How large, profit-hungry corporations helped create the middle class
When liberal commentators like Paul Krugman discuss the rise of the middle class—basically, the rise in the standard of living of the average American family—they attribute it to regulations such as labor laws and mandatory employee benefits, amongst other things. But what they rarely discuss is the role of large corporations in raising the American standard of living. And if they discussed this, then more people would rightly call the government’s role in America’s economic progress into question.
The average American was only able to enjoy a rising standard of living because he was able to afford a home, a car, a kitchen filled with nutritious food and state-of-the-art appliances, and the many other conveniences of a modern consumer society. Shopping centers were not always burgeoning with affordable goods. What made this possible is not the National Labor Relations Board but the large corporations seeking their own profit through relentlessly working to deliver better consumer goods at lower prices.
For instance, consider this excerpt from Marc Levinson’s The Great A&P on what life was like before supermarket chains:
Food was hugely expensive, relative to wages. The average working-class family in the 1920s devoted one-third of its budget to groceries, the average farm family even more. Most households spent more to put dinner on the table than for their rent or their mortgage. And for the average housewife, shopping for food consumed a large part of the day. This money, time, and effort bought plenty of calories, but only moderate amounts of nutrition. With neither display space nor refrigeration, many neighborhood stores carried only token stocks of fresh fruits and vegetables. Fresh fish and poultry were rarities. The poorest third of American households consumed a sorely inadequate daily intake of vitamins and minerals, because there was little of either in the food that their neighborhood shops had for sale.
Big business changed this. By building supermarkets, businesses provided a diverse selection of quality foods at affordable prices in a single, convenient location. By establishing trustworthy brands, corporations offered products that customers knew would always meet a certain standard. By adapting new technologies such as in-transit refrigeration techniques, corporations were able to offer Americans products grown in distant lands. By capitalizing on economies of scale, corporations were able to drive down prices, making the luxuries of yesterday affordable to masses of today.
Now any American can walk into a Walmart and, in the words of journalist Charles Fishman, “command a cornucopia from every corner of the globe that wasn’t available, not even to the richest and most powerful, one hundred years ago.”
For another example of how large corporations fueled economic progress, consider Robert Slater’s description of the history of General Electric from his book The New GE: How Jack Welch Revived an American Institution:
Where none had existed 10 years earlier, by 1928 1.25 million refrigerators and 7.5 million radios were in American households. At the same time the number of electrically wired homes increased from 7 million to 19 million. That produced a rise in power consumed from 25 million to nearly 100 million kilowatt-hours a year.
Accordingly, GE broadened its consumer product line to include an electric mixer and a vacuum cleaner in the late 20s and, by the 30s, clocks, clothes, washers, dishwashers, air conditioners, radios, and food waste disposers. During the depression years, GE adopted this advertising slogan: ‘More Goods for More People at Less Cost.’
This list can go on. By pioneering the mass production of automobiles, the Ford Motor Company put Americans on wheels. By mass producing a diverse range of vehicle makes and models, General Motors transformed the automobile industry from offering a plain mode of transportation to “a car for every purse and purpose,” in the words of famous GM executive Alfred Sloan. By helping to put a personal computer on every desk, companies such as IBM, Intel, and Microsoft transformed our way of sharing and storing information, our way of doing business, and our way of life.
It is worth noting that many of these surges—affordable automobiles, appliances, and the like—transpired well before the New Deal, and other programs of government intervention that are typically credited with raising the American standard of living. Rather than absorb the conventional narrative that thanks the government, we should consider that the rise in the American standard of living was surely due, not to interventions, but to the elements of freedom in the economy.