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The giant corporation and the state owned enterprise are cut from the same cloth. Victor Berger, the Milwaukee politician who was the first Socialist representative ever elected to the House, tried to get the Sherman Anti-Trust law overthrown in 1912. The reason was simple: according to the logic of the dominant socialist economic policy of the time, the more a corporation became a monopoly, the more it carved out a form that could be used when the state took it over. There was a natural evolution between monopoly and state ownership.

This logic was not only a powerful argument in socialist circles. John Kenneth Galbraith, one of the great radical liberals in twentieth century America, also believed that the  monopoly form of the corporation rid itself of the pernicious, profit-seeking behaviors that made capitalism a bain to the common man, and promoted scientific progress and peace between labor and capital.

I understand the logic, but I believe Victor Berger and Galbraith were wrong.

This may seem irrelevant to this week’s news about the Facebook IPO, but I think events that transpired in 1911 and 1912 have a strong bearing on the 21^st century’s corporate mindset.

The facebook IPO was a public relations triumph for billionaires, certainly. While Trayvon Martin, as every rightwing commentator knows, was righteously killed because he wore a hoodie, the hoodie of Mark Zuckerman, the son of a rich dentist who has become a Forbes Magazine icon, is just an adorable sign of the clean American whiz kid. Don’t we all I-Love  him?

But the IPO was also your typical political economic disaster. The price of the stock was put at an incredible 105 times earnings. The New Economy of the nineties names, really, a ratio – that is, the rise in the ratio between price and earnings. In an early era – in the Progressive era – this had another name: overcapitalization. And instead of celebrating an economic mechanism whereby speculators are allowed and encouraged to treat themselves to stunning windfalls, the Progessives justly saw overcapitalization as waste and fraud.

Lawrence Mitchell, in The Speculation Economy, has, I think correctly, seen the first two decades of the 20^th century in America as the period in which the limits of American progressive politics – and by extension, the limits of anti-corporationism in the West – were drawn and hardened. By 1920, the attempt to reform the stock market from the root had failed.

The high point of the reform effort came in 1911. In that year, the House of Representatives passed a bill a bill that was narrowly turned down in the Senate, S. 232. S. 232 would not only have required federal incorporation of all interstate businesses. Here’s Mitchell’s description of it:

“It would have replaced traditional state corporate finance law by preventing companies from issuing “new stock” for more than the cash value of their assets, addressing both traditional antitrust concerns and newer worries about the stability of the stock market by preventing overcapitalization. But it would have done much more.

S. 232 was designed to restore industry to its primary role in American business, subjugating finance to its service. It would have directed the proceeds of securities issues to industrial progress by preventing corporations from issuing stock except “for the purpose of enlarging or extending the business of such corporation or for improvements or betterments”, and only with the permission of the Secretary of Commerce and Labor. Corporations would only be permitted to issue stock to finance revenue-generating industrial activities rather than finance the ambitions of sellers and promoters. … S. 232 would have restored the industrial business model to American corporate capitalism and prevented the spread of the finance combination from continuing it dominance of American industry.” (137)

Martin Sklar, in The Corporate Reconstruction of American Capitalism, summarized the spirit of the drafts prepared during Theodore Roosevelt’s administration that stood in the background of the bill’s eventual configuration  in this way: ‘whenever the amount of outstanding stock should exceed the value of assets, the secretary would require the corporation to call in all stock and issue new stock in lieu thereof in an amount not exceeding the value of assets, and each stockholder would be required to surrender the old stock and receive the new issue in an amount proportionate to the old holdings.”

I’ve already manifested my manifesto for a new Soviet version of 21^st century capitalism – one that destroys the corporate form and replaces  it with hundreds of thousands of small scale enterprises in flexible cooperative structures. It does not overturn capitalism, but it does radically turn capitalism around. The limitation of both the corporation and the state is a kind of capitalism with a human face – which is much more radical than where ‘socialism’ is at the moment. For this kind of harmony of opposites, of cooperation and competition, to really work, the speculative economy would have to be radically subordinated to production. The pleasure palace of the oligarchs, the four hundred trillion dollar derivatives structure that burdens the earth (even as it actually does not exist – truly, an extreme case of economic neuroses), will have to be burnt to the ground.

The Facebook IPO is a monument to the folly of our contemporary economic arrangements. These arrangements are undergoing a systematic change that will produce an environment in which the middle class, that compromise formation of 20^th century capitalism, has a dodo’s chance of survival. Revolution from the middle class in the 20^th century usually resulted in fascism. In the 21^st century, however, the speculative and rent-seeking echelon, by steadily increasing the divide between it and everyone else, is creating a new fusion between the middle class and its erstwhile enemies, marginals  of every type, as well as the working class. We will see what comes of it all.