All Commentary
Wednesday, June 30, 2010

Businessmen on Business Values

A Cato Institute report issued last October estimates corporate welfare at $87 billion in 2001. That’s 30 percent bigger than Cato’s previous 1997 corporate welfare estimate of $65 billion. Welfare for business? Business in bed with the state? What goes on? (See Stephen Slivinski, “The Corporate Welfare Budget: Bigger Than Ever,” Cato Policy Analysis No. 415, October 10, 2001.)

True, President Bush stoutly sought corporate welfare cuts of about $12 billion a year ago, notably in such programs as the Overseas Private Investment Corporation, Export-Import Bank, Small Business Administration, and Maritime Administration’s guaranteed loan program. Somehow these proposed cuts vanished with September 11 and the Hill politics of budgetary “stimulus” at a recessionary hour. Comments the Cato report on some of the “worst” corporate welfare programs: “They subsidize large, profitable corporations at the expense of taxpayers for projects that already receive, or could receive, adequate funding from the private sector.”


The Cato report notes how hard it is for business and members of Congress to overcome their incestuous relationship. Such was the problem congressmen faced in shutting down military bases — and jobs — in their home districts, bases declared surplus by the Defense Department itself. Years passed till cooler heads in the House and Senate hit on the winning military-base-closure commission idea. Cato urges an analogous corporate-welfare-reform commission: it would propose a list of corporate welfare programs for repeal by Congress, which would hold an up-or-down vote on the entire package.

A personal confession: As a young innocent some 50 years ago setting out in graduate economics at New York University, I saw businessmen as born defenders of the faith, natural trustees of free markets — save for some renegade protectionists milking the system. Then I met visiting NYU Professor Ludwig von Mises, who set me straight by having me look up this passage in the English edition of his Socialism (1951, p. 503; original German edition 1922): “The entrepreneur, the man who seizes the opportunity of the moment, has little interest in the issue f a secular struggle of indefinite duration. . . . To fight on principle for the maintenance of an economy based on private property in the means of production is no part of the program of organized entrepreneurs.”

Corporate Philanthropy

This Mises point on corporate expediency, on getting along by going along, is seen in work by the Capital Research Center, based, like Cato, in Washington, D.C. Check its annual series, Patterns of Corporate Philanthropy, on the widespread business habit of handing over responsibility for corporate giving to a philanthropic managerial class hardly in sympathy with the workings of a free economy. The 2001 Patterns, using freemarket criteria, gives an “A” to no large firm for its corporate philanthropy; a “B” to but one big firm, Cigna; a “C” to eight large firms, including Weyerhaeuser and Bristol-Myers Squibb; a “D” to six large firms, including Merrill Lynch and Procter and Gamble; and an “F” to five large firms: PNC Bank, Sara Lee, May Department Stores, Target Stores, and Freddie Mac.

Nationally syndicated columnist Mona Charen, who wrote the preface in the 2001 Patterns, finds Big Business weak-kneed in standing up to intimidation and shakedowns. She refers, for example, to Jesse Jackson’s prevailing on major Wall Street firms to come across with nice contributions to him and his friends “on pain of lawsuits, boycotts, and other forms of protest.”

Henry Ford II, on quitting the Ford Foundation as a trustee in 1976, told an associate it was a “madhouse,” explaining that the foundation is “a creature of capitalism, a statement that, I’m sure, would be shocking to many professional staff people in the field of philanthropy.” As the late William E. Simon, president of the John M. Olin Foundation and former secretary of the treasury, wrote in the
preface to the 1992 edition of Patterns: “Capitalism has no reason in this world to underwrite its enemies, but it does have a reason — in fact, a duty — to support individuals and institutions dedicated to preserving Western civilization and the economic and political institutions that have given America the highest standard of living, the greatest prosperity, and, most importantly, the greatest individual freedom ever known to man.”

Antitrust Faults

Antitrust is another area where corporate rectitude falls short. The broad theory of the Sherman Antitrust Act of 1890 is to safeguard consumers by safeguarding competition. Sure. But look how, for example, U.S. District Judge Thomas Penfield Jackson and the U.S. Justice Department pursued Microsoft on grounds of “monopoly.” The real litigants turn out to be not so much consumers represented by a noble U.S. government, but hard-driving, privilege-seeking Microsoft competitors like Sun Microsystems, Netscape, Oracle, and other corporate loathers of competition that bites them in the pocketbook. Surely businessmen and investors in general should return to first principles, rethink the role of government and business in a free society (avoiding pork like poison), re-examine their corporate philanthropy programs, and support more heavily pro-free-market organizations.

Business — and personal — integrity is the thing, a beacon that shines across the world whether you read the Bible or the Koran. As Polonius advises Laertes:

This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man.

  • William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises.