The Stanglehold of Big Business; C. Dykes

Charles Dykes The Stranglehold ~~ of ~f "Big Business" A "corporation" was originally a fonn of organization granted by sover eigns in the Middle Ages to such en tities as local governments and trade groups in order to facilitate the reg ulation of legal monopolies and the collection of taxes. Coming down to our own day, there are a tremendous number of "non-business" corpora tions; in the public mind, however, "corporation" and "business enter prise" are practically synonymous. And, despite the demonstrable fact that there are vastly more small corporate business enterprises than large ones, "corporation" and "Big Business" are frequently equated. 1 In the early nineteenth century there were many Americans who re garded the business corporation with its grant of powers and ability to acMr. Dykes is a businessman, freelance writer and enthusiastic advocate of the free market. cumulate vast amounts of capital as a danger to the free society. Advo cates of a small-holders agrarian so ciety, following the lead of Thomas J efferson, had an intense dislike for commercial corporations because of their tendency to grow into large ag gregations of economic wealth. Not surprisingly there were relatively few corporations at that time.

Later, .Thorstein Veblen declared the corporation to be primarily a de vice contrived by absentee owners in order to promote monopoly in their own interests. In the latter half of the twentieth century such influen tial men as John Kenneth Galbraith have told the world that the Ameri can economy is dominated by a handful of giant corporations. It is said that the managers of these commercial behemoths exercise enormous power over the civil gov323 324 THE FREEMAN June ernment that is supposed to regu late them. Galbraith maintains that this rul ing elite-the managerial class, or what he calls the "technostruc ture" -manipulates consumer de mand at will. He suggests, more over, that American society is dominated by about 500 of these cor porate business enterprises. As he sees it, these colossuses are freely able to "administer" prices and "maximize" profits even as they are manipulating consumer demand through advertising, which is some times termed "thought-control" by antibusiness elites. 2 What about this? Concerning the charge that giant business corpora tions exercise vast powers over the civil government, let us start by not ing that in the early 1970s there were about 1.6 million profit-seeking cor porations in the United States, while the total number of business con cerns was around 5.1 million. The corporate sector as a whole ac counted for only about half of the U.S. economy in 1974, which was about the same share it had in 1940.

Contrary to Galbraith, who claimed the 500 largest corporations produce close to half of all goods and services, the actual figure is around 25 per cent. The 500 largest employ less than 25 per cent of the labor force, and own only about 28 per cent of the nation's tangible wealth, strangely enough about what they owned in 1929. Of course the list of corporations composing the 500 largest is not static, and has changed many times over the years. CrucialQuestions Regarding the claim that "Big Business" dominates American pol itics by lobbying and campaign con tributions, several crucial questions need to be asked. For instance, if the large corporations are so powerful politically, why were they impotent to stem the flood-tide of environ mental and consumerist legislation of the 1970s-e.g., the OHSA and EEO Acts? The overwhelming ma jority of corporate giants opposedthis legislation and yet they passed any way. Further, it is a fact, capable of exact demonstration, that public policy for over 40 years, but espe cially since 1960, has been increas ingly hostile to business. If the cor porate leviathans are as powerful as men like Professor Galbraith allege, is it possible that government regu lation would be all-pervasive as it is today, or that the tide of antibusi ness sentiment throughout the land would be so virulent?

What about "thought control," "the management of demand"-i.e., ad vertising-the supposed ability of "Big Business" to manipulate the consumer at will? It is enough to point out that it is relatively easy to teach people to want things; teach ing people not to want things is quite 1983 THE STRANGLEHOLD OF "BIG BUSINESS" 325 another matter. All the noonday brightness of Madison Avenue ge nius would be powerless to persuade the mass of people to exchange their color television sets for. black and white, or give up their cars and re turn to walking and public' transportation. There is no question that some sectors of the economy are domi nated by a small number of giant corporations. According to scholarly investigations of the matter, con centration in manufacturing has centered in six industries of ex tremely high capital intensity in which enterprises of large scale are essential to realize economies of scale. Around 50 of the 100 largest corporations in the U.S. today are in automotive, oil refining, steel, non ferrous metals, industrial chemi cals, and aircraft. What do they have in common?These industries are also the industries of highest concentra tion in the other industrialized na tions of the world. This indicates they have common problems and that common causal factors underlie their development.

We would not pretend that giant business corporations as organiza tions are always exemplars of the spirit of liberty and personal initia tive. As Michael Novak observes, "executives and workers in very large corporations necessarily encounter problems of morale, spirit, and effi ciency quite unlike those present in small pioneering firms. Bureau cratic thinking may afflict them."3 Despite this tendency, corporate ti tans have played and continue to play an important role in the preserva tion of liberty. We live, after all, in an age which is witnessing the rampant growth of state power. "Government in Amer ica has become an industry, greater, more dynamic, wealthier, and more expansionary than ever the capital ism of the Harrimans and Rocke fellers was in its nineteenth-century heyday."4 A ProtectiveBarrier The large business corporation stands, among other mediating structures, as a powerful barrier be tween the .individual and the omnip otent ambitions of the messianic po litical state. "Were the state to acquire control over the large cor porations, the political system would thoroughly dominate the economic system. The likely result would be a productive capacity run at about the efficiency of the U.S. Postal Service.

The most destructive would be the diminishment of liberty."5 What future has "Big Business" in America? As David M. Smick has pointed out, "the Fortune 500 have experienced virtually no net job growth for more than a decade. The newest research shows instead that nearly all new jobs are coming from firms with precisely the opposite 326 THE FREEMAN June characteristics."6 Smick goes on to observe that these firms "are not only small, but minuscule. Nearly 70% of new jobs come from firms with 20 or fewer employees." And just as corporate giants are not providing new jobs for the American work force, neither are they providing many new innova tions in technology. Most new devel opments in an industry are launched commercially by small firms. The indispensable role played by indus try giants is to rationalize and mo bilize the breakthroughs of inven tive genius and entrepreneurial vision and to create economies of scale together with efficient chan nels of distribution which bring the fruits of innovation and vision to consumers in quality form at afford able prices.

Mediating Structures However much some of us may la ment the bureaucratic tendencies of large business corporations, how ever frequently it may be necessary to counter the myth of their domi nance of the American economic or der, still, it is crucial that their vital role as efficient producers of eco nomic goods and services be appre ciated and defended. But even more important is their position as me diating structures between the in dividual and the state. And unlike the state, whose decrees are en forced by its police powers, the large business corporation has no power to make anybody work for it, invest in it, or buy its products. . Whereas the state forces us to subscribe to its services whether we want to or not, the giant corpora tions-and all other business enter prises large or small-cannot make consumers buy their products if they don't meet their needs or the price is too high. No matter how wasteful or destructive government bureaucra cies may be, they tend to grow ever larger and more mischievous. Busi ness enterprises, on the other hand, that do not produce products or ser vices which consumers need at prices they can afford, go bankrupt, or are taken over by better managers, with the result often being a radical reorganization.

In this context, where the freedom to succeed or fail is very real, some business enterprises are not only successful in surviving, but emerge as the leaders of their industry. Thus the competition that breeds excel lence not only provides many of the necessi ties of life and other good things at affordable prices to ordi nary men and women, but a mediat ing structure is established which can serve as one more barrier between the liberty of the person and the coercive bureaucratic state which would limit that precious liberty. The hostility of most politicians and government bureaucrats to the free market in general, and to "Big 1983 THE STRANGLEHOLD OF "BIG BUSINESS" 327 Business" in particular, is well known. This is in many ways a strange and disturbing phenome non. Walter Berns illustrated pow erfully the irony of this attitude sev eral years ago: "I put it to you that we shall never see President Carter or any other president of the United States-embrace and indeed plant a kiss on the cheek of the chief execu tive officer of a major oil company, even though we have already seen him embrace and kiss the chief ex ecutive officer of what is now the greatest tyranny on the face of the earth. Secretary Vance has said that Mr. Carter and Mr. Brezhnev 'share the same dreams and aspirations'; he would never be so impolitic as to say that of Mr. Carter and the pres ident of Exxon Corporation, even though in this case it is probably true."

In defending "Big Business" against its enemies, it is not reBusiness Statesmanship quired that we approve of all its ac tivities, or admire the actions and life styles of all its representatives. Many times we may find these rep rehensible. It is imperative, how ever, that we understand and make clear to others that the stranglehold of "Big Business" is a myth; and that, indeed, the large business enter prise, whether consciously or uncon sciously, occupies a strategic place in the defense of liberty. i -FOOTNOTESlRobert Hessen, In Defense of the Corpora tion (Stanford, Calif.: Hoover Institution Press, 1979). 2TheNew Industrial State (Boston: Hough ton Mifflin, 1967). 3The Spirit of Democratic Capitalism (New York: Simon & Schuster, 1982), p. 235. 4William Bentley Ball, "Mediating Struc tures and Constitutional Liberty," Worldview (September 1978), p. 41. 5Novak,p. 178. 6"What Reaganomics is All About," The Wall Street Journal (July 8, 1981).

IDEAS ON LIBERTY EVERY experienced analyst knows that, unless current transactions build up permanent capital in the form of good will, they are consummated at too heavy a cost. Business leaders should instruct those at the merchandising fringe that no sale is worthwhile unless it builds a friendly attitude toward the company. Otherwise, the immediate profit is made at the unreason able cost of dissipating longterm, intangible corporate assets in the form of public esteem and good will. MERRYLE STANLEY RUKEYSER, "The Crusade Against Excellence"