Power, Inc. The Epic Rivalry Between Big Business and Government--and the Reckoning That Lies Ahead

Beginning with the story of an inquisitive Swedish goat wandering off from his master and inadvertently triggering the birth of the oldest company still in existence, "Power, Inc." follows the rise and fall of kings and empires, the making of great fortunes, and the chaos of bloody revolutions.

David Rothkopf is the internationally acclaimed author of Superclass: The Global Power Elite and the World They Are Making and Running the World: The Inside Story of the National Security Council and the Architects of American Power. He is the president and chief executive of Garten Rothkopf, an international advisory firm, and a visiting scholar at the Carnegie Endowment for International Peace and CEO and Editor-at-Large of the FP Group, publishers of Foreign Policy Magazine.

1     The Goat with the Red Horns
 
In the abyss itself lie in wild confusion—pell-mell—stones, slag and scoria, and an eternal, stupefying sulphurous vapour rises from the depths, as if the hell-broth, whose reek poisons and kills all the green gladsomeness of nature, were being brewed down below. One would think this was where Dante went down and saw the Inferno, with all its horror and immitigable pain.
—E.T.A. Hoffmann, “The Mines of Falun”
 
 
The Past, Present, and Future of the Power Struggle That Defines Our Times
Throughout the writing of this book, I have had an image in my mind. It is of one of those charts showing the evolution of mankind. You know the type: they begin with an ape, heavy-browed, bent over, walking on all fours. They end with us, Homo sapiens, walking upright and looking somewhat brighter. The chart in my imagination however, illustrates another side of the story of human evolution. Rather than presenting us from a purely biological perspective—from the point of view of where, for example, in our family trees we picked up those useful opposable thumbs or the ability to digest frozen yogurt—it is describing a much more recent, still-unfolding aspect of our collective development. The imagined diagram, like this book, focuses on stages of our social evolution. More specifically, it describes the evolution of some of the most important organizations by which we bring order and productivity to our societies. As it happens, these are also the mechanisms by which power is distributed and wielded, by which rules are formulated and enforced, by which human collaborations and conflicts are facilitated.
Studying these organizations closely, you begin to wonder whether they themselves are actually the alpha organisms on the planet, the life forms that rule here on earth and of which we individuals make up only the temporary and replaceable working parts—much like the giant interconnected families of Armillaria ostoyae, also known as honey mushrooms, can grow to cover thousands of acres and live for millennia. A mushroom here or there gets lopped off, tossed into a salad, or eaten by some charming woodland critter, but the rest of the organism goes on about its business, sucking the water and nutrients out of great forests of trees that tower above the largely unseen fungus but that ultimately succumb to Armillaria’s superior organization.
After all, we individual human beings are fragile, small, and—at least for the moment—not even capable of reproducing while acting alone. Our time here is limited, and unsurprisingly, this unfortunate twist in the rules of nature has weighed heavily on us. Almost all human societies have cooked up higher powers that we define as higher first and foremost because they are immortal. And one of the things that distinguish us from the organizations we have created to live within is that they too are designed to be immortal, to outlast us and thus in some important respects to be above us like the gods themselves … or like large, enduring fungal networks.
In my imagined chart, the great-ape phase of evolution is the family, the basic social building block of every stage of human civilization. Then comes the tribe, and then the village. After that we see the development of ever larger, stronger, more complex products of organizational evolution until we reach one of those forks in the road, a little bit like the one that occurred during the period during which Neanderthals and Homo sapiens lived simultaneously. Grappling with the choice we face at that crossroads is where we have been these past few hundred years. On the one hand, there is an organizational approach that often seems to have much in common with the Neanderthals, better suited to the past but still strong and with much to recommend it. At the same time, we can see the irreversible rise of another one, not fully formed perhaps, suggesting several evolutionary steps to come, but clearly better suited to the global environment that is developing and changing around it.
On this timeline, however, the Neanderthals are national governments (this illustration was not created, I should hasten to say, because governments are on the verge of extinction, but rather because they are not as well suited to thrive in their current environment as some of their contemporaries on the organizational evolutionary chart), and the Homo sapiens, the ones that seem to have the evolutionary edge, are corporations—or at least global structures that are a lot more like multinational companies than they are like the traditional images of countries that we have today. No doubt some might say this is comparing humans to apes—apples and oranges as primates go—evolutionary cousins but clearly not the same species. But tell that to the companies and the governments. They have been locked in a power struggle with each other since the earliest days that companies were ushered into being by sovereigns who used them for economic purposes. They are different, but they are often compelled to occupy the same space. They are different, but in order to survive, it may well be that each must become more like the other. They are different, but they are both facing major evolutionary hurdles that must be addressed if they are to continue to exist in a rapidly changing international environment.
Also, as with the story of human evolution, this one is not without controversy. Just as the idea that men descended from the same ancient grandma as lemurs and chimps is offensive to those who take the Bible as literal truth, so too is the idea that somehow corporations are usurping the traditional place of countries on the international stage, thus upsetting some deeply ingrained, very nearly theological intellectual conventions. For example, to that group of political scientists who call themselves “realists,” this idea undercuts a central tenet of their worldview. Of course, one must always be skeptical of groups that give themselves a name that implies that only their adherents “get it” and that everyone else is by definition out of touch with “reality.” And in this instance, the skepticism is warranted despite the fact that “realists” trace their intellectual origins back thousands of years to venerable characters whose names are now inscribed on library friezes, such as Thucydides. Because while realism is purportedly built around the study of power, “realist” theory suggests that international power is solely concentrated in the hands of states. Private actors don’t really have a role in the realist cosmology. This despite the fact that today private organizations often and obviously wield power in ways that once only countries could, and in some cases in ways that many countries no longer can.
Many companies have greater economic resources at their disposal than many countries. Countries once derived power from their ability to print money, but now most can’t or don’t or have ceded the power to set the value of their currencies to markets. In fact, most of the value-bearing instruments in today’s financial markets are actually created by private organizations, traded in private markets, and only very lightly if at all regulated or understood by governments. And recently governments have concluded that the fate of private financial institutions is so important to the well-being of society that when those institutions falter—even as a result of greed and, in some cases, malfeasance—it is incumbent upon states to prop up the private entities even as private entities have from time to time propped up states.
Countries once controlled borders, but now borders are no longer the effective barriers to commerce or cultural exchange they once were, and while states are weakened by this, global private actors are strengthened. Multinational corporations effortlessly move capital, products, services, and production facilities across borders that are far more porous now than they were in the past. As has been the case almost since their very inception, private actors also have the ability to project force and influence political outcomes, and many have far more developed mechanisms of international persuasion than do the vast majority of countries. Think about the private military companies that the U.S. government employs to fight in the Middle East, or the influence that corporate lobbyists wield in democratic legislatures, or the success that some major energy companies have had in forestalling action on climate change and other environmental issues.
To be fair, even more recently developed theories of international relations such as liberalism (which is similar to realism but stresses the pacifying effects of free trade, democracy, and international institutions) and constructivism (a theory that focuses on cultural factors and asserts that the international system is a social construct) mention private actors only in passing despite their growing influence and role in the global era. In short, most theories of how international society works—the supposed focus of the academic discipline of international relations—are state-centric. Which, as I suggest, is either to miss or to grossly undervalue an important part of what is shaping today’s world and will shape tomorrow’s.
Such intellectual blind spots lead, not surprisingly, to some pretty important flaws in theories on which some pretty important decision making is based. For example, they lead to the thought that the central work involved in advancing national interests involves diplomacy between states. They also assume that national borders define sovereign bubbles in which there is considerably more unity of purpose among resident actors than there actually is. Yet as we all can see from recent headlines, nonstate actors from giant corporations to terrorist groups act in their narrow self-interest and in ways that are often at odds with the policy of the states in which they live and operate. While states are at no risk of disappearing, as the Neanderthals did, many weaker states are nowhere near as influential as the emerging class of globally active “supercitizens,” private mega-organizations that wield great clout on economic, social, environmental, and a host of other issues (far beyond that of ordinary people operating in national political systems—hence the term “supercitizens”). Whom would you pick in a one-on-one contest to influence, say, global climate talks—ExxonMobil or Morocco? Who has more clout in an effort to impact global financial markets—JPMorgan Chase or the Central Bank of Thailand? If you were the U.S. governor in postinvasion Iraq, whom would you have chosen to protect you—the Iraqi army or Blackwater?
In addition, while the international relations theories taught in most schools assume that the biggest security threats to states come from other states, it has also been clear for quite some time that nonstate actors pose real risks. But some of the risks to the security and soundness of states that have been posed by the private sector are much more insidious and slow-moving. Over the past several centuries, the accumulation of power on the part of private actors has been, as we will see, slowly, often invisibly, but directly linked to the atrophying of states’ muscle, role, and prerogatives.
For a number of years now, observant students of the world have noted important aspects of these problems associated with many of the mainstream ideas about how the world is organized. From my colleague Jessica Mathews in her 1997 article “Power Shift” in Foreign Affairs to perceptive academics like Princeton’s Anne-Marie Slaughter in her book A New World Order or Harvard’s Joe Nye in his book The Future of Power, political analysts have explored different dimensions of the changes that are afoot. These authors and others have noted that most “modern” ideas are based on a notion of a world of nation-states that dates back to the middle of the seventeenth century. They have made the case that in order to be truly realistic, contemporary theories need to take into consideration that power is more dispersed and more complex than previously thought. They also suggest that we are in a transitional period that will be marked by the continuing transfer of power from governments to nonstate actors.
In an era like ours, of emerging transnational threats and challenges from global warming to combating the proliferation of weapons of mass destruction, nation-states will have to develop new and more effective forms of international cooperation in order to achieve their objectives and maintain their relevance. Public-private partnerships will become essential to offset public-private rivalries. Indeed, public-private partnerships are already absolutely essential for handling global financial markets, managing our shared climate, or even projecting force halfway around the world. In some cases, countries may have to become more like companies. And at the same time, as the latter grow and their impact amplifies, companies may well have to become more and more like states in recognizing that a tacit social contract exists between them and a civilization that allows them to play such a central role.
In other words, we live in a world in which the old rules don’t apply and we don’t have a fully developed set of new ones. Changes are happening rapidly, and each major development of the past decade—from financial crises to wars to global warming—suggests that as has happened in the past, periods of transition in which there is broad disagreement about how the world is or can or should be ordered are very dangerous indeed. And for all these reasons, this is a story that must be told in a book rather than as a chart.
The Goat with Red Horns
There is one other important difference between my image of the chart of human organizational evolution and the conventional one featuring our knuckle-dragging forefathers. My chart tells a story that begins not with an ape, but with a goat.
The story of human evolution, we are told, began in the hot, humid landscapes of Africa. Our goat, however, first appears in a much colder place, in what today you would call Sweden. One can’t be precisely sure when it took place; perhaps it was during the reign of Sweden’s first king, Olof Skotkonung. But our story has less to do with Olof than with an anonymous goatherd who was tending his flock in central Sweden in the region then known as Dalarna or Dalecarlia. The goat belonged to a farmer whose name has been lost to time. But according to local lore, the goat was named Kare, and one day it wandered off onto the forested slopes near the town of Falun, which until the goat’s adventure was an unremarkable rural village located between two lakes. After no doubt causing his owner considerable consternation by his absence, Kare eventually strolled back home. That is when he created an even bigger stir. Because now, the previously perfectly ordinary goat’s previously perfectly ordinary horns had turned red.
Shocked, the farmer retraced Kare’s steps looking for something to explain his goat’s transformation. Ultimately he came across a bog that the adventurous animal had apparently explored. There he noticed a rust-colored puddle atop a vein of reddish-orange soil. And this, according to the stories they have told for a millennium, is how copper was first discovered in Sweden in a place that would someday be known as Stora Kopparberg, the Great Copper Mountain.
For most of the past thousand years, Stora Kopparberg was also the name taken by the enterprise devoted to mining that mountain. Its story is important to us because it so closely traces the rise of business and the twists and turns in the relationship between business and government, both the symbiosis and the tug-of-war between public and private power.
Enter the Everycompany
The business that grew up from the discovery by that wayward goat is considered by many experts to be the oldest continuously operating corporation in the world. There are documents from an early share transaction involving Stora that date back to 1288. Today, the company, renamed Stora Enso, is a booming multinational with operations in more than thirty-five countries—an important but not terribly well known enterprise that controls half as much territory as Belgium and has annual sales that are larger than the GDP of almost a hundred countries. Stora is among the world’s oldest companies, and for the purposes of this book it can usefully serve as the “everycompany,” both as an independent entity and in terms of its relationship with Sweden and ultimately, inevitably, other nation-states, a touchstone for those seeking to understand how the structure of the world economy came to be what it is today.
As a consequence, the horns of Kare the goat are, in some respects, the nibs of a pen, and the reddish liquid into which they were dipped are the ink with which we will write an important part of our story. And the business that grew from the copper mountain and the country that spawned that business are among that story’s most important protagonists, characters to which we will return throughout because key events in their history illustrate so well the evolution that we seek to understand.
You could hardly pick a place that would seem less likely to be an Eden of free enterprise than the terrain around Falun. It lay at the northern frontier of European civilization in a region that for half of the year is typically bitterly cold and inhospitable. In that area much of the terrain was too rocky or rough to be useful for farming. Few people lived in the area, and during the Viking Age that preceded the discovery of copper by several hundred years, what few historical records there are suggest that those people were pretty tough customers. Indeed, residents of Dalecarlia have continued to be known as an independent breed, a fact that would lead both to the impulse to hew great riches from unyielding rock and to regular conflicts with Swedish kings who sought to impose their sovereign will upon them.
But under the region’s typically cold and often forbidding landscape lay an extraordinary resource, one so great that it would ultimately become not only the linchpin of Sweden’s economy when the country was one of the world’s foremost powers during the seventeenth and eighteenth centuries, but a vital driver of Europe’s economy from the late Middle Ages through the Industrial Revolution. It was home to Europe’s most abundant supply of copper, producing at one point in the seventeenth century 70 percent of the entire continent’s copper. Mining activity is thought to have begun in the region around the time of King Olof. Initially, the “mining” was pretty superficial—locals scraping out a little of the precious metal near the surface and smelting it for use around their farms and in their daily activities. But within decades the mining became more organized, and within two centuries, the approach to tapping the riches took a turn that marked a bright line in history, the moment when a new way of organizing human activity took root in that rocky, rust-colored soil.
It is important to note, of course, that while the corporation today known as Stora Enso may be the oldest business so organized to still be in operation, it is hardly the first corporation, nor is it anything like the world’s oldest business. The Japanese construction company Kongo Gumi, now part of Takamatsu Corporation, was reportedly founded in 578. Several dozen other businesses still in existence are known to predate Stora, including a rather remarkable number of restaurants, hotels, breweries, and wine- and liquor-making establishments in Europe and Japan.
Because of Life’s Uncertainty and Doubtful Course
What makes Stora so relevant is that it is the oldest example still in operation of a corporation, a legal entity owned by shareholders that had a status all its own. The idea of incorporation—literally meaning embodiment, giving an idea legal standing on its own—has evolved greatly over time. Many of the legal features of the modern corporation have their origins in ancient Rome, where the Romans pioneered the idea of the business corporation as a legal “person” with shareholders and limited liability. Initially, the corporation was seen as something endowed with its status by the sovereign, beholden to that sovereign and very limited in the scope of its undertaking and rights. How the idea has developed since, and how corporations have over time come to be seen as the full legal equivalent of citizens and then as entities sometimes rivaling states, is the subject of this book.
From its earliest days, Stora was organized in a way that lent itself to the corporate shareholder structure. Miners had rights to particular portions of the mine based on their efforts and capabilities to bring up and melt down the ore. Agreements had to be drawn up among those who had such rights to protect their collective interests. Ultimately, those rights were reflected in share documents that themselves had value and could be bought and sold.
Stora’s claims to being the oldest continuously operating corporation in the world are tied to the document that offers the first evidence of its existence. That document is a Deed of Exchange dated June 16, 1288. This mottled and now brittle sheet of parchment, bedecked with massive wax seals attesting to its official nature, records a deal between a man named Peter, Bishop of Vasteras, and his nephew, Niccolai Kristinesson, by which Peter purchased back from his nephew a one-eighth interest in the copper mountain. He had previously transferred the share to his nephew in exchange for some cash that the cleric needed to serve his bishopric.
Despite the fact that the document suggests Peter grappled with cash flow problems, it also attests to his elevated status within society and his keen eye for business opportunities. Living on a large estate featuring its own little subeconomy of mills, pastures, fisheries, and forests, Peter was a man of Sweden’s upper class. As such, he was aware of the latest news about economic developments throughout Northern Europe. The mine at Falun had already been a going concern for two hundred years when he bought into it, but Peter got wind of some important technological developments that he concluded improved its chances of future profitability.
A group of monks had tipped him off to the fact that Stora Kopparberg had made some improvements in the waterwheel technology used to power the mine. (A literal and figurative grace note as far as our story is concerned, as in many ways the Catholic Church was really the world’s first global “private” enterprise and, as we shall later see, the Reformation was in many ways the first nationalist backlash against globalization.) As a consequence, Peter felt it important to purchase back from his nephew the share in the mine, which he did in exchange for an estate, mills, and fishing rights. One journalist has cited this first recorded corporate transaction as also being the earliest recorded case of “insider trading.”
The fact that Bishop Peter’s share exchange was sanctioned by Sweden’s king is further evidence not only of his place in society but also of the place of this transaction in the country’s economic life. The document reads:
We, Peter, by the grace of God bishop in Vasteras, greet all who see this letter in the name of the Savior of all men. Because of life’s uncertainty and its doubtful course, even those proceedings carried out in a legal manner are at times obscured by the darkness of oblivion. The endurance of truth should, therefore, be strengthened for posterity by letters and witnesses. Led by this wise consideration, we wish to make known to all through this letter that we assigned to our nephew, Niccolai Kristinesson, an eighth share in the copper mountain … which as is known, had been acquired throughout our care; and this in return for a loan which we in our first year in office, with its many needs, had received from our nephew … Later … we made such an exchange with the said Niccolai that the possession of the above-mentioned eighth share shall return to us and our church. And he in its place shall have the Froslunda estate … together with the mills … and also all that lawfully belongs thereto, to occupy freely in perpetuity … And in order that in the future no false statements can be made concerning this, we have had this letter written and have had it sealed with the seal of our Exalted and Illustrious Lord, Magnus, King of Sweden.
The signature and seal of King Magnus Ladislaus ensured that the transaction would be recognized as sanctioned and would deter future challenges to the ownership rights it transferred. But it also was indicative of the fact that the Swedish crown was deeply involved in the activities of the mine from its earliest days. The reasons are severalfold. First, at the time, the rights of sovereigns were pretty much unlimited throughout Europe, as monarchs not only controlled the means to impose their will but were seen as the sole legitimate legal forces, endowed by divine providence with their power. But beyond this, Sweden’s kings quickly came to see the great copper mountain as one of the vital economic organs of their society. The copper from the mines was used to forge weapons for Sweden’s armies. The copper was also exported throughout Europe by merchants, including prominently those from the Hanseatic League (an alliance of cities from what we now think of as northern Germany). Through what might be seen as an important surge in the movement toward “globalized” markets, these traders saw to it that Falun’s copper made its way to virtually every corner of Europe, thus providing important hard currency for Sweden’s treasury, as well as for Bishop Peter and the other owners of the mine.
The copper went to local uses as well. It was made into cannons for the Royal Navy. It was used by the upper crust of Swedish society for the roofs of their homes, for kettles, for bathtubs, for kettle drums and church bells. It was used as collateral to pay off foreign debts, finance wars, and defray other pressing expenses. For all these reasons, the involvement of the state in the development of the business of the miners from Dalecarlia was significant and growing, consistent with the role other states would play in the development of early “big businesses,” and would ultimately be a source of contention between the power of the Swedish crown and the private owners of the mine. In fact, throughout the Middle Ages and the Renaissance, while the crown played a central role in controlling Sweden’s copper trade, it was also so very dependent on the work of the hardscrabble men who worked beneath the surface of the copper mountain that it was often very difficult to tell who was controlling whom. In this respect, even in the early days of its existence, Stora Kopparberg illustrates both the norms of early public-private sector relations and also the central tension that would shape those relations for the ensuing eight hundred years.
A Royal Charter for Hell Signed on the First Saturday in Lent
By 1336, when he was about twenty years old, Sweden’s king Magnus IV, also known as Magnus Eriksson, was monarch of Sweden, Norway, and a substantial chunk of Denmark called Scania. He had also married a member of the French aristocracy and legitimately saw himself as being in the first tier of European rulers. But ruling such a far-flung kingdom meant putting down costly rebellions, dealing with challenges at his borders—from those with Russian principalities in the East to those with the Danes in the South (also costly)—and ensuring that the nobility who had granted the king the right to rule felt that their economic interests were being served through growth at home (not surprisingly, also a burden on the royal coffers).
For all these reasons, Magnus took an increasing interest in the mines at Falun, ultimately determining to visit them in 1347 with the objective of reasserting royal authority over them by issuing a royal charter setting up a new, more clearly delineated set of rules by which the miners could prosper and yet serve the interests of the kingdom. What Magnus found when he got to Falun in 1347 was unlikely to have been very appealing. Rolling hills and glistening lakes aside, the deeper the miners dug into the mountainside, the grimmer the enterprise became. And although we have no contemporary descriptions of the mine from the mid-fourteenth century, visitors from ensuing centuries offer up a number of descriptions that are so consistent and unvarying that they help suggest a picture of what Magnus saw in 1347 when he visited Falun and the enterprise that had made it a boom town.
While Falun and the mine were not seen to resemble the “peaceful communities filled with the familiar smells of meadows and farmyards” that more or less defined the rest of the Swedish landscape, visitors did regularly suggest it resembled another place that also happens to be located well below the surface of the earth. An Englishman who visited in 1708 wrote:
The traveler on his way here is seized by terror even from afar when he sees the dark and heavy smoke which the city ceaselessly spews forth in such quantities that the stranger is inclined to believe that he has come to the cave of Cyclops rather than to a city. The smoke derives from the furnaces that are spread out over an area of a square mile around the Varpan and Runn lakes. When the wind is from the west, this smoke darkens the city so that there is twilight at midday, and the inhabitants must light torches to be able to go about their business. All the private and public buildings in the city are blacked by soot, and all the brass ornaments out of doors are covered by verdigris.
While the residents of the town rationalized the situation by developing the belief that the black smoke that emanated from the mine was actually good for their health, they could hardly have helped but notice that it gradually killed off all plant life in a wide radius around the town. Perhaps it was the desolation that led renowned Swedish botanist Carl von Linne to remark after having visited the mine in 1734 that it was “Sweden’s greatest wonder, but as terrible as Hell itself.” Linne continued:
No theologus has ever been able to describe Hell so frightfully as it appears here. Down in the crowded passageways, buried like moles, the laborers go like black assistants of Satan, surrounded by soot and darkness, smoke and fumes, naked to the waist, with a woolen rag in front of their mouths to keep from breathing in smoke and dust by the heap; the sweat runs out of their bodies like a woolen bag …
The abysmal working conditions were also treacherous. From the moment they approached the mine, miners risked falls from great heights, the collapse of tunnels, being crushed by falling debris, or being burned by the constant fires that were lit to soften the stone so that ore could be carved out. Linne wrote, “A cave-in, in which everything might crumble in a heap in less than an instant, was feared at any minute, without the least hope of safety … Fear of being so far underground and of such darkness and danger, raised the hair on my head, so that I desired nothing more than to once more be able to stand on the surface of the earth.” Others echoed the netherworldly theme. A visitor in 1662 wrote of the miners, “Since they are rather black, and grope around in the blue haze like goats on rocks, those who go down there in the dust and smoke and darkness look like mountain trolls and small devils, so that a stranger may become dizzy when he regards the men with torches.”
About a century and a half later, it was clear that word of the appalling conditions had spread so far that E.T.A. Hoffmann, the famed German author of The Nutcracker and the subject of Offenbach’s famous opera The Tales of Hoffmann, took it upon himself to memorialize them in his short story “The Mines of Falun.” The story is based loosely on the sad tale of a young miner named Mats Israelsson, who not only suffered a horrible fate but also had to suffer the indignity of being known to history as “Fat Mats.” Israelsson was setting fires deep underground in 1676 when a large cave-in buried him alive. Quickly forgotten, he joined the ranks of the countless others entombed within the mine. Then, forty-two years later, a new generation of miners was digging in the area in which he had been lost and came upon the chamber in which Mats had been sealed. In it they found the body of a young miner. Although such discoveries were fairly commonplace, the boy’s appearance was not. Mats’s body was still soft, his clothes intact. But when he was brought to the surface no one could think of anyone who had been lost fairly recently—which was their assumption because of his well-preserved appearance.
Then, an elderly lady, Margareta Olsdotter, heard about the discovery and took it upon herself to investigate. When she saw the body she immediately recognized the face of her lover of four decades before—Mats, the man who proposed to her shortly before he disappeared into the mine. Preserved by the mine’s copper sulfate, “Fat Mats” was subsequently laid to rest in a nearby cemetery, but his story became so widely known that he was commonly thereafter referred to as “the world’s most famous” resident of Falun.
Like other writers, Hoffmann was captivated by the romantic and tragic nature of the story (and like others he overlooked the fact that Margareta actually ended up being married twice after Mats’s disappearance). But he too could hardly resist the familiar metaphors when describing the environment in which his miner hero lived and died:
In the abyss itself lie in wild confusion—pell-mell—stones, slag and scoria, and an eternal, stupefying sulphurous vapour rises from the depths, as if the hell-broth, whose reek poisons and kills all the green gladsomeness of nature, were being brewed down below. One would think this was where Dante went down and saw the Inferno, with all its horror and immitigable pain.
Despite the clear consensus that the mine was a dangerous, putrid, and filthy place to work, there are also many references from Hoffmann’s fiction and reports from Linne and other visitors that the miners were happy to have the work they did. Linne observed, “In these dark chambers where a cave-in is constantly feared, this condemned people carried on; happy beings; for they claw and fight to come there. How dark and horrible it ever may be, workers are never lacking; but rather people seek with force and the greatest energy to come to work there.”
In fact, the same thing that drew the workers to the mine also drew Magnus Eriksson: the opportunity to tap into the riches nature had left beneath Falun’s soil. Miners made more on average than any other comparable group in Sweden. Those who owned shares in the mine or who had permanent concessions grew wealthy. And the king came to town to ensure he was guaranteed his piece of the pie. His vehicle was a royal charter that outlined the rules and responsibilities for the miners. But it is worth noting that the king recognized even in the mid-fourteenth century the importance of protecting certain of the miners’ rights and prerogatives, granting them among other liberties the right to own private property in exchange for their labor. This was an important first concession. It assured the king that the enterprise would continue running smoothly, but it also gave the miners a taste of independence that would grow over time. Those who gained the concessions would later use them as the foundation to claim additional privileges and ultimately, five centuries later, to break away from state ownership altogether. It was a story that may have begun with Stora but would be repeated countless times during the next half millennium.
Magnus however, was simply looking to ensure cash flows and his authority for the moment. His charter decreed that master miners would oversee production in exchange for royalties and that they would be overseen by a royal bailiff who reported directly to the king. In return, the enterprise was granted a number of unusual privileges that underscored its unique role within Sweden’s economy. The charter states, in language echoed by other such documents throughout Europe that clearly communicates the great and unquestioned power of the sovereign over all aspects of life at the time:
We, Magnus, by the grace of God King of Sweden, Norway, and Scania, greet you Mastermen and all the common people on the copper mountain, in the name of our Lord …
First, we grant that everyone who clears by burning and puts the timber axe over the forest and is a day laborer who goes daily to the mine … possesses the ground without paying rent …
We also graciously vouchsafe, as has previously been done, that any man who is outlawed in Sweden, wherever it may be in the kingdom, who is a man willing and able to work for his bread, may and shall all have sanctuary among you and remain there in peace, unless he be a murderer of his master, a traitor, a proven thief, or a molester of women …
In all matters all the people at the mine, each in his place, shall do as the [royal] bailiff orders …
Over the next several decades the mine boomed, and the importance of asserting control over it became a central concern for the monarchs of Sweden. In 1396, Queen Margarita followed Magnus’s example and reasserted royal authority over the mine, as did many of her successors over the centuries that followed. During those centuries, royally chartered enterprises, semiautonomous businesses that were granted special privileges in exchange for advancing the interests of the state, became more and more common throughout Europe. As we shall see, Stora’s example presaged those of much better known companies, widely acknowledged predecessors of today’s multinationals such as the Muscovy Company, the British East India Company, the Dutch East India Company, and the South Sea Company—each a key player that redefined the relationship between the seats of public power and their private counterparts.
Stirrings of Independence and a Brutal Reply
As it happens, the twists and turns in the relationship between the men of Falun and their kings well illustrates the on-the-ground reality associated with many of the defining moments in the evolution of Western political and economic history.
For example, as the Reformation arrived and many of the most prominent of Europe’s monarchs began to assert their primacy over a church that had overreached, grown corrupt, and threatened to impose its “universal” laws over their national ones, a similar story was unfolding in Sweden.
The nature of carving bits of precious metal out of the unyielding earth and of living with the constant fear of being crushed to death amid the gloom of billowing smoke and settling soot had a powerful effect on the personalities of the miners. It amplified those traits that Swedish historians have described as special to the “men of Dalarna … men who are independent and unafraid, men prepared—once upon a time—to reach for their weapons…” This independence was both a blessing and a curse, as is illustrated by the story of the miners’ relationship with one of Sweden’s greatest kings, an accomplished, brutal, and rather twisted leader named Gustav Vasa.
King Gustav has been described as having “an almost pathological greed for power, he was utterly unscrupulous and ruthless and his word was decidedly not to be relied on. He was litigious, but had scant respect for the law and still less for truth. His mendacity was beyond belief, his greed for wealth bottomless.” In these respects, he shared much with his contemporaries, including Henry VIII of England, Louis XII of France, the Holy Roman Emperor Charles V, and an assortment of popes. The rulers of the day were, for the most part, noble in name only. In fact, one of the comforts of reading history is that the leaders of the past make their flawed successors today look benign by comparison.
Despite this, or perhaps because of it, the men of Dalarna supported the rise to power of Gustav Vasa. However, being the sort of man he was (which is to say, someone in a line of work in which political success involved not being poisoned or overthrown by your friends or family—for further reference see that notable, almost contemporary view of Scandinavian royalty, Hamlet), Vasa did not exactly reward those closest to him or those who had backed him for their support. In fact, among other things, he put one of his closest advisers to death for disagreeing with him, and he periodically rolled loaded cannons into parliament in order to tilt the electoral balance in his favor. In fact, it probably became clear after not too long that the king was not going to provide the miners with change they could believe in. He was fond of administering beatings with whatever wrought-iron household implement was handy, once beating a goldsmith to death for taking a day off without permission, and in at least one instance he chased one of his secretaries through his palace with a knife.
He asserted his will in other ways, consistent with the fashions of the statecraft of his day. In an effort to consolidate power and ensure that he could meet the costs of running a kingdom, he introduced a host of reforms that strengthened the state’s control over the economy. He declared the church subordinate to the king and seized its assets throughout Sweden. If in order to consolidate his power he was willing to shrug off centuries of deference to Rome, and by extension the God he was raised to believe in, it should have come as no surprise when he decided also to tighten his grip on the mine that was the very heart of his country’s economy and the font of its wealth.
The miners were resistant to his policies and were not shy about expressing disagreement with his views on everything from new mining technologies to how the smelting houses should be managed. Ultimately, a decision by the king to give a group of foreign traders from what is now Germany a monopoly over managing Swedish trade with Europe in exchange for a war loan proved to be the last straw. The German traders took advantage of the arrangement in a way that cut deeply into profits at the Great Copper Mountain.
With both their political freedoms and their economic livelihood encroached upon, the Dalesmen revolted, not once but three times. The first effort, in 1524, was led by a couple of Catholic clergymen who had been dispossessed. The king easily and unhesitatingly quashed the uprising and ultimately appropriated the last thing the prelates had left: their lives. Three years later, after a harsh tax was imposed (again, to fund the king’s wars), a substantial number of the region’s men determined to replace Gustav with another candidate. But support was spotty, and the outcome was the same: Gustav won, and the leaders of the rebellion lost their heads.
Despite Gustav’s blunt methods, however, he had not successfully quelled the irrepressible spirit of the miners. Again in 1531 they rose up. The king was determined that this time he would deliver a lesson that would not be forgotten. In the bitter cold of a Swedish January, Gustav made his way up the copper mountain to Falun. There, summoning the leaders of the community together, he assailed them, asserting that they were traitorously trying to subvert his efforts to form a centralized state, a modern Sweden. He was particularly infuriated that the miners had claimed earlier that to travel through the region, the king would have to receive a safe-conduct from them. They had so long been unburdened or unconcerned with the demands of the nobility that they simply didn’t know how to deal with this assertive king.
To punctuate his scathing words to a crowd that was the contemporary equivalent of the Great Copper Mountain Chamber of Commerce, the king then sent his men into the gathered crowd, where they seized the five master miners who had led the rebellion. As you might expect, given Gustav’s predilections, they were then publicly beheaded, and their bloody noggins were placed on a wooden plank and displayed as a message to all that further uprising would not be tolerated and that the state’s authority was not to be challenged.
Quickly following this with strong measures to assert his economic control over the mine, Gustav seized and bought up shares until, two decades after the final uprising, he controlled two-thirds of the smelting houses in Falun. He directed the copper from the mine into the munitions, cannons, anchors, horseshoes, armor, and weapons with which he consolidated and extended his power and Sweden’s. Moreover, he established central-government control over the mine for two centuries to come, a period during which the application of Falun’s wealth would elevate Sweden to one of Europe’s and the world’s greatest powers. During those centuries, the crown viewed the mine as a source of hot and cold running resources, mining without much of an eye toward sound practices. The frenzy to produce and support the rapidly growing needs of the state led to more and more accidents, more loss of life, and more resentment of the state among the miners. But there was no letup.
In 1613, Gustavus Adolphus, a successor to Vasa, chose to “monopolize the sales of copper from the mine in the hands of the state; to use the proceeds of an indemnity tax to pay the miners; and, lastly, to sell the metal to merchants against silver dollars, which they had to bring in from the Continent, through their sales of copper there.” He then used these proceeds to pay off an obligation to the Danes, a ransom that was 80 percent funded by proceeds from the mine. He also sought to create mining operations that would be more efficient than Stora Kopparberg, but both of his competing companies were failures and Stora remained central to Sweden’s fate. In exchange for its primacy, Stora helped Gustavus Adolphus create a Swedish empire that girded the Baltic. Indeed, in 1625, five years before Sweden entered the Thirty Years’ War—the decisive conflict in determining the centrality of the power of nation-states—Gustavus Adolphus actually put Sweden on the copper standard. Not only was this expedient in a country with an abundance of the precious material, but it was also an effort to raise prices for copper throughout Europe. The policy was not terribly successful, but the move illustrates that when Sweden achieved its pinnacle of global influence during and immediately after the three-decades-long conflict that was the worst to ravage Europe in its history, it was a pinnacle built atop a copper mountain.
In fact, Gustavus Adolphus’s daughter, Queen Christina, said as much. “The greatness of the realm,” she asserted without fear of contradiction, “rises and falls with the Falun mine.” She spoke in 1640, eight years before the Peace of Westphalia, at a time when Sweden had been engaged in the great European conflict for a decade and when Stora was by far its leading enterprise and its chief source of export revenue. Evidence of its output was found from the copper at the tips of the pikes that distinguished Swedish troops as they seized German territories and parts of Denmark, to the cash that was one of the nation’s most important assets when Sweden negotiated the Treaty of Westphalia. As a consequence, Stora Kopparberg’s creation seven hundred years before was not only partially responsible for the lands that Sweden claimed at the war’s end (which made it the third-largest country in Europe in land mass after Russia and Spain), but ironically, the enterprise also played a central role in shaping the Treaty of Westphalia, the turning point in history after which the primacy of the nation-state was clearly and finally established.
By the end of the Thirty Years’ War, the Catholic Church had been subordinated (the pope was excluded from negotiations at the Treaty of Westphalia), the Holy Roman Empire had been shattered, and the concept of cuius regio, eius religio was enshrined. (It means “whose realm, his religion” and gave sovereigns the right to determine the religion of their own states—provided they chose from a menu limited to Catholicism, Lutheranism, and Calvinism.) Further, it established secular state sovereignty as a core principle of the international system. The treaty not only brought an end to centuries of fighting between church and state, it also brought peace to a continent that had been in turmoil because there had been no widely accepted political order. A patchwork quilt of varied political, religious, and private actors was constantly rent with tensions and the lack of an equilibrium or agreed-upon rules. But the “rules” of Westphalia were so clear, and the cost by which they had been established was so great, that they have stood, in key respects, until today. And key ideas framed there—such as the irreducible, inalienable primacy of sovereignty—came to be accepted over time in every corner of the globe.
With Every End a New Beginning
The world being what it is, we find even in the immediate wake of the moment that brought order and clarity to Europe and defined the role of the nation-state the first stirrings of changes that would ultimately complicate and then challenge that new reality. Those changes came as the newly confident nation-states sought to expand their power through international trade and exploration. In order to support those efforts, those countries created next-generation private enterprises, enterprises modeled on the experience of companies such as Stora. Chartered joint-stock corporations such as the British East India Company, the Dutch East India Company, the Hudson Bay Company, and La Compagnie des Habitants rose up in the decades just after Westphalia. They were evidence of new prosperity, and engines of new conflicts. And not only would these companies continue the evolution begun by Stora, but Stora would change and reinvent itself as they did.
Mercantilism was the dominant economic school of thought in this period, and nation-states that had recently consolidated themselves protected their new prerogatives by introducing protectionist policies that discouraged imports and actively promoted exports. The Age of Empire was one consequence of mercantilism, since countries sought to expand their domains in search of the resources they needed for growth. Spanish ships that had first crossed the Atlantic a century and a half earlier now plied established trade routes, as did their British competitors. Portuguese, Dutch, French, and English ships made for Asia. Overseas trade built economies and also helped fuel a prosperity that led to a growth in Europe’s population of over 100 million from a century before. The Peace of Westphalia had not only created a new world order that stabilized Europe, but once the European powers branched out in search of new territories and markets, it created the first genuinely global economy. That economy relied on joint-stock companies to expand into new markets and impose European views about how they should grow. Presaging complications that would seem quite familiar today, they not only fueled booms and busts but were seen as closely linked with political elites and, moreover, in some instances as actors behaving very much like independent states themselves.
Thus, around the time of Sweden’s pinnacle of copper-gilded power and the Treaty of Westphalia, both states and corporations began an evolutionary fugue in which each developed capabilities and modalities that would sometimes draw them together so closely as to make them parts of a whole and would sometimes set them at odds with each other over the control of riches, influence, or both. An event that was supposed to simplify the global power scene, ending centuries of tension between church and state, marked the beginning of a new such power struggle, one that we would come to see as being between the public and private sectors.
As we shall see at almost every turn in the history of nation-states and corporations, the oldest corporation still in existence rode the shifting tide. Often, as Stora Kopparberg evolved into Stora and eventually Stora Enso, transitions in its relations with the Swedish government or other governments worldwide, or later with companies it acquired or even NGOs with which it jousted, led the way for changes that were coming to society worldwide. It is striking that many of the biggest transformations came at watershed moments in history when revolutions of one sort or another were in the air. The greatest of these moments—Stora’s birth at the end of the Middle Ages, its growth as a nationally important enterprise during the beginning of the Renaissance, and the central role it played in the changes associated with the Reformation and the Thirty Years’ War, the Treaty of Westphalia, the Enlightenment, the Industrial Revolution, and the global era—were accompanied by others in the area of science, art, technology, and of course political philosophy and economics.


 
Copyright © 2012 by David Rothkopf