Civic Engagement as an Antidote to Corporate Greed

Runaway corporations aren’t held to any standards of good citizenship. But where governments fail to regulate, organized communities can make a difference.

| October 2012

  • Civic Empowerment By Edward C. Lorenz
    “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.
    Cover Courtesy Michigan State University Press

  • Civic Empowerment By Edward C. Lorenz

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.

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