Book Review: Gangs of America

First published by The New York Times Book Review
September 14, 2003

”Nothing is illegal if 100 businessmen decide to do it.”

After two years of corporate scandals, billions of dollars in investor losses and a tawdry parade of guilty-pleading corporate princelings — the latest, on Wednesday, was Ben F. Glisan Jr., a former treasurer at Enron — it’s hard not to love a book that opens with that ruefully apt observation, attributed to Andrew J. Young Jr., the former Atlanta mayor and ambassador to the United Nations.

That was just the first laugh-out-loud moment in ”Gangs of America” (Berrett-Koehler Publishers), Ted Nace’s provocative and entertaining examination of the rise of corporate power in America. It is followed by wonderful vignettes of the obscure jurists, lobbyists and business executives who helped slap together the intellectual bricks and legal mortar of the American Corporation.

The often lopsided conclusions drawn from this engaging history will infuriate or exasperate many readers. Mr. Nace successfully founded the Peachpit Press, a technology publishing house, and is thus a baptized capitalist himself, but he nevertheless thinks that corporations have too much power and he wants citizens to do something about it. Even if you disagree with his conclusions, no one but the most humorless acolyte of the capitalist religion could be bored by the evidence he gathers.

That is a surprising and welcome achievement, because most of the business-bashing books that tumble down on us these days are the literary equivalent of fingernails scraping across a blackboard. And that’s a shame, because behind all the caterwauling about ”Corporation Rex” are some profoundly important questions about the balance between the virtues of our civic institutions and the demands of our corporate interests. America is long overdue for a less rapturous re-examination of its continuing experiment with the joint-stock, limited-liability business form that we call the corporation. Despite its unfortunately pugnacious title, ”Gangs of America” addresses both needs with lively insights and refreshing research.

Mr. Nace opens with a succinct account of how General Motors and a handful of other giant corporations helped engineer the eclipse of America ‘s electric streetcar system in the 1930’s and 40’s. But, thankfully, this is not another catalog of corporate conspiracies and corruption. Instead, Mr. Nace is curious about how corporations — those merely imaginary constructions of legal paperwork — acquired their power and rights.

His research took him deep into the archives of the 14th Amendment, at least as important for corporate Americans as it was for African-Americans. He dusts off some shocking but largely forgotten discoveries about the Supreme Court case that is the Rosetta stone of corporate law. And he examines the little-noticed contributions to corporate power made by Lewis F. Powell Jr., the Supreme Court Justice who died in 1998.

”Powell tended to be a bridge builder between conservatives and liberals on social issues such as abortion,” Mr. Nace writes. ”But in his advocacy on behalf of large corporations, Powell was anything but moderate.” In 1971, two months before his nomination to the Supreme Court, Mr. Powell drafted a memorandum for the United States Chamber of Commerce warning that free enterprise was fighting for its life against passionate antibusiness forces in American society. ”As every business executive knows, few elements of American society today have as little influence in government as the American businessman,” Mr. Powell wrote just three decades ago. He added, ”One does not exaggerate to say that, in terms of political influence with respect to the course of legislation and government action, the American business executive is truly the ‘forgotten man.’ ”

How we got from there to the point where energy executives are intimately involved in the drafting of American energy policy is just one of the fresh strands of historical evidence woven into Mr. Nace’s story.

Of course, there are flaws, two of them fairly serious. Mr. Nace almost entirely ignores the American shareholder. He approaches corporations as ”them,” separate and threatening. In fact, in the spirit of Pogo, the Walt Kelly cartoon character, we must increasingly say that we have met the corporation and it is us. Mr. Nace also slights the contributions the corporate form has made to average Americans’ prosperity — aside from a whimsical acknowledgment that ”this book owes its existence to a computer made by Toshiba Corp., software from Microsoft Corp., electricity supplied by Pacific Gas & Electric Corp. and coffee roasted by Peet’s Inc.”

Fortunately, Mr. Nace’s case for the prosecution is ably balanced in bookstores these days by the case for the defense, ”The Company: A Short History of a Revolutionary Idea” (Modern Library) by John Micklethwait and Adrian Wooldridge, two writers for The Economist. By itself, ”The Company” is too rosy by half about the history of the joint-stock corporation. Where are the greedy appetites, brazen vote-buying and courtroom arm-twisting? And unlike Mr. Nace, these writers think the future belongs to smaller, nimble corporations, not the multinational giants.

But ”Gangs of America” and ”The Company” agree that the corporate form is best thought of as a ”technology,” as potentially beneficial as gene-splicing, as potentially dangerous as atom-splitting. Together, they offer a stimulating point-counterpoint perspective on what may be one of the most important debates of this new corporate century.

© 2003 New York Times