The Rebirth of Family Capitalism or How the Koch Brothers, Sheldon Adelson, Sam Walton, Bill Gates, and Other Billionaires Are Undermining America
… Charles and David Koch are perfect specimens of the new breed of family capitalists on steroids. Koch Industries is a gigantic conglomerate headquartered in the heartland city of Wichita, Kansas. Charles, who really runs the company, lives there. David, the social and philanthropic half of this fraternal duopoly, resides in New York City. Not unlike George “the Duke” Pullman, Charles has converted Wichita into something like a company city, where criticism of Koch Industries is muted at best.
The firm’s annual revenue is in the neighborhood of $10 billion, generated by oil refineries, thousands of miles of pipelines, paper towels, Dixie cups, Georgia Pacific lumber, Lycra, and Stainmaster Carpet, among other businesses. It is the second largest privately owned company in the United States. (Cargill, the international food conglomerate, comes first.) The brothers are inordinately wealthy, even for our “new tycoonery.” Only Warren Buffett and Bill Gates are richer.
While the average businessman or corporate executive is likely to be pretty non-ideological, the Koch brothers are dedicated libertarians. Their free market orthodoxy makes them adamant opponents of all forms of government regulation. Since their companies are among the top 10 air polluters in the United States, that also comports well with their material interests -- and the Kochs come by their beliefs naturally, so to speak.
Their father, Fred, was the son of a Dutch printer who settled in Texas and started a newspaper. He later became a chemical engineer and invented a better method for converting oil into gasoline. In one of history’s little jokes, he was driven out of the industry by the oil giants who saw him as a threat. Today, Koch Industries is sometimes labeled “the Standard Oil of our time,” an irony it’s not clear the family would appreciate. After a sojourn in Joseph Stalin’s Soviet Union (of all places), helping train oil engineers, Fred returned stateside to set up his own oil refinery business in Wichita. There, he joined the John Birch Society and ranted about the imminent Communist takeover of the government. In that connection he was particularly worried that “the colored man looms large in the Communist plan to take over America.”
Father Fred raised his sons in the stern regimen of the work ethic and instructed the boys in the libertarian catechism. This left them lifelong foes of the New Deal and every social and economic reform since. That included not only predictable measures like government health insurance, social security, and corporate taxes, but anything connected to the leviathan state. Even the CIA and the FBI are on the Koch chopping block.
Dynastic conservatism of this sort has sometimes taken a generation to mature. Sam Walton, like many of his nineteenth-century analogs, was not a political animal. He just wanted to be left alone to do his thing and deploy his power over the marketplace. So he stayed clear of electoral and party politics, although he implicitly relied on the racial, gender, and political order of the old South, which kept wages low and unions out, to build his business in the Ozarks. After his death in 1992, however, Sam’s heirs entered the political arena in a big way.
In other respects Sam Walton conformed to type. He was impressed with himself, noting that “capital isn’t scarce; vision is” (although his “one stop shopping” concept was already part of the retail industry before he started Walmart). His origins were humble. He was born on a farm in Kingfisher, Oklahoma. His father left farming for a while to become a mortgage broker, which in the Great Depression meant he was a farm re-possessor for Metropolitan Life Insurance. Sam did farm chores, then worked his way through college, and started his retail career with a small operation partly funded by his father-in-law.
At every juncture, the firm’s expansion depended on a network of family relations. Soon enough, his stores blanketed rural and small-town America. Through all the glory years, Sam’s day began before dawn as he woke up in the same house he’d lived in for more than 30 years. Then, dressed in clothes from one of his discount stores, off he went to work in his red Ford pick-up truck.
Some dynasts are pietistic and some infuse their business with religion. Sam Walton did a bit of both. In his studiously modest “life style,” there was a kind of outward piety. Living without pretension, nose to the grindstone, and methodically building up the family patrimony has for centuries carried a sacerdotal significance, leaving aside any specific Protestant profession of religious faith. But there was professing as well. Though not a fundamentalist, he was a loyal member of the First Presbyterian Church in Bentonville, Arkansas, where he was a “ruling elder” and occasionally taught Sunday school (something he had also done in college as president of the Burall Bible Class Club).
Christianity would play a formative role in his labor relations strategy at Walmart. His employees -- "associates," he dubbed them -- were drawn from an Ozark world of Christian fraternity which Walmart management cultivated. “Servant leadership” was a concept designed to encourage workers to undertake their duties serving the company’s customers in the same spirit as Jesus, who saw himself as a “servant leader.”
This helped discourage animosities in the work force, as well as blunting the -- to Walton -- dangerous desire to do something about them through unionizing or responding in any other way to the company’s decidedly subpar working conditions and wages. An aura of Christian spiritualism plus company-scripted songs and cheers focused on instilling company loyalty, profit-sharing schemes, and performance bonuses constituted a twentieth century version of Pullman’s town idyll.
All of this remained in place after Sam’s passing. What changed was the decision of his fabulously wealthy relatives to enter the political arena. Walton lobbying operations now cover a broad range of issues, including lowering corporate taxes and getting rid of the estate tax entirely, as his heirs subsidize mainly Republican candidates and causes. Most prominent of all have been the Walton efforts to privatize education through vouchers or by other means, often enough turning public institutions into religiously affiliated schools.
Wall Street has never been known for its piety. But the tycoons who founded the Street’s most lucrative hedge funds -- men like John Paulson, Paul Tudor James II, and Steve Cohen, among others -- are also determined to up-end the public school system. They are among the country’s most powerful proponents of charter schools. Like J.P. Morgan of old, these men grew up in privilege, went to prep schools and the Ivy League, and have zero experience with public education or the minorities who tend to make up a large proportion of charter school student bodies.
No matter. After all, some of these people make several million dollars a day. What an elixir! They are joined in this educational crusade by fellow business conquistadors of less imposing social backgrounds like Mark Zuckerberg, who has ensured that Facebook will remain a family domain even while “going public.” Another example would be Bill Gates, the most celebrated of a brace of techno-frontiersmen who -- legend would have it -- did their pioneering in homely garages, even though the wonders they invented would have been inconceivable without decades of government investment in military-related science and technology. What can’t these people do, what don’t they know? They are empire builders and liberal with their advice and money when it comes to managing the educational affairs of the nation. They also benefit handsomely from a provision in the tax code passed during the Clinton years that rewards them for investing in “businesses” like charter schools.
Our imperial tycoons are a mixed lot. They range from hip technologists like Zuckerberg to heroic nerds like Bill Gates, and include yesteryear traditionalists like Sam Walton and the Koch brothers. What they share with each other and their robber baron ancestors is a god-like desire to create the world in their image.
Watching someone play god may amuse us, as “the Donald” can do in an appalling sort of way. It is, however, a dangerous game with potentially deadly consequences for a democratic way of life already on life support.