All Commentary
Wednesday, March 1, 1961

What Education Should Business Support?

Mr. Rukeyser is a business consultant, lecturer, and writer of the nationally syndicated column, “Everybody’s Money.”

The Congressman, who favored free enterprise, was berating busi­ness executives for their failure to flood the House of Representa­tives with mail and propaganda equal in size and weight to that from labor unions and sundry other critics of the modern cor­poration.

I could not accept the view that personalities in management, who are trustees for share owners, should throw their weight around. Executives, in the nature of things, are a numerically small group—at best a minority, but potentially an elite group.

As the brain or intelligence cen­ter of the economic system, man­agement should rely for support on the merit of its basic ideas and philosophy—not on its compara­tively slight brute force. The phi­losophy of management is a sophisticated approach to the adven­ture of living, and stands in sharp contrast to the techniques of primitive tribes who implement their will with clubs.

Accordingly, it would be a cor­ruption of the management func­tion to regard itself as the op­posite number of misguided pres­sure groups. Its mission is not through brute force to offset a wrong push in one direction with an equally potent and ill-con­sidered pull in the opposite direc­tion. Management’s opportunity is to promote civilization through in­culcating in men’s minds and hearts principles of creativity and self-discipline which enlarge their potentials for better living. Thus, expressions from management should at all times be responsible, and should be guided by a respect for the public interest.

Whether or not adversaries dis­torted Charles E. Wilson’s re­marks about the identity of the interests of the nation and those of General Motors, it is essential for industrial generalissimos to understand the impact of their private or company decisions on the public interest.

High in public interest are the problems of education and of cor­porate giving for that purpose. Corporate and individual respon­sibility cannot glibly be dis­charged through indiscriminate giving, to colleges and universi­ties, of funds belonging to the stockholders. This delicate subject should be carefully delineated. A businessman must distinguish be­tween standards for personal phi­lanthropy, on the one hand, and of contribution of corporate funds, on the other. Unless the donation can be justified in terms of the en­lightened self-interest of those who own the company, then it is better to leave the giving to the individual recipients of corporate dividends or interest rather than to tap the corporate till.

Obviously, if any corporation of­ficer or director is so emotionally confused that he feels disposed to finance movements and ideologies which will destroy a free economy, he should use his personal funds—not those of his stockholders. If one of the objects of corporate giving is to gain good will or cre­ate a more friendly environment for business, it is clearly improper to endow ideologies designed to destroy voluntary institutions.

Conflicting Principles

The modern business or financial corporation, bank or trust com­pany, investment dealer or in­surance enterpriser is part and parcel of a voluntary system. By the same token, these instrumen­talities are in mortal conflict with the theory that government can do everything better and more effi­ciently than can the citizen. Volun­tary enterprise is the antithesis of compulsion and force. Contem­porary advertising and selling are social symbols of the individual’s right to choose, and are based on the gentle art of persuasion—the opposite of state-imposed compul­sion.

Accordingly, it is worse than muddleheaded to use stockholders’ funds to finance propaganda de­signed to destroy the foundations of a free economic society. Cer­tainly, the blueprint of a dictated society, seductively and falsely labeled as a Welfare State, is in­harmonious with the competitive market economy of which the mod­ern corporation is an example. If a corporate executive is to play his optimum role as a leader of public opinion, he should understand the external environmental factors which create his opportunity. He is unfit to serve if he wears blinders which exclude from his consciousness the broad social, po­litical, economic, and cultural forces which create the climate in which he operates.

Enlightened Self-Interest

To be blunt, the explanation for meager sales of motor cars in the United States in 1931, 1932, and 1933 was no reflection of any in­ternal loss of management skill in the design or production of motor cars. The trouble was external and lay in subtle causes which unbal­anced the national economy.

By participation not only as a provider of funds but as an active fellow student in scientific and mature efforts to formulate the ideas and techniques which make for fulfillment of the desires of free men and women, the execu­tive furthers general well-being and serves his own higher self-interest as well. If a businessman takes everything out of the system and puts back nothing, he is as antisocial as the backward farmer who mines the soil.

The educated businessman learns, in the phrase of Wilhelm Röpke, that prudent money man­agement and a free open market system provide “A Humane Econ­omy.” It is high time that mature business leaders learn to reject the spurious attempts by academic racketeers to associate inflation with human betterment and “wel­fare-state” regimentation with personal freedom.

Practitioners of the enterprise system should take pride in their respect for merit, for craftsman­ship, and for creative and original thinking. They should join hands with the trend-bucking scholars who hold high the banner of in­dividual free choice and personal responsibility. Certainly, they should not use stockholders’ funds to subsidize those who adulterate the recipes of progress by glorify­ing concepts of slavery and com­pulsion.

Selective corporate giving to ed­ucational institutions can be of im­mense value, but those who handle “other people’s money”—to bor­row Mr. Justice Brandeis’ historic phrase—should relate the gift to the enlightened self-interest of the corporate donor. Certainly, a cor­poration that depends on the serv­ices of engineers, chemists, or physicists, for example, can justi­fy liberal endowment of their hu­man supply depots—the engineer­ing schools and the universities training scientists.

Similarly, the principle can properly be extended to liberal arts colleges, where the quid pro quo is less direct. In an expand­ing society, business needs to re­cruit executives from able person­alities who have been trained as to the humanities and an affirmative philosophy of life. But such giv­ing should be on an annual, or an income, basis rather than in the form of an unrestricted capital endowment. The promise of a re­current gift gives the donor with high social conscience an oppor­tunity to be selective. This pro­cedure reserves the privilege of cutting off gifts to those educa­tional institutions which fail to achieve scientific objectives and scholarly approaches to the dy­namic problems of contemporary civilization.

Room for Honest Differences

This standard should not be cor­rupted to discourage honest dis­sent. The essence of a free society and the foundation for the Ameri­can economic system is individual free choice—free choice as to goods and services, as to voca­tions, and as to ideas, spiritual beliefs, and attitudes. The very structure of competition is based on respect for individual differ­ences. It would thus be a perverse and antisocial abuse of corporate trust for a chief executive to be guided in company giving solely by his own prejudices and dogmas. But at the same time it would not be justifiable in terms of the en­lightened self-interest of the cor­porate giver to endow propagand­ists—Marxian or what not—whose intent is to destroy the voluntary system on which business survival depends.

Any financial or other help man­agement can give toward dissemi­nation of scientific and objective understanding of a free society is a good investment. Such expendi­tures of corporate income are a prudent transfer of funds to capi­tal account for “franchise protec­tion.” Promotion of popular un­derstanding is a cost-reducing out­lay, just as much so as automatic machinery. Popular understanding of the social and economic forces at work prevents the economic waste growing out of friction, fallacious legislation, or emotional prejudice.

No one questions the right of management to expend corporate funds for burglary insurance or for various protective devices. But the threat to private property from direct stealing is picayune compared to confiscatory processes which result from biased thinking and ideas rooted in ignorance. It is nonsensically shortsighted to expect any bright long-term fu­ture in growth stocks if the pri­vate property system is to go by the boards.

Such astigmatism to the eco­nomic consequences of dissident social and political ideas is a de­terrent to advancement in spirit­ual and material well-being. When a distinguished and suave Har­vard graduate was debating with me in Town Hall in New York whether there should be a ceiling of $25,000 on personal income, I admonished the dowagers in the audience, who were living on divi­dends and interest, not to get any false sense of security from the utter politeness and courtesy of my differing colleague. “Though my opponent will liquidate you in a most courteous and courtly man­ner,” I explained, “you will be liquidated, nevertheless.”

“Not as I Do . . . .”

In my own salad days, nearly four decades ago, I asked the bril­liant legal counsel and important stockholder of the Burns Brothers’ Coal Company how he reconciled his being a millionaire with his adherence to the Socialist Party. The late Morris Hillquit, outstand­ing socialist leader and unsuccess­ful candidate for Mayor in New York City, showed mental resil­iency in his reply.

“Individual investments and choice of securities, in my opin­ion,” Mr. Hillquit explained, “pre­sent exactly the same question to Socialists and Radicals as they do to individualists and reactionaries. The Socialist is opposed to the economic system which permits of unearned revenues in the shape of rent, interest, and profits. Heseeks to substitute that system by one based on the principle of co­operative labor and equitable dis­tribution of the product. He ex­pects that system to be brought about by a series of economic and legal reforms on a national, even an international scale and not through individual practices. The economic system operates equally on all persons, regardless of the political or social views held by them. A Socialist or Radical can­not by his own individual act with­draw himself from the operation of the system while it lasts. He can find place only in the estab­lished economic categories as em­ployer, worker, professional, and so forth. If he earns or otherwise acquires money, he can put it only to such uses as the system affords to him. He would accomplish no good by throwing it away or keep­ing it in a strong box. If he has any money to invest, he must look for safe and profitable investment in the ordinary way.

“Purely as a matter of senti­ment, a Socialist or Radical, would, in my opinion, ordinarily discriminate against securities of particularly odious concerns such, for instance, as are largely based on the exploitation of labor, pur­suit of notorious antiunion policy, and so forth.”

So be it.

Perhaps the late Mr. Hillquit unwittingly gave a practical yard­stick for corporate giving. Certain­ly Mr. Hillquit’s criterion of dis­criminating against the particu­larly “odious” would obviously muddle corporate manage­ment from subsidizing socialist or communist academies which would be set up to destroy such phil­anthropic supporters. So doing would be as misguided as if the American Medical Association should decide to endow a School for Charlatans.

There was sophistry, of course, in Mr.Hillquit’s attempt to defend his theoretical and practical schiz­ophrenia. Obviously, securities must be selected by yardsticks other than those he highlighted. First of all, the long term in­vestor wants to know whether a given corporation has the ca­pacity to survive in competition, whether it can operate profitably, and whether its shares are priced competitively on a price-to-earn­ings ratio. These bear more on in­vestment values than does the de­gree of management affection for labor unions.

The effort to deal with social ideas in isolation from economic principles leads to absurdity. This was demonstrated when the global leader of the revolt against the razor, Fidel Castro, repelled tour­ists from Havana by his lawless procedures. After the event, the revolutionary leader naively called in consultants to counsel with him as to why Cuba‘s hitherto profit­able tourist trade had dried up. Castro’s innocence resembled the situation of the man who mur­dered his mother and his father and then went into court to plead for clemency on the ground that he was an orphan.

Misappropriation of Funds

Thus, it seems to me a misuse of stockholders’ funds to give cor­porate gifts which can’t be sanc­tioned directly or indirectly in terms of enlightened self-interest. Contributions to bona fide educa­tional institutions which maintain scholarly and objective standards are a wise investment. They help to preserve the spiritual and in­tellectual foundations for a free society, the only kind of society in which custodians of voluntary companies in finance and business can hope to survive.

Scholars should, of course, have wide freedom in exploring ideas, information, and points of view. Control of funds should not in­clude narrow-minded restrictions on academic freedom. But aca­demic freedom is not threatened by a refusal to support those with closed minds who oppose the phi­losophy of free inquiry and free expression. To be specific, card-carrying members of the communist conspiracy should not be eligible for support, for they have an allegiance other than to their own conscience.

Businessmen can with confi­dence support pursuit of the ideals of liberty, particularly since their own function of supervision is linked with the conditions of a free society. Freedom includes the right of dissent, and even the right to be wrong. But freedom recog­nizes the human personality as something created in the image of God, each person with his own in­alienable rights. Business is po­tentially progressive and liberal because it is itself an expression of the libertarian point of view.

In the competition against an­cient ideas of slavery and regimen­tation “in modern dress,” it is a duty of management to lead and energize those committed to en­larging the horizons of the indi­vidual. Such freedom is right up the alley of properly conceived business enterprises. And in the process of helping, the business­man himself will be educated to a better understanding of the social, economic, and political forces which make possible such success as he may enjoy.



The Law and Education

You say: “There are persons who lack education,” and you turn to the law. But the law is not, in itself, a torch of learning which shines its light abroad. The law extends over a society where some persons have knowledge and others do not; where some citizens need to learn, and others can teach. In this matter of education, the law has only two alternatives: It can permit this transaction of teaching-and-learning to operate freely and with­out the use of force, or it can force human wills in this matter by taking from some of them enough to pay the teachers who are appointed by government to instruct others, without charge. But in this second case, the law commits legal plunder by violating liberty and property.

Bastiat, The Law (1850)