Reclaim Democracy!

Book Review: Gangs of America

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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

How Media Giants Are Reassembling The Old Oligopoly

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by Martin Peers
First Published September, 15 2003 in the Wall Street Journal

Two years ago, Mattel Inc. gave CBS a choice. The network had refused to broadcast the toymaker’s movie “Barbie in the Nutcracker” in prime time. So Mattel threatened to pull millions of dollars of advertising from the Nickelodeon cable channel — owned by CBS parent Viacom Inc.

Viacom, which had spent a decade bulking up with acquisitions, now wielded its new clout, according to people familiar with the situation. If Mattel made good on its threat, Viacom said, it would be blacklisted from advertising on any Viacom property — a wide swath of media turf that also includes MTV, VH-1, BET, a radio broadcasting empire and even billboards. Mattel backed down, and the Barbie movie ended up running during a less-desirable daytime period.

Neither company will comment on the scrape, but Viacom says Mattel remains a “valued advertising partner.” More generally, President Mel Karmazin in an interview is blunt about his company’s strategy: “You find it very difficult to go to war with one piece of Viacom without going to war with all of Viacom.”

Viacom and its big media peers have been snapping up cable channels because they’re one of the few entertainment outlets generating strong revenue growth these days. More broadly, the media giants have discovered that owning both broadcast and cable outlets provides powerful new leverage over advertisers and cable- and satellite-TV operators. The goliaths are using this advantage to wring better fees out of the operators that carry their channels and are pressuring those operators into carrying new and untried channels. They’re also finding ways to coordinate promotions across their different holdings.

Entertainment giants such as Viacom, NBC parent General Electric Co. and Walt Disney Co., which owns ABC, now reach more than 50% of the prime-time TV audience through their combined broadcast and cable outlets. The total rises to 80% if you include the parents of newer networks — such as News Corp.’s Fox and AOL Time Warner Inc.’s WB — and NBC’s pending acquisition of Vivendi Universal SA’s cable assets, estimates Tom Wolzien, an analyst at Sanford C. Bernstein & Co.

The big media companies are quietly re-creating the “old programming oligopoly” of the pre-cable era, notes Mr. Wolzien, a former executive at NBC. Of the top 25 cable channels, 20 are now owned by one of the big five media companies.

The idea of owning broadcast networks as well as cable channels is “comfortable for people like ourselves,” says Bob Wright, chairman of NBC, which two weeks ago signed a preliminary agreement to acquire Vivendi Universal’s USA and Sci-Fi cable channels, along with the Universal film studio, bolstering a stable of cable channels that includes Bravo, MSNBC and CNBC.

For the past several years, Viacom and other media companies have pressed the Federal Communications Commission to relax restrictions on owning local TV stations. One of their main arguments: Their audience is shrinking as cable booms and the TV audience fragments. The original three broadcast networks now capture only 33.7% of the prime-time television audience, down from 69.3% in 1985-86. Cable now boasts a 49.3% share, compared with 7.5% in the mid-’80s, according to a Cabletelevision Advertising Bureau analysis of data from Nielsen Media Research.

But with the wave of consolidation and the increased reach of the media giants, some cable systems are fighting to keep restrictions on TV-station ownership in place. Cox Enterprises, parent of the fourth-biggest cable operator, Cox Communications, has argued that the big broadcasters are abusing protections granted them under federal law. The broadcasters, Cox argues, are using those protections to charge cable systems more for their cable channels. Cox and others have complained to the FCC that media companies make them accept less-popular cable channels in exchange for carrying their broadcast networks.

Media companies counter that their consolidation only puts them on a level playing field with cable operators, who are themselves merging into giants. Comcast Corp.’s acquisition of AT&T Corp.’s cable division last year gave it a reach of more than 21 million homes, for instance, almost 30% of homes served by cable. Comcast has already begun to tell cable channels it wants to save money on what it pays for programming, setting the scene for increasingly contentious negotiations with big media companies.

“There has been so much consolidation” among the distributors that “unless you are equally big … you risk a situation where you can be marginalized,” says Viacom President Karmazin.

Following the Money

In buying up cable channels, the media conglomerates are simply following the money. The music business is shrinking rapidly as piracy eats into sales. Universal Music Group, the world’s biggest, is now thought to be valued at $5 billion to $6 billion, less than half what it was a few years ago. The film business is volatile, with a quarter’s performance dependent on whether movies bomb or not. The publishing business is steady but grows at a slow pace. Broadcast television’s audience is shrinking, and its business model is entirely dependent on advertising revenue, a cyclical business.

Cable channels are gushing cash because they generate revenue from two sources — subscriptions and advertising. The subscriptions don’t come directly from customers, but through cable-TV services, which operate the vast array of wires and pipelines connected to homes, and through satellite-TV services that beam the signal. For the right to carry the programming on their systems, these cable-operating companies pay a range of monthly fees, from 26 cents a subscriber for VH-1 to more than $2 for ESPN. These fees, for the most part, increase every year, providing a steadily rising annuity for the channel owners.

As cable viewership has increased, so has advertising. Since 1980, cable-channel ad revenue has risen from practically nothing to $10.8 billion in 2002, according to the Cabletelevision Advertising Bureau. Some channels, meanwhile, are cashing in on strong brand names. Nickelodeon, for one, is a merchandising powerhouse, with products including Dora the Explorer backpacks and SpongeBob SquarePants videogames.

The result has been an explosion in profits. MTV earned just $54 million in 1989, estimates Kagan World Media, but is expected to make more than 10 times that much this year. QVC, the home shopping channel, generates so much money that Liberty Media recently agreed to buy full ownership of the channel at a value of about $14 billion — the same value put on all of Vivendi Universal’s film and TV assets.

Cable channels’ surging profits have transformed the bottom lines of their parent companies. E.W. Scripps Co., the 125-year-old Cincinnati newspaper publisher and TV-station owner, now relies on its cable division for much of its profit growth. In 1994, Scripps launched the Home and Garden channel on the initiative of a TV executive, Ken Lowe, amid widespread skepticism. One Scripps newspaper publisher approached Mr. Lowe at the time to complain “a lot of the cash that I’m making here is being shipped to you…. You better know what you’re doing,” Mr. Lowe recalls.

Nine years later, HGTV has become one of the most popular cable channels, with shows such as “Design on a Dime” and “House Hunters.” Scripps added a controlling stake in the Food Network in 1997. In the second quarter of this year, the impact of cable channels, including the Home and Garden channel and the Food Network, was clear: Newspaper and broadcast-TV profits both fell, while cable-channel profit jumped 70%, helping Scripps’s net profit more than double. Scripps stock is trading near its 52-week high of $90.65, up almost 30% for the past 12 months.

The publisher who had complained about the cable-channel investment recently thanked Mr. Lowe, now Scripps’s CEO, noting that the rise in Scripps’s stock price would put his three children through college, Mr. Lowe says.

Since 1990, almost half of the top 50 cable channels have changed hands. Among the big deals: Disney’s $19 billion acquisition of ESPN’s parent, Capital Cities/ABC, and Time Warner’s $6.7 billion purchase of CNN parent Turner Broadcasting, both negotiated in the summer of 1995. In 2001, Disney bought the Family Channel from News Corp. for $5.2 billion.

Last year, NBC bought Bravo for $1.3 billion. CBS, owner of The Nashville Network (now Spike TV) and Country Music Television, itself was gobbled up in 2000 by MTV’s longtime parent, Viacom. Viacom has since added channels such as BET and Comedy Central.

Mr. Karmazin recently boasted to investors that the company’s broadcast and cable outlets reach 26% of the nation’s viewers in prime time, a significantly bigger share than any other company. Having such a big market share is “real important for lots of reasons, in terms of dealing with advertisers and our cable partners,” he told investors.

Ad sales and marketing executives from the CBS and MTV Networks divisions meet regularly to share information and plot cross-promotional opportunities. In January 2001, MTV staged the halftime show for the Super Bowl, which was broadcast on CBS, featuring performances from Aerosmith and Britney Spears.

Last fall, CBS helped stem a slide in young women viewers of its reality blockbuster series “Survivor” with a documentary on the series that ran repeatedly on MTV before the new season of Survivor premiered. The premiere episode of “Survivor” on CBS saw a 23% jump in its young female audience, says George Schweitzer, executive vice president of marketing for CBS. CBS promoted its sitcom “King of Queens” through a special last Friday on Viacom’s Comedy Central cable channel.

Protecting One Another

The broadcast and cable sides of Viacom generally don’t try to sell ads jointly, but the common ownership allows them to protect each other’s flanks. At a presentation to advertisers last spring, MTV executives compared the audience reach for most of MTV Networks with ABC, NBC, Fox and WB — but CBS’s figures weren’t included in the breakdown, so that MTV didn’t siphon ads from its corporate cousin.

Meanwhile, Disney’s ownership of both ABC and ESPN allows it to spread out the cost of expensive sports packages such as its deals with the National Football League and the National Basketball Association. ABC Sports is, in fact, overseen by the same executive who runs ESPN, George Bodenheimer, and the two operations regularly promote each other’s programming and share talent.

Joint ownership of cable and broadcast is particularly valuable in negotiations with cable operators. A 1992 law allows broadcasters to regularly renegotiate the price for carrying TV stations’ signal on cable. While broadcasters could charge a cash fee, they usually offer the broadcast stations free in exchange for carrying a new cable channel they’ve launched. Few viewers would subscribe to cable if ABC, CBS or NBC weren’t on the channel line-up, so the cable operators have little leverage.

The strategy lets broadcasters add more cable channels, including many narrowly focused networks. Since 1993, big media companies have launched at least 35 new cable channels by bartering the right to carry their broadcast stations, estimates George Callard, an attorney with Cinnamon Mueller, a law firm that is counsel to the American Cable Association.

Using such a strategy, cable operators say, Disney has shoehorned its Soapnet cable channel, which features reruns of soaps such as “General Hospital,” into services reaching 33 million homes. Disney argues that fewer than half of those homes have the channel as a result of a barter arrangement.

Cox Enterprises complained in a filing with the FCC in January that Cox Communications had to agree to carry Soapnet nationally in exchange for the right to offer ABC stations in just a few of its markets. A Disney spokesman says Cox is a “savvy negotiator” that “wouldn’t have signed the deal unless they found value in it.”

Catalina Cable, a cable-TV operator on Catalina Island off the California coast, has only 1,440 customers. Ralph Morrow, Catalina’s owner, says he was asked to carry Soapnet when he tried to renew his right to carry a Disney ABC affiliate for the beginning of 2000. He says he suggested paying cash for ABC instead. Disney’s response was that the cash fee for ABC would be “really high,” he says. “They made it clear to me” that he didn’t have that option “at a reasonable price.” A Disney spokesman says Mr. Morrow mischaracterized its offer, noting that Disney offers operators “multiple options, including a stand-alone cash offer which we believe to be a fair offer and fair value.”

Mr. Morrow, who says he doesn’t see the need for a soap-opera channel, now pays Disney 11 cents a subscriber for Soapnet. Disney responds that surveys of viewers have shown Soapnet to be popular. The channel drew 97,000 viewers in July and August, according to Nielsen. In the same period, HGTV — which is available in about two and a half times as many homes — averaged 457,000 viewers.

–Joe Flint contributed to this article.

© 2003 The Wall Street Journal

Corporations the Only Winners in Occupation of Iraq

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By Devin Nordberg
September 13, 2003

“It’s not about oil. It’s not about oil.”

But we’re taking their oil. And not just to finance reconstruction.

Paul Bremer, the U.S. administrator of the Iraqi occupation, made that clear back in July when he declared that Iraq needs to accept foreign investment and privatization of its oil before a permanent government is put in charge of the country. In other words, democracy is welcome only after the most important economic decisions for the future of Iraqis have been decided for them.

You’d think that such a blatant rejection of democracy and obvious grab at Iraq’s oil would attract more notice. Bremer made it clear that corporations take priority over people in Iraq, and that the Bush Administration’s occupation will continue that.

The Bush occupation of Iraq has an eerie similarity to another intervention in the Middle East that occurred 50 years ago — the CIA-British coup that ousted Iran’s democratically elected leader, Mohammed Mossadegh, and installed the infamous Shah of Iran.

So when Arab nations greet our rhetoric of creating democracy with suspicion or outright derision, we’ve earned it. Iranians struggled successfully for democracy and U.S. politicians promptly crushed their dream.

Then as now, the United States and Great Britain used violence to prevent Iraq and Iran from controlling their own oil.

This set of priorities contrasts sharply to the U.S. occupation of Japan after World War II, when Americans sat down with Japanese scholars and collaboratively designed and implemented one of the most progressive, democratic constitutions in the world*. We can take pride for having helped Japan evolve into a peaceful, stable, and prosperous country that is one of our closest allies. Today, Iranian and Iraqi people resent our support of their previous corrupt regimes and, understandably, don’t trust our intentions now.

The differences between American occupations of 1945 Japan and 2003 Iraq reflect the rise of corporate power here and abroad, and within the Bush administration in particular. Dick Cheney’s former company, Halliburton, is already cashing in on Iraqi “rebuilding” contracts that it obtained from the U.S. government. The oil companies that donated so heavily to the Bush campaign will reap huge profits if they are allowed to take over oil production in Iraq. The weapons makers profit from Bush’s policies as well, and even telecommunications companies stand to benefit, since Bremer intends to give foreign corporations license to operate mobile phone networks in Iraq.

It’s no surprise that Dick Cheney, Paul Wolfowitz and Donald Rumsfeld have been advocating an invasion of Iraq since at least 1998 through the Project for a New American Century. It could be argued that Saddam Hussein has been a marked man since he nationalized Iraqi oil back in 1973, but that’s another story.

Meanwhile, the American occupation of Iraq increasingly resembles the cycle of violence between Palestinians and Israelis: American soldiers are ambushed and killed, and the U.S. military retaliates by rounding up and imprisoning Iraqi “suspects,” including civilians, women, and children as young as 11. More Iraqi violence results, and the cycle continues. Iraqis have little hope that American troops will withdraw anytime soon and have not been treated with dignity or human rights by their occupiers.

How did the American ideals of liberty and justice become hollow slogans for presidents to use to justify military attacks abroad? Ever since Eisenhower warned us of the dangers of the military-industrial complex, it has become steadily more powerful. Corporations should not be allowed to influence foreign policy.

Yet the Bush administration’s foreign policy, like domestic policy, often seems to come directly from corporate board rooms. For example, Executive Order 13303 grants complete legal immunity to transnational oil companies operating in Iraq. While U.S. soldiers attempt to establish law and order in Iraq, Bush has put oil companies above the law.

The time to end the occupation of Iraq is overdue. We should pull our troops out before more of them die, hand the temporary administration of Iraq over to the United Nations, let the U.N. weapons inspectors back in Iraq, fund the rebuilding of Iraq through the U.N., and allow Iraqis to choose their own government.

The best way for us to fight terrorism is to advance justice; and justice will not be possible as long as corporations are prioritized over people.

© 2003 ReclaimDemocracy.org

Devin Nordberg is a volunteer for ReclaimDemocracy.org.

 

The Language of Power, Fear and Emptiness

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By Renana Brooks
First published in The Nation, July 2003

Editor’s note: This article obviously is written from the perspective of a Bush opponent, but it goes far beyond criticism, providing some fascinating insight for those who share our interest in the power of language and framing of issues.

George W. Bush is generally regarded as a mangler of the English language. What is overlooked is his mastery of emotional language–especially negatively charged emotional language–as a political tool. Take a closer look at his speeches and public utterances, and his political success turns out to be no surprise. It is the predictable result of the intentional use of language to dominate others.

President Bush, like many dominant personality types, uses dependency-creating language. He employs language of contempt and intimidation to shame others into submission and desperate admiration. While we tend to think of the dominator as using physical force, in fact most dominators use verbal abuse to control others. Abusive language has been a major theme of psychological researchers on marital problems, such as John Gottman, and of philosophers and theologians, such as Josef Pieper. But little has been said about the key role it has come to play in political discourse, and in such “hot media” as talk radio and television.

Bush uses several dominating linguistic techniques to induce surrender to his will. The first is empty language. This term refers to broad statements that are so abstract and mean so little that they are virtually impossible to oppose. Empty language is the emotional equivalent of empty calories. Just as we seldom question the content of potato chips while enjoying their pleasurable taste, recipients of empty language are usually distracted from examining the content of what they are hearing. Dominators use empty language to conceal faulty generalizations; to ridicule viable alternatives; to attribute negative motivations to others, thus making them appear contemptible; and to rename and “reframe” opposing viewpoints.

Bush’s 2003 State of the Union speech contained thirty-nine examples of empty language. He used it to reduce complex problems to images that left the listener relieved that George W. Bush was in charge. Rather than explaining the relationship between malpractice insurance and skyrocketing healthcare costs, Bush summed up: “No one has ever been healed by a frivolous lawsuit.” The multiple fiscal and monetary policy tools that can be used to stimulate an economy were downsized to: “The best and fairest way to make sure Americans have that money is not to tax it away in the first place.” The controversial plan to wage another war on Iraq was simplified to: “We will answer every danger and every enemy that threatens the American people.” In an earlier study, I found that in the 2000 presidential debates Bush used at least four times as many phrases containing empty language as Carter, Reagan, Clinton, Bush Senior or Gore had used in their debates.

Another of Bush’s dominant-language techniques is personalization. By personalization I mean localizing the attention of the listener on the speaker’s personality. Bush projects himself as the only person capable of producing results. In his post-9/11 speech to Congress he said, “I will not forget this wound to our country or those who inflicted it. I will not yield; I will not rest; I will not relent in waging this struggle for freedom and security for the American people.” He substitutes his determination for that of the nation’s. In the 2003 State of the Union speech he vowed, “I will defend the freedom and security of the American people.” Contrast Bush’s “I will not yield” etc. with John F. Kennedy’s “Ask not what your country can do for you, ask what you can do for your country.”

The word “you” rarely appears in Bush’s speeches. Instead, there are numerous statements referring to himself or his personal characteristics–folksiness, confidence, righteous anger or determination–as the answer to the problems of the country. Even when Bush uses “we,” as he did many times in the State of the Union speech, he does it in a way that focuses attention on himself. For example, he stated: “Once again, we are called to defend the safety of our people, and the hopes of all mankind. And we accept this responsibility.”

In an article in the January 16 New York Review of Books, Joan Didion highlighted Bush’s high degree of personalization and contempt for argumentation in presenting his case for going to war in Iraq. As Didion writes: “‘I made up my mind,’ he had said in April, ‘that Saddam needs to go.’ This was one of many curious, almost petulant statements offered in lieu of actually presenting a case. I’ve made up my mind, I’ve said in speech after speech, I’ve made myself clear. The repeated statements became their own reason.”

Poll after poll demonstrates that Bush’s political agenda is out of step with most Americans’ core beliefs. Yet the public, their electoral resistance broken down by empty language and persuaded by personalization, is susceptible to Bush’s most frequently used linguistic technique: negative framework. A negative framework is a pessimistic image of the world. Bush creates and maintains negative frameworks in his listeners’ minds with a number of linguistic techniques borrowed from advertising and hypnosis to instill the image of a dark and evil world around us. Catastrophic words and phrases are repeatedly drilled into the listener’s head until the opposition feels such a high level of anxiety that it appears pointless to do anything other than cower.

Psychologist Martin Seligman, in his extensive studies of “learned helplessness,” showed that people’s motivation to respond to outside threats and problems is undermined by a belief that they have no control over their environment. Learned helplessness is exacerbated by beliefs that problems caused by negative events are permanent; and when the underlying causes are perceived to apply to many other events, the condition becomes pervasive and paralyzing.

Bush is a master at inducing learned helplessness in the electorate. He uses pessimistic language that creates fear and disables people from feeling they can solve their problems. In his September 20, 2001, speech to Congress on the 9/11 attacks, he chose to increase people’s sense of vulnerability: “Americans should not expect one battle, but a lengthy campaign, unlike any other we have ever seen…. I ask you to live your lives, and hug your children. I know many citizens have fears tonight…. Be calm and resolute, even in the face of a continuing threat.” (Subsequent terror alerts by the FBI, CIA and Department of Homeland Security have maintained and expanded this fear of unknown, sinister enemies.)

Contrast this rhetoric with Franklin Roosevelt’s speech delivered the day after the Japanese attack on Pearl Harbor. He said: “No matter how long it may take us to overcome this premeditated invasion, the American people in their righteous might will win through to absolute victory…. There is no blinking at the fact that our people, our territory and our interests are in grave danger. With confidence in our armed forces–with the unbounding determination of our people–we will gain the inevitable triumph–so help us God.” Roosevelt focuses on an optimistic future rather than an ongoing threat to Americans’ personal survival.

All political leaders must define the present threats and problems faced by the country before describing their approach to a solution, but the ratio of negative to optimistic statements in Bush’s speeches and policy declarations is much higher, more pervasive and more long-lasting than that of any other President.

Let’s compare “crisis” speeches by Bush and Ronald Reagan, the President with whom he most identifies himself. In Reagan’s October 27, 1983, televised address to the nation on the bombing of the US Marine barracks in Beirut, he used nineteen images of crisis and twenty-one images of optimism, evenly balancing optimistic and negative depictions. He limited his evaluation of the problems to the past and present tense, saying only that “with patience and firmness we can bring peace to that strife-torn region–and make our own lives more secure.”

George W. Bush’s October 7, 2002, major policy speech on Iraq, on the other hand, began with forty-four consecutive statements referring to the crisis and citing a multitude of possible catastrophic repercussions. The vast majority of these statements (for example: “Some ask how urgent this danger is to America and the world. The danger is already significant, and it only grows worse with time”; “Iraq could decide on any given day to provide a biological or chemical weapon to a terrorist group or individual terrorists”) imply that the crisis will last into the indeterminate future.

There is also no specific plan of action. The absence of plans is typical of a negative framework, and leaves the listener without hope that the crisis will ever end. Contrast this with Reagan, who, a third of the way into his explanation of the crisis in Lebanon, asked the following: “Where do we go from here? What can we do now to help Lebanon gain greater stability so that our Marines can come home? Well, I believe we can take three steps now that will make a difference.”

To create a dependency dynamic between him and the electorate, Bush describes the nation as being in a perpetual state of crisis and then attempts to convince the electorate that it is powerless and that he is the only one with the strength to deal with it. He attempts to persuade people they must transfer power to him, thus crushing the power of the citizen, the Congress, the Democratic Party, even constitutional liberties, to concentrate all power in the imperial presidency and the Republican Party.

Bush’s political opponents are caught in a fantasy that they can win against him simply by proving the superiority of their ideas. However, people do not support Bush for the power of his ideas, but out of the despair and desperation in their hearts. Whenever people are in the grip of a desperate dependency, they won’t respond to rational criticisms of the people they are dependent on. They will respond to plausible and forceful statements and alternatives that put the American electorate back in touch with their core optimism.

Bush’s opponents must combat his dark imagery with hope and restore American vigor and optimism in the coming years. They should heed the example of Reagan, who used optimism against Carter and the “national malaise”; Franklin Roosevelt, who used it against Hoover and the pessimism induced by the Depression (“the only thing we have to fear is fear itself”); and Clinton (the “Man from Hope”), who used positive language against the senior Bush’s lack of vision. This is the linguistic prescription for those who wish to retire Bush in 2004.

Rank Divides America

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By Robert W. Fuller
First published by Newsday, August 3, 2003

The recent Supreme Court decision on the University of Michigan Law School’s use of race in the admissions process has stirred up an all-too-familiar controversy. By what means can we deliver on Thomas Jefferson’s proposition that “all men are created equal”? While the decision upheld a limited place for affirmative action, it was the hope of Justice Sandra Day O’Connor that 25 years from now affirmative action “will no longer be necessary.”

Without question, affirmative action has given teeth to the goal of equal opportunity. But it alone cannot bring about the society O’Connor hopes for because it fails to address a problem more fundamental than racism, sexism and the variety of other “isms” that still plague us. What underlies all these forms of discrimination is something less conspicuous but no less profound in its consequences. It is rank – in particular, low rank signifying a lack of power.

The most significant unexplored rift dividing America today – one that cries out for our attention – is not that of race, gender, age or religion. Rather, it is the gap between the “somebodies” – the relatively powerful and successful – and the “nobodies” – the relatively weak and vulnerable. The nobodies are not just another in the litany of identity groups. There is something different about this grouping, because each and every one of us can be a member of it just as all of us have at some point nominated someone else for inclusion.

It happens every day. A boss harasses an employee. A customer demeans a waiter. A coach bullies a player. A doctor disparages a nurse. A teacher humiliates a student. A parent belittles a child. Somebodies with higher rank and more power in a particular setting can maintain an environment that is hostile and demeaning to nobodies with lower rank and less power in that setting, much as most everywhere whites used to be at liberty to mistreat blacks.

Some 35 years of affirmative action have put racists and sexists on notice. But there has been no corresponding outcry against abuses that occur within a race or gender. Blacks insult and exploit other blacks of lower rank, whites do the same to whites and women to women, all with confidence that it will pass as business as usual.

We don’t have a ready name for abuse and discrimination based on rank, but it deserves one. When discrimination and injustice are race-based, we call it racism; when they’re gender-based, we call it sexism. By analogy, rank-based abuse and exploitation can be called “rankism.” Naming rankism, putting it in the spotlight, is half the battle.

Rankism occurs when rank-holders use the power of their position to secure unwarranted advantages or benefits for themselves. It typically takes the form of self-aggrandizement and exploitation of subordinates. It is the opposite of service. Good leaders eschew rankism; bad ones indulge in it. It can be found in governments, businesses, families, workplaces, schools and universities, as well as religious, nonprofit and health-care organizations. It distorts personal relationships, erodes the will to learn, fosters disease, taxes productivity, undermines public trust, stokes ethnic hatred and incites revenge. Recent front-page examples of rankism include corporate and philanthropic corruption, sexual abuse by clergy, school hazing, and abuse of elders.

At the societal level, rank-based discrimination afflicts none more inescapably than those lacking the protections of social rank – the working poor. Two recent books chronicle this widening fissure. In “Nickel and Dimed: On (Not) Getting By in America,” Barbara Ehrenreich makes a compelling case that the working poor are in effect unacknowledged benefactors whose labor subsidizes the more advantaged. In “Wealth and Democracy: A Political History of the American Rich,” Kevin Phillips explores how the rich and politically powerful create and perpetuate privilege at the expense of the middle- and lower classes.

I am not in any way proposing that we do away with rank. This would make about as much sense as doing away with race or gender. When earned and exercised appropriately, rank is a legitimate, virtually indispensable tool of an organization. But when the high-ranking abuse their authority, those of lower rank experience discrimination and injustice not different in their material and psychological effects from the discrimination and injustice we now disallow when their victims belong to the familiar identity groups.

To achieve a just society, we have to decide what it means to be a nation of equals. Indeed, at first glance, such a goal might seem absurd. How can we be equals when we are obviously unequal in skill, talent, beauty, strength, health and wealth – in any commonly recognized trait for that matter? The answer is that people are equal in a sense they have always considered fundamental to being human: They are equal in dignity.

This is not some utopian ideal. As Vartan Gregorian, president of the Carnegie Corporation of New York, once put it: “Dignity is not negotiable.” Rankism is invariably an insult to the dignity of an individual or group. If the aggrieved party dare not protest, it will nurse its wounds until a time when it can exact revenge. The 20th century has seen numerous demagogues who have promised to restore the pride and dignity of a people who felt they’d been “nobodied.” The long-term and most horrific consequences of rankism between peoples range from sabotage and terrorism to genocide and war.

It’s natural at first to wonder whether rankism is part of human nature. Not so long ago, it was widely believed that racism and sexism were, but now they are generally regarded as learned. While the impulse to exploit a power advantage for personal gain is hardly uncommon in our species, history shows it is equally in our nature to detest such abuses and to act together to circumscribe the authority of rank-holders.

To this end, we have overthrown kings and tyrants and placed political power in the hands of the people. We have reined in monopolies with antitrust legislation. We have limited the power of employers through unionization. Blacks, women, homosexuals and people with disabilities have all built effective movements that succeeded in replacing a once-sacrosanct social consensus with another that repudiated it.

People acquiesce in rankism because they fear the consequences of resisting: demerit, demotion, ridicule and ostracism. The muffled complaints, occasional whistle-blowing and sporadic outbursts we do hear echo those of blacks and women who resisted in solitary protest before popular movements made it impossible to ignore their demands.

By breaking the taboo on discussing rank, giving this kind of abuse and discrimination a name and revealing its costs, we can anticipate that the tacit social consensus that supports rankism will unravel. Like the members of other identity groups, victims of rankism can then be expected to join forces and make themselves heard. An auspicious example is the recently founded Roman Catholic lay organization Voice of the Faithful, whose goal is to limit the absolute authority of clerics. In time, we may see the emergence of a broad-based “dignitarian” movement dedicated to overcoming rankism in all its guises.

Today’s N-word is “nobody.” The successes of affirmative action herald the day when the victims of indignity, injustice and inequity are as apt to be white as black, male as female, or straight as gay. Even now, what primarily marks people for mistreatment and exploitation is low rank and the powerlessness it signifies. Overcoming rankism is democracy’s next step. In taking it, we will have the opportunity to honor the dual commitment to both freedom and justice that our nation’s founders imprinted on the American psyche.

Robert Fuller is the author of “Somebodies and Nobodies: Overcoming the Abuse of Rank.” You can learn more about this issue at his website, dignitarians.org

© 2003 Robert Fuller
Used with permission of author

Argument Against a Bank of Wal-Mart

by

Testimony of Terry J. Jorde
From FDIC hearing of July 16, 2003 in Washington, D.C.

Editor’s note: The following is Mr. Jorde’s testimony at 2003 sympsium held by the Federal Deposit Insurance Corporation.

Good morning. My name is Terry Jorde, and I’m pleased to be here to present a community banker’s perspective on the issue of mixing banking and commerce.

I am president and CEO of CountryBank USA, a community bank with two offices in Cando and Devils Lake, North Dakota. I also have the honor and privilege of being the only active banker to sit on the FDIC’s Advisory Committee on Banking Policy. I’d like to thank the FDIC and especially Chairman Powell for inviting me to participate today.

At the Advisory Committee’s last meeting, I offered my comments on the issue of mixing banking and commerce generally, and particularly on the issue of whether it is good public policy for a commercial firm to own a bank. My reward for speaking up was to be invited to sit on this panel today to present my views a little more formally-surrounded by others whose views likely differ from mine.

It will come as no surprise to most in this audience that I, like nearly all community bankers, oppose the mixing of banking and commerce. We have been accused of holding this view because we are afraid of competition. Now, I have just as much interest in self-preservation as the next person, and I think I’m a pretty good community banker, but if the competition overwhelmed me, I like to think that I’m probably still employable. Therefore, I would like to use my time this morning to consider the issue from a public policy standpoint, not from the point of view of a competitor, but from the point of view of consumers of banking services, both businesses and households alike.

U.S. law generally prohibits affiliations or combinations between banks and commercial firms. The historical reasons for separating banking and commerce are well known, and in my view are probably more valid today than in the past. They include:

  • Conflicts of interest and misallocation of credit that arise when banks and commercial firms affiliate;
  • Aversion to financial and economic monopolies; and
  • Concern about extending the federal safety net and increasing taxpayer losses.

Conflicts of Interest
Let’s put this into context by considering a bank or industrial loan company owned by Wal-Mart. Now, I really have nothing against Wal-Mart and a year ago I may have used Enron as an example, but I’m going to pick on Wal-Mart today since they are the largest company in the world, and it’s no secret that they really, really, really want to own a bank.

Now, imagine that you are a small business retailer in a town with a Wal-Mart SuperCenter (assuming that you haven’t already been run out of business by Wal-Mart). And you need an operating loan or a loan to expand your business. You are a hardware store owner, a Jiffy-Lube franchise owner, a pharmacist, a grocer, a florist, an optometrist, a used car dealer, or any one of a number of other small businesses that may compete with Wal-Mart. Would a Wal-Mart owned bank agree to lend you the money if you were creditworthy? Would you want to share your confidential business plans and information with this bank?

Well, you say, I would just seek credit elsewhere. But, what if there are no other local credit providers in your community because the Wal-Mart bank has underpriced them out of existence? You could try to get credit from outside your local market, but those banks and lenders don’t know you and your business, and you don’t fit their cookie cutter mold to qualify for a credit-scored small business loan, so they will not lend you money either.

Imagine you are a supplier to Wal-Mart. What if Wal-Mart tells you it won’t do business with you anymore unless you obtain your banking and credit services at the Wal-Mart bank?

These are examples of how commercial and banking affiliations can interfere with a bank’s role as an impartial financial intermediary-one whose credit decisions should be based on merit, and not competitive concerns. These affiliations would undermine one of the key strengths of the U.S. financial and economic system-the efficient and unbiased allocation of credit among competing borrowers. In my view, commercial and banking affiliations, such as a Wal-Mart owned bank, would be particularly harmful in smaller communities where there are fewer alternative sources of credit.

Small business financing is not just important in and of itself. Small business financing is key to economic development in local communities. Local banks that fund local businesses, and that can provide relationship banking that is so important to small business, are particularly attuned to this issue, and are uniquely equipped to facilitate the local economic development process, which can be time-consuming and resource intensive.

Community bankers provide tremendous leadership in their communities, which is critical to economic development and community revitalization. Last week alone, I spent six hours in a hospital board meeting, four hours in an economic development corporation meeting, and another four hours working with other local community bankers to develop a financial incentive package for a potential new business in our community.

You could argue that this was not an efficient and cost-effective way to spend my time, and in fact, Wal-mart might agree with you, as not one of their 1.3 million employees were at any of these meetings (and Wal-mart is in my community). But the difference is that, unlike Wal-mart, the survival of CountryBank USA depends on the economic vitality of Cando and Devils Lake, North Dakota, and I have a very real incentive to work to assure their success.

Consumers
Let’s consider consumers. Wal-Mart says 20% of its customers don’t have bank accounts. The answer isn’t letting Wal-Mart own a bank, but figuring out why the 20 percent are unbanked. It isn’t because of a lack of banks available to those customers. My local community of Cando has 1,300 people and is served by 3 community banks. Our branch location in Devils Lake has 7,500 people and is served by 8 banks, all of which have low or no-cost deposit and checking products that are affordable for customers of all income levels.

My bank offers one consumer checking account and it’s free. And our checks are free, our debit card is free, out Internet banking is free, our ATM card is free and thanks to the Fed, our loans are almost free!

But what will happen to banking services for consumers and households in a world where Wal-Mart owns a bank? If the past is prologue, local banks, just like local retailers in towns where Wal-Mart has located, will no longer be able to compete. While the initial effect may be cheaper services at the Wal-Mart bank, the long-term effect will be reduced choices for consumers as the number of financial services providers shrinks, and as the products become more commoditized.

A Wal-Mart owned bank will not be able to look past a consumer’s credit score to understand the customer’s individual circumstances and can’t make the customer a loan based on a long-standing relationship and personal knowledge of the customer… something my bank does every day. (Source: https://www.crediful.com/)

Monopolies
Our country was founded on the ideals of separation and dispersion of political and economic power. A hallmark of our strong economy, which is the envy of the world, is our diversified economic system, with both a diversified financial sector and a strong and robust small and middle market business sector. Bank and commercial affiliations would undermine this strength, and enable huge conglomerates to dominate the American economy.

We have already seen alarming consolidation in the banking industry, and in a number of other industry sectors. The number of banks continues to decline while the market share of the largest banks continues to grow. In 1995, there were 10,168 commercial banks in this country. By the end of 2002, this number had dropped 27%, down to 7,482. Only 405 (or 6%) of the nation’s banks are greater than $1 billion in assets, yet they control 85% of the total commercial banking assets in the United States . The 80 banks with more than $10 billion in assets control 72% of industry assets, up from 52% in 1995.

When you consider that banks with only 15% of the banking assets provide nearly 40% of the small business loans, you understand that a policy that supports a strong system of community banks provides essential fuel to the economic engine of the United States . Allowing commercial and bank affiliations would only serve to undermine our cultural heritage and the financial and economic diversity essential to our nation’s well being.

Federal Safety Net
Mixing banking and commerce also presents the danger of extending the safety net protecting depositors of federally insured institutions. Commercial affiliates of banks may seek to shift losses to the bank, or financial difficulties at an affiliate could lead to loss of confidence in the bank, even where it does not try to tap the bank’s resources. While firewalls between the bank and its affiliates are important to help mitigate these dangers, firewalls tend to melt when there is a really hot fire.

Imagine if Enron or WorldCom had owned a large insured bank or ILC. Even if the Enron Bank were run safely and soundly, what would have happened to that bank upon news of its parent’s spectacular demise?

All of these banking and commerce issues were considered again by the Congress when it passed the Gramm-Leach-Bliley Act, which reaffirmed our nation’s long-standing policy against mixing banking and commerce. Congress specifically considered and rejected the notion of allowing financial holding companies to have a 15% “basket” of commercial activities.

In addition, Congress closed the unitary thrift loophole, which allowed a commercial company to own a single FDIC-insured savings institution. Congress was spurred to action to close the loophole, in fact, by an eleventh hour application by Wal-Mart to buy a unitary thrift-the specter of which Congress found unacceptable.

ILCs
I would like to close with a few thoughts about industrial loan companies. These hybrid FDIC-insured bank charters, available in a few states, have been the focus of a renewed debate about banking and commerce, as the Congress considers legislation that would expand ILC powers.

Because of an exemption in the Bank Holding Company Act, ILCs can be owned by any commercial company, and their owners are not subject to the same supervision and oversight by the Federal Reserve that applies to other bank holding companies. ILCs were granted this loophole in 1987, on the condition that the ILC either refrain from offering demand deposits withdrawable by check, or remain below $100 million in assets.

In 1987, there were a number of small ILCs that functioned as local institutions. Many converted to state bank or savings association charters. Today, however, deposits in a number of ILCs have grown into the billions of dollars, and ILCs have been acquired by a number of large corporations. In 1995, Utah’s loan companies had combined assets of $2.9 billion, but by the end of last year had more than $100 billion. The largest, owned by Merrill Lynch, has assets of $65 billion and would rank 17th on a list of the country’s largest banks. Other ILC owners include General Motors Corp., BMW, GE Capital, Sears, Volvo, and Morgan Stanley Dean Witter.

Wal-Mart applied to acquire a California industrial bank last year, but was thwarted when the state legislature passed end-of-session legislation allowing only financial companies to own ILCs. California now applies the activities restrictions of the Bank Holding Company Act to ILC owners.

Pending federal legislation would effectively remove the conditions for Bank Holding Company Act exemption imposed on ILCs in 1987. Interest on business checking legislation would allow ILCs that cannot currently offer demand deposits to offer their functional equivalent, Business NOW Accounts. This, in essence, makes ILCs full service banks, but outside the scope of the Bank Holding Company Act.

To make matters worse, pending regulatory relief legislation would permit ILCs (and other banks) to branch de novo across state lines regardless of existing state laws.

The combination of these two measures would allow large corporations to use the ILC charter to offer full service banking, nationwide, by setting up branches in each of their locations, and not be subject to the same laws and regulations as owners of FDIC-insured banks and thrifts.

ILCs have said it would be unfair to deny them these expanded powers as they are only asking for parity with other banking institutions.

If parity is appropriate, then why not parity of holding company supervision and holding company activities restrictions?

If it is appropriate to restrict ownership of banks to financial companies and subject bank holding companies to certain rules and oversight, then it is appropriate to do so for an ILC that is the functional equivalent of a commercial bank.

Supervision
And then there is the subject of supervision. The FDIC does have limited authority to examine bank affiliates in order to police transactions between the affiliate and the bank, but it pales in comparison to the oversight and supervision of bank holding companies provided for under the Bank Holding Company Act-including general examination authority, consolidated umbrella supervision, capital requirements and enforcement authority for unsafe and unsound activities at the parent or affiliate.

Chairman Powell has argued that the FDIC and the State supervisory agencies are perfectly capable of supervising and examining ILC’s. I couldn’t agree more. My bank has been examined by the FDIC and our state-banking department for all of the 24 years of my banking career and the quality of their supervision is outstanding. I have had the unique opportunity to serve on the FDIC’s Advisory Committee as well as the Board of the North Dakota Department of Financial Institutions. I have seen firsthand that their commitment to safety and soundness is beyond reproach.

But the capability of the FDIC is not the question that we are here to discuss today. Rather, the question is whether the FDIC, or the Federal Reserve, or any regulatory agency for that matter, has the ability to prevent a meltdown from occurring if the parent company implodes. Back where I come from, if the dog that wags the tail gets sick, the whole dog is sick. If the dog dies, you can’t save the tail!

It is important to recognize that the policy issue here is not about which regulatory agency gets to be in charge. That’s irrelevant. The question is whether there is any regulatory agency that can prevent the systemic risk that will result from large commercial companies owning or controlling banks.

The U.S. policy of separating banking and commerce has served our nation and its economy very well. We are the envy of the world and our banking system is stronger than ever. The arguments for change are not compelling. The risks of getting it wrong are enormous.

Thank you very much for this opportunity to present my views.