Empires Apart (52 page)

Following the publication of works like the Communist Manifesto and
Das Kapital
, Social Democratic parties imbued with the ideology of Marxism sprang up across Europe and North America. Over time most of these parties gradually changed their objectives, and by 1914 when the First World War started they were more concerned with the reform of capitalism than its overthrow. There were exceptions to this trend, the most important being the Russian Social Democratic and Labour party dominated by Lenin. To emphasise its difference from the reformist parties elsewhere it adopted a new name – the Communist party.

Russia now had two competing ideologies: autocracy and communism. After the revolution these two ideologies merged to create a form of society radically different from anything that had gone before, and yet one that on closer inspection had characteristics that had been there for centuries: a single all-powerful autocrat, a disdain for private property and an imperialism that was to be uncannily similar to its
predecessor's. America after the civil war had also witnessed the fusion of two ideologies – its century-old democracy and the new corporate capitalism – but the process was much less dramatic. The society of the robber barons was as different (and as similar) to the society of the Pilgrim Fathers as Stalin's Russia was to Ivan the Terrible's but the changes went almost unremarked. The Bolsheviks claimed to have changed everything and yet much stayed the same; the new American oligarchs claimed to have changed nothing and yet a new way of life had emerged. The souls of both nations continued ever changing and ever constant.

The Bolsheviks set out to destroy not just the Romanov regime but also the whole apparatus of autocracy: they believed that the working class, with the Communist party in the vanguard, would transform every aspect of Russian society, eventually creating the world's first genuine democracy. But Lenin recognised that the socialist nirvana could not be created overnight and that to gain and keep control the Bolsheviks would need many of the same tools as their predecessors: a strong army, an all-seeing secret police and an absence of free elections. He also grasped the importance of the tools of the future: one of the key events of the Russian Revolution was Lenin's radio broadcast to the nation on 12 November 1917, which set the stage for the mass propaganda campaigns that would follow under Stalin.

Lenin realised that even if he crushed all internal opposition his regime would be under constant attack from outside, so he needed to spread his message of revolution. By its very nature Marxism was global. Whereas the Romanovs believed God had entrusted them with a mission to forever expand their empire, Lenin believed that history itself had ordained that the society he was creating would expand to cover the whole world; all societies would pass through feudalism and capitalism to arrive at his doors. Right from the beginning the Bolsheviks were committed to spreading their authority far beyond the borders of Russia, a commitment fulfilled by Stalin's Red Army at the end of the Second World War. It is open to debate whether the train of history set in motion by Lenin, Trotsky and the other Bolshevik founding fathers was bound
to follow the track that ended in Stalinism or whether it might, with different drivers, have turned off, but the fact is that Stalinism is where it ended up. The ideologies of communism and autocracy merged to become a new force, and a new force that was inherently imperialist.

Exactly the same sort of merging of ideologies – in this case democracy and corporate capitalism – happened in the United States, but with one massive difference. Unlike communism the new ideology across the Atlantic had never proclaimed its intention to destroy the old; indeed it had never proclaimed itself at all. In the half-century or so after the American Civil War an ideology arose that was to shape the world, and yet did so in such an apparently organic way that few recognised what was happening. Even today the ideology has no commonly recognised name.

The evolution of the ideology of democracy was the most important philosophical development in American history. The evolution of the concept of the corporation was almost as fundamental. The emergence of the corporation as a legal entity with unlimited scope and limited liability made possible a form of imperialism that would change the face of the world.

It is possible to understand the history of Russian imperialism without understanding the ideology of communism in any depth. Although communist imperialism was not the same as tsarist imperialism, the fundamentals were not dissimilar: they both relied primarily on crude military force, they both served to magnify the authority of the autocrat, they were both opportunistic in scope but particularly fixated on Poland and the west, they both appropriated territory and property in the name of the state. In the end communist imperialism proved to be a transitory phenomenon with little lasting impact, just one more vagary in the history of the Russian empire. By contrast American imperialism in the century between the Spanish-American War and the invasions of Iraq changed almost beyond recognition, and it is impossible to understand this evolution without understanding the ideology of what might be called, for want of a better term, corporatism.

The period of the robber barons after the American Civil War resembled the Russia of today, with the collapse of old certainties, corrupt government and accelerating technological change making possible the sudden emergence of fantastically wealthy individuals dominating economic and political life. The difference is that today's Russia has jettisoned the ideology of communism without yet developing a universally accepted alternative. In America the ideology and institutions of democracy, although they had failed to prevent a murderous civil war, survived. The institutions continued almost unchanged to the present day, but the ideology underlying them was about to develop in a radical new direction.

European historians have generally regarded the First World War as the great watershed that changed world history for ever. Equally plausible is the claim that the American Civil War marked the beginning of the new age. In May 1863, 3,000 Confederate cavalrymen destroyed a key northern ‘asset' near Parkersburg, West Virginia. As flames from the appropriately named Burning Springs flared into the sky, the world witnessed for the first time oilwells and oil supplies on the front line of war. Not only was it a sign of technological change but of political and economic change, for with oil came the corporation.

Before the civil war America had been a land of local lords – southern planters, New England factory owners, New York merchants. Fifty years later the lords were not local but national, and after a further fifty years they were international. The social convulsions brought on by war, the construction of railways knitting the nation together and the economic potential of mass production set the stage for men to wield commercial power on an altogether larger scale – if the right tool could be found. That tool was the corporation.

In modern Russia that tool has arrived ready-made. Everyone knows what an oil company is, and so it was easy for unscrupulous men to carve oil companies out of the old communist structures. Earlier American oligarchs had to make it up as they went along.

Corporations had existed long before Rockefeller and Carnegie, but the robber barons married them to the ideology of democracy in a way unimaginable to the Founding Fathers. When limited liability companies were first proposed in England centuries before, the idea met enormous opposition. Until then all rights had been human rights and all rights implied corresponding responsibilities. The idea that a man could pass some of his rights to a legal abstraction, a corporation, and in doing so limit his own responsibilities, was totally alien. Only in the most exceptional circumstances would the monarch agree to a charter of incorporation, and then it was surrounded by a mass of conditions and was likely to be revoked at any moment. One such corporation, the East India Company, seemed to illustrate exactly the dangers that such charters were supposed to prevent, as it gobbled up territory in southern Asia in just the same way that the tsars were doing further north. It was the prospect of the company starting to throw its commercial weight around in the American colonies that tipped the colonists into revolt, as well as the company's tea into Boston Harbour.

The first stage on the road to the modern corporation was a minor legal development in medieval Europe that embodied a huge philosophical leap – the acceptance that a virtual object, a corporation, could have rights. It is difficult now to imagine a time when this was inconceivable, a time when all rights were human rights. Before the invention of the corporation people were fully responsible in law for their actions, whether they were acting as individuals or in a group. They could of course act in concert, but if someone else felt aggrieved about a group's actions their legal remedy was to sue the group's members. Treating the collective as a legal entity that could sue and be sued in its own right was an enormous leap forward, and one that immediately raised the question of what the entity's legal rights and responsibilities would be.

This question was answered in the next development: the concept of limited liability – the doctrine that a corporation's responsibilities could be more limited than its owners'. If I owe you £100 but only have £50 in the bank you can make me sell my belongings to give you your
£100. But if I create a corporation with limited liability and put £50 in its bank account then that is all you can get back; if my corporation owes you £100 then tough – you still only get £50 and I get to keep my belongings, because my liability is limited to the £50 I invested. The English parliament realised that giving corporations limited liability was a massive step, which created great danger for members of the public who might end up being owed money they could not collect. Parliament therefore made sure that these corporations were only created where there was a specific public benefit that could not be achieved in any other way; charters of incorporation severely limited what the corporations were allowed to do. At first the same philosophy was applied in America. It was a commonplace at the time of the American Rebellion that business should be the domain of entrepreneurs – men who were both owners and managers and who would take full responsibility for their actions. Only in very rare cases was it permissible for an activity to justify the creation of some other form of organisation in which individuals could limit their responsibilities behind the veil of incorporation.

Ted Nace, who saw the American Revolution primarily as an attack on the corporate power of the East India Company, has researched the fundamental changes in US political values since that time. The changes started soon after the United States was born and greatly alarmed many of the Founding Fathers. Nace quotes Thomas Jefferson, who spoke out towards the end of his life against the perils facing the new nation: ‘I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength.'

Up until the civil war charters of incorporation were still relatively rare and were granted by state legislators for very specific purposes, such as building a railway, and were always circumscribed by numerous conditions. Corporations were prohibited from doing anything not specifically allowed in their charter, and the charter itself was usually granted for a limited period. Corporations could only operate within the state where they were incorporated, and often the state legislature retained considerable powers to veto activities. In the half-century after
the civil war these restrictions were swept away, and today's multipurpose corporations transformed commercial and political life.

The robber barons who came to dominate American industry realised that if the bothersome public benefit requirements could be stripped away the institution of the corporation would both shroud their activities from public view and allow them to raise large sums of money from investors, who were now freed from all responsibility for the consequences of their investment. The federal system of government proved ideally suited to implementing the oligarchs' agenda. Malleable legislators, particularly in New Jersey and Delaware, were persuaded to charter perpetual multipurpose corporations that allowed the oligarchs to do whatever they wanted for as long as they wanted. When other states refused to follow suit the oligarchs simply used their tame legislators in states like New Jersey to set up corporations there, with the power to take over corporations domiciled elsewhere.

The age of the robber barons only lasted thirty or forty years but it changed the face not just of America but of the world. History until the end of the civil war reflected social and economic currents ridden and occasionally diverted by powerful individuals. History was played out at the macro level or the micro: the story of Russia and America in the 1860s could be portrayed in macro terms as the forces of industrialisation undermining slavery and serfdom, or in micro terms as Abraham Lincoln and the Tsar Liberator ‘making history'. The robber barons appeared on the stage as one more set of micro-characters ‘making history', but they left behind them something altogether new – the corporation. From then on history was driven not just by great social forces and great historical figures but by inanimate legal abstractions that seemed to have acquired the ability to live for ever. Between macro and micro appeared something altogether new.

Quite distinct from the macro-historical forces of ideology, economics and technology and the micro-history of presidents and tsars, there sprang up a murky midi-history in which micro-characters, hidden away in the boardrooms of Standard Oil and US Steel, made decisions which collectively
had macro-impacts. Not only did their businesses directly have an impact upon the way people lived but they often exercised real political power; at the turn of the century one wag commented that Standard Oil could do anything with the Pennsylvania state legislature except refine it.