, a ragged social safety net, and politics dominated by the wealthy. But this time the cause is not the growth of the corporate sector, but its collapse. If we want to build an economy that works for all and that provides opportunities to the young, we need to start with an accurate diagnosis of our current situation. The Vanishing American Corporation is my venture at such a diagnosis.

I want to thank several readers who gave generous comments on this manuscript as it evolved. They include J. Adam Cobb, David Drews, Wallace Katz, Maggie Levenstein,Dana Muir, and Niels Selling; three excellent Berrett-Koehler reviewers: Jeffrey Kulick, Robert Ellman, and Michael S. Brady; and particularly Steve Piersanti, who xii preface shepherded this book with care and expertise from its very earliest stage, in spite of my serial deadline prevarications. Working with Berrett-Koehler has been a delight from start to finish. As always, I also thank my delightful spouse Christina Brown for her endless cheer and encouragement. I hope the final product justified her faith.

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