Coming Events
The Limits of American Capitalism.
by Robert L. Heilbroner.
Harper and Row. 134 pp. $4.95.
The theme of this interesting and provocative little book is the present role and future prospects of that large-scale corporate sector of the economy that now dominates what may be called American capitalism. The gist of the argument may be simply put. The current version of American capitalism will without much doubt hold sway during the rest of this century and well into the next. At the same time, the scope and power of the large-scale corporate sector are in important respects visibly diminishing and the business apologetics offered in its behalf are considered by an increasing proportion of the citizenry to be a mixture of hypocrisy and cant. Termites are already gnawing at the foundation. Some time, presumably beginning in the next century, other, non-business groups will emerge, exercising a larger degree of influence in the selection of social goals and offering to the community a reasoned justification of these goals more acceptable than the one vouchsafed by current business “ideology.”
The prime mover in this evolution, or revolution, is science and technology. On the one hand, science-based technology, through its effects on productivity, will create problems of labor displacement that the business system cannot handle and that can only be effectively managed by the state. On the other hand, changes in technology are in process of creating important social groups with a non-business orientation—government administrators, the military, but, above all, a professional community predominantly scientific—with sufficient political influence to substitute other goals and values for those of the business system. Heilbroner obviously assigns a large role in this change to “ideology,” “the process of rationalization and intellectualization to which both Max Weber and Joseph Schumpeter referred as the great solvents of the spirit of our age.” At the same time the path for a new ideology is cleared by the appearance of new social groups and behind this appearance are the activities of science-based technology. Heilbroner offers us what is essentially a technological interpretation of social change.
The book includes two long essays, the first of which is primarily factual, summarizing well-known quantitative data on the position of large firms and offering qualitative judgments on changing power relations of big business. The second, more speculative essay, peers into the future and attempts to discern where present trends may lead us. In the first essay, the author is essentially a popularizer, and a very good one, of established scholarly findings. Heilbroner obviously knows the literature well and treats it perceptively. May we not, however, also ask of a popularizer that his comparisons and illustrations be illuminating? This reviewer found some of Heilbroner’s baffling. The 19th- and 20th-century capitalisms of Europe are asserted to be very different from those of contemporary America. “Compare,” he says, “the worlds of Proust, Mann, Sinclair Lewis, and J. P. Marquand.” The differences and similarities of Western European and American economic structures are interesting and instructive but I doubt whether their differences and similarities are very usefully conveyed by literary disquisitions on 18th-century Lübeck, the Parisian haute-monde of the 19th century, or the life of the late George Apley.
One would have thought that the ways of describing and measuring the share of the large corporation in the sum of economic activities had nearly been exhausted. Heilbroner, however, comes up with a new angle. Let us imagine that “some curiously selective catastrophe” obliterated the hundred and fifty largest corporations in the country. If one thinks of the corporation in terms of its physical assets he would inevitably conclude, as Heilbroner does, that “the nation would come to a standstill.” This is true but not very interesting. Suppose one thinks of the corporation in the traditional sense as the group of men who control the enterprise and then propounds the question what would happen if the hundred and fifty largest corporations disappeared. We should then have an analogue to Saint Simon’s parable propounded a hundred and fifty years ago.
“Let us suppose,” said Saint Simon, “that France keeps all of the men of genius it possesses in the sciences, in the fine arts, and in the trades but has the misfortune to lose”—and here he lists the nobles, ministers of state, civil servants, the church hierarchy, and ten thousand of the richest landlords.
“This accident,” he observes, “would certainly afflict the French for they are kindly people. . . . But this loss of the thirty thousand individuals, reported to be the most important in the state . . .” would leave France functioning as before.
What would happen if the “top management” of the hundred and fifty largest U.S. corporations disappeared? Certainly this loss would be regretted since Americans also are kindly people, but whether the nation would then “come to a standstill” might be subject to doubt.
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The present position of big business in the United States offers the paradox that while its “legitimacy” has never been less subject to question, its freedom of maneuver is progressively curtailed. “Few would deny,” Heilbroner thinks, “that however fiercely labor may attack big business—and it is not very fiercely any more—it is not any longer afraid of the big corporation as it once was.” The power to exploit small business enterprises has also declined, largely because of the strengthening of antitrust legislation. Likewise, “the power of big business to shape legislation or to have its way in the determination of national policy is on the wane.” On the other hand, the ability of business to influence consumer choices via lavish advertising expenditures has probably increased, and there is no evidence that the average rate of profit on investment has been lessened by any or all of the influences impinging on the scope of action of large corporations. These are qualitative judgments offered without much searching exploration of the evidence, but they seem sensible to this reviewer.
Heilbroner emphasizes the distinction between the operation of capitalism as a “functional system” in which inputs of land, labor, and capital produce outputs of goods and services, and the operations of capitalism as “a system of privilege”—“a structure in which the top 2 per cent of all American families own between two-thirds and three-quarters of all corporate stock, and where the top 2 per cent of all income receivers enjoy incomes roughly ten times larger than the average received within the nation as a whole.”
How are the forces of change now at work likely to affect the capitalist system, on the one hand, as a producer of goods and services and, on the other, as a distributor of incomes within a “system of privilege”? Heilbroner finds the answer to the first question largely in the effects of a science-based technology on the displacement and subsequent redeployment of the labor force. The answer to the second depends mainly on the relative political strength of the non-business groups whose emergence accompanies technological change as compared with the strength of the defenders of the existing “system of privilege” and on the character of the goals and values represented in a new ideology.
Technological change has the direct effect, through a lowering of costs, of a continual expansion of the available supply of material goods, but it has the indirect effect of continuous labor displacement. The only instruments that business has available for handling the problems of material abundance and labor displacement are the profit and loss calculations of the market process. As goods become more abundant, “the necessary marketing behavior must be sustained by supplementary motives of emulation and competitive striving. Thus the endless and relentless exacerbation of economic appetites in advanced capitalism—an exacerbation that does not draw the line at subjecting children to commercial propaganda or at interrupting its most serious presentations ‘to bring you this important message from our sponsor’—is not merely a surface aberration, but a deeply-rooted functional necessity to provide the motivations on which the market system depends.”
The relentless pressure of advertising and sales promotion may continue to expand the consumption of goods the business system is capable of producing, but probably not at a rate that will make possible the absorption of a constant share of the labor force. If persistent technological change plus the large influx of new entrants into the labor force creates an employment crisis during the next decade, which Heilbroner regards as “not unlikely,” policies “designed to create employment through a substantial enlargement of public activities at state and local as well as federal levels” may well be necessary. Such a development would leave the large-scale business sector intact but would mark a further diminution in its relative size and importance.
The effect of technological change, including automation, on employment in manufacture, on aggregate employment, and on the distribution of income is still very much an unsettled question. One would suppose that, if the effects on productivity are as great as commonly supposed, these effects would show up in a large increase in the value of output per man-hour. No such discrete change, however, is yet visible in the figures. Nevertheless, there is reason to suppose that manufacturing employment as a percentage of total employment which reached its high point in the 1920’s will continue to decline. The evidence of decline would be marked were it not for the persistence of high military output. Although the demand for goods and services in general may be insatiable, the demand for the kind of output manufacturing firms are capable of producing is not. How, then, is the flow of entrants into the labor force to be absorbed? Some part of the answer to this question is provided by a look at three of the fastest growing “industries” in the economy, i.e., education, recreation, and medical care. At this stage there seems little reason to believe that whatever the inroads of automation in the area of goods production, employment opportunities elsewhere in the economy will be insufficient to absorb a properly trained labor force.
But Heilbroner is probably right that these new employment opportunities are likely to be provided by a different mix of public and private enterprise than characterizes the present structure of capitalism. And he is also right in thinking that these changes are likely to bring to the fore groups of professionals, public administrators, and scientists with an essentially non-business outlook. Whether these groups will advance a new set of goals and values capable of replacing the now dominant business ideology remains to be seen.
As the reader ponders the sample statements on business ideology cited by Professor Heilbroner, he can only conclude that this is an outcome devoutly to be wished.
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