The Public Interest and Private Enterprise; W. Peterson

The Public Interestof Private Enterprise and the Private Interest of Public Polic' WILLIAM H. PETERSON Politics is the conduct of pub lic affairs for private advantage. Ambrose Bierce public (pub/Ilk), adj. 1. Of or pertaining to the people; relat ing to, belonging to, or affect ing a nation, state, or commun ity at large;- opposed to private. 2. Open to common or general use, enjoyment, etc.; as a publ ic meeting. 3. Open to the knowledge or view of all; generally seen, known or heard. >J private (prj/vit), adj. 1. Be longing to, or concerning, an individual; personal; one's own; not general or common; as private property or opinions. 2. Sequestered; secluded; as, to wish to be private. 3. Not public in nature,' not in public life or under public control; as, privat_e schools or citizens. -Webster's New Collegiate Dictionary 82 ONE of the unsettling incongruitief of the 20th Century lies in thE mislabelings, semantic inversion~ and twisted meanings thrust on a host of everyday words - a thrus1 which has garbled communication~ no end and trapped hs in a lot of false notions and unpublic public policies. Orwell illustrated this Newspeak problem beautifully in 1984 and Animal Fa,rm.

Take the world liberal, for ex ample, whose modern meaning de notes an advocate of big govern ment but whose root is the Latin liber - i.e., free. So originally a liberal was a liberator, a minimizer of government's role, or, more preDr. Peterson is a government economist pres ently on leave to work at a book on economic reasoning based on the theories of the late Ludwig von Mises.

1974 THE PUBLIC INTEREST OF PRIVATE ENTERPRISE 83 cisely, an advocate of freedom. In political terms, 18th Century lib erals like John Locke and David Hume sought to limit the power of government so as to maximize the freedom of the individual. John Locke, for example, held in his Second Treatise on Civil Govern ment that the only function of government was the protection of property, which he broadly defined to include life and liberty. In economic terms, early liberal economists like French physiocrats Francois Quesnay and Jean Vin cent de Gournay and classical econ omists Adam Smith and David Ricardo called for laissez faire (then essentially meaning free trade but bastardized today into something bordering on economic anarchy). To enhance in particu lar the royal tax take and in gen eral the wealth of nations (the phrase is of course Smith's) they wanted to cut back the over-ex tended and self-defeating policies of mercantilism - the very policies which touched off the Boston Tea Party and the American Revolu tion.

But as Webster's foregoing defi nitions indicate, the semantic trap is perhaps nowhere better seen in the two everyday supposed anto nyms, public and private, as in public schools and private corpor ations. Public suggests something open, social, above-board, altruistilc, operated on a nonprofit basis. Private, on the other hand, sug gests something closed, asocial, secretive, self-interested, operated for profit (yet another word in disrepute) . Shame on You! No wonder, then, private corpor ations are prodded to think of the public interest, of their Social Re sponsibility instead of their pres ent self-interest. Accordingly, cor porate owners and managers are reminded of their great wealth and power and are exhorted, if not admonished: Consider social indi eators, engage in social accounting, be mindful of our national objec tives. In other words, don't just stand there but do something con structive on poverty, education, crime, alienation, ecology, conser vation, consumerism, occupational :safety, job monotony, women's rights, racial discrimination, urban renewal, cultural deprivation, economic development at home and abroad. This list of sins of commis sion and omission and kind of when-are-you-going-to-stop-beat ing-your-wife indictment could be extended and certainly will be as our troubled times roll on.

Indeed, some of the exhorters and admonishers have lacked on a Social Engineering Thesis to the Social Responsibility Thesis; they hold that if we can find the tech84 THE FREEMAN Februar1 nology to get to the moon with a systems approach, so with linear programming and operations re search we can crack the social problems of, say poverty or urban decay or - what have you? All it takes is less private interest and more public interest; all it takes is will - in the case of Social Respon sibility, corporate will. Economist Milton Friedman is one man who has rej ected this thesis of Social Responsibility, saying that businessmen should stick to their private knitting, worry about their stockholders and concentrate on making profits. The unintended upshot: Society is thereby furnished with goods, ser vices and jobs - Smith's valid but much derided Invisible Hand. (In this vein, Friedman has also criti cized public schools as education ally deficient because of their lack of competition, and has pushed for the voucher plan whereby parents can choose private or public, i.e., government, schools.) Economist Neil Chamberlain of Columbia University does not go as far as Friedman. In his new The Limits of Corporate Respons'i bility (Basic Books), Professor Chamberlain says, yes, business men can take some "modest, in cremental, assuaging actions" on the Social Responsibility and So cial Engineering fronts - say, a corporate gift to underwrite a ballet at the Kennedy Center or tc equip a lab at Cal Tech - that kind of thing.

Social Responsibility Chamberlain labels his compro mise position the Limited Respon sibility Thesis and well reminds us of the corporate facts of life the constraint of cost, the impera tive of profitability, the injunction of competition. But assuaging ac tions may not be enough, muses Chamber lain as he ranges over corporate involvement in consum erism, education, ecology, Wash ington politics, trade unionism, local communities, foreign lands. For if responsibility for solution of mounting social problems is shunted onto other shoulders or ignored, what then? Maybe some kind of Federal takeover would be in the offing and survival of the corporate sys tem would no longer be in the cards. Better, then, harkening to the Committee for Economic De velopment's call for a public-pri vate partnership, or as Chamber lain quotes approvingly from the 1971 CED publication Social Re sponsibil1ities of Business Corpor ations: The converging of two trends - the business thrust into social fields, and government's increasing use of mar ket incentives to bring even greater business involvement - is gradually 1974 THE PUBLIC INTEREST O:F PRIVATE ENTERPRISE 85 bringing these two powerful institu tions into a constructive partnership for accelerating social progress. This emerging partnership is more than a contractual relationship between a buyer and seller of services. Funda mentally, it offers a new means for developing the innate capabilities of a political democracy and a private enterprise economy into a new poli tico-economic system capable of man aging social and technological change in the interest of a better social order.

Strange Partners Partnership - admittedly the word is sweet and what the CED and Dr. Chamberlain envision is limited in scope, but partnership between what and what? And how limited would the public-private partnership turn out to be over time ? We are brought full circle to the implications of public and private, to the public interest of private enterprise and the private interest, not uncommonly, of pub lic policy - to what I am afraid adds up to the unsocial side of So cial Responsibility and Social En gineering. Consider the private interest of much public policy. Think of Watergate, for example, and how in the name of national security or Social Responsibility some rather private interests were ad vanced when a number of execu tives of blue-chip corporations were "requested" to contribute to the Committee for the Reelection of the President, or CREEP. (This comment is nonpartisan, for cor porate executives - perhaps some of the very same contributors to CREEP - had also donated heav ily to the Democratic campaign coffers in the 1964 campaign when the Democrats were the incum bent party; and, of course, quite a few corporate executives are regular Democrats and Democratic contributors. ) Or think of the ICC's "public policy" in rejecting Southern Rail way's application for a 60 per cent cut in grain haulage rates in intro ducing its 90-ton "Big John" hop per cars - a cut which offended truck and barge line operators. Or think of our public-private sugar policy ever since the first Sugar Act in 1934. Here Uncle Sam plays sugar daddy to a host of relatively high-cost domestic cane and beet sugar growers and then cuts in a number of "selected" foreign sugar producers who are favored with import allotments. Washington sugar draws lobbyists like flies, especially when quota-reshuffling time rolls around. All this wheel ing and dealing is, of course, at the expense of the American consumer who regularly pays pennies per pound more for sugar than what the market price would have been, and has been doing so for four 86 THE FREEMAN February decades. The list of such public policies privately motivated and privately benefited could be ex tended ad nauseam.

Or think in historical and civil libertarian terms of how the Founding Fathers met the di lemma of authoritarianism, typi fied by George III, with the checks and balances of limited govern ment. Just how limited would our Government be under the partner ship concept? Who's to Say? Some more questions, particu larly as the partnership matures: Which partner, public or private, would be the majority partner, which the minority partner? Which would be the dominant partner, which the silent partner? And what would happen to com petition, economic calculation and freedom of enterprise? The ques tions beg the answer: Sooner or later the "partnership" would drift into some sort of planning; and overtly or covertly the government would choose and enforce its rul ings, notwithstanding the prefer ences and efficacies of the market, i.e., the consumers. Or think how perilously close the Chamberlain-CED's endorse ment of a public-private partner ship comes, or is capable of com ing, to state dirigisme, to further erosion of our market economy, to the real possibility of modern authoritarianism not unlike that which surfaced in Europe, Asia, Africa and Latin America in the 20th Century. In fact, isn't this what President Eisenhower was warning us of, in his reference to the "military-industrial complex"

in the final hours of his Adminis tration? Now, on the other hand, what of the public interest of private en terprise? First, it should be noted private enterprise is private in name only. Every business must serve the public or it will be swiftly punished with losses and, unless it mends its ways, ulti mately extinguished. GM and GE, Exxon and Dupont, IBM and Ford are indeed giants but they, too, like the Ma and Pa delicatessen, are under the yoke of profit and loss, of the life-and-death power of the consumer - who can be cor porate as well as individual. (What happened to Ford's Edsel, RCA's and GE's computers, Lockheed's Electra, Dupont's Corfam - or to those defunct corporate giants of yesteryear like American Locomo ti ve, American Molasses and American Woolen?) Moreover, the ability of so called private enterprise to serve the public far better than public enterprise in economic matters has been demonstrated over and over again. (Witness the "service" of 1974 THE PUBLIC INTEREST OF PRIVATE ENTERPRISE 87 the U.S. Postal Service, study the doleful findings of Brookings In stitution researchers on Great So ciety programs, l ask yourself why the Government continues to sub sidize hospital construction and teacher education when hospital beds and school teachers are in 1 See Setting National Priorities: The 1973 Budget (Brookings Institution, Washington), 1972.

Morality and Choice surplus, or check with your friends back from Eastern Europe on pro ducer responsiveness to consumer needs there.) So a public-private government industry partnership anyone? I hope not. Neil Chamberlain has helpfully spelled out the limits of corporate responsibility. I only wish he had reaffirmed the Consti tutional limits of government re sponsibility as well. , IDEAS ON LIBERTY WHAT OUR GENERATION is in danger of forgetting is not only that morals are of necessity a phenomenon of individual conduct but also that they cap exist only in the sphere in which the individual is free to decide for himself and is called upon voluntarily to sacrifice personal advantage to the observance: of a moral rule. Outside the sphere of individual responsibility there is neither goodness nor badness, neither opportunity for moral merit nor the chance of proving one's conviction by sacrificing one's desires to what one thinks right. Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value. Weare neither entitled to be unselfish at someone else's expense nor is there any merit in being unselfish if we have no choice. The members of a society who in all r€~spects are made to do the good thing have no title to praise.

FRIEDRICH A. HAYEK, The Road to Serfdom WHILE the early afternoon sun shine warmed the wooded hillside, an old man and a little boy slowly wended their way upward toward the top. The old man's hair was snow-white, and though his chis eled features were covered with wrinkled and leathery skin, his pale blue eyes sparkled and snapped, revealing an ageless spirit in a body that had learned to live well. The littleboy was like most little boys of about 7 chunky, plump, ful~ of bounce and energy, a mind like a sponge, and indulging in the greatest of all his delights, spending a Sunday after noon climbing a hill with Grandpa. It was a slow climb, with lots of pauses, to catch one's breath, to study the trees, the leaves, the shrubs, the bugs, to listen to the birds, and the sound of water bub bling in little brooks and streams, Mr. Demers is a vocational counselor in Veneta, Oregon. 88 R. W. DEMERS and the wind through the pine needles, and all of the glories that live on a hillside.