Of Our Time: Taking Care of Business

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 shareholders as possible.
—Milton Friedman, Capitalism and Freedom

In a market economy, as Charles E. Lindblom reminded us in Politics and Markets, business holds a position of special privilege. It tends to dominate not just the economy, but the polity and the prevailing ideology. Though business lost some of its luster in the excesses of the 1980s, the pendulum did not swing back toward a national mood of greater public-mindedness as Arthur Schlesinger, Jr., had predicted. On the contrary, the prestige of business has come roaring back in the '90s, as the American economy has regained competitive strength globally.

The dynamism of business is taken as simple proof of its virtue. Indeed, the last time business enjoyed such general approbation was nearly a lifetime ago—before the great crash of 1929. That was a decade when a president could declare with a straight face that the business of America is business, and Bruce Barton, in his best-selling 1925 book The Man Nobody Knows, could insist that the teachings of Jesus of Nazareth were best interpreted as a marketing text.

Business then entered several decades of well-earned purgatory. Even in the 1950s, when business was back in the saddle politically, it was still very much on the defensive culturally. In the TV sitcoms of that era the fathers were businessmen, though what they actually did was obscure; the office was the place they came home from. They were good providers and vaguely out of it. To be a man in a gray flannel suit was to be a hopeless conformist; Arthur Miller's salesman was to be pitied. Auto executive Charles E. Wilson's oft-misquoted declaration in his 1952 Senate testimony for confirmation as Eisenhower's Secretary of Defense—"For years I thought what was good for our country was good for General Motors, and vice versa"—was mostly ridiculed. The 1960s followed.

But in the 1990s, not only is there broad consensus that right-thinking Americans wish General Motors only the very best (and also Microsoft and FedEx); there is also the sense that business is modern, and dynamic, and hip. Making money is hip. Adding value, gaining market share, playing with computers—all very hip. To be a businessman or businesswoman is to be an individualist, not a conformist. You can be entrepreneurial in a racy way, a stodgy way, or in a crunchy way like Ben and Jerry. That's the whole point: Business embodies freedom. Do whatever the hell you like, as long as the customer buys the product. In a recent airline magazine, I read a profile of a man who runs his entire business—computer, fax, e-mail, and all, from his yacht. Very efficient, and very fun.

A new magazine, Fast Company, is explicitly targeted at the hip entrepreneur—a kind of Rolling Stone for capitalists. In the 1950s, nobody in his right mind would have launched a magazine for hip entrepreneurs. There weren't any. But in the 1990s, the conjuncture of hip and entrepreneurial is not antithetical; it's almost redundant. Analysts wonder whether Fast Company will make it—not because it exaggerated its niche, but because it underestimated its competition: All business magazines are hip.

Consider the metamorphosis of the computer as a cultural icon. Thirty years ago, the computer stood for regimentation. It kept draft records, built bombs, and directed sophomores into required courses. The computer was going to make everyone alike. Protesters of that era wore placards: "I am a Berkeley student: Do not fold, spindle, or mutilate." [Note to readers under 40: The early computers used punch cards to sort and tabulate data.] Today, of course, the personal computer is precisely the badge of individualism. Where do you want to go today?

All of this has added up to an ideology articulated in its purest form by theorists such as George Gilder, and embraced in the futurism of Newt Gingrich: The information age expresses and confirms the ideology of Milton Friedman. As Gilder wrote in his 1989 book Microcosm, "As the chip reorganizes industry and commerce, so it will reorganize the powers of states and nations." The microcomputer dethrones the state, empowers the individual, neuters the bureaucrat, and, perhaps most important, creates the perfectly frictionless economy long imagined by classical economists. In a similar statement, John Naisbitt's Global Paradox declares that "As the global economy gets larger, the component parts get smaller." On the Internet, not only does nobody know whether you're a dog, as the famous New Yorker cartoon had it. The customer doesn't know, or care, whether you are a Fortune 500 behemoth, or a small start-up, as long as you deliver the goods. Whatever value-added you can bring to the stream of commerce is yours to capture. If you have little to offer, too bad. The result is what Mickey Kaus dubbed meritocratic inequality.

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The ostensible rendezvous of microelectronics with free market ideology gives business the presumed social virtue that it has long sought. The result is an ultra-libertarian ideology, attractive to millions of cyber-individualists, who celebrate the new blend of autonomy and connectedness afforded by the Net, and are almost uniformly hostile to regulation and skeptical about the need for a public sector generally. It is only one more facile step to the general equation of private return with social return, and to the claim that whatever a market society needs will be done by private business interests.

But of course, this conclusion elides certain enduring realities about capitalism that have not been repealed by the information age. The first is the problem of externalities, both positive and negative. Free markets still tend to treat the natural environment as a free sink. Nothing in the logic of profit maximizing (or information technology) signals an entrepreneur to incur avoidable costs to clean up air and water, total quality management or no. Nor is the entrepreneur, hip or stodgy, signalled to invest shareholder money in the training of workers as long as trained workers are available on the labor market.

The second is the problem of values. No matter how hard the enthusiasts of the new corporation try to infer social values from the logic of competition itself, markets remain fundamentally amoral; values need to be found elsewhere—and then imposed on corporations lest they overrun everything else we hold dear. While the entrepreneurial life today may be more energizing and uplifting for its big winners (though one suspects that the robber barons also had a grand time), it does not solve the rest of society's problems, and often exacerbates then. A recent spate of books pointing to cleaner air and water and pooh-poohing environmental cataclysm conveniently ignored the fact that environmental progress was entirely the result of citizen consciousness translated into public regulation, and not at all the result of newly enlightened oil company executives realizing that, as one ad put it, "we have to live here, too."

Intensified competitiveness not only leads to socially beneficial innovation. It also leads the market to invade realms where it doesn't properly belong, creating perverse outcomes that flow from the logic of competition itself. How does a health insurance plan profit-maximize in a fiercely competitive environment? By avoiding insurance contracts with sick people and by creating financial incentives so that sick people get less treatment than they otherwise would claim. To the extent that patients and doctors rebel, the rebellion is based on extra-market principles and values. Competition worsens the perversity. The remedy requires limits on market logic.

At a moment when "competitiveness" is the supreme value, enthusiasts imbue the corporation with universal virtue and conclude logically that corporations will, in the natural course of events, deliver everything that society needs. Elsewhere in this issue, Bernard Avishai ["Social Compact, Version 2.0"] examines the proposition that corporations, whose most important assets are their employees, will therefore logically treat their people with dignity and nurturance. But, as Avishai recounts, the claim just doesn't compute. Corporations may desire a pool of highly skilled employees, but the logic of their situation simply fails to impel them to provide all the education and training that society requires. To discern some logic of enlightened self-interest that would convert corporate executives to educators is a dead end—as policy, as ideology, as politics.

Richard Rothstein likewise examines the new movement of corporate codes of conduct aimed at making American companies take responsibility for the wages and working conditions of their employees or subcontractors in the Third World [see "The Starbucks Solution"]. Rothstein finds the movement mostly disappointing. A set of government rules would be far more effective. If Starbucks worries about Juan Valdez at all, it is the result of external consumer pressures organized politically, and not enlightened corporate self- interest. The occasional corporate executive may bring extra-corporate values to the table (Aaron Feuerstein of Malden Mills became a secular saint for not laying off workers in the dead of winter after his factory burned) but such behavior seldom reflects enlightened competitive self-interest. Feuerstein's was a family business with a lucrative niche product and a strong union. He also had an extra-corporate conscience.

For more than 200 years, social philosophers have been debating whether commerce tends to make society more barbarous or more civil. The best-informed tour guide to this ongoing debate is Professor Albert Hirschman. Hirschman found a text from as early as 1704 that claimed "Through commerce, man learns to deliberate, to acquire manners. . . ." Commerce was said to sweeten man's more brutal tendencies: If people were to have ongoing commercial relations, they couldn't be deceiving and killing each other. But of course the market system has co-existed all too well with wars and swindles.

By now, we should appreciate that business does many things superbly, but has an unfortunate tendency to invade realms where it just doesn't belong. Even in a capitalist society, the value of business is instrumental, not transcendent. The late Arthur Okun, a fully licensed economist, put it well. "The market deserves a place, and . . . it deserves to be kept in its place."

It would be very nice if we could infer from the logic of the market that "it's just good business" for corporations to invest in worker training, provide decent health care, not lay off faithful employees, support communities, devise "family-friendly" workplaces, and make sure that contract workers in wretched corners of the Third World are treated with human dignity, but these are self-defeating dreams. Indeed, the more intensively competitive the commercial environment becomes—the more it reflects market principles—the less likely are corporations to behave humanely. Corporations can add value, but citizens must add values. For the most part, the business sector needs to be dragged kicking and screaming into a social contract. To pretend otherwise is to unilaterally disarm.

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