Responses to the coronavirus reveal the complex roles corporations play not just as economic institutions, but also as social institutions. With their personal messages of support, their leaders proudly position themselves as front-line responders. Properly understanding such gestures requires tracing the development of corporate behavior back to the early 20th century. It was in this era that corporations, having already been granted their legal status as “people,” first unveiled their more human face.
The American economy was at that time settling into unprecedented levels of concentrated economic power. A wave of mergers in the 1890s saw the swallowing up of smaller businesses by giant, bureaucratically coordinated corporations. The newly emerged leviathans faced significant opposition from populist discontent, trade unions, antitrust efforts and calls for industrial democracy. Industry leaders responded to these pressures in a manner that would shape corporate behavior for the next century.
What emerged was two distinct but closely related modes of “personable capitalism.” The first is generally called welfare capitalism. Essentially, employers began assuming responsibility for providing their workers different modes of security and stability in the form of assistance programs, health insurance and other benefits. Welfare capitalism blended a progressive-era vision of reforming the working class with an older form of employer paternalism.
Earlier entrepreneurs such as Robert Owen and Josiah Wedgwood had long offered employee assistance programs, health services and even provided housing for their workers. But the mammoth corporations that arose at the end of the 19th century, due to size and complexity, were largely coordinated by bureaucratic administration and an indifference to employee welfare. This was industrial capitalism in its most impersonal form.
Many business leaders soon recognized strategic reasons to change course. For one, it served to ward off the siren calls of statism and socialism that many workers at the time found compelling. Employers discovered they could effectively “buy off” organizing workers with perks and benefits. But these leaders also argued that this was simply good business. Henry Ford famously believed his overextended paternalism — offering workers higher wages while closely monitoring their private lives — would instill the discipline necessary for both orderly work and consumption. Other leaders, such as General Electric President Gerard Swope justified worker benefits on economic grounds. Happier workers were better workers.
But this first form of personable capitalism was closely tied to a second form: the rise of human relations in management theory. The leading advocate was a psychologist named Elton Mayo, whose claim that psychological research could both predict and control labor unrest caught the attention of business leaders. After receiving a handsome grant from John D. Rockefeller Jr., Mayo launched studies of several American factories in 1923.
Mayo couched his approach within a larger diagnosis of modern society. Drawing on worker interviews, he posited that an overarching sense of fatigue, repression and loneliness was sabotaging workers’ ability to function properly. This diagnosis located the root causes of labor unrest as running far deeper than what collective bargaining could possibly address. Workers longed for deeper relationships with others, and with modern society not providing this, corporations were suffering.
Mayo’s solution turned conventional wisdom on its head: Modern industrialism should not be blamed for the alienation of the “mass worker,” but heralded as the solution. Work environments could imitate and thereby replace the strong communal bonds that modern societies lacked. Mayo believed the “medieval ideal of the cooperation of all” could effectively be re-created. The harmonious functioning of labor, management and capital would solve modernity’s lost sense of solidarity.