The Losing Struggle to Save Private Enterprise

Mr. Barger is a corporate public relations executive and writer in Toledo, Ohio.

In the past few years, there have been several rescue efforts by prominent business executives to "save the private enterprise system." It is becoming obvious to many business leaders that complete 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 electorate 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, what should they be saying and doing? Is there any specific program or organizational effort that will stem the tide of government interventionism that now threatens almost every business activity? Is there anywhere a leadership 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 interventionism in the past few years. Business leaders are not necessarily effective spokesmen for the private enterprise system. Most of them, not surprisingly, express 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 interventionism without sounding naive or self-serving. The several current attempts to rescue private enterprise 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 business leaders praise the free enterprise or private enterprise system, but seek out government protections and subsidies for their own businesses and industries. In so doing, they are accepting the principle of interventionism. It is true that they have plausible explanations for seeking and demanding favors from the government, and usually have community or shareholder 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 government favors, it is a signal for other businesses to seek the same kinds of supposed benefits. Businessmen who are already enjoying government benefits, but deplore the rush towards statism, are in effect saying that they like the government gravy train but want to exclude others from equal participation with themselves.

There is also another type of inconsistency expressed by the businessman who wants to see industries 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 organizations, "They brought it on themselves. I’m glad to see them get what’s coming to them. I don’t like government control, but in this case it was 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 businessmen that they are being regimented only because business has been dishonest or has performed poorly in meeting consumer and public needs. This is widely accepted, and some industries have launched seemingly worthy efforts to "drive the deadbeats 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 interventionisms and turn to other matters.

Without defending bad business practices, one can easily predict that it’s going to be almost impossible for American business to perform 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 industries have attempted to explain their activities in public advertising. In some cases, this has backfired, and businessmen have been accused of trying to "whitewash the same old activities" without showing commendable improvement or change. The critics always seem to be one step ahead of businessmen, and are always sure to have a new argument or criticism when previous criticisms no longer apply or have been outmoded by change.

"Business Leaders Fail in a Political 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 company’s sales without government intervention at some point in the process. (It is true that Mr. Ralph Nader was credited with the demise of the G.M. Corvair; however, this was an exceptional case and there is some belief that ordinary 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, despite the publicity about lavish pay-outs to political campaigns 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 that matter, businessmen do not really function effectively when they move to Washington to serve as government officials. The business game and the political game are two separate arenas of activity, and often the businessman’s drive and need to get things done turn out to be liabilities in his dealings with political representatives.

The businessman 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 or in dealing with political people. 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 them…. The unaccustomed necessity of cajoling and persuading a large number of strong-willed and diverse men can prove to be a time-consuming and humbling exercise."

But if the businessman is politically inept, the same cannot be said of his opponents. For the most part, consumerists and other business critics seem to have an almost natural instinct for influencing government. Either they know how to make their presence felt, or they have learned how to intimidate Congressmen and appointed officials. It is a political fact that a few well-organized groups of college students have been able to hitch-hike to Washington with nothing more than their sleeping bags and some petitions, and make more of an impact than some of the nation’s top corporations.

"Too Much Reliance on Rational Arguments."

Again and again, businessmen have tried to defend the American business system by demonstrating how well it has performed when measured against almost any other system in the world. There is still a persistent belief among businessmen that they have failed to tell this story well, and that this failure is the only reason that private enterprise is now under such bitter attacks.

Actually, the accomplishments of American business are well-known to almost everybody. If faith in the effectiveness of private business and industry ever wavered, it was probably during the Fall of 1957 when it appeared that the Soviet Union had surpassed the U.S. technologically by launching Sputnik; and this disenchantment lasted only briefly. If anything, American business has oversold its capability. Businessmen may appear bewildered and angry over the growing list of demands that they solve every human problem, but corporations have long boasted of their achievements. It is not surprising that some misguided people now think that major corporations can do many other jobs just as efficiently as they produced automatic dishwashers 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 that already agree with the speaker. The business executive is understandably worried about profits, because his own performance is measured by his ability to produce good earnings consistently. He also knows that a business can be undermined and destroyed 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’ beliefs that businessmen put profits ahead of everything else. The public continues to hold a number of false views about business problems in spite of the fact that business executives and business organizations have been defending the importance of profits in speeches up and down the land.

Perhaps all this emphasis makes it appear that the businessman invented profits and is the only person who really has an interest in maintaining profits. But this is not really true. The professional manager seeks profits out of necessity, 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 setbacks.

Everybody’s Struggle

The point of all this is not that business executives are always inept and hypocritical 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 business firms. If the so-called free enterprise system is to be defended only by a few overworked business executives, then it is probably already 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 disguised 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 subsidies and laws giving them special privileges. But such actions have become part of the very fabric of our economy, and almost everybody has become dependent on subsidies and similar interventions 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 excessive. 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 interventions while upholding certain others.

What about the frequently heard statement that certain business groups "brought control on themselves?" The principle to be defended here is that regulations and controls are actually prior restraints that do violence to personal freedom and to individual rights. It is just as wrong to impose regulation on businesses, because of their alleged shortcomings, 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 government bureaucrats to intervene in ordinary business activities would have been viewed as a threat to everybody’s rights and property. Americans, many with bitter memories of oppressions under various European monarchies, were distrustful of government power and seemed to have an intuitive grasp of the need for limited government.

But this early and beneficial distrust of government apparently gave way to a belief that certain businesses were so dominated by rogues and monopolists that only regulation could "protect" the public. Regulation of the railroads was followed by similar regulations of all types of business, until now many organizations are controlled by several government agencies that are often at odds with one another. In practice, government regulation is turning out to be a costly nightmare, and even the advocates of regulation will admit that it is usually bureaucratic and clumsy. But few people are willing to insist that regulation is morally wrong and ought to be abolished. Instead, more arguments — particularly those by the businessman who must operate under regulation — really turn out to be attempts to force the regulators to be reasonable and efficient.

The Market Allows Free Choice

The most serious error businessmen make in defending private 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 business-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 spending 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 resist 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 attacks. 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 government action. He does not real-ize that governments are destroying his freedom and committing wrong acts when they silently confiscate 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 interventionist — 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 services, and employ people. Small wonder that the interventionist usually wins.


Let the Market Function

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

Further Reading


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