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Previously in Politics & Prose:

What Work Costs Us (February 1999)
Richard Sennett's The Corrosion of Character examines the demoralizing effects of the new "flexible" economy.

Downsizing Days Are Here Again (January 1999)
The return of big corporate layoffs -- and what the government can do.

Unsparing Witness (December 1998)
Few of us are aware that the topic of sex and slavery was treated openly and unflinchingly in the early nineteenth century.

Newt's Last Stand (November 1998)
Christopher Caldwell, the author of last June's "The Southern Captivity of the GOP," on why Newt Gingrich couldn't save his party from its paralysis. Plus, Jack Beatty offers "A Modest Proposal" to Republicans in search of a unifying issue.

The Last Refuge of the American Bigot (October 1998)
The murder in Wyoming and the search for the roots of anti-gay violence.

More by Jack Beatty in Atlantic Unbound.

Join the conversation in the Politics & Society conference of Post & Riposte.

How Big Business Got a Soul
A recent book shows how the hated monopolies of the late nineteenth century used advertising to give themselves a makeover -- and to shape public opinion to their advantage

by Jack Beatty

March 10, 1999

Late in the last century a wave of corporate mergers combined 1,800 existing companies into 157 behemoths. Thanks to an 1886 Supreme Court ruling (Santa Clara County v. Southern Pacific Railroad), which rested on the Fourteenth Amendment, corporations had the legal status of "persons." But "a rising chorus of American voices chanted from the 1890s onward" that these "persons" had no soul, according to a recent book by the late history professor Roland Marchand, Creating the Corporate Soul. The corporation was cold and aloof, with immense power and no scruples. J. P. Morgan spoke for the tycoonery when he commented, "I owe the public nothing" -- an improvement over William Vanderbilt's brazen "the public be damned." The colossi of the meat, railroad, insurance, oil, coal, and other industries had no reservoir of public affection to draw on to insulate them from the exposés of muckraking journalists, who rose to prominence at the end of the century in the pages of the first mass magazines. "Silence is golden," John D. Rockefeller had advised: never apologize, never explain. But in the new climate of trust-busting and publicity the corporation could no longer afford silence. Indeed, Rockefeller himself hired Ivy Lee, one of the country's first public-relations consultants, to salvage the image of Standard Oil after the "Ludlow massacre," in which company and state militia shot and killed striking miners (two women and eleven children also died) in the Colorado coal fields. Corporations as diverse as AT&T, General Electric, and General Motors embarked on similar image campaigns. Through the magic of advertising and public relations, the corporate "person" was about to get a soul.

corpslbk picture Marchand's richly informative book has a big-page textbook format to accommodate scores of early twentieth century ads, some in color, all as redolent of the past as a scratchy voice on an old recording.

Business history knows few success stories to rival the decades-long corporate makeover begun by AT&T in 1908. The company is now in the midst of its second makeover, aimed at undoing the first. The 1908 makeover was undertaken to escape competition through a government-sanctioned monopoly. Today, AT&T is seeking to reenter the rough-and-tumble competitive world. Its new chairman, C. Michael Armstrong, wants his company to compete for local telephone service against the five Baby Bells, and, by acquiring cable-giant TCI, to become "the only communications provider its customers need," as The New York Times recently characterized Armstrong's ambition.

AT&T had an equally bold strategy in 1908. In 1894 the patent rights giving the nine-year-old American Telephone and Telegraph Company a monopoly over phone equipment expired. Overnight, a plethora of competitors sprang up, shaving AT&T's market share from 100 percent in 1894 to 51 percent in 1907. Even worse for AT&T than competition was the threat of government nationalization, the fate of many European phone companies. After the panic of 1907 had nearly sunk the company, the Kubla Khan of early-century finance, J. P. Morgan, demanded that AT&T install new leadership, and Theodore Vail, a former AT&T vice-president, was called back to save the company. Vail and Morgan were of one mind: AT&T must somehow win immunity from competition without falling into government's hands. Vail's strategy was to launch the first, and perhaps the longest institutional advertising campaign of the twentieth century, in order to change AT&T's corporate image from detested monopoly to servant of the people.

In a series of monthly magazine advertisements in a homey populist style, AT&T defended its goal of monopolizing the phone system as a natural one, the necessary guarantor of "universal service" through a "single system." Other ads followed, depicting heroic telephone linemen fighting blizzards, and comely telephone operators weaving strands of speech through "the magic loom of the Bell System," to quote from the ad's lush copy. One ad plunged so deeply into bathos as to show a widow and her children opening the envelopes containing their AT&T dividend checks. So successful was Vail's ad campaign at changing AT&T's image that after the federal government took control of the phones in the war emergency of 1918 there was no talk of making the arrangement permanent. AT&T got its sacrosanct monopoly back as soon as the war was over. Why should the public take over a company already dedicated to public service?

attad picture
"Our Stockholders," an AT&T ad from 1919

AT&T withstood a like challenge in the 1930s, when New Deal regulators exposed the scale and cost of AT&T's customer-financed campaign to win customer allegiance. Fortune credited the lack of public outcry to a generations' worth of AT&T ads. In Creating the Corporate Soul, Marchand says the image AT&T fashioned for itself early in the century was nothing less than that of a "loved monopoly."

Big business finally transcended its image problem and caught up with AT&T during the Second World War, when its herculean war production demonstrated the advantage of bigness. Unabashedly patriotic corporate advertising assisted in the image campaigns. The ads came in profusion, since the Treasury in 1942 had agreed to let companies deduct the cost of advertising from their pre-tax profits. Corporations pursued, according to Marchand, a "double-barreled strategy" -- "one barrel for the war theme, one barrel for the product" -- adding a "Fifth Freedom," the freedom of enterprise, to FDR's Four (freedom of speech and expression, freedom of worship, freedom from want, and freedom from fear). In an act of singular ingratitude toward the Roosevelt Administration, which was in effect subsidizing wartime advertising, corporate ads struck out at New Deal "planners" and "regimentation." One Republic Steel ad recklessly equated the New Deal with "Axis tyrannies."

After being in disfavor during the 1930s, big business at last had the public on its side: by 1944, one survey found, GM had "an all-time high" of public approval. Du Pont, unable to reach a 50 percent approval rating as late as 1937, now found favor with 69 percent of women and 76 percent of men. Even Alcoa, which a majority believed had a monopoly of the aluminum business, won the regard of 80 percent of the public.

"Less than ten years ago," Peter Drucker wrote in 1946, "it still seemed to be a vital issue of American politics whether to have Big Business or not," but after the war "it was nothing less than sentimental nostalgia" to deny that the large corporation had become "America's representative social institution." Creating the Corporate Soul shows how this transformation took place -- by means of a historic triumph of advertising and public relations.

For decades big business connoted security -- the lifetime career, the good benefits, the gold watch. No longer. Under pressure from global competition and impatient stockholders, big business has gone in for downsizing in a big way, and has become perhaps our prime agent of insecurity. No advertising campaign can efface the impression of countless headlines reading "AT&T (or GE or IBM) To Layoff 40,000." The transformation of big business from a symbol of security to a force for insecurity is, arguably, the most pervasive change in American life since the 1960s, the last years of the postwar oligopoly -- the dominance of the economy by a few big firms in each industry who competed on image and service, not on price.

Join the conversation in the Politics & Society conference of
Post & Riposte.

More by Jack Beatty in Atlantic Unbound.

Jack Beatty is a senior editor at The Atlantic Monthly and the author of The World According to Peter Drucker (1997) and The Rascal King: The Life and Times of James Michael Curley (1992).

Copyright © 1999 by The Atlantic Monthly Company. All rights reserved.
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