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An Outpost of Corporatism: the Franchise State on Wall Street*

Published online by Cambridge University Press:  28 March 2014

Michael Moran
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Extract

WRITERS ON CORPORATISM AGREE ABOUT LITTLE BUT ARE nevertheless strikingly united in one belief, that America has failed to develop strong corporatist institutions. The two most important collections published in recent years, for instance, both contain papers explaining this supposed American uniqueness. Yet the notion that corporatism is conspicious by its absence is odd. It is indeed true that the United States has failed to develop one particularly ambitious form of corporatism — the organization of capital and labour into central institutions designed to achieve agreed national aims. The essence of corporatism consists, however, of something less than this grand social scheme. It resides in what Offe calls ‘the attribution of public status to interest groups’. Endowing private bodies with public duties and public powers involves crossing a constitutional Rubicon. Behind fie the landscapes of liberal polities, with their open political struggle and comparatively clear separation of government from civil society. Beyond the Rubicon lie the features in Schmitter's famous description of corporatism — compulsion, hierarchy, monopoly. But these are contingent, not necessary, features. The quintessence of corporatism consists in the effort to endow private interests with sovereign authority. In so doing it challenges the great aim of a liberal polity — the separation of economic from political power — imposing in its place the ‘devolution of public policy making and enforcement on organised private interest’.

Type
Original Articles
Information
Government and Opposition , Volume 22 , Issue 2 , 01 April 1987 , pp. 206 - 223
Copyright
Copyright © Government and Opposition Ltd 1987

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References

1 Salisbury, R., ‘Why no corporatism in America?’ in Schmitter, P. and Lehmbruch, G., Trends Towards Corporatist Intermediation, London, Sage, 1979, pp. 213–30Google Scholar; Wilson, G., ‘Why is there no corporatism in the United States?’ in Lehmbruch, G. and Schmitter, P., Patterns of Corporatist Polkymaking, London, Sage, 1982, pp. 219–36Google Scholar

2 Offe, C., ‘The attribution of public status to interest groups’ in his Disorganised Capitalism, Cambridge, Polity Press, 1985, pp.237 ffGoogle Scholar.

3 Maier, C., ‘Fictitious bonds … of wealth and law: on the theory and practice of interest representation in Berger, S. (ed.), Organising Interests in Western Europe, Cambridge, Cambridge Unversity Press, 1981, p. 49 Google Scholar.

4 Lowi, T., The End of Liberalism: The Second Republic of the United States, New York, Norton, 2nd ed., 1979 Google Scholar; Wolfe, A., The Limits of Legitimacy: Political Contradictions of Contemporary Capitalism, New York, Free Press, 1977, pp. 126 ffGoogle Scholar. Readers of Wolfe will recognise how indebted to him is my argument. I should make it clear, therefore, that Wolfe himself wishes to confine corporatism to society wide arrangements (pp. 126—7). Lowi rejects the word because of its Fascist connections (p. 50). The intellectual foundations of American corporatism are also explored in Gilbert, J., Designing the Industrial State, Chicago, Quadrangle, 1972 Google Scholar and in Lustig, R. J, Corporate Liberalism: the Origins of Modem American Political Theory, Berkeley, University of California Press, 1982 Google Scholar. The evolution of accompanying administrative structures is well described in Freedman, J., Crisis and Legitimacy: the Administrative Process and American Government, Cambridge University Press, 1978 Google Scholar.

5 Allen, J. (ed.), Democracy and Finance: the Addresses and Public Statements of William Douglas, New Haven, Yale University Press, 1940, p. 244 Google Scholar.

6 Securities Industry Association, Annual Report, 1985, p. 8.

7 Maier, ‘Fictitious bonds … of wealth and law’, op. cit., p. 28.

8 Section 6 of the Act describes the registration requirements; sections 10, 11 and 19 relate to SEC powers of intervention.

9 Douglas s collected speeches on finance are in Democracy and txnance, op. cit.

10 The corporatist character of the Act is well described in Hawley, E.W., The New Deal and the Problem of Monopoly, Princeton, Princeton University Press, 1966, pp. 53—71Google Scholar.

11 This relies on the following contemporary documents: Securities and Exchange Commission, Anual Report 1937, pp. 73–4, and 1938, pp. 32–3, Washington, Government Printing Office, 1937 and 1938; and Regulation of Over-the-Counter Market, House Document No. 2307, 75th Congress, 3rd Sess., 1938, p. 5; and Regulation of Over-the-Counter Market, Hearings, Senate Hearings, No. 42937, 75th Congress, 3rd Sess., 1938, pp. 7fF.

12 Securities and Exchange Commission, Annual Report 1940, Washington, Government Printing Office, 1940, pp. 108–9.

13 Report of the Special Study of Securities Market of the Securities and Exchange Commission — hereafter cited as Special Study 1963, House Document No. 95, 88th Congress, 1st Sess., 1963.

14 hereisabrief summary in United States General Accounting Office, Securities And Futures: How the Markets Developed and How They Are Regulated, Washington, General Accounting Office, 1986.

15 Moylan, J., ‘The Place of Self-Regulation in the Securities Industry’. Securities Regulation Law Journal, 6, 1, 1978, pp. 49–58.Google Scholar

16 For a summary of preceding attempts see Bedts, R. de, The New Deal’s SEC, New York, Columbia Unversity Press, 1964, pp. 1—11.Google Scholar

17 Stock Exchange Practices: Report of the Committee on Banking and Currency, Senate Report No. 1455, 73rd Congress, 2nd Sess., 1934.

18 Federal Securities Exchange Act of 1934, Senate Report No. 792, 73rd Congress, 2nd Sess., 1934.

19 This relies on Burns, J., Roosevelt: the Lion and the Fox, London, Seeker and Warburg, 1956, chs. land V.Google Scholar

20 Wall Street’s often brutal campaign is authoritatively described in Seligman, J., The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modem Corporate Finance, Boston, Houghton Mifflin, 1982, pp. 72–100.Google Scholar

21 The most detailed study is Parrish, M., Securities Regulation and the New Deal, New Haven, Yale University Press, 1970 Google Scholar.

22 Draft of Proposed Report to Secretary Roper On Stock Exchange Regulation (typescript, SEC Library Washington, at LH SEA 1934 X, Vol. 8). The first quotation is on pp. 18–19, and the second on p. 28. The final Report to the Secretary of Commerce of the Committee on Stock Exchange Regulation, transmitted to Congress in January 1934, is filed at the same place.

23 House Document No. 1383, 73rd Congress, 2nd Sess., 1934, for an example.

24 Securities and Exchange Commission, Annual Report, 1938, p. 33.

25 House Report, Regulation of Over-the-Counter Market, pp. 4—5.

26 There is a revealing account of the close relations with the securities bar in the early years by Gadsby, E., SEC counsel 1934—42, in ‘A private practitioner’s view of the development of the Securities and Exchange Commission’, George Washington Law Review, 28, 1, 1959, pp. 18—28.Google Scholar

27 For an authoritative, and critical, review of relations with accountants I rely on the Report of the Sub-Committee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce, House Document 75—981, 94th Congress, 2nd Sess.

28 A representative, often quoted statement, is that by Commissioner Matthews, Regulation of Over-the-Counter Market: Hearings, Senate Report 3255, 75th Congress, 2nd Sess., 1938, pp. 7ff.

29 Practical regulation, especially by the Federal Reserve Board, of course involves substantial devolution of authority. But no association in banking approaches the status of an SRO. On the Fed and the banks see G. Epstein, ‘Federal Reserve Politics and Monetary Instability’ in Stone, A. and Harpham, E. (eds), The Political Economy of Public Policy, London, Sage, 1982, pp.211—10Google Scholar.

30 The deep historical roots of regulation are clear in Hammond’s, B. two monumental studies: Banks and Politics in America: from the Revolution to the Civil War, Princeton, Princeton University Press, 1957 Google Scholar; and Sovereignty and an Empty Purse: Banks and Politics in the Civil War, Princeton, Princeton University Press, 1970.

31 Quoted in Werber, W., ‘Social control of finance: the national market system for securities’, Columbia Law Review 75, 7, 1975, pp. 1233–98.Google Scholar

32 Securities and Exchange Commission, Annual Report, 1938 p. 30; New York Stock Exchange, Report of the President 1936, p. 19.

33 Vogel, D., National Styles of Regulation, Ithaca, Cornell University Press, 1986, authoritatively describes thisGoogle Scholar.

34 Quoted, Special Study, p. 603.

35 Sobel, R., N.Y.S.E.: A History of the New York Stock Exchange 1935–75, New York, Weybright and Talbey, 1975, p. 92 Google Scholar.

36 Securities Industry Study, Report, House Document 92–1519, 92nd Congress, 1st Sess. 1972; and Securities Industry Study, Report, Senate Document 85–033, 93rd Congress, 1st Sess., 1972.

37 Very well described in: ‘Informal bargaining process: an analysis of the SEC’s regulation of the New York Stock Exchange’, The Yale Law Journal, 80, 4, 1971, pp. 811–44.

38 Securities and Exchange Commission, Response to Questionnaire for Federal Regulatory Agencies from House Subcommittee on Oversight and Investigations, Committee on Interstate and Foreign Commerce, SEC, 1975; typescript in SEC Library, Washington.

39 For instance, Wolfson, N., ‘A critique of the Securities and Exchange Commission’, Emory Law Journal, 30, 1981, pp. 120–67Google Scholar.

40 Study of the Securities Industry, Report {Document 85–033), p. 201.

41 Special Study 1963, Part 3–5, pp. 694–6.

42 Seligman, , Transformation of Wall Street, pp.281 ffGoogle Scholar. is authoritative on the American Stock Exchange scandal.

43 Jennings, R., ‘Self-Regulation in the securities industry: the role of the Securities and Exchange Commission’, Law and Contemporary Problems, XXIX, 3, 1964, pp. 663—90CrossRefGoogle Scholar is a good summary of die enforcement experience until then.

44 On the abuse of APA procedures see Schotland, R., ‘After 25 years: we come to praise the APA and not to bury it’, Administrative Law Review, 24, 3, 1972, pp. 261–73.Google Scholar

45 Maier, C., Recasting Bourgeois Europe: Stabilisation in France, Germany and Italy in the Decade after World War I, Princeton, Princeton University Press, 1975, p. 9 Google Scholar.

46 Special Study 1963 Part 3–5, pp. 693–720.

47 History of National Association of Securities Dealers, Washington, NASD, 1959; House Document 92–1519, 1972, pp. 84–5.

48 Sobel, N.Y.S.E., Part HI ‘Decay and Response’, is excellent on this.

49 This is all very well described in the Senate Securities Industry Study of 1972 (85–033).

50 The Justice Department’s ‘anti-trust* broadside is printed in House Document 93—37, 1971—2, pp. 3135–56.

51 The House Hearings ran to nine volumes (92—37 to 37h); the Senate Hearings appear as four volumes covering September 1971 to October 1972.

52 The standard study is: Securities and Exchange Commission, Study of Unsafe and Unsound Practices of Brokers and Dealers, published as House Document 92–231, 1971.

53 The establishment of the SIPC was preceded by complex negotiations to safeguard self regulation. These are well described by the main participants in: Securities Investor Protection Corporation, Conference of Self-Regulating Organisations 1975 (typescript of proceedings in SEC Library, Washington, no serial no.).

54 Unsafe And Unsound Practices, op. cit., esp. pp. 2—5—14.

55 Securities and Exchange Commission, Annual Report 1983, pp.21 and 26.

56 For instance, from fiscal 1981 to fiscal 1986 SEC staff numbers fell by over 300, while securities registered almost doubled in number. Figures in SEC, Annual Report 1985, pp. 123 and 145.

57 The General Counsel to one of the major securities houses has recently put the case for greater administrative justice in: Miller, S. S., ‘Self-regulation of the securities markets: A critical examination’, Washington and Lee Law Review, 42, 3, 1985, pp. 853–87.Google Scholar

58 Naylor, B., ‘Financial Services’ PACs Swell in Size and Number’, The American Banker, 14 07 1986, p. 11 Google Scholar.