Runaway corporations aren’t held to any standards of good citizenship. But where governments fail to regulate, organized communities can make a difference.
“Civic Empowerment in an Age of Corporate Greed” (Michigan State University Press, 2012) is a thought-provoking examination of corporate irresponsibility and its effects on civic engagement. In case studies of egregious environmental, employee and investor abuses, author Edward C. Lorenz demonstrates how communities organize to confront failures in corporate and bureaucratic leadership.
In the late 1970s, the residents of St. Louis, Mich., found their community in the middle of a Superfund site—an area of land and water deeply contaminated by Velsicol (formerly Michigan) Chemical. Years later, with the cleanup largely failing, a citizen taskforce took on responsibilities of rebuilding. In Civic Empowerment in an Age of Corporate Greed (Michigan State University Press, 2012), professor Edward C. Lorenz evaluates several case studies in community development—perhaps the solution to rising, damaging corporate irresponsibility. In this excerpt from the book's introduction, Lorenz begins the argument that communities are the agents of civic reform.
While innumerable historic examples exist of abuse of individual power and excessive self-interest, early twenty-first century global financial crises illustrate that such abuses can impact large numbers of people and communities. Individual excess transitioned into a fundamental societal problem when its pathologies were magnified in corporations no longer properly controlled by either civic processes or cultural norms. As the new century’s financial crises unfolded, a common error of analysis focused on relatively recent changes in law or policy that encouraged imprudent behavior, such as the repeal of bank regulations in the previous decade. The problems that became evident in the fall of 2008 had been brewing in American business and civil society for decades and were grounded not merely in contemporary leadership mistakes, however grievous, but in much longer-term civic, economic, and environmental ideologies and practices.
There is no better way to see this than through a case study of a group of firms that at one time or another were linked to Fruit of the Loom. Politically and economically, they often modeled exploitation if not contempt for local communities, their workers, and their investors. Environmentally, the former chemical subsidiary Velsicol left a multistate legacy of carelessly dumped chemical and radioactive wastes. Rather than be distracted by flagrant recent financial misjudgments, this case study reveals the need for widespread and systematic reforms ranging from U.S. institutional leadership practices to renewed citizen empowerment if the sources of the problems are to be addressed. The case of Fruit of the Loom exposes two primary sources of the economic and cultural maladies of the new millennium, as well as effective ways of curing them.
First, the firm’s history illustrates how poor corporate and civic leadership can negatively affect workers and residents of host communities, the natural world, and ultimately the economic viability of companies themselves. Advocates of sustainable capitalism have called these three dimensions of corporate impact the “triple bottom line.” Velsicol’s behaviors, which first appeared confined to egregious environmental practices, demonstrated that disregard for any of the three dimensions likely will undermine continued success in the other two. The business media, as well as the scientific and technical professionals who worked for and with the firm, blindly dismissed early concerns with the company’s environmental impact, or later the movement of Fruit’s jobs out of historic host communities as inevitable adjustments to allow the company to remain competitive. The firm’s bankruptcy in late 1999 proved the error of such compartmentalized economics.
Reviewing the history of this company is especially helpful because of its links to some of the most flawed leaders in finance and government. As the national economy unraveled in 2008 and 2009, even casual observers of U.S. leadership recognized Fruit’s collaborators as failures. Whether junk-bond promoters such as Michael Milken, insurance schemers at AIG, or officials of the Federal Reserve, all had helped Fruit flounder, yet had survived its collapse for another decade. The core danger of the 2008–09 collapse, as with the earlier problems in savings and loans, was not the loss of jobs and wealth, but that the response would be the use of short-term public subsidies to allow failed leaders and practices to continue. The public therefore urgently needs to review the longer-term history of the behaviors that underlay the crises, rather than focus only on mistakes tied to mortgages or auto technology. The study of Fruit of the Loom and the companies that became part of its complex structure shows, for example, that the insurance giant AIG did not merely speculate carelessly in the “subprime” mortgage market, but speculated more generally in other high-risk insurance schemes. Examining the history of Fruit of the Loom also shows the long-term consequences of deregulation of the financial sector and promotion of excessive debt financing. While detrimental to the firm’s workers, host communities, natural environment, and outside investors, these schemes transferred massive amounts of wealth, especially savings accumulated over many years of productive business activity, to the private accounts of speculators, much as the 2008–09 bank bailout transferred public subsidies to the private accounts of bank owners.
Second, beyond the details of corporate skullduggery and administrative incompetence revealed by the Fruit of the Loom case, the firm’s history, especially that of the Velsicol subsidiary, chronicles the evolution of an ideology and methodology for exploiting the environment and people. Firms like Velsicol relied heavily on the power arising from professional expertise, and effectively used it to control citizen objections to their egregious behavior. As with so many mid-twentieth-century U.S. manufacturers, respect for the leaders of Fruit of the Loom arose from a long history of innovation and entrepreneurship within components of the Fruit “empire.” The firm’s experts pioneered the production of ubiquitous products such as underwear and the window envelope, and made technological advances in aluminum casting and fluorescent lighting. A Nobel laureate praised one of its chief scientists. Community development leaders celebrated the philanthropy of its owners. Yet, several of the firm’s great philanthropists equally symbolized the pursuit of naked self-interest.
Environmentally, the history of the firm exemplifies what Thomas Berry called “the central human issue and the central Earth issue of the twenty-first century … that after … centuries of industrial efforts to create a wonderworld we are in fact creating wasteworld, a nonviable situation.” Socially, the history of Fruit demonstrates how separation of corporate ownership and leadership from the communities in which the firm operated encouraged the transfer of wealth from the producers. It also imposed excess risk on the workers and their workplace, exorbitantly enriching managers and their institutional collaborators. Finally, the firm’s behavior illustrates the timeless need for civic institutions to adopt and enforce regulations to protect communities and the natural world from pillage and abuse. With the rise of what political scientists labeled “interest group liberalism,” in the middle of the century, Fruit exemplified how firms undermined, even corrupted, civic capacity. They retrained citizens to pursue individual interests in jobs and cheap consumer goods rather than seek the more amorphous but much more important long-term public interest.
The leadership at Fruit of the Loom and its affiliates created numerous problems that parallel fundamental troubles in the U.S. policymaking process. While some link these difficulties to the Reagan administration’s advocacy of “deregulation” and neoliberalism, this study shows that those problems had earlier manifestations, more deeply rooted in the dominant American theory of “political economy.” The company’s controversial abuses of the environment and workers began in periods often marked by progressive regulatory regimes. This investigation suggests that the widely shared free-market ideology that dominated both political parties in the second half of the twentieth century facilitated these abuses. The transition to an era of “deregulation” did not correspond to intensification of these wrongs; in fact, some progress in addressing the firm’s problems occurred after the appearance of “Reaganomics.” The “Fruit” case is important because it clarifies that neither the liberal nor neoliberal ideologies behind the dominant U.S. policy process effectively protects the public interest, and it also suggests a procedural approach and supporting ideology that do identify and defend that common good.
The story of the firm’s contamination and later financial collapse did not end with a fully negative result. In St. Louis, Michigan, the only community where the firm left multiple highly contaminated sites, and one where the local plant was shuttered and demolished, citizens modeled a response that might well be copied by those facing similar fates. Not only did St. Louis citizens join together to aggressively confront the firm and docile regulators, but they displayed concern and support for the other communities and global civic culture threatened by the firm and its allies elsewhere. They concluded that if a humane policy process, marked by restraint and integrity, is to emerge in the world, communities familiar with the failure of current corporate and civic leadership must learn from their local experience but act globally, confronting related abuses of the natural world, workers, communities, and investors.
Two cases may serve to substantiate that corporate irresponsibility and the ensuing damage originated years before late twentieth-century deregulation. Both cases show the variety of destructive impacts that resulted from the absence of civic responsibility among corporate leadership—one primarily costing jobs, the other contaminating the natural world. The first example occurred at a factory of West Point-Stevens, the large apparel firm acquired by Fruit of the Loom in 1988. This company, like the subsequent example, demonstrates how firms that passed in and out of the Fruit of the Loom empire were adversely affected by that experience.
West Point-Stevens, especially the old J.P. Stevens part of the firm, had been infamous for hostility to organized labor. In the 1960s and 1970s, Stevens fought a protracted battle with the Amalgamated Clothing and Textile Workers Union (ACTWU). During what some would characterize as the height of progressive U.S. liberalism, Stevens held off the ACTWU organizing campaigns for two decades, a confrontation immortalized in the Oscar-winning movie Norma Rae. The movie, which appeared in 1979, described the successful labor-organizing activity of Crystal Lee Jordan at the O.J. Henley plant in Roanoke Rapids, North Carolina. In fact, it took nineteen months after the release of Norma Rae before the company signed a comprehensive union agreement, a few weeks before Ronald Reagan won the White House. For the next two decades, during the peak of what many consider anti-progressive neoliberalism, the union endured. What doomed the ACTWU was not hostility from the Reagan administration, but the excesses of corporate raiders, who perfected a scheme that permitted speculators with modest means, such as Fruit of the Loom’s Bill Farley, to acquire companies. He procured Fruit in 1984 by borrowing billions, and then attempted to pay down his debt using assets of its various affiliates, such as West Point. While Farley’s efforts to acquire West Point-Stevens transpired during the era of deregulation, he, as so many of his junk-bond compatriots, refined the techniques long before 1980.
While 1980s deregulation of banking and the stock market facilitated such transactions, the rise of institutional investors provided the capital needed by the deregulated market. Roanoke Rapids suffered because these investors focused only on short-term growth in stock value, resulting from debt-financed takeovers of cautious old firms. Investors like Bill Farley understood that companies with a large market share and a reputation for innovation could be milked for short-term profits if new investment were halted and production moved to low-wage countries. A firm raided for its cash and trademark could be sold shortly after purchase, with much of the acquisition debt following the firm like an albatross. For plants such as the Roanoke Rapids facilities of West Point-Stevens, multiple debt-financed leveraged buyouts burdened them with pressure for reduced investment in technology and wages.
In the mid-1980s, West Point-Pepperell had borrowed to buy out Stevens, and then in 1988 Farley borrowed $1.6 billion to buy West Point. The massive indebtedness that grew from these consolidations cursed the surviving firms with unsustainable interest payments. The subsequent reduction in technical investment initiated a continuous decline in global competitiveness. At one point during his takeover of West Point, Farley’s cash flow covered only 70 percent of his interest payments. What had been West Point’s comfortable productivity advantage over foreign competitors disappeared, and the firm could only compete by moving production to places where reduced labor costs compensated for low productivity. To pay the soaring debt, Farley squandered assets not only from West Point but from highly profitable subsidiaries, such as his aluminum-casting operation, Doehler-Jarvis. As the empire collapsed around him, Farley lost control of Fruit of the Loom a few months before it entered bankruptcy. However, the indisputable tragedy of such mismanagement was the closure in spring 2003 of facilities such as the “Norma Rae” factory in North Carolina.
The purpose of investigating these cases is to validate the long-term nature of the problems at Fruit of the Loom. It was not decimated by 1980s-era deregulation or by other short-term policy changes, such as new trade laws. These were not causes but effects of a long-term rise of self-interested irresponsibility among business leaders, institutional investors, policy experts, and the media, which celebrated rather than critiqued the behaviors. The “Norma Rae” factory did not close in 2003 because of a labor battle; it folded after two decades of labor peace because of the incompetence of corporate leaders and the disinterest of the company’s investors in actual production. This situation did not originate in the 1980s; it emerged earlier in what this book contends is a version of U.S. liberalism that welcomed excessive focus on self-interest.
The second case is that of Velsicol Chemical, a company whose owners egregiously impacted the environment in their pursuit of self-interest. Velsicol Chemical and its predecessors had a long history of environmental degradation and explicit contempt for critics of their irresponsibility. Contrary to those who concentrate only upon the deleterious effect of deregulation in the 1980s, Velsicol faced its first effective regulation after 1980 and made its worst environmental impacts in the early 1970s, the era often identified as the pinnacle of modern environmental policy. The history of Velsicol is important because it shows that the problems inherent in the political economy of the last century were not rectified by new government environmental regulations. Some corrective action only occurred when citizens were willing to identify the public interest and to demand accountability from civic institutions and civil society.
With and without federal environmental laws, Velsicol defied public law and regulators for decades. Velsicol had been linked to massive fish kills in the Mississippi River, yet escaped responsibility because of its effective lobbying. Company leaders convinced local community leaders, in an era of prosperity, that jobs were more critical than environmental stewardship. After the appearance of Rachel Carson’s Silent Spring, Velsicol, joined by petrochemical leaders and their collaborators, initiated an attack vilifying Carson and her allies. While one could argue that the attacks on Silent Spring came before modern environmental regulation, the firm’s most infamous environmental catastrophe occurred in the spring of 1973 at the height of federal environmental regulation and shortly after creation of the U.S. Environmental Protection Agency (EPA). Velsicol’s St. Louis, Michigan, factory mistakenly shipped tons of a highly toxic fire retardant made of polybrominated biphenyls (PBBs) in place of an animal feed supplement, resulting in PBB’s entry into the food chain. The incident reveals the failure of the regulatory state to prevent accidents.
Remediation of the consequences of the PBB accident took place under the Superfund law. Officially the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), passed by the lame-duck Congress in December 1980 after the election of Ronald Reagan, Superfund authorized the EPA and state partners to identify the worst hazardous waste sites (the National Priorities List) and establish a mechanism to assure funding for their cleanup. When the company settled claims after the PBB blunder, agreeing to close and contain contaminants at the St. Louis facility, the small town had three Superfund sites: the former plant site, a dumpsite in the middle of a golf course, and the former county landfill. In the 1980s and 1990s, decades supposedly characterized by deregulation, Superfund evolved, with strengthening amendments in 1986 and later reform efforts empowering communities to resist corporate opposition to vigorous enforcement.
While some communities took advantage of support for informed civic engagement in the regulatory process, the media increasingly became an accomplice of corporate interests. For example, in 2003, after the loss of 50,000 U.S. jobs and bankruptcy, CBS-radio provided Fruit’s lobbyist, John Albertine, with a forum to defend deregulation. Similarly, the Detroit News published a series on the twentieth anniversary of Velsicol’s contamination of the food chain, ignoring the long-term peer-reviewed epidemiological studies documenting a number of serious health problems. Despite this evidence, the News editorialized, “The PBB case is especially interesting because it was one of the first of a long string of chemical scares caused by rising environmentalist concerns about industrial pollution. As Mr. Tobin [the News’ reporter] noted, nearly all of those scares . . . have turned out to be medical busts.”
The study of Fruit of the Loom documents how ideology tended to blind journalists and many applied scientists. On the one hand, they tended to approach all technical issues with a general faith in scientific progress, seeing use of pesticides, for example, as inherently better than past “primitive” procedures. Additionally, the persistent faith in individualism and the free market implanted a bias in favor of unregulated “progress.” The Detroit News account of the PBB legacy, and Dr. Albertine’s comments on deregulation both arise from trust in the ability of market forces not only to allocate resources but also to determine the “public” interest. This faith has origins in the early history of the United States and, in its excess form, is distinctly “American.”
Confidence in the quest of self-interest burdened the United States with special challenges in protecting human and natural resources. The exploitation of people or the environment had to become extreme before civil society accepted restrictions on market freedom. The disasters at places like St. Louis or Roanoke Rapids inescapably resulted from what the great Austrian economist Joseph Schumpeter called the creative destruction that inevitably arose from the success of creative entrepreneurs. As scholars of the abolition movement have recorded, the United States long had difficulty determining the balance between the self-interest of the slave owner and the slave. Similarly, although excessive dumping of poisons into the environment at Donora, Pennsylvania, in 1948 were condemned, the economic benefits of emitting tiny amounts of endocrine disruptors were not censured, despite the costs of altered reproductive behavior. The policy process habitually rejected development restraint, overturning local regulations as “takings” of individual rights. Albert Hirschman explained how the American experience—moving to a continent vacant of all but Indians, who were easily pushed aside and forgotten—instilled in the civic culture a sense that the challenges arising from excessive individualism were forgotten by “going West,” or otherwise abandoning devastated communities. Even when Americans claimed to be guided by higher principles, these values were blatantly phrased in individualistic or libertarian terms.
As the new millennium approached, with the frontier vanished, the nation nostalgically renewed the traditional liberal faith in individualism. Contemporary neoliberals claimed that innovation required the rejection of efforts to force protection of the amorphous community development interests. They merged fatalism with fear to condemn any deviation from the principles of laissez-faire political economy. Nobel Prize–winning economists, such as Gary Becker, rationalized growing income inequality, not as an affliction or predicament, but as proof of the value of education. Under the concept of “human-capital formation,” they converted the mission of schooling, especially higher education, from imparting wisdom into a hedonistic quest for wealth in the brutal global economy. Becker and his associates avoided examining the dubious contributions of leaders at firms like Fruit of the Loom, who procured excessive compensation while failing to manufacture products efficiently in nations with strong civil societies.
The unprecedented productivity of the U.S. free market provided powerful reinforcement for an economic ideology justifying minimal regulation of the environment and employment. Leaders emerged in politics and the professions who no longer regarded the economy as a subsystem of the larger civil society, but as the total system. This trend was especially true in agriculture and its growing use of the latest science, including Velsicol’s pesticides, to produce abundant and nearly identical foods. Citizens became consumers, directed not to worry about the wider or longer-term consequences of production methods, but to enjoy cheap abundance. As a leading agricultural economist, John Ikerd, observed:
To the extent that neoclassical economics includes any remaining element of happiness, it most clearly is hedonistic in nature rather than eudaimonic. Economists commonly refer to overall well-being as the ultimate objective of economic activity, and in contemporary psychology, 'the terms well-being and hedonism are essentially equivalent.' The current pursuit of economic wealth is a pursuit of individual, hedonistic, sensory pleasure. And the pursuit of individual wealth, within this context, inevitably encourages the exploitation of others for individual gain and thus degrades the integrity of personal relationships.
In the last decades of the twentieth century, the reappearance of staggering income differences, the decline in political participation, and the weakening of independent institutions, such as churches that previously sanctified the “habits of the heart,” compelled many to worry about the American prospect. Individualism spread not only from boardrooms to colleges and universities, it also thrived in the churches, undermining their leavening role that Tocqueville saw as nurturing those civic “habits of the heart.” Many churches shifted their message from the transcendent and the sacred to individual adjustment, personal therapy, and the blessing of “success.” The media popularized other movements toward hedonism, as did modern public-relations practices that promoted unregulated individualism and rationalized its egregious conduct.
Since the early republic, some of the great works of social analysis and literature have noted the tension between the excesses of individual freedom and the need to define and protect community. For example, after touring the United States during the 1830s, Alexis de Tocqueville produced a classic assessment of these tensions in a large federal democracy. He understood that all societies walked a fine line between the twin scourges of anarchy and oligarchy. On both sides, a few powerful or violent leaders emerged, bringing oppression, exploitation, and at its worst, pillage and rape to the many. After observing the young U.S. democracy, Tocqueville concluded his visit hopeful that the U.S. political culture controlled the worst tendencies inherent in individual freedom through its “habits of the heart.” These habits included a distinctive mix of commitment to republican principles and personal self-restraint, reinforced especially by the country’s vigorous and competing churches. Although people in the United States sought individual success without hesitation or shame, they qualified that pursuit by “explaining almost all the actions of their lives by the principle of self-interest rightly understood.” Tocqueville added:
The principle of self-interest rightly understood produces no great acts of self-sacrifice, but it suggests daily small acts of self-denial. By itself it cannot suffice to make a man virtuous; but it disciplines a number of persons in habits of regularity, temperance, moderation, foresight, self-command; and if it does not lead men straight to virtue by the will, it gradually draws them in that direction by their habits.
In 1985, Habits of the Heart shifted from Tocqueville’s concept to become the title of a best-selling study of the decline of community and the rise of individualism in America. Habits of the Heart was neither the first nor the only investigation of growing concern about personal interest. What came to be called “communitarianism” produced numerous studies during the last third of the twentieth century that critiqued the abandonment of “rightly understood” as a modifier for self-interest, and its replacement with “naked” or “radical.” Of course, even before the communitarians, the general culture had described the extreme pursuit of wealth at all costs as “greed,” and listed it as a deadly sin. A number of leading business scholars had expressed concern with the negative consequences of entrepreneurship as much as they celebrated the innovation. William Kapp once summarized his research as presenting “a detailed study of the manner in which private enterprise under conditions of unregulated competition tends to give rise to social costs which are not accounted for in entrepreneurial outlays but instead are shifted to and borne by third parties and the community as a whole.” When the management guru Peter Drucker examined the topic in the 1980s, he likewise emphasized the need for observing warning signs of entrepreneurship gone wrong, rather than focusing on “success stories.” The prevailing justification for entrepreneurial creative destruction was progress. Communities like St. Louis in the late twentieth century experienced a contrary fate. They witnessed job loss and environmental pollution arising from earlier enterprise with no replacement innovation, only abandonment.
The Fruit of the Loom case is worthy of study because in one community, St. Louis, the only town with three of the firm’s highly contaminated sites, citizens awakened and found their “habits of the heart.” At the turn of the new millennium, they organized to challenge irresponsible corporate leadership, and the media and experts who defended such behavior. The uniqueness of their action is visible through a review of the problems, both environmental and economic, in many of the other communities that hosted company facilities. A number of these communities also tried to confront the closures and contamination left by the company, only to fail. St. Louis took advantage of all possible structures and processes to sustain corrective efforts. The community’s story can be emulated, and that makes the story worth telling.
Reforms of Superfund administered under the Reagan administration and the first Bush administration provided an initial structure and funding, which empowered St. Louis citizens. Once empowered, however, they continued to insist on a wider role for citizens in policymaking than those reforms envisioned. The community’s contemporary response began in 1997 after EPA and state officials returned to town in 1997 to report that earlier Superfund remediation had failed. Within weeks, outraged residents took advantage of the new reforms of Superfund to create a community advisory group (CAG) to advise the EPA—the Pine River Superfund Citizen Task Force—and to secure a modest amount of funding: a technical assistance grant (TAG). The TAG allowed the citizens to hire their own experts to secure second opinions on technical and scientific issues.
When the task force started in 1998, it only raised some technical challenges to the government and companies. By the end of the next year, it sought large funding for a sophisticated health study, and in 2000 filed a $100 million claim against Fruit of the Loom in bankruptcy court. The details of that history are at the core of this book, providing a model to address the problems from modern corporate irresponsibility and individual excess. Partnering with a local college for free technical expertise, the task force did not stop with aggressive legal tactics. Slowly, it pioneered ways to directly challenge elite expertise in and out of government and in the press. Early in the millennium, CAG leaders forced the Department of Justice to hold three hearings in the community on environmental settlements with the local polluters. At the second of these, the local community expanded its focus beyond its region, inviting people from Memphis, Tennessee, who faced Velsicol contamination there, to come to the St. Louis hearing. This step inaugurated the community’s awareness that local groups needed to join together to confront national problems created by irresponsible global leadership. The challenge that remained was to link with communities outside the United States where firms such as Fruit of the Loom have found few requirements to report their impacts on what John Elkington has called the triple bottom line: people, plant, and profit. Relying on weak international regulatory mechanisms, the leadership of firms can exploit workers, abuse the environment, and ignore investor protections. Consequently, in 2007 and 2008, the task force pioneered an approach to global corporate irresponsibility.
Long advised by policy experts to “think globally and act locally,” local environmental activists usually focus on reviewing general environmental issues and then apply those lessons to their specific circumstances. By implication, the local groups lack the expertise or resources to shape the national or global policy process. In 2006–07, the Pine River Task Force learned it was being outmaneuvered in complex policy negotiations by the perceived wisdom developed by global experts and the mechanisms they controlled for justifying policy—conferences, peer-reviewed technical publications, and global forums. The catalyst for the task force’s new strategy materialized when global petrochemical lobbyists began to undermine the global consensus on the restricted use of DDT. After the New York Times published a story in its science section that argued for use of DDT against malaria in Africa and critiqued the waste of funds on Superfund cleanups of DDT in the United States, the CAG determined that it needed a global response. The Pine River group teamed with Alma College to sponsor the Eugene Kenaga International DDT Conference in March 2008. They captured the endorsement of the Society for Environmental Toxicology and Chemistry, and the International Society of Environmental Toxicologists, bringing together African and First World health experts to directly challenge the World Health Organization and urge support for the Stockholm Convention on Persistent Organic Pollutants.
This study is guided by the assumption that the case method is an appropriate way to understand the functioning of the national policy process and the vibrancy of an ideology, such as neoliberalism. In the social sciences, there is debate about the value of case studies. As one political scientist observed, “Most researchers who work with quantitative methods are averse to doing case studies. They presume that case studies cannot test or inspire theory because they suffer from selection bias.” Only work built on large data sets and analyzed dispassionately is acceptable. The goal is to create unifying theories. Based on such theorizing, neoliberal political economists have long proposed that regulation inhibits innovation. Since the late 1970s, they have had an opportunity to test their theories, beginning with the transportation deregulation of the Carter administration and intensifying under President Reagan and his successors. The country has experienced exceptional levels of economic growth since deregulation began. A neoclassical economist can say, based on data for the total economy, that rational analysis proves that much of the old regulation was bad. They boast of the precision of the laws of market economics, proven valid by mathematical models.
A few argue against this methodology. Nancy Cartwright of the London School of Economics has warned, “Economists simply do not know enough to fill in their law claims sufficiently.” The gaps in mathematical models reveal the need for alternative approaches, such as the case method used in this study. Almost a century ago, Pierre Duhem, the French mathematician, writing about seemingly more precise physical theory, extolled the value of studying specific cases: “Between an abstract symbol and a concrete fact there may be a correspondence, but there cannot be complete parity; the abstract symbol cannot be the adequate representation of the concrete fact.” While the limits of our theories may be minimized in much of the natural and social sciences, our legal system is quite conscious of them. Kim Scheppele, professor of comparative law at the University of Pennsylvania, observed:
Social scientists of a statistical bent often dismiss as 'anecdota' the sort of experiences that [the victim of an accident] had, while lawyers and judges often distrust the statistics that social scientists provide because the statistics can’t ever be said to be 'true' in a particular case ... Nonetheless, the statistical backdrop makes it harder to argue that each accident taken alone is really as bizarre as it sounds. To the judge or the lawyer, accidents are possible because each case is unique. But to the social scientist, one could have “law without accidents” because from the bird’s-eye view of the patterns, very little is truly unpredictable when taken in the aggregate.
Although on the national level, theories about deregulation seem correct, the case for individuals can be quite different. As the country has decreased regulation in the last quarter century, the nation has experienced fresh economic activity. Yet, most studies of income distribution show growing inequality during the era. Without careful analysis of the impact upon specific subgroups in the population, macroeconomic data crunching can mask negative impacts upon the majority of the population behind massive benefits arising for a few. Additionally, short-term economic gains for a few may fail to measure the long-term legacy of unsustainable resource use, abandoned communities, egregious social dysfunction, and individual injustice. Such conditions may be rampant in a place with immense aggregate economic growth, such as the U.S.-Mexico border region. The fundamental error arises from forgetting that people function not with what Scheppele called a bird’s-eye view, but with a very human one. They do not only scan the world from the sky to get the big picture, they land and feel the complexity on the ground.
One of the challenges in assessing ideologically driven movements, such as neoliberalism, is the difficulty of understanding actual, as opposed to theoretical, impacts. The epistemological difficulty with analyzing neoliberalism is that it subsumes the political under the economic. Work, culture, even family relations can be reduced to market issues, as when reference is made to the “labor market.” Yet, many people consider work as a source of meaning for life—a vocation. Similarly, many citizens assume policymaking is a process of providing equity or justice, not merely profits. If Jefferson was right that one of the three core purposes of government is to promote happiness, neoliberalism is woefully inadequate, centered on life devoted to economic maximization. In real communities, numerous citizens assess civic efficacy with standards beyond economic efficiency, including equal enjoyment of the environment.
David Rosenbloom captured this complexity of good public policy by saying it must balance three nearly contradictory concerns: what he called the managerial, the political, and the legal. The neoliberals fixate on the managerial emphasis upon economic efficiency. This approach relies on experts who view individuals impersonally and emphasize the scientific method and rationalism to achieve knowledge. By contrast, the political approach depends on elected representatives and their agents to address the concerns of society, seeing individuals primarily as parts of groups and communities. Civic leaders ascertain citizen needs and expectations through elections, lobbying, and other forms of interaction with constituents. This is a messy process, for on most issues only an intense minority—on both sides of a debate—has an opinion. The third position is explained by Scheppele. As a civil society based on law, citizens expect case-by-case adjudication, reacting to people as discrete individuals with rights, who demand procedural due process no matter how inefficient.
The PBB accident can be approached in each of these three ways. From the managerial perspective, studies of accidents reveal how often, in comparable situations, companies and their employees make mistakes. The actuarial tables of insurance companies grow from this process. However, the politician cannot respond to angry constituents by saying, “It was bound to happen to someone, just accept it.” No, the residents of the contaminated watershed, or the workers, or the farmers, expect their political representatives to respond to their problems regardless of the odds. Finally, the judge must decide if the injury from the accident to a specific individual warrants application of a legal sanction. Neoliberals envision citizens taking the first approach, trusting the occasional accident to be essential for economic growth. People living in real places, not ideologically isolated neoliberal “think tanks,” want the three approaches balanced and applied at the same time. Unlike a Washington lobbyist, the citizen grasps that the regulation of self-interest is superior to the deregulated economic growth promised by neoliberalism.
The PBB accident introduced a known carcinogen into the bodies of approximately eight million people. Worse, PBB is not the contaminant that makes the Velsicol site in Michigan one of the most expensive Superfund cleanups. Massive DDT dumping caused the current remediation, but that is not the end of the firm’s environmental legacy. In filings with the U.S. Justice Department in 2002, Velsicol admitted responsibility for 165 other sites, at least two of which rival the cleanup costs of the one in Michigan. However, they are not the sole disasters that unfolded at the Fruit of the Loom empire. At one point in the late twentieth century, Fruit’s leadership controlled U.S. businesses employing over 75,000 people. By 2004, that employment had fallen to 12,800. While a modest number of those jobs survived abroad, human-rights groups challenged their value. Furthermore, the leaders of Fruit of the Loom and its predecessors and descendants repeatedly manipulated corporate finances, costing thousands of investors and pensioners hundreds of millions of dollars. That these problems happened repeatedly in many places—Roanoke Rapids; Clarksville, Memphis, and Toone, Tennessee; Toledo, Ohio; and elsewhere—not just St. Louis, proves that the PBB mistake was not simply an accident but a warning of what should have been prevented.
This study begins and ends with advocacy of building sustainable communities by promoting alternative forms of policymaking and responsible leadership. The evidence from this case study attests to the urgency of the task. That John Albertine could be a leader at Fruit of the Loom and still be solicited by the media to comment on regulation demonstrates the need for a renewed civic consciousness and commitment to integrity and sustainability. While the word is used too frequently, including in the context of this book, sustainability means, at a minimum, that “the present generation has the obligation to pass on to future generations an average capital stock,—of goods, services, knowledge, raw materials—that is equivalent to today’s.” A stronger version assumes that “some natural resources and ecological processes are critical; they cannot be depleted below a certain level without dramatic ramifications.” While people, economic institutions, and technological tools and practices change, building a sustainable community embraces permanence and not short-term exploitation. Good stewards of such a community struggle to reject the short-term and destructive, while laboring to promote the general welfare by preserving resources, maintaining public law, or encouraging vigorous civic life. The hope in producing this book is that it will motivate readers to organize their communities and inspire them to promote sustainable public policies.
One step toward sustainability is to keep Rosenbloom’s three approaches in balance. At its core, this study documents the consequences of poor leadership at Velsicol; its last parent, Fruit of the Loom; and other firms linked to them. Their negative impact upon management practices, finance, employment, and the environment was so damaging to humans as well as to the natural world that this story cries out for a conscious response. It proves the need for renewal of civic life as a defense against those who were formerly called robber barons. Despite the complacent neoliberal demands for less regulation, this case makes it clear that that ideology is fatally flawed.
The pattern for this new civic vitality complies with Tocqueville’s “habits of the heart.” The community advisory group process of the EPA modeled this approach. Without glorifying a rather minor governmental procedural change, the CAG was one example of empowered citizens, a rare species at the start of the new millennium in America. The CAG at the Velsicol site in Michigan regularly objected to legal interpretations and decisions that failed to acknowledge the equity implicit in protecting the environment for future generations. In the mid-twentieth century, political scientists Grant McConnell and Theodore Lowi warned that U.S. civil society was in peril because “justice” had come to be considered as the product of a deal between powerful interests. This study concludes with an appeal for emphasis upon Rosenbloom’s third approach: restoring public law to its prominence. A core ingredient of a sustainable society is widely respected and fairly enforced public law.
As a corrective to the emotions and fears they believe are emboldened by modern environmental regulation, one school of modern legal scholars calls for injecting natural and social-science expertise to the law. ChiCAGo’s Cass Sunstein has modeled this solution, advocating precise, scientific calculations of risks and benefits. He assumes that with enough data, the experts can determine accurately the perils of alternative government decisions. While tempting to an academic, no amount of research can detect precisely all risks, since the long-term ones may be assessed incorrectly or remain obscure to contemporary scientists. There are innumerable precedents of more general failures of what James Scott of Yale University terms “highmodernist” planning. Thus, this study advocates that the experts serve as consultants to an active citizenry.
In 1978, as the Velsicol problems escalated in Michigan, an environmental aide to Governor William Milliken, an expert employed by a thoughtful public figure of the era, voiced concern about local citizens’ input into the environmental policy process. In a letter to a county commissioner, he said, “I have reservations about the kind of citizen committee that [the state senator] was proposing. We have learned from past experience that it’s awfully easy to frighten the public to a degree which may be unwarranted about toxic chemical problems.” Considering that the expert-dominated process yielded a $38 million solution that not only failed to contain the pollution but exposed inhabitants to additional toxins for at least another quarter century, the citizens could not have done worse.
This study teaches that the most basic principle of democracy is right: the collective citizenry must control the leaders, even their highly trained experts. The average citizen is not always correct, and there clearly is the need for professionals employed in the civil service to monitor policy implementation; however, experts and self-interested individualists also can be wrong and can be more dangerous if mistaken than a single ordinary citizen. Whatever the merits for specific environmental policy, reinvigorated civic engagement is essential for the good of civil society. In order to escape Hirschman’s pathological excuse of “going West,” the United States needs a corrective to excessive individualism. The St. Louis case, especially when contrasted to the other communities harmed by Fruit of the Loom, demonstrates processes and structures to control neoliberal excess and its professional allies in the media and the natural and social sciences. This case therefore highlights the endless need to control “robber barons,” and also to regain control of the policy process and mark it with restraint and integrity.
This study does not end as a pessimistic account of the triumph of neoliberal cynicism, but with descriptions of a community-empowerment process that has had at least modest success. Such empowerment resembles other historical examples. As this investigation concludes, the St. Louis, Michigan, example is linked, hopefully not presumptuously, to the battle for humanistic civic life throughout the modern world, beginning with the Renaissance. That linkage illustrates the value of pondering the struggles of the past that pitted special interests against the public good, and more importantly, restores confidence that communities can achieve a good society. As citizens seek to restore expectations and methodologies that support their vision of the long-term public interest, they can perceive that this is an old fight that must be renewed periodically to restore control over elite economic leaders and their accomplices. It is about civic empowerment to direct innovation and enterprise toward the creation of a good society.
This study celebrates the historic strengths of the American system, such as the multilayered federal policy structure with a preference for public decisions, which most impact daily lives, legislated at the local level. Another attribute has been the distrust of the corruption and hunger for power of far-away experts, beginning with the minions of George III. This examination does not reject the civic tradition; rather, it challenges the twentieth-century policy innovation that empowered professionals, linked to special interests, at the expense of those with a vision of the long-term public interest. As Frank Fischer phrased the current debate: “Already talk of democracy all too often serves as little more than a thinly veiled guise for elite government. The question is: Can the democratic process be rescued from the increasingly technocratic, elitist policy-making processes that more and more define our present age?” Max Weber—one of the great defenders of the virtues of the modern bureaucratic state, but also a perceptive critic of its vices—warned citizens to find mechanisms to assert their values.
While celebrating vigorous local participation in technocratic policymaking, this study is not guided either by simplistic adulation of local wisdom or a bias against either business or national political leadership. Local people often can be foolish, primitive, superstitious, and bigoted. They seldom possess the expert knowledge of modern professionals, whether physicians, accountants, or economists. Nor do they understand global and national political imperatives, as do better-trained leaders. Yet, this study maintains that local weaknesses must be balanced by concern with the potential immorality of the specialist or the corruption of the Washington official. The only checks on experts and insiders is either a benevolent dictator, or a vigorous public-policy process that allows outspoken or outraged citizens to say, “No!” The locals can do a lot of irrational things, but those may be not nearly as evil in intent or consequence as the health problems spawned by the irresponsible chemists at Velsicol, or the theft of worker and investor wealth by the devious accountants in the pocket of Fruit of the Loom’s officials. An unqualified local manager may cost a handful of his neighbors work when his incompetence causes his business to fail. Such behavior pales by comparison to the impact of the leadership at Fruit of the Loom, whose actions caused 65,000 workers to lose their jobs, and more to surrender their pensions, health insurance, and investments.
Welcoming business creativity has given the United States its great wealth, permitting most residents to live more affluent lives than almost anyone else in the world. This study is not oblivious to that achievement. In fact, many communities adversely affected by the behavior of Fruit of the Loom wish they had an innovative entrepreneur to bring good jobs to their hometowns. Nothing written in this study seeks to inhibit innovation, some of which inevitably results in failures and errors. The cases examined here are not examples of random business failures, inevitable in a free economy. They are not random accidents, such as the unavoidable odds that for every mile driven by millions of drivers, some misjudgments will lead to injury and death. These cases are more analogous to the accidents of the chronically drunk. The public response is no-fault insurance for the random driver errors, and criminal prosecution for the severely impaired. However, there have been no criminal prosecutions of leaders involved in the events chronicled here, with the exception of one set of charges against Velsicol’s officials, punished by token fines after the firm hired one of the best-connected law firms in the country to guide it to victory. Their success in enriching themselves at the expense of their workers is reason to cease protecting the recklessness of the civically and socially impaired. That our media consults them as economic experts rather than exposes their disingenuousness suggests the extent of collusion in their actions and ideology. This story intends to encourage corrective actions and embrace of an ideology that envisages reform of our failing civic processes.
This excerpt has been reprinted with permission from Civic Empowerment in an Age of Corporate Greed by Edward C. Lorenz, published by Michigan State University Press, 2012.