by ROBERT L. HEILBRONER
BY a curious coincidence, I first read the chapters of this book, many of them still in rough draft, during the very week that Lieutenant Calley was found guilty of shooting twenty-two South Vietnamese civilians, and the thought that ran through my head was whether there was not an unhappy similarity between the events described in these pages and those for which that pathetic murderous young officer was tried.
For like My Lai, the incidents in this book are atrocities. Moreover, in one case as in the other, the atrocities are not merely hideous exceptions but, rather, discovered cases of a continuing pattern of misbehavior. Behind My Lai lay the unpublicized shellings of hamlets and hospitals, the “surgical” bombings from 50,000 feet, the search-and-destroy missions. Behind the incidents in this book he the stream of petty wrongdoings over which the Better Business Bureau casts its ineffective eye, and the larger cases of more or less deliberately perpetrated harm that a careful reader can unearth, almost any day, in the back pages of The New York Times.
I do not wish to push the analogy too far. Yet, consider the case of Libby, McNeil & Libby, a major foodpacker that found itself hampered by the imposition of a ban on cyclamates issued by the Food and Drug Administration in 1969. Over the next sixteen months, Libby sold some 300,000 cases of cyclamate-sweetened fruit to customers in West Germany, Spain and elsewhere. “Fortunately,” the Wall Street Journal quotes James Nadler, Libby’s vice-president for international business, “the older civilizations of the world are more deliberate about judging momentary fads that are popular in the U.S. from time to time.”1 The momentary fad to which he was referring was the upshot of nineteen years of increasingly alarming laboratory findings concerning the effects of cyclamates on chick embryos—effects that produced grotesque malformations similar to those induced by thalidomide.2
What we have here is a business version of the principle behind the Vietnam War—the imposition of casualties on other peoples in the name of some tenet, such as freedom or profits, as the case may be. Not that Libby is the only adherent to this principle. The Journal article goes on to report that Parke, Davis & Co. sells its Chloromycetin to foreign nations without some of the warnings concerning dangerous side effects that it is forced to display here, and with a much wider range of recommended applications than it is allowed to mention here. The same double standard is true for Merck & Co.’s antirheumatic drug Indocin, sold abroad under much less cautious description than at home.
If these practices are not atrocities, I do not know what an atrocity is. To bring the point home, let me admit that in business, as in war, not all the atrocities are on our side. A companion article in the Journal tells how certain Swiss drugs banned in Sweden—Preludin, a reducing agent, and Ritalin, an antidepressant—are marketed in the United States. From the point of view of their manufacturer, Ciba-Geigy, Ltd., we are the Vietnamese.
Atrocities are not, of course, the only, or perhaps even the central, issue with regard to the problem of corporate responsibility. But they serve to give life to questions that otherwise tend to become too abstract to command the thoughtful attention they require.
They make us ask, for example, where responsibility begins and where it ends. Are the executives in this recital of little corporate My Lais the Lieutenant Calleys of the business world? If so, how far up the corporate ladder does moral responsibility extend? The corporate generals in this book, like those in Vietnam, are distant from the scene of the crime; and although some generals in both cases no doubt knew vaguely about “the realities,” the majority almost certainly did not. It is probable that the topmost echelons of Goodrich were unaware of the faked brake tests, the board of directors of General Motors unaware of the shoddy quality of their buses, the man at the helm of the big oil companies ignorant of the bribery by their subsidiary Woodbridge—or that what they did know about these matters was very different from what we now know. Armies and corporations alike have ways of sweetening the news as it ascends the hierarchy of command. When a corporation president or a member of its board of directors says that he is “shocked” at the absence of safety devices in his plant or at some gross instance of pollution in a distant mill, the chances are that he is shocked, just as the Army high command was shocked at My Lai. The question is: Is being shocked good enough?
This brings us to the larger issue to which the preceding chapters have led. That issue is not merely the intensification of a search for further excesses within the business system, so that more Leutys and Sinks can be exposed. Nor is it even to devise ways of bringing generals as well as lieutenants to account. It is to ask what rules of conduct we can apply to the exercise of corporate authority from the top down, what definitions of responsibility we can impose from the bottom up.
Here is where the analogy between corporate wrongdoing and military wrongdoing finally comes to an end. For a world of difference separates the nature of military authority and responsibility from that of the corporation. Within the military world, despite squabbling among the services, a single organization of command unites the Armed Forces. By Constitutional provision, this single organization is subject to the authority of the President and the financial control of Congress. A written code of conduct, a definite system of internal justice, even an international convention, are supposed to determine the proper limits of military behavior. We all know they do not. But at least when the Army oversteps the bounds, we know where the bounds are; when it condones wrongdoing, at least we know what wrong has been done.
No such clarity of structure characterizes the system of authority in the business world. Here, for all the concentration of wealth among a few hundred giant corporations, nothing like a unity of command directs the world of business against a common enemy. On the contrary, the business world is constantly engaged in waging war against itself, as businesses vie with one another for market power. Nor is there any direct authority emanating from the central Executive or Legislative over business. Instead, a thousand laws and regulations hedge business behavior about, offering at the same time a thousand interpretations of what it can get away with. Nor, finally, is there anything resembling a system of courts-martial for business wrongdoing. The errant businessman is punished—or, rather, admonished—by society if he is caught; if he is not, he is congratulated by his fellow businessmen.3
But most important of all, a great divide separates the definition of responsibility of the military man from that of the businessman. The general knows what he is supposed to do, and until the Vietnam War, he was rarely hard put to determine where his military mission began and ended. Moreover, until the explosion of military technology following World War II, the military man knew as well where the larger boundaries of his responsibilities ended. His purpose was to defend his country, and beyond that narrowly defined objective he neither sought nor wielded appreciable influence in other areas of life.
It is different with the businessman. He, too, is supposed to have a clear-cut mission—to make profits; and a clearly defined boundary of responsibility—to conduct a law-abiding business enterprise. As the legal profession will testify, this narrow authorization is difficult enough to delimit—there is an immense body of law as to what a business can and cannot “legally” do in its lawful quest for profit. But beyond this ill-defined economic domain stretches the much larger and still less clear domain of the social and political responsibilities that reside in the lawful conduct of a profit-making business.
Should a business be held responsible for the social consequences of its profitable products? Are antipersonnel weapons, fast cars, electronic surveillance equipment, detergents, pesticides and the like, just “economic commodities”? Is business responsible for the human consequences of arranging work in boring and monotonous ways in order to achieve its lawful profit? Is business supposed always to support the policies of its national government by producing goods that the government orders, even if it disapproves of those policies? May business legitimately seek to alter government policies in ways that will enhance its profits?
These are questions that begin to indicate the extent and shadowiness of business responsibility—questions that put both the atrocities of the small fry and the “shock” of the higher-ups into a deeper perspective. Everyone knows that the sorts of misbehavior reported in these chapters should not be tolerated, and that the men on top ought to bear some responsibility for their subordinates. But when we ask the broader question of where the boundaries should ultimately be drawn around business power as a whole, the answers are more difficult to find. Indeed, it may be that there are no wholly satisfying answers to the larger questions. But let us defer a final judgment until we have looked more carefully into the problem.
It might be useful to start by getting an idea of what we mean by business power. For the conception of that power has changed remarkably over the years, and the nature of the change will help us define the problem of corporate responsibility today.
Historically, the power of big business has been identified with the power of “the Trusts,” and the concern of economists, as churchwardens of the free-enterprise system, has been to warn against the consequences of trustification. Precisely what were those consequences? In part, of course, that certain corporations and their owners would make a great deal of money, John D. Rockefeller and the Standard Oil Company being the favorite examples. But beyond that was an effect that economists call a “misallocation of resources.” Monopolies sell goods at higher prices than do competitive firms. Therefore, they sell fewer of those goods than they would if they were sold at competitive prices. In a word, the public is both overcharged and undersupplied when business is allowed to indulge its penchant for suppressing competition.
I would say that until fairly recently, the misallocation-of-resources argument (coupled with a considerable dislike for millionaires) provided the main thrust of the effort to control corporate behavior. Recently, however, technical studies by economists have considerably lessened fears about the degree of resource misallocation4—that is, such studies have shown that monopolistically produced goods would not be that much cheaper or produced in numbers that much larger if they were sold at competitive prices. Meanwhile, quite on his own, the average citizen has become far less incensed with the problem of big-business pricing than with the exactions of local labor monopolists such as the local TV repair man or the only plumber in town.
There is some reason behind this general turning away from the issue of monopolization as the single most pressing item of corporate responsibility. A few giant corporations do make giant profits—GM, for example, probably makes a pretax profit of about $2000 on each of its buses5; and the drug companies often make very large margins—up to 25 and 50 percent—on new prescription drugs such as MER/29. For the top 500 industrial corporations on Fortune’s famous list, however, the average percentage of profit on sales during the 1960s has been around 5 percent. This does not seem a piratical margin. Hence, with some exceptions, I think most economists would agree that monopoly as such no longer deserves the concentrated attention it once had.6
Indeed, looking back on the economists’ obsessive concern with the economic effects of monopoly, it is remarkable how little attention was paid to the other kinds of power that very large size could bring besides the ability to squeeze extra dollars out of the consumer or to under-supply him with goods. One searches the traditional texts in vain for a discussion of whether the power of massive wealth could not be used to break a labor union or to run a company town with a heavy hand, or to finance an expensive lobby or win favors from regulatory agencies, or simply to create an impenetrable bureaucracy that would face the complaining consumer with the polite smile of the stone deaf.
If such a range of possibilities had been put to the churchwardens not too many years ago, there is little doubt what the next candidate for corporate responsibility would have been. This was the stubborn refusal of the big companies to deal equitably with organized labor. Second only to the complaints about price rigging, the attention of the corporate reformer of the late nineteenth century was focused on the harshness of corporate labor relations. For example, after the famous Homestead strike in the Carnegie mills (put down by the dispatch of 8000 militia), Henry Frick posted a notice reading:
Individual applications for employment at the Homestead Steel Works will be received by the General Superintendent either in person or by letter until 6 P.M. Thursday, July 21, 1892. It is our desire to retain in our service all of our old employees whose past records are satisfactory and who did not take part in the attempts which have been made to interfere with our right to manage our business. Such of our old employees as do not apply by the time above named will be considered as having no desire to re-enter our employment, and the positions which they held will be given to other men.7
Having won the strike, Frick imposed a twelve-hour day seven days per week, with a twenty-four-hour stretch every two weeks; abolished all grievance committees; kept all wage scales secret; eliminated extra pay for Sunday work; forbade all workers’ meetings; and cut wages far below prestrike levels. “I would rather see the works blown up with dynamite than turned over to those [union] scoundrels,” said Francis Lovejoy, secretary of the company, at a meeting of the Board of Directors in 18998—a position firmly maintained until the end of the 1930s. By then, largely because of the intervention of Federal power, the great companies caved in, and the unthinkable came to pass in the institution of collective bargaining.
All this has such an air of historic bygones that it is difficult to believe that labor relations was once a burning issue with respect to corporate responsibility. By this, I do not mean to imply that the power of massed capital is no longer deployed against labor. On a smaller scale, we still find a heartless exploitation of labor in migrant farm workers’ camps, where the employer is often a small-to-middling contractor who sells, however, to giant canners or packers; and to a lesser extent, labor is hard used by some big companies in the hotel and textile industries, and carelessly abused by employers in coal. Yet I doubt that most people, workers included, would maintain that the great problem of corporate power today lies in its mistreatment of the workingman. Labor has now built its own structures of power, particularly in those areas in which it engages in direct confrontation with big corporations; and what used to be an uneven contest of strength has now the attributes of a stand-off, or perhaps even of a coalition of forces against third parties, i.e., the consuming public.
Where, then, is the exercise of corporate power felt most keenly in our time? The two current outcries are the rape of the environment and the abuse of the consumer. That is, if you ask people: “What is bad about corporations?” the chances are the answer will have something to do with smoke or sludge, or with faulty brakes or poisonous vichyssoise.
I do not for a moment want to pooh-pooh the seriousness of both these concerns. Yet I think the problem of corporate responsibility comes into sharper focus if we look at these issues thoughtfully. The first, let us admit, is an example of “lashing out at big business” (as the conservatives like to put it) for sins that are not wholly of their making. A great deal of environmental despoliation results from our own careless behavior as consumers. More important, until very recently, the issue of ecological damage had simply not risen to public awareness, so that corporations poured their wastes into the environment with no more concern than we poured toxic fertilizers over our gardens. (In how many board rooms has the favorite aerial photo of The Works, with its great billowing stacks, been hurriedly replaced by a new ground level photo showing the factory blending into the long grass?)
Or take the hue and cry over consumer deception. Has the abuse of the buyer actually worsened over the last half century? I think back on Upton Sinclair’s description of the meat-packing industry or on 100,000,000 Guinea Pigs, the corporate Chamber of Horrors of my youth, and doubt it.
What, then, explains the fury with which we turn on the corporation for despoiling the air and water, and for vending shoddy or dangerous wares? I suspect that the answer lies more in our resentment of the kind of presence that the corporation represents than in the particular crimes it commits (which, I repeat, I have no wish to condone or minimize). What fuels the public protest against corporate misbehavior is the same animus that fuels the protest against the Teamsters Union or against “Welfare.” It is an aspect of a widely shared frustration with respect to all bastions of power that are immense, anonymous and impregnable, and yet inextricably bound up with the industrial society that few of us wish to abandon.
This feeling of individual impotence in the face of massive organizations is by no means new. What is new is the recognition that the targets of our frustration are here to stay, immovably embedded in society. Protests against corporate misbehavior in the late nineteenth century could perhaps permit themselves the populist delusion that the offending companies—the Standard Oils and Carnegie Steels—were excrescences that could be removed from society, growths that could be cut out or at least cauterized. No such delusion is any longer possible, either with regard to labor unions, government agencies or the corporation itself. The big corporation is no longer a special case of business power and organization; it is the normal form of business power and organization. Moreover, the extent and presence of that power has been growing irresistibly. Today many corporations have incomes larger than the gross national products of some respectable nations. General Motors’ annual intake, for example, exceeds the gross national product of Belgium or Switzerland; Standard Oil’s (N.J.), that of Denmark; IBM’s, that of Portugal. Moreover, the great companies are growing considerably faster than these nation-states. Indeed, if IBM continues its rate of growth of the last decade for another two decades, it will become the largest economic entity in the world.
Meanwhile at home the size and influence of the topmost companies expands apace. In 1968, the 100 biggest industrial firms owned roughly half the total assets of the nation’s 1.5 million corporations. This was the same percentage that the biggest 200 had owned only twenty years before. All by themselves the top 10 corporations on Fortune’s list of the 500 largest industrials sold $100 billion worth of goods, employed 2 million people, made $5 billion in profits. Figures such as these caused the late Professor A. A. Berle to declare that we must come to think of major corporations in somewhat the same terms we have heretofore applied to nation-states.
In the face of this organizational imperative it hardly matters whether corporations act no more carelessly than we do ourselves, or that their conduct has probably not deteriorated and may even have improved. What matters is that they have insinuated themselves more deeply into the structure of our lives and spread their influence over a far wider area of social activity than in the past. Thus when corporations rape the environment or abuse us as guinea pigs, suddenly we awaken to the realities of our individual powerlessness and of our dependence on their smooth and presumably benign functioning. Then our frustrations and resentments surface with a rush, in the demand that corporate power be brought to heel and that corporate officials be made accountable.
The question is How?
The answers to that question, as we shall see, run a wide gamut. Let us begin at the right wing of that gamut by examining the position of Milton Friedman, an internationally famous economist and proponent of what has come to be known as the libertarian philosophy:
…[There] is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception and fraud … Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine. If businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is? Can self-selected private individuals decide what the social interest is? Can they decide how great a burden they are justified in placing on themselves or their stockholders to serve that interest?9
In an area in which syrup flows freely, there is something astringent and bracing about Friedman’s position. The social responsibility of businessmen is to make money, period. Friedman would not chide a corporation that pursued a “social” policy because it would aid its long-term search for profits, but he would deny the propriety of any activity that had no possible gain in view, even the donation of business funds to charity. Moreover, there is a clear-cut logic to his position. It is not up to the corporation to decide how much of the stockholder’s money to give to charity, or which charity to give it to. Instead, the corporation should pay out all its earnings (instead of keeping back about half as an addition to surplus, as most companies now do), after which the stockholders should do with their money what they see fit, whether this be to consume it, to reinvest it, to give it to the Red Cross or to the National Rifle Association.
I am far from persuaded of the useful consequences of Friedman’s view, but there is more than a grain of persuasiveness in his basic argument. When the Dow Chemical Company announces that it is making Napalm not for profit but for patriotism, I am sure that its directors swell with feelings of social responsibility; and when it discontinues the manufacture of Napalm in response to public protest, I have no doubt that its officers again experience the glow of social benefaction. But I am not sure that such motives provide the best grounds on which social decisions should be made. For, indeed, when Friedman asks on what basis the businessman is qualified to make good social decisions, he is asking a question that is not easy to answer. Why should we entrust the disposition of large sums to men whose sympathies and prejudices, not to say “philosophy,” are different from mine, or from yours? How far does the philanthropic impulse properly go? By whose say-so are boards of directors authorized to play God?
Given the clarity of Friedman’s argument, why has it not carried the field and settled the problem of corporate responsibility once and for all? I suspect that one very strong reason is that businessmen themselves recoil from the implication that they are “only” moneymakers. One of the problems of the theology of capitalism is that capitalists do not like to act like the creatures of pure self-interest that they are supposed to be.
But there are other, less suppositious reasons for the failure of the Friedman doctrine to make much headway. One of them is that it does not squarely face up to the consequences of its own First Rule. For if corporations in fact sought to maximize the profits of their stockholders, we would find General Motors lowering the price of its cars enough to drive Chrysler and even Ford to the wall; IBM underselling its puny competition; General Electric driving Westinghouse out of the market. All of this would be entirely legitimate and perfectly consistent with profit-maximizing, but it would of course be generally viewed as an exercise of supreme corporate irresponsibility. (One can imagine the editorials in The New York Times excoriating GM for using the “excuse” of profit-maximizing as an adequate explanation for driving its competition into bankruptcy.)
A second reason why Friedman’s doctrine fails to convince, despite its logic, is that it makes an assumption about the relationship between business and government that is difficult to maintain. The assumption is that government makes the rules independently of business; or contrariwise, that business will acquiesce in the “rules of the game” established by government, but will have no hand in making them. Yet if nearly a century of regulatory history tells us anything, it is that the rules-making agencies of government are almost invariably captured by the industries which they are established to control. Thus the ICC becomes the protector and promoter of the railways; the FPC, the ally of private rather than public power; the FCC, unable to define any standard of “public interest” that might cut seriously into the profits of the broadcasting industry; the CAB, an agency whose primary aim is to limit competition among the airlines; the Pentagon, a guardian of the health of its client corporations; even the SEC, as we have seen in the case of the Susquehanna Corporation, an agency characterized by a philosophy of benign neglect. Unless Professor Friedman wishes to deny this generally established pattern of affairs, I do not see how his proposals amount to anything more than a license for business to define its “social responsibility” behind the respectable screen of a government front, after which it will indeed more or less live up to its own standards.
Lastly, Friedman’s proposals rest on a curious conception of modern capitalism itself. The conception is that the rightful claimants to the huge surpluses produced by the corporate structure are its stockholders. Yet, the “ownership” exercised by the shareholder over his corporation bears little resemblance to that of the small businessman over his property. No longer even a significant source of venture capital, the stockholder is now merely a passive holder of certificates of varying degrees of risk and potential return. As to the actual operations, the available choices, even the real performance of “his” corporation, he knows little, being guided in his estimate of the corporation’s activities by the collective judgment of the stock market, largely comprised of other holders as blind as himself.
That these wholly ineffectual individuals should have a “right” to the earnings of the company from which they have already been given the privilege of extracting some dividends and gambling for capital gains, seems based on a philosophy of ownership that has long since lost all accord with the facts. In the end, the profits of the corporation are extracted from the sweat of its labor force, the shrewdness and intelligence of its management, and the desires—pristine or manipulated—of the public. If any group should be given the right to determine the disposition of the corporate surplus for “social” ends, labor, management, and the public at large would seem to have a far more legitimate claim than stockholders. Moreover, since 75 percent of all corporate stock is held by the richest 2 percent of families, the view that shareowners should carry out the social responsibilities of the corporation amounts in actuality to a decision that the wealthiest group in the nation has a better claim to social wisdom than its admittedly uncertain managers—a contention that I find difficult to justify, although perhaps Professor Friedman does not.
As I noted above, few parts of the community are less comfortable with the doctrine of the morality of selfishness than the business community itself. Hence, it is hardly surprising that a quite different philosophy of social responsibility emanates from the spokesmen for the large corporation. As far back as Owen Young of General Electric in the 1920s, top businessmen have been proclaiming the need for business management to think beyond the limits of profit-making. As Frank Abrams, chairman of Standard Oil, expressed it in the 1950s, the responsibility of management is “to maintain an equitable and working balance among the claims of the various directly interested groups—stockholders, employees, customers, and the public at large.”10 In the 1960s this theme was further embroidered by Ralph Cordiner, then chairman of General Electric, with the concept of the “professional manager”—the manager trained in his task of reconciling the private interest with the public weal.11
Since Cordiner’s company was soon thereafter involved in a particularly nasty conspiracy suit with Westinghouse (about which Cordiner declared that he himself knew nothing), and since Cordiner subsequently became closely associated with the presidential campaign of that paragon of social responsibility Barry Goldwater, we may perhaps discount somewhat the claims of professional detachment for which he was so fervent a spokesman. Indeed, there is something hollow in the protestations of “professionalism” of a group of men who must meet no socially approved criteria for certification as managers, and who cannot be removed for failing to act in a “professional” manner.
Nonetheless, there is an element of realism in the businessman’s philosophy that escapes Professor Friedman’s net. It is that power is thrust irrevocably and inescapably into the hands of business management, who must exercise it according to some criteria. The most sophisticated expositor of this view was A. A. Berle, who described the drift of power into the hands of a small, almost invulnerable group of corporate directors, but who believed that the exercise of this power could be guided by the development of a “corporate conscience.”12
Berle’s thesis is, of course, an elitist one. Recognizing the existence of power, it entrusts its use to the largely self-directed discretion of a managerial group, rather than subjecting it to external control. Like all elitist theories, it therefore places more confidence for social progress in the benevolence of the upper classes than in the common sense of the lower.
It may be that to attain corporate responsibility we shall in fact ultimately have to depend on precisely such an internalized mechanism of authority—there have been, after all, responsible ruling groups in society as well as irresponsible ones.
But how responsible is the American chief executive? The question is not easy to answer. The Committee for Economic Development, one of the more forward-looking business groups, recently published a pamphlet on Social Responsibilities of Business Corporations that, for all its smarmy tone (“Business has carried out its basic economic responsibilities to society so well largely because of the dynamic workings of the private enterprise system”), approved a wide spectrum of forward-looking corporate social activities—aid to education, training of the disadvantaged, the support of equal opportunity, participation in urban renewal, active antipollution measures, assistance to the arts, to mention only a few.
Who could fault such a show of virtue?13 On the other hand, Daniel Yankelovich, Inc., recently polled the executives of the Fortune top 500 to ascertain their views, and came up with a less reassuring picture. Fortune reported the results of the poll with a headline reading: “Many business leaders believe that they live in a racist society, that wealth is distributed unfairly, and that the nation needs spiritual regeneration.” True enough, but Fortune failed to report that many more interviewees among the top 500 did not subscribe to these beliefs. Examples14:
Business is overly concerned with profits and not with public responsibilities:
| STRONGLY AGREE | PARTLY AGREE | |
| Businessmen | 5% | 31% |
| Total Youth | 51 | 41 |
Economic well-being in this country is unjustly and unfairly distributed:
| STRONGLY AGREE | PARTLY AGREE | |
| Businessmen | 6% | 40% |
| Total Youth | 31 | 45 |
Basically we are a racist nation:
| STRONGLY AGREE | PARTLY AGREE | |
| Businessmen | 15% | 31% |
| Total Youth | 28 | 46 |
I do not mean to paint the American business executive as an utter reactionary. What the poll shows me is that there does exist a minority—perhaps an influential minority—of socially “aware” businessmen; but the same poll also shows me that there exists a considerably larger majority of complacent or indifferent businessmen. This is hardly surprising—as Gunnar Myrdal has written, privileged groups in society invariably display an extraordinary selectivity with regard to what they “know” about it. Thus if the conscience of the majority of executives is to guide the future conduct of the corporation, we can predict with a high degree of certitude what course the corporation will follow. This is the course of least social change—a course that has already gashed the hull of the ship of state and that seems certain to run it on the rocks for good, if unchallenged. Left to themselves I have no doubt that business groups will address the problem of corporate responsibility with great seriousness, turning out admirable pamphlets such as that published by the Committee on Economic Development, but leaving matters thereafter to the “dynamic workings of the private enterprise system.” If we are to go beyond such pieties to actual changes in corporate behavior, something more substantial than the present state of the corporate conscience will have to provide the motivating influence.
Let me therefore deal briefly with something a great deal more substantial—the proposal that we solve the problem of corporate responsibility by the simple expedient of breaking great companies into much smaller units. Economists have long been aware that in many industries the minimum plant size to permit efficient operations is much smaller than the average firm size (most of whom operate more than one plant). Hence the suggestion to fragment large companies into plant-size companies, retaining all the efficiencies of assembly-line production, but removing the agglomeration of financial strength from which corporate power emerges.
I deal only glancingly with this proposal for two reasons. First, it is clearly beyond the limits of any realistic economic reform. It is possible that a rejuvenated antitrust movement might go so far as to split General Motors into an automobile division, a refrigerator division, a financing division etc.; or even that the core of the company might be fractured, like a mighty diamond, into a Chevrolet Corporation, a Cadillac Corporation, a Buick Corporation, an Oldsmobile Corporation, etc. But the possibility of splitting these (still immense) companies down to the size of a simple plant seems certain to encounter such a barrage of business opposition that its chances for political passage are nil.
There is a second reason why I give the idea short shrift: It is far from certain that diminishing the size of giant companies would result in a higher level of “socially responsible” behavior. Let me remind the reader of Galbraith’s famous sentence in American Capitalism: “The showpieces [of the economy] are, with rare exceptions, the industries which are dominated by a handful of large firms. The foreign visitor, brought to the United States,…visits the same firms as do the attorneys of the Department of Justice in their search for monopoly.”15
Galbraith goes on to point out that the models of powerlessness—the highly competitive textile or coal industries, for example—have also been the models of industrial backwardness, characterized by low research and development, low wages and long hours, antiunionism, company towns, etc. I see no reason to believe that an IBM cut down to size would spend its fragmented profits in a more socially beneficial manner than its master company, and I see a good many reasons to believe that such a cluster of sons of IBM might well be pressed into a competitive struggle that would reduce the price of computer service for the nation at large, but at the cost of less handsome buildings, fewer employee amenities and a more narrow view of corporate responsibility in general. The power of the corporation to work social good or evil would not be lessened by fragmenting it. It would only be made less visible and hence, in the end, less accountable or controllable than by bringing it out into the open at the top.
Finally, let me consider still another means of coping with corporate irresponsibility. It is quite simply to nationalize the offending companies.
Back in the 1930s, nationalization was much touted as a social corrective. When the British Labor party took over after World War II, it immediately applied the remedy of nationalization to a number of key industries—coal, banking, railroads, later steel. Recently, Professor Galbraith has again raised the idea of nationalization with regard to the armaments industry, and with the advent of Amtrak—a public corporation for interurban passenger traffic—something very much like a nationalized railroad system has become a reality in America.
There is no doubt that nationalization can serve as an effective means of controlling corporate activities. The Germans have run an efficient nationalized railways system since the days of Bismarck; the French have a nationalized automobile company (Renault); the English have a first-rate national airline (BOAC); the Italians have a nationalized oil company (E.N.I.); even we Americans have a nationalized power company—the Tennessee Valley Authority. Moreover, there is no doubt that nationalization can serve at least two very important social purposes. As in post World War II England, it can provide the funds and management for failing industries and put them on an efficient footing—the British Coal Board and Railway Authority are two instances in point. Second, a single nationalized firm, coexisting with and competing against private corporations, can serve as a kind of standard bearer for the industry: Few would deny that TVA has been a pacesetter for much of the power industry.
These are by no means small achievements, and they indicate that the nationalization of inefficient industries or of individual misperforming firms may indeed serve as a means of raising the general level of social performance. Yet, I fear that as a general prescription for assuring a high level of responsible performance, nationalization is not a cure-all. Let me cite a few instances:
Item: The same Tennessee Valley Authority that has pioneered in so many areas, is currently being sued for the devastation it has wrought in strip mining, and is regarded as a major environmental offender.
Item: In place of the wicked and inefficient private companies that once ran the transportation system in New York City, we now have the wicked and inefficient public Transit Authority.
Item: The United States Post Office, which is a nationalized industry, has proven so grossly inefficient that it has had to take up a new existence as a semiautonomous “corporation.”
Item: The effect of nationalizing the war contractors would be to bind in eternal wedlock what is still only a love affair between the Pentagon and, say, Lockheed Aircraft. It is the scandal of the military-industrial interlock that the big contractors are now “protected” by the Pentagon. Is it to be assumed that they will be more severely treated if and when they become part of the Pentagon?
I do not think it is necessary to belabor the obvious. The effect of nationalizing a firm is to transfer its effective “ownership”—i.e., the control over the disposition of its surplus, as well as the control over the nature of its operations —from a group of private individuals mixing their desire to make money with a confused set of social “ideals,” to a group of public officials mixing their desires to make careers together with their confused ideas as to social ideals. Given what history has taught us about the self-protective and expansive proclivities of bureaucracies, there is no clear reason to prefer one to the other. To be sure, the motive of social service or public service is preferable to that of private profit-seeking. On the other hand, the curbs over profit-seeking—in the form of competition or of displacement by dissatisfied power groups who “raid corporations”—probably provides more active controls over the efficiency of private enterprise than can be exercised over public enterprise.
I do not wish to close this approach to the problem of corporate irresponsibility by writing off nationalization merely as a misguided ideal. It may be that the deficiencies of public ownership and operation are preferable to those of private enterprise. With all its faults, the TVA may be preferable to a congeries of private firms, BOAC better than Pan Am (the latter not quite an example of shining private enterprise since it depends for some 44 percent of its revenues on the Defense Department); the French or German nationalized railroads better than the American nonnationalized roads (could they be worse?). I only wish to make the point that the choice is not entirely one-sided. Nationalized corporations also pollute the environment, abuse authority, create impenetrable bureaucracies, exploit workers, defy public opinion, and generally misbehave. Shall I cite the Atomic Energy Commission’s scandalous disregard of radiation hazards (plus a thick public relations cover-up) as an example? The nationalization of a failing industry, such as interurban rail service, may be a last resort (and to repeat, the nationalization of a single firm may be a bold shock measure), but it does not solve the problem of corporate responsibility. It merely makes explicit the ultimate nature of that problem, which is how to exert effective political control over an economic institution.
It would not be surprising, considering the discouraging limitations of the proposals above, if the movement to control the corporation had by now achieved the same state of respectable crackpottery as the movement to create world government. On the contrary, the air was never more filled with plans to bring the corporation to heel.
The reason for this, I believe, lies in that general mood of mixed resentment toward, and dependence on, organized power to which we have already paid heed. Throughout the world, and in many areas beside that of business, there is visible a growing restiveness before authority, especially before unresponsive authority. The revolt against the impersonality of the bureaucracies that both support and oppress us has found its expression in sit-downs of welfare clients and in student protests against university administrators, as well as in the renewed impetus of the anticorporation movement. Moreover, the common theme that binds together these otherwise differently directed protests is their shared aim of “politicizing” the institutions they attack—that is, of piercing the aloofness of the institutional enemy and opening it to the political energies and conflicts of society.
Politicizing the corporation takes two general forms. One broad line of attack aims at making both managers and investors more aware of the social consequences of their actions. This strategy is typified by the efforts of the Council on Economic Priorities, headed by Alice Tepper, a former Wall Street analyst. The Council has performed prodigies of research with regard to the involvement of corporations in munitions manufacture, in pollution, in racial hiring practices and in overseas investments. It believes that the most effective weapon against corporate irresponsibility is unfaultable research—for instance, Efficiency in Death, the Council’s book on munitions-making which described in excruciating detail the characteristics of antipersonnel and other weapons, and then the full particulars of companies involved in the manufacture of such weapons.
Another Council product was Paper Profits, an enormously detailed survey of paper-mill pollution, listing, company by company and plant by plant, the antipollution devices that had been installed, the amounts of money that had been spent for purification, etc. A sample of their analysis follows:
COMPANY POLLUTION OVERVIEW
Potlatch Forests, Inc. was the fourth-largest lumber producer in the United States in 1968 and in 1969 supplied 3.5% of the total plywood market in the country and 6.2% of the high-grade bleached paper-board market. A subsidiary, Northwest Paper, operates two pulp mills: one at Lewiston, Idaho, on the Washington-Idaho border, and one at Cloquet, Minnesota. A second subsidiary, Swanee Paper Corporation, operates a paper mill. The two pulp mills produce 1255 tons of pulp using 52 million gallons of water daily.
In a speech before an audience of securities analysts, Potlatch President Benton Cancell stated, “Being endowed with a wealth of natural resources, located close to manufacturing plants, our job is to fully utilize such resources.” The company’s pollution control record indicates that “fully utilize” is closer to “fully use up” where air and water are concerned. The Cloquet mill has only a five million gallon capacity clarifier to handle 22 million gallons of bleached calcium sulfite and Kraft effluent per day and its air pollution controls are similarly inadequate. Lewiston has no secondary treatment and its air pollution control equipment is so overloaded as to be almost useless. The mill emits over 6100 lbs. of particular matter and almost 7000 lbs. of sulfurous gases daily into the atmosphere.
Needless to say, neither mill is in compliance with state water or air pollution regulations and Lewiston is the only industrial facility in the nation to have been the subject of two separate Federal Pollution Abatement Conferences: water pollution in 1964, and air pollution in 1967. In fact, the enforcement division of the Department of the Interior Water Quality Administration is reconvening the abatement conference because there has not been satisfactory improvement in the water quality of the Snake River.
Despite the fact that there is no mention of pollution, pollution control, environment, ecology, et al., in Potlatch’s annual report, the company is aware of the problem. To illustrate its concern, Potlatch ran a nationwide advertisement showing a picture of the sparkling clean Clearwater River. The text read, “It cost us a bundle, but the Clearwater still runs clear.” The message was clear, but the medium was a bit muddy. The photograph was taken many miles upstream of the Lewiston mill, which doesn’t even discharge into the Clearwater, but pipes its effluent to the Snake River. If the Clearwater is clean, it didn’t cost Potlatch “a bundle,” it cost the “price” of the Snake River and the public must pay the bill.
Not surprisingly, Potlatch ranks high in lack of cooperation with CEP [the Council on Economic Priorities]. It seems to have been waiting for CEP to go away just as it has waited for its pollution to go away. One of the company’s responses to a question about air pollution equipment at Cloquet reflects its attitude: “You know, you don’t just pick up this stuff off the shelf in a grocery store.”16 From the condition of its pulp mills, it is clear that Potlatch hasn’t even window-shopped for pollution control equipment. Apparently production equipment is more easily obtainable, however, because the company was able to spend $27 million in 1969 on a new off-machine coater at Cloquet and a new continuous digester and bleach plant at Lewiston.
Sociology students may recall that the word “potlatch” comes from an American Indian festival during which an annual bonfire was fueled with all of one’s possessions to demonstrate both wealth and the confidence of replenishing it within the next year. Potlatch Forests seems to feel this way about our air and water resources.
CEP estimates that, in addition to the $21.6 million which Potlatch has reportedly budgeted for pollution control at its two pulp mills, between $5.4 and $15.4 million more will be required to thoroughly clean both air and water, making a total expenditure of between $28 and $37 million.
By its meticulous research, the Council hopes to accomplish two primary aims. One is to make companies themselves self-conscious about (or simply conscious of) their actions as members of a society as well as of an economy. Directors do not like to be singled out as socially irresponsible citizens any more than anyone else; and at least some kinds of practices can be lessened simply by making the generals aware of what the troops are doing. For example, when the Council’s report on paper-mill pollution came out, it was roundly denounced by the paper companies, but its research findings were not challenged, and at least one company—St. Regis Paper—increased its antipollution expenditures by some $35 million.
Second, the Council on Economic Priorities (and like-minded groups) have their eye on the $26 billion of securities held by nonprofit investors—churches, universities, pension funds and the like—as well as the unknown billions held by private individuals who are sensitive to the social performance of “their” companies. (Indeed, the Council got its start when Alice Tepper was asked by a Boston synagogue to prepare a list of socially desirable investments.)17
What is to be expected of these investors? One aim is that they will sell the stocks of “bad” companies and buy the stocks of “good” ones, thereby exerting pressure on managers to act “better.” This is a tactic for which limited hopes can be entertained at best. But the Council and similar groups also hope to motivate investors to take on the political responsibility of voicing their opinions with regard to corporate policy, rather than passively voting their proxies in favor of the management.
This would be, to put it mildly, a radical change in the stance of institutional investors, most of whom maintain an aloofness from corporate affairs, or simply endorse things as they are. Despite the urging of students and faculty alike, the members of the Harvard Corporation in 1971 refused to vote their shares for Campaign GM—a campaign organized to force General Motors to admit public members to its board and to form a shareholders’ committee to monitor the corporation’s performance. But this stand-offish position may now be changing. The trustees of Bryn Mawr supported two of three proposals in Round II of Campaign GM; stirrings on other boards of universities, church groups, pension funds, and so forth, indicate the emergence of a small but influential pressure group for corporate change; church-sponsored resolutions have already caused commotion at annual meetings of American Metal Climax, Kennecott Copper, Gulf Oil; and even Harvard has sponsored a report on its moral duties as a stockholder.
It would be asking a great deal to believe that even the vote of the Harvard Corporation would bring General Motors to its knees. But it might bring it to its senses. The total votes for Campaign GM (Round I came to only 2.7 percent of all votes cast, although it attracted almost 5 percent of all voters), but the publicity was enough to induce General Motors to place a Negro on its board and to establish a council on social policy. The power of social indignation, fortified by solid research, may become an influential force for making corporate management “politically” aware of the consequences of its behavior—that is, for forcing management to confront and defend, with regard to a wide range of social issues, policies that were previously acted on without reflection.
Publicity plus outrage is one strategem of the new effort toward corporate responsibility. Legal changes that will alter the actual structure or liabilities or penalties of corporations is another and potentially much more powerful approach. Sponsored by various groups, including Ralph Nader’s Center for the Study of Responsive Law, and the Project for Corporate Responsibility (which organized Campaign GM), this tactic seeks the politicization of the corporation by a redefinition of its powers and its obligations.
A full listing of the suggested legal changes would be lengthy, but the sample below gives an idea of the spectrum of proposals that is being advanced:
Federal incorporation laws to avoid the present welter of differing state requirements and to put the corporation (or at any rate, the large corporation) directly under Federal accountability.
Greatly enlarged disclosure requirements, forcing corporations to divulge facts and figures with regard to antipollution expenditures, racial distribution of employees, etc.
Public representatives on boards of directors, chosen to represent various constituencies such as suppliers, customers, workers, or simply the public at large.
Stiffer penalties for violation of laws that protect the consumer or the environment, with penalties that include the suspension of responsible executives.
The required appointment of corporate officials charged with responsibility for assuring the compliance of their companies with existing legislation.
Cumulative voting of shares, so that small shareowners, who now can cast no more than one vote for or against each director, may concentrate all their voting power for or against one director.
Full availability of corporate income tax returns for public inspection.
Imposition of involuntary “social bankruptcy” for corporations that have failed consistently to abide by existing legislation.
Protection of the rights of corporate employees against corporate retaliation for public testimony with regard to acts of the corporation.
Needless to say, these proposals are anathema to the corporate world, which sees its very existence—and more than that, of course, the existence of the “free enterprise” system—imperiled by their adoption. The first round of Campaign GM was fought by General Motors as “a challenge [to] the entire system of corporate management in the United States.” Is it? We can be certain that fifty years ago Mr. Roche, who is president of GM, would have been among those to maintain with equal certitude that the recognition of collective bargaining was the death blow to private enterprise. I would guess that in much less than fifty years GM will have a vice-president for environmental affairs and a vice-president for consumer relations just as it now has a vice-president for labor relations.
Indeed, with perhaps few exceptions, there seems to be little on the fist of radical reforms that could not be accepted as part of corporate procedure (I must confess that I do not see how “social bankruptcy” could be effectively enforced). Many of these proposals, such as Federal incorporation laws, have long been urged, others have taken on new urgency and meaning in view of the increasing awareness of environmental damage and consumer abuse. It seems highly probable that we will move toward a considerably stricter legal framework for corporate behavior within the next decade, particularly if the accumulation of social problems turns us, at the polls, in the direction of a new New Deal.
What is perhaps a more sobering question is the difference that such laws could make. The absorption of the regulatory agencies by the corporate sector gives us good reason to regard the lasting effects of these changes as considerably less than their initial impact. Public representatives, whether from within the corporation or from outside it, will tend to be “co-opted” by the corporation, quite without any deliberate intent (not that that will be lacking), but because co-optation seems to be a law of political life. The stiffer penalties, the personal liability, the Federal law of incorporation will weed out the more outrageous cases of wrongdoing but will leave the normal run of corporate life much undisturbed, although no doubt somewhat more circumspect. Full disclosure of corporate income tax returns will constitute an additional bonanza for the public-accounting profession, which will be driven to new heights of virtuosity to convert privileges and perquisites into “costs of production” and to magnify maintenance and janitorial work into environmental triumphs.
As Ralph Nader has said: “[The corporative system] has a greater absorptive capacity than Mandarin China, and more resilience than the Vatican. Corporations, yielding when they were forced to, have in the end overwhelmed populism, organized labor, the New Deal, the regulatory state, and they will so overwhelm the consumer movement. Any real reform will come from the disasters, not from the reforms.”
Nader is undoubtedly right to apply a very large discount to the current movement for reform. Yet it would be wrong to apply a total discount. The challenges that face the corporation today are still relatively simple and clear-cut—the control over pollution, and a decent respect for the consumer. There seems no reason why these problems cannot be met by legal restrictions on corporate behavior at least as adequately as was the problem of the behavior toward labor unions in an earlier day.
Ahead lies a series of much more difficult problems, many of them not even on the agenda of the reformers, much less the corporations. There is the problem of the tedium of much work, both in the factory and in the office. There is the problem of the degradation of language and belief for which corporate advertising is so much to blame. There is the problem of the corporate role in promoting or selecting technological change itself. To these challenges, more complex and more subversive by far than those to which the current reforms are addressed, there are as yet no proposals for corporate responsibility. But their time will come, once the present problems begin to yield to the efforts that are now being mounted against them.
We have traveled a long distance from the small atrocities of the Lieutenant Calleys of the corporate field. Yet a nagging question remains. As we have seen, the plans for corporate reform are palliative rather than fundamental, aimed at minimal objectives and unsure even of attaining these. As Ralph Nader’s statement makes clear, even the most devoted workers for corporate responsibility have a certain skepticism as to what they can accomplish.
Why, then, stop at half measures? Why not work for the abolition of the corporation—indeed, for the end of the whole system of capitalism for which the corporation is the principal agent? That question leads me to a final statement that will, I fear, be distasteful to conservative and radical alike. It is that the corporation, with its vast powers at best half controlled, is a form of social organization from which there will be no escape for many generations to follow.
The reason for this lies in the technology of our time. In all industrial societies, the provision of steel and power, computers and automobiles, even bread and water, today requires the coordination of enormous numbers of men, welded together by complex processes of extraction and assembly and transportation. From one nation to another the legal forms, the powers and immunities of the organizations that supervise this technology vary, but in all industrial societies, socialist as well as capitalist, something like the corporation dominates the economic process. That is, in all advanced societies we find semiautonomous, bureaucratic, profit-oriented (even in socialist nations) enterprises carrying out these vast technological operations—and bringing in their train an accumulation of power and influence that eludes effective control.
That is not, however, the full extent of the dilemma of our age. A more terrible fact is that we do not know any better way to organize mankind in the immense numbers needed to operate our technology, other than by utilizing the motives of acquisitiveness or bureaucratic conformity through which the corporation exerts its dominion over men. In small-scale communities, men cooperate. But men can no longer live in small communities on this crowded planet, even if they wanted to. In large communities, men contend; and some means must be found to concert their energies to the common needs of survival.
Nothing is more sobering in this regard than that socialism—the hope of the future and the despair of the present—must use as its main weapon against the irrationalities of corporate capitalism the irrationalities of the nation-state, and that all its efforts to bind together a large society by appeals other than to man’s acquisitiveness or to his patriotism have proved delusive.18
I do not know which institution it is more blasphemous to challenge—the nation-state with its flags and parades, its solemn mystical unity, and its latent ferocity; or the corporation with its insatiable wealth-seeking, its dehumanizing calculus of plus and minus, its careful inculcation of impulses and goals that should at most be tolerated. Nevertheless, I write these dangerous words to put the problem of this book in proper focus. We are easily misled by the gleaming technology of our age into thinking that we live at a time when men are also highly polished, or would be if only the present institutions were changed for other ones. We might as well believe that the shining armor of the knight encased a person of superior morality as well as strength. Capitalism and nationalism—the driving forces of our time—persist by their capacity to appeal to that which is as primitive as it is powerful. I do not say that men cannot become more socialized, or that a world without corporations, without nationalism, may not be the destination toward which we are gradually making our way. But as things now stand, the corporation that binds men together by appealing to their acquisitive natures, and the state that binds them together by appealing to their patriotic natures, are the only means we have for ensuring our survival, even if by a terrible irony they are also the institutions by which our survival is most seriously endangered.
So we shall have to live with the corporation as we shall have to live with the nation-state. Indeed the prospect is that the corporation and the nation-state will become more closely knit under plannified capitalism—motives of patriotism infusing the key firms in the private sector; the calculus of economic benefit (suitably amended to represent the “public interest”) informing the public sector.
Does this render futile all efforts to achieve corporate responsibility? On the contrary, the very persistence of the corporation gives to the search for responsibility a deeper significance than the remedy of the abuses of the moment. The creation of a responsive and responsible corporation becomes an indispensable step in the creation of a responsive and responsible state—perhaps the central social problem of our age. If this chapter has made it clear that achieving this goal is much more complex than we tend to imagine, this is only because the task of humanizing all social organizations is a profoundly difficult one. I do not wish to dishearten the crusader for corporate responsibility. May his cause prevail. But little is gained when we delude ourselves as to the ease with which human society can be restructured. The cause of reform, not to mention that of constructive revolution, is too important to be nurtured on anything but the truth.
1 The Wall Street Journal Feb. 11, 1971.
2 James Turner, The Chemical Feast (New York, 1970), p. 12.
3 Sociologist E. H. Sutherland has written a famous description of the double standard of morality that protects “white collar crime.” As he points out, most large businesses regularly commit numerous crimes, assuming that a crime is defined as the deliberate violation of a law. But almost no businessmen think of their activity as “criminal,” although they would certainly apply that judgment to anyone who violated the law in nonbusiness areas of life. Sutherland points out that the surrounding society also does not think that business law violation is really a crime in the way that housebreaking or governmental dishonesty is. There is a difference, in the popular morality, between a businessman who may “get away with murder” and a man who really “breaks the law.” See his White Collar Crime (New York, 1949).
4 See “Monopoly and Resource Allocation” by Arnold Harberger, American Economic Review (May 1954) and “The Effect of Monopoly on Price” by David Schwartzman, Journal of Political Economy (August 1959).
5 Based on an estimate of a profit of $608 per automotive unit in 1955. See Martin Shubik, Strategy and Market Power (New York, 1959), cited in Bruce Russett, Economic Theories of International Politics (Chicago, Markham, 1968), p. 158.
6 See, however, Gardiner C. Means, Pricing Power and the Public Interest (New York, 1962).
7 Joseph Frazier Wall, Andrew Carnegie (New York, 1970), p. 561.
8 Ibid., p. 632.
9 Capitalism and Freedom (Chicago, University of Chicago Press, 1962), p. 133. See also Friedman’s article in The New York Times Magazine, September 12, 1970.
10 The Editors of Fortune, The Permanent Revolution (New Jersey, 1951), p. 80.
11 See Ralph J. Cordiner, New Frontiers for Professional Managers (New York, McGraw-Hill, 1956).
12 A. A. Berle, The Twentieth Century Revolution and The American Economic Republic.
13 The answer, I am happy to report, includes two members of the CED itself, one of them an executive of the Crown Zellerbach Corporation. These heretics objected to the “carelessness of scholarship” of the report, and to its many statements that “simply do not meet any serious test of veracity.” Specifically they singled out the hymns of praise that the report sang to business performance, its easy assumption of the accountability of private power, and its apotheosis of the corporate manager. It should be added, however, that the report was voted down by only three businessmen (one of whom did not state his reasons: perhaps the report went too far). Presumably the rest of the fifty-odd members lapped it up.
14 Source: Fortune, October 1969.
15 J. K. Galbraith, American Capitalism (New York, Houghton Mifflin, 1956), p. 96.
16 Earl R. Bullock, Assistant to the President, telephone conversation with CEP, August 17, 1970.
17 Professors Malkiel and Quandt point out in a recent issue of The Harvard Business Review that it would be impossible to hold a wholly guiltless portfolio—even U. S. Bonds have their socially seamy side, as long as the war absorbs so much Federal expenditure. Still, one does not have to be a purist in these matters. Honeywell Corporation, as the largest maker of antipersonnel weapons, is in a different class of guilt-edged securities than, say, Jewel Tea.
18 I think I should add a longish footnote here. First, there is the question of whether the commune movement which has sprung up among our youth does not represent a way out of this dilemma. For a few perhaps it does. Communes may represent a useful sanctuary for some, but they are essentially a parasitic form of social organization, not a harbinger of a new form.
Much more important is another mode of social organization, represented today mainly by Yugoslavia. This is the worker-managed economy, where workers exercise the supervisory powers now delegated to boards of directors, and thereby participate in the decision-making that affects their economic lives. Worker-managed enterprises are often said to present the most practical alternative to bureaucratic and hierarchical enterprise. The reason that I consign this hopeful thought to a footnote is that I am far from convinced that worker management will succeed in practice to the extent that its fervent well-wishers hope. I am impressed by an argument posed by political scientist Robert Dahl in his brilliant After the Revolution? Workers do not want to participate in the operation of “their” enterprises, says Dahl. What workers seek is not more involvement with the factory, but less. They want high pay, short hours and good working conditions from their jobs; but their participatory energies are reserved for their families, their local interests, their outside political affiliations.
There is a ring of chastening truth in Dahl’s contentions. But I would not want to write the worker-managed enterprise off until it had been given a full try. It is unfortunate that Yugoslavia, with its regional divisions and disadvantaged economic status, must be the testing ground for a social experiment of great potential value for the industrialized world.