The Losing Struggle to Save Private Enterprise; M. Barger

Struggle PrivateEnterprise MELVIN D. BARGER IN THE PAST FEW YEARS, there have been several rescue efforts by prominent business executives to "save the private enterprise sys tem." It is becoming obvious to many business leaders that com" plete government control of the business system lies dead ahead unless something is done to change the present trend. Elisha Gray II, the highly respected former chief of Whirlpool Corporation, stated that in his opinion "the American elector'ate will largely dismantle the free-enterprise system in the next 10 years if we businessmen continue to stand mute." Other prominent executives have voiced similar fears. But what can be done to save private enterprise? If businessmen decide to' speak out and .. to act, Mr. Barger is a corporate public relations ex ecutive and writer in Toledo, Ohio. '. what should they be saying and doing? Is there any specific pro gr'am or organizational effort that will stem the tide of government interventionism that now threat ens almost every business activ ity? Is there anywhere a leader ship or set of ideas that will do the job that needs to be done?

Who has the answer? So far, nobody has effectively answered these questions. But one thing should be clear to anyone who has studied the growth of in terventionism in the past few years. Business leaders are not necessarily effective spokesmen for the private enterprise system. Most of them, not surprisingly, ex press themselves very well when talking about their own companies, products, and markets. Only a few have the ability to talk about the general problem .of intervention195 196 THE FREEMAN April ism without sounding naive or self-serving. The several current attempts to rescue private enter prise are well-intentioned, but it will be a major miracle if the rush toward government control is slowed, let alone stopped. There are a number of reasons why most business leaders tend to lose out when they try to defend private enterprise. Here are some of them: An Inconsistent Viewpoint - A surprisingly large number of busi ness leaders praise the free enter prise or private enterprise system, but seek out government protec tions and subsidies for their own businesses and industries. In so doing, they are accepting the prin ciple of interventionism. It is true that they have plausible explan~ tions for seeking and demanding favors from the government, and usually have community or share holder support in doing so. But it is impossible to be an advocate of subsidies for one's own business without destroying a part of the market system. It is 'also true that protectionist actions and subsidies breed more of the same. If one business or industry receives gov ernment favors, it is a signal for other businesses to seek the same kinds of supposed benefits. Busi nessmen who are already enjoying government benefits, but deplore the rush towards sta tism, are in effect say:ing that they like the government gravy train but want to exclude others from equal par ticipation with themselves.

There is also another type of in consistency expressed by the busi nessman who wants to see indus tries other than his own placed under strict regimentation. It's not unusual to hear an otherwise knowledgeable business executive inveigh against the alleged greed of oil companies or public utilities and declare, when tighter controls are placed on such organzations, "They brought it on themselves. I'm glad to see them get what's coming to them. I don't like gov ernment control, but in this case it wa.s their own fault. I hope they get it in the neck!" "Do We Deserve Freedom?" Somewhat like the "they-brought it-on-themselves" syndrome is the widespread belief among business men that they are being regi mented only because business has been dishonest or has performed poorly in meeting consumer and public needs. This is widely ac cepted, and some industries have launched seemingly worthy efforts to "drive the deadbe'ats and fast operators out of business." There seems to be a hope that if business will only perform "as it should,"

then the government will end its 1976 THE LOSING STRUGGLE TO SAVE PRIVATE ENTERPRISE 197 interventionisms and turn to other matters. Without defending bad business practices, one can easily predict that it's going to be almost impos sible for Americ·an business to per form much above its present levels, or at least so as to satisfy its critics. In every business, there are good reasons why things are done ,as they are and why certain limitations exist. Usually, most of these problems are associated with cost restrictions. A number of businesses and in dustries have attempted to explain their activities in public advertis ing. In some cases, this has back fired, and businessmen have been accused of trying to "whitewash the same old activities" without showing commendable improve ment or change. The critics always seem to be one step ahead of busi nessmen, and are always sure to have a new argum'ent or criticism when previous criticisms no longer apply or have been outmoded by change.

"Business Leaders Fail in a Po litical Environment." - Most of the attacks on business are threats only because they eventually end up as legislation ·and controls. In other words, consumerism and most of the other antibusiness movements feared by businessmen are really political movements. It is very doubtful, for example, that the writings and pronouncements of consumerists could harm a com pany's sales without government intervention at som'e point in the process. (It is true that Mr. Ralph Nader was credited with the de mise of the G.M. Corvair; how ever, this was an exceptional case and there is some belief that ordi nary market forces also helped destroy this automobile). But the game changes radically once the controversy moves to Washington. Here, businessmen are really fish out of water, de spite the publicity about lavish pay-outs to political c,ampaigns and other business involvement in politics. The businesman may try to obtain influence in Washington, but he is usually ill-suited to this role. For th~t matter, businessmen do not really function effectively when they move to Washington to serve as government officials. The business game and the politic,al game are two separate arenas of activity, and often the business man's drive and need to get things done turn out to be lia'bilities in his dealings with political repre sentatives.

The businessm,an is an expert in winning public acceptance of his own products, but he is far less skilled than the professional politician in personally winning the public's approval and support 198 THE FREEMAN April or in dealing with political peo ple. As an article in the Fall 1972 Harvard Business Review put it, "Most corporate executives . are accustomed to giving orders and having them carried out without question. The act of influencing politicians is °a mystery to the:m. . ~ . The unaccustomed necessity of cajoling and persuading a large number of strong-willed and di verse men can prove to be a time consuming. and humbling exer cise." But jf· the businessman is polit ically inept, the same cannot be said of his opponents. For the most par,t, consumerists and other business critics seem to have an almost natural instinct for .influ encing government. Either they know how to make their presence felt, or they have l'earned how to intimidate Congressmen and ap pointed officials. It is a political fact that a few well-organized groups of college students have been able to hitch-hike to Wash ington with nothing ·more than their· sleeping bags and some peti tions, and mak'e more of an impact than some of the na,tion's top corporations.

"Too Much Reliance on Ration al Arguments." - Again and again, businessmen have tried to defend the American business sys tem by demonstrating how well· it has performed when measured against almost any other system· in the world. There is still a persist ent belief among business,men that they have failed to tell this story well, and that this failure is the only reason that priva1te enterprise is now under such bitt'er attacks. Actually, theaccomplishmen ts of American business are well known to almost everybody. If faith in t'heeffectiveness of pri vate business and industry ever wavered, it was probably during the Fall of 1957 when itt appeared that the Soviet Union had sur passed the U.S. technologically by launching Sputnik; and this disen chantment lasted only briefly. If anything, American business has oversold its capability. Business men may appear bewildered and angry over the growing list of de m·ands that they solve every hu man problem, but corporations have long boasted of their achieve ments. It is not surprising that some misguided people now think that m'ajor corporations cando many other. jobs just as efficiently as they produced aut'Omaticdish washers and color television sets.

"Businessmen are Trapped in the Profit Argument." - One of the favorite topics for executive speeches is "the· importance of profits," although many of· these speeches are given before groups 1976 THE LOSING STRUGGLE TO SAVE PRIVATE ENTERPRISE 199 that already ,agree with the speaker. The business executive is understandably w·orried about profits, becaus'e his own perform ance is measured by his ability to produce .good earnings consist ently. He 'also knows that a busi ness can be undermined and de stroyed .by two or three years of losses. At the same time, it is only a firm's earnings that generate funds to expand business. Unfortunately, "importance of profit" speeches apparently do little more than reinforce critics' heliefs that businessmen put profits ahelad of everything else. The public continues to hold a number of false views about busi ness problems in spit'e of the fact that· business executives and busi ness organizations have been de fending the importance of profits in speeches up and down the land.

Perhaps all this emphasis makes it appear that the businessman in vented profits and is the only per son who really has an intereslt in maintaining profits. But this is not really true. The professional manager seeks profits out of nec essity, but he would often be just as pleased if his performance could be measured in some way other than by the earnings test.· Almost any business manager would often feel relieved. if he could prepare the type of annual report used by government agencies --. lots of generalities but no specifics that can show year-by-year gains or set backs. Everybody's Struggle The point of all this is not that business executives are always inept and hypocri tical in their struggles to save free enterprise. They are,. however, taking on a responsibility that should be shared by others, including the employees and customers. of busi ness firms. If the so-called free en terprise systetn is to be defended only by a few overworked business executives, then i.t is prohably al ready on the threshold of doom.

How much better it would be if large numbers of people began to understand that private property and the free market system must be defended on moral grounds. Study most interventions, and they soon turn out 'to be carefully dis guised schemes for the forcible transfer of resources from one group to another. This would be denounced as thievery if pressure groups went directly to certain other groups and seized the .funds and other property that :they are often. able to obtain by means of su'bsidies and laws giving them special privileges. But such actions have become part of the very fabric of· our economy, and almos t everybody has become dependent on subsidies and similar interven200 THE FREEMAN April tions in his own business. Hence, few people are able or willing to be critics of all interventions; most people, it turns out, criticize only ·the interventions that they consider to be improper or exces sive. Such arguments can never be very effective. Interventions of any kind are always shaped by political needs, and it is a useless exercise to criticize certain inteventions while upholding certain others.

What 'about the frequently heard statement that certain business groups "brought control on them selves?" The principle to be de fended here is that regulations and controls are actually prior re straints that do violence to per sonal freedom and to individual rights. It is just as wrong to im pose regulation on businesses, be cause of their alleged shortcom ings, as it would be to regulate newspapers because some of them print trash, or to control churches because some cults believe in handling snakes. At one time, the arrogant and high-handed ,attempts of govern ment bureaucrats to intervene i.n ordinary business activities would have been viewed as ,a threat to everybody's rights and property. Americans, many with hitter mem ories of oppressions under various European monarchies, were dis trustful of government power and seemed to have an intuitive grasp of the need for limited govern ment.

But this early and beneficial dis trust of government apparently gave way to a belief that cer tain businesses were so dominated by rogues and monopolists that only regulation could "protect" the public. Regulation of the railroads was followed by similar regula tions of all types of business, until now many organizations are con trolled by several government agencies that are often at odds with one another. In practice, gov ernment regulation is turning out to be a costly nightmare, and even the advocates of regulation will admit that it is usually bureau cratic and clumsy. But few people are willing to insist that regula tion is morally wrong and ought to be abolished. Instead, more arguments - particularly those by the businessman who must oper ate under regulation - really turn out to be ·attempts to force the reg ula.tors to be reasonable and effi cient. The Market Allows Free Choice The most serious error busi nessmen make in defending pri vate enterprise is in failing to demonstrate that free choice is possible only where there is a free market place. Here again, the case for the free market has a good moral foundation. The business1976 THE LOSING STRUGGLE TO SAVE PRIVATE ENTERPRISE 201 man, unless he is a monopolist by government edict or is engaging in fraud, can survive only if he can profitably produce the goods and services that the customer freely chooses in the market place.

The free choice of the customer is all-important. If the customer is not to have free choice in spend ing his money, then his claim to his own property has been diluted to a certain extent and at least some of his property has been transferred to others without his open consent. The customer would try to re sist attacks on his property by pickpockets and hold-up men; he rightly recognizes such actions as being dishonest and immoral, and he can usually count on others to uphold his right to resist such at tacks. But he has not seen that it is also immoral and fraudulent when his free choice to spend his money has been taken away by gov ernment action. He does not realLet the Market Function ize that governments are destroy ing his freedom and committing wrong acts when they silently con fiscate much of his income and establish rigid laws to govern how his remaining income shall be spent.

In today's world, it is virtually impossible to find a prominent business executive who is willing to state that private enterprise has a moral foundation that never can be established in a socialist society. We are surrounded by topsy-turvy thinking, and it is often the socialist - the interven tionist - who confidently believes that he has morality on his' side. Sadly, many businessmen often believe that the interventionist is on the right side too, but they still insist that they deserve a place in the sun because they are efficient or supply useful goods and ser vices, and employ people. Small wonder that the interventionist usually wins. , IDEAS ON LIBERTY COMPARE the accomplishments of the federal urban renewal program, guided by the visible hand of the urban experts, with the accomplishments of the plans of private individuals, guided by the invisible hand of the free market place. If this is what can be accomplished by a relatively free housing market, the rational course of action is to allow it to function, not to attack and fight it.

MARTIN ANDERSON, The Federal Bulldozer WHEN, in his theory of natural law, John Locke suggested that a man is entitled to such land as he can "redeem from the state of nature," our forefathers under stood what he meant. Each plot which they wished to farm had to be reclaimed from the piney woods, native brush, or bogs, filled with the hazards of wild beasts or hostile Indians. Even today, in tropical climes, the plan tation operator recognizes the jungle as an enemy, constantly poised to swallow up his fields, while its animals stand ready to destroy his crops. These people have known, as indeed farmers everywhere still know, that nature is an adversary· w,9rthy of conMr. LaDow, of San Diego, recently retired as a teacher of social studies in high school. 202 CHARLES R. LADow FriendorFoe? stant vigilance. That is reason enough to respect Jefferson's opin ion that representative govern ment is only safe when farmers hold a balance of power.