A readiness to suspect Rot at the Top—a conviction that our major institutions are prone to corruption and irresponsibility—is an enduring aspect of the American character. Like the other American myths, this one changes over time, and its varying versions have manifested both the best and the worst features that distinguish our culture, from a healthy vigilance against abuse of authority to occasional hysteria over fiendish plotting by the devils of the day. Previous chapters have examined how prevailing versions of the other myths have drifted away from current realities, so that they are less faithful guides to the challenges we now confront. In emphasizing either toughness or magnanimity, they have ignored the central challenge of seeking joint benefits and avoiding joint losses. So too with the tale of Rot at the Top. This mythology, however, has a special feature. The other myths generally evolve in responses (albeit often delayed or distorted) to our collective experience; today’s version of the Triumphant Individual is quite unlike that which prevailed fifty years ago, which was in turn different from that of one hundred years go. But the myth of the Rot at the Top tends to cycle, alternating its indictment between the two major realms of authority: political power and economic power.
The liberal version of this tale typically concerns itself with the depradations of business; the conservative, with the bloat and meddling of government. As with the other stories, this one clearly has roots in reality. Both public and private bureaucracies have on occasion been impervious to the wants and needs of those whom they were established to serve. Neither has been immune from corruption, and both political and economic elites are often cushioned against the consequences of incompetence. At the highest reaches of either realm of authority—here as elsewhere—arrogance is often endemic.
Yet our readiness to lay the blame for any ills that beset us at the door of the most visibly powerful among us—while it spares America the passivity and subservience that plague other cultures—risks obscuring the responsibility of citizens at large and our collective power and obligation to make choices. As we lament a pattern of failing farms, shuttered factories, or rising unemployment, our mythology comfortingly but insidiously blinds us to the fact that the fault lies not solely with “them”—with corporate or governmental leaders—but with us, in our failure to come to grips with the choices we face about what rules will govern our economic system. As the world becomes more complex and integrated, these choices become at once more daunting and more urgent. The temptation to avoid them increases, as does the cost. In excoriating in turn the demons of corporate or government control, we have fabricated a false dichotomy between economic and political leadership. We have paid scant attention to how the “market” should be organized and maintained to engender a productive working relationship between public and private spheres. As the global economy shrinks, this oversight has constrained our capacity to adapt.
By some accounts, public suspicions of Rot at the Top have deepened in recent years. In 1966, 42 percent of Americans surveyed expressed a “great deal of confidence” in congressional leaders, 41 percent were equally confident about the president and his cabinet, 55 percent expressed great confidence in corporate executives, and fully 62 percent felt the same way about top-level military officers. Even labor leaders (22 percent) and the press (29 percent) summoned a fair degree of confidence. But by 1981 a different picture emerged: Confidence in government and business leaders had fallen by about 20 percentage points; leaders in the military, labor unions, and the press suffered comparable declines.1 The drop was even more precipitous when the public was asked about the relationship between government and business. In 1958 more than three out of four Americans believed that their government was run for “the benefit of the people”; only 18 percent thought it was run “by a few big interests looking out for themselves.” By the end of 1972 opinions had reversed: Now more than half believed that the “big interests” were in control.2
One could look upon this decline in confidence as a unique event in American history, attributable to the Vietnam War, the Watergate scandal, and economic stagnation. Left-leaning liberals, no less than conservatives, recoiled from the corruption and incompetence they saw at the top of American government. Daniel Ellsberg’s jeremiad to a crowd of students in the fall of 1971 exemplified nonpartisan scorn: “If there is one message I have gotten from the Pentagon papers, it is to distrust authority, distrust the president, distrust the men in power, because power does corrupt, even in America.”3 Modern liberals may defend government, and conservatives decry it, but when discussion turns to the latest adventure of the Central Intelligence Agency or the Pentagon their positions are often reversed.
The recent decline in confidence is not unique to American history, however; what is more unusual, perhaps, is the high degree of confidence Americans felt for their leaders in the decades immediately following World War II. The subsequent decline has been more like a return to the normal level of suspicion that had been there from the start—against the imperial power of the British Parliament and Crown in the late eighteenth century; against the fragile central government established in Philadelphia and then in Washington; against the Bank of the United States, chartered corporations, and the caucus system in the 1830s; against Eastern plutocrats and bankers in the 1880s; against the urban machines and the trusts at the turn of the century; against the “economic royalists” of the 1930s. Dwight Eisenhower conjured up a specter of Rot at the Top that would haunt subsequent decades: “the military-industrial complex.”
What precisely is the source of the Rot? Not great wealth alone. America’s rich have always claimed a large portion of the nation’s productive resources.4 But this has by no means always inspired general resentment or alarm. Opulence in America has provoked more ambition than hostility. In this, too, we are different from older cultures with feudal origins and histories of class conflict. For most of us, the rich are not “them”; they are what we aspire to become.5 We worry only when private wealth exercises political power. It was here that Theodore Roosevelt and Woodrow Wilson drew the line on the trusts, and Franklin D. Roosevelt damned the “economic royalists.” Private wealth applied to ostentatious consumption is perfectly appropriate; applied to the purchase of political power, it becomes diabolic.
Nor is the Rot attributable to our political-economic system. In neither Marxism nor the fantasies of the far right have Americans found a plausible diagnosis of what ails the nation. For the most part, we have been proud of our system of government and we like capitalism. The Constitution, checks and balances, free speech, the right to vote, autonomous corporations, the free flow of capital, the profit motive, the free market—all of these features of democratic capitalism are held in deep regard. We may seek to improve them from time to time, but the basic principles remain sacrosanct. We worry only when the system is exploited by individuals or groups bent on accumulating power—when authority is misused. Nothing is held in lower contempt in America than “the interests”; nothing more reviled than monopolists, influence peddlers, and political cabals. Other nations, with parliamentary systems and deep social and economic cleavages, explicitly organize their politics around blocs of economic interests, whose leaders openly bargain on behalf of their constituents. In the United States, such corporatist negotiations are anathema. Pluralism—the play of competing groups for political influence—may provide an apt description for how policy actually gets made in America; but it is not how we choose to see ourselves. No one trusts the big boys negotiating in the back rooms.
The cause of the Rot is assumed to be concentrated power. Our enduring crusade has been to check power wherever it occurs, whether in public or in private spheres. We have been less certain, however, about how we should go about the task, and what structures of leadership and organization should remain after we harness this danger.
When the myth takes up the depredations of business, the moral is that we must contain corporate malfeasance through strong government action. When the tale turns to the encroachments of government, the lesson is that we must liberate ourselves from meddling bureaucrats. Occasionally the two themes have been merged in a cautionary tale about collusion between business and government, but usually one or the other is seen as the source of the perversion. Casting issues of organization and authority as essentially moral struggles, though perhaps invigorating, tends to leave murky the question of how we are to arrange our common affairs once the miscreants have been routed. Thus each purging has appeared to invite a surge of unconstrained power on the other side.
For most of this century, conservative Republicans have sympathized with business; liberals and Democrats, with government. These affiliations have rarely rendered the parties or their candidates durably attractive to the majority of the electorate. Rather, political campaigns most commonly have been waged against one or the other of these demons; American politicians do not bid for power, they beg the electorate’s aid in ejecting the rascals that currently hold power. Republicans and conservatives have spoken darkly of the threats to liberty posed by government and labor; Democrats and liberals, of the threats to democracy and equality posed by business.
The pendulum of righteous fulmination has tended to swing back and forth as business, then government, alternate in ascendancy. It was business’s turn in the 1880s, with the advent of large-scale enterprise. Progressivist activism followed in the early decades of this century with the first large wave of government regulation, culminating in the establishment of the Federal Trade Commission, laws governing hours and working conditions, health standards for medicines and meat, and antitrust legislation. The pendulum swung back again in the 1920s, as business regained its preeminence, and government duly receded.6 Efforts to enact welfare and labor legislation, or to expand farm supports, failed or were vetoed. The courts found social reform legislation to be unconstitutional. The Harding, Coolidge, and Hoover administrations busied themselves dismantling what was left of the previous decades’ economic controls.
With the New Deal, government again held sway, and business was once more on the defensive. Industrial production in 1932 was 52 percent of its 1929 level, and industry’s ability to deliver the goods was thrown into doubt. Meanwhile, well-publicized disclosures of corruption and gross privilege undercut its legitimacy. Out of this environment came a wave of regulations, imposing on business the obligations to engage in collective bargaining, offer employees minimum wages (and maximum hours), pay for part of Social Security, open the books to prospective shareholders, and pay taxes on undistributed profits.
It was not until the 1970s that the pendulum swung firmly once again. The effusion of regulations and expenditures of the 1960s was largely a continuation of what had begun thirty years before; government—its status bolstered by victory over fascism and depression—had remained ascendant. But in the 1970s America was stymied by a massive and novel set of economic phenomena as inexplicable as the Depression had once been: low productivity growth and stagnating real incomes, coupled with spiraling inflation. It was easy to blame the crippling effects of regulation, and the excessive spending of the welfare state. Amid growing public apprehensions, the long ascendancy of government came to an end, and the myth reverted to a former set of villains.
Beginning in 1968 no one became President of the United States, and few were elected to Congress, without denouncing the government. It became a staple of campaign rhetoric to rail against unresponsive bureaucrats, Washington insiders, arrogant public officials, and cumbersome intervention with the market. Every successful contender was an “outsider”—like the rest of “us”—campaigning against “them” in the nation’s capital. Every successful bid for public office was cast as a crusade to “send a message” to Washington.
Even before Ronald Reagan entered the White House, the public’s attention was focused on the perils of centralized government: Solutions were sought in tax revolts; “privatization” of services; deregulation of the transportation, communications, and securities industries; block grants and revenue sharing that delegated authority to the states; a scaling back of antitrust prosecutions; and efforts to pare environmental and health regulations. Federal expenditures did not shrink, nor did the number of federal personnel substantially fall. But the rate of increase was stalled, and the terms of debate fundamentally altered. The burden was now on government to justify its interventions into the economy, rather than on business to justify its power in society.
Each of these swings of the pendulum marked a shift in the core definition of the economic problem: It was due either to the unregulated and unaccountable power of business or to the overreaching of government. Each swing marked a corresponding shift in the pronouns of political discourse: “They” were, respectively, Wall Street moguls or Washington politicos; “we” were, respectively, common folk ground under the heel of big business, or entrepreneurs trapped in the clutches of big government. Each manifestation of the mythic warning was silent about the other demon lurking in the shadows: When business was indicted, there was little mention of the failings to which government was prone; when blame shifted to government, we forgot what had ever troubled us about private economic power.
By the 1980s the pendulum had swung all the way. Not since the 1920s had business been so unconstrained. In 1965, for example, corporate tax payments had accounted for 26 percent of federal revenues; by 1983 the portion was down to 6 percent. The biggest corporations enjoyed their lowest effective tax rates in fifty years. General Electric, for one, paid no taxes at all between 1981 and 1983, on profits of $6.5 billion. John Kenneth Galbraith had written reassuringly in the 1950s of the “countervailing power” within the American system, which offset the influence of large corporations. But in the America of the eighties, these counterweights were all but removed. Health, safety, and environmental regulations were deferred or cut back; consumer groups and environmentalists no longer claimed the influence or the media attention they once did. Organized labor was all but routed; union membership was down to 17 percent of the private-sector work force, and wage concessions were the order of the day.
Few voices any longer broached the subject of corporate responsibility to the poor or to the communities and nations in which they did business. With increasing alacrity, American-based corporations abandoned communities and laid off workers as they shifted their production abroad. Egregious displays of corporate negligence provoked little public outrage or regulatory response. A Union Carbide plant spewed poisonous fumes that killed 2,000 Indians in Bhopal and injured many thousands more. Johns Manville retreated into the shelter of bankruptcy law to dodge the claims of workers sickened by exposure to its asbestos. A. H. Robbins continued to market a contraceptive device it apparently had known for years could cause sterility and worse. In earlier eras, and surely in times to come, such revelations would inspire denunciation and legislation, but not while it was government’s turn in the dock.
America’s defense contractors similarly continued to display stunning greed and incompetence: General Electric admitted to defrauding the U.S. Air Force by forging workers’ time cards; McDonnell Douglas produced fighter jets whose tail fins cracked; General Dynamics overcharged the Pentagon and was indicted for fraud. By 1985 forty-five of the nation’s hundred largest military contractors were under criminal investigation for kickbacks, illegal overcharges, and other sins, although none was long barred from profitable Pentagon contracts.
Corporate lobbyists swarmed over Capitol Hill. Political action committees (PACs) upped their contributions to congressional candidates from $16 million in 1978 to $57 million in 1984.7 Access and influence flowed in return for these contributions. Governors and mayors eagerly offered tax breaks and subsidies to any company that might locate within their jurisdictions; not a few firms learned the art of playing off desperate localities against each other.
By the close of 1986, Wall Street was awash in scandal. Many millions of dollars had been pocketed by trading on “insider” information unavailable to the general public.
The point of this catalogue of iniquities and improprieties is not to inspire yet another swing of the pendulum; if the pattern holds, the cycle will not easily be either hurried or retarded. What is remarkable about this list is the failure of such examples, individually or as part of a pattern, to excite any appreciable protest from a chronically suspicious citizenry. Such displays of unaccountable power would surely have inspired a general indictment of business in an era when the pendulum of righteous fulmination was swinging in a different direction. But in the 1980s, with government cast as the demon, there was little interest in attacking business. It is the purity of the myth of Rot at the Top that is here so strikingly displayed; Americans are determined to take their devils one at a time. Editors and politicians occasionally pontificated indignantly about this or that corporate enormity. But until the spell of antigovernment fervor had run its course, business would remain largely proof against abuse.
If the past offered any guide, business would eventually overreach. Public tolerance, or indifference, would invite ever more egregious displays of power until one day—with the economy once again in shambles—America would swing to the other side. Campaign orators would once again fulminate against “them” in the boardrooms of corporate America. There would be talk of “sending a message to Wall Street.” A new set of regulations and restrictions, doubtless hastily assembled and ill-considered, would be invoked. And the corruption, incompetence, and arrogance of government would pass for a time from American consciousness.
Placing blame is among the most comforting cognitive acts, for it allows one to cast away responsibility. The cycles of righteous fulmination, first against corporate malfeasance and then against government intervention and then back again, have enabled us to keep at bay some troubling questions regarding how a complex economy is to be organized, and how responsibilities should best be divided between public and private realms. Perhaps we could once avoid answering those questions. But as we lose the luxuries of economic isolation or preeminence that we once enjoyed, the costs of dodging these issues increase.
The first legal function of the modern corporation is to generate profits for those who risk their money supporting it. No serious person who has thought about the issue, however, believes that the unfettered pursuit of profit will always be consistent with the public’s best interests. Economic activities have social consequences, for good or ill, that go beyond returns to shareholders. But contrary to the condemnation of profit seeking per se that periodically erupts in American politics, corporate executives do not necessarily behave irresponsibly when they ignore these social consequences in the pursuit of private profit—unless these social concerns are codified in law. In the absence of laws and rules that tell corporate executives where the public interest lies, they should be under no obligation to guess. They are neither trained nor selected to make such choices.
Corporations, and those who lead them, do have a public responsibility to obey the law, however. This obligation is meaningless if it applies only to the literal letter of the law and scorns its spirit and purpose. Government agencies, and those who lead them, for their part, do have a responsibility to address the social consequences of business activity—to constrain and channel economic endeavors in accordance with the public interest. But this does not mean that government is authorized or competent to organize the economy through commands and controls. The roles and responsibilities of business and government to together define and animate our market economy is the broad topic to which we next turn.