Men will always demand an explanation for their perception of economic reality and a justification for their economic actions. If we can call a body of ideas that meets this demand an ideology, then we may safely say that there will always be ideology. To assert otherwise, as it has become fashionable to do, is to evade the patent lessons of both past and present events.
Consider, for example, the origins of the modern economy during the 17th and 18th centuries in England's North Country, where entrepreneurs began to fabricate coarse cottons for a mass market. Breaking through the restrictions of medieval ideology, they harnessed “free” labor to the factory, and fought inventors for the “right” to use their machines. As it was clawing its way to the top, the new class of manufacturers was beset by the need to justify its acquisition of power. Its spokesmen proposed a simple syllogism: nature must be free; textiles are part of nature; therefore textiles must be free. The French Physiocrats, who had pleaded with their monarch to let Nature take its course, contributed to this ideology and Adam Smith's philosophy of natural law completed it. Thus arose the new morality of an Invisible Hand providentially guiding the destiny of man—that is, of middle-class man—and as Morse Peckham once said, every propaganda device was used to persuade the miserable working classes to postpone their gratifications to the lives of their great-grandchildren.
In America the entrepreneur's ideology assumed the guise of Social Darwinism, a view which insisted that those who survived were the fittest, and that those who lacked the imagination to exploit Nature's abundance deserved to be condemned to a hopeless existence. Social Darwinism was also a form of natural law, for it argued that the process of competitive selection took place under the benign auspices of a Deity that did not interfere but wisely preordained a culmination of eternal harmony.
Though we are apt to think that such notions are no longer in vogue, they maintain a curious underground existence in certain types of recondite economic theory. For instance, attempts are still made to establish a positive correlation between high personal income and willingness to undertake risk, and thus to demonstrate that those whose incomes are low are patently unwilling to hazard their possessions, meager as they may be. These speculations are likely to be expressed in abstruse language and couched in the arcane symbolism of game-theory and econometrics, but their implications are no different from those of Herbert Spencer's crude Darwinism. Meanwhile the economic issues have become far more complex. The free enterprise practices that once generated the rationalizations embodied in Social Darwinism no longer exist. Economic reality is the corporation; free enterprise is safe enterprise; price setting is a form of private taxation; business policy is public policy.
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To his great credit, Michael Reagan makes these matters thoroughly explicit in The Managed Economy, one of the more sober studies of the managerial ideology to have been published in recent years. According to Reagan, the source of the complication that we face in trying to disentangle reality from ideology is that the automatic market economy of the 19th century has been done to death, and displaced by a managerial oligarchy whose conscious choices now weigh heavily in the allocation of resources. “The rise of this managed economy,” in Reagan's words, “reunites politics and economics . . . into political economy,” not because government intervention has increased but because the important decisions, even in the private sector, are individual ones embodying entirely personal values.
More than anything else, this change makes both the Jeffersonian ideal of a nation of property holders and the industrial paternalism of an Andrew Carnegie quite useless in today's corporate world. For the fact is that property in the 18th-or 19th-century meaning of the word no longer exists. It is an empty term, replaced by a complex of claims and rights that not even the Supreme Court can always disentangle.
As a consequence, ownership of property is now irrelevant: in the modern corporation the only ownership one can possibly discern is that of pieces of paper—shares of stock—the purchase and sale of which on the exchange literally have nothing to do with how the actual property of a corporation—its buildings, equipment, and raw materials—is disposed. The key question is control: and by a strange mutation of “rights” the managerial economy is not unlike the Communist state—he who uses and enjoys actual property and real instruments of production is the effective “owner.” And here Reagan suggests, after the fashion of the late C. Wright Mills, that such “ownership” can transmute economic power into solid political currency.
At this crucial point ideology once again intrudes. The public can presumably no longer be damned (at least not openly), though it can still be bamboozled. A fresh stereotype has to be created, in which such slogans as “corporate conscience,” “balance of interests,” and “managerial responsibility” are employed to legitimize power. Managerial elites try to, convince themselves that they “do good” for workers, suppliers, distributors, communities, universities, and other cultural institutions. The archon believes himself to be a steward who discharges responsibilities on behalf of the whole society, but who in the last analysis does not have to answer to anyone. Reagan argues, and quite correctly, that were this autonomy indeed complete, we should be subjected to a corporate totalitarianism more intolerable than some of the political dictatorships we have so bitterly come to know.
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The author maintains that the notion of corporate responsibility cannot work because the motive drive in business is still monetary gain and the managers pay obeisance to the public welfare only so long as it enhances the balance sheet. Corporate responsibility does not work because the objectives of profit-making frequently impose standards of performance that injure the public. Herbert Davenport, a noted American economist, once observed that grass cutting, pocket-picking, drug adulteration, and exaggerated advertising are all productive since they are marketable activities. According to Reagan, corporate responsibility should not work, finally, because it is “antidemocratic to the core and would tend toward a business-elite system in which corporate power would control society.”
Therefore, he insists that government intervention in economic affairs is essential. Government enhances economic freedom, rather than diminishes it, so that the most urgent item on the political agenda is to broaden such intervention to deal with problems that can be handled in no other way. Automation is a case in point: how else can income be provided for those who have been pushed aside by the march of technology? Of course, this implies cooperation between the public and private realms, but unfortunately the latter seems today to be the dominant partner. Witness the command of industry representatives over such regulatory agencies as the Interstate Commerce Commission, Federal Power Commission, and the Civil Aeronautics Board; or the scandalous way in which research and development contracts with government are inflated by the pyramiding of costplus expenses. Reagan's suggestions for redressing the present imbalance range all the way from economic planning to reform of the Senate, and the prospect of their adoption may therefore be dim; nevertheless they are eminently practicable, and few will deny that objectives of this nature are worth pursuing.
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The title of Robin Marris's book is misleading, for it leads one to expect a study of the relationship of the corporation to society, whereas the author is more interested in exploring the tortuous thoughts that managers supposedly pursue in maximizing “pecuniary viability.” In other words, he elaborates not a theory of capitalism but a so-called theory of the firm, which is as bloodless a fiction as was ever found in a freshman economics text.
Marris's unhappy attempt to relate his esoteric formulas of corporate growth to sociology and politics results in observations that are either weird or unintentionally funny. Three examples must suffice: the late C. Wright Mills's power elite argument is repeatedly referred to as the “Wright-Mills thesis”; the analysis of managerial salaries and bonuses is clothed in terrifyingly fancy formulas which prove only that managers will grab as much as they can; and it is asserted that if the “owners” of a corporation won't pay the managers an adequate recompense, the latter will quit and convert themselves into teachers, doctors, labor leaders, and politicians. Of course, Mr. Marris can claim that he is only building a “model,” but even a model as abstract as his ought at least to take its bearings from common sense.
Now all this is rather surprising, for elsewhere Marris, who is an English Fabian, has written: “The corporations have great power, yet, in the political sense, little responsibility. In general they are of course run by ‘responsible’ men, i.e., men who behave reasonably according to their own lights. But in the political and social sense these men are responsible to no one . . . they certainly do not interpret their duties as comprehending general human development. . . .” At that time Marris observed that corporations are apt to treat consumers like the “pigskin” in a football game. It is a great pity that he does not expand on this theme in his present book, which reads as though he were only interested in providing a virtuoso mathematical performance for the benefit of his fellow economists. Readers who want to know how “managerial” capitalism really functions in its contemporary phase are therefore advised to turn to Michael Reagan's realistic study.
