Corporation Nation

Corporation Nation

Corporation Nation

Corporation Nation

Synopsis

From bank bailouts and corporate scandals to the financial panic of 2008 and its lingering effects, corporate governance in America has been wracked by crises. Amid a weakening system of checks and balances in which corporate executives have little incentive to protect shareholder interests, U.S. corporations are growing larger and more irresponsible at the same time. But dependence on corporate profit was crucial to the early republic's growth, success, and security: despite protests that incorporated business was an inefficient and potentially corrupting system, U.S. state governments chartered more corporations per capita than any other nation--including Britain--effectively making the United States a "corporation nation." Drawing on legal and economic history, Robert E. Wright traces the development and decline of corporate institutions in America, connecting today's financial failures to deteriorating corporate law.

In the nineteenth century, checks and balances kept managerial interests aligned with those of stockholders, and public opinion grew supportive as corporations raised billions of dollars to finance infrastructure such as transportation networks, financial systems, and manufacturing operations. But many of these checks and balances were dismantled after the Civil War, creating a space for the managerial malfeasance that spiraled into economic crisis in the twenty-first century. Bolstered with archival and original data, including the first complete count of American business corporations before the Civil War, Corporation Nation makes a compelling argument for improved internal governance and more effective external government regulation.

Excerpt

If they were honestly and safely conducted, [corporations] would afford a
safe and satisfactory investment for small sums and thus tend to equalize
the wealth of the people.

–V. H. Lockwood, 1897

The development of the for-profit business corporation over time has never been well understood, even in the nation most responsible for its economic ascendance, the United States. “American-style corporate capitalism,” two business scholars recently proclaimed, “is an international juggernaut” (an overwhelmingly destructive force) and perhaps the single most important institutional feature of modern, developed economies the globe over. Yet even leading scholars of the U.S. economy have underestimated the number, ubiquity, and economic importance of early corporations, creating the misapprehension that they were insignificant until after, or perhaps during, the Civil War.

Two reporters for the generally astute economics weekly The Economist recently wrote a book that called the corporation “yet another quirky… invention” of “Victorian Britain.” Many contemporaries, however, believed that America, not the Mother Country, was responsible for raising corporations from vehicles of monopoly privilege to a widely used form of business. “In no other age or country,” wrote Andrew Allison in 1884, “have private corporations entered so extensively into the business of the country, never so thoroughly into the details of everyday life, as with us.” Moreover, while Britain embraced the corporate form before most other nations did, the economies of both America and Britain were significantly corporatized well before Victoria’s long reign began in 1837.

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